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| ☐ | Preliminary Proxy Statement |
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| ☒ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
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☐ | Soliciting Material Pursuant to §240.14a-12 |
| ☒ | No fee required. | |||
| ☐ | Fee paid previously with preliminary materials. | |||
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and0-11. | |||
March 11, 202213, 2023
Dear Fellow Goodyear Shareholder,
Thank you for your continued investment in Goodyear. On behalf of the Board of Directors, I’mI am pleased to invite you to attend the 20222023 Annual Meeting of Shareholders.
We are proudOur business made significant progress in 2022 amid a very challenging operating environment marked by record levels of Goodyear’s performance amid the macroeconomic recoveryinflation, supply challenges and softening economic growth globally. Despite this backdrop, Goodyear grew share in 2021, particularly in light of a number of concurrent challenges impacting us as well as many ofboth replacement and OE markets, backed by new fitment wins, innovative new products, our customers – including globaladvantaged supply chain bottlenecks, inflation and labor shortages. In that environment, our global consumer OE and replacement volume exceeded the industry. leading customer service.
At the same time, we captured the value of our brands in the marketplace, achieving a record level of price/mix. We also continued to execute on plant optimization and structural cost initiatives throughout our operations in the face of continued inflationary pressures. While some of these necessary actions are difficult, I am confident they will set us up for future success.
Our teams also made great progress on the combination of Goodyear and Cooper. With much of the work to integrate the two companies completed during 2022, we are well-positioned to capture the full value of this historic combination in 2023 and beyond. We remain focused on further integrating our brand and product portfolios to benefit our customers and consumers, while driving efficiency in our operations.
During 2022, we also continued to demonstrate why we are a leader at the forefront of new mobility. This is evident in our industry-leading commercial fleet services like Goodyear Sightline, as well as our new business models like our direct-to-consumer mobile van service and AndGo, our predictive vehicle servicing platform.
Through these innovations, we are forging new partnerships and achieving new milestones as we shape the future of mobility. One instance of this is a first for our industry: demonstrated capability to accurately estimate tire-road friction potential and provide real-time information to maximize uptime through our partnership with Gatik, a leader in autonomous middle mile logistics.
While these and other innovations are adding value for customers and helping us win in the marketplace today, we are also performed well. Our accomplishments and outstanding performance arefocused on
operating in ways that will benefit generations to come. Goodyear recently unveiled a testamentdemonstration tire made of 90% sustainable materials – a significant step toward our goal of creating the industry’s first 100% sustainable-material tire by 2030. We plan to the dedication and talent of our associates.
As you know, in June 2021, we took a transformational stepdistinguish ourselves further by offering an up to strengthen the breadth of our product portfolio and enhance our value proposition with the acquisition of Cooper Tire. This transaction strengthens our leadership position70% sustainable-material tire for sale to consumers in the U.S. in 2023.
Goodyear also continues to make progress toward its other sustainability targets, including our goal of reducing Scope 1 and nearly doubles our presence in China. With Cooper’s brands, Goodyear now offers a full suite of products across the value spectrum to meet the needs of all customers2 emissions by 46% and consumers. The combination also affords significant financial benefits.
In addition to these successes, we also made significant progress in readying our business for tomorrow.
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Our ability to execute remains strong despite the challenges the larger world is facing. We understandare growing share, capturing the importancevalue of reducing our carbon footprint,brands and realizing the value of our new goals demonstratelargest-ever acquisition. We also remain undeterred as we help enable mobility and contribute meaningfully to create a better future for the world in which we live.
I am extremely proud of what our pledge to combat climate change.
Taken together,teams delivered in 2022. In doing so, they demonstrated resilience in the face of adversity – a defining characteristic for our business is performing at a high level despite ongoing volatility. We’re recovering share while improving margins. The integration of Cooper Tire is off to a strong start and we’re driving the innovation necessary to ensure we continue leading our industry through the mobility revolution and beyond.125-year-old company.
On behalf of our Board of Directors, thank you for your continued support. We look forward to welcoming you at our annual meeting.
Sincerely,
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Richard J. Kramer Chairman of the Board, Chief Executive Officer and President |
March 11, 202213, 2023
Dear Fellow Goodyear Shareholder,
It is a privilegeI am grateful to continue servingserve as Goodyear’s independent Lead Director. As a Board, we areremain steadfastly committed to representing your interests by providing robust independent oversight and delivering on ourGoodyear’s strategic priorities. We are proud of Goodyear’s performance, particularly given the challenges and disruptions caused by COVID-19 over the last two years. It’s my pleasure to provide you an update on some of the key areas on which we have focused as a Board over the last year.
BOARD OVERSIGHT OF STRATEGY AND PERFORMANCE
Our Board of Directors is composed of committed, qualified and diverse individuals who bringprovide a wealth of experience and expertise directly relevant to Goodyear’s business. As the Company’s strategy and operations evolve over time, we as a BoardWe remain focused on ensuring we have the right skillsetskillsets on the Board to oversee the execution of thatGoodyear’s strategy. To that end, we wereare pleased to welcome Prashanth Mahendra-Rajah, CFONorma Clayton, formerly of Analog Devices,The Boeing Company and currently the Chair of the Board of Trustees of Tuskegee University, as a new independent Director since our last annual shareholder meeting. Prashanth’s extensiveNorma’s leadership experience in helping position global companies for transformative growth following mergersmanufacturing, operations, technology, innovation and acquisitions is particularly valuablehuman resources will be invaluable to Goodyear and its shareholders as we continue to integrate Cooper Tire. Prashanth also contributesbuild our business and fulfill our role of enabling mobility in a fast-evolving industry.
We are proud of Goodyear’s performance in 2022, particularly given the challenges that we have faced due to the war in Ukraine and the resulting impact on the European economy, global inflation, and the ongoing effects of the COVID-19 pandemic in some regions.
RESPONSIVENESS TO SHAREHOLDER CONCERNS
The Board deep expertisewas disappointed with our say-on-pay vote outcome in financial management2022 and executive leadership. Additionally, as Alan McCollough, Peter Hellman and Stephanie Streeter retire from the Board, I want to thank them for their long-term leadership and dedication to Goodyear.
COMMITMENT TO SUSTAINABILITY AND CORPORATE RESPONSIBILITY
As a Board we are keenlyhas been focused on Goodyear’sunderstanding and responding to the shareholder feedback we received related to that vote. Through our engagement efforts that were led by the Chairman of our Human Capital and Compensation Committee, we sought to elicit and consider shareholders’ perspectives related to our executive compensation program. The Compensation Committee, of which I am a member, has carefully considered and adopted a number of specific actions suggested by our shareholders in order to respond to the say-on-pay vote and align our executive compensation program with respectshareholder expectations and shareholder value creation. Those actions, including changes to corporate responsibility given we know they are priorities for the Company’s investors and other stakeholders. To that end, we were proud to share our long-term climate strategy during 2021. Thisincentive plan design and
announcement included Goodyear’s commitmentenhancements in our proxy disclosure, are described in our Compensation Discussion and Analysis in this Proxy Statement.
In addition to achieving net-zero greenhouse gas emissions by 2050 and 2030 emission reduction targets based on Science-Based Targets initiative (SBTi) standards, as well asdiscussing our plan to adopt disclosures aligned with the Task Force on Climate-related Financial Disclosures (TCFD) framework for 2022. Our net-zero goal and alignment to SBTi reflect our commitment to sustainability and reducing our carbon footprint. As part of this process, we recently enacted a multi-phase plan to reach 100% renewable energy across most of our facilities in Europe and Turkey by the end of 2022.
We also recognize as a Board the importance of fostering a corporate culture that prioritizes diversity, equity and inclusion. We believe this is critical to Goodyear’s long-term success and that this culture of diversity and inclusion starts at the top of our organization. As a Board we oversaw the creation of Goodyear’s Diversity & Inclusion Executive Council, comprised of senior leaders to help align these initiatives with Goodyear’s philosophy, strategic direction, vision and values. As a Board we’ve also engaged with leaders across the business regarding our commitment to creating a diverse and inclusive workforce through talent acquisition, including how we as a Company strive for qualified female and minority candidates on every executive slate.
EXECUTIVE COMPENSATION
We continue to align executive compensation programs, we appreciated the opportunity to discuss with shareholder value creation by focusing our leadership on near-term strategicshareholders Goodyear’s strategy, operations, governance practices, and operational priorities, notably the integration of Cooper Tire. Further, to help support our focus onenvironmental and sustainability and corporate responsibility efforts, the Board recently approved the addition of specific ESG metrics to our annual and long-term incentive plans. We are confident these metrics – focused on reducing greenhouse gas emissions and rolling resistance and increasing diverse management representation – elevate our environmental sustainability and diversity and inclusion commitments.
PROACTIVE SHAREHOLDER OUTREACHinitiatives.
On behalf of the Board, I want to thank Goodyear’s investors for regularly engaging with the Company and sharing their valuable perspectives on what we are doing well and how we can continue to improve. As part ofimprove our regular, robust outreach and engagement program, we spoke with many of our investors in 2021 on topics ranging from the acquisition of Cooper Tire, the industry’s macro conditions, strategy and operations, executive compensation and corporate responsibility practices and goals. Feedbackprogram. The feedback we receivedreceive from shareholders wasis reported to the full Board and is vital to our thoughtful deliberationsdecision-making process.
SUCCESSION PLANNING
One of the Board’s core responsibilities is the selection and retention of, and succession planning for, the chief executive officer and other members of management. The Board regularly discusses and reviews management succession plans, both with the chief executive officer and in executive session. I am particularly pleased this year to see some of the fruits of those efforts with the election of Christina Zamarro as Executive Vice President and Chief Financial Officer and Darren Wells as Executive Vice President and Chief Administrative Officer, a newly created position overseeing Goodyear’s strategy and growth initiatives. We have included a further update on our succession planning practices in the Company’s strategy, operations, executive compensation program, governance practices, and oversight of environmental and sustainability initiatives.section titled “Management Succession Planning.”
I appreciate your ongoing confidence in Goodyear and the Board of Directors, and thank you for your continued investment. We remain committed to serving your interests, and we appreciate the opportunity to serve Goodyear on your behalf.
Sincerely,
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Laurette T. Koellner Independent Lead Director |
NOTICE OF 20222023 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT
To the shareholders:
The
| Location:
1989 Front Street
Time & Date:
Monday, April Eastern Time
The Board of Directors fixed the close of business on February
If you are not able to attend, we hope that you will vote by proxy. These proxy materials contain detailed information about the matters on which we are asking you to vote. Please read the materials, including the Board’s recommendation on each Proposal, thoroughly. Your vote is very important to us.
March By order of the Board of Directors
Daniel T. Young, Secretary |
To elect the 
To consider and approve an advisory resolution regarding the compensation of our named executive officers (Proposal 2);
To consider and 
To consider and approve a proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 
To consider and approve a proposal to amend Goodyear’s Articles of Incorporation to eliminate statutory supermajority vote requirements applicable to our common stock (Proposal 5);
To consider and vote upon a shareholder proposal (Proposal 
To act upon such other matters and to transact such other business as may properly come before the meeting or any postponements or adjournments thereof.
Please vote via the internet or by telephone or complete, date and sign your Proxy and return it promptly in the enclosed envelope
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This summary is an overview of information that you will find elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. This proxy statement and the form of proxy are first being sent to shareholders on or about March 11, 2022.13, 2023.
Proposals and Board Recommendations
| Proposal | Proposal | Board’s Voting Recommendation | Page Reference | Proposal | Board’s Voting Recommendation | Page Reference | ||||||||||
1. | Election of Directors | FOR each Nominee | 13 | Election of Directors | FOR each Nominee | 15 | ||||||||||
2. | Advisory Vote on Executive Compensation | FOR | 19 | |||||||||||||
2. | Advisory Vote on Executive Compensation | FOR | 22 | |||||||||||||
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3. | Adoption of 2022 Performance Plan | FOR | 85 | Advisory Vote on Say-On-Pay Frequency | ONE YEAR | 23 | ||||||||||
4. | Ratification of Appointment of Independent Registered Public Accounting Firm | FOR | 97 | |||||||||||||
4. | Ratification of Appointment of Independent Registered Public Accounting Firm | FOR | 91 | |||||||||||||
5. | Shareholder Proposal regarding Simple Majority Vote | AGAINST | 99 | |||||||||||||
5. | Company Proposal with respect to amending the Company’s Articles to eliminate statutory supermajority vote requirements applicable to our common stock | FOR | 93 | |||||||||||||
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6. | Shareholder Proposal regarding Shareholder Ratification of Excessive Termination Pay | AGAINST | 95 | |||||||||||||
Business Overview
Goodyear is one of the world’s leading manufacturers of tires, engaging in operations in most regions of the world. In 2021,2022, our net sales were $17.5 billion$20,805 million and Goodyear net income was $764$202 million. We develop, manufacture, distribute and sell tires for most applications through our strong portfolio of brands, led by the Goodyear brand, one of the most recognizable brand names in the world, as well as the Cooper, Dunlop, Kelly, Mastercraft, Roadmaster, Debica, Sava and Fulda brands.
We are one of the world’s largest operators of commercial truck service and tire retreading centers. We operate approximately 1,000950 retail outlets where we offer our products for sale to consumer and commercial customers and provide repair and other services. We have a pervasive distribution network that is focused on making the tire buying process easier — with a concentrated network of aligned third-party distributors, approximately 300 warehouse distribution facilities, and a leading business-to-consumere-commerce platform.
We manufacture our products in 57 manufacturing facilities in 23 countries, including the United States, and we have marketing operations in almost every country around the world. We employ approximately 72,00074,000 full-time and temporary associates worldwide.
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2022 Year in Review
2021 Business Performance
During 2021, ourDespite a challenging operating results improved significantly as the overall macroeconomic environment continued to recover following the onset of the COVID-19 pandemic in 2020. In that environment, we2022, Goodyear grew volume and market share in our consumer businesses, where we are benefiting from new product launches, actionsand delivered stable earnings on robust revenue growth.
Thanks to strengthen distribution and recent OE fitment wins, including robust growth in electric vehicle tire deliveries. At the same time, we delivered strong earnings growth through price and mix, which more than offset the impacts of higher raw material costs. In addition, we successfully offset the impact of higher costs resulting from COVID-related labor shortages and inflation in wages, energy and transportation.
Nonetheless, our 2021 results continued to be negatively influenced by the direct and indirect macroeconomic effects of the ongoing pandemic. Our global businesses are experiencing varying stages of recovery, as national and local efforts in many countries to contain the spread of COVID-19 continued to impact economic conditions.
While these challenges were certainly significant, we continued to execute on our strategy throughout 2021. To this end, we announced our goal to achieve net-zero greenhouse gas emissions by 2050,combination with minimal reliance on offsets. In support of this ambition, we established new intermediate-term emission-reduction targets aligned with SBTi standards.
As an industry leader, we’re also committed to using more sustainable materials in our tires to help protect our planet for future generations. As a result, we’re working diligently to develop a 100 percent sustainable-material tire by the end of the decade.
Cooper Tire Acquisition
On June 7, 2021, we completed our acquisition of Cooper Tire & Rubber Company (“Cooper Tire”), along with a slate of innovative new products and our advantaged supply chain, we grew tire volumes more than the fifth largestindustry during 2022. We delivered replacement volume growth of 7% against an industry that declined 2%. We also grew OE volumes 15% against an industry that grew 5%, reflecting continued industry recovery and new fitment wins. During 2022, we won 60 percent of the fitments we sought and nearly tripled our wins on electric vehicle fitments versus 2021.
In the face of significant inflationary cost pressures, we captured the value of our brands in the marketplace, reflected in strong revenue per tire manufacturergrowth of approximately 16% (before the effects of foreign currency). In addition to driving the top line higher, price/mix benefitted earnings by $2.5 billion — a company record, which more than offset $1.9 billion of higher raw material costs and most of the $0.9 billion of inflationary and other cost increases.
In response to ongoing cost pressures, we took actions to manage our cost structure. In addition to pursuing ongoing operational productivity initiatives, which are even more valuable given the effects of inflation, we also commenced a series of structural cost savings programs to help our businesses match the reality of the current environment. Expected to benefit 2023 and beyond, these programs include the announced closure of our facility in North America.Melksham, UK, the exit of our South African retail operations, and a rationalization and reorganization of our global salaried workforce.
WithAs we executed well in the acquisitionface of an uncertain and volatile environment, we continued to lay the groundwork for future earnings growth while making progress to help shape a better future through our sustainability initiatives.
We made meaningful progress on the integration of Cooper Tire, ensuring the combination’s promised value and putting us on track to achieve the targeted run-rate synergies by mid-2023.
We continued to demonstrate why we have grownare a leader at the forefront of new mobility trends, where we are helping shape the intelligent tire. In one example, we demonstrated capability to accurately estimate tire-road friction potential and provide real-time information to maximize uptime through our business in markets and segments that play to our strengths and have increased our portfolio of products and services for our customers and consumers.
The combination markspartnership with Gatik, a transformational milestone for both of our companies, each with rich histories in our shared home state of Ohio. The combination created a stronger U.S. leader in autonomous middle mile logistics.
Meanwhile, we continued to make progress on our bold sustainability goals. Among these is our recently unveiled demonstration tire comprised of 90% sustainable materials — a significant step toward our goal of creating the global tire industry, with over 200 years of combined industry experience and more than 50 manufacturing locations. We believe this transaction drives significant value for all our stakeholders – our shareholders, our customers, our employees, and the communities in which we operate.industry’s first 100% sustainable-material tire.
COMPELLING STRATEGIC AND FINANCIAL BENEFITS
Strengthened Leadership Position in Global Tire Industry. The combination strengthened Goodyear’s leading position in the U.S., while significantly growing our position in other North American markets. In China, the combination nearly doubled Goodyear’s presence and increases the number of relationships with local automakers, while creating broader distribution for Cooper replacement tires through Goodyear’s network of 2,500 branded retail stores.
Combined Two Complementary Brand Portfolios with a Comprehensive Offering Across the Value Spectrum. Creates opportunities to leverage the strength of Goodyear original equipment and premium replacement tires, along with the mid-tier power of the Cooper brand, which has particular strength in the light truck and SUV segments. Together, these brands have the opportunity to deliver a more complete offering to aligned distributors and retailers.
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Expected to Provide Significant, Immediate and Long-Term Financial Benefits.Synergies and Tax Benefits. We expect to achieve approximately $250 million in run-rate cost synergies (increased from our original estimate of $165 million) within two years following the close of the transaction. In addition, the combination is expected to generate net present value of $450 million or more by utilizing Goodyear’s available U.S. tax attributes. These tax attributes are expected to reduce the company’s cash tax payments, positioning it to generate additional free cash flow. Earnings and Balance Sheet. The transaction is immediately accretive to earnings per share, modestly improves Goodyear’s balance sheet position and enhances the company’s ability to delever.
Opportunity to Create Additional Value from Manufacturing and Distribution. Opportunities for expansion of select Cooper facilities will increase capital efficiency and flexibility. Additional revenue growth opportunities will result from the addition of the Cooper brand to Goodyear’s global distribution network.
Increases Scale to Support Investments in New Mobility and Fleet Solutions. As an industry leader in the U.S., the combined company will offer tire products and a broad selection of services through Goodyear’s relationships with traditional and emerging original equipment manufacturers; autonomous driving system developers; new and established fleet operators; and other mobility platforms.
Relative Performance
Our market share in key consumer replacement tire markets, global consumer original equipment tires, and key commercial replacement tire markets all rose in 20212022 when compared to 2020.2021.
| Share of Market | 2020 | 2021 | 2021 | 2022 | ||||||||||||
Consumer Replacement - Key Markets | 11.5 | % | 12.2 | % | ||||||||||||
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Consumer Replacement - Key Markets | ||||||||||||||||
Consumer Replacement - Key Markets | 12.2 | % | 15.4 | % | ||||||||||||
Consumer OE - Global | ||||||||||||||||
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Consumer OE - Global | ||||||||||||||||
Consumer OE - Global | 8.6 | % | 8.9 | % | 8.9 | % | 10.1 | % | ||||||||
Commercial Replacement - Key Markets | 8.7 | % | 8.8 | % | ||||||||||||
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Commercial Replacement - Key Markets | ||||||||||||||||
Commercial Replacement - Key Markets | 8.8 | % | 10.1 | % | ||||||||||||
Our stock price rose by 95%, significantly outperforming both our principal tire industry peers and the S&P 500, for the year ended December 31, 2021.
2021 Stock price performance
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Shareholder Engagement and Responsiveness
We believe that it is important for us to communicate regularly with shareholders regarding areas of interest or concern. We have a robust shareholder engagement program that includes an annual outreach that is focused on our long-term business strategy, executive compensation, corporate governance, executive compensation, corporate responsibility and other topics suggested by our shareholders. ThisOur annual outreach helps to ensure that our shareholders are heard and able to communicate directly with us on these important matters. The following chart demonstrates our long-standing commitment to a robust shareholder engagement program:
Commitment to Shareholder Engagement (Shareholders Engaged as a % of Outstanding Common Stock)
As part of our annual outreach (based on our outstanding Common Stockcommon stock as of September 30, 2021)December 31, 2022):
We requested the opportunity to meet with 59% of our shareholders;
We ultimately engaged with shareholders representing 49% of our Common Stock; and
 | We requested the opportunity to meet with shareholders representing 80% of outstanding shares held by institutional investors. |  | We engaged with shareholders representing 63% of outstanding shares held by institutional investors. The Chairman of our Compensation Committee participated in most meetings. |
The Chairman of our Compensation Committee met with several of our largest shareholders (representing 15% of our Common Stock) to discuss changes to our compensation programs and to continue to provide a direct line of communication between our shareholders and the Board of Directors.
Specifically, ourOur outreach meetings this year gave us the chancean opportunity to discuss:
Our acquisition of Cooper Tire, expected synergies and integration efforts;
Our continued recovery from the impacts of the COVID-19 pandemic;
Our leadership position in mobility and fleet solutions;
Our thorough process for setting challenging targets and aligning pay and performance;
Our recently announced net-zero 2050 climate ambition and nearer-term 2030 science-based targets for reducing greenhouse gas emissions;
An update on our corporate responsibility strategy, known as Goodyear Better Future;
Our executive compensation program, including changes the Compensation Committee was considering for 2022 as a result of shareholders’ feedback on our 2020 and 2021 executive compensation program; and
Our corporate governance and corporate responsibility practices.
| • | Executive compensation, including investor feedback on our 2022 say-on-pay vote and actions we proposed taking in response; |
| • | Our sustainability initiatives and disclosures, including our recent Task Force on Climate-related Financial Disclosure (TCFD) response and information from our Corporate Responsibility Report; |
| • | Board oversight, composition and governance, including our response to the 2022 shareholder proposal calling for the elimination of any remaining supermajority voting requirements; |
| • | Updates on our diversity and inclusion initiatives; |
| • | Our leadership position in mobility and fleet solutions; and |
| • | Our recent acquisition of Cooper Tire and ongoing integration efforts. |
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| PROXY SUMMARY
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RESPONSE TO 2022 SAY-ON-PAY VOTE
At the 20212022 annual meeting, our say-on-pay vote was approved by 69%21% of our shareholders. As a result,The Human Capital and Compensation Committee (the “Compensation Committee”) and entire Board were disappointed with this outcome and have been focused on understanding and responding to our shareholders’ feedback reflected in this vote. Through our engagement efforts, we reached outsought to several ofelicit and consider shareholders’ perspectives related to our shareholders who voted againstexecutive compensation program, program design elements and specific actions to inform appropriate responses to the say-on-pay vote.
During these engagements, we continued to receive positive feedback on our say-on-pay proposal to better understand their concerns. The most commonly expressed concern was that we reset severalbalanced metrics related goals and performance periods in our 2020the 2022 annual and long-term incentive plans, givenand shareholders did not have concerns with the profound impact of the pandemic on our operations in the first half of the year. Those concerns were mitigated for some shareholders by our reduction of the target and maximum payouts for our 2020 compensation programs. All of the shareholder feedback that we received was reported to the Compensation Committee and the Board of Directors for its consideration.
We understand the concerns raised by somefundamental aspects of our compensation program’s design. Instead, shareholders regarding the extent of the changes made to our 2020 compensation programs. The Compensation Committee acknowledges that the COVID-19 pandemic and the associated circumstances in 2020 were extraordinary and necessitated unique actions and responses. The Committee did not make any in-flight changes to our 2021 compensation programs and, absent extraordinary circumstances, does not intend to adjust in-flight long-term incentive awards in the future.
In 2021, the Compensation Committee retained many of the Share, Cost and Cash metrics used in the 2020 compensation program due to their success in motivating our employees. Additionally, we re-introduced EBIT and net income to ensure continued focus on profitability, thereby ensuring that our financial metrics continue to be aligned with our strategic objectives.
In addition, beginningwho voted against say-on-pay in 2022 noted specific compensation actions taken during 2021 as the driver of their vote. These actions were not repeated in 2022, and the Compensation Committee made furthercommitments to not repeat these actions in the future except in truly extraordinary circumstances. Furthermore, other changes were implemented to our incentive plansprogram, informed by feedback we received from our shareholders.
Our Compensation Discussion and Analysis, beginning on page 27, provides a discussion of the areas of concern that these shareholders expressed and the actions the Compensation Committee has taken in responseresponse. All of the shareholders that we spoke with indicated that these actions were appropriate and acceptable resolutions to shareholder feedback:the low say-on-pay vote in 2022.
Returned to a full-year (rather than a half-year) performance period for EBIT and free cash flow in the annual plan;
Reduced the weighting of strategic and operational objectives from 40% to 20% and added specific environmental, social and governance (ESG) and new mobility metrics (weighted at 10% each) in the annual plan; and
Equally weighted net income and cash flow return on capital in the long-term plan.
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Executive Compensation Highlights
Our executive compensation program is designed to support achievement of our business objectives and to serve the long-term interests of our shareholders and is strongly aligned to Company performance and measurable financial and other metrics, thereby aligning management’s interests with our shareholders’ interests by focusing management on driving increased shareholder value. Our financial and other metrics also continue to be aligned with our strategic objectives, as shown in the table below.
| Strategic Objective | ||
| Competitive Advantage | Market Share and Variable Manufacturing Cost | |
| Profitability | EBIT and Net Income | |
| Strong Liquidity | Free Cash Flow | |
| Return Generated on Investments in Business | Cash Flow Return on Capital | |
| Superior Shareholder Returns | Relative TSR Modifier | |
| New Mobility | New Mobility Goals | |
| Corporate Responsibility and Sustainability | ESG Metrics | |
| Specific Drivers of Success of Business | Strategic and Operational Performance Goals | |
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| PROXY SUMMARY |
The resulting compensation for our named executive officers is comprised of a mix of variable and fixed compensation that is strongly linked to our performance.
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For 2021,2022, our financialcompensation metrics were:
Incentive Program
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New Mobility | 10% | ||||||||||||||||||||||||
Environmental, Social and Governance (ESG) | 10% | ||||||||||||||||||||||||
Strategic and Operational Performance Goals |
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Performance-Based Awards (Paid out in Equity and Cash)
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Our Board of Directors
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Director Nominees
Our well-qualified and diverse group of directors brings an important mix of leadership, boardroom and operating experience to Goodyear. Our directors provide us with critical insights on many important issues facing our business. These collective attributes enable the Board to exercise appropriate independent oversight of management and pursue long-term, sustainable shareholder value creation by providing strategic input on the development and oversight of the implementation of our long-term strategy.
Board Diversity
The Board is committed to creating a board that is strongly independent and diverse. Our Board also seeks to have well-balanced tenures, with longer-servinglonger serving directors who provide knowledge of our business through industry cycles and newer directors with fresh perspectives.
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Consistent with our Corporate Governance Guidelines, the Governance Committee seeks nominees who will provide a diversity of perspectives in Board deliberations, as well as diversity in personal characteristics, such as age, gender and ethnicity. While the Board has not adopted a formal policy with regard to the consideration of diversity in identifying director nominees, the Governance Committee and the Board believe that considering diversity is consistent with the goal of creating a Board that best serves the needs of the Company and the interests of its shareholders, and it is one of the many factors that they consider when identifying individuals for Board membership.
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| PROXY SUMMARY |
The composition of the nominees for election to the Board at the 2023 Annual meetingMeeting is reflected below. See Proposal 1 for additional details.
Corporate Governance Highlights
WE HAVE AN ABIDING COMMITMENT TO GOOD GOVERNANCE, AS ILLUSTRATED BY THE FOLLOWING PRACTICES:
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• Annually elected directors; no classified board
• Majority voting for the election of directors with a resignation policy
• Lead independent director with clear, robust responsibilities
• 100% independent audit, compensation and nominating committees
• Regular executive sessions of the independent directors
• Conduct annual Board and Committee evaluations | • Proxy access available to 3 year, 3% shareholders for up to 20% of Board
• Overboarding policy in place for directors
• No poison pill in place
• Shareholders have the right to call a special meeting at 25%
• Clear and robust corporate governance guidelines
• Maintain a leading corporate responsibility program with Board oversight
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| Executive Compensation | ||
| Summary Compensation Table | ||
| Summary of Realized Pay Earned by Our Chief Executive Officer for | ||
USE OF FORWARD-LOOKING STATEMENTS
For additional information regarding our use of forward-looking statements in this Proxy Statement, see Exhibit A.
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PRINCIPLES AND BOARD MATTERS
Goodyear is committed to having sound corporate governance principles. Having such principles is essential to running Goodyear’s business efficiently and to maintaining Goodyear’s integrity in the marketplace. Goodyear’s Corporate Governance Guidelines, Business Conduct Manual, Board of Directors and Executive Officers Conflict of Interest Policy and charters for each of the Audit, Human Capital and Compensation, Corporate Responsibility and Compliance, Finance, and Governance Committees are available at https://corporate.goodyear.com/us/en/investors/governance/documents-charters.html. Please note, however, that information contained on the website is not incorporated by reference in this Proxy Statement or considered to be a part of this document. A copy of the committee charters and corporate governance policies may also be obtained upon request to the Goodyear Investor Relations Department.
CURRENT COMMITTEE MEMBERSHIP AND MEETINGS HELD DURING 20212022
| Committees | Committees | ||||||||||||||||||||||||||||||||||||||||||||||||||
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| Independent | Audit | Compensation | Corporate & Compliance | Finance | Governance | Executive | Independent | Audit | Human Compensation | Corporate & Compliance | Finance | Governance | Executive | |||||||||||||||||||||||||||||||||||||
Ms. Clayton |
| MEMBER | MEMBER | ||||||||||||||||||||||||||||||||||||||||||||||||
Mr. Firestone |
| CHAIR | MEMBER | MEMBER |
| CHAIR | MEMBER | MEMBER | |||||||||||||||||||||||||||||||||||||||||||
Mr. Geissler |
| MEMBER | MEMBER |
| MEMBER | MEMBER | |||||||||||||||||||||||||||||||||||||||||||||
Mr. Hellman |
| MEMBER | MEMBER | ||||||||||||||||||||||||||||||||||||||||||||||||
Ms. Koellner, Lead Director |
| MEMBER | MEMBER | CHAIR |
| MEMBER | MEMBER | CHAIR | |||||||||||||||||||||||||||||||||||||||||||
Mr. Kramer, Chairman and CEO | MEMBER | MEMBER | |||||||||||||||||||||||||||||||||||||||||||||||||
Ms. Lewis |
| CHAIR | MEMBER | MEMBER |
| CHAIR | MEMBER | MEMBER | |||||||||||||||||||||||||||||||||||||||||||
Mr. Mahendra-Rajah |
| MEMBER | MEMBER |
| MEMBER | MEMBER | |||||||||||||||||||||||||||||||||||||||||||||
Mr. McCollough |
| MEMBER | MEMBER | ||||||||||||||||||||||||||||||||||||||||||||||||
Mr. McGlade |
| CHAIR | MEMBER | MEMBER |
| CHAIR | MEMBER | MEMBER | |||||||||||||||||||||||||||||||||||||||||||
Mr. Palmore |
| MEMBER | CHAIR | MEMBER |
| MEMBER | CHAIR | MEMBER | |||||||||||||||||||||||||||||||||||||||||||
Ms. Siu |
| MEMBER | MEMBER |
| MEMBER | MEMBER | |||||||||||||||||||||||||||||||||||||||||||||
Ms. Streeter |
| MEMBER | MEMBER | ||||||||||||||||||||||||||||||||||||||||||||||||
Mr. Wessel | MEMBER | MEMBER | |||||||||||||||||||||||||||||||||||||||||||||||||
Mr. Williams |
| MEMBER | CHAIR | MEMBER |
| MEMBER | CHAIR | MEMBER | |||||||||||||||||||||||||||||||||||||||||||
Number of Meetings in 2021 | 6 | 8 | 3 | 3 | 4 | 0 | |||||||||||||||||||||||||||||||||||||||||||||
Number of Meetings in 2022 | 6 | 5 | 3 | 4 | 4 | 1 | |||||||||||||||||||||||||||||||||||||||||||||
| 1 |
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS | ||||||||||||
| Board Leadership Structure
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Mr. Kramer serves as our Chairman, Chief Executive Officer and President and Ms. Koellner was elected by the independent members of the Board to serve as our independent Lead Director, initially effective June 30, 2019 and subsequently each year thereafter. The Board believes that the current Board leadership structure is the most appropriate for the Company and its shareholders at this time. The Board periodically reviews the Board leadership structure and the roles of the Chairman and independent Lead Director, taking into consideration the views expressed by our shareholders.
In order to ensure that the independent and non-management members of the Board maintain proper oversight of management on behalf of our shareholders, the Board has an independent Lead Director who is elected annually by the independent members of the Board. The election of a Lead Director by the independent members of the Board demonstrates the Board’s continuing commitment to strong corporate governance, Board independence and the importance of the role of Lead Director.
Currently, the Board believes that having Mr. Kramer serve as Chairman best positions the Company to compete successfully and advance our shareholders’ interests. His extensive knowledge of the Company and the tire industry, gained through 2223 years of experience in positions of increasing authority including Chief Financial Officer and President, North America, is valuable to the Board in his role as Chairman. Mr. Kramer has provided strong and open leadership of the Board as the Company executes its strategy in a highly competitive industry that continues to be challenged by volatile global economic conditions. The current combination of the Chairman and CEO roles enhances the Company’s ability to coordinate the development, articulation and execution of a unified strategy at both the Board and management levels. The Board also believes that having Mr. Kramer serve as Chairman and CEO has facilitated the flow of information to, and discussion among, members of the Board regarding the Company’s business.
The Governance Committee believes that Ms. Koellner is highly qualified to serve as our Lead Director and that she provides strong leadership of the independent and non-management directors and diligently fulfills her duties as Lead Director.
LEAD DIRECTOR DUTIES
| • | Preside at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors |
| • | Call meetings or executive sessions of the independent directors, and coordinate and develop the agenda for those meetings or sessions |
| • | Serve as liaison between the Chairman and the independent directors |
| • | Approve the schedule of Board meetings to ensure that there is sufficient time for discussion of all agenda items and advise the Chairman on the same |
| • | Approve all information sent to the Board, including meeting agendas, and advise the Chairman on such matters, and may specifically request the inclusion of information |
| • | Interview, along with the Chairman of the Governance Committee, all Board candidates and make recommendations to the Governance Committee and the Board |
| • | Discuss with the Governance Committee and the Chairman the membership of Board committees and the selection of committee chairs |
| • | Evaluate, together with the Compensation Committee, the Chairman and CEO’s performance, and meet with the Chairman and CEO to discuss that evaluation |
| • | Assist the Governance Committee in connection with the annual Board and committee evaluation process, and address any issues regarding director performance |
| • | If requested by major shareholders, ensure that she is available for consultation and direct communication in appropriate circumstances |
| 2 |
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS | ||||||||||||
| Board Leadership Structure
|
Additional duties of our independent Lead Director are set forth in Annex II to our Corporate Governance Guidelines.
In addition to the clearly-delineated and comprehensive oversight responsibilities of our Lead Director, the independent directors have ample opportunity to, and regularly do, assess the performance of the CEO and provide meaningful direction to him. The Board has strong and effective independent oversight of management:
82% of the Company’s director nominees are independent;
| • | 83% of the Company’s director nominees are independent; |
All members of the Audit, Compensation and Governance Committees are independent directors;
| • | All members of the Audit, Compensation and Governance Committees are independent directors; |
Committee Chairs, all of whom are independent, approve agendas for their committee meetings;
| • | Committee Chairs, all of whom are independent, approve agendas for their committee meetings; |
Board and Committee agendas are prepared based on discussions with all directors and recommendations from management, and all directors are encouraged to request agenda items, additional information and/or modifications to schedules as they deem appropriate; and
| • | Board and Committee agendas are prepared based on discussions with all directors and recommendations from management, and all directors are encouraged to request agenda items, additional information and/or modifications to schedules as they deem appropriate; and |
The Board holds executive sessions of the independent directors at each Board meeting that are led by the Lead Director.
| • | The Board holds executive sessions of the independent directors at each Board meeting that are led by the Lead Director. |
The Board’s policy is that, especially in our changing and challenging environment, it must retain the flexibility to determine the most effective Board leadership structure at any particular point in time. As a result, the Board has the responsibility to establish our leadership structure, including in connection with any CEO succession. Some of the factors that the Board has considered, and may consider in the future, in combining or separating the Chairman and CEO roles, include:
The respective responsibilities of the Lead Director, the Chairman of the Board and the CEO;
| • | The respective responsibilities of the Lead Director, the Chairman of the Board and the CEO; |
The effectiveness of the current Board leadership structure, including the Board’s assessment of the performance of the Chairman and CEO and the Lead Director and whether the Board is maintaining strong, independent oversight of management;
| • | The effectiveness of the current Board leadership structure, including the Board’s assessment of the performance of the Chairman and CEO and the Lead Director and whether the Board is maintaining strong, independent oversight of management; |
Shareholder views on our Board leadership structure;
| • | Shareholder views on our Board leadership structure; |
The Company’s operating and financial performance, including the potential impact of particular leadership structures on the Company’s performance;
| • | The Company’s operating and financial performance, including the potential impact of particular leadership structures on the Company’s performance; |
The ability to attract or retain well-qualified candidates for the positions of CEO, Chairman of the Board and Lead Director;
| • | The ability to attract or retain well-qualified candidates for the positions of CEO, Chairman of the Board and Lead Director; |
Practices at other similarly situated U.S. public companies; and
| • | Practices at other similarly situated U.S. public companies; and |
| • | Legislative and regulatory developments. |
Legislative and regulatory developments.
Board’s Role in Risk Oversight
Management continually monitors the material risks facing the Company, including competitive, strategic, operational, financial (accounting, liquidity and tax), legal, regulatory, and environmental, social and governance risks. The Board as a whole has responsibility for oversight of management’s identification and management of, and planning for, those risks. Reviews of certain areas are conducted by relevant Board Committees that report their deliberations to the Board.
| 3 |
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS | ||||||||||||
| Board’s Role in Risk Oversight
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The Board and its Committees oversee risks associated with their principal areas of focus, as summarized below. The Board and its Committees exercise their risk oversight function by carefully evaluating the reports they receive from management and by making inquiries of management with respect to areas of particular interest to the Board. Board oversight of risk is enhanced by the fact that the Lead Director and Chairman attend virtually all Committee meetings and that Committee reports are provided to the full Board following each Committee meeting. We believe that our leadership structure also enhances the Board’s risk oversight function since our Lead Director regularly discusses the material risks facing the Company with management. The Chairman is also expected to report candidly to his fellow directors on his assessment of the material risks we face, based upon the information he receives as part of his management responsibilities. Both the Lead Director and the Chairman are well-equipped to lead Board discussions on risk issues.
BOARD/COMMITTEE AREAS OF RISK OVERSIGHT
| Full Board | • Strategic, financial and execution risk associated with the annual operating plan and strategic plan (including allocation of capital investments);
• Major litigation and regulatory matters;
• Significant acquisitions and divestitures;
• Management succession planning. | ||
| Audit Committee | • Risks associated with financial matters, particularly financial reporting and disclosure, accounting, and internal controls, as well as risks associated with information technology and cybersecurity. | ||
| Human Capital and Compensation Committee | • Risks associated with the establishment and administration of executive compensation, incentive compensation programs, diversity and inclusion, and performance management of officers. | ||
| Governance Committee | • Risks associated with Board effectiveness and organization, corporate governance matters, and director succession planning. | ||
| Finance Committee | • Risks associated with liquidity, pension plans (including investment performance, asset allocation and funded status), tax strategies, currency and interest rate exposures, and insurance strategies. | ||
| Committee on Corporate Responsibility and Compliance | • Risks associated with health, safety and the environment, climate change, sustainability, product quality, and the Company’s legal and ethical compliance | ||
| 4 |
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS | ||||||||||||
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Management Succession Planning
The Board of Directors considers the selection and retention of, and succession planning for, the Chief Executive Officer and other senior leaders to be one of its most important responsibilities. In accordance with our Corporate Governance Guidelines, the CEO delivers a report regarding succession planning with respect to the office of the Chief Executive Officer and other members of the executive management team on at least an annual basis. The Board then discusses management succession with the CEO, and during an executive session when the CEO is not present. These discussions include an evaluation of potential internal candidates for succession and identification of additional experience that candidates should gain to be ready to succeed in their proposed new roles. The Board also retains, from time to time, outside advisors to assist the Board in assessing our senior leadership and identifying developmental needs. As necessary, the Board also considers the need to recruit talent externally if internal candidates do not possess the requisite skills. In practice, these discussions often occur more frequently than annually, based on the Company’s needs at any particular time.
The Board also reviews, on an annual basis, talent across the entire organization, in particular diversity and how promotions and new hires supplement the diversity pool, focusing on what skill sets are needed for the that group to be successful. More frequent updates on progress against our goals are provided to the Compensation Committee in their meetings throughout the year. Associates who may become members of the executive team in the next five to ten years are provided exposure to the Board through presentations and other networking events.
An example of the Board’s succession planning activities is the recently announced leadership changes. Effective on January 1, 2023, Darren Wells was elected Executive Vice President and Chief Administrative Officer, a newly created position overseeing our strategy, business development, information technology and project management initiatives, and Christina Zamarro was promoted to succeed Mr. Wells as Executive Vice President and Chief Financial Officer. Prior to her promotion, Ms. Zamarro most recently served as Vice President, Finance and Treasurer.
Consideration of Director Nominees
The Governance Committee will consider properly submitted shareholder nominations of candidates for membership on the Board as described below under “Identifying and Evaluating Nominees for Director.” In evaluating nominations, the Governance Committee seeks to address the criteria described below under “Director Selection Guidelines.”
Any shareholder desiring to submit a proposed candidate for consideration by the Governance Committee should send the name of the proposed candidate, together with biographical data and background information concerning the candidate, to the Office of the Secretary, The Goodyear Tire & Rubber Company, 200 Innovation Way, Akron, Ohio 44316-0001.
The Board of Directors has approved guidelines for selecting directors as part of our Corporate Governance Guidelines. Criteria considered in the selection of directors include:
Personal qualities and characteristics, including the highest personal and professional integrity, sound judgment, and reputation in the business community or a record of public service;
| • | Personal qualities and characteristics, including the highest personal and professional integrity, sound judgment, and reputation in the business community or a record of public service; |
| 5 |
Substantial business experience or professional expertise and a record of accomplishments;
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS | ||||||||
| Director Selection Guidelines |
Experience and stature necessary to be highly effective, working with other members of the Board, in serving the long-term interests of shareholders;
| • | Substantial business experience or professional expertise and a record of accomplishments; |
Ability and willingness to devote sufficient time to the affairs of the Board and the Company and to carry out their duties effectively;
| • | Experience and stature necessary to be highly effective, working with other members of the Board, in serving the long-term interests of shareholders; |
The needs of the Company at the time of nomination to the Board and the fit of a particular individual’s skills and personality with those of the other directors in building a Board that is effective and responsive to the needs of the Company;
| • | Ability and willingness to devote sufficient time to the affairs of the Board and the Company and to carry out their duties effectively; |
Diverse business experience, substantive expertise, skills and background, as well as diversity in personal characteristics, such as age, gender and ethnicity; and
| • | The needs of the Company at the time of nomination to the Board and the fit of a particular individual’s skills and personality with those of the other directors in building a Board that is effective and responsive to the needs of the Company; |
| • | Diverse business experience, substantive expertise, skills and background, as well as diversity in personal characteristics, such as age, gender and ethnicity; and |
Ability to satisfy Goodyear’s and The Nasdaq Stock Market’s independence standards.
| • | Ability to satisfy Goodyear’s and The Nasdaq Stock Market’s independence standards. |
Identifying and Evaluating Nominees for Director
The Governance Committee (in this section, the “Committee”) is responsible for identifying, screening and recommending persons for nomination to the Board. The Governance Committee considers candidates for Board membership suggested by its members and other Board members, as well as management and shareholders. On occasion, the Committee also retains third-party executive search firms to identify candidates. Mr. Mahendra-Rajah was initially identified as a potential candidate for Board membership by a third-party search firm. In addition, underUnder our prior master labor agreement with the United Steelworkers (the “USW”), the USW had the right to nominate a candidate for consideration for membership on the Board. Mr. Wessel, who became a director in December 2005, was identified and recommended by the USW.
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Ms. Clayton, who became a director in 2022, was identified and recommended by Ms. Koellner, our Lead Director.
Once a prospective nominee has been identified, the Committee makes an initial determination on whether to conduct a full evaluation of the candidate. This initial determination is based on whatever information is provided to the Committee with the recommendation of the prospective candidate, as well as the Committee’s own knowledge of the prospective candidate, which may be supplemented by inquiries to the person making the recommendation or others. The preliminary determination is based primarily on the need for additional Board members and the likelihood that the prospective nominee can satisfy the director selection guidelines described above. If the Committee determines, in consultation with the Chairman of the Board, the Lead Director and other Board members as appropriate, that additional consideration is warranted, it may request a third-party search firm to gather additional information about the prospective nominee’s background and experience and to report its findings to the Committee. The Committee then evaluates the prospective nominee against the standards and qualifications set out in Goodyear’s director selection guidelines. The Committee also considers such other relevant factors as it deems appropriate, including the balance of management and independent directors and the evaluations of other prospective nominees. The Committee seeks to have a diverse Board representing a range of backgrounds, knowledge and skills relevant to the Company’s business and the needs of the Board. We consider the members of our Board to have a diverse set of business and personal experiences, backgrounds and expertise, and to be diverse in terms of age, gender and ethnicity. These diversity characteristics are among the Board’s priorities when evaluating a pool of potential director candidates.
In connection with this evaluation, the Committee determines whether to interview the prospective nominee, and if warranted, the Lead Director, the Chairman of the Committee, one or more other members of the Committee and others as appropriate,
| 6 |
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS | ||||||||
| Identifying and Evaluating Nominees for Director |
interview prospective nominees in person or by telephone. After completing this evaluation and interview, the Committee makes a recommendation to the full Board as to the persons who should be nominated for election to the Board, and the Board makes its decision after considering the recommendation and report of the Committee.
DIRECTOR SKILL AND DIVERSITY MATRIX
Our Board is comprised of committed, qualified individuals with a diverse and complementary blend of skills, business and personal experiences, backgrounds and expertise, including the following:
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Gender Diverse | F | M | M | F | F | M | M | M | F | M | M | |||||||||||||||||||||||||||||||||
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| 7 |
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS | ||||||||
| Identifying and Evaluating Nominees for Director |
Public Company CEO/CFO | Directors who have served in senior leadership roles at large organizations provide us with a practical understanding of organizations, processes, strategy, risk management and other factors that promote growth. | |
Financial Expert/M&A/Capital Markets | An understanding of finance and accounting assists our directors in overseeing our financial reporting and internal controls to ensure they are accurate and transparent. | |
| Industrial Manufacturing | Directors with manufacturing experience provide valuable insight to management on the development and execution of our strategy. | |
Automotive / Auto Supply Chain | Directors with experience in automotive or the automotive supply chain provide valuable insight to management on our broader industry and the factors impacting it. | |
| Technology | Directors with expertise in technology provide valuable insight to management in developing advanced technologies that enable us to deliver superior products and services to our customers. | |
| International | As a global company, we benefit from our directors who have experience with multinational companies or in international markets to help direct our global business plans and navigate challenges that we may encounter in our international operations. | |
Marketing and Branded Consumer Products | Marketing and branding initiatives are essential to our growth strategy to increase market share in a competitive industry. | |
Business Model Transformation | Directors who have enabled transformational growth help us consider how our products and services are delivered in the market as consumer preferences change over time. | |
| Legal/Regulatory | Directors with knowledge of the legal and regulatory framework in which we operate help evaluate risks and how our business may be impacted by governmental actions and public policy. | |
Board Structure and Committee Composition
As of the date of this Proxy Statement, Goodyear’s Board has fourteentwelve directors, each elected annually, and the following six committees: (1) Audit, (2) Human Capital and Compensation, (3) Corporate Responsibility and Compliance, (4) Finance, (5) Governance, and (6) Executive. The current membership and the function of each of the committees are described below. Each of the committees operates under a written charter adopted by the Board, except for the Executive Committee which is provided for by our Code of Regulations. During 2021,2022, the Board held nine meetings. Each director attended at least 75% of all Board and applicable Committee meetings. Directors are expected to attend annual meetings of Goodyear’s shareholders. All of the directors who then served on the Board attended the last annual meeting of shareholders.
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS | ||||||||||||
| Audit Committee
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MEMBERS:
Mr.
Mr. Mahendra-Rajah
Mr. McGlade (Chairman)
Mr. Palmore
MEETINGS IN
The Board has determined that each member of the Audit Committee is independent within the meaning of Goodyear’s independence standards and applicable Securities and Exchange Commission (“SEC”) rules and regulations, and Mr. | KEY RESPONSIBILITIES:
The Audit Committee assists the Board in fulfilling its responsibilities for oversight of the integrity of Goodyear’s financial statements, Goodyear’s compliance with legal and regulatory requirements related to financial reporting, the independent registered public accounting firm’s qualifications and independence, and the performance of Goodyear’s internal auditors and independent registered public accounting firm. The Audit Committee appoints, evaluates and determines the compensation of Goodyear’s independent registered public accounting firm; reviews and approves the scope of the annual audit plan; reviews and pre-approves all auditing services and permitted non-audit services (and related fees) to be performed by the independent registered public accounting firm; oversees investigations into complaints concerning financial matters; reviews policies and guidelines with respect to risk assessment and risk management, including Goodyear’s major financial risk exposures; oversees Goodyear’s information technology and cybersecurity strategy; prepares the Audit Committee report for inclusion in the annual proxy statement; and annually reviews the Audit Committee charter and the Committee’s performance. The Audit Committee works closely with management as well as Goodyear’s independent registered public accounting firm. The Audit Committee has the authority to obtain advice and assistance from, and receive appropriate funding from Goodyear for, outside legal, accounting or other advisors as the Audit Committee deems necessary to carry out its duties.
The report of the Audit Committee is on page |
Human Capital and Compensation Committee
MEMBERS:
Mr. Firestone (Chairman)
Ms. Koellner
Mr.
MEETINGS IN
The Board has determined that each member of the Compensation Committee is independent within the meaning of Goodyear’s independence standards and applicable Nasdaq listing standards. | KEY RESPONSIBILITIES:
The Board of Directors has delegated to the Compensation Committee primary responsibility for establishing and administering Goodyear’s compensation programs for officers and other key personnel. The Compensation Committee oversees Goodyear’s compensation and benefit plans and policies for directors, officers and other key personnel, administers its incentive compensation plans (including reviewing and approving grants to officers and other key personnel), and reviews and approves annually all compensation decisions relating to officers, including the Chief Executive Officer. The Compensation Committee also prepares a report on executive compensation for inclusion in the annual proxy statement, reviews and discusses the Compensation Discussion and Analysis with management and recommends its inclusion in the annual proxy statement, and periodically reviews our
In performing its duties, the Compensation Committee meets periodically with the CEO to review compensation policies and specific levels of compensation paid to officers and other key personnel, and reports and makes recommendations to the Board regarding executive compensation policies and |
| 9 |
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS | ||||||||
| Human Capital and Compensation Committee |
Human Capital and Compensation Committee (continued)
other significant decisions related to the administration of its duties. The Compensation |
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Compensation Committee (continued)
Committee also will consider the results of shareholder advisory votes on executive compensation matters and the changes, if any, to Goodyear’s executive compensation policies, practices and plans that may be warranted as a result of any such vote and reviews an annual risk assessment of Goodyear’s executive compensation policies, practices and plans as part of its role in overseeing management’s identification and management of, and planning for, compensation-related risks. Under its charter, the Compensation Committee may delegate its authority to one or more of its members as appropriate.
The Compensation Committee has the authority to retain outside advisors, including independent compensation consultants, to assist it in evaluating actual and proposed compensation for officers. The Compensation Committee also has the authority to approve, and receive appropriate funding from Goodyear for, any such outside advisor’s fees. Prior to retaining any such advisors, the Compensation Committee considers the independence-related factors identified in applicable securities laws and Nasdaq listing standards. During |
Committee on Corporate Responsibility and Compliance
MEMBERS:
Mr. Mahendra-Rajah
Mr. Palmore (Chairman)
Ms. Siu
Mr. Wessel
MEETINGS IN | KEY RESPONSIBILITIES:
The Committee on Corporate Responsibility and Compliance reviews Goodyear’s legal and ethical compliance programs as well as its business conduct policies and practices and its policies and practices regarding its relationships with shareholders, employees, customers, governmental agencies and the general public. The Committee monitors Goodyear’s objectives, policies, programs and performance with respect to |
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS | ||||||||||||
| Finance Committee
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MEMBERS:
Mr. Firestone
Mr.
Ms. Lewis (Chairwoman)
Ms. Siu
MEETINGS IN | KEY RESPONSIBILITIES:
The Finance Committee consults with management and makes recommendations to the Board of Directors regarding Goodyear’s capital structure, dividend policy, tax strategies, compliance with terms in financing arrangements, insurance strategies, banking arrangements and lines of credit, pension plan funding, and significant mergers and acquisitions and other business development activities. The Finance Committee also reviews and consults with management regarding policies with respect to interest rate and foreign exchange risk, liquidity management, counterparty risk, derivative usage, credit ratings, and investor relations activities. |
MEMBERS:
Ms. Koellner
Ms. Lewis
Mr.
Mr. Williams (Chairman)
MEETINGS IN
The Board has determined that each member of the Governance Committee is independent within the meaning of Goodyear’s independence standards. | KEY RESPONSIBILITIES:
The Governance Committee identifies, evaluates and recommends to the Board of Directors candidates for election to the Board. The Committee also develops and recommends appropriate corporate governance guidelines, recommends policies and standards for evaluating the overall effectiveness of the Board of Directors in the governance of Goodyear and undertakes such other activities as may be delegated to it from time to time by the Board of Directors. |
MEMBERS:
Mr. Firestone
Ms. Koellner (Chairwoman)
Mr. Kramer
Ms. Lewis
Mr. McGlade
Mr. Palmore
Mr. Williams
MEETINGS IN | KEY RESPONSIBILITIES:
The Executive Committee is comprised of the Chairperson of each of the Board’s other standing committees, the Chairman of the Board and the Lead Director, who serves as Chairwoman of the Executive Committee. The Executive Committee may transact all business and take any actions that can be done by the Board of Directors, except that it does not have authority to fill any Board or committee vacancies. |
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS | ||||||||||||
| Corporate Responsibility
|
In 2021,2022, we reinforced our commitment to corporate responsibility. Corporate responsibility commitment, which includes being a responsible corporate citizen for our communities and the environment and improving the sustainabilityis an integral part of our strategy and operations. As part of this, we maintainedWe are committed to ethical and sustainable practices to protect the planet and people; give back to the community; provide a safe, diverse, and healthy workplace; and engage our focus on the health and safety of our employees while serving and meeting the needs of our customers and consumers.associates in these efforts.
Notably, we recentlySustainability is included a section focused on sustainability in Goodyear’s refreshed strategy roadmap. This illustratesroadmap — illustrating the importance of sustainability factors, consistent with our corporate responsibility framework, Goodyear Better Future. We believe this reinforcesFuture, and reinforcing our commitment to our high-priority ESG topicsbalancing environmental, social and helps positionfinancial demands without compromising the ability of future generations to meet their needs while we work to meet our business goals.needs.
Goodyear Better Future’sFuture’s governance structure focuses on enhancing the management, transparency and communication of our high-priority ESG topics. The pillars of our corporate responsibility framework are highlighted on the following page.
ENVIRONMENTAL SUSTAINABILITY AND CLIMATE CHANGE
As part of our corporate responsibility commitment, Goodyear reinforced its efforts around environmental stewardship over the last year. That’s why we launched our CEO-sponsored climate strategy development in 2021, led by a cross-functional operating committee and supported by external climate expertise. This work will ensure we understand our most significant climate impacts and the key risks and opportunities we face.
As part of our climate strategy, inIn December 2021, we announced our climate ambition, which features our goal to reach net-zero value chain greenhouse gas (GHG) emissions by 2050, aligned with the Science BasedScience-Based Targets initiative (SBTi) and its new Net-Zero Standard. We also announced our commitment to achieve near-term science-based targets by 2030 and will submit our 2030 and 2050 targets to SBTi for independent validation.2030. Using 2019 as a base year, we are committed to reducing our Scope 1 and 2 emissions by 46% by 2030 and relevantcertain direct Scope 3 emissions by 28% over the same time frame. Goodyear submitted our 2030 and 2050 targets to SBTi for independent validation in 2022.
In the next phase of our climate strategy work, we will deliver2022, Goodyear developed a comprehensive decarbonization roadmap, including an action plan to achieve our climate ambition, and will expandambition. In addition, we expanded our climate reporting to align with the recommendations and supplementary guidance from the Task Force on Climate-related Financial Disclosures (TCFD). Moving forward, we will workcontinue to integrate actions to achieve our ambitions into our operating plans and implement new metrics to track our progress across many of the Goodyear Better Future topics outlined below.progress.
BOARD AND MANAGEMENT OVERSIGHT
While our full Board oversees and guides our strategic direction, the Board’s Committee on Corporate Responsibility and Compliance oversees our corporate responsibility and climate strategy objectives and regularly monitors our progress towards achieving them. Functional leaders, including our Vice President and Chief Sustainability Officer; Vice President, Global Quality; Senior Vice President, Global Operations and Chief Technology Officer; and Vice President, Compliance & Ethics,Chief Risk Officer and Associate General Counsel, Regulatory Affairs, meet with the Committee regularly to align and review our strategy, goals and progress.
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS | ||||||||||||
| Corporate Responsibility
|
BETTER FUTURE FRAMEWORK
Goodyear Better Future, our corporate responsibility framework, was launched in 2018 to enhance the existing governance of our high-priority topics. The framework details the high-priority environmental and social sustainability topics we manage across the business. Our focus on these topics creates value for our stakeholders, drives innovation, manages risk, and builds a better future.
The pillars of our framework are highlighted below.
| Pillar |
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| Topic | Sustainable Raw Materials and Sourcing Supply Chain Management | Safety and Health Operational Impacts End-of-Life Tires (“ELT”) Business Continuity | Advancing Tire Performance Shaping the Mobility Revolution | Compliance and Ethics Health and Wellness Community Engagement Diversity and Inclusion Talent Development | ||||
Focus Areas | • Source sustainable natural rubber • Increase sustainable material usage • Pursue raw material traceability • Remove materials of concern • Manage supply chain ESG risks | • Culture of safety and health • Reduce environmental impacts • Produce high-quality products • Drive ELT to beneficial reuse • Risk analysis and mitigation | • Fuel efficiency, safety, longevity, and comfort • Fleets, autonomous, connected and electric vehicles | • Demonstrate ethical values • Healthy and well workforce • Global community engagement • Diverse and inclusive culture • Robust talent development | ||||
Our Corporate Responsibility Report is typically published in the second quarter of each year. For more information on Goodyear’s commitment to corporate responsibility, please visit www.goodyear.com/responsibility. Please note, however, that information contained on the website is not incorporated by reference in this Proxy Statement or considered to be a part of this document.
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS | ||||||||||||
| Communications with the Board
|
As described on Goodyear’s website at https://corporate.goodyear.com/us/en/investors/governance/contact-board.html, shareholders may communicate with the Board or any of the directors (including the Lead Director or the non-management directors as a group) by sending correspondence to the Office of the Secretary, The Goodyear Tire & Rubber Company, 200 Innovation Way, Akron, Ohio 44316-0001. All communications will be compiled by the Secretary and submitted to the Board or the individual directors on a periodic basis.
The Board has determined that nineten of the eleventwelve director nominees are independent within the meaning of Goodyear’s independence standards, which are based on the criteria established by The Nasdaq Stock Market and are included as Annex I to Goodyear’s Corporate Governance Guidelines. Mr. Kramer, our Chairman of the Board, Chief Executive Officer and President, is not considered independent. In addition, in light of his relationship with the USW, Mr. Wessel is not considered independent. Further, the Board expects that Mr. Wessel will recuse himself from discussions and deliberations regarding Goodyear’s relationship with the USW. The Board also determined that the nature and size of the ordinary course commercial relationships between Goodyear and Parker-Hannifin Corporation did not impair the independence of Mr. Williams. The relationship was de minimis, constituting approximately three one-hundredthsthree-hundredths of one percent (0.03%) of either Goodyear’s or Parker-Hannifin’s consolidated gross revenues in the most recent fiscal year.
Our Corporate Governance Guidelines provide that directors may not simultaneously serve on the board of directors of (i) more than four public companies, including the Company, or (ii) in the case of public company executive officers, more than two public companies, including the Company.
The Governance Committee annually reviews each director’s service on and contributions to the Board, including consideration of each director’s public company leadership roles and other outside commitments, prior to recommending a director or nominee for election to the Board. All of our directors are currently in compliance with our overboarding policy.
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PROPOSAL 1 – ELECTION OF DIRECTORS
The Board of Directors has selected the following eleventwelve nominees recommended by the Governance Committee for election to the Board of Directors. The directors will hold office from their election until the next Annual Meeting of Shareholders, or until their successors are elected and qualified. If any of these nominees for director becomes unavailable, the persons named in the proxy intend to vote for an alternate designated by the current Board of Directors.
Mr. Peter S. Hellman and Mr. W. Alan McCollough were not nominated for re-election to the Board of Directors due to the retirement age provisions of Goodyear’s Corporate Governance Guidelines and Ms. Stephanie A. Streeter has decided not to stand for re-election to the Board of Directors. Mr. Hellman will be retiring from the Board at the Annual Meeting after nearly 12 years of distinguished service, Mr. McCollough will be retiring after 15 years of distinguished service, including several as our independent Lead Director, and Ms. Streeter will be retiring after nearly 14 years of distinguished service. Goodyear and the Board of Directors are deeply grateful to Mr. Hellman, Mr. McCollough and Ms. Streeter for their leadership and guidance during their tenures on the Board.
James A. FirestoneNorma B. Clayton
Director Since: November 28, 2022 Committees: Audit Corporate Responsibility and Compliance Age: 64 | CURRENT PRINCIPAL OCCUPATION: Retired. Formerly Vice President for Learning, Training and Development of The Boeing Company DESCRIPTION OF BUSINESS EXPERIENCE: Ms. Clayton was Vice President for Learning, Training and Development of The Boeing Company, an aerospace manufacturer, from July 2007 until her retirement in March 2016. Ms. Clayton joined Boeing in February 1995 where she held a variety of leadership roles across engineering, plant operations and optimization, manufacturing excellence, quality and product safety, sourcing, supply chain and procurement, and human resources. Prior to joining Boeing, she spent several years leading plant operations and sourcing at Lockheed Martin, and prior to that, she held management roles in manufacturing and engineering at General Electric, after starting her career at General Motors. | OTHER PUBLIC COMPANY DIRECTORSHIPS HELD SINCE JANUARY 1, 2018: Nucor Corporation (2021 – present) Ms. Clayton is also currently the Chair of the Board of Trustees of Tuskegee University. Ms. Clayton’s global leadership experience in manufacturing, operations, technology, innovation and human resources will be valuable to Goodyear and its shareholders as it continues to build its business and enables mobility in a fast-evolving industry. | ||||||
| 15 |
| ELECTION OF DIRECTORS |
James A. Firestone
|
Director Since: December 3, 2007
Committees: Compensation (Chairman) Finance Executive
Age:
|
|
CURRENT PRINCIPAL OCCUPATION:
Retired. Formerly Executive Vice President and President, Corporate Strategy and Asia Operations of Xerox Corporation
DESCRIPTION OF BUSINESS EXPERIENCE:
Mr. Firestone was Executive Vice President and President, Corporate Strategy and Asia Operations of Xerox Corporation from January 2014 until his retirement on October 31, 2016. Mr. Firestone was President, Corporate Operations from October 2008 to December 2013 and President of Xerox North America from October 2004 to September 2008. Before joining Xerox in 1998, Mr. Firestone worked for IBM Corporation as general manager of the Consumer Division and for Ameritech Corporation as president of Consumer Services. He began his business career in 1978 with American Express, where during his 15-year tenure he ultimately rose to President, Travelers Cheques. |
OTHER PUBLIC COMPANY DIRECTORSHIPS HELD SINCE JANUARY 1, None
Mr. Firestone has extensive executive management experience in positions of increasing responsibility, including most recently as a senior executive officer of Xerox Corporation, which is of similar size and global complexity as Goodyear. He also has over 20 years of profit and loss management responsibility, as well as significant international business experience and merger and acquisition experience. These experiences provide him with unique and valuable insights as a director of Goodyear, particularly with respect to operations and finance matters. | ||||
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Werner Geissler
| 
Director Since: February 21, 2011
Committees: Audit
Age:
|
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CURRENT PRINCIPAL OCCUPATION:
Retired. Formerly Vice Chairman, Global Operations of The Procter & Gamble Company
DESCRIPTION OF BUSINESS EXPERIENCE:
Mr. Geissler was Vice Chairman, Global Operations of The Procter & Gamble Company from August 2007 until his retirement on December 31, 2014, and was Group President, Central & Eastern Europe, Middle East and Africa from July 2004 to July 2007. He joined Procter & Gamble in 1979 and held positions of increasing responsibility in various brand and general management and operations roles in Europe, the Middle East, Central Asia, Japan, Africa and the United States. |
OTHER PUBLIC COMPANY DIRECTORSHIPS HELD SINCE JANUARY 1,
Philip Morris International Inc. (2015 – present) Mr. Geissler, a native of Germany, has deep executive management experience, including as a senior executive officer of Procter & Gamble, where he oversaw Procter & Gamble’s extensive worldwide business operations. He has significant international business experience and profit and loss management responsibility. These experiences provide him with valuable insights as a director of Goodyear, particularly with respect to consumer marketing and international, operations and finance matters. | |||||||
| 16 |
| ELECTION OF DIRECTORS |
Laurette T. Koellner
|
February 23, 2015
Lead Director
Committees: Compensation Governance Executive (Chairwoman)
Age:
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|
CURRENT PRINCIPAL OCCUPATION:
Retired. Formerly President of Boeing International and Executive Chairman of International Lease Finance Corporation
DESCRIPTION OF BUSINESS EXPERIENCE:
Ms. Koellner most recently served as Executive Chairman of International Lease Finance Corporation, an aircraft leasing subsidiary of American International Group, Inc., from June 2012 until its sale in May 2014. From 1978 until 2007, Ms. Koellner held positions of increasing responsibility at McDonnell Douglas Corporation and The Boeing Company, an aerospace company, including as President of Boeing International, where she oversaw Boeing’s international operations, and President of Connexion by Boeing, which provided satellite-based connectivity services to aircraft and maritime vessels. While at Boeing, Ms. Koellner also served as Vice President and General Auditor, Vice President and Corporate Controller, and Chief Human Resources Officer. |
OTHER PUBLIC COMPANY DIRECTORSHIPS HELD SINCE JANUARY 1,
Celestica Inc. (2009 – present) Nucor Corporation (2015 – present) Papa John’s International, Inc. (2014 – present)
Ms. Koellner has significant senior executive management experience, including extensive international business experience, as well as financial and human resources experience. Her service in leadership positions on several public company boards of directors provides her with the necessary skills to be Lead Director and also provides us with important insights on business practices in a variety of industries. | |||||||
|
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Richard J. Kramer
| 
February 22, 2010
Committees: Executive
Age: |
|
CURRENT PRINCIPAL OCCUPATION:
Chairman of the Board, Chief Executive Officer and President of Goodyear
DESCRIPTION OF BUSINESS EXPERIENCE:
Mr. Kramer joined Goodyear in March 2000 as Vice President – Corporate Finance, serving in that capacity as Goodyear’s principal accounting officer until August 2002, when he was elected Vice President, Finance – North American Tire. In August 2003, he was named Senior Vice President, Strategic Planning and Restructuring, and in June 2004 was elected Executive Vice President and Chief Financial Officer. Mr. Kramer was elected President, North American Tire in March 2007 and continued to serve as Chief Financial Officer until August 2007. In June 2009, Mr. Kramer was elected Chief Operating Officer and continued to serve as President, North American Tire until February 2010. He was elected Chief Executive Officer and President effective April 13, 2010 and Chairman effective October 1, 2010. Prior to joining Goodyear, Mr. Kramer was with PricewaterhouseCoopers LLP for 13 years, including two years as a partner. |
OTHER PUBLIC COMPANY DIRECTORSHIPS HELD SINCE JANUARY 1,
The Sherwin-Williams Company (2012 – present)
Mr. Kramer has been an executive officer of Goodyear for | |||||||
| 17 |
| ELECTION OF DIRECTORS |
Karla R. Lewis
|
Director Since: April 12, 2021
Committees: Finance (Chairwoman) Governance Executive
Age:
|
|
CURRENT PRINCIPAL OCCUPATION:
President and Chief Executive Officer of Reliance Steel & Aluminum Co.
DESCRIPTION OF BUSINESS EXPERIENCE:
Ms. Lewis is currently |
OTHER PUBLIC COMPANY DIRECTORSHIPS HELD SINCE JANUARY 1,
Reliance Steel & Aluminum Co.
Ms. Lewis has over 30 years of financial management experience from her service as Controller and Chief Financial Officer of Reliance. She also possesses extensive merger and acquisitions and integration experience, having worked on many such transactions during her career at Reliance. These experiences will be valuable to Goodyear and its shareholders in both the near-term and in the years to come. | |||||||
|
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Prashanth Mahendra-Rajah
| 
Director Since: June 11, 2021
Committees: Audit Corporate Responsibility and Compliance
Age:
|
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CURRENT PRINCIPAL OCCUPATION:
DESCRIPTION OF BUSINESS EXPERIENCE:
Mr. Mahendra-Rajah is currently
|
OTHER PUBLIC COMPANY DIRECTORSHIPS HELD SINCE JANUARY 1,
None
Mr. Mahendra-Rajah’s expertise in finance, analysis and strategic planning has made him a highly valued leader throughout his career. Among his accomplishments as a senior executive, he has helped position global companies for transformative growth following mergers and acquisitions. His extensive background in technology industries combined with a general-manager mindset will be extremely valuable to Goodyear and its shareholders as the Company focuses on future mobility. Mr. Mahendra-Rajah also has the necessary skills and experience to be an “audit committee financial expert.” | |||||||
| 18 |
| ELECTION OF DIRECTORS |
John E. McGlade
| 
Director Since: December 5, 2012
Committees: Audit (Chairman) Governance Executive
Age:
|
|
CURRENT PRINCIPAL OCCUPATION:
Retired. Formerly Chairman, President and Air Products and Chemicals, Inc.
DESCRIPTION OF BUSINESS EXPERIENCE:
Mr. McGlade was Chairman, President and Chief Executive Officer of Air Products and Chemicals, Inc., a global provider of atmospheric, process and specialty gases, from March 2008 until his retirement on July 1, 2014. He joined Air Products in 1976 and held various positions of increasing responsibility, including as Group Vice President, Chemicals Group, and President and Chief Operating Officer.
|
OTHER PUBLIC COMPANY DIRECTORSHIPS HELD SINCE JANUARY 1,
Bunge Limited (2014 – 2019)
Mr. McGlade has strong leadership skills and extensive management, international and operating experience. He has also had responsibility for the environment, health, safety and quality function during his career at Air Products. These experiences provide him with unique and valuable insights as a director of Goodyear, particularly with respect to operations matters. Mr. McGlade’s tenure as a Chief Executive Officer of a publicly traded company also provides him the necessary skills to be Chairman of our Audit Committee and to be an “audit committee financial expert.” | |||||
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Roderick A. Palmore
|
Director Since: August 7, 2012
Committees: Audit Corporate Responsibility Executive
Age:
|
|
CURRENT PRINCIPAL OCCUPATION:
Senior Counsel at Dentons US LLP Formerly Executive Vice President, General Counsel, Chief Compliance and Risk Management Officer, and Secretary of General Mills, Inc.
DESCRIPTION OF BUSINESS EXPERIENCE:
Mr. Palmore joined General Mills, a global manufacturer and marketer of food products, as Executive Vice President, General Counsel, Chief Compliance and Risk Management Officer, and Secretary in February 2008 and served in that capacity until his retirement on February 16, 2015. Following his retirement from General Mills, he joined Dentons, an international law firm, as senior counsel. From 1996 to 2008, he worked for Sara Lee Corporation in a variety of legal leadership roles, ultimately becoming Executive Vice President, General Counsel and Secretary. Prior to 1996, he worked at the U.S. Department of Justice and in private practice. |
OTHER PUBLIC COMPANY DIRECTORSHIPS HELD SINCE JANUARY 1,
Cboe Global Markets, Inc. (2000 – present) Express Scripts Holding Co. (2014 – 2018)
In his role at General Mills, he was responsible for the company’s worldwide legal activities, corporate ethics, compliance, and corporate security. Notably, Mr. Palmore is also a nationally recognized advocate for diversity in the legal industry and the founding chair of the Leadership Council on Legal Diversity. Through his experience as general counsel of consumer product public companies, in private practice and as an Assistant U.S. Attorney, Mr. Palmore has extensive experience in compliance and ethics matters, diversity, equity and inclusion, and the legal issues facing Goodyear. In addition, his experience provides him with strong risk management skills. This broad business knowledge and public board experience, as well as his strong leadership skills, are valuable assets to the Board of Directors. | |||||||
| 19 |
| ELECTION OF DIRECTORS |
Hera K. Siu
|
Director Since: December 4, 2019
Committees: Corporate Responsibility Finance
Age:
|
|
CURRENT PRINCIPAL OCCUPATION:
Retired. Formerly Corporate Vice President and Chief Executive Officer, Greater China, of Cisco Systems, Inc.
DESCRIPTION OF BUSINESS EXPERIENCE:
Ms. Siu was Chief Executive Officer, Greater China, for Cisco Systems, Inc., a leading global technology company, from July 2017 until her retirement on September 28, 2020. She previously served as Chief Operating Officer, Greater China, of Cisco from November 2016 until June 2017.
From February 2014 to June 2016, she served as Senior Vice President and Managing Director, Greater China, for Pearson, LLC, a global education company that leverages technology to enhance teaching and learning. Ms. Siu was employed by SAP, a global software and data processing firm, as Senior Vice President, and then President, of |
OTHER PUBLIC COMPANY DIRECTORSHIPS HELD SINCE JANUARY 1,
Vallourec SA TeamViewer AG ASMPT Limited (August 2022 – present)
China and Hong Kong from April 2010 to June 2013, and as Senior Vice President, e-Commerce, Asia Pacific Region, from July 2013 to January 2014. Ms. Siu also previously held positions of increasing responsibility and leadership for companies including Nortel, Inc., Hong Kong Telecom, Ltd., Computer Associates, Inc., and Nokia Telecommunications, Ltd.
Ms. Siu possesses more than 30 years of management experience, with a strong understanding of outcome-based solutions and emerging business models. Her extensive technology background and deep knowledge of the China marketplace will be extremely valuable to Goodyear and its shareholders as Goodyear continues to focus on the future of mobility. | |||||||
|
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Michael R. Wessel
| 
Director Since: December 6, 2005
Committees: Corporate Responsibility and Compliance
Age:
|
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CURRENT PRINCIPAL OCCUPATION:
President of The Wessel Group Incorporated
DESCRIPTION OF BUSINESS EXPERIENCE:
Mr. Wessel has served as President of The Wessel Group Incorporated, a government and political affairs consulting firm, since May 2006. Prior to founding The Wessel Group, he served as Senior Vice President of the Downey McGrath Group, a government affairs consulting firm, from March 1999 to December 2005 and as Executive Vice President from January 2006 to April 2006.
Mr. Wessel is an attorney with over 30 years of experience as an economic and international trade policy advisor in Washington, D.C. Mr. Wessel has acted as an advisor to Congressman Richard Gephardt, both in the U.S. House of Representatives and to his presidential campaigns in 1987-88 and 2003-04, to the Clinton/Gore Transition |
OTHER PUBLIC COMPANY DIRECTORSHIPS HELD SINCE JANUARY 1,
None
Office in 1992 and 1993, and to Senator John Kerry’s presidential campaign in 2004. Mr. Wessel also serves as a Commissioner on the U.S.-China Economic and Security Review Commission, a position he has held since April 2001.
Mr. Wessel’s extensive experience with public policy matters and his government service, including as an advisor to former Majority Leader Gephardt and as an appointee on government commissions, provides us with valuable perspectives on public policy matters impacting trade, international economic affairs and other matters of importance to Goodyear. | |||||||
| 20 |
| ELECTION OF DIRECTORS |
Thomas L. Williams
| 
Director Since: February 26, 2019
Committees:
Governance (Chairman) Executive
Age:
|
|
CURRENT PRINCIPAL OCCUPATION:
Executive Chairman of the Board
DESCRIPTION OF BUSINESS EXPERIENCE:
Mr. Williams is the |
OTHER PUBLIC COMPANY DIRECTORSHIPS HELD SINCE JANUARY 1,
Parker-Hannifin Corporation (2015 – present) Chart Industries, Inc. (2008 – 2019)
Mr. Williams has over 30 years of international operations experience and particular expertise on complex and cyclical businesses, as well as extensive knowledge of manufacturing, distribution, logistics and innovation, through his service in executive-level positions at both Parker and General Electric. He also has a track record of focusing on safety and sustainability. As a global manufacturer, we believe that Mr. Williams will provide valuable perspectives in these areas as a director of Goodyear. | |||||||
Your Board of Directors unanimously recommends that shareholders vote FOR each of the nominees for director named in this Proxy Statement (Proposal 1).
|
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PROPOSAL 2 – ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
We are seeking your vote to approve, on an advisory (or non-binding) basis, the compensation of our named executive officers as disclosed in this Proxy Statement.
Our Compensation Discussion and Analysis (“CD&A”), which starts on page 21,27, describes our executive compensation program. We encourage you to read the CD&A before casting your vote.
The advisory resolution below, commonly known as a “say-on-pay” proposal, gives you the opportunity to express your views on our executive compensation program for our named executive officers. The “say-on-pay” proposal is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the executive compensation policies, practices and plans described in this Proxy Statement.
The resolution is required by Section 14A of the Securities Exchange Act of 1934. The resolution is not intended to indicate your approval of the matters disclosed under the heading “Risks Related to Compensation Policies and Practices” or future “golden parachute” payments. We will seek shareholder approval of any “golden parachute” payments at the time of any transaction triggering those payments to the extent required by applicable law.
We ask you to vote “FOR” the following resolution which will be presented by the Board of Directors at the Annual Meeting:
“RESOLVED, that the shareholders of The Goodyear Tire & Rubber Company approve, on an advisory basis, the compensation of the named executive officers as disclosed in the Company’s Proxy Statement for the 20222023 Annual Meeting of Shareholders.”
Although this proposal is an advisory vote that will not be binding on the Compensation Committee or the Board of Directors, the Compensation Committee will consider the results of this shareholder advisory vote and the changes, if any, to our executive compensation policies, practices and plans that may be warranted as a result of this vote. The Board of Directors has determined, consistent with the shareholders’ vote on the matter in 2017, to hold an advisory vote regarding the compensation of our named executive officers every year until the next vote on the frequency of such advisory votes, which is currently expected to occur at the 2023 Annual Meeting of Shareholders.
Your Board of Directors unanimously recommends that shareholders vote FOR the advisory resolution to approve the compensation of our named executive officers (Proposal 2).
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PROPOSAL 3 – ADVISORY VOTE ON THE FREQUENCY OF FUTURE SAY-ON-PAY ADVISORY VOTES
We are seeking your preference, on an advisory (or non-binding) basis, with respect to the frequency of future shareholder votes regarding the compensation of our named executive officers. This advisory “frequency” vote is required at least once every six years. The last advisory “frequency” vote was in 2017.
After careful consideration of this proposal, our Board of Directors has determined that an advisory vote regarding the compensation of our named executive officers that occurs annually is the most appropriate alternative for the Company, and therefore our Board recommends that you vote for a frequency of “One Year” for future shareholder votes regarding the compensation of our named executive officers.
We have found that an annual advisory vote on our executive compensation program has enhanced shareholder communication by encouraging our shareholders to regularly provide us with their input on our executive compensation policies, practices and plans. We believe that an annual advisory vote will continue to provide us a means to obtain regular feedback on shareholder sentiment regarding our executive compensation decisions.
You may vote for a say-on-pay vote frequency of every one, two or three years, or you may abstain from expressing a preference when you vote on the following resolution which will be presented by the Board of Directors at the Annual Meeting:
“RESOLVED, that the option of once every one year, two years or three years that receives the highest number of votes cast will be determined to be the preferred frequency with which the Company is to hold a shareholder advisory vote regarding the compensation of the Company’s named executive officers.”
The option of one year, two years or three years that receives the highest number of votes cast by shareholders will be the frequency for the shareholder advisory vote regarding the compensation of our named executive officers that will be considered to be preferred by our shareholders. However, because this vote is not binding on the Board, the Board may decide, either now or in the future, that it is in the best interests of our shareholders and the Company to hold a shareholder advisory vote regarding the compensation of our named executive officers more or less frequently than the option preferred by our shareholders.
Your Board of Directors unanimously recommends that shareholders vote for a frequency of ONE YEAR for future say-on-pay advisory votes (Proposal 3).
| 23 |
|
March 13, 2023
Dear Fellow Goodyear Shareholder,
As Chairman of the Human Capital and Compensation Committee, I would like to share the Committee’s perspective on executive compensation at Goodyear and how we are designing a program to ensure alignment between our talented executives’ and shareholders’ interests, with a focus on long-term value creation and alignment of pay with performance.
The Committee continuously seeks input from investors on how the program can drive the achievement of our corporate objectives and align with the investment community’s priorities. With this in mind, we were disappointed with the low level of support our say-on-pay proposal received in 2022. Following that vote, we directed a robust shareholder engagement campaign in 2022 — meeting with Goodyear’s investors to better understand their perspectives on our executive compensation program and hear their concerns on our 2022 say-on-pay proposal, including why they opposed the proposal.
I personally participated in many of these meetings with Goodyear’s largest investors and solicited their feedback directly. I was encouraged to hear that the overwhelming majority of investors support Goodyear’s ongoing executive compensation program and share the Committee’s confidence that it effectively incentivizes and rewards the executive team. We also asked for investors’ perspective on potential program changes the Committee was considering in response to their feedback.
Investors broadly expressed their support for these changes, and the Committee was pleased to approve the following program enhancements for 2023:
awards so that a target payout is only achieved if relative TSR is at the 55th percentile of the peer group rather the the 50th percentile. |
In response to growing investor interest in Goodyear’s sustainability initiatives and their integration with the Company’s long-term value creation strategy, the Committee enhanced disclosure of our ESG-related performance metrics and goals, including those in our annual and long-term incentives in 2022.
In our conversations with investors, we heard that some opposed the 2022 say-on-pay proposal specifically because of the one-time awards the Committee granted to certain officers in 2021. Furthermore, some shareholders interpreted these retention awards as an indication that Goodyear’s succession planning may be inadequate.
I explained that the Committee only granted these awards given Goodyear’s unique circumstances at that time, and that the Committee deemed those awards necessary to ensure the retention of key executives amid the integration of Cooper Tire, which marked Goodyear’s largest-ever acquisition. The awards achieved the desired effect; I am pleased to report that the Cooper Tire integration has gone well and our synergies are on track. Additionally, to respond
| 24 |
| Letter to shareholders |
to investors’ concerns, we enhanced our succession planning disclosures in this Proxy Statement to highlight the Board’s active and robust ongoing succession planning processes. Finally, we committed to not grant similar one-time awards or make payments outside of our normal compensation program except in truly extraordinary circumstances and to not grant further one-time pension- based retention awards under any circumstances.
The Committee is confident that all of these program changes for 2023 are directly responsive to the shareholder feedback we received leading up to and following the 2022 say-on-pay vote, and ensure that our program remains aligned with shareholder interests. We hope to have your support for this years’ say-on-pay vote.
I invite you to read the Compensation Discussion and Analysis that follows for a comprehensive review of our
executive compensation program, the shareholder feedback we received, and the changes made in response to that feedback. On behalf of the Committee, thank you for your continued engagement and support of Goodyear.
Sincerely,
James A. Firestone
Chairman, Human Capital and Compensation Committee
| 25 |
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COMPENSATION DISCUSSION AND ANALYSIS TABLE OF CONTENTS
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| Long-Term Compensation | |
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| Impact of TSR Modifier and Payout of | |
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| Executive Deferred Compensation Plan | |
| Compensation Policies and Practices | |
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USE OF FORWARD-LOOKING STATEMENTS
For additional information regarding our use of forward-looking statements in this Proxy Statement, see Exhibit A.
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COMPENSATION
DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis describes the Company’s executive compensation philosophy and programs, focusing in particular on the Compensation Committee’s decisions about named executive officers (“NEOs”) in 2021.2022.
OUR NEOS FOR 20212022 ARE:
Richard J. Kramer | Chairman, Chief Executive Officer and President | |
Darren R. Wells | Executive Vice President and Chief Financial Officer | |
Stephen R. McClellan | President, Americas | |
Christopher R. Delaney | President, Europe, Middle East and Africa | |
David E. Phillips | Senior Vice President and General Counsel | |
Ryan G. Patterson | Former Senior Vice President and Chief Operating and Integration Officer, Americas | |
2021 OPERATING RESULTSSHAREHOLDER ENGAGEMENT AND MEANINGFUL RESPONSE
At the 2022 annual meeting, our say-on-pay vote was approved by 21% of our shareholders. The Compensation Committee | ||
EXTENSIVE SHAREHOLDER ENGAGEMENT
| We requested the opportunity to meet with shareholders representing 80% of outstanding shares held by institutional investors. | | We engaged with shareholders representing 63% of outstanding shares held by institutional investors. The Chairman of our Compensation Committee participated in most meetings. |
In evaluating potential changes to our executive compensation program, the Compensation Committee carefully reviewed the shareholder feedback received from our engagement efforts. During 2021, our operating results improved significantly as the overall macroeconomic environment continued to recover following the onset of the COVID-19 pandemic in 2020. In that environment, we grew volume and market share in our consumer businesses, where we are benefiting from new product launches, actions to strengthen distribution and recent OE fitment wins, including robust growth in electric vehicle tire deliveries. At the same time, we delivered strong earnings growth through price and mix, which more than offset the impacts of higher raw material costs. In addition, we successfully offset the impact of higher costs resulting from COVID-related labor shortages and inflation in wages, energy and transportation.
Nonetheless, our 2021 results continued to be negatively influenced by the direct and indirect macroeconomic effects of the ongoing pandemic. Our global businesses are experiencing varying stages of recovery, as national and local efforts in many countries to contain the spread of COVID-19 continued to impact economic conditions.
Despite these significant challenges,engagements, we continued to execute on our strategy throughout 2021.
For example, last year we:
Gained market share in our consumer, commercial and original equipment businesses
Delivered strong price and mix performance that more than offset rising raw material costs
Continued to invest in, and develop products and services for, new mobility and fleet solutions
Notably, on June 7, 2021, we completed our acquisition of Cooper Tire, the fifth largest tire manufacturer in North America. The acquisition is expected to:
Strengthen our leadership position in the global tire industry
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Combine two complementary brand portfolios with a comprehensive offering across the value spectrum
Provide the opportunity for additional value creation from manufacturing and distribution
Increase our scale to support investments in new mobility and fleet solutions
Provide significant immediate and long-term financial benefits
We expect to generate substantial financial benefits from the merger, including $250 million of run-rate synergies by mid-2023, which was increased from our initial expectation of $165 million. In addition, the combination is expected to generate net present value of $450 million or more by utilizing our available U.S. tax attributes. These tax attributes are expected to reduce our cash tax payments, positioning us to generate additional free cash flow.
Our stock price rose by 95%, significantly outperforming both our principal tire industry peers and the S&P 500, for the year ended December 31, 2021.
As part of our annual shareholder outreach, we requested the opportunity to meet with 59% of our shareholders and we ultimately engaged with shareholders representing 49% of our Common Stock. The Chairman of our Compensation Committee met with several of our largest shareholders (representing 15% of our Common Stock) to provide a direct line of communication between our shareholders and the Board of Directors. Our outreach meetings gave us the chance to discuss:
Our acquisition of Cooper Tire, expected synergies and our integration efforts
Our continued recovery from the impacts of the COVID-19 pandemic
The changes we made to our compensation programs to maintain focus on our business priorities
The inclusion of ESG metrics in our annual and long-term incentive plans
Our thorough process for setting challenging targets and aligning pay and performance
The rationale for the grant of integration awards related to the Cooper Tire acquisition
Our commitment to sound executive compensation practices
During our discussions with investors, we receivedreceive positive feedback on our balanced metrics in the 20212022 annual incentive plan and the long-term incentive plan, which include financial, operationalplans, and return-based metrics as wellshareholders did not have concerns with the fundamental aspects of our compensation program’s design. Instead, shareholders who voted against say-on-pay in 2022 noted specific compensation actions taken during 2021 as the newly-introduced ESG metrics in our long-term incentive plan. Investors also supported the rationale, goals and structuredriver of their vote.
The following table provides an overview of the grants madeareas of concern that these shareholders expressed and actions the Compensation Committee has taken in relation to our recent acquisition of Cooper Tire.
response. All of the shareholder feedbackshareholders that we received was reportedspoke with indicated that these actions were appropriate and acceptable resolutions to the Compensation Committee and the Board of Directors for its consideration.low say-on-pay vote in 2022.
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||||||
| Executive Summary
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RESPONSIVENESS TO SHAREHOLDER FEEDBACK, CHANGES TO OUR EXECUTIVE COMPENSATION PROGRAM AND OUR STRONG PAY AND PERFORMANCE ALIGNMENT
At the 2021 annual meeting, our say-on-pay vote was approved by 69% of our shareholders. As a result, we reached out to several of our shareholders who voted against our say-on-pay proposal to better understand their concerns. The most commonly expressed concern was that we reset several metrics and restated goals and performance periods in our 2020 annual and long-term incentive plans given the profound impact of the pandemic on our operations in the first half of the year. Those concerns were mitigated for some shareholders by our reduction of the target and maximum payouts for our 2020 compensation programs.
We understand the concerns raised by some of our shareholders regarding the extent of the changes made to our 2020 compensation programs. The Committee acknowledges that the COVID-19 pandemic and the associated circumstances in 2020 were extraordinary and necessitated unique actions and responses. The Committee did not make any in-flight changes to our 2021 compensation programs and, absent extraordinary circumstances, does not intend to adjust in-flight long-term incentive awards in the future.
In 2021, the Compensation Committee retained many of the Share, Cost and Cash metrics used in the 2020 compensation program due to their success in motivating our employees. Additionally, we re-introduced EBIT and net income to ensure continued focus on profitability, thereby ensuring that our financial metrics continue to be aligned with our strategic objectives.
In 2021, the Compensation Committee also:
Set rigorous goals to incentivize our employees to take advantage of the expected recovery in economic conditions
Added specific, measurable ESG metrics and goals aligned with high-priority topics to our long-term incentive plan
Closed the Supplementary Pension Plan to new entrants
Granted integration-related awards to our officers and other key managers to motivate them to aggressively pursue synergies from the Cooper Tire acquisition and to produce superior shareholder returns
In addition, beginning in 2022, the Compensation Committee made further changes to our incentive plans in response to shareholder feedback:
Returned to a full-year (rather than a half-year) performance period for EBIT and free cash flow in the annual plan
Reduced the weighting of strategic and operational objectives from 40% to 20% and added specific ESG and new mobility metrics (weighted at 10% each) in the annual plan
Equally weighted net income and cash flow return on capital in the long-term plan
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||||||
| Executive Summary
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The resulting compensation for our named executive officers, as described below, is comprised of a mix of variable and fixed compensation that is strongly linked to Company performance.
OUR 2021 EXECUTIVE COMPENSATION PROGRAM STRUCTURAL IMPROVEMENTS
Our compensation programs focus leadership on key areas that create value and align with the interests of our shareholders. The Compensation Committee considers many factors when modifying our compensation programs, including alignment with the company’s strategy, market practice and trends, and shareholder feedback, including the results of say-on-pay votes. We have taken numerous actions over the past several years to enhance our programs, strengthen the links between pay and performance and incentivize management to deliver for shareholders, including the following:
2022 OPERATING RESULTS
Operating results during 2022 reflected solid performance in a uniquely challenging environment.
A CHALLENGING GLOBAL AND INDUSTRY BACKDROP
The tire industry continued its post-pandemic recovery to begin the first half of 2022. This recovery, however, was also marked by a host of challenges impacting the industry and industrial economy more broadly. These included supply chain disruption and staffing constraints. At the same time, the effects of war in Ukraine and the lingering influence of COVID-19 in China further stressed automotive supply chains globally and replacement markets regionally.
While some of these challenges proved to be transitory, others persisted throughout the entire year. Among the most impactful on our operations were the effects of decades-high inflation, resulting in significant increases not only in our raw material costs, but also costs for other inputs like wages, transportation and energy.
As the effects of inflation and central bank actions implemented in response to inflation took hold, industry growth slowed in several markets during the second half of the year, especially Europe. This included dealers lowering inventories on a weaker economic outlook and to manage the effects of inflation on their own balance sheets.
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||||||
| Executive Summary
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Despite these challenges, Goodyear grew share and delivered stable earnings on robust revenue growth during the year.
Thanks to the combination with Cooper Tire, along with a slate of innovative new products and our advantaged supply chain, we grew tire volumes more than the industry during 2022. We delivered replacement volume growth of 7% against an industry that declined 2%. We also grew OE volumes 15% against an industry that grew 5%, reflecting continued industry recovery and new fitment wins. During 2022, we won 60 percent of the fitments we sought and nearly tripled our wins on electric vehicle fitments versus 2021.
In the face of significant inflationary cost pressures, we captured the value of our brands in the marketplace, reflected in strong revenue per tire growth of approximately 16% (before the effects of foreign currency). In addition to driving the top line higher, price/mix benefitted earnings by $2.5 billion – a company record, which more than offset $1.9 billion of higher raw material costs and most of the $0.9 billion of inflationary and other cost increases.
In response to ongoing cost pressures, we took actions to manage our cost structure. In addition to pursuing ongoing operational productivity initiatives, which are even more valuable given the effects of inflation, we also commenced a series of structural cost savings programs to help our businesses match the reality of the current environment. Expected to benefit 2023 and beyond, these programs include the announced closure of our facility in Melksham, UK, the exit of our South African retail operations, and a rationalization and reorganization of our global salaried workforce.
Cash flow from operating activities for the full year was $521 million compared with approximately $1.1 billion of cash generation in the prior year, reflecting a planned rebuild of our finished goods inventories given abnormally low levels in 2021 and the impact of inflation on working capital. We began to trim production levels in the fourth quarter of the year to manage these effects and a slower industry volume environment at the end of the year.
LOOKING AHEAD
As we executed well in the face of an uncertain and volatile environment, we moved the business forward in other ways. We continued to lay the groundwork for future earnings growth while also making progress to help shape a better future through our sustainability initiatives.
We made meaningful progress on the integration of Cooper Tire, ensuring the combination’s promised value and putting us on track to achieve the targeted run-rate synergies by mid-2023.
We continued to demonstrate why we are a leader at the forefront of new mobility trends, where we are helping shape the intelligent tire. In one example, we demonstrated capability to accurately estimate tire-road friction potential and provide real-time information to maximize uptime through our partnership with Gatik, a leader in autonomous middle mile logistics.
Meanwhile, we continued to make progress on our bold sustainability goals. Among these is our recently unveiled demonstration tire comprised of 90% sustainable materials – a significant step toward our goal of creating the industry’s first 100% sustainable-material tire.
Goodyear also continues to make progress toward its other sustainability targets, including our goal of reducing Scope 1 and 2 emissions by 46% and certain Scope 3 emissions by 28% by 2030. To this end, our operations in Europe achieved 100% renewable electricity by the end of 2022, fulfilling the goal set out in 2021.
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||||||
| Executive Summary
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For 2021, the mix of performance metrics was as follows:STRONG PAY FOR PERFORMANCE ALIGNMENT
The following table shows our compensation program’s strategic objectives and related metrics:
| Strategic Objective | Metric | |||||||||||||||
| Competitive Advantage | Market Share and Variable Manufacturing Cost | |||||||||||||||
| Profitability |
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| Strong Liquidity |
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| Return Generated on Investments in Business | Cash Flow Return on Capital | |||||||||||||||
| Superior Shareholder Returns | Relative TSR Modifier | |||||||||||||||
| New Mobility Goals | |||||||||||||||
| Corporate Responsibility and Sustainability |
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| Specific Drivers of Success of Business |
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Strategic and Operational Performance Goals |
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We believe that our compensation program is consistent with our performance-based compensation philosophyOur 2022 payouts reflect solid execution in a challenging environment and serves the long-term interests of our shareholders. We will continue to seek feedback from our investors and consider ongoing enhancements to the program.
CEO TARGET COMPENSATION VS. REALIZED COMPENSATION
The payouts under our incentive compensation plans were strongly aligned with our performance under our operating plan — demonstrating our commitment to structure an executive compensation program that pays for performance.
In line with our pay for performance philosophy, the realized value of our executives’ compensation responds to our performance and broader market conditions. The following table illustrates this by comparing the Company’s stock price with the CEO’s three-year average target and realized pay.
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Our Pay Programs Compared with the Experience of Our Shareholders
In the above chart, target pay reflects base salary, target annual incentive opportunity and the grant date target value of long-term incentives. Realized pay is base salary earned, annual incentive earned, long term incentive to be paid out for the three-year performance cycle then ending, and pre-tax compensation earned, if any, upon the exercise of stock options and the vesting of stock awards regardless of when they were granted.
pay-for-performance alignment. For 2021,2022, the payout for overall company performance underon our annual incentive plan was 166%103%, driven by strong performance acrossin our Share Cost, Cash and EBIT metrics, attributable to better than expectedmetrics. For the completed 2020-2022 performance and improved market conditions.cycle, the payout for performance on our long-term awards was 76%, including the impact of the TSR modifier which reduced payouts by 20%.
As a resultEarnings for the 2022 performance period under each of our strong operating2020-2022, 2021-2023 and 2022-2024 long-term awards were approved at 34%, driven by below target achievement on our net income metric and below threshold performance earningson our cash flow return on capital metric. Actual payouts for the 2021 performance periods under our 2019-2021, 2020-2022 and 2021-2023outstanding long-term awards of 81%, 150% and 150%, respectively, were approved for the applicable periods,remain subject to continued service, a relative total shareholder return modifier (which we refer to asemployment, the “TSR modifier” and which is described in more detail on page 47), and for the 2021-2023 performance cycle ESG metrics of up to 25% of target. Although our stock outperformed both our tire industry peers and the S&P 500 for the year ended December 31, 2021, our stock was in the bottom quartile of companies in the S&P 500 during the three-year period ended December 31, 2021, resulting in a TSR modifier and an ESG index.
Our 2022 payouts reflect the continued rigor of 0.8 times, which reduced the payout for the 2019-2021 performance cycle by 20%.our compensation program goals.
To further demonstrate structural pay and performance alignment, the following table shows both our annual and long-term incentive plan payouts over the last five years, as well as the impact of the relative TSR modifier on our long-term awards.awards:
INCENTIVE PAYOUT HISTORY
| 2017 | 2018 | 2019 | 2020 | 2021 | 2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||||||||||||||||||||||
Annual Incentive Plan Payout | 0% | 0% | 131% | 77% | 166% | |||||||||||||||||||||||||||||||||||
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Annual Incentive Plan Payout | 0% | 131% | 77% | 166% | 103% | |||||||||||||||||||||||||||||||||||
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Three-Year Long-Term Incentive Plan Payout | ||||||||||||||||||||||||||||||||||||||||
Three-Year Long-Term Incentive Plan Payout | ||||||||||||||||||||||||||||||||||||||||
Three-Year Long-Term Incentive Plan Payout | 121% | 39% | 22% | 33% | 86% | 39% | 22% | 33% | 86% | 76% | ||||||||||||||||||||||||||||||
Three-Year TSR Modifier | 0.90x | 0.80x | 0.80x | 0.80x | 0.80x | |||||||||||||||||||||||||||||||||||
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Three-Year TSR Modifier | 0.80x | 0.80x | 0.80x | 0.80x | 0.80x | |||||||||||||||||||||||||||||||||||
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||||||
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The Compensation Committee has adopted a number of best practices that are consistent with our performance-based compensation philosophy and serve the long-term interests of our shareholders:
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Compensation Philosophy and Strategy
The following core principles form the foundation of the compensation program for our executives, including the named executive officers:
FIRST, compensation programs should motivate our executives to take actions that are aligned with our short- and long-term strategic objectives, and appropriately balance risk versus potential reward.
| SECOND, as executives move to a greater level of responsibility, the percentage of their pay based on performance should increase to ensure the highest level of accountability to shareholders.
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THIRD, performance pay should offer an opportunity for above average compensation when our performance exceeds our goals balanced by the risk of below average compensation when it does not. | FOURTH, the percentage of total compensation paid in the form of equity should also increase as executives have increasing responsibility for corporate performance, thereby more closely aligning their interests with those of our shareholders.
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Components of Executive CompensationPAY FOR PERFORMANCE
We providebelieve that our compensation program is consistent with our performance-based compensation philosophy and serves the long-term interests of our shareholders. The payouts under our incentive compensation plans are strongly aligned with our performance under our operating plan — demonstrating our commitment to an executive compensation program that pays for performance.
Consistent with our philosophy, as illustrated below, 90% of total target compensation for our CEO is at-riskand benefits that are market-competitive in which a large portionalmost 70% is performance-based.
In the above chart, total target compensation reflects base salary, target annual incentive opportunity and the grant date target value of the total opportunity is variable and tied to our performance and changes in shareholder value over a multi-year period. The key components of compensation provided to our executive officers and how each supports our compensation objectives are presented in the following table:long-term incentives.
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For 2022, the payout for overall company performance on our annual incentive plan was 103%, driven by strong performance in our Share metrics, attributable to better than expected performance despite challenging market conditions.
As a result of challenging global economic conditions, performance under our 2020-2022, 2021-2023 and 2022-2024 long-term awards of 34% was approved for the 2022 performance periods, subject to continued service, a relative total shareholder return modifier (which we refer to as the “TSR modifier” and which is described in more detail on page 47) and, for the 2021-2023 and 2022-2024 performance cycles, an ESG index of up to 25% of target. For the year ended December 31, 2022, our stock was in the bottom quartile of companies in the S&P 500 during the three-year period ended December 31, 2022, resulting in a TSR modifier of 0.8 times, which reduced the payout for the 2020-2022 performance cycle by 20%.
Process for Determining Executive Compensation Decision-Making
The Compensation Committee undertakes ongoing review of our executive compensation policies, practices and plans to determine whether they are consistent with our compensation philosophy and objectives, and whether they need to be modified in light of changes in our business or the markets in general. The Compensation Committee also meets periodically with the CEO to review compensation policies and specific levels of compensation paid to officers and other key personnel, and reports and makes recommendations to the Board regarding executive compensation policies and plans. In addition, the CEO annually makes recommendations to the Compensation Committee regarding salary adjustments and the setting of annual and long-term incentive targets and awards for officers other than himself, including the other named executive officers. The Compensation Committee also obtains feedback, advice and recommendations on our compensation program from its independent compensation consultant. The Compensation Committee alsoconsultant and reviews Company performance, compensation practices of its peers, compensation surveys and other materials regarding executive compensation.
In determining the compensation of a named executive officer, the Compensation Committee considers various factors, including:
Company performance against corporate and operating unit objectives,
The Company’s relative shareholder return,
The compensation of officers with similar responsibilities at comparable companies,
Individual performance,
Current and future responsibilities,
Retention considerations,
The awards given to the named executive officer in past years, and
The relationship between the compensation to be received by the officer and the compensation to be received by the other named executive officers (which we refer to as “internal pay equity”), including comparing the relationship to that found at comparable companies. In reviewing the CEO’s compensation relative to our other named executive officers, the Compensation Committee takes into account the fact that we do not currently have a president or chief operating officer between the CEO and our business unit presidents or corporate senior vice presidents as do many companies.
| • | Company performance against corporate and operating unit objectives, |
| • | The Company’s relative shareholder return, |
| • | The compensation of officers with similar responsibilities at comparable companies, |
| • | Individual performance, |
| • | Current and future responsibilities, including succession considerations, |
| • | Retention considerations, |
| • | The awards given to the named executive officer in past years, and |
| • | The relationship between the compensation to be received by the officer and the compensation to be received by the other named executive officers (which we refer to as “internal pay equity”), including comparing the relationship to that found at comparable companies. In reviewing the CEO’s compensation relative to our other named executive officers, the Compensation Committee takes into account the fact that we do not currently have a president or chief operating officer between the CEO and our business unit presidents or corporate senior vice presidents as do many companies. |
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COMPENSATION DISCUSSION AND ANALYSIS | ||||||||
| Process for Determining Executive Compensation
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EXECUTIVE COMPENSATION GOVERNANCE AND BEST PRACTICES
The Compensation Committee generally sets “primaryhas adopted a number of best practices that are consistent with our performance-based compensation” which we define philosophy and serve the long-term interests of our shareholders:
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COMPENSATION DISCUSSION AND ANALYSIS | ||||||||
| Process for Determining Executive Compensation |
INDEPENDENT COMPENSATION CONSULTANT
The Compensation Committee has the authority to include salary, annual cash incentivesretain outside advisors, including compensation consultants, to assist it in evaluating actual and long-termproposed compensation for our officers. In August 2021, the CEOCompensation Committee selected Exequity as its independent compensation consultant.
As part of their engagement, the compensation consultant reviewed our executive compensation peer group and conducted a competitive analysis of compensation for the other named executive officers as follows:
Over 90%well as an analysis of the share usage, dilution and overhang of our CEO’sequity compensation plan. The compensation consultant also assisted the Compensation Committee with a variety of other issues, including setting CEO compensation, the design and establishment of performance metrics and goals under our variable incentive plans, reviewing our compensation risk analysis, responding to our 2022 say-on-pay vote outcome, and reviewing this Compensation Discussion and Analysis.
In addition, the compensation consultant reviewed and provided recommendations regarding our non-management director compensation program and made presentations to the Compensation Committee on trends and regulatory developments in executive compensation. When requested by the Compensation Committee, an Exequity representative attends Compensation Committee meetings and participates in private sessions with the Compensation Committee, and Committee members are free to consult directly with Exequity as desired. The compensation consultant works with Goodyear management only under the direction of the Compensation Committee and does not provide any other advice or consulting services to the Company.
COMPENSATION PEER GROUP
The Compensation Committee annually reviews the pay opportunity is at-risklevels and almost 70% is performance-based practices of peer companies in order to assess the competitive positioning of Goodyear’s pay levels and plan designs. For these purposes, the Compensation Committee utilizes the following peer group:
FOR 2022 COMPENSATION DECISIONS, THE PEER GROUP CONSISTED OF:
Adient plc | Fluor Corporation | PPG Industries, Inc. | ||||||||||
Aptiv PLC | Kimberly-Clark Corporation | Stanley Black & Decker, Inc. | ||||||||||
BorgWarner Inc. | Lear Corporation | Tenneco Inc.2 | ||||||||||
Cummins Inc. | Navistar International Corporation1 | Textron Inc. | ||||||||||
Dana Incorporated | PACCAR Inc. | Trane Technologies | ||||||||||
Eaton Corporation plc | Parker-Hannifin Corporation | Whirlpool Corporation | ||||||||||
Emerson Electric Co. | ||||||||||||
1 – No longer publicly traded as of July 2021
Long-term compensation is delivered through grants2 – No longer publicly traded as of restricted stock unitsNovember 2022
Our peer group consists of 19 companies selected according to their similarity to our size and long-term performance-based incentive awards thatcomplexity, operations, products, revenues, markets, availability of information, and any other information the Compensation Committee deems appropriate. Such companies are payablelikely to have executive positions comparable in sharesbreadth, complexity and scope of Common Stock and cash. responsibility to ours.
The mix of long-term compensation between cash-based long-term incentives, performance shares and restricted stock units is based, in part, on the market value of our Common Stock, the number of shares available for grant under our shareholder-approved equity compensation plan, and considerations relating to managing the dilutive effect of share-based awards.
We generally target base salaries for our CEO andpeer group does not include other officers below median market rates,companies in the aggregate, consistent with the requirements of our master labor agreement with the USW,tire industry because no other U.S.-based tire company is similar in size and wecomplexity to us, and non-U.S.-based tire companies do not publish comparable compensation information.
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| Process for Determining Executive Compensation |
We consider median market levels of compensation when setting total target primary compensation levels for our officers. The actual positioning of target compensation relative to the median varies based on each executive’s experience and skill set, and generally results in executives who are new in their role being placed lower in the range and those with more experience being placed higher in the range. We emphasize variable compensation because it minimizes fixed expense associated with salary and enables total compensation to fluctuate directly with performance against operating goals, strategic and operational performance objectives and changes in share price. This approach aligns overall costs with performance and provides executives with a leveraged and attractive compensation opportunity that varies based on results.
For further information regarding the Compensation Committee and its authority and responsibilities, see “Corporate Governance Principles and Board Matters — Compensation Committee” at page 7.
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Role of Compensation Consultant
The Compensation Committee, has the authority to retain outside advisors, including compensation consultants, to assist it in evaluating actual and proposed compensation for our officers. Beginning in August 2021, the Compensation Committee retained Exequity as its independent compensation consultant. Prior to August 2021, the Compensation Committee retained F.W. Cook as its independent compensation consultant.
As part of their engagement, the compensation consultants reviewed our executive compensation peer group and conducted a competitive analysis of compensation for the named executive officers as well as an analysis of the share usage, dilution and overhang of our equity compensation plan. The compensation consultants also assisted the Committeetogether with a variety of other issues, including setting CEO compensation, compensation related to leadership succession and retention activities, the design and establishment of performance metrics and goals under our variable incentive plans, the design of the integration awards, closing the Goodyear Supplementary Pension Plan (the “Supplementary Plan”) to new entrants, the design of the proposed 2022 Performance Plan (see Proposal 3), and reviewing our compensation risk analysis and this Compensation Discussion and Analysis.
In addition,consultant, annually reviews the compensation consultants reviewed and provided recommendations regarding our non-management director compensation program and made presentations to the Compensation Committee on trends and regulatory developments in executive compensation. A representative of the compensation consultant regularly attends Compensation Committee meetings. The compensation consultants work with Goodyear management only under the direction of the Compensation Committee and do not provide any other advice or consulting services to the Company.
Peer Group Benchmarking of Primary Compensation
As noted above, the Compensation Committee considers median market levels of compensation when setting target primary compensation levels for our officers.peer group. For these purposes, the Compensation Committee has determined market rates by considering two sources:
Proxy statements and other public filings of 20 peer companies; and
Broad-based compensation surveys published from time to time by national human resources consulting firms.
FOR 2021 COMPENSATION DECISIONS, THE PEER GROUP NOTED ABOVE CONSISTED OF:
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This peer group was selected because the companies, as a whole, represent organizations of comparable size and complexity with which we compete for executive talent. The peer group includes companies in similar industries with comparable business models and global reach. It does not include other companies in the tire industry because no other U.S.-based tire company is similar in size and complexity to us, and non-U.S.-based tire companies do not publish comparable compensation information.
The Compensation Committee strongly believes that performance should be the primary basis on which compensation decisions are made. At the same time, the Compensation Committee believes that our peer group should reflect the fact that our executive officers are responsible for managing a larger and more complex enterprise with higher debt relative to that of many other publicly traded companies with a larger market capitalization. Accordingly, in 2020, prior to analyzing competitive compensation data to help inform 20212022 compensation decisions, the Compensation Committee reviewedreplaced Air Products & Chemicals, Deere & Company and Illinois Tool Works with Dana and Fluor in order to remove peers with the composition oflargest market capitalizations and to better align the peer group using the following criteria:with our market capitalization.
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At the time of evaluation, our peer group had annual revenues – the size criteria most strongly correlated to compensation – ranging from $9.0 billion to $38.9 billion and median revenues of $15.6 billion (our comparable revenues for the trailing twelve months ended March 31, 2020 were $14.2 billion).
Following its review of the criteria described above, theThe Compensation Committee did not make any additional changes to ourthe peer group for 20212023 compensation decisions. The Compensation Committee may make changesHowever, Navistar was acquired in the peer group from timeJuly 2021 and ceased to time based on the criteria described above or other relevant factors.be publicly traded.
Data with respect to comparable elements of primarytotal target compensation is compiled for the peer group of companies described above from available sources, including, in most cases, the most recently available annual proxy statements and other SEC filings that address executive compensation matters.
The Compensation Committee considers the following factors when establishing performance metrics and targets, including the related threshold and maximum target levels:
Corporate strategy
Macroeconomic and tire industry environment
Annual and long-term operating plans
Performance history
Input from its compensation consultant and management
Difficulty of the targets in light of the above factors
| • | Corporate strategy |
| • |
|
| • |
|
| • |
|
| • | Input from its compensation consultant and management |
| • | Difficulty of the targets in light of the above factors |
The Compensation Committee set the performance metrics, and related weightings and targets, for our 20212022 executive compensation program in February 2021. Following the acquisition of Cooper Tire in June 2021, the Compensation Committee did not alter any of the targets previously set in February 2021 and determined to evaluate performance against those targets excluding the results of Cooper Tire and transaction costs related to the Cooper Tire acquisition so that Goodyear’s performance would be evaluated on a comparable, stand-alone basis.2022. The Compensation Committee believes that the performance metrics it established will focus management’s attention on the key drivers of our business and that the performance targets it established wereare rigorous, while providing meaningful motivational value to our executives. The achievement of these performance targets would ensure that we continue to meet the significant challenges we face, are a stronger competitor and are positioned for ongoing recovery from volatile economic conditions as well as long-term growth. Generally, the Compensation Committee separately granted integration awards focusedprefers to set targets that exceed prior years’ results. However, it also understands that this method is not always practical, especially in our highly cyclical industry that can be impacted by external forces beyond the control of management.
For a discussion of our annual incentive plan metrics, targets and performance, see “Annual Compensation — Annual Incentive Plan – Annual Incentive Plan Metrics and Targets,” and for a discussion of our long-term incentive plan metrics, targets and performance, see “Long-Term Compensation — 2022 Grants of Performance-Based Incentives — Long-Term Compensation Metrics and Targets.”
| 36 |
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||
| 2022 Executive Compensation Elements |
2022 Executive Compensation Elements
We provide executive compensation and benefits that are market-competitive in which a large portion of the total opportunity is variable and tied to our performance and changes in shareholder value over a multi-year period. The key components of compensation provided to our executive officers and how each supports our compensation objectives are presented in the following table:
| 37 |
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||
| 2022 Executive Compensation Elements |
The mix of long-term compensation between cash-based long-term incentives, performance shares and restricted stock units is based, in part, on the acquisitionmarket value of Cooper Tire thatour Common Stock, the number of shares available for grant under our shareholder-approved equity compensation plan, and considerations relating to managing the dilutive effect of share-based awards.
Annual Compensation
BASE SALARY
The Compensation Committee determined that base salary increases were
Consistent with the requirements of our master labor agreement with the USW, | Name | 2021 Base Salaries | 2022 Base | |||||||
Kramer |
| $1,300,000 |
| $1,400,000 | ||||||
Wells |
| 800,000 |
| 835,000 | ||||||
McClellan |
| 750,000 |
| 780,000 | ||||||
Delaney |
| 750,000 |
| 765,000 | ||||||
Phillips |
| 575,000 |
| 600,000 | ||||||
Patterson2 |
| 650,000 |
| 650,000 | ||||||
1 Base salaries were effective May 1, 2022. 2 Mr. Patterson left the Company on October 31, 2022. The pro-rated salary amount for that period is $541,667. | ||||||||||
ANNUAL INCENTIVE PLAN
ANNUAL INCENTIVE PLAN METRICS AND TARGETS
All of our named executive officers are described in detail below.
eligible to earn cash incentives under our annual incentive plan. The performance targetsmetrics in the annual incentive plan continued to emphasize the importance of our balance sheetearnings (as measured by EBIT) and theour generation of free cash flow, while re-introducing earningsboth on a full-year basis. The performance metrics (EBITalso continued to measure our market share, both in consumer and net income). They also challenged us to perform well in the marketplace (as measured by market share), continue to win new business for the future through building our pipeline of fitmentscommercial replacement and with OE manufacturers, and manage our variable manufacturing costs. In addition, the Compensation Committee introducedreduced the weighting of individual strategic objectives from 40% to 20% and added goals for ESG metrics of up to 25% of target to incentivize important ESG-relatedand New Mobility initiatives, that furthered our strategic priorities.weighted at 10% each.
All of thesePayouts for corporate officers are based on overall company results and individual performance metrics allowed our team the ability to demonstrate stronggoals. Payouts for operating unit officers are based 50% on their operating unit’s performance irrespective of market conditions, which was important given the ongoing pandemic. The achievement of these performance targets would ensure that we had met the significant challenges we faced, were a stronger competitor and were positioned50% on overall company results for post-pandemic recoveryShare, Cost, Cash and EBIT and on overall company results for ESG and New Mobility, as well as for long-term growth.
In February 2021, the Compensation Committee changed the Cash metric in the annual incentive plan from one based on available cash and liquidity to free cash flow and re-introduced EBIT as a measure of profitability, both consistent with our historical practice, and returned the maximum payout opportunity to 200%, consistent with market and our historical practice. The Compensation Committee also retained two half-yeartheir individual performance periods for free cash flow and EBIT due to continuing uncertainty surrounding the macroeconomic impact of the COVID-19 pandemic in 2021. The free cash flow and EBIT metrics were determined semiannually in February 2021 and August 2021. The performance goals established for the second half of 2021 were ultimately higher than those that would have been established based on the information available in February 2021, leading to more challenging goals overall for the year. The Share and Cost metrics and the strategic and operational performance goals all had one-year performance periods and were set in February 2021.
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To align our compensation program with our business priorities during the recovery phase of the pandemic and to properly motivate and retain our employees, the Compensation Committee approved the following metrics in our annual incentive plan:
Our EBIT targets for the first half of 2021 reflected improvement in profitability of approximately $780 million versus the first half of 2020. The plan required that we grow our unit volume in excess of the industry, deliver earnings through improvements in price and mix, and generate net cost savings. Our free cash flow target for the first half of 2021 was based on an anticipated use of cash of approximately $1.0 billion that reflected the need to replenish inventory levels to support customer service following widespread factory shutdowns during the second quarter of 2020.
In August 2021, our EBIT targets for the second half of 2021 were increased to reflect better than anticipated results during the first half of 2021 and required that we continue to grow unit volume in excess of the industry and that we deliver earnings through improvements in price and mix. Our target also required that we sustain earnings at the level that we delivered in the
first half of 2021 despite higher raw material costs, inflationary cost pressures in wages, benefits, transportation and energy,
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and temporary COVID-related labor inefficiencies in the U.S. given increased staffing and training costs. Our free cash flow targets for the second half of 2021 were also raised to reflect higher earnings and stronger working capital management during the first half of 2021. Free cash flow performance in 2020 was exceptionally strong given widespread factory shutdowns during the second quarter of 2020 which significantly reduced inventory.
Our consumer replacement Share targets for 2021 required us to grow market share beyond 2020 levels for all key markets except for Brazil, given an expectation for a significant increase in imported competitor tires in 2021. The threshold was set at share levels commensurate with recent share performance. Our consumer replacement share performance is also subject to a relative pricing control metric to ensure profitable share growth.
Our commercial replacement Share targets for 2021 required us to grow market share beyond 2020 levels for all key markets except Brazil, given an expectation for a significant increase in imported competitor tires in 2021. The threshold was set at share levels commensurate with recent share performance.
Our OE Share targets required profitable market share growth on new fitment wins with OE manufacturers. The threshold was set commensurate with recent share performance.
Our Cost targets for 2021 required continued improvements in variable manufacturing cost per tire. The threshold was set at cost levels commensurate with recent performance. Maximum attainment was set at an amount that required approximately double the amount of cost efficiencies required in the plan at target. Our cost target performance is subject to control metrics to ensure customer service levels.
Our 2021 annual incentive program targets largely exceeded 2020 results. Seven of the nine targeted metrics in the program were higher than prior year actuals. One exception was our free cash flow target for the second half of 2021, which was lower given widespread COVID-related factory shutdowns in 2020 which led to a significant reduction in our inventory. This resulted in unusually strong free cash flow generation during the second half of 2020 relative to earnings. The other exception was our commercial replacement share target, given the expectation that the tire market in Brazil would see increased supply of imported competitor products following COVID-related supply chain disruptions in 2020.
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The following table shows our 2021 annual compensation targets compared to our 2020 actual results (dollars in millions):
| Metric | 2021 Target | 2020 Actual | ||||||
1H 2021 EBIT | $ | 280 |
| $ | (500 | ) | ||
2H 2021 EBIT | $ | 435 |
| $ | 415 |
| ||
1H 2021 Free Cash Flow | $ | (999 | ) | $ | (1,049 | ) | ||
2H 2021 Free Cash Flow | $ | 215 |
| $ | 1,758 |
| ||
Market Share: | ||||||||
Consumer Replacement |
| 11.9 | % |
| 11.5 | % | ||
Commercial Replacement |
| 8.4 | % |
| 8.7 | % | ||
Original Equipment Fitments |
| 9,700 |
|
| 9,161 |
| ||
Variable Manufacturing Cost Per Tire: | ||||||||
Consumer | $ | 14.76 |
| $ | 16.43 |
| ||
Commercial | $ | 62.09 |
| $ | 65.51 |
| ||
LONG-TERM COMPENSATION TARGETS
In February 2021, the Committee decided to continue setting the metrics and targets for each of the one-year performance periods for the 2021-2023 long-term awards at the beginning of each period, rather than on the grant date, due to the difficulty in setting longer-term targets given the cyclicality of the tire industry and the continuing COVID-19 pandemic. As a result, we continued to limit the maximum payout opportunity for the financial metrics to 150% of target for each one-year performance period. We retained the three-year TSR modifier and introduced ESG metrics of up to 25% of target that are based on specific, measurable goals over a three-year period. If maximum performance is achieved on the ESG metrics and the TSR modifer, the maximum payout opportunity would be capped at 200% of target. The Compensation Committee also re-introduced net income as a measure of profitability, consistent with our historical practice.
Our 2021 long-term incentive program targets exceeded 2020 results for net income. Our free cash flow return on capital target was lower than our 2020 actual results, given widespread COVID-related factory shutdowns in 2020 which led to a significant reduction in our inventory. This resulted in unusually strong free cash flow generation during 2020 relative to earnings.
Our net income target for 2021, like our EBIT targets, required that we grow volume in excess of the industry and deliver earnings through improvements in price and mix. Similarly, our cash flow return on capital target for 2021 reflected essentially breakeven free cash flow for the year, excluding a one-time $500 million working capital investment that was driven by the need to rebuild inventory levels to support customer service following widespread factory shutdowns during the second quarter of 2020.
The following table shows our 2021 long-term compensation targets compared to our 2020 actual results (dollars in millions):
| Metric | 2021 Target | 2020 Actual | ||||||
Net Income (Loss) |
| $40 |
|
| $(443 | ) | ||
Cash Flow Return on Capital |
| 0.0 | % |
| 8.1 | % | ||
| ||||||||
|
|
None of the named executive officers, other than Mr. Patterson, received | Name | Annual Base Salary | % Increase | |||||||
Kramer |
| $1,300,000 |
| 0% | ||||||
Wells |
| 800,000 |
| 0% | ||||||
McClellan |
| 750,000 |
| 0% | ||||||
Delaney |
| 750,000 |
| 0% | ||||||
Patterson |
| 641,667 |
| 6.9% | ||||||
2021 ANNUAL CASH INCENTIVE PAYOUTS
For 2021, the performance objectives under our annual incentive plan were as follows:
Corporate Officers
Officers of Our Three Operating units
goals. We believe these weightings hold our operating unit executives most accountable for financial results in the areas where they have the most control and influence, but also motivate them to work cooperatively with other operating units to maximize results for the entire Company. Actual payouts can range from 0% to 200% of target.
Overall Company performance is relevant
| 38 |
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||
| Annual Compensation |
| 39 |
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||
| Annual Compensation |
The following table shows our 2022 annual compensation targets compared to our 2021 actual results (dollars in millions, except for determiningvariable manufacturing costs):
| Metric | 2022 Target | 2021 Actual | ||||||
EBIT | $ | 1,325 |
| $ | 1,112 |
| ||
Free Cash Flow | $ | 50 |
| $ | 369 |
| ||
Market Share: | ||||||||
Consumer Replacement |
| 15.0 | % |
| 15.1 | % | ||
Commercial Replacement |
| 9.7 | % |
| 9.9 | % | ||
Original Equipment Fitments |
| 10,170 |
|
| 13,269 |
| ||
Variable Manufacturing Cost Per Tire: | ||||||||
Consumer | $ | 17.21 |
| $ | 17.54 |
| ||
Commercial | $ | 73.61 |
| $ | 76.52 |
| ||
Our EBIT targets for 2022 reflected improvements in profitability of over $200 million, or approximately 20%, versus 2021. The plan required that we offset historic levels of inflation, including nearly $2.0 billion of higher raw material costs and $900 million of other inflationary cost pressures in wages, benefits, transportation and energy, primarily through improvements in price and mix. Our free cash flow target for 2022 reflected improved earnings that would be more than offset by an anticipated use of cash of approximately $260 million for working capital, reflecting the annual incentive paymentsneed to continue to replenish inventory levels to support customer service, and increased capital expenditures of approximately $300 million.
Our replacement Share targets for 2022 required us to hold or grow our market share in consumer and commercial replacement compared to 2021 levels for all named executive officers. Additionally, Americas’ performance is relevantkey markets except for determiningBrazil, given an expectation for a significant increase in imported competitor tires in 2022. Our OE Share targets for 2022 required an increase in our overall win rate for OE bids (i.e., the annual incentive paymentpercentage of bids won) from that achieved in 2021, as well as growth in new fitment wins with OE manufacturers compared to our original 2021 plan of 9,700 fitment wins, which we substantially over-performed. Our 2022 targets were established using the expected volume of new OE fitment opportunities, which fluctuates based on the number of new vehicle model introductions in any given year.
Our Cost targets for Mr. McClellan, EMEA’s performance is relevant2022 required ongoing improvements in variable manufacturing cost per tire and reflected the inclusion of Cooper Tire manufacturing facilities for determining the annual incentive payment for Mr. Delaneyfirst time and Asia Pacific’sthe anticipated impact of inflation on energy costs and Americas’ performance is relevant for determining the annual incentive payment for Mr. Patterson. wages.
ANNUAL INCENTIVE PLAN PAYOUTS
In February 2022,2023, the Compensation Committee reviewed actual results for 20212022 with respect to achievement of the company-wide and operating unit performance
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objectives. The table below shows the performance objectives, actual results for 20212022 and corresponding payout percentage under our annual incentive plan for the Share, Cost, Cash and EBIT metrics.
Payout Under Annual Incentive Plan | ||||||||||||||||||||
50% | 100% | 200% | Actual Results | Payout Percentage | ||||||||||||||||
Overall Company Performance (2021): |
|
|
|
|
|
|
|
|
| |||||||||||
Market Share: | ||||||||||||||||||||
Consumer Replacement |
| 11.5 | % |
| 11.9 | % |
| 12.2 | % |
| 12.2 | % |
| 200% |
| |||||
Commercial Replacement |
| 7.9 | % |
| 8.4 | % |
| 8.7 | % |
| 8.8 | % |
| 200% |
| |||||
Original Equipment Fitments |
| 7,750 |
|
| 9,700 |
|
| 10,725 |
|
| 12,619 |
|
| 200% |
| |||||
Cost: | ||||||||||||||||||||
Consumer |
| See below |
|
| 107 | % |
| 107% |
| |||||||||||
Commercial |
| See below |
|
| 49 | % |
| 0% |
| |||||||||||
1H Free Cash Flow |
| $(1,150 | ) |
| $ (999 | ) |
| $ (750 | ) |
| $(353 | ) |
| 200% |
| |||||
2H Free Cash Flow |
| $ 65 |
|
| $ 215 |
|
| $ 365 |
|
| $ 534 |
|
| 200% |
| |||||
1H EBIT |
| $ 180 |
|
| $ 280 |
|
| $ 380 |
|
| $ 472 |
|
| 200% |
| |||||
2H EBIT |
| $ 335 |
|
| $ 435 |
|
| $ 535 |
|
| $ 516 |
|
| 181% |
| |||||
| 40 |
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||
| Annual Compensation |
Payout Under Annual Incentive Plan | ||||||||||||||||||||
50% | 100% | 200% | Actual Results | Payout Percentage | ||||||||||||||||
Overall Company Performance (2022): |
|
|
|
|
|
|
|
|
| |||||||||||
Market Share: | ||||||||||||||||||||
Consumer Replacement |
| 14.6 | % |
| 15.0 | % |
| 15.3 | % |
| 15.4 | % |
| 200% |
| |||||
Commercial Replacement |
| 9.2 | % |
| 9.7 | % |
| 10.0 | % |
| 10.1 | % |
| 200% |
| |||||
Original Equipment Fitments |
| 8,150 |
|
| 10,170 |
|
| 11,125 |
|
| 16,250 |
|
| 200% |
| |||||
Cost: | ||||||||||||||||||||
Consumer |
| See below |
|
| 95 | % |
| 95% |
| |||||||||||
Commercial |
| See below |
|
| 52 | % |
| 52% |
| |||||||||||
Free Cash Flow |
| $ (150 | ) |
| $ 50 |
|
| $ 175 |
|
| $ (305 | ) |
| 0% |
| |||||
EBIT |
| $ 1,000 |
|
| $ 1,325 |
|
| $ 1,565 |
|
| $ 1,188 |
|
| 79% |
| |||||
The table below shows the payout percentages under our annual incentive plan for each of our operating units.
Payout Percentage
| ||||||||||||||||||||||||||||||||
Payout Percentage | ||||||||||||||||||||||||||||||||
Share
| Cost
| Cash
| EBIT
| Share
| Cost
| Cash
|
EBIT
| |||||||||||||||||||||||||
Americas |
| 120 | % |
| 53 | % |
| 200 | % |
| 200 | % |
| 140% |
|
| 27% |
|
| 0% |
|
| 126% |
| ||||||||
EMEA |
| 141 | % |
| 68 | % |
| 158 | % |
| 184 | % |
| 188% |
|
| 87% |
|
| 0% |
|
| 0% |
| ||||||||
Asia Pacific |
| 200 | % |
| 135 | % |
| 159 | % |
| 113 | % |
| 183% |
|
| 123% |
|
| 165% |
|
| 76% |
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Our Cost metric is variable manufacturing cost per tire that is based on actual levels of production in our factories. This metric incentivizes our team to manage controllable costs in a variety of operating scenarios. The target for cost is expressed as a range for two reasons. First, our actual production volumes are not known at the outset of the plan period. Second, as output changes in our factories, the variableness of costs also changes. For our operating units, annual attainment is calculated by averaging monthly attainment percentages. Corporate attainment is calculated using the weighted average attainments for each operating unit.
Variable Manufacturing Cost Per Tire Targets
| |||||||||||||||||||||||||||||||||||
Variable Manufacturing Cost Per Tire Targets | |||||||||||||||||||||||||||||||||||
| 50% | 100% | 200% | Attainment | 50% | 100% | 200% | Attainment | ||||||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||||||||
Americas | $15.70-19.33 | $15.50-18.94 | $15.30-18.55 | 72% |
| $18.76-23.00 |
|
| $18.25-22.26 |
|
| $18.01-21.80 |
|
| 53 | % | |||||||||||||||||||
EMEA | 15.35-18.95 | 15.15-18.56 | 14.95-18.17 | 79% |
| 16.75-20.42 |
|
| 16.35-19.83 |
|
| 16.15-19.43 |
|
| 110 | % | |||||||||||||||||||
Asia Pacific | 6.88-8.32 | 6.80-8.17 | 6.73-8.01 | 135% |
| 6.78-8.15 |
|
| 6.61-7.91 |
|
| 6.54-7.76 |
|
| 123 | % | |||||||||||||||||||
Commercial: | |||||||||||||||||||||||||||||||||||
Americas | $66.02-81.28 | $65.15-79.62 | $64.29-77.95 | 33% |
| $77.22-94.95 |
|
| $75.89-92.68 |
|
| $74.89-90.75 |
|
| 44 | % | |||||||||||||||||||
EMEA | 52.61-75.00 | 51.32-63.97 | 51.02-63.67 | 57% |
| 62.10-76.32 |
|
| 60.37-73.84 |
|
| 59.56-72.29 |
|
| 64 | % | |||||||||||||||||||
In response to feedback from shareholders in 2021, we reduced the weighting of the individual strategic objectives from 40% to 20%. ESG and New Mobility were introduced into the program as separately weighted metrics in 2022, each weighted 10%.
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||||||
| Annual Compensation
|
| Metric | Goals | Achievement | % Payout | |||
ESG | Environmental goals include specific milestones on climate-related disclosure, climate target setting and climate strategy development to facilitate achievement of 2030 and 2050 climate ambitions, including TCFD disclosure, SBTi targets submission and climate strategy roadmap development. Diversity and inclusion goals include expanding our diversity hiring practices enterprise-wide by expanding diverse slate requirements to two diverse candidates for 75% of all new hires and our inclusive leader training to an additional 1,400 people leaders. | Achieved | 100% | |||
New Mobility | Finalize business plans for the New Mobility, Beyond Tires and Venture Fund initiatives and gain alignment with the Board of Directors. | Achieved | 100% | |||
StrategicIndividual strategic and operational performance goalsobjectives are established annually and include measurable goals tied to strategic initiatives as well as financial and non-financial metrics, including ESG-related metrics. The establishment of strategic and operational performance goals drives more rigor in our goal setting, while also building accountability for non-financial objectives. In 2022, these objectives such as building talentincluded, but were not limited to, the Cooper Tire integration, plant optimization, capital expenditures, senior leadership succession, associate engagement, sustainability reporting, long-term strategy and teams, diversity and inclusion, innovation, and process improvements. The Compensation Committee maintained the relative weighting of strategic and operational performance goals in our annual incentive plan at 40% and aligned those goals with our Share, Cost, Cash and EBIT objectives and the other actions needed to recover from the impact of the pandemic on our business.risk mitigation.
The Compensation Committee evaluated the CEO’s performance against his individual strategic and operational performance goals,objectives, and the CEO evaluated each other named executive officer’s performance against their individual strategic and operational performance goalsobjectives and made a recommendation to the Compensation Committee for its consideration. Based on its evaluation of the CEO, and its consideration of the CEO’s recommendation for the other named executive officers,NEOs, the Compensation Committee determined that each of the named executive officersNEOs would receive a payout at 100% of target for their performance against their individual strategic and operational performance goals.
The 2021 performance against the strategic and operational performance goals for each named executive officer was:
Richard J. Kramerobjectives. Their individual accomplishments are summarized below:
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| • Exceeded Cooper Tire integration synergy targets and plant optimization targets • Achieved key milestones on • Enhanced senior leadership succession process • Improved associate engagement scores over prior year | |
Wells | • Achieved full ERP system integration with Cooper Tire • Met sustainability reporting deadlines and enchanced related reporting process • Met key milestones on major capital expenditure projects • Improved associate engagement scores over prior year | |
McClellan | • Exceeded Cooper Tire integration synergy targets • Exceeded plant optimization gap closure targets • Met key milestones on major capital expenditure projects • Improved associate engagement scores over prior year • Aligned globally on long-term strategic priorities | |
Delaney | • Exceeded all Connected Vehicle targets, including expansion of our service network • Achieved key milestones on major capital expenditure projects • Developed cost and capability strategy • Improved associate engagement scores over prior year | |
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||||||
| Annual Compensation
|
Darren R. Wells
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| |
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Stephen R. McClellan
Key Accomplishments
|
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Christopher R. Delaney
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Ryan G. Patterson
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The Compensation Committee then established an aggregate incentive pool for all officers, and determined the calculated payout for each officer. In this process, the officer’s target incentive amount is first multiplied by the same percentage used to determine the applicable portion of the aggregate incentive pool. (For example, if the portion of the aggregate incentive pool applicable to such officer, e.g., overall company, is funded at 100% of the aggregate target incentive amount, the officer’s individual payout initially would be set at 100% of his individual incentive target.) Then, the CEO assesses the officer’s contributions towards Company goals and makes his recommendations with respect to individual payout amounts to the Compensation Committee, which considers the CEO’s recommendations and determines the final payouts. The Compensation Committee undertakes the same process for the CEO and makes the determination as to the final payout amount for the CEO. In 2021, officers can earn between 0% and 200% of their target incentive, but the total payout for all officers may not exceed the aggregate incentive pool.
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The incentive pool for the overall company was funded at 166% of the target incentive amount (and the operating unit pools were funded at 154% to 160% of the target incentive amount). The Compensation Committee approved the following awards for our named executive officers under our annual incentive plan:
Name
| Target Award
| Actual Award
| Actual Award
| |||||||||
Kramer | $ | 2,080,000 |
| $ | 3,452,800 |
|
| 166% |
| |||
Wells |
| 800,000 |
|
| 1,328,000 |
|
| 166% |
| |||
McClellan |
| 787,500 |
|
| 1,244,250 |
|
| 158% |
| |||
Delaney |
| 750,000 |
|
| 1,155,000 |
|
| 154% |
| |||
Patterson |
| 585,000 |
|
| 953,630 |
|
| 163% |
| |||
In February 2021, the Compensation Committee granted 70% of total long-term compensation in the form of long-term performance-based incentives, payable in Common Stock and cash, and 30% in the form of restricted stock units.
2021 GRANTS OF PERFORMANCE-BASED INCENTIVES
Long-term performance-based incentives granted in 2021 have the following characteristics:
The awards will be payable approximately 30% in shares of Common Stock and approximately 70% in cash.
The payout is based on results over a three-year performance cycle, with performance targets for each year of the three-year period established at the beginning of each performance period, weighted one-third for each year in the three-year performance cycle.
The payout can range from 0% to 150% for the 2021-2023 performance cycle based on actual results on the financial metrics (and assuming the recipient remains continuously employed by us through the entire three-year period or, for retirement-eligible officers, through December 31, 2021).
The payout for the financial metrics can increase or decrease up to 20% based on our total shareholder return versus the S&P 500 over the three-year period ending December 31, 2023.
The payout can increase up to 25% (up to a maximum payout of 200%) based on our performance against specific, measurable environmental and social goals regarding reducing greenhouse gas emissions, reducing tire rolling resistance and increasing diversity in leadership positions over the three-year period ending December 31, 2023.
Results will be based on our consolidated performance, with no award tied to business unit performance. In this manner, the plan balances performance measures used under our annual incentive plan and reinforces the need for teamwork among executives. Net income is used as a measure to focus on improvement in profitability. Cash flow return on capital is an efficiency metric that measures how much return is generated in proportion to the investment in the business in terms of plant, property and equipment and working capital.
Name
| Target Award
| Actual Award
| Actual Award
| |||||||||
Kramer | $ | 2,240,000 |
| $ | 2,307,200 |
|
| 103% |
| |||
Wells |
| 835,000 |
|
| 860,050 |
|
| 103% |
| |||
McClellan |
| 819,000 |
|
| 802,620 |
|
| 98% |
| |||
Delaney |
| 765,000 |
|
| 742,050 |
|
| 97% |
| |||
Phillips |
| 510,000 |
|
| 525,300 |
|
| 103% |
| |||
Patterson1 | 585,000 | 477,488 | 82% | |||||||||
| 1 | Actual award prorated to reflect partial year employment through October 31, 2022. |
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||||||
| Long-Term Compensation
|
Long-Term Compensation
In February 2022, the Compensation Committee made long-term incentive awards to executive officers. The target long-term incentive grants were composed of three components: (a) restricted stock units (RSUs) constituting approximately 30% of the target opportunity, (b) stock-settled performance units (PSUs) constituting approximately 20% of the target opportunity, and (c) cash-settled performance units (EPUs) constituting approximately 50% of the target opportunity. The following table summarizes the target award values for our executives in accordance with our annual long-term program:
Performance-Based Awards
| ||||||||||||||||
| Stock-Settled Awards | ||||||||||||||||
Name
| Aggregate Target LTI Award | RSUs1 | 2022-2024 PSUs2 | 2022-2024 EPUs | ||||||||||||
Kramer | $ | 10,650,000 |
| $ | 3,195,000 |
| $ | 2,130,000 |
| $ | 5,325,000 |
| ||||
Wells |
| 3,100,000 |
|
| 930,000 |
|
| 620,000 |
|
| 1,550,000 |
| ||||
McClellan |
| 2,800,000 |
|
| 840,000 |
|
| 560,000 |
|
| 1,400,000 |
| ||||
Delaney |
| 2,800,000 |
|
| 840,000 |
|
| 560,000 |
|
| 1,400,000 |
| ||||
Phillips |
| 1,400,000 |
|
| 420,000 |
|
| 280,000 |
|
| 700,000 |
| ||||
Patterson | 1,600,000 | 480,000 | 320,000 | 800,000 | ||||||||||||
| 1 | See the “Grants of Plan-Based Awards” Table at page 63 for information regarding the target number of restricted stock units actually granted, which was determined by dividing the amount in this column by the closing market price of our Common Stock on the date of grant. |
| 2 | See the “Grants of Plan-Based Awards” Table at page 63 for information regarding the target number of performance shares actually granted, which was determined by dividing the amount in this column by the closing market price of our Common Stock on the date of grant. |
2022 GRANTS OF PERFORMANCE-BASED INCENTIVES
Long-term performance-based incentives granted in 2022 have the following characteristics:
| • | The payout is based on our consolidated results over a three-year performance cycle, with financial performance targets for each year of the three-year period established at the beginning of each year, weighted one-third for each year in the three-year performance cycle. |
| • | Financial performance is measured 50% on net income and 50% on cash flow return on capital (“CFROC”). Net income is used as a measure to focus on improvement in profitability. CFROC is an efficiency metric that measures how much return is generated in proportion to the investment in the business in terms of plant, property and equipment and working capital. |
| • | The payout based on financial performance can range from 0% to 150% for the 2022-2024 performance cycle based on actual results on the financial metrics. |
| • | The payout for the financial metrics is subject to a modifier (0.8x to 1.2x) based on three-year relative total shareholder return (TSR) versus peer companies over the entire three-year performance cycle ending December 31, 2024. |
| 44 |
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||
| Long-Term Compensation |
| • | The resulting calculated payout can increase by up to 25% based on our performance against our three-year ESG index, which is comprised of specific, measurable environmental and social goals regarding reducing greenhouse gas emissions and the development of a tire comprised of at least 85% sustainable materials over the entire three-year period ending December 31, 2024. A sustainable material is defined as a bio-based/renewable or recycled material or one that may be produced using or contributing to other sustainable practices for resource conservation and/or emissions reductions, including mass-balance materials. |
| • | The overall maximum payout is 200% of target. |
| 45 |
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||
| Long-Term Compensation |
LONG-TERM COMPENSATION METRICS AND TARGETS
In February 2022, the Compensation Committee set financial performance metrics and targets for (i) year 3 of the 2020-2022 long-term awards, (ii) year 2 of the 2021-2023 long-term awards, and (iii) year 1 of the 2022-2024 long-term awards. The Compensation Committee also set ESG metrics and targets for the full three-year 2022-2024 performance period.
The performance metrics in our long-term awards emphasize the importance of our earnings (as measured by net income) and the efficiency of our utilization of free cash flow (as measured by CFROC), both now weighted equally as was done pre-pandemic.
The following table shows our 2022 long-term compensation targets compared to our 2021 actual results (dollars in millions):
| Metric | 2022 Target | 2021 Actual | ||||||
Net Income |
| $570 |
|
| $553 |
| ||
Cash Flow Return on Capital |
| 2.8 | % |
| 3.0 | % | ||
Our 2022 long-term incentive program targets exceeded 2021 results for net income. Our net income target for 2022, like our EBIT targets, required that we offset historic levels of inflation, including nearly $2.0 billion of higher raw material costs and $900 million of other inflationary cost pressures in wages, benefits, transportation and energy, primarily through improvements in price and mix.
Our cash flow return on capital target was slightly lower than our 2021 actual results, given that the Company’s anticipated improved earnings would be more than offset by a one-time working capital investment and increased capital expenditures. The working capital investment was required to rebuild inventories following a period of slower production during the pandemic, which left year-end 2021 finished good inventory below levels required to effectively operate our business going forward.
| 46 |
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||
| Long-Term Compensation |
Relative Total Shareholder Return (TSR) Modifier
To add further rigor to the long-term awards and ensure executives are focused on Goodyear’s stock price performance and aligned with our shareholders, the Compensation Committee also provided that the awards will be modified based on Goodyear’s relative total shareholder return performance versus an index of 19 highly relevant peer companies.
This modifier is designed to assess Goodyear’s success in creating shareholder value relative to other capital-intensive automotive and cyclical industrial companies with comparable leverage and strong correlations to Goodyear’s Common Stock performance. This group of companies better reflects our relative success in enhancing shareholder value than would comparisons to the peer companies used for benchmarking executive pay (which are chosen primarily due to their positioning as executive talent competitors) or a broad-based market index like the S&P 500, which we have used historically. This approach has the further benefit of creating greater comparability throughout economic cycles. The Compensation Committee believes this reflects the understanding investors have of risk and reward in making investment decisions.
THE COMPARISON GROUP CONSISTS OF:
Adient plc | Flowserve Corporation | Stoneridge, Inc. | ||||||||||
American Axle & Manufacturing | Ford Motor Company | Tenneco Inc.1 | ||||||||||
Aptiv PLC | General Motors Company | Terex Corporation | ||||||||||
BorgWarner Inc. | Hillenbrand, Inc. | The Timken Company | ||||||||||
Carpenter Technology Corporation | Lear Corporation | WESCO International, Inc. | ||||||||||
Dana Incorporated | nVent Electric plc | |||||||||||
Enovis (formerly, Colfax Corporation) | Regal Rexnord Corporation | |||||||||||
| 1 | Tenneco, Inc. became a private company in 2022. It will be excluded from the TSR modifier. |
The TSR modifier measures the relative performance of our Common Stock versus the S&P 500TSR peer group over the three-year performance cycle of our long-term incentive awards and is calculated based on the trailing two-month average closing price for our Common Stock and the S&P 500TSR peer group (as in existence at the end of the period), assuming the reinvestment of dividends. The TSR modifier will cause the payout for the financial metrics in our long-term incentive awards to increase or decrease up to 20% as follows:
| Goodyear Common Stock vs. | TSR Modifier | |
≥ 75th Percentile |
| |
= 50th Percentile |
| |
≤ 25th Percentile |
| |
| 1 | Results between these performance levels will be interpolated. |
The table below shows the aggregate value of the long-term performance-based incentives granted to each of our named executive officers for the 2021-2023
| 47 |
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||
| Long-Term Compensation |
Beginning in 2023, performance cycle at the target award opportunity, as well as55th percentile is required to achieve a 1.0x modifier, with the amount payable in sharesmodifier capped at 1.0x if absolute TSR is negative over the three-year period, regardless of Common Stock and cash.relative performance.
ESG Index
Name
| Aggregate Target Award
| Portion Payable in Shares ($)1
| Portion Payable in Cash
| |||||||||
Kramer |
| $7,455,000 |
|
| $2,130,000 |
|
| $5,325,000 |
| |||
Wells |
| 2,030,000 |
|
| 580,000 |
|
| 1,450,000 |
| |||
McClellan |
| 1,890,000 |
|
| 540,000 |
|
| 1,350,000 |
| |||
Delaney |
| 1,890,000 |
|
| 540,000 |
|
| 1,350,000 |
| |||
Patterson |
| 1,050,000 |
|
| 300,000 |
|
| 750,000 |
| |||
| Metric | Goal | |
Greenhouse Gas Emissions |
Reduce global Scope 1 and Scope 2 greenhouse gas emissions by 14% by December 31, 2024, compared to a 2019 baseline. | |
Sustainability | Develop a tire with 85% sustainable material content by December 31, 2024 that meets our durability and rolling resistance standards and Department of Transportation requirements. | |
The Compensation Committee set rigorous ESG goals that are intended to be challenging, but with motivational value for the If we achieve one of these goals, the | ||
2022 FINANCIAL PERFORMANCE FOR THE 2021 PERFORMANCE PERIOD
The table below shows the performance goals, actual results and payoutachievement percentages for the 20212022 performance period applicable to the 2019-2021, 2020-2022, 2021-2023 and 2021-20232022-2024 performance cycles. Actual payouts are determined at the end of the 3-year performance cycle based on the attainment of performance targets and are subject to the modifiers discussed above. With respect to the 2019-2021 performance cycle, each year was weighted evenly (33%), goals were set on the grant date and the maximum payout was 200% of the target award opportunity. With respect to the 20212022 performance period of the 2020-2022, 2021-2023 and 2021-20232022-2024 performance cycles, each year was weighted evenly (33%), goals were set at the beginning of the performance period and the maximum payout for financial performance metrics was 150% of the target award opportunity.
| ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net Income
| ||||||||||||||||||||
| Performance Cycle | Threshold
| Target
| Maximum
|
Actual Results
|
%
| |||||||||||||||
2020-2022 | $ | 330 |
| $ | 570 |
| $ | 750 |
| $ | 383 |
|
| 68 | % | |||||
2021-2023 | $ | 330 |
| $ | 570 |
| $ | 750 |
| $ | 383 |
|
| 68 | % | |||||
2022-2024 | $ | 330 |
| $ | 570 |
| $ | 750 |
| $ | 383 |
|
| 68 | % | |||||
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||||||
| Long-Term Compensation
|
“Net income,” as defined in our long-term incentive plans, means the Company’s net income, excluding charges for rationalizations, accelerated depreciation, certain pension curtailment and settlement charges, charges relating to the refinancing of debt, changes in tax valuation allowances and other discrete tax items, and the cumulative effect of accounting changes. Our 20212022 “net income” also excluded the impact of certain other items noted in the table below. Our 20212022 “net income” for purposes of our long-term incentive plans was calculated as follows:
| ($ in millions) | 2021
| 2022
| ||||||
Goodyear net income (as reported) | $ | 764 |
| $ | 202 |
| ||
Cooper Tire net income |
| (136 | ) | |||||
Cooper Tire transaction and financing costs |
| 100 |
| |||||
Changes in tax valuation allowances and other discrete tax items |
| (403 | ) | |||||
Brazilian tax ruling |
| (87 | ) | |||||
Rationalization and accelerated depreciation charges |
| 82 |
|
| 146 |
| ||
Pension curtailment and settlement charges |
| 32 |
|
| 93 |
| ||
Net gains on asset sales and other dispositions |
| (6 | ) | (87 | ) | |||
Changes in tax valuation allowances and other discrete tax items |
| 23 |
| |||||
Other |
| 3 |
|
| 6 |
| ||
Net income | $ | 349 |
| $ | 383 |
| ||
Cash Flow Return on Capital
| Cash Flow Return on Capital
| |||||||||||||||||||||||||||||||||||||||
Performance Cycle
| Threshold
| Target
| Maximum
| Actual Results
| Payout Percentage
| Threshold
| Target
| Maximum
| Actual Results
| %
| ||||||||||||||||||||||||||||||
2019-2021 |
| 1.7 | % |
| 4.4 | % |
| 6.6 | % |
| 3.0 | % |
| 95 | % | |||||||||||||||||||||||||
2020-2022 |
| (1.7 | )% |
| 0.0 | % |
| 3.0 | % |
| 9.0 | % |
| 150 | % |
| 1.0 | % |
| 2.8 | % |
| 4.0 | % |
| (1.1 | %) |
| 0 | % | ||||||||||
2021-2023 |
| (1.7 | )% |
| 0.0 | % |
| 3.0 | % |
| 9.0 | % |
| 150 | % |
| 1.0 | % |
| 2.8 | % |
| 4.0 | % |
| (1.1 | %) |
| 0 | % | ||||||||||
2022-2024 |
| 1.0 | % |
| 2.8 | % |
| 4.0 | % |
| (1.1 | %) |
| 0 | % | |||||||||||||||||||||||||
“Cash flow return on capital,” as defined in our long-term incentive plans, means free cash flow from operations divided by the sum of average net fixed assets and average working capital. For the 2019-2021 performance cycle, “free cash flow from operations” means cash flow from operating activities before pension contributions and direct payments and rationalization payments, less capital expenditures. For the 2021 performance period of the 2020-2022 and 2021-2023 performance cycles, “free“Free cash flow from operations” means cash flow from operating activities, less capital expenditures.expenditures and plus rationalization payments and pension contributions and direct payments.
Our 20212022 cash flow return on capital calculation for the 2019-2021 performance cycle excluded the impact on free cash flow from operations of certain items related to the acquisition of Cooper Tire. Our 2021 cash flow return on capital calculation for the 20212022 performance period of the 2020-2022, 2021-2023 and 2021-20232022-2024 performance cycles also excluded a one-time $500 $260 million working capital investment that was driven by the need to rebuild inventory levels.
| ||||||||
|
|
Based on the results during the 20212022 performance period, the Compensation Committee approved earnings on the long-term incentive awards for that period in an amount equal to 81%34% of the target amount for 2019-2021 awards, 150% for 2020-2022 awards and 150% for 2021-2023 awards. The amounts earned on the long-term incentive awards reflect our strong net income performance and our solid cash flow return on capital.
The table below shows amounts earned by each of the named executive officers in respect of their long-term incentive grants for the 2021 performance period of their 2019-2021 awards, which represents one-third of the three-year target award opportunity:2020-2022, 2021-2023 and 2022-2024 awards.
Name
| Aggregate
| Portion of
| Portion of
| |||||||||
Kramer |
| $2,426,648 |
|
| $1,437,800 |
|
| 28,639 |
| |||
Wells |
| 660,744 |
|
| 391,500 |
|
| 7,798 |
| |||
McClellan |
| 615,207 |
|
| 364,500 |
|
| 7,260 |
| |||
Delaney |
| 615,207 |
|
| 364,500 |
|
| 7,260 |
| |||
Patterson |
| 341,781 |
|
| 202,500 |
|
| 4,033 |
| |||
The table below shows amounts earned by each of the named executive officers in respect of their long-term incentive grants for the 2021 performance period of their 2020-2022 awards, which represents one-third of the three-year target award opportunity:
Name
| Aggregate
| Portion of Cash ($)1
| Portion of
| |||||||||
Kramer |
| $3,000,660 |
|
| $2,662,500 |
|
| 105,237 |
| |||
Wells |
| 817,047 |
|
| 724,950 |
|
| 28,656 |
| |||
McClellan |
| 760,721 |
|
| 675,000 |
|
| 26,679 |
| |||
Delaney |
| 760,721 |
|
| 675,000 |
|
| 26,679 |
| |||
Patterson |
| 422,621 |
|
| 375,000 |
|
| 14,821 |
| |||
|
| 49 |
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||||||
| Long-Term Compensation
|
The table below shows amounts earned by each of the named executive officers in respect of their long-term incentive grants for the 20212022 performance period of their 2020-2022 awards, which represents one-third of the three-year target award opportunity:
| Name | Aggregate Target Award ($) | Portion of Actual Award Payable in Cash ($)1 | Portion of Actual Award Payable in Shares (# of Shares)1 | |||||||||
Kramer |
| $2,783,170 |
|
| $603,500 |
|
| 23,853 |
| |||
Wells |
| 757,824 |
|
| 164,322 |
|
| 6,495 |
| |||
McClellan |
| 705,585 |
|
| 153,000 |
|
| 6,046 |
| |||
Delaney |
| 705,585 |
|
| 153,000 |
|
| 6,046 |
| |||
Phillips |
| 313,595 |
|
| 68,000 |
|
| 2,687 |
| |||
Patterson2 | 391,990 | 0 | 0 | |||||||||
| 1 | Payable subject to a three-year relative total shareholder return modifier. See “Impact of TSR Modifier and Payout of 2020-2022 Long-Term Incentive Awards” below. |
| 2 | Mr. Patterson forfeited his award when he left the Company on October 31, 2022. |
The table below shows amounts earned by each of the named executive officers in respect of their long-term incentive grants for the 2022 performance period of their 2021-2023 awards, which represents one-third of the three-year target award opportunity:
| Name | Aggregate Target Award ($) | Portion of Actual Award Payable in Cash ($)1 | Portion of Actual Award Payable in Shares (# of Shares)1 | Aggregate Target Award ($) | Portion of Actual Award to be Payable in Cash ($)1 | Portion of Actual Award to be Payable in Shares (# of Shares)1 | ||||||||||||||||||
Kramer |
| $2,586,373 |
|
| $2,662,500 |
|
| 63,355 |
|
| $2,500,632 |
|
| $603,500 |
|
| 14,360 |
| ||||||
Wells |
| 704,334 |
|
| 725,100 |
|
| 17,251 |
|
| 680,887 |
|
| 164,322 |
|
| 3,910 |
| ||||||
McClellan |
| 655,701 |
|
| 675,000 |
|
| 16,062 |
|
| 633,963 |
|
| 153,000 |
|
| 3,640 |
| ||||||
Delaney |
| 655,701 |
|
| 675,000 |
|
| 16,062 |
|
| 633,963 |
|
| 153,000 |
|
| 3,640 |
| ||||||
Patterson |
| 364,280 |
|
| 375,000 |
|
| 8,923 |
| |||||||||||||||
Phillips |
| 305,263 |
|
| 73,678 |
|
| 1,752 |
| |||||||||||||||
Patterson2 | 352,204 | 0 | 0 | |||||||||||||||||||||
| 1 | Payable contingent on continued service through December 31, 2023 or, for retirement-eligible officers, through December 31, |
| 2 | Mr. Patterson forfeited his award when he left the Company on October 31, 2022. |
| 50 |
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||
| Long-Term Compensation |
The table below shows amounts earned by each of the named executive officers in respect of their long-term incentive grants for the 2022 performance period of their 2022-2024 awards, which represents one-third of the three-year target award opportunity:
| Name | Aggregate Target Award ($) | Portion of Actual Award to be Payable in Cash ($)1 | Portion of Actual Award to be Payable in Shares (# of Shares)1 | |||||||||
Kramer |
| $2,504,251 |
|
| $603,500 |
|
| 15,584 |
| |||
Wells |
| 728,971 |
|
| 175,678 |
|
| 4,536 |
| |||
McClellan |
| 658,431 |
|
| 158,678 |
|
| 4,097 |
| |||
Delaney |
| 658,431 |
|
| 158,678 |
|
| 4,097 |
| |||
Phillips |
| 329,274 |
|
| 79,356 |
|
| 2,048 |
| |||
Patterson2 | 376,256 | 0 | 0 | |||||||||
| 1 | Payable contingent on continued service through December 31, 2024 or, for retirement-eligible officers, through December 31, 2022, and subject to three-year relative total shareholder return and ESG modifiers. |
| 2 | Mr. Patterson forfeited his award when he left the Company on October 31, 2022. |
IMPACT OF TSR MODIFIER AND PAYOUT OF 20192020 – 20212022 LONG-TERM INCENTIVE AWARDS
Although our stock outperformed both our tire industry peers and the S&P 500 for the year ended December 31, 2021, ourOur stock was in the bottom quartile of companies in the S&P 500 during the three-year period ended December 31, 2021,2022, resulting in a TSR modifier of 0.8 times. See page 47 for more information on the calculation of the TSR modifier.
The Compensation Committee approved the payout of shares of Common Stock and cash to the named executive officers with respect to the 2019-20212020-2022 performance cycle as follows.
Cash Payout
| Cash Payout | |||||||||||||||||||||||||||||||||||||||
Name
| 2019
| 2020
| 2021
| Impact of TSR
| Total Payout of
| 2020 Performance Period1 | 2021 Performance Period2 | 2022 Performance Period | Impact of TSR Modifier | Total Payout of 2020-2022 Awards | ||||||||||||||||||||||||||||||
Kramer |
| $2,520,500 |
|
| $1,775,000 |
|
| $1,437,800 |
| $ | (1,146,700 | ) |
| $4,586,600 |
| $ | 1,775,000 |
| $ | 2,662,500 |
| $ | 603,500 |
| $ | (1,008,200 | ) | $ | 4,032,800 |
| ||||||||||
Wells |
| 686,400 |
|
| 483,300 |
|
| 391,500 |
|
| (312,300 | ) |
| 1,248,900 |
|
| 483,400 |
|
| 724,950 |
|
| 164,322 |
|
| (274,472 | ) |
| 1,098,200 |
| ||||||||||
McClellan |
| 639,000 |
|
| 450,000 |
|
| 364,500 |
|
| (290,700 | ) |
| 1,162,800 |
|
| 450,000 |
|
| 675,000 |
|
| 153,000 |
|
| (255,600 | ) |
| 1,022,400 |
| ||||||||||
Delaney |
| 639,000 |
|
| 450,000 |
|
| 364,500 |
|
| (290,700 | ) |
| 1,162,800 |
|
| 450,000 |
|
| 675,000 |
|
| 153,000 |
|
| (255,600 | ) |
| 1,022,400 |
| ||||||||||
Patterson |
| 355,000 |
|
| 250,000 |
|
| 202,500 |
|
| (161,500 | ) |
| 646,000 |
| |||||||||||||||||||||||||
Phillips |
| 200,000 |
|
| 300,000 |
|
| 68,000 |
|
| (113,600 | ) |
| 454,400 |
| |||||||||||||||||||||||||
Patterson3 |
| 250,000 |
|
| 375,000 |
|
| 0 |
|
| N/A |
|
| 0 |
| |||||||||||||||||||||||||
| 1 |
|
Previously reported, to the extent applicable, in the Proxy Statement dated March 10, 2021. |
| 2 | Previously reported, to the extent applicable, in the Proxy Statement dated March 11, 2022. |
| 3 | Mr. Patterson forfeited his award when he left the Company on October 31, 2022. |
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||||||
| Long-Term Compensation
|
Shares Payout | Shares Payout | |||||||||||||||||||||||||||||||||||||||
Name
| 2019 (# of Shares)
| 2020 (# of Shares)
| 2021 Performance Period (# of Shares)
| Impact of TSR Modifier (# of Shares)
| Total Payout of (# of Shares)
| 2020 (# of Shares) | 2021 (# of Shares) | 2022 Performance Period (# of Shares) | Impact of TSR Modifier (# of Shares) | Total Payout of (# of Shares) | ||||||||||||||||||||||||||||||
Kramer |
| 50,209 |
|
| 35,358 |
|
| 28,639 |
|
| (22,842 | ) |
| 91,364 |
|
| 70,158 |
|
| 105,237 |
|
| 23,853 |
|
| (39,851 | ) |
| 159,397 |
| ||||||||||
Wells |
| 13,671 |
|
| 9,628 |
|
| 7,798 |
|
| (6,220 | ) |
| 24,877 |
|
| 19,104 |
|
| 28,656 |
|
| 6,495 |
|
| (10,852 | ) |
| 43,403 |
| ||||||||||
McClellan |
| 12,728 |
|
| 8,964 |
|
| 7,260 |
|
| (5,790 | ) |
| 23,162 |
|
| 17,787 |
|
| 26,679 |
|
| 6,046 |
|
| (10,103 | ) |
| 40,409 |
| ||||||||||
Delaney |
| 12,728 |
|
| 8,964 |
|
| 7,260 |
|
| (5,790 | ) |
| 23,162 |
|
| 17,787 |
|
| 26,679 |
|
| 6,046 |
|
| (10,103 | ) |
| 40,409 |
| ||||||||||
Patterson |
| 7,071 |
|
| 4,980 |
|
| 4,033 |
|
| (3,216 | ) |
| 12,868 |
| |||||||||||||||||||||||||
Phillips |
| 7,905 |
|
| 11,858 |
|
| 2,687 |
|
| (4,490 | ) |
| 17,960 |
| |||||||||||||||||||||||||
Patterson3 |
| 9,882 |
|
| 14,821 |
|
| 0 |
|
| N/A |
|
| 0 |
| |||||||||||||||||||||||||
| 1 | Previously reported, to the extent applicable, in the Proxy Statement dated March |
| 2 | Previously reported, to the extent applicable, in the Proxy Statement dated March |
| 3 | Mr. Patterson forfeited his award when he left the Company on October 31, 2022. |
2022 RESTRICTED STOCK UNIT GRANTS
In 2021, we returned to granting restricted stock units instead of stock options for our executive officers.
Restricted stock units granted in 20212022 to the named executive officers have the following terms:
restricted stock units vest and convert into shares of Common Stock three years from the grant date, contingent on continued service to the vesting date or, for retirement-eligible officers, to December 31, 2021; and
| • | restricted stock units vest and convert into shares of Common Stock three years from the grant date, contingent on continued service to the vesting date or, for retirement-eligible officers, to December 31, 2022; and |
restricted stock units accrue dividend equivalents, if any, that are subject to the same vesting requirements as the underlying restricted stock units.
| • | restricted stock units accrue dividend equivalents, if any, that are subject to the same vesting requirements as the underlying restricted stock units. |
The portion of long-term compensation provided in the form of restricted stock units grants each year is determined based on the availability of Common Stock under our equity compensation plans, as well as market data on long-term compensation.
The table below shows the aggregate grant date fair value and the number of restricted stock units granted to each of our named executive officers in 2021.2022.
Name
| Aggregate Grant Date
| Number of Restricted Stock Units (#)
| ||||||
Kramer |
| $3,194,993 |
|
| 190,065 |
| ||
Wells |
| 869,985 |
|
| 51,754 |
| ||
McClellan |
| 809,990 |
|
| 48,185 |
| ||
Delaney |
| 809,990 |
|
| 48,185 |
| ||
Patterson |
| 699,987 |
|
| 42,097 |
| ||
Following the successful closing of the acquisition of Cooper Tire, the Compensation Committee granted awards to further incentivize value creation and to align compensation outcomes with the shareholder experience. These awards feature both
| Name | Aggregate Grant Date | Number of Restricted Stock Units (#) | ||||||
Kramer |
| $3,194,998 |
|
| 206,262 |
| ||
Wells |
| 929,989 |
|
| 60,038 |
| ||
McClellan |
| 839,992 |
|
| 54,228 |
| ||
Delaney |
| 839,992 |
|
| 54,228 |
| ||
Phillips |
| 419,996 |
|
| 27,114 |
| ||
Patterson1 |
| 479,989 |
|
| 30,987 |
| ||
| 1 | Mr. Patterson forfeited his award when he left the Company on October 31, 2022. |
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||||||
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incentiveRetirement and retentive elements related to the achievement and outperformance of publicly announced synergy targets and significant stock price appreciation. During our annual shareholder outreach, we shared information with our investors regarding the design of the integration incentive awards. Investors supported the rationale, goals and structure of the awards.Other Benefits
Value Creation Plan AwardsRETIREMENT BENEFITS
In August 2021, the Compensation Committee granted awards to approximately 75 key operating leaders, including each of the named executive officers. The awards to the named executive officers were composed of performance shares with the following characteristics:
The awards will be denominated in shares of Common Stock.
The payout will be based on stock price appreciation over a three-year performance period that began on August 1, 2021 and ends on July 31, 2024. The timing of the award corresponds with our first Committee meeting following the closing of the merger.
The payout will be based on the appreciation of our Common Stock from a base price of $15.26 (the closing market price on the date of grant) during any 45-calendar day period in a measurement period that begins on August 1, 2022 and ends on July 31, 2024.
The payout can be adjusted based on performance compared to an index of 19 of our industry peers.
Payout can range from 0% to 200% of the value of the performance shares granted.
Stock Price Appreciation Targets
The Committee believes the stock price appreciation goals are rigorous and imply significant shareholder value creation. The stock price appreciation goal at target reflects an approximate 50% increase in our stock price from the grant date. Unless our stock price performance is in the top quartile of the peer group, no payout will be earned for stock price appreciation of less than the threshold goal and only a minimal payout will be earned for threshold goal performance.
Attainment of the stock price appreciation goals will be measured based on the average stock price over a period of 45 consecutive calendar days in order to eliminate short-term market volatility. As a result, the award would only be earned if we experienced sustained stock price performance over that 45-day period.
The table below shows the threshold, target and maximum payouts for the Value Creation Plan performance shares.
Payout of Value Creation Plan Performance Shares
| Stock Price
| Stock Price
| ||||||
Threshold (1%) |
| 31% |
| $ | 20.01 |
| ||
Target (100%) |
| 51% |
|
| 23.00 |
| ||
Maximum (200%) |
| 83% |
|
| 28.00 |
| ||
Performance shares earned during the performance period will vest and be settled in cash on July 31, 2024, based on the highest 45-calendar day period during the measurement period. Unvested performance shares are not entitled to receive dividend equivalents.
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|
|
Relative Stock Price Modifier
To add further rigor to the award, ensure executives are focused on Goodyear’s stock price performance, and to partially mitigate the impact of broader stock market movements, the Compensation Committee also provided that the awards will be modified based on Goodyear’s stock price performance compared to an index of 19 highly relevant peer companies.
This modifier is designed to assess Goodyear’s success in creating shareholder value relative to other capital-intensive automotive and cyclical industrial companies with comparable leverage and strong correlations to Goodyear’s Common Stock. This group of companies better reflects our relative success in enhancing shareholder value than would comparisons to the peer companies used for benchmarking executive pay (which are chosen primarily due to their positioning as executive talent competitors) or the S&P 500, which is referenced under our performance-based long-term incentive awards. This approach has the further benefit of creating greater comparability throughout economic cycles. The Committee believes this reflects the understanding investors have of risk and reward in making investment decisions.
THE COMPARISON GROUP CONSISTS OF:
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The Value Creation Plan’s modifier measures the relative performance of our Common Stock compared to the peer group set forth above over the three-year performance period and is calculated based on the trailing 45-day average closing price of our Common Stock and the comparison group, assuming the reinvestment of dividends. The Value Creation Plan’s modifier will cause the payout of the awards to be modified as follows (up to a maximum payout of 200%) as follows:
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The table below shows the aggregate grant date fair value and the number of performance shares granted to each ofWe provide our named executive officers with respectretirement benefits under both tax-qualified and non-qualified retirement plans. Tax-qualified plan benefits are pursuant to a defined benefit pension plan, the Value CreationGoodyear Salaried Pension Plan (the “Salaried Plan”), which was frozen effective December 31, 2008, and a defined contribution plan, the Goodyear Employee Savings Plan for Salaried Employees (the “Savings Plan”). Non-qualified plan benefits are pursuant to a defined benefit plan, the Goodyear Supplementary Pension Plan (the “Supplementary Plan”), which was closed to new entrants effective December 31, 2021. We also maintain a non-qualified defined benefit Excess Benefit Plan, which was also frozen effective December 31, 2008, that pays an additional pension benefit over that paid from the Salaried Plan if a participant does not meet the eligibility requirements of the Supplementary Plan.
For all employees who do not meet the eligibility requirements of the Supplementary Plan, there is also a corresponding non-qualified defined contribution Excess Benefit Plan that mirrors the retirement contributions feature of the Savings Plan.
Retirement benefits are important to attracting, motivating and retaining talented executives with a history of leadership and to providing retirement replacement income. Retirement benefits are an important factor in an executive’s decision to accept or reject a new position.
The aggregate grant date fair value forSupplementary Plan provides additional pension benefits to officers. All of the named executive officers representsparticipate in the Supplementary Plan. The Compensation Committee has adopted a small portion, or 0.58%,policy prohibiting the grant of shareholder value creation at target. The Committee strongly believes that these amounts offer appropriate additional incentive forservice credit to participants in the execution of novel strategic initiatives to drive excess returns overSupplementary Plan and closed the plan period.to new entrants effective December 31, 2021.
Name
| Aggregate Grant Date
| Number of Performance Shares (#)
| ||||||
Kramer |
| $5,456,000 |
|
| 275,000 |
| ||
Wells |
| 1,984,000 |
|
| 100,000 |
| ||
McClellan |
| 1,785,600 |
|
| 90,000 |
| ||
Delaney |
| 1,785,600 |
|
| 90,000 |
| ||
Patterson |
| 1,587,200 |
|
| 80,000 |
| ||
Synergy-Related Integration Awards
In June 2021,Mr. Kramer, Mr. Wells and Mr. McClellan are currently eligible to receive a benefit under the Compensation Committee granted cash-based awardsSupplementary Plan. Mr. Kramer and Mr. McClellan will receive benefits from the frozen Salaried Plan. Mr. Wells, Mr. Delaney and Mr. Phillips are not eligible to approximately 25 leadersparticipate in the Salaried Plan or the defined benefit Excess Benefit Plan. Participants in the Savings Plan, including all of the Goodyearnamed executive officers, are currently eligible to receive Company matching contributions and Cooper Tire integration teams, including Mr. Patterson, who is the executive officer at Goodyear responsible for the integration of Cooper Tire.
Payments under these awards are based on performance against the following performance objectives:
75% upon realizing $165 million (both threshold and target) to $250 million (maximum) of core synergies from the Cooper Tire acquisition by May 31, 2023 (payable at 0% to 200% of target).
25% upon realizing $250 million (both threshold and target) to $400 million (maximum) of working capital savings by May 31, 2023 (payable at 0% to 200% of target).
Mr. Patterson’s total target synergy-related incentive award is $487,500, which was based on 75% of his annual incentive target to recognize the significance of achieving a successful outcome from the Cooper Tire acquisition.
Retention-Related Integration Awardsretirement contributions.
In May 2021, the Compensation Committee approved retention agreements with Mr. Kramer and Mr. McClellan and Mr. Wells.that are tied to the pension benefit obligation under the Supplementary Plan. The Compensation Committee approved these agreements to help secure the retention of these three key executive officersMr. Kramer and Mr. McClellan through at least December 31, 2023 due to their importance in directing the successful integration of Cooper Tire and the execution of our other ongoing strategic initiatives. The awards also help to ensure successful succession planning for the new, larger company and successful succession planning outcomes as our seasoned executives will navigate the newly combined company through the integration which by definition is disruptive.
| ||||||||
|
|
process. For a discussion of the Board’s succession planning process, see “Management Succession Planning” at page 5.
The retention agreements with Mr. Kramer and Mr. McClellan provide for a lump sum payment equal to the difference, if any, between the Supplementary Plan benefit calculated based on the interest rate at January 1, 2021 (0%) and the benefit based on the interest rate at the time of their respective retirement, subject to continuous service through December 31, 2023 and the other terms and conditions of their respective retention agreement.
The Committee structured these awards for Mr. Kramer and Mr. McClellan through the Supplementary Plan to help mitigate the risk of rising interest rates by incentivizing continued employment through this guarantee against interest rate changes. These agreements, in effect, mitigate the incentive for Mr. Kramer and Mr. McClellan to retire amid a potentially more favorable interest rate environment.
A 25 basis point increase in the underlying interest rate would increase the value of Mr. Kramer’s pension benefit by approximately $850,000 and Mr. McClellan’s pension benefit by approximately $400,000. At January 1, 2022, the underlying interest rate remained unchanged.
As noted above, the Supplementary Plan is closed to new entrants and only legacy executives, including Mr. Kramer and Mr. McClellan, qualify for the Supplementary Plan.
Mr. Wells returned to Goodyearresult in 2018 after having retired in 2016. In addition to considering Mr. Wells’ roles in the integration and succession planning outcomes, the Committee considered feedback from shareholders that Mr. Wells’ experience and continued involvement in strategy development is highly valued. The retention agreement with Mr. Wells provides that he will be eligible to receive a one-time cash award of $2.0 million, payable in March 2024, subject to his continued employment with the Company through at least December 31, 2023 and the other terms and conditions of his retention agreement. The Committee determined the amount of the retention benefit provided to Mr. Wells based on an assessment of retentive elements already contained within the Company’s long-term incentive awards and other retentive elements of our plans, in conjunction with an analysis of value sufficient to address retention risk through the integration. Mr. Wells would not have benefited through the retention agreement structure approvedapproximately $850,000 for Mr. Kramer and a retention benefit of approximately $400,000 for Mr. McClellan.McClellan and a corresponding reduction in their
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||||||
| Retirement and Other Benefits
|
previously accrued pension benefit obligation of the same amount, resulting in no new net cost to the Company. At January 1, 2023, the underlying interest rate was 2.75%, resulting in an aggregate potential retention benefit of approximately $9,350,000 for Mr. Kramer and approximately $4,400,000 for Mr. McClellan and a corresponding reduction in their previously accrued pension benefit obligation.
| CEO Payout Scenarios | ||||||||||||
| Change in Long-Term Interest Rate | Potential Retention Benefit Value | Decrease in Pension Benefit Obligation | New Net Cost to Company | |||||||||
0.00% | $ | 0 | $ | 0 | $ | 0 | ||||||
1.00% | 3,400,000 | (3,400,000 | ) | 0 | ||||||||
2.00% | 6,800,000 | (6,800,000 | ) | 0 | ||||||||
3.00% | 10,200,000 | (10,200,000 | ) | 0 | ||||||||
The Compensation Committee structured these awards in order to retain Mr. Kramer and Mr. McClellan amid the Cooper Tire integration and other strategic initiatives by offsetting their incentive to retire due to the rising interest rate environment, which would erode the value of their fully vested Supplementary Plan benefits. In approving these retention agreements, the Compensation Committee considered the following factors:
| • | The projected award value; |
| • | The effective cap on the award due to the dollar-for-dollar decrease in the corresponding pension benefit obligation that was already accrued in the Company’s consolidated financial statements, resulting in no new net incremental cost to the Company; |
| • | The historic stability of the interest rate used to calculate the Supplementary Plan benefit (i.e., the 12-year High-Quality Market Corporate Bond Yield Curve) and, therefore, the retention benefit; and |
We provide our named executive officers with retirement benefits under both tax-qualified and non-qualified retirement plans. Tax-qualified plan benefits are pursuant to a defined benefit pension plan, the Goodyear Salaried Pension Plan (the “Salaried Plan”), which was frozen effective December 31, 2008, and a defined contribution plan, the Goodyear Employee Savings Plan for Salaried Employees (the “Savings Plan”). Non-qualified plan benefits are pursuant to a defined benefit plan, the Supplementary Plan. We also maintain a non-qualified defined benefit Excess Benefit Plan, which was also frozen effective December 31, 2008, that pays an additional pension benefit over that paid from the Salaried Plan if a participant does not meet the eligibility requirements of the Supplementary Plan.
For all employees who do not meet the eligibility requirements of the Supplementary Plan, there is also a corresponding non-qualified defined contribution Excess Benefit Plan that mirrors the retirement contributions feature of the Savings Plan.
Mr. Kramer, Mr. Wells and Mr. McClellan are currently eligible to receive a benefit under the Supplementary Plan. Mr. Kramer, Mr. McClellan and Mr. Patterson will receive benefits from the frozen Salaried Plan. Mr. Wells and Mr. Delaney are not eligible to participate in the Salaried Plan or the defined benefit Excess Benefit Plan. Participants in the Savings Plan, including all of the named executive officers, are currently eligible to receive Company matching contributions and retirement contributions.
The Supplementary Plan provides additional pension benefits to officers and certain other key individuals identified by the Compensation Committee. All of the named executive officers participate in the Supplementary Plan, which was closed to new entrants effective December 31, 2021. Retirement benefits, including those provided through a supplemental executive retirement plan, are important to attracting, motivating and retaining talented executives with a history of leadership and to providing retirement replacement income. Retirement benefits are an important factor in an executive’s decision to accept or reject a new position. The Compensation Committee has adopted a policy prohibiting the grant of additional service credit to participants in the Supplementary Plan.
| • | The closure of the Supplementary Plan to new entrants. |
The number reported in the “Change in Pension Value” column in the Summary Compensation Table reflects the change in each named executive officer’s pension value in 2021.2022. Changes in pension value are caused largely by two factors: (1) additional pension benefits accrued by the named executive officers under the Supplementary Plan when they receive higher compensation due to roles of increasing responsibility or through strong performance and due to the passage of time, and (2) changes in assumptions used for financial reporting purposes, such as changes in discount rates and updated actuarial assumptions regarding life expectancies. Mr. Kramer’s pension value increaseddecreased in 20212022 due to an increase in the discount rate used to calculate the pension value, which more than offset an increase in accrued benefits due to higher five-year average compensation and an additional year of credited service, which was partially offset by an increase in the discount rate used to calculate the pension value.service.
For more information regarding the terms of these plans and the named executive officers’ accrued benefits under these plans, see “Defined Contribution Plan Benefits” at page 6967 and “Pension Benefits” at page 69.68.
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||||||
| Retirement and Other Benefits
|
SEVERANCE AND CHANGE IN CONTROL BENEFITS
Our Executive Severance and Change in Control Plan (the “Executive Severance Plan”) provides for the payment of severance benefits to our officers, including all of the named executive officers, if their employment is terminated under certain circumstances during certain periods before or within two years following a change-in-control of the Company. The Executive Severance Plan does not provide for any excise tax gross-ups or walk-away rights.
The Executive Severance Plan is designed to attract, retain and motivate officers, provide for stability and continuity in the event of an actual or threatened change-in-control, and ensure that our officers are able to devote their full time and attention to the Company’s operations in the event of an actual or threatened change-in-control.
The Executive Severance Plan and the related change-in-control triggers (commonly referred to as “double triggers”) generally provide for the payment of severance benefits if employment is terminated under certain circumstances during certain periods before or within two years following a change-in-control of the Company. The change-in-control triggers in our equity compensation plans are substantially similar to those in the Executive Severance Plan. We selected the specific change-in-control triggers used in the Executive Severance Plan and our equity compensation plans, such as the acquisition of 20% or more of Goodyear’s Common Stock, a significant change in the composition of the Board of Directors or the acquisition of actual control of Goodyear, based upon our review of market practices, including provisions included in similar agreements of other public companies. Based upon that review, we determined that the terms and conditions of the Executive Severance Plan, including the specific change-in-control triggers, were consistent with market practices.
The Executive Severance Plan also provides severance benefits to our officers, including each of the named executive officers, if their employment is terminated by us other than for Cause (as defined in the Executive Severance Plan), death or disability, and other than in connection with a change-in-control.
To be eligible to receive benefits under the Executive Severance Plan, an officer must execute a release and agree, among other things, to certain confidentiality, non-disparagement, non-solicitation and non-competition covenants.
The Compensation Committee believes that our severance benefits are in the best interests of the Company and our shareholders, are a necessary component of a competitive compensation program, and are in line with severance benefits in place at other companies.
For additional information regarding the terms of the Executive Severance Plan and benefits payable under that plan, see “Potential Payments Upon Termination or Change-in-Control” at page 73.71.
We provide certain executive officers, including our named executive officers, with limited personal benefits and perquisites, as described below and in footnote 5 to the Summary Compensation Table at page 63.60. The Compensation Committee has reviewed and approved the perquisites described below. The Compensation Committee recognizes that these perquisites are an important factor in protecting our executive officers and in enabling them to focus on our business with minimal disruption. We do not provide any tax reimbursements to our executive officers for any of the perquisites we provide them.
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||||||
| Retirement and Other Benefits
|
Home Security Systems. We pay for the cost of home security systems for a limited number of executive officers in order to enhance their safety and protect our investment in them. We cover the cost of installation, monitoring and maintenance for these systems.
Use of Company Aircraft. In limited circumstances, executive officers are permitted to use our company aircraft for personal travel.
Tire Program. We offer our executive officers and Board members the opportunity to receive up to two sets of tires per year at our expense, including the cost of tires, mounting, balancing and disposal fees.
Financial Planning and Tax Preparation Services. We offer financial assistance to our executive officers to help them cover the cost of financial planning and tax preparation services. In providing this benefit, we seek to alleviate our executives’ concern regarding personal financial planning so that they may devote their full attention to our business. The maximum annual cost to the Company under this program is $9,000 per officer.
Club Memberships. We pay the annual dues for a corporate club membership that is available to Mr. Kramer and Mr. McClellan. None of the other named executive officers utilize this corporate club membership. The membership is intended to be used primarily for business purposes, although members may use the club for personal purposes so long as they pay all incremental costs, other than the annual dues, related to that personal use.
Annual Physical Exams. We strongly encourage our executive officers to have an annual comprehensive physical examination which we pay for in order to enhance their physical well-being and protect our investment in them.
EXECUTIVE DEFERRED COMPENSATION PLAN
The Goodyear Deferred Compensation Plan for Executives (the “Deferred Compensation Plan”) is a non-qualified deferred compensation plan that provides named executive officers and other highly compensated employees the opportunity to defer various forms of compensation. For participants, this offers an additional means to save for retirement on a tax-deferred basis. There is no guaranteed return associated with any deferred amounts. During 2021,2022, none of the named executive officers made deferrals under the Deferred Compensation Plan.
For additional information regarding the terms of the Deferred Compensation Plan and participant balances, see “Nonqualified Deferred Compensation” at page 72.
Compensation Policies and Practices
To better link the interests of management and our shareholders, the Compensation Committee has established stockholding guidelines for our officers. These guidelines specify a number of shares that our officers are expected to accumulate and hold based on a multiple of annual base salary of six times for the CEO, three times for Executive Vice Presidents, Presidents of our operating units and Senior Vice Presidents, and two times for elected Vice Presidents. Therefore, the stockholding requirement71.
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||||||
| Compensation Policies and Practices
|
Compensation Policies and Practices
STOCKHOLDING GUIDELINES
In keeping with our objective of aligning our executives’ interests with our shareholders’ interests, we require our executives to hold equity in the Company equal in value to a designated multiple of their base salaries. Under the Company’s stockholding guidelines, officers must hold 100% of the net shares issued to them until they achieve the required stock ownership level, unless they demonstrate a need to sell shares due to a financial hardship. The required ownership values for Mr. Kramer is six times his annual base salary and for Mr. Wells, Mr. McClellan, Mr. Delaney and Mr. Patterson is three times their annual base salary. our named executive officers vary based on the executive’s level of responsibility as follows:
Title | Required Ownership as a | |||
Chief Executive Officer | 6x | |||
President, Executive Vice President or Senior Vice President | 3x | |||
All shares of Common Stock owned outright by officers (or their spouses) and held by them in the Goodyear stock fund of the Savings Plan, and 60% of the shares of restricted stock or restricted stock units, earned (but unvested) performance shares awarded to officers and share equivalent units held in our deferred compensation plan are counted as ownership in assessing compliance with the guidelines. UnearnedUnvested performance shares and unexercised stock options are not counted toward compliance with the guidelines. The stock price used in assessing compliance with the guidelines as of May 1st of each year will be the average closing stock price for the prior 60-day200-day period.
The stockholding guidelines also include stock retention provisions. If an officer has met their stockholding requirement, they are required to retain 25% of the net shares received from any vested shares of Common Stock or any exercised options for at least one year from the date of vesting or exercise and may only sell or otherwise dispose of shares to the extent they will still meet their stockholding requirement following that sale or disposition. If an officer has not met their stockholding requirement, they are required to retain all of the net shares received from any vested shares of Common Stock or any exercised options, and may not sell or otherwise dispose of shares until they have met their stockholding requirement, unless they demonstrate a need to sell shares due to a financial hardship. Net shares are the shares remaining after payment of the exercise price and/or withholding taxes.
During 2021,2022, each of our named executive officers complied with our stockholding guidelines and are making progress towards satisfying their stockholding requirement, with Mr. Kramer, Mr. McClellan and Mr. Delaney exceedingsatisfied their stockholding requirement.
PROHIBITION ON HEDGING AND PLEDGING
We have adopted, as part of our insider trading policy, prohibitions on the short sale of our Common Stock and other securities and the issuance, purchase or sale of, or trading or dealing in, puts, calls or other options or rights relating to our Common Stock and other securities. These provisions prohibit our directors, officers and employees from hedging the risk of their ownership of our Common Stock. We also prohibit our directors, officers and employees from holding our Common Stock and other securities in a margin account or otherwise pledging them as collateral for a loan.
RECOVERY OF COMPENSATION (CLAW-BACK POLICY)
If the Compensation Committee determines that an officer has engaged in conduct detrimental to the Company, the Compensation Committee may take a range of actions to remedy this conduct, prevent its recurrence and impose appropriate discipline. Discipline would vary depending on the facts and circumstances, and may include (1) termination of employment,
| 57 |
COMPENSATION DISCUSSION AND ANALYSIS | ||||||||
| Compensation Policies and Practices |
(2) cancelling or reducing any outstanding compensatory grants or awards, (3) initiating an action for breach of fiduciary duty or fraud which could include recovery of any unjustly obtained incentive compensation, and (4) requiring reimbursement of compensation or other payments in accordance with provisions of the Sarbanes-Oxley Act of 2002, our claw-back policy described below or the terms of the relevant compensation plan. These remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities.
Beginning with awards made in 2012, the Compensation Committee adopted a claw-back policy that effectively contractually extends the claw-back provisions of the Sarbanes-Oxley Act of 2002 that apply to our Chief Executive Officer and Chief Financial Officer to the Presidents of each of our strategic business units and all of our Executive and Senior Vice Presidents. If we are
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required to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement as a result of misconduct, the claw-back policy would permit the Compensation Committee to require reimbursement of (1) any incentive compensation received from us during the one-year period following the publication of misstated financial statements and (2) any profits realized from the sale of our securities during that one-year period. We will make any necessary revisions to our claw-back policy once implementing rules pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 are adopted by the SEC and The Nasdaq Stock Market.
In addition, under our equity compensation plans, (and the proposed 2022 Performance Plan), the Compensation Committee may require a plan participant who engages in competition with us within 18 months after their termination of employment to return or forfeit the realized value of all awards under those plans during such period of time that the Compensation Committee determines. Our Executive Severance Plan also provides for the recovery or forfeiture of severance payments if a person receiving payments pursuant to the plan violates certain confidentiality, non-disparagement, non-solicitation and non-competition covenants.
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We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussion with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference in Goodyear’s Annual Report on Form 10-K for the year ended December 31, 2021.2022.
THE HUMAN CAPITAL AND COMPENSATION COMMITTEE
James A. Firestone, Chairman
Laurette T. Koellner
W. Alan McCollough
Stephanie A. StreeterThomas L. Williams
|
|
The table below sets forth information regarding the compensation of the CEO, the Chief Financial Officer of Goodyear (the “CFO”), and the persons who were, at December 31, 2021,2022, the other three most highly compensated executive officers of Goodyear, and Mr. Patterson, who would have been one of our most highly compensated executive officers had he continued to serve as such on December 31, 2022 (collectively, the “named executive officers”), for services in all capacities to Goodyear and its subsidiaries during 2019, 2020, 2021 and 2021.2022.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)1 | Option Awards ($)2 | Non-Equity Incentive Plan Compensation ($)3 | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)4 | All Other Compensation ($)5 | Total ($) | Year | Salary ($) | Bonus ($) | Stock Awards ($)1 | Option Awards ($)2 | Non-Equity Incentive Plan Compensation ($)3 | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)4 | All Other Compensation ($)5 | Total ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Richard J. Kramer | 2021 | $ | 1,300,000 | $ 0 | $ | 10,688,026 | $ | 0 | $9,068,900 | $ | 199,123 | $159,529 | $ | 21,415,578 | 2022 | $ | 1,366,667 | $ | 0 | $ | 5,658,051 | $ | 0 | $3,109,500 | $ | 0 | $183,130 | $ | 10,317,348 | |||||||||||||||||||||||||||||||||||||||||||
Chairman of the Board, | 2020 | 1,218,750 | 0 | 1,757,495 | 1,970,000 | 6,156,200 | 4,777,795 | 122,873 | 16,003,113 | 2021 | 1,300,000 | 0 | 10,688,026 | 0 | 9,068,900 | 199,123 | 159,529 | 21,415,578 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chief Executive Officer | 2019 | 1,300,000 | 0 | 5,149,951 | 0 | 6,242,900 | 4,102,650 | 175,154 | 16,970,655 | 2020 | 1,218,750 | 0 | 1,757,495 | 1,970,000 | 6,156,200 | 4,777,795 | 122,873 | 16,003,113 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
and President | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Darren R. Wells | 2021 | 800,000 | 0 | 3,408,666 | 0 | 2,857,250 | 412,158 | 122,342 | 7,600,416 | 2022 | 823,333 | 0 | 1,614,371 | 0 | 1,089,900 | 97,016 | 124,475 | 3,749,095 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President | 2020 | 780,000 | 0 | 144,999 | 869,999 | 1,790,300 | 519,909 | 79,084 | 4,184,291 | 2021 | 800,000 | 0 | 3,408,666 | 0 | 2,857,250 | 412,158 | 122,342 | 7,600,416 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
and Chief Financial Officer | 2019 | 800,000 | 0 | 4,402,314 | 0 | 1,884,700 | 204,581 | 103,985 | 7,395,580 | 2020 | 780,000 | 0 | 144,999 | 869,999 | 1,790,300 | 519,909 | 79,084 | 4,184,291 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stephen R. McClellan | 2021 | 750,000 | 0 | 3,112,012 | 0 | 2,668,050 | 309,082 | 95,476 | 6,934,620 | 2022 | 770,000 | 0 | 1,471,271 | 0 | 1,011,698 | 0 | 103,882 | 3,356,851 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
President, Americas | 2020 | 731,250 | 0 | 135,003 | 809,999 | 1,697,350 | 2,502,934 | 49,652 | 5,926,188 | 2021 | 750,000 | 0 | 3,112,012 | 0 | 2,668,050 | 309,082 | 95,476 | 6,934,620 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2019 | 750,000 | 0 | 1,305,607 | 0 | 2,195,057 | 1,516,536 | 47,604 | 5,814,804 | 2020 | 731,250 | 0 | 135,003 | 809,999 | 1,697,350 | 2,502,934 | 49,652 | 5,926,188 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Christopher R. Delaney | 2021 | 750,000 | 0 | 3,112,012 | 0 | 2,578,800 | 532,135 | 24,555 | 6,997,502 | 2022 | 760,000 | 0 | 1,471,271 | 0 | 951,128 | 173,290 | 24,789 | 3,380,478 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
President, Europe, Middle | 2020 | 731,250 | 0 | 135,003 | 809,999 | 1,628,150 | 577,157 | 25,097 | 3,906,656 | 2021 | 750,000 | 0 | 3,112,012 | 0 | 2,578,800 | 532,135 | 24,555 | 6,997,502 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
East and Africa | 2019 | 750,000 | 0 | 1,305,607 | 0 | 1,381,348 | 290,995 | 28,410 | 3,756,360 | 2020 | 731,250 | 0 | 135,003 | 809,999 | 1,628,150 | 577,157 | 25,097 | 3,906,656 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
David E. Phillips | 2022 | 591,667 | 0 | 718,028 | 0 | 632,734 | 0 | 21,364 | 1,963,793 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Vice President & | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General Counsel | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ryan G. Patterson | 2021 | 641,667 | 0 | 2,574,088 | 0 | 1,744,630 | 433,239 | 45,996 | 5,439,620 | 2022 | 541,667 | 0 | 833,739 | 6 | 0 | 477,488 | 0 | 6 | 2,019,754 | 3,872,648 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Vice President and Chief | 2020 | 585,000 | 0 | 75,004 | 449,999 | 1,015,600 | 1,170,642 | 20,354 | 3,316,599 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Former Senior Vice President | 2021 | 641,667 | 0 | 2,574,088 | 0 | 1,744,630 | 433,239 | 45,996 | 5,439,620 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating and Integration Officer, | 2019 | 600,000 | 0 | 725,337 | 0 | 1,075,747 | 557,435 | 25,645 | 2,984,164 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
and Chief Operating and | 2020 | 585,000 | 0 | 75,004 | 449,999 | 1,015,600 | 1,170,642 | 20,354 | 3,316,599 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Americas | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Integration Officer, Americas | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | Represents the aggregate grant date fair value as of the respective grant date for each |
| 2 | Represents the aggregate grant date fair value as of the respective grant date for each award. The assumptions made in valuing option awards reported in this column are discussed in Note to the Consolidated Financial Statements No. 1, “Accounting Policies” under “Stock-Based Compensation” and Note to the Consolidated Financial Statements No. 19, “Stock Compensation Plans” included in Goodyear’s Annual Report for the year ended December 31, |
| 3 | Represents amounts awarded under our annual and long-term incentive compensation plans. For additional information regarding annual cash incentive awards in |
| 60 |
EXECUTIVE COMPENSATION | ||||||||
| Summary Compensation Table |
Amounts awarded under our long-term incentive compensation plans are, for |
| ||||||||
|
|
The following table provides further information on the amounts payable, or earned but not yet payable, for performance periods ending on December 31, |
2021 Annual Incentive (Currently Payable) | 2021 Period; 2019-2021 Long- Term Incentive (Currently Payable) | 2019-2021 Impact of TSR Modifier (Currently Payable) | 2021 Period; 2020-2022 Long- Term Incentive (Not Yet Payable) | 2021 Period; 2021-2023 Long- Term Incentive (Not Yet Payable) | 2022 Annual Incentive (Currently Payable) | 2022 Period; 2020-2022 Long- Term Incentive (Currently Payable) | 2020-2022 Impact of TSR Modifier (Currently Payable) | 2022 Period; 2021-2023 Long- Term Incentive (Not Yet Payable) | 2022 Period; 2022-2024 Long- Term Incentive (Not Yet Payable) | |||||||||||||||||||||||||||||||
Kramer |
| $3,452,800 |
|
| $1,437,800 |
|
| $(1,146,700 | ) |
| $2,662,500 |
|
| $2,662,500 |
|
| $2,307,200 |
|
| $603,500 |
|
| $(1,008,200 | ) |
| $603,500 |
|
| $603,500 |
| ||||||||||
Wells |
| 1,328,000 |
|
| 391,500 |
|
| (312,300 | ) |
| 724,950 |
|
| 725,100 |
|
| 860,050 |
|
| 164,322 |
|
| (274,472 | ) |
| 164,322 |
|
| 175,678 |
| ||||||||||
McClellan |
| 1,244,250 |
|
| 364,500 |
|
| (290,700 | ) |
| 675,000 |
|
| 675,000 |
|
| 802,620 |
|
| 153,000 |
|
| (255,600 | ) |
| 153,000 |
|
| 158,678 |
| ||||||||||
Delaney |
| 1,155,000 |
|
| 364,500 |
|
| (290,700 | ) |
| 675,000 |
|
| 675,000 |
|
| 742,050 |
|
| 153,000 |
|
| (255,600 | ) |
| 153,000 |
|
| 158,678 |
| ||||||||||
Phillips |
| 525,300 |
|
| 68,000 |
|
| (113,600 | ) |
| 73,678 |
|
| 79,356 |
| |||||||||||||||||||||||||
Patterson |
| 953,630 |
|
| 202,500 |
|
| (161,500 | ) |
| 375,000 |
|
| 375,000 |
|
| 477,488 |
|
| 0 |
|
| N/A |
|
| 0 |
|
| 0 |
| ||||||||||
| 4 | Represents total change in pension value for each named executive officer, which reflects both the accrual of additional benefits and changes in the assumptions used to value the benefits. The discount rate used to calculate the Supplementary Plan pension value increased from |
Increase in Pension Value due to Benefit Accrual | Decrease in Pension Value due to Assumption Changes | Total Change in Pension Value | Increase in Pension Value due to Benefit Accrual | Decrease in Pension Value due to Assumption Changes | Total Change in Pension Value | |||||||||||||||||||||||
Kramer |
| $852,631 |
|
| $(653,508 | ) |
| $199,123 |
|
| $3,753,029 |
|
| $(8,506,280 | ) | $ | (4,753,251 | ) | ||||||||||
Wells |
| 453,822 |
|
| (41,664 | ) |
| 412,158 |
|
| 663,096 |
|
| (566,080 | ) |
| 97,016 |
| ||||||||||
McClellan |
| 698,396 |
|
| (389,314 | ) |
| 309,082 |
|
| 1,341,825 |
|
| (3,708,451 | ) |
| (2,366,626 | ) | ||||||||||
Delaney |
| 574,405 |
|
| (42,270 | ) |
| 532,135 |
|
| 884,039 |
|
| (710,749 | ) |
| 173,290 |
| ||||||||||
Phillips |
| 709,088 |
|
| (990,491 | ) |
| (281,403 | ) | |||||||||||||||||||
Patterson |
| 721,865 |
|
| (288,626 | ) |
| 433,239 |
|
| — |
|
| — |
|
| (89,428 | ) | ||||||||||
No nonqualified deferred compensation earnings are required to be reported because the Deferred Compensation Plan does not provide for “above-market” or preferential earnings as defined in applicable SEC rules and regulations. |
| 5 |
|
| Perquisites | Personal Use of Company Aircraft | Contributions to Savings Plan | Other Compensation | TOTAL | ||||||||||||||||
Kramer |
| $55,725 | a |
| $93,855 |
|
| $33,550 |
|
| $0 |
|
| $183,130 |
| |||||
Wells |
| 12,310 |
|
| 96,915 |
|
| 15,250 |
|
| 0 |
|
| 124,475 |
| |||||
McClellan |
| 21,069 |
|
| 49,263 |
|
| 33,550 |
|
| 0 |
|
| 103,882 |
| |||||
Delaney |
| 9,539 |
|
| 0 |
|
| 15,250 |
|
| 0 |
|
| 24,789 |
| |||||
Phillips |
| 12,214 |
|
| 0 |
|
| 9,150 |
|
| 0 |
|
| 21,364 |
| |||||
Patterson |
| 1,098 |
|
| 0 |
|
| 21,350 |
|
| 1,997,306 | b |
| 2,019,754 |
| |||||
| a | Includes $34,346 for |
| b |
|
| 6 | Mr. Patterson left the Company on October 31, 2022. As a result, he forfeited all unvested stock awards and his benefits under the Supplementary Plan. |
EXECUTIVE COMPENSATION | ||||||||||||
| Summary of Realized Pay Earned by Our Chief Executive Officer for |
Summary of Realized Pay Earned by Our Chief Executive Officer for 2019, 2020, 2021 and 20212022
Our compensation programs for Mr. Kramer and our other officers are primarily based on performance. The information shown below is intended to supplement and not be a substitute for the information in the Summary Compensation Table. The Summary Compensation Table includes several items that are driven by accounting and actuarial assumptions, which are not necessarily reflective of compensation actually realized by Mr. Kramer in a particular year. For example, the information required to be in the Summary Compensation Table combines pay actually received (base salary and annual cash incentive payments) with the accounting value of equity compensation granted, which may never be realized, and earned but unvested long term cash awards, which continue to be subject to forfeiture and a TSR modifier until the vesting date. The Summary Compensation Table is also required to include other compensation (contributions to qualified defined contribution plans and perquisites) and the change in pension values (based on actuarial assumptions), much of which is not realized in the periods presented.
The following table reports base salary, annual incentive earned, long term incentive to be paid out for the three-year performance cycle ending in each respective year and pre-tax compensation earned upon the exercise of stock options and the vesting of stock awards regardless of when they were granted.
Name | Year | Salary ($)1 | Annual Incentive ($)2 | Long Term Incentive Cash Payout ($)3 | Stock Option Exercises ($)4 | Long Term Incentive Equity Vesting ($)5 | Total Realized Pay ($) | Year | Salary ($)1 | Annual Incentive ($)2 | Long Term Incentive Cash Payout ($)3 | Stock Option Exercises ($)4 | Long Term Incentive Equity Vesting ($)5 | Total Realized Pay ($) | ||||||||||||||||||||||||||||||||||||||||||
Kramer |
| 2021 |
| $ | 1,300,000 |
| $ | 3,452,800 |
|
| $4,586,600 |
|
| $7,417,253 |
| $ | 3,897,790 |
| $ | 20,654,443 |
|
| 2022 |
|
| $1,366,667 |
|
| $2,307,200 |
|
| $4,032,800 |
|
| — |
|
| $4,219,217 |
|
| $11,925,884 |
| ||||||||||||||
| 2020 | 1,218,750 | 1,601,600 | 1,732,400 | — | 253,516 | 4,806,266 | 2021 | 1,300,000 | 3,452,800 | 4,586,600 | $7,417,253 | 3,897,790 | 20,654,443 | |||||||||||||||||||||||||||||||||||||||||||
| 2019 | 1,300,000 | 2,724,800 | 1,192,800 | — | 210,527 | 5,428,127 | 2020 | 1,218,750 | 1,601,600 | 1,732,400 | — | 253,516 | 4,806,266 | |||||||||||||||||||||||||||||||||||||||||||
| 1 | Mr. Kramer’s salary was targeted at market median for |
| 2 | Mr. Kramer’s individual targets were set at 160% of base salary for |
| 3 | The percentage of Mr. Kramer’s long term incentive target to be paid in cash is fifty percent. This column shows the cash payout for each of the performance cycles completed in the respective year. The |
| 4 | In 2021, Mr. Kramer exercised 1,310,262 stock options and realized $7,417,253. At December 31, |
| 5 | Twenty percent of Mr. Kramer’s long term incentive target was granted in the form of performance shares in |
EXECUTIVE COMPENSATION | ||||||||||||
| Grants of Plan-Based Awards
|
The following table summarizes grants of plan-based awards made to the named executive officers during 2021.2022.
Estimated Future Payouts Under |
Estimated Future Payouts | All Other Stock Awards: Number of Shares of Stock or Units (#)3 | Grant Date Fair Value of Stock Awards ($) |
Estimated Future Payouts Under |
Estimated Future Payouts | All Other Stock Awards: Number of Shares of Stock or Units (#)3 | Grant Date Fair Value of Stock Awards ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kramer | 2/26/2021 | $ | 2,662,500 | $ | 5,325,000 | $ | 10,650,000 | 2/28/2022 | $ | 2,662,500 | $ | 5,325,000 | $ | 10,650,000 |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Kramer | 2/26/2021 | 35,079 | 70,158 | 126,284 | $ | 1,225,660 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kramer | 2/26/2021 | 21,119 | 42,237 | 84,474 | 811,373 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kramer | 8/5/2021 | 2,750 | 275,000 | 550,000 | 5,456,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kramer | 2/26/2021 | 190,065 | 3,194,993 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 35,079 | 70,158 | 126,284 |
| $ | 1,008,170 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 21,119 | 42,237 | 84,474 |
| 725,632 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 22,918 | 45,836 | 91,672 |
| 729,251 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
|
|
|
| 206,262 | 3,194,998 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wells | 2/26/2021 | 725,000 | 1,450,000 | 2,900,000 | 2/28/2022 | 775,000 | 1,550,000 | 3,100,000 |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wells | 2/26/2021 | 9,552 | 19,104 | 34,387 | 333,747 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wells | 2/26/2021 | 5,751 | 11,501 | 23,002 | 220,934 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wells | 8/5/2021 | 1,000 | 100,000 | 200,000 | 1,984,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wells | 2/26/2021 | 51,754 | 869,985 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 9,552 | 19,104 | 34,387 |
| 274,524 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 5,751 | 11,501 | 23,002 |
| 197,587 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 6,671 | 13,342 | 26,684 |
| 212,271 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
|
|
|
| 60,038 | 929,989 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
McClellan | 2/26/2021 | 675,000 | 1,350,000 | 2,700,000 | 2/28/2022 | 700,000 | 1,400,000 | 2,800,000 |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
McClellan | 2/26/2021 | 8,893 | 17,786 | 32,015 | 310,721 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
McClellan | 2/26/2021 | 5,354 | 10,708 | 21,416 | 205,701 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
McClellan | 8/5/2021 | 900 | 90,000 | 180,000 | 1,785,600 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
McClellan | 2/26/2021 | 48,185 | 809,990 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 8,893 | 17,786 | 32,015 |
| 255,585 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 5,354 | 10,708 | 21,416 |
| 183,963 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 6,026 | 12,051 | 24,102 |
| 191,731 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
|
|
|
| 54,228 | 839,992 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Delaney | 2/26/2021 | 675,000 | 1,350,000 | 2,700,000 | 2/28/2022 | 700,000 | 1,400,000 | 2,800,000 |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Delaney | 2/26/2021 | 8,893 | 17,786 | 32,015 | 310,721 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Delaney | 2/26/2021 | 5,354 | 10,708 | 21,416 | 205,701 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Delaney | 8/5/2021 | 900 | 90,000 | 180,000 | 1,785,600 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Delaney | 2/26/2021 | 48,185 | 809,990 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patterson | 2/26/2021 | 375,000 | 750,000 | 1,500,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patterson | 6/11/2021 | n/a | 487,500 | 975,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patterson | 2/26/2021 | 4,941 | | 9,881 | | | 17,786 | | 172,621 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patterson | 2/26/2021 | 2,975 | 5,949 | 11,898 | 114,280 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patterson | 8/5/2021 | 800 | 80,000 | 160,000 | 1,587,200 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patterson | 2/26/2021 | 26,769 | 449,987 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patterson | 3/24/2021 | 15,328 | 250,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 8,893 | 17,786 | 32,015 |
| 255,585 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 5,354 | 10,708 | 21,416 |
| 183,963 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 6,026 | 12,051 | 24,102 |
| 191,731 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
|
|
|
| 54,228 | 839,992 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Phillips | 2/28/2022 | 350,000 | 700,000 | 1,400,000 |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 3,953 | 7,905 | 14,229 |
| 113,595 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 2,578 | 5,155 | 10,310 |
| 88,563 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 3,013 | 6,026 | 12,052 |
| 95,874 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
|
|
|
| 27,114 | 419,996 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patterson7 | 2/28/2022 | 400,000 | 800,000 | 1,600,000 |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 4,941 | 9,881 | 17,786 |
| 141,990 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 2,975 | 5,949 | 11,898 |
| 102,204 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2022 |
|
|
| 3,443 | 6,886 | 13,772 |
| 109,556 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2/28/2022 |
|
|
|
|
|
| 30,987 | 479,989 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | Grants of the cash portion of our long-term incentive awards were made under the 2017 Performance Plan. For additional information regarding such awards, see “Compensation Discussion and Analysis — Long-Term Compensation — |
| 63 |
EXECUTIVE COMPENSATION | ||||||||
| Grants of Plan-Based Awards |
| ending December 31, |
| ||||||||
|
|
| 2 | Grants of the equity portion of our long-term incentive awards were made under the 2017 Performance Plan. For additional information regarding such grants, see “Compensation Discussion and Analysis — Long-Term Compensation — |
| 3 | Grants of restricted stock units were made under the 2017 Performance Plan. For additional information regarding such grants, see “Compensation Discussion and Analysis — Long-Term Compensation — |
| 4 | Represents the grant date fair value of the |
| 5 | Represents the grant date fair value of the |
| 6 | Represents the grant date fair value of the 2022 performance period for the 2022-2024 performance cycle. |
| 7 | All outstanding awards were cancelled when Mr. Patterson left the Company on October 31, 2022. |
EXECUTIVE COMPENSATION | ||||||||||||
| Outstanding Equity Awards at Fiscal Year-End
|
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information about outstanding equity awards held by the named executive officers as of December 31, 2021.2022.
| Option Awards
| Stock Awards
| Option Awards
| Stock Awards
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#)1 | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($)2 | Option Expiration Date |
| Number of Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested ($)3 | Equity Incentive Number of | Equity Incentive Market or | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#)1 | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($)2 | Option Expiration Date |
| Number of Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested ($)3 | Equity Incentive Number of | Equity Incentive Market or | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kramer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kramer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kramer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kramer | 821,075 | 5 | $17,505,319 | 429,631 | 10 | $ 9,159,733 | 714,165 | 5 | $7,248,775 | 408,908 | 10 | $ 4,150,416 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 221,105 | $26.44 | 2/24/2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 256,993 | 27.16 | 2/23/2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 259,228 | 29.90 | 2/22/2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 264,486 | 35.26 | 2/27/2027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 750,000 | 4 | 10.12 | 2/25/2030 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wells | 162,435 | 6 | $3,463,114 | 315,216 | 10,11 | $ 6,720,405 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wells | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wells | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wells | 137,489 | 6 | $1,395,513 | 138,184 | 10 | $ 1,402,568 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 110,406 | 331,218 | 4 | $10.12 | 2/25/2030 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
McClellan | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
McClellan | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
McClellan | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
McClellan | 151,233 | 7 | $3,224,288 | 129,201 | 10 | $ 2,754,565 | 126,212 | 7 | $1,281,052 | 124,808 | 10 | $ 1,266,801 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 35,804 | $26.44 | 2/24/2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 55,725 | 27.16 | 2/23/2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 51,593 | 29.90 | 2/22/2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 53,394 | 35.26 | 2/27/2027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 102,792 | 308,375 | 4 | 10.12 | 2/25/2030 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Delaney | 151,233 | 8 | $3,224,288 | 129,201 | 10 | $ 2,754,565 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Delaney | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Delaney | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Delaney | 126,212 | 8 | $1,281,052 | 124,808 | 10 | $ 1,266,801 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 40,677 | $28.09 | 8/24/2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 39,010 | 29.90 | 2/22/2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 34,147 | 35.26 | 2/27/2027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12,176 | 32.72 | 10/9/2027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 102,792 | 308,375 | 4 | 10.12 | 2/25/2030 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patterson | 99,345 | 9 | $ 2,118,035 | 101,778 | 10 | $ 2,169,907 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Phillips | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Phillips | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Phillips | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Phillips | | 97,421 | 9 | | $988,823 | | | 17,205 | 10 | | $174,631 | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8,028 | $32.72 | 10/9/2027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 57,107 | 171,319 | 4 | 10.12 | 2/25/2030 |
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patterson11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patterson11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patterson11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patterson11 | 0 | $0 | 0 | $0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 114,214 |
| 10.12 | 2/25/2030 |
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | Because the options in this column were fully vested as of December 31, |
| 2 | The exercise price of each option granted under our equity compensation plans is equal to 100% of the per share fair market value of the Common Stock on the date granted (calculated as the closing market price for such date). The option exercise price and/or withholding tax obligations may be paid by delivery of shares of Common Stock valued at the fair market value on the date of exercise. |
| 3 | Calculated by multiplying |
| 4 | Vests as to |
| 5 | 103,492 restricted shares (which Mr. Kramer will receive when the value of the shares is deductible by the Company for federal income tax purposes), |
| 6 |
|
EXECUTIVE COMPENSATION | ||||||||||||
| Outstanding Equity Awards at Fiscal Year-End
|
| 7 |
|
| 8 |
|
| 9 | 9,486 and 2,048 earned performance share units vest on December 31, |
|
| 10 | Unearned performance share units that will vest on December 31, |
| 11 |
|
During the restriction period for shares of restricted stock, the recipient is not entitled to delivery of the shares, restrictions are placed on the transferability of the shares, and all or a portion of the shares will be forfeited if the recipient terminates employment for reasons other than as approved by the Compensation Committee. Upon expiration of the restriction period, the appropriate number of shares of Common Stock will be delivered to the grantee free of all restrictions. During the restriction period for shares of restricted stock, the grantee shall be entitled to vote restricted shares and receive dividends. For grants made after April 2013, shares of restricted stock will be credited with notional dividends that vest and are payable in cash (without interest) at the same time and subject to the same conditions as the underlying shares of restricted stock. Restricted stock units do not have any voting rights but receive dividend equivalents that vest and are payable in shares of Common Stock at the same time and subject to the same conditions as the underlying restricted stock units. Earned and unearned, but unvested, performance share units do not have any voting rights and are not entitled to receive dividend equivalents. For additional information regarding the terms of the performance share units, see “Compensation Discussion and Analysis — Long-Term Compensation — 20212022 Grants of Performance-Based Incentives.”
EXECUTIVE COMPENSATION | ||||||||||||
| Option Exercises and Stock Vested
|
Option Exercises and Stock Vested
The following table sets forth certain information regarding option exercises by, and the vesting of stock awards for, the named executive officers during 2021.2022.
| Option Awards | Stock Awards | Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized On Exercise ($)1 | Number of Shares Acquired on Vesting (#) | Value Realized On Vesting ($) | Number of Shares Acquired on Exercise (#) | Value Realized On Exercise ($)1 | Number of Shares Acquired on Vesting (#) | Value Realized On Vesting ($) | |||||||||||||||||||||||||||||||||||
Kramer |
| 1,310,262 |
|
| $7,417,253 |
|
| 207,361 |
|
| $3,897,790 | 2 |
| — |
| $ | — |
|
| 327,117 |
| $ | 4,219,217 | 2 | |||||||||||||||||||
Wells |
| — |
|
| — |
|
| 53,531 |
|
| 1,003,455 | 3 |
| — |
|
| — |
|
| 89,072 |
|
| 1,148,867 | 3 | |||||||||||||||||||
McClellan |
| 140,400 |
|
| 1,183,595 |
|
| 47,940 |
|
| 910,332 | 4 |
| — |
|
| — |
|
| 82,929 |
|
| 1,069,637 | 4 | |||||||||||||||||||
Delaney |
| — |
|
| — |
|
| 44,455 |
|
| 851,749 | 5 |
| — |
|
| — |
|
| 82,929 |
|
| 1,069,637 | 5 | |||||||||||||||||||
Phillips |
| — |
|
| — |
|
| 31,068 |
|
| 359,676 | 6�� | |||||||||||||||||||||||||||||||
Patterson |
| 6,097 |
|
| 63,641 |
|
| 23,759 |
|
| 457,423 | 6 |
| — |
|
| — |
|
| 23,622 |
|
| 366,377 | 7 | |||||||||||||||||||
| 1 | Represents the difference between the exercise price and the fair market value of our Common Stock on the date of exercise. |
| 2 | Represents the total value realized upon the vesting of |
| 3 | Represents the total value realized upon the vesting of |
| 4 | Represents the total value realized upon the vesting of |
| 5 | Represents the total value realized upon the vesting of |
| 6 | Represents the total value realized upon the vesting of |
| 7 | Represents the total value realized upon the vesting of 23,622 restricted stock units. Mr. Patterson left the Company on October 31, 2022 and forfeited his 2020-2022 performance share award. |
Defined Contribution Plan Benefits
The Savings Plan is a tax-qualified defined contribution plan that permits eligible employees, including all of the named executive officers, to contribute 1% to 50% of their compensation to their Savings Plan account, subject to an annual contribution ceiling ($19,50020,500 in 2021)2022) and an annual compensation limit ($290,000305,000 in 2021)2022), whichever occurs first. Savings Plan participants who are age 50 or older and contributing at the maximum plan limits or at the annual contribution ceiling are entitled to make “catch-up” contributions annually of an additional 25% of their compensation up to a specified amount ($6,500 in 2021)2022). Participants in the Savings Plan are eligible to receive Company matching contributions and retirement contributions in addition to the retirement benefits described below under “Pension Benefits.” Savings Plan participants are also eligible to make after-tax contributions subject to limits imposed by the Internal Revenue Code of 1986, as amended (the “Code”). Contributions are invested, at the direction of the participant, in any one or more of the fifteen available funds and/or in mutual funds under a self-directed account.
| 67 |
EXECUTIVE COMPENSATION | ||||||||
| Pension Benefits |
Pension Benefits
Goodyear’s Salaried Pension Plan is a defined benefit plan qualified under the Code in which U.S.-based salaried employees hired before January 1, 2005 participate, including Mr. Kramer, Mr. McClellan and Mr. Patterson. Accruals in the Salaried Plan were frozen effective December 31, 2008. The Salaried Plan was designed to provide tax-qualified pension benefits for most Goodyear salaried employees.
The Salaried Plan contains formulas based on age and service.
| ||||||||
|
|
These formulas are multiplied by five-year average compensation below and above a breakpoint ($51,000 in 2008, the year the Salaried Plan was frozen), with the result representing a lump sum benefit under the plan. Compensation is held to the qualified plan limit under the Code, which was $230,000 for 2008. A portion of the benefit may be paid by employee contributions. Effective December 31, 2007, all active participants in the Salaried Plan became vested and are entitled to a benefit upon any termination of employment. Benefits are available on a five-year certain and continuous annuity basis at age 65, by converting the lump sum to an annuity. Annuity benefits payable to a participant who retires prior to age 65 are subject to a reduction for each month retirement precedes age 65. Benefits under the Salaried Plan are funded by an irrevocable tax-exempt trust.
Participation in the Salaried Plan was frozen effective December 31, 2004. Subsequent hires, including Mr. Wells, Mr. Delaney and Mr. Delaney,Phillips participate in the retirement contributions feature of the Savings Plan. Under the Savings Plan, each participant receives an allocation each pay period equal to a percentage of compensation, with compensation held to the qualified plan limit under the Code. Effective January 1, 2009, Salaried Plan participants, including Mr. Kramer, Mr. McClellan and Mr. Patterson, also began receiving allocations under the retirement contributions feature of the Savings Plan.
Goodyear also maintains the Supplementary Plan, a non-qualified plan which provides additional retirement benefits to our officers, and certain other key employees, including all of the currently employed named executive officers. The Supplementary Plan was closed to new entrants effective December 31, 2021. The Supplementary Plan provides pension benefits to participants who retire with at least 30 years of service, retire after age 55 with at least ten years of service or retire after age 65 with at least five years of service. The formula for an annuity benefit is based on a percentage determined using credited service (22% with 10 years, 38% with 20 years, 48% with 30 years and 54% with 40 years) times five-year average compensation above the breakpoint ($71,40073,500 in 2021)2022), with compensation inclusive of base salary and annual incentive payments. The five-year average compensation uses the highest five calendar years, not necessarily consecutive, out of the last ten years. Benefits are offset for the Salaried Plan, the retirement contributions feature of the Savings Plan, applicable non-U.S. benefits and certain prior employer benefits. Under the Supplementary Plan, benefits payable to a participant who retires prior to age 62 are subject to a reduction of 0.4% for each month retirement precedes age 62. All benefits from the Supplementary Plan will be paid in a lump sum. For participants considered to be among the top 50 wage earners of the Company, benefits cannot be distributed prior to six months after separation of service. Mr. Kramer, Mr. Wells and Mr. McClellan are vested in their Supplementary Plan benefits. Mr. Patterson was not vested in his Supplementary Plan benefit upon the termination of his employment.
Mr. Kramer Mr. McClellan and Mr. PattersonMcClellan are eligible for immediate commencement of the benefit from the Salaried Plan as of December 31, 2021.2022. Mr. Wells, Mr. Delaney and Mr. DelaneyPhillips are not participants in the Salaried Plan. The chart below indicates the date at which each named executive officer is or will be eligible to receive a benefit from the Supplementary Plan.
| 68 |
EXECUTIVE COMPENSATION | ||||||||
| Pension Benefits |
SUPPLEMENTARY PLAN
Name | Earliest Eligibility for Benefit Commencement | |
Kramer | Currently eligible | |
Wells1 | Currently eligible | |
McClellan | Currently eligible | |
Delaney | September 1, 2025 | |
Phillips | November 1, 2030 | |
Patterson |
|
| 1 | Under the terms of the Supplementary Plan, Mr. Wells retains vesting credit for his prior eligible service at Goodyear, but did not retain any of the previously accrued benefits for that prior service. |
| ||||||||
|
|
We also maintain a non-qualified defined benefit Excess Benefit Plan that pays an additional pension benefit over that paid from the Salaried Plan if a participant does not meet the eligibility requirements of the Supplementary Plan. For employees hired after December 31, 2004, and for all employees as of December 31, 2008, who do not meet the eligibility requirements of the Supplementary Plan, there is a corresponding defined contribution Excess Benefit Plan that mirrors the retirement contributions feature of the Savings Plan. Like the qualified plans, effective December 31, 2008 accruals were frozen under the defined benefit Excess Benefit Plan and all affected participants began receiving defined contribution allocations under the defined contribution Excess Benefit Plan.
The Pension Benefits table below shows for the named executive officers the number of years of credited service, present value of accumulated benefit and payments during the last fiscal year, for each defined benefit plan.
The “Present Value of Accumulated Benefit” is the lump sum value as of December 31, 20212022 of the expected pension benefit payable at age 62 that was earned as of December 31, 2021.2022. That is, the benefit reflects service and compensation only through 2021,2022, not projected for future years. The benefit payment at age 62 is assumed to be the lump sum form. The present value is measured using the same assumptions used for financial reporting purposes (and which are set forth following the Pension Benefits Table), with the exception of the commencement age. The commencement age is assumed to be 62 because that is the age at which the Supplementary Plan benefit is payable with no reduction for early retirement. If a participant would not have 10 years of service at age 62, then the benefit is assumed to be payable at the age when 10 years of service would be attained.
Generally, a participant’s years of credited service under the Supplementary Plan are based on years of employment with Goodyear. However, in the past, credit for service prior to employment with Goodyear was infrequently granted. Mr. Kramer received 13.6 additional years of credited service following his hiring by Goodyear in respect of service with a prior employer. The benefits paid to Mr. Kramer under the Supplementary Plan will be reduced by amounts he is entitled to receive under the pension plan maintained by his prior employer. Due to this service grant, the present value of accumulated benefit in the Pension Benefits Table is $6,372,181$5,099,523 higher for Mr. Kramer. None of the other named executive officers have received any additional years of credited service.
| 69 |
EXECUTIVE COMPENSATION | ||||||||
| Pension Benefits |
The Compensation Committee has adopted a policy prohibiting the grant of additional service credit to participants in the Supplementary Plan.
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($)1 | Payments During Last Fiscal Year ($) | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($)1 | Payments During Last Fiscal Year ($) | ||||||||||||||||||||
Kramer | Supplementary Pension Plan |
| 35.42 |
|
| $28,287,863 |
|
| $— |
| Supplementary Pension Plan |
| 36.42 |
|
| $23,658,643 |
|
| $— |
| ||||||||
Salaried Pension Plan |
| 8.83 |
|
| 404,641 |
|
| — |
| Salaried Pension Plan |
| 8.83 |
|
| 280,610 |
|
| — |
| |||||||||
Wells | Supplementary Pension Plan |
| 3.25 |
|
| 1,175,370 |
|
| — |
| Supplementary Pension Plan |
| 4.25 |
|
| 1,272,386 |
|
| — |
| ||||||||
McClellan | Supplementary Pension Plan |
| 34.00 |
|
| 9,927,325 |
|
| — |
| Supplementary Pension Plan |
| 35.00 |
|
| 7,808,268 |
|
| — |
| ||||||||
Salaried Pension Plan |
| 21.00 |
|
| 728,846 |
|
| — |
| Salaried Pension Plan |
| 21.00 |
|
| 481,277 |
|
| — |
| |||||||||
Delaney | Supplementary Pension Plan |
| 6.33 |
|
| 1,956,598 |
|
| — |
| Supplementary Pension Plan |
| 7.33 |
|
| 2,129,888 |
|
| — |
| ||||||||
Phillips | Supplementary Pension Plan |
| 11.50 |
|
| 1,020,456 |
|
| — |
| ||||||||||||||||||
Patterson | Supplementary Pension Plan |
| 19.50 |
|
| 3,144,717 |
|
| — |
| Salaried Pension Plan |
| 6.58 |
|
| 104,198 |
|
| — |
| ||||||||
Salaried Pension Plan |
| 6.58 |
|
| 193,626 |
|
| — |
| |||||||||||||||||||
| 1 | All amounts shown are estimates as of December 31, |
| ||||||||
|
|
The amounts set forth in the table above are based on the following assumptions:
the measurement date is December 31, 20212022
the form of payment is a lump sum
the interest rate used to calculate the Supplementary Plan lump sum payment for benefits commencing in 20222023 or later: 0.50%2.75%
the interest rate used to calculate the Salaried Plan lump sum payment for benefits commencing in 20222023 or later: 2.88%5.49% (Mr. Kramer, Mr. McClellan and Mr. Patterson)
the mortality assumptions used to calculate the lump sum are those set forth in Code Section 417(e) for the Salaried Plan and those set forth in UP-1984 Mortality for the Supplementary Plan
| • | the mortality assumptions used to calculate the lump sum are those set forth in Code Section 417(e) for the Salaried Plan and those set forth in UP-1984 Mortality for the Supplementary Plan |
the discount rate used to determine the present value of the accumulated benefit is 2.48%5.36% for the Supplementary Plan and 2.88%5.49% for the Salaried Plan
the benefit commencement age is the later of age 62 and the age at which 10 years of service is attained (or, if older, age at the measurement date)
the accumulated benefit is calculated based on credited service and pay as of December 31, 20212022 (for the Salaried Plan, credited service and pay as of December 31, 2008).
| 70 |
EXECUTIVE COMPENSATION | ||||||||
| Nonqualified Deferred Compensation |
Nonqualified Deferred Compensation
The Deferred Compensation Plan is a non-qualified deferred compensation plan that provides named executive officers and certain other highly compensated employees the opportunity to defer their base salary and annual incentive payments. Deferred amounts may be invested in one of five investment alternatives or, with respect to annual incentive payments, Goodyear stock units. Four of these investment alternatives are funds managed by The Northern Trust Company, and currently include a money market fund, an equity index fund, a bond fund and a balanced fund. The average interest rate payable with respect to funds invested in the Northern Trust money market fund was 0.01%1.33% for the year ended December 31, 2021.2022. The fifth investment vehicle is a growth fund managed by American Century Investments. Investment elections among the five investment alternatives may be changed daily. Deferrals of annual incentive payments into Goodyear stock units will result in a 20% premium paid in stock units that will vest in one year. There is no guaranteed return associated with any deferred amounts, and deferred amounts are subject to the claims of creditors in the event of our bankruptcy. Distribution of deferred amounts may begin after separation of service or in a selected number of years ranging from one to 20. Payment of deferred amounts will be in a lump sum or up to 15 annual installments, as elected at the time of deferral. Redeferral of amounts originally deferred prior to January 1, 2005 is allowed only if elected one year prior to the scheduled payout. Any stock units are converted to shares of Common Stock and distributed to the participant on March 31 of the fourth year following the end of the plan year under which the award was earned.
| ||||||||
|
|
The following table sets forth certain information regarding nonqualified deferred compensation of the named executive officers.
Name | Executive Contributions in | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY ($)2 | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | Executive Contributions in | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY ($)2 | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | ||||||||||||||||||||||||||||||
Kramer |
| — |
|
| — |
|
| $29,894 |
|
| — |
|
| $223,619 |
|
| — |
|
| — |
| ($ | 28,413 | ) |
| — |
| $ | 195,206 |
| ||||||||||
Wells |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||
McClellan |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||
Delaney |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||
Phillips |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||||||||||||||||
Patterson |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||
| 1 | Represents deferral in |
| 2 | No portion of these earnings were included in the Summary Compensation Table because the Deferred Compensation Plan does not provide for “above-market” or preferential earnings as defined in applicable SEC rules and regulations. |
Potential Payments Upon Termination or Change-in-Control
We provide for the payment of severance and certain other benefits to our named executive officers upon certain types of terminations of employment, as described below.
EXECUTIVE SEVERANCE PLAN
The Executive Severance Plan provides severance benefits to the Company’s officers, including all of the named executive officers, as follows:
| (1) | If a participant’s employment is terminated by the Company and its affiliates other than for Cause (as such term is defined below), death or disability (and other than in connection with a change-in-control, as described in paragraph |
| 71 |
EXECUTIVE COMPENSATION | ||||||||
| Potential Payments Upon Termination or Change-in-Control |
| (2) below), such participant will generally receive: (i) earned but unpaid base salary and annual incentive compensation and accrued paid vacation, sick leave, sabbatical, holiday and other paid time off; (ii) a pro-rated annual incentive payment based on actual performance for the entire fiscal year in an amount not to exceed the participant’s target annual incentive; (iii) a cash severance payment equal to the sum of the participant’s base salary and target annual incentive at the time of severance multiplied by the participant’s severance multiple, which is established by the Compensation Committee and currently ranges from 1.0x to 2.0x; (iv) if the sum of the participant’s age plus years of credited service is equal to or greater than 75, vesting of the participant’s benefit under the Supplementary Plan; (v) continued health care coverage for a number of years equal to the participant’s severance multiple; and (vi) outplacement services in an amount not to exceed $25,000. Mr. Kramer’s severance multiple is 2.0x and each of the other named executive officers’ severance multiple is 1.5x. |
| (2) | If a participant’s employment is terminated involuntarily other than for Cause, death, disability or mandatory retirement or by the participant for Good Reason during the pendency of, and for ninety days following the cessation of, a Potential Change in Control (as such term is defined below) or within two years following a Change in Control (as such term is defined below), such participant will generally receive: (i) earned but unpaid base salary and annual incentive compensation and accrued paid vacation, sick leave, sabbatical, holiday and other paid time off; (ii) a pro-rated annual |
| ||||||||
|
|
| incentive payment based on the participant’s target annual incentive; (iii) a cash severance payment equal to twice the sum of the participant’s base salary and target annual incentive; (iv) if the participant has at least five years of service, vesting of the participant’s Supplementary Plan benefit; (v) continued health care coverage for up to two years; and (vi) outplacement services in an amount not to exceed $25,000 and reimbursement for certain legal fees incurred in connection with certain claims made under the Executive Severance Plan. |
To be eligible to receive the benefits described above, the participant must execute a release and agree, among other things, to certain confidentiality, non-disparagement, non-solicitation and non-competition covenants.
The Executive Severance Plan has been effective since February 28, 2013 and now renews for one-year periods unless the Company provides notice, at least 90 days prior to the end of the current term, of its intent not to renew the Executive Severance Plan. The Executive Severance Plan automatically renewed for an additional one-year period ending on February 28, 2023.2024.
As used in the Executive Severance Plan:
“Cause” means (1) the continued failure by an eligible employee to substantially perform the employee’s duties with the Company (other than any such failure resulting from the employee’s incapacity due to physical or mental illness), (2) the engaging by the employee in conduct which is demonstrably injurious to the Company, monetarily or otherwise, (3) the employee committing any felony or any crime involving fraud, breach of trust or misappropriation or (4) any breach or violation of any agreement relating to the employee’s employment with the Company where the Company, in its discretion, determines that such breach or violation materially and adversely affects the Company.
A “Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:
| (1) | any person is or becomes the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company other than securities acquired by virtue of the exercise of a conversion or |
| 72 |
EXECUTIVE COMPENSATION | ||||||||
| Potential Payments Upon Termination or Change-in-Control |
| similar privilege or right unless the security being so converted or pursuant to which such right was exercised was itself acquired directly from the Company) representing 20% or more of (A) the then outstanding shares of Common Stock of the Company or (B) the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors; or |
| (2) | the following individuals cease for any reason to constitute a majority of the number of directors then serving on the Board of Directors (the “Incumbent Board”): individuals who, on February 28, 2013, constitute the Board of Directors and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including, without limitation, a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board of Directors or nomination for election by the Company’s shareholders was approved or recommended by a vote of at least two-thirds of the directors then still in office who either were directors on February 28, 2013 or whose appointment, election or nomination for election was previously so approved or recommended; or |
| (3) | there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than a merger or consolidation pursuant to which (A) the voting securities of the Company outstanding immediately prior to such merger or consolidation will continue to represent (either by remaining outstanding |
| ||||||||
|
|
| or by being converted into voting securities of the surviving entity or any parent thereof) more than 50% of the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, (B) no person will become the beneficial owner, directly or indirectly, of securities of the Company or such surviving entity or any parent thereof representing 20% or more of the outstanding shares of common stock or the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to such merger or consolidation) and (C) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation (or any parent thereof) resulting from such merger or consolidation; or |
| (4) | the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, (A) more than 50% of the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of which (or of any parent of such entity) is owned by shareholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale, (B) in which (or in any parent of such entity) no person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the outstanding shares of common stock resulting from such sale or disposition or the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to such sale or disposition) and (C) in which (or in any parent of such entity) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors. |
“Good Reason” means the occurrence during the pendency of, and for ninety days following the cessation of, a Potential Change in Control or within two years following a Change in Control, without the affected eligible employee’s written consent, of any of the following:
| (1) | the assignment to the employee of duties that are materially inconsistent with the employee’s authority, duties or responsibilities immediately prior to a Potential Change in Control or, in the absence thereof, a Change in Control (other |
| 73 |
EXECUTIVE COMPENSATION | ||||||||
| Potential Payments Upon Termination or Change-in-Control |
| than pursuant to a transfer or promotion to a position of equal or enhanced responsibility or authority) or any other action by the Company which results in a material diminution in such authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the employee, provided, however, that any such material diminution that is primarily a result of the Company no longer being a publicly traded entity or becoming a subsidiary or division of another entity shall not be deemed “Good Reason” for purposes of the Executive Severance Plan, except that an employee shall have Good Reason if the Company is no longer a publicly traded entity and, immediately before the Change in Control that caused the Company no longer to be a publicly traded entity, substantially all of the employee’s duties and responsibilities related to public investors or government agencies that regulate publicly traded entities; |
| (2) | a change in the location of such employee’s principal place of business by more than 50 miles when compared to the employee’s principal place of business immediately before a Potential Change in Control or, in the absence thereof, a Change in Control; |
| (3) | a material reduction in the Employee’s annual base salary or target annual incentive opportunity from that in effect immediately before a Potential Change in Control or, in the absence thereof, a Change in Control; and |
| ||||||||
|
|
| (4) | the failure by any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, to expressly assume and agree to perform the Executive Severance Plan in the same manner and to the same extent that the Company would be required to perform it if no succession had taken place. |
A “Potential Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:
| (1) | the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; |
| (2) | the Company or any person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control; |
| (3) | any person becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company other than securities acquired by virtue of the exercise of a conversion or similar privilege or right unless the security being so converted or pursuant to which such right was exercised was itself acquired directly from the Company) representing 20% or more of either the then outstanding shares of Common Stock of the Company or the combined voting power of the Company’s then outstanding voting securities; or |
| (4) | the Board adopts a resolution to the effect that a Potential Change in Control has occurred. |
The description above is meant only to be a summary of the provisions of the Executive Severance Plan. The Executive Severance Plan was an exhibit to a Form 8-K filed with the SEC on March 6, 2013.
| 74 |
EXECUTIVE COMPENSATION | ||||||||
| Potential Payments Upon Termination or Change-in-Control |
QUANTIFICATION OF TERMINATION BENEFITS
The table below shows amounts that would be payable to each of the named executive officers (other than Mr. Patterson), as of December 31, 2021,2022, upon the termination of their employment in the circumstances indicated in each row of the table. The amounts shown are calculated on the assumption that the triggering event occurred on December 31, 2021.2022. As Mr. Patterson left the Company prior to December 31, 2022, he is not included in the table below. We have assumed that, if a named executive officer resigned or was terminated for Cause, the Compensation Committee would have exercised its discretion to cancel any outstanding awards in respect of the performance cycles ending on December 31, 20212022 prior to the payment of those awards in February 2022.2023. Other assumptions used to determine the amounts shown are described below.
Cash Severance. The amounts shown in the rows captioned “Termination Without Cause” and “Involuntary Termination Within Two Years of Change in Control” are calculated in accordance with the terms of the Executive Severance Plan. (See “Executive Severance Plan” above.) Cash severance is not payable in any other circumstance.
Annual and Long-Term Cash Incentives. The amounts shown in the table for annual and long-term cash incentives are the amounts earned for the annual or three-year performance cycles ended December 31, 2021.2022. The amounts shown in the rows captioned “Death/Disability” and “Retirement” also include the amounts earned but not yet payable for completed performance periods under the 2020-20222021-2023 and 2021-20232022-2024 long-term cash incentive awards. The amounts shown in the row captioned “Involuntary Termination Within Two Years of Change in Control” also include (a) the amounts earned but not yet payable for completed performance periods and (b) the unearned amounts at the target amount of the award opportunity for uncompleted performance periods under the 2020-20222021-2023 and 2021-20232022-2024 long-term cash incentive awards.
| ||||||||
|
|
Equity. The amounts shown in the table for equity with respect to restricted stock units in the rows captioned “Death/Disability” and “Retirement” reflect pro-rata vesting, and in the row captioned “Involuntary Termination Within Two Years of Change in Control” reflect the full vesting, of the restricted stock units upon the occurrence of those events. In each case, the amounts shown are calculated based on a per share price of $21.32,$10.15, the closing market price of our Common Stock on December 31, 2021.2022.
The amounts shown in the table for equity with respect to performance share awards are the amounts earned for the three-year performance cycle ended December 31, 2021.2022. The amounts shown in the rows captioned “Death/Disability” and “Retirement” also include the amounts earned but not yet payable for completed performance periods under the 2020-20222021-2023 and 2021-20232022-2024 performance share awards. The amounts shown in the row captioned “Involuntary Termination Within Two Years of Change in Control” also include (a) the amounts earned but not yet payable for completed performance periods and (b) the unearned amounts at the target amount of the award opportunity for uncompleted performance periods under the 2020-20222021-2023 and 2021-20232022-2024 performance share awards and the Value Creation Plan performance share awards. In each case, the amounts shown are calculated based on a per share price of $21.32,$10.15, the closing market price of our Common Stock on December 31, 2021.2022.
Our equity compensation plans provide that unexercised stock options terminate automatically if the optionee ceases to be an employee of Goodyear or one of its subsidiaries for any reason, except that (a) upon retirement or disability of the optionee more than six months after the grant date, each stock option will become immediately exercisable and remain exercisable until the earlier of five years or its expiration date, (b) in the event of the death of the optionee more than six months after the grant
| 75 |
EXECUTIVE COMPENSATION | ||||||||
| Potential Payments Upon Termination or Change-in-Control |
date, each stock option will become immediately exercisable and remain exercisable until the earlier of three years after the date of death of the optionee or its expiration date, and (c) for options granted on or after June 8, 2010, in the event of the termination of the optionee’s employment by us other than for cause, each vested stock option will remain exercisable for 90 days following the date of termination of their employment. For these purposes, resignations, terminations without cause, and involuntary terminations upon a change in control are treated like a retirement if the employee is eligible for retirement as of the date of termination. Mr. Kramer and Mr. McClellan were eligible for retirement on December 31, 2021.
Additional Retirement Benefits. The table below shows the additional retirement benefits, if any, that would be payable to the named executive officer if the named executive officer’s employment was terminated on December 31, 2021,2022, and that named executive officer was vested in the benefit as of that date. Mr. Kramer, Mr. Wells and Mr. McClellan are vested in their Supplementary Plan benefit. Mr. Delaney isand Mr. Phillips are not yet vested in a Supplementary Plan benefit, isare not eligible to participate in the Salaried Plan or the defined benefit Excess Benefit Plan, and would instead receive substantially smaller benefits from the defined contribution Excess Benefit Plan. Mr. Patterson is not yet vested in a Supplementary Plan benefit, and would instead receive a substantially smaller benefit from the Salaried Plan and the defined contribution Excess Benefit Plan. The Supplementary Plan and Salaried Plan amounts shown in the Pension Benefits table are the present values at December 31, 20212022 of benefits that would be payable in lump sum form at the later of age 62 and the age at which 10 years of service is attained (or age at December 31, 2021,2022, if older than 62). The amounts shown in the table below are the additional amounts that would be payable, together with the amounts shown in the Pension Benefits table, in lump sum form after termination of employment at December 31, 2021.2022. The additional amounts are solely due to differences in the assumptions used to value the benefit as of December 31, 2021.
| ||||||||
|
|
2022.
In the event of an “Involuntary Termination Within Two Years of Change in Control,” Mr. Delaney’s and Mr. Phillips’s benefits under the Supplementary Plan will become vested since he hasthey each have five years of credited service. For Mr. Delaney, the difference between the amount payable from the Supplementary Plan upon a triggering event ($2,395,618)2,578,534) and the value presented in the Pension Benefits table ($1,956,598)2,129,888) is solely due to differences in the assumptions used in the calculations. In the event of an “Involuntary Termination Within Two Years of Change in Control,” Mr. Patterson’s benefits under the Supplementary Plan will become vested since he has five years of credited service. For Mr. Patterson,Philips, the difference between the amount payable from the Supplementary Plan upon a triggering event ($2,750,315)1,114,336) and the value presented in the Pension Benefits table ($3,144,717)1,020,456) is solely due to differences in the assumptions used in the calculations.
All Other Benefits. The amounts shown for all other benefits for each scenario include the payment of accrued vacation. In addition, the amounts shown in the row captioned “Termination Without Cause” include reimbursement of COBRA payments and payments for outplacement services (capped at $25,000), and the amounts shown in the row captioned “Involuntary Termination Within Two Years of Change in Control” include reimbursement of COBRA payments, payments for outplacement services (capped at $25,000), and reimbursement for legal fees, if any (assumed to be $0 for purposes of the table below).
For purposes of the table below, resignations, terminations without cause, and involuntary terminations upon a change in control are treated like a retirement if the employee is eligible for retirement as of the date of termination. Mr. Kramer and Mr. McClellan were eligible for retirement on December 31, 2022.
Name | Triggering Event | Cash Severance | Annual and Long-Term Cash Incentives | Equity | Additional Retirement Benefits | All Other Benefits | Total | |||||||||||||||||||
Kramer | Death/Disability | $ | — |
|
| $15,139,400 |
| $ | 27,673,751 |
| $ | 2,669,909 |
| $ | 150,000 |
| $ | 45,633,060 |
| |||||||
Retirement |
| — |
|
| 15,139,400 |
|
| 27,673,751 |
|
| 2,669,909 |
|
| 150,000 |
|
| 45,633,060 |
| ||||||||
Termination Without Cause |
| 6,760,000 |
|
| 15,139,400 |
|
| 27,673,751 |
|
| 2,669,909 |
|
| 216,354 |
|
| 52,459,414 |
| ||||||||
Involuntary Termination Within Two Years of Change in Control |
| 6,760,000 |
|
| 20,464,400 |
|
| 37,012,925 |
|
| 2,669,909 |
|
| 216,354 |
|
| 67,123,588 |
| ||||||||
Wells | Death/Disability |
| — |
|
| 4,976,737 |
|
| 7,654,269 |
|
| 107,818 |
|
| — |
|
| 12,738,824 |
| |||||||
Retirement |
| — |
|
| 4,510,350 |
|
| 3,019,807 |
|
| 107,818 |
|
| — |
|
| 7,637,975 |
| ||||||||
Termination Without Cause |
| 2,400,000 |
|
| 6,510,350 |
|
| 3,019,807 |
|
| 107,818 |
|
| 57,789 |
|
| 12,095,764 |
| ||||||||
Involuntary Termination Within Two Years of Change in Control |
| 3,200,000 |
|
| 7,960,250 |
|
| 14,423,535 |
|
| 107,818 |
|
| 68,718 |
|
| 25,760,321 |
| ||||||||
McClellan | Death/Disability |
| — |
|
| 4,207,050 |
|
| 7,126,413 |
|
| 889,787 |
|
| 77,885 |
|
| 12,301,135 |
| |||||||
Retirement |
| — |
|
| 4,207,050 |
|
| 7,126,413 |
|
| 889,787 |
|
| 77,885 |
|
| 12,301,135 |
| ||||||||
Termination Without Cause |
| 2,306,250 |
|
| 4,207,050 |
|
| 7,126,413 |
|
| 889,787 |
|
| 126,232 |
|
| 14,655,732 |
| ||||||||
Involuntary Termination Within Two Years of Change in Control |
| 3,075,000 |
|
| 5,557,050 |
|
| 9,926,470 |
|
| 889,787 |
|
| 134,015 |
|
| 19,582,322 |
| ||||||||
Delaney | Death/Disability |
| — |
|
| 4,117,800 |
|
| 6,389,006 |
|
| — |
|
| 57,692 |
|
| 10,564,498 |
| |||||||
Termination Without Cause |
| 2,250,000 |
|
| 2,317,800 |
|
| 493,814 |
|
| — |
|
| 115,892 |
|
| 5,177,506 |
| ||||||||
Involuntary Termination Within Two Years of Change in Control |
| 3,000,000 |
|
| 5,467,800 |
|
| 9,926,470 |
|
| 2,395,618 |
|
| 126,958 |
|
| 20,916,846 |
| ||||||||
Patterson | Death/Disability |
| — |
|
| 2,739,685 |
|
| 3,654,944 |
|
| — |
|
| 47,500 |
|
| 6,442,129 |
| |||||||
Termination Without Cause |
| 1,852,500 |
|
| 1,599,630 |
|
| 274,346 |
|
| — |
|
| 105,289 |
|
| 3,831,765 |
| ||||||||
Involuntary Termination Within Two Years of Change in Control |
| 2,470,000 |
|
| 3,837,130 |
|
| 6,481,068 |
|
| 2,750,314 |
|
| 116,218 |
|
| 15,654,730 |
| ||||||||
EXECUTIVE COMPENSATION | ||||||||||||
|
|
Because Mr. Patterson was terminated without cause on October 31, 2022, he is not included in the table below. In connection with his departure and subject to his compliance with non-competition and other obligations under the Executive Severance Plan, Mr. Patterson was entitled to receive compensation under the Executive Severance Plan, including cash severance in the amount of $1,852,500, a prorated annual incentive in the amount of $477,488, payouts under the defined contribution Excess Benefit Plan in the amount of $465,416, and other accrued benefits of $169,804.
Name | Grant Date | Cash Severance | Annual and Long-Term Cash Incentives | Equity | Additional Retirement Benefits | All Other Benefits | Total | |||||||||||||||||||
Kramer | Death/Disability | $ | — |
| $ | 10,209,500 |
| $ | 8,881,654 |
| $ | 11,282,822 |
| $ | 161,538 |
| $ | 30,535,514 |
| |||||||
Retirement |
| — |
|
| 10,209,500 |
|
| 8,881,654 |
|
| 2,144,619 |
|
| 161,538 |
|
| 21,397,311 |
| ||||||||
Termination Without Cause |
| 7,280,000 |
|
| 10,209,500 |
|
| 8,881,654 |
|
| 11,282,822 |
|
| 207,766 |
|
| 37,861,742 |
| ||||||||
Involuntary Termination Within |
| 7,280,000 |
|
| 15,534,500 |
|
| 13,032,070 |
|
| 11,282,822 |
|
| 207,766 |
|
| 47,337,158 |
| ||||||||
Wells | Death/Disability |
| — |
|
| 4,256,543 |
|
| 1,842,678 |
|
| 181,694 |
|
| — |
|
| 6,280,915 |
| |||||||
Retirement |
| — |
|
| 3,023,350 |
|
| 1,836,054 |
|
| 181,694 |
|
| — |
|
| 5,041,098 |
| ||||||||
Termination Without Cause |
| 2,505,000 |
|
| 5,023,350 |
|
| 1,836,054 |
|
| 181,694 |
|
| 47,286 |
|
| 9,593,384 |
| ||||||||
Involuntary Termination Within |
| 3,340,000 |
|
| 6,539,950 |
|
| 3,245,246 |
|
| 181,694 |
|
| 54,714 |
|
| 13,361,604 |
| ||||||||
McClellan | Death/Disability |
| — |
|
| 2,811,720 |
|
| 1,697,371 |
|
| 4,568,796 |
|
| 81,000 |
|
| 9,158,887 |
| |||||||
Retirement |
| — |
|
| 2,811,720 |
|
| 1,697,371 |
|
| 1,124,779 |
|
| 81,000 |
|
| 5,714,870 |
| ||||||||
Termination Without Cause |
| 2,398,500 |
|
| 2,811,720 |
|
| 1,697,371 |
|
| 4,568,796 |
|
| 120,474 |
|
| 11,596,861 |
| ||||||||
Involuntary Termination Within |
| 3,198,000 |
|
| 4,195,020 |
|
| 2,964,172 |
|
| 4,568,796 |
|
| 125,298 |
|
| 15,051,286 |
| ||||||||
Delaney | Death/Disability |
| — |
|
| 2,751,150 |
|
| 1,113,094 |
|
| — |
|
| 58,846 |
|
| 3,923,090 |
| |||||||
Retirement |
| — |
|
| 1,764,450 |
|
| 410,151 |
|
| — |
|
| — |
|
| 2,174,601 |
| ||||||||
Termination Without Cause |
| 2,295,000 |
|
| 1,764,450 |
|
| 410,151 |
|
| — |
|
| 105,038 |
|
| 4,574,639 |
| ||||||||
Involuntary Termination Within |
| 3,060,000 |
|
| 4,134,450 |
|
| 2,964,172 |
|
| 2,578,534 |
|
| 112,102 |
|
| 12,849,258 |
| ||||||||
Phillips | Death/Disability |
| — |
|
| 1,457,850 |
|
| 868,843 |
|
| — |
|
| 21,923 |
|
| 2,348,616 |
| |||||||
Retirement |
| — |
|
| 979,700 |
|
| 182,294 |
|
| — |
|
| — |
|
| 1,161,994 |
| ||||||||
Termination Without Cause |
| 1,665,000 |
|
| 979,700 |
|
| 182,294 |
|
| — |
|
| 60,476 |
|
| 2,887,470 |
| ||||||||
Involuntary Termination Within |
| 2,220,000 |
|
| 2,141,050 |
|
| 2,701,498 |
|
| 1,114,336 |
|
| 64,993 |
|
| 8,241,877 |
| ||||||||
| 77 |
EXECUTIVE COMPENSATION | ||||||||
| Director Compensation Table |
Director Compensation Table
The table below sets forth information regarding the compensation paid to our non-management directors during 2021.2022.
Name | Fees Earned or Paid in Cash | Stock Awards ($)1 | All Other ($)2 | Total ($) | Fees Earned or Paid in Cash | Stock Awards ($)1 | All Other ($)2 | Total ($) | ||||||||||||||||||||||||
Clayton3 |
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||
Firestone |
| $151,250 |
|
| $145,000 |
|
| $— |
|
| $296,250 |
|
| $156,250 |
|
| $160,000 |
|
| $952 |
|
| $317,202 |
| ||||||||
Geissler |
| 130,000 |
|
| 145,000 |
|
| 1,603 |
|
| 276,603 |
|
| 130,000 |
|
| 160,000 |
|
| 659 |
|
| 290,659 |
| ||||||||
Hellman |
| 130,000 |
|
| 145,000 |
|
| — |
|
| 275,000 |
| ||||||||||||||||||||
Hellman4 |
| 36,429 |
|
| 84,835 |
|
| — |
|
| 121,264 |
| ||||||||||||||||||||
Koellner |
| 185,000 |
|
| 145,000 |
|
| — |
|
| 330,000 |
|
| 185,000 |
|
| 160,000 |
|
| — |
|
| 345,000 |
| ||||||||
Lewis |
| 93,571 |
|
| 68,118 |
|
| — |
|
| 161,689 |
|
| 142,500 |
|
| 160,000 |
|
| — |
|
| 302,500 |
| ||||||||
Mahendra-Rajah |
| 72,143 |
|
| 44,217 |
|
| 2,585 |
|
| 118,945 |
|
| 130,000 |
|
| 160,000 |
|
| 1,364 |
|
| 291,364 |
| ||||||||
McCollough |
| 130,000 |
|
| 145,000 |
|
| — |
|
| 275,000 |
| ||||||||||||||||||||
McCollough4 |
| 36,429 |
|
| 84,835 |
|
| 1,426 |
|
| 122,690 |
| ||||||||||||||||||||
McGlade |
| 151,250 |
|
| 145,000 |
|
| — |
|
| 296,250 |
|
| 156,250 |
|
| 160,000 |
|
| — |
|
| 316,250 |
| ||||||||
Palmore |
| 145,000 |
|
| 145,000 |
|
| — |
|
| 290,000 |
|
| 145,000 |
|
| 160,000 |
|
| — |
|
| 305,000 |
| ||||||||
Siu |
| 130,000 |
|
| 145,000 |
|
| — |
|
| 275,000 |
|
| 130,000 |
|
| 160,000 |
|
| 622 |
|
| 290,622 |
| ||||||||
Streeter |
| 145,000 |
|
| 145,000 |
|
| — |
|
| 290,000 |
| ||||||||||||||||||||
Streeter4 |
| 38,929 |
|
| 84,835 |
|
| — |
|
| 123,764 |
| ||||||||||||||||||||
Wessel |
| 130,000 |
|
| 145,000 |
|
| — |
|
| 275,000 |
|
| 130,000 |
|
| 160,000 |
|
| 864 |
|
| 290,864 |
| ||||||||
Williams |
| 145,000 |
|
| 145,000 |
|
| 1,790 |
|
| 291,790 |
|
| 145,000 |
|
| 160,000 |
|
| — |
|
| 305,000 |
| ||||||||
| 1 | Represents quarterly grants of restricted stock units pursuant to the Outside Directors’ Equity Participation Plan. For further information regarding this plan, see the description below. |
As of December 31, |
| Name | Number of Restricted Stock Units | Number of Deferred Share Equivalent Units | Total Share Equivalents | Number of Restricted Stock Units | Number of Deferred Share Equivalent Units | Total Share Equivalents | ||||||||||||||||||
Clayton |
| — |
|
| — |
|
| — |
| |||||||||||||||
Firestone |
| 112,655 |
|
| 4,337 |
|
| 116,992 |
|
| 124,764 |
|
| 4,337 |
|
| 129,101 |
| ||||||
Geissler |
| 87,565 |
|
| — |
|
| 87,565 |
|
| 99,675 |
|
| — |
|
| 99,675 |
| ||||||
Hellman |
| 91,167 |
|
| — |
|
| 91,167 |
|
| — |
|
| — |
|
| — |
| ||||||
Koellner |
| 54,667 |
|
| 16,861 |
|
| 71,528 |
|
| 66,777 |
|
| 16,861 |
|
| 83,638 |
| ||||||
Lewis |
| 3,779 |
|
| — |
|
| 3,779 |
|
| 15,889 |
|
| — |
|
| 15,889 |
| ||||||
Mahendra-Rajah |
| 2,407 |
|
| — |
|
| 2,407 |
|
| 14,516 |
|
| 2,460 |
|
| 16,976 |
| ||||||
McCollough |
| 112,655 |
|
| 7,527 |
|
| 120,182 |
|
| — |
|
| 7,527 |
|
| 7,527 |
| ||||||
McGlade |
| 69,374 |
|
| — |
|
| 69,374 |
|
| 81,483 |
|
| — |
|
| 81,483 |
| ||||||
Palmore |
| 72,606 |
|
| — |
|
| 72,606 |
|
| 84,715 |
|
| — |
|
| 84,715 |
| ||||||
Siu |
| 25,361 |
|
| — |
|
| 25,361 |
|
| 37,470 |
|
| — |
|
| 37,470 |
| ||||||
Streeter |
| 112,384 |
|
| — |
|
| 112,384 |
|
| — |
|
| — |
|
| — |
| ||||||
Wessel |
| 112,655 |
|
| 14,219 |
|
| 126,874 |
|
| 124,764 |
|
| 14,219 |
|
| 138,983 |
| ||||||
Williams |
| 32,913 |
|
| — |
|
| 32,913 |
|
| 45,023 |
|
| — |
|
| 45,023 |
| ||||||
| 2 | Represents income associated with the Company’s provision of up to two sets of automobile tires per year to the directors. |
EXECUTIVE COMPENSATION | ||||||||||||
| Director Compensation Table
|
| 3 | Ms. Clayton was elected to the Board on November 28, 2022. |
| 4 | Mr. Hellman, Mr. McCollough and Ms. Streeter did not stand for re-election to the Board at the Company’s 2022 annual meeting of shareholders and their terms ended on April 11, 2022. |
Goodyear directors who are not officers or employees of Goodyear or any of its subsidiaries receive, as compensation for their services as a director, a combination of cash retainer and stock awards pursuant to the Outside Directors’ Equity Participation Plan (the “Directors’ Equity Plan”).
The Compensation Committee reviews pay levels for non-management directors each year with assistance from its compensation consultant, who prepares a comprehensive assessment of Goodyear’s non-management director compensation program. That assessment includes benchmarking of director compensation against the same peer group used for executive compensation purposes, an update on recent trends in director compensation, and a review of related corporate governance best practices. Following that review, the Board of Directors, consistent with the recommendation of the Compensation Committee, keptretained the outside directors’ annual cash compensation at $130,000, increased the grant date fair value of annual stock awards from $145,000 to $160,000, and increased the additional amounts payable to the chairpersons of the Audit and Compensation Committees from $20,000 to $25,000, effectiveprogram, which has been in effect since October 1, 2021. On a full year basis, the Lead Director receives an additional $55,000, the chairpersons of the Audit and Compensation Committees receive an additional $25,000, and the chairpersons of all other committees receive an additional $15,000. 2021, as set forth below.
Compensation Component | Amount | |||
Annual Cash Retainer | $130,000 | |||
Annual Equity Retainer | 160,000 | |||
Lead Director | 55,000 | |||
Audit Committee Chair | 25,000 | |||
Human Capital and Compensation Committee Chair | 25,000 | |||
Corporate Responsibility and Compliance Committee Chair | 15,000 | |||
Finance Committee Chair | 15,000 | |||
Governance Committee Chair | 15,000 | |||
Any director who attends more than 24 Board and committee meetings will receive $1,700 for each additional meeting attended ($1,000 if the meeting was attended virtually or by telephone). In addition, the Board may form special committees from time to time and determine the compensation of the chairperson of such committees. Travel and lodging expenses incurred in attending Board and committee meetings are paid by Goodyear. Mr. Kramer did not receive additional compensation for his service as a director.
Outside directors also participate in the Directors’ Equity Plan, which is intended to further align the interests of directors with the interests of shareholders by making part of each director’s compensation dependent on the value and appreciation over time of our Common Stock. For 2021,2022, each eligible director received a quarterly grant of restricted stock units with a grant date fair value of $36,250 for the first, second and third quarters of 2021 and $40,000, for the fourth quarter of 2021, payable on the first business day of the subsequent calendar quarter based on the closing market price of our Common Stock on that date. These restricted stock units will be paid to directors in shares of Common Stock on the fifth business day of the quarter following the quarter during which the director leaves the Board. The Directors’ Equity Plan also permits each participant annually to elect to have 25%, 50%, 75% or 100% of his or her cash retainer and meeting fees deferred and converted into share equivalent units based on the closing market price of our Common Stock on the payment date. Under the Directors’ Equity Plan, the restricted stock units and share equivalent units receive dividend equivalents at the same rate as our Common Stock, which dividends will be converted into restricted stock units or share equivalent units, as the case may be, based on the closing market price of our Common Stock on the dividend payment date. Share equivalent units accrued prior to October 1, 2010 will be converted to a dollar value at the closing market price of our Common Stock on the
| 79 |
EXECUTIVE COMPENSATION | ||||||||
| Director Compensation Table |
later of the first business day of the seventh month following the month during which the participant ceased to be a director and the fifth business day of the year next following the year during which the participant ceased to be a director. Amounts earned and vested on or after January 1, 2005, will be paid out in a lump sum on the fifth business day following the conversion from share equivalent units to a dollar value. Share equivalent units accrued on or after October 1, 2010 will be paid to directors in shares of Common Stock on the fifth business day of the quarter following the quarter during which the director leaves the Board.
| ||||||||
|
|
The stockholding guidelines for directors specify that a director must accumulate and hold a number of shares equal in value to five times the annual cash retainer. Shares owned directly and restricted stock units and share equivalent units accrued to a Directors’ Equity Plan account are counted as ownership in assessing compliance with the guidelines. The stock price to be used in assessing compliance with the guidelines as of May 1st of each year will be the average closing stock price for the prior 60-day200-day period. During 2021,2022, each of our directors complied with our stockholding guidelines.
Risks Related To Compensation Policies And Practices
We have reviewed our compensation policies and practices for our employees and have concluded that the risks arising from those policies and practices are not reasonably likely to have a material adverse effect on us.
For 2021,2022, the annual total compensation of the CEO, as set forth in the Summary Compensation Table, was $21,415,578,$10,317,348, and the median of the annual total compensation of all employees, other than the CEO, was $43,746,$42,773, resulting in a ratio of 490:241:1 (the “pay ratio”).
In determining the median employee, we collected information regarding taxable wages for all employees, defined consistently with applicable SEC regulations, of the Company and its consolidated subsidiaries as of October 1, 20202022 for the period beginning January 1, 20202022 and ending September 30, 2020.2022. Taxable wages generally included an employee’s actual income, including wages, overtime, bonuses and other cash incentives, that are subject to taxation in the applicable jurisdiction. We converted earnings paid in local currencies to U.S. dollars by applying the average exchange rate used for the preparation of our financial statements for the period from January 1, 20202022 to September 30, 2020.
For 2021, we used the same median employee that was identified in 2020. As permitted by applicable SEC regulations, in 2021, we omitted the approximately 10,000 employees of Cooper Tire when considering whether we needed to identify a new median employee. There has been no change in our legacy employee population or employee compensation arrangements that we believe would significantly impact our pay ratio disclosure.2022.
We did not utilize the “de minimis” exception, statistical sampling or other similar methods, or any cost-of-living adjustment, as permitted by applicable SEC regulations, in calculating the pay ratio.
| 80 |
 |
| Value of Initial Fixed $100 Investment Based on: | ||||||||||||||||||||||||||||||||
| Year | Summary Compensation Table (SCT) Total for PEO 1 | Compensation Actually Paid to PEO 2 | Average SCT Total for Non-PEO NEOs 1 | Average Compensation Actually Paid to Non-PEO NEOs 3 | TSR | Peer Group TSR 4 | Goodyear Net Income (in millions) | EBIT (Company- Selected Measure) (in millions) | ||||||||||||||||||||||||
| 2022 | $ | 10,317,348 | $ | (11,700,294 | ) | $ | 3,264,573 | $ | (2,598,280 | ) | $ | 66.05 | $ | 104.59 | $ | 202 | $ | 1,188 | ||||||||||||||
| 2021 | 21,415,578 | 39,794,054 | 6,743,039 | 11,818,873 | 138.73 | 142.18 | 764 | 988 | 5 | |||||||||||||||||||||||
| 2020 | 16,003,113 | 13,870,027 | 4,333,433 | 4,338,563 | 70.99 | 117.51 | (1,254 | ) | (85 | ) | ||||||||||||||||||||||
| 1 | During 2020-2022, Mr. Kramer was our Chief Executive Officer. During 2020-2021, our non-PEO NEOs consisted of Messrs. Wells, McClellan, Delaney and Patterson. During 2022, ournon-PEO NEOs consisted of Messrs. Wells, McClellan, Delan ey, Phillips and Patterson. |
| 2 | The following table sets forth the adjustments made to the SCT Total for PEO during each year presented to determine compensation actually paid (CAP) to PEO, with “fair value” calculated in accordance with ASC Topic 718 as of the end of the specified period: |
| Covered Year | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| SCT Total for PEO | $10,317,348 | $21,415,578 | $16,003,113 | |||||||||
| Deduct aggregate change in actuarial present value of accumulated benefit under pension plans reported in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” Column of the SCT | 0 | (199,123 | ) | (4,777,795 | ) | |||||||
Add “service cost” for pension plans a | 736,934 | 751,064 | 672,490 | |||||||||
Add “prior service cost” for pension plans b | 0 | 0 | 0 | |||||||||
| Deduct amounts reported under “Stock Awards” Column of the SCT | (5,658,051 | ) | (10,688,026 | ) | (1,757,495 | ) | ||||||
| Deduct amounts reported under “Option Awards” Column of the SCT | 0 | 0 | (1,970,000 | ) | ||||||||
Add the fair value of awards granted in the covered year that remain outstanding and unvested as of covered year-end c | 2,566,857 | 17,417,825 | 7,596,234 | |||||||||
Add(Subtract) change in fair value of awards granted in any prior year that remain outstanding and unvested as of the covered year-end d | (15,440,422 | ) | 8,704,509 | (1,693,415 | ) | |||||||
Add the fair value of awards granted and vested during the covered year e | 193,682 | 0 | 0 | |||||||||
Add(Subtract) change in fair value from prior year-end to vesting date of awards granted in any prior year that vested during the covered yearf | (4,416,642 | ) | 2,392,227 | (254,427 | ) | |||||||
| Subtract fair value of awards granted in any prior year that were forfeited or failed to vest during the covered year | 0 | 0 | 0 | |||||||||
| Add dividends on unvested awards paid during the covered year | 0 | 0 | 51,322 | |||||||||
| Add incremental fair value of awards modified during the covered year | 0 | 0 | 0 | |||||||||
| Compensation Actually Paid: | (11,700,294 | ) | 39,794,054 | 13,870,027 | ||||||||
| a | Service cost is actuarially determined for services rendered during the covered year. |
| b | There were no plan amendments or initiations during the reporting period. |
81 |
ITEM 402(v) PAY VERSUS PERFORMANCE | ||||||||
 | Pay Versus Performance Table |
| c | For 2022, the value includes the fair value of the 2022 RSU awards and 1/3 of the 2021-2023 and 2022-2024 PSU awards, each with respect to the 2022 performance period. For 2021, the value includes the fair value of the 2021 RSU awards, 1/3 of the 2020-2022 and 2021-2023 PSU awards, each with respect to the 2021 performance period, and the Value Creation Plan awards. For 2020, the value includes the fair value of the 2020 RSU awards, 2020 stock option awards, and 1/3 of the 2020-2022 PSU awards with respect to the 2020 performance period. The values do not necessarily correspond to the actual value that will be received by the executive officers upon vesting. |
| d | For 2022, the value includes the change in fair value of the 2020 RSU awards, 2021 RSU awards, 1/3 of the 2021-2023 PSU awards with respect to the 2021 performance period, Value Creation Plan awards and various stock option awards. For 2021, the value includes the change in fair value of the 2019 RSU awards, 2020 RSU awards, 1/3 of the 2020-2022 PSU awards with respect to the 2020 performance period and various stock option awards. For 2020, the value includes the change in fair value of the 2018 RSU awards, the 2019 RSU awards, all of the 2019-2021 PSU awards and various stock option awards. The values do not necessarily correspond to the actual value that will be received by the executive officers upon vesting. |
| e | For 2022, the value includes 1/3 of the 2020-2022 PSU awards with respect to the 2022 performance period. |
| f | For 2022, the value includes the 2019 RSU awards and 2/3 of the 2020-2022 PSU awards with respect to the 2020 and 2021 performance periods and various stock option awards. For 2021, the value includes the 2018 RSU awards, all of the 2019-2021 PSU awards and various stock option awards. For 2020, the value includes the 2017 RSU awards and all of the 2018-2020 PSU awards and various stock option awards. |
| 3 | The following table sets forth the adjustments made to the SCT during each year presented to determi ne th e averageCAP to the Non-PEO NEOs, with “fair value” calculated in accordance with ASC Topic 718 as of the end of the specified period: |
| Covered Year | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Average SCT Total for non-PEO NEOs | $ | 3,264,573 | $6,743,039 | $ | 4,333,433 | |||||||
Deduct aggregate change in actuarial present value of accumulated benefit under pension plans reported in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” Column of the SCT | (54,061 | ) | (421,654 | ) | (1,192,661 | ) | ||||||
Add “service cost” for pension plans a | 393,302 | 445,423 | 385,290 | |||||||||
Add “prior service cost” for pension plans b | 0 | 0 | 0 | |||||||||
| Deduct amounts reported under “Stock Awards” Column of the SCT | (1,221,736 | ) | (3,051,695 | ) | (122,502 | ) | ||||||
| Deduct amounts reported under “Option Awards” Column of the SCT | 0 | 0 | (734,999 | ) | ||||||||
Add the fair value of awards granted in the covered year that remain outstanding and unvested as of covered year-end c | 484,879 | 4,992,033 | 2,239,042 | |||||||||
Add(Subtract) change in fair value of awards granted in any prior year that remain outstanding and unvested as of the covered year-end d | (3,278,827 | ) | 2,487,301 | (495,692 | ) | |||||||
Add the fair value of awards granted and vested during the covered year e | 34,551 | 0 | 0 | |||||||||
Add(Subtract) change in fair value from prior year-end to vesting date of awards granted in any prior year that vested during the covered year f | (1,067,225 | ) | 624,426 | (86,107 | ) | |||||||
Subtract fair value of awards granted in any prior year that were forfeited or failed to vest during the covered year g | (1,153,736 | ) | 0 | 0 | ||||||||
| Add dividends on unvested awards paid during the covered year | 0 | 0 | 12,759 | |||||||||
| Add incremental fair value of awards modified during the covered year | 0 | 0 | 0 | |||||||||
| Compensation Actually Paid: | (2,598,280 | ) | 11,818,873 | 4,338,563 | ||||||||
| a | Service cost is actuarially determined for services rendered during the covered year. |
| b | There were no plan amendments or initiations during the reporting period. |
| c | For 2022, the value includes the fair value of the 2022 RSU awards and 1/3 of the 2021-2023 and 2022-2024 PSU awards, each with respect to the 2022 performance period. For 2021, the value includes the fair value of the 2021 RSU awards, 1/3 of the 2020-2022 and 2021-2023 PSU awards, each with respect to the 2021 performance period, and the Value Creation Plan awards. For 2020, the value includes the fair value of the 2020 RSU awards, 2020 stock option awards, and 1/3 of the 2020-2022 PSU awards with respect to the 2020 performance period. The values do not necessarily correspond to the actual value that will be received by the executive officers upon vesting. |
| d | For 2022, the value includes the change in fair value of the 2020 RSU awards, 2021 RSU awards, 1/3 of the 2021-2023 PSU awards with respect to the 2021 performance period, Value Creation Plan awards and various stock option awards. For 2021, the value includes the change in fair value of the |
82 |
ITEM 402(v) PAY VERSUS PERFORMANCE | ||||||||
| Pay Versus Performance Table |
| 2019 RSU awards, 2020 RSU awards, 1/3 of the 2020-2022 PSU awards with respect to the 2020 performance period and various stock option awards. For 2020, the value includes the change in fair value of the 2018 RSU awards, the 2019 RSU awards, all of the 2019-2021 PSU awards and various stock option awards. The values do not necessarily correspond to the actual value that will be received by the executive officers upon vesting. |
| e | For 2022, the value includes 1/3 of the 2020-2022 PSU awards with respect to the 2022 performance period. |
| f | For 2022, the value includes the 2019 RSU awards and 2/3 of the 2020-2022 PSU awards with respect to the 2020 and 2021 performance periods and various stock option awards. For 2021, the value includes the 2018 RSU awards, all of the 2019-2021 PSU awards and various stock option awards. For 2020, the value includes the 2017 RSU awards and all of the 2018-2020 PSU awards and various stock option awards. |
| g | For 2022, the value in this row reflects the aggregate fair value of awards forfeited by Mr. Patterson when he left the Company on October 31, 2022. |
| 4 | Dow Jones US Auto Parts Index |
| 5 | As reported in the 2022 Proxy Statement. This figure excludes results from Cooper Tire. Following the acquisition of Cooper Tire in June 2021, the Compensation Committee did not alter any of the previously established targets for the Company’s annual incentive plan and evaluated performance against the metrics for the Company, excluding results of operations attributable to Cooper Tire. |
83 |
ITEM 402(v) PAY VERSUS PERFORMANCE | ||||||||||||
| Pay Versus Performance Table |
84 |
ITEM 402(v) PAY VERSUS PERFORMANCE | ||||||||
| Pay Versus Performance Table |
| Most Important Performance Measures for Determining NEO Pay |
| 1. Share |
| 2. Cost |
| 3. Cash (Free Cash Flow) |
| 4. EBIT |
| 5. Adjusted Net Income |
| 6. Cash Flow Return on Capital |
85 |
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BENEFICIAL OWNERSHIP OF COMMON STOCK
The persons identified in the table below have reported that they beneficially owned more than 5% of the outstanding shares of the Common Stock as follows:
Name and Address of Beneficial Owner | Shares of Common Stock Beneficially Owned | Percent of Common Stock Outstanding Beneficially Owned | Shares of Common Stock Beneficially Owned | Percent of Common Stock Outstanding Beneficially Owned | ||||||||||||
BlackRock, Inc. | ||||||||||||||||
55 East 52nd Street New York, New York 10055 | 33,238,289 | 1 | 11.8 | % | 34,713,271 | 1 | 12.3 | % | ||||||||
The Vanguard Group, Inc. | ||||||||||||||||
100 Vanguard Blvd. Malvern, Pennsylvania 19355 | 27,912,321 | 2 | 9.9 | % | 28,724,606 | 2 | 10.1 | % | ||||||||
AllianceBernstein L.P. | ||||||||||||||||
1345 Avenue of the Americas New York, New York 10105 | 19,559,049 | 3 | 6.9 | % | 17,999,772 | 3 | 6.4 | % | ||||||||
Dimensional Fund Advisors LP | ||||||||||||||||
6300 Bee Cave Road Building One Austin, Texas 78746 | 15,106,478 | 4 | 5.3 | % | ||||||||||||
| 1 | At December 31, |
| 2 | At December 31, |
| 3 | At December 31, |
| 4 | At December 31, 2022, sole voting power in respect of 14,837,876 shares and sole dispositive power in respect of 15,106,478 shares, as stated in a Schedule 13G filed with the SEC on February |
In addition, The Northern Trust Company, 333 S. Wabash Avenue, Chicago, Illinois 60604, has indicated that at the record date it held 3,116,7523,230,495 shares, or approximately 1.1% of the outstanding shares, of Common Stock as the trustee of various employee savings plans sponsored by Goodyear.
| 86 |
| BENEFICIAL OWNERSHIP OF COMMON STOCK
|
On February 15, 2022,14, 2023, each director and nominee, each named executive officer, and all directors, nominees and executive officers as a group, beneficially owned the number of shares of Common Stock set forth in the table below.
| Beneficial Ownership at February 15, 20221 | ||||||||||||||||||||
Name | Shares of Common Stock Owned Directly2 | Shares of Common Stock Held in Savings Plan3 | Shares of Common Stock Subject to Exercisable Options4 | Deferred Share Equivalent Units and Restricted Stock Units | Percent of Class | |||||||||||||||
James A. Firestone | -0- | -0- | -0- | 118,828 | 6 | * | ||||||||||||||
Werner Geissler | 50,000 | -0- | -0- | 89,402 | 6 | * | ||||||||||||||
Peter S. Hellman | -0- | -0- | -0- | 93,004 | 6 | * | ||||||||||||||
Laurette T. Koellner | -0- | -0- | -0- | 73,365 | 6 | * | ||||||||||||||
Karla R. Lewis | -0- | -0- | -0- | 5,616 | 6 | * | ||||||||||||||
Prashanth Mahendra-Rajah | -0- | -0- | -0- | 4,616 | 6 | * | ||||||||||||||
W. Alan McCollough | -0- | -0- | -0- | 122,018 | 6 | * | ||||||||||||||
John E. McGlade | -0- | -0- | -0- | 71,210 | 6 | * | ||||||||||||||
Roderick A. Palmore | -0- | -0- | -0- | 74,442 | 6 | * | ||||||||||||||
Hera Siu | -0- | -0- | -0- | 27,197 | 6 | * | ||||||||||||||
Stephanie A. Streeter | -0- | -0- | -0- | 114,221 | 6 | * | ||||||||||||||
Michael R. Wessel | -0- | -0- | -0- | 128,710 | 6 | * | ||||||||||||||
Thomas L. Williams | -0- | -0- | -0- | 34,750 | 6 | * | ||||||||||||||
Richard J. Kramer | 640,822 | 5 | 250 | 1,251,812 | 479,349 | 7,8 | * | |||||||||||||
Darren R. Wells | 43,961 | -0- | 220,812 | 97,424 | 8 | * | ||||||||||||||
Christopher R. Delaney | 55,391 | -0- | 331,594 | 90,705 | 8 | * | ||||||||||||||
Stephen R. McClellan | 125,666 | 1,836 | 402,100 | 90,705 | 8 | * | ||||||||||||||
Ryan G. Patterson | 30,820 | -0- | 122,242 | 65,719 | 8 | * | ||||||||||||||
All directors, nominees, named executive officers and all other executive officers as a group (24 persons) |
| 1,010,191 |
|
| 5,642 |
|
| 2,340,315 |
|
| 2,067,955 |
|
| 1.2 | % | |||||
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During 2021, Goodyear and its subsidiaries, in the ordinary course of their business and at competitive prices and terms, made sales to or purchases from, or engaged in other transactions with, corporations of which certain Goodyear non-management directors are directors and/or executive officers. Goodyear does not consider the transactions to be material to its business and believes such transactions were not material in relation to the business of such other corporations or the interests of the directors concerned.
On an annual basis, each director and executive officer is obligated to complete a Director and Officer Questionnaire that requires disclosure of any transactions with the Company in which the director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest. Under the “Board of Directors and Executive Officers Conflict of Interest Policy,” directors and executive officers are expected to promptly disclose actual and potential conflicts of interest to Goodyear’s General Counsel, who may consult with the Chairman of the Governance Committee or the Lead Director on matters of interpretation of the policy. Any waivers of the policy are required to be approved by the Board of Directors, and any such waivers will be promptly disclosed to shareholders.
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PROPOSAL 3 – APPROVAL OF THE 2022 PERFORMANCE PLAN
At the Annual Meeting, we will ask our shareholders to approve Goodyear’s 2022 Performance Plan (the “2022 Plan”). In general, the 2022 Plan authorizes Goodyear to grant stock options and stock appreciation rights (“SARs”), and to make restricted stock or restricted stock unit grants, performance grants, other stock-based grants and cash-based grants to officers and other employees of Goodyear and its subsidiaries and to directors of Goodyear.
Proposed Share Authorization
The 2022 Plan is intended to replace the 2017 Performance Plan (the “2017 Plan”), as more fully described below. If the 2022 Plan is approved by shareholders, the following shares of Common Stock would be available for delivery under the plan: (a) 21,000,000 new shares of Common Stock, plus (b) certain shares of Common Stock subject to outstanding awards under the 2017 Plan (or any other prior equity compensation plan) as of the date the 2022 Plan is approved by our shareholders, to the extent that such awards expire according to their terms or are forfeited, terminated, canceled or surrendered or are settled, or can be paid, only in cash, or are surrendered in payment of taxes associated with such awards (other than stock options or SARs).
HOW WE CALCULATED THE PROPOSED SHARE AUTHORIZATION
The Board of Directors believes that our future success depends, in large part, on our ability to attract, retain and reward highly qualified officers and other employees. Equity compensation is a key component of our compensation program because it helps us to attract, retain and reward highly qualified officers and other employees, to motivate them to achieve the business objectives established to promote Goodyear’s long-term growth, profitability and success, and to encourage their ownership of Common Stock. The 2022 Plan is designed to advance these interests of Goodyear and its shareholders.
As of February 28, 2022, and excluding the new shares of Common Stock requested under the 2022 Plan, 1,912,276 shares of Common Stock remained available for issuance or delivery under the 2017 Plan. Based on our historical grant practices, as summarized below, and our projected recruiting and retention needs, we anticipate that Goodyear would no longer be able to grant annual equity awards under our long-term incentive program for employees and our non-employee director compensation program beyond 2022 unless we reserve new shares of Common Stock for issuance under the 2022 Plan.
In order to maintain the flexibility to keep pace with our competitors and effectively attract, motivate and retain high-caliber employees and directors, we are asking our shareholders to authorize 21,000,000 new shares of Common Stock for issuance as awards under the 2022 Plan. We intend to grant future equity awards under the 2022 Plan in amounts that are reasonable and consistent with market data prepared by the Compensation Committee’s independent consultant. Based on our projected recruiting and retention needs, we believe that the new shares requested under the 2022 Plan would allow us to grant equity awards to employees and directors for approximately five more years.
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In determining the size of this share request, the Compensation Committee considered, among other things, our outstanding equity awards, our burn rate, our stock price and volatility, our projected recruiting and retention needs, the potential dilution of our equity compensation program, the voting guidelines of certain institutional investors and proxy advisory firms, the advice of its independent compensation consultant, and competitive market practices. The results of this comprehensive analysis were presented to the Compensation Committee and the Board of Directors for its consideration. Certain of these factors are outlined below.
The Compensation Committee and your Board of Directors believe it is in the best interests of Goodyear and its shareholders to adopt the 2022 Plan. If shareholders do not approve the 2022 Plan, we will continue to have the authority to grant equity-based awards under the 2017 Plan after the Annual Meeting. However, we may be required to increase the cash components of our compensation programs to remain at competitive levels in the marketplace, which would significantly inhibit our ability to attract, retain and reward highly qualified officers and other employees and align their interests with those of our shareholders.
IMPACT ON 2017 PLAN
Upon shareholder approval of the 2022 Plan, Goodyear will no longer make grants under the 2017 Plan. Moreover, we will not make any grants of equity awards under the 2017 Plan during the period commencing on March 1, 2022 and ending on the date of the Annual Meeting; however, awards outstanding under the 2017 Plan will continue to remain outstanding and subject to the terms and conditions of the 2017 Plan.
As noted above, as of February 28, 2022, and excluding the new shares of Common Stock requested under the 2022 Plan, 1,912,276 shares of Common Stock remained available for issuance or delivery under the 2017 Plan. Any shares of Common Stock that are subject to awards of stock options or SARs under the 2017 Plan are counted as one share for each share granted for purposes of the remaining share reserve and any shares of Common Stock that are subject to any other awards are counted as 2.00 shares for each share granted for purposes of the remaining share limit.
As of February 28, 2022, there were 2,278,135 shares of Common Stock subject to outstanding service-based restricted stock unit awards, 1,977,162 shares subject to outstanding performance share awards (calculated at target and including only the portion of the award payable in shares rather than cash) and 6,295,290 shares subject to outstanding stock options. As of that date, the weighted average exercise price of the outstanding stock options was $17.13, the weighted average remaining contractual term for the stock options was 6.08 years, and the closing market price of a share of Common Stock as reported on The Nasdaq Stock Market was $15.49 per share.
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BURN RATE
We use our burn rate to measure the potential life expectancy of our equity plan and shareholder dilution. Our burn rate experience is summarized in the table below, which provides data on our share usage under our employee and non-employee director compensation programs for the last three completed fiscal years.
Fiscal Year | # Of Participants | Stock Options Granted | Service-Based RSUs Granted | Performance Shares Earned(1) | Total Shares(2) | Burn Rate | ||||||||||||||||||
2021 |
| 381 |
|
| 0 |
|
| 771,038 |
|
| 250,293 |
|
| 421,605 |
|
| 0.16% |
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2020 |
| 419 |
|
| 4,167,384 |
|
| 747,551 |
|
| 154,141 |
|
| 4,539,602 |
|
| 1.95% |
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2019 |
| 1,162 |
|
| 0 |
|
| 2,429,527 |
|
| 123,681 |
|
| 1,053,964 |
|
| 0.45% |
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3-year Average Burn Rate (2019-2021) |
| 0.85% |
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Our burn rate is calculated as the total amount of equity granted in any year, divided by the weighted average number of common shares outstanding as of the end of each fiscal year. For purposes of this calculation (i) stock options and service-based restricted stock unit awards were counted in the year granted, and (ii) performance share awards were counted in the year earned (and only to the extent earned and paid in shares of Common Stock rather than cash). Our future burn rate will depend on a number of factors, including the number of participants in the 2022 Plan, our stock price, changes to our compensation strategy, changes in business practices or industry standards, changes in our capital structure due to stock splits or similar events, the compensation practices of our competitors or changes in compensation practices in the market generally, and the methodology used to establish the equity award mix.
DILUTION AND OVERHANG
We measure the dilutive impact of our equity program (the so-called overhang) by dividing (i) the number of shares of Common Stock subject to outstanding equity awards, plus the number of shares available to be granted under our equity plans (the “numerator”), by (ii) the total number of shares of Common Stock outstanding, plus the shares included in the numerator. As of February 28, 2022, our fully diluted overhang was approximately 4.23%. The 21,000,000 new shares of Common Stock being requested under the 2022 Plan would bring our fully diluted overhang to approximately 10.06%, which we believe to be reasonable and within industry norms.
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SUMMARY OF THE 2022 PLAN
The principal features of the 2022 Plan are summarized below. The summary does not contain all information that may be important to you. You should read the complete text of the 2022 Plan which is set forth as Exhibit B to this Proxy Statement.
Plan Administration. The 2022 Plan will be administered by a committee (the “Committee”) of not less than three members of the Board of Directors who qualify as “non-employee directors” within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934 and as “independent directors” for purposes of the rules and regulations of The Nasdaq Stock Market. The Committee will have the sole authority to, among other things:
Construe and interpret the 2022 Plan,
Make rules and regulations relating to the administration of the 2022 Plan,
Select participants,
Establish the terms and conditions of awards, and
Reduce the amount of an award, without the consent of any participant.
The Compensation Committee of the Board of Directors will act as the Committee under the 2022 Plan.
Eligibility. Any employee of Goodyear or any of its subsidiaries, including any officer of Goodyear, selected by the Committee is eligible to receive grants of stock options, SARs, restricted stock, restricted stock units, and performance and other awards under the 2022 Plan. Directors of Goodyear are also eligible to receive awards (other than performance awards) under the 2022 Plan. Subject to the limits specified in the 2022 Plan, the selection of participants and the nature and size of awards will be wholly within the discretion of the Committee. It is anticipated that all ten non-employee directors of Goodyear and all thirteen Board-appointed officers of Goodyear will receive various grants under the 2022 Plan and approximately 2,500 other employees of Goodyear and its subsidiaries will participate in at least one feature of the 2022 Plan. A participant must be an employee of the company or a subsidiary or a director of the company continuously from the date a grant is made through the date of vesting thereof, unless otherwise provided by the Committee.
Shares Subject to the 2022 Plan. A total of twenty-one million (21,000,000) shares of Common Stock may be issued under the 2022 Plan. Any shares of Common Stock that are subject to awards of stock options or SARs will be counted as one share for each share granted for purposes of the aggregate share limit and any shares of Common Stock that are subject to any other awards will be counted as 2.00 shares for each share granted for purposes of the aggregate share limit. In addition, shares of Common Stock that are subject to awards issued under the 2022 Plan or under the 2017 Plan (or any other prior equity compensation plan) that expire according to their terms or are forfeited, terminated, canceled or surrendered or are settled, or can be paid, only in cash, or are surrendered in payment of taxes associated with such awards (other than stock options or SARs) will be available for new awards under the 2022 Plan as one share for each share subject to awards of stock options or SARs and 2.00 shares for each share subject to any other awards. In no event will (1) any shares of Common Stock subject to a stock option that is canceled upon the exercise of a tandem SAR, (2) any shares of Common Stock subject to awards that are surrendered in payment of the exercise price of a stock option or in payment of taxes associated with the exercise of a stock option or SAR, (3) any shares of Common Stock subject to a SAR that are not issued in connection with the stock settlement of the SAR upon the exercise thereof or (4) any shares of Common Stock reacquired by Goodyear on the open market or otherwise using cash proceeds from the exercise of stock options become available for grant under the 2022 Plan.
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Limits on Director Awards. The 2022 Plan includes limits on awards to non-employee directors. In particular, the sum of (1) the aggregate grant date fair value of all awards granted in any single calendar year, plus (2) the aggregate amount of any cash retainers and fees payable in that calendar year, in each case, to any single non-employee director, shall not exceed $750,000.
Adjustments. The maximum number and kind of shares available for issuance under the 2022 Plan is subject to appropriate adjustments to reflect certain events, such as a stock dividend, stock split, reorganization, recapitalization or business combination. Upon any of these events, similar equitable adjustments shall be made to the following, as determined by the Committee in order to prevent dilution or enlargement of the rights of participants:
The maximum number of shares which may be subject to any type of award or any outstanding award to any participant during any specified period.
The per share exercise price of any outstanding stock option or SAR and the number or kind of any units which are the subject of any other outstanding award.
Term, Amendment and Termination. If adopted, the 2022 Plan will remain in effect until February 28, 2032, unless sooner terminated by the Board of Directors. Termination will not affect awards then outstanding. The Board of Directors may terminate or amend the 2022 Plan at any time without shareholder approval, unless such approval is necessary to comply with the Securities Exchange Act of 1934, the Code, the rules and regulations of The Nasdaq Stock Market or other applicable law. In any event, shareholder approval will be required to, among other things, amend the 2022 Plan to increase the maximum number of shares which may be issued pursuant to the 2022 Plan or change the restrictions on the repricing of stock options or SARs.
Prohibition in Repricing. The repricing of stock options and SARs is expressly prohibited by the 2022 Plan unless approved by shareholders. For purposes of the 2022 Plan, “repricing” means (1) the cancellation of a stock option or SAR in exchange for another award under the 2022 Plan if the exercise price of the new award is lower than the exercise price of the cancelled stock option or SAR, (2) a reduction in the exercise price of a stock option or SAR, or (3) the cancellation of a stock option or SAR in exchange for cash or another award under the 2022 Plan.
Minimum Vesting Provisions. All awards granted under the 2022 Plan that are settled in shares of Common Stock are subject to a minimum vesting requirement of at least one year, with an exception for awards covering up to 5% percent of the share reserve (up to 1,050,000 shares).
Stock Options. The 2022 Plan will permit the Committee to grant stock options to officers and selected employees of Goodyear and its subsidiaries and directors of Goodyear. No more than twenty-one million (21,000,000) shares may be issued pursuant to incentive stock options. The per share exercise price for any stock option shall not be less than 100% of the fair market value of a share of Common Stock at the date of grant. Fair market value is defined as the closing market price of the Common Stock on The Nasdaq Stock Market on the relevant date. The closing price per share of Common Stock on February 28, 2022 was $15.49. The 2022 Plan permits the Committee to establish the term (up to ten years) and the vesting schedule.
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Incentive stock options, as defined in Code Section 422(b), may be granted to employees of Goodyear and its subsidiaries under the 2022 Plan, each having a term of up to ten years from the date of grant. The amount of incentive stock options vesting in a particular year cannot exceed $100,000 per grantee, determined using the fair market value of the shares of Common Stock subject to such option or options on the date of grant.
Stock Appreciation Rights. SARs may be granted under the 2022 Plan in tandem with, in relation to or independent of any other award under the 2022 Plan.
A SAR entitles the holder to receive an amount equal to all, or some portion (as determined by the Committee), of the excess of the fair market value of a share of Common Stock on the date of exercise over the fair market value of such share at the date of grant, multiplied by the number of shares as to which the holder is exercising the SAR. SARs may be paid in cash or in shares of Common Stock (at fair market value on the date of exercise), or a combination thereof, as determined by the Committee. The Committee will establish the term (up to ten years) and may also determine that a SAR shall be automatically exercised on one or more specified dates.
Restricted Stock and Restricted Stock Units. The 2022 Plan authorizes the granting of restricted stock and restricted stock units to officers and other key employees of Goodyear and its subsidiaries and to directors of Goodyear. The Committee selects the grantees and determines the terms and conditions of each award.
Restricted stock and restricted stock units will be subject to a restriction period. During the restriction period, the recipient is not entitled to delivery of the shares or units, restrictions are placed on the transferability of the shares or units, and all or a portion of the shares or units will be forfeited if the recipient terminates employment or service for reasons other than as approved by the Committee. The Committee may also require that specified performance goals (as defined below) be attained during the restriction period. Upon expiration of the restriction period, the appropriate number of shares of Common Stock will be delivered to the grantee (or credited to the grantee’s account) free of all restrictions. During the restriction period for restricted shares, the grantee shall be entitled to vote restricted shares (but not restricted stock units).
Performance Grants. Under the 2022 Plan, officers and key employees of Goodyear and its subsidiaries may be granted the contingent right, expressed in units (which may be equivalent to a share of Common Stock or other monetary value), to receive payments in shares of Common Stock, cash or any combination thereof (“performance grants”) based upon performance over a specified period (“performance period”). At the time of grant, the Committee shall also establish one or more performance criteria (the “performance measure”) applicable to the performance grant and targets that must be attained relative to the performance measure (“performance goals”). Performance measures that are financial metrics may be determined in accordance with United States Generally Accepted Accounting Principles (GAAP) or may be adjusted when established (or at any time thereafter) to include or exclude any items otherwise includable or excludable under U.S. GAAP. Performance measures may be calculated before or after taxes, interest, depreciation, amortization, discontinued operations, effect of accounting changes, acquisition expenses, restructuring expenses, items that are unusual in nature or infrequent in occurrence, extraordinary items, non-operating items or unusual charges, as determined by the Committee at the time the performance measures are established or at any time thereafter. Performance goals may be established on a corporate-wide basis, with respect to one or more business units, divisions, subsidiaries or business segments and in either absolute terms or relative to the performance of one or more comparable companies or an index covering multiple companies. Performance goals may include a minimum, maximum and target level of performance, with the amount of award based on the level attained.
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Other Stock-Based Grants. The 2022 Plan permits other stock-based grants in shares of Common Stock, in Common Stock equivalents or in other stock-based units on such terms and conditions as the Committee determines. These grants may be made to officers and other key employees of Goodyear and its subsidiaries and to directors of Goodyear.
Restrictions on Dividends and Dividend Equivalents. During the restriction period or performance period for restricted stock, restricted stock units, stock-based performance grants and other stock-based grants (but not stock options and SARs), the grantee shall be entitled to receive dividends or dividend equivalents, unless the Committee otherwise provides, provided any such dividends and dividend equivalents will be accumulated or deemed reinvested in additional restricted stock or units until the applicable award becomes earned and vested. Currently, the Committee has not provided for dividend equivalents on stock-based performance grants. No dividend equivalents may be granted with respect to any stock options or SARs.
Recoupment of Awards. Amounts paid or payable pursuant to the 2022 Plan may be subject to recoupment or claw-back pursuant to our Claw-back Policy (as described on page 59), including as may be adopted in the future, or to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law.
Transferability. Awards under the 2022 Plan will not be transferable other than by will or the laws of descent and distribution; except that the Committee may permit the transfer of an award (other than an incentive stock option) (i) by gift to the employee’s spouse, children and grandchildren, or to a trust or partnership (or similar legal entity) for the benefit of any one or more of them, or (ii) pursuant to a domestic relations order.
Deferrals. The Committee may defer the payment of any award, or permit participants to defer their receipt of payment, for such period or periods and on such terms and conditions as the Committee may specify. Deferrals may be in the form of Common Stock equivalents, which earn dividend equivalents, or in cash, which may earn interest at a rate or rates specified by the Committee.
Change in Control. The 2022 Plan provides for “double-trigger” vesting of equity awards in connection with a Change in Control. This means that if (1) a participant’s employment is terminated other than for Cause or by the participant for Good Reason within two years of a Change in Control of Goodyear or (2) awards granted under the 2022 Plan are not assumed, converted, replaced or continued by the resulting entity in connection with a Change in Control of Goodyear, then: (i) all stock options and SARs then outstanding under the 2022 Plan become fully exercisable; (ii) all terms and conditions of all restricted stock grants then outstanding are deemed satisfied; and (iii) all performance grants and other stock-based grants shall be deemed to have been fully earned at the target amount of award opportunity.
“Cause” and “Change in Control” are defined in the 2022 Plan in Exhibit B to this Proxy Statement, using a similar standard to that which is used in our Executive Severance Plan, described beginning on page 73. For purposes of the 2022 Plan, “Good Reason” has the meaning specified in our Executive Severance Plan or our Continuity Plan for Salaried Employees, as applicable, for the respective participants in those plans.
U.S. Federal Income Tax Consequences. Based on the Code and existing regulations thereunder in effect as of the date of this Proxy Statement, the anticipated U.S. federal income tax consequences of the several types of awards under the 2022 Plan are as described below. The discussion below is general in nature and does not take into account all of the considerations that may apply in light of the circumstances of a particular participant and is not intended to serve as tax advice. Moreover, the
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income tax consequences under applicable state, local or foreign tax laws may not be the same as under U.S. federal income tax law.
Grant of Stock Options and SARs. An optionee will not recognize any taxable income at the time a stock option or SAR is granted.
Exercise of Incentive Stock Options. No ordinary income will be recognized by the holder of an incentive stock option at the time of exercise. However, the excess of the fair market value of the shares of Common Stock at the time of exercise over the aggregate option exercise price will be an adjustment to alternative minimum taxable income for purposes of the federal “alternative minimum tax” at the date of exercise. If the optionee holds the shares of Common Stock purchased for two years after the date the option was granted and one year after the acquisition of such shares, the difference between the aggregate option price and the amount realized upon disposition of the shares will constitute a long term capital gain or loss.
If the shares of Common Stock are disposed of in a sale, exchange or other “disqualifying disposition” within two years after the date of grant or within one year after the date of exercise, the optionee will realize taxable ordinary income in an amount equal to the lesser of (i) the excess of the fair market value of the shares of Common Stock purchased at the time of exercise over the aggregate option exercise price and (ii) the excess of the amount realized upon disposition of such shares over the option exercise price.
Exercise of Non-Qualified Stock Options. Taxable ordinary income will be recognized by the holder of a non-qualified stock option at the time of exercise in an amount equal to the excess of the fair market value of the shares of Common Stock purchased at the time of such exercise over the aggregate option exercise price. On a subsequent sale of the shares, the optionee will generally recognize a taxable capital gain or loss based upon the difference between the per share fair market value at the time of exercise and the per share selling price at the time of sale. The capital gain or loss will be short term or long term depending on the period of time the shares are held by the optionee following exercise.
Exercise of Stock Appreciation Rights. Upon the exercise of a SAR, the holder will realize taxable ordinary income on the amount of cash received and/or the then current fair market value of the shares of Common Stock acquired. The holder’s basis in any shares of Common Stock acquired will be equal to the amount of ordinary income upon which he or she was taxed. Upon any subsequent disposition of such Common Stock, any gain or loss realized will be a capital gain or loss (short term or long term depending on the period of time the shares are held by the participant following exercise of the SAR).
Restricted Stock. A participant receiving a grant of restricted stock will not recognize income when restricted shares of Common Stock are granted, unless the participant makes the Section 83(b) election described below.
When the restrictions on the shares of Common Stock are removed or lapse, the excess of fair market value of such shares on the date the restrictions are removed or lapse over the amount paid by the participant for the shares will be ordinary income to the participant. Upon disposition of the shares of Common Stock, the gain or loss recognized by the participant will be treated as a capital gain or loss. The capital gain or loss will be short term or long term depending upon the period of time the shares are held by the participant following the removal or lapse of the restrictions.
If a Section 83(b) election is filed by the participant with the Internal Revenue Service within 30 days after the date of grant, then the participant will recognize ordinary income and the participant’s holding period will commence as of the date of grant.
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The amount of ordinary income recognized by the participant will equal the excess of the fair market value of the shares as of the date of grant over any amount paid by the participant for the shares of Common Stock. If such election is made and a participant thereafter forfeits the restricted shares of Common Stock, no refund or deduction will be allowed for the amount previously included in such participant’s income.
Restricted Stock Units and Performance Grants. A participant receiving a restricted stock unit grant or a performance grant will not recognize income at the time the grant is made. When a participant receives payment in cash or shares of Common Stock, the amount of cash and the fair market value of the shares of Common Stock received will be ordinary income to the participant.
Withholding Taxes. No withholding taxes are payable in connection with the grant of any stock option or SAR or the exercise of an incentive stock option. However, applicable withholding taxes must be paid at the time of exercise of any non-qualified stock option or SAR by an employee. Withholding taxes generally must also be paid in respect of any restricted stock when the restrictions thereon lapse. In respect of all other awards, withholding taxes generally must be paid whenever the participant recognizes income for tax purposes.
Federal Income Tax Consequences to Goodyear. To the extent that a participant recognizes ordinary income in the circumstances described above, Goodyear will be entitled to a corresponding federal income tax deduction provided that, among other things, the income (i) meets the test of reasonableness, is an ordinary and necessary business expense, and is not an “excess parachute payment” within the meaning of Section 280G of the Code; and (ii) is not disallowed by the $1 million limitation on executive compensation under Section 162(m) of the Code.
Registration with the SEC. Goodyear intends to file a Registration Statement on Form S-8 relating to the new shares of Common Stock reserved for issuance under the 2022 Plan with the SEC pursuant to the Securities Act of 1933 after approval of the 2022 Plan by our shareholders.
Other Information. Future benefits under the 2022 Plan are not currently determinable, nor are the benefits that would have been granted for the last completed fiscal year had the 2022 Plan then been in effect. However, current benefits granted to officers and all other employees likely would not have been increased if they had been made under the proposed 2022 Plan.
Set forth in the table below is certain information regarding the number of shares of our Common Stock that were subject to outstanding stock options or other compensation plan awards at the dates indicated.
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Equity Compensation Plan Information
Plan Category | Number of Shares to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Shares Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Shares Reflected in Column (a)) (c) | |||||||||
Equity compensation plans approved by shareholders |
| 6,438,801 |
| $ | 17.03 |
|
| 3,310,039 | (1) | |||
Equity compensation plans not approved by shareholders |
| — |
|
| — |
|
| — |
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Total at December 31, 2021 |
| 6,438,801 |
| $ | 17.03 |
|
| 3,310,039 |
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Equity compensation plans approved by shareholders |
| 6,295,290 |
| $ | 17.13 |
|
| 1,912,276 | (2) | |||
Equity compensation plans not approved by shareholders |
| — |
|
| — |
|
| — |
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Total at February 28, 2022 |
| 6,295,290 | * | $ | 17.13 |
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| 1,912,276 |
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The following resolution will be presented by your Board of Directors at the Annual Meeting:
“RESOLVED, that the adoption of the 2022 Performance Plan of The Goodyear Tire & Rubber Company, the complete text of which is set forth as Exhibit B to the Proxy Statement of the Company for the 2022 Annual Meeting of Shareholders be, and the same hereby is, approved.”
Adoption of the Plan requires the affirmative vote of a majority of our outstanding Common Stock. If the Plan is not approved by shareholders, the Plan will not be adopted and Goodyear will consider other alternatives available with respect to performance based compensation.
Your Board of Directors unanimously recommends that shareholders vote FOR adoption of the 2022 Performance Plan (Proposal 3).
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PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) as Goodyear’s independent registered public accounting firm for the fiscal year ending December 31, 2022. Representatives of PwC are expected to be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
The following table presents fees and expenses for services rendered by PwC for fiscal 2021 and 2020.
(IN THOUSANDS)
| 2021 | 2020 | |||||||
Audit Fees and Expenses1 | $ | 14,484 |
| $ | 10,161 |
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Audit-Related Fees and Expenses2 |
| 348 |
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| 188 |
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Tax Fees and Expenses3 |
| 617 |
|
| 549 |
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All Other Fees and Expenses4 |
| 441 |
|
| 208 |
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Total | $ | 15,890 |
| $ | 11,106 |
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All audit, audit-related, tax and other services were pre-approved by the Audit Committee, which concluded that the provision of such services by PwC was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. The Audit Committee’s Pre-Approval Policy provides for pre-approval of audit, audit-related, tax and all other fees on an annual basis and, in addition, individual engagements anticipated to exceed pre-established thresholds must be separately approved. Under the policy, the Audit Committee delegates pre-approval authority to the Chairman of the Committee. The Chairman is to report any such pre-approval decisions to the Audit Committee at its next scheduled meeting.
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Management has the primary responsibility for the integrity of Goodyear’s financial information and the financial reporting process, including the system of internal control over financial reporting. PricewaterhouseCoopers LLP (“PwC”), Goodyear’s independent registered public accounting firm, is responsible for conducting independent audits of Goodyear’s financial statements and the effectiveness of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”) and expressing an opinion on the financial statements and the effectiveness of internal control over financial reporting based upon those audits. The Audit Committee is responsible for overseeing the conduct of these activities by management and PwC.
As part of its oversight responsibility, the Audit Committee has reviewed and discussed the audited financial statements, the adequacy of financial controls and the effectiveness of Goodyear’s internal control over financial reporting with management and PwC. The Audit Committee also has discussed with PwC the matters required to be discussed by the applicable requirements of the PCAOB and the Securities and Exchange Commission. The Audit Committee has received the written disclosures and the letter from PwC required by applicable requirements of the PCAOB regarding PwC’s communications with the Audit Committee concerning independence, and has discussed with PwC their independence from Goodyear.
Based on the review and discussions with management and PwC referred to above, the Audit Committee has recommended to the Board of Directors that Goodyear include the audited consolidated financial statements of Goodyear and subsidiaries for the year ended December 31, 2021 in Goodyear’s Annual Report on Form 10-K for the year ended December 31, 2021 and in its 2021 Annual Report to Shareholders.
THE AUDIT COMMITTEE
John E. McGlade, Chairman
