Finance Committee | | | | | Members: Members
| | Duties and Responsibilities
| | | Renée J. Hornbaker (Chair) Charles K. Stevens IIIIII* Meetings in 2022:2023:4
*Retiring effective May 2, 2024 | | Duties and Responsibilities The purpose of the Finance Committee is to review with management and, where appropriate, make recommendations to the Board regarding: •the Company’s financial position and financing activities, including consideration of the Company’s financing plans and strategies; •significant corporate transactions (including acquisitions, divestitures, and joint ventures); •financial status of the Company’s defined benefit pension plans; •payment of dividends and issuance and repurchase of stock; and •use of financial instruments, commodity purchasing, insurance, and other hedging arrangements and strategies to manage exposure to financial and market risks. | | | A copy of the charter is available on the “Investors — Governance” section of the Company’s website. | | |
32 2023 Proxy Statement 
Corporate Governance — Committee Reports
Committee Reports
Audit Committee Report
On behalf of the Board, the Audit Committee oversees the Company’s financial reporting process and its internal control over financial reporting and related disclosure controls and procedures, areas for which management has the primary responsibility. The independent registered public accounting firm is responsible for expressing an opinion on the conformity of the Company’s audited financial statements with accounting principles generally accepted in the United States and for issuing its report on the Company’s internal control over financial reporting. All audit and non-audit services provided to the Company by the independent registered public accounting firm are pre-approved by the Audit Committee or by the Chair of the Audit Committee pursuant to delegated authority, and the Audit Committee considers the compatibility of such non-audit services with the accounting firm’s independence. At the beginning of the year, the Audit Committee reviewed and approved all known audit and non-audit services and fees to be provided by and paid to PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm. During the year, specific audit and non-audit services or fees not previously approved by the Audit Committee were approved in advance by the Audit Committee or by the Chair of the Audit Committee pursuant to delegated authority.
The Audit Committee evaluates the performance of the independent registered public accounting firm, including the senior audit engagement team, each year and determines whether to reengage the current independent registered public accounting firm or consider other independent registered public accounting firms. In doing so, the Audit Committee considers the quality and efficiency of the services provided by the firm, the firm’s global capabilities, and the firm’s technical expertise, tenure as the Company’s independent registered public accounting firm, and knowledge of the Company’s global operations and industry. Based on this evaluation, the Audit Committee decided to retain PricewaterhouseCoopers LLP to serve as independent registered public accounting firm for the year ending December 31, 2023. Although the Audit Committee has the sole authority to appoint the independent registered public accounting firm, the Audit Committee has continued its long-standing practice of recommending that the Board ask stockholders to ratify the appointment of the independent registered public accounting firm at the 2023 Annual Meeting (see “Item 2 — Ratification of Appointment of Independent Registered Public Accounting Firm”).
Of the Audit Committee’s nine meetings during 2022, five were regular meetings that included separate private (or “executive”) sessions of the Audit Committee with the Company’s independent registered public accounting firm and with Company management, including the Director of Corporate Audit Services, the Chief Legal Officer, the Chief Financial Officer, the Chief Accounting Officer, the Corporate Controller, the Director of Corporate Compliance, the Chief Information Officer, and other financial and legal management employees, and among the Audit Committee members themselves. These executive sessions included discussion of specific financial management, legal, accounting, auditing, internal and disclosure controls, corporate compliance, and risk management matters. As part of its oversight of the Company’s risk management process, the Audit Committee reviewed and discussed management’s risk assessment and risk management program, including individualKey areas of riskboard oversight
Corporate strategy and the overall risk management process. See “Risk Oversight” later in this proxy statement. The Audit Committee also met with the Chief Legal Officer and the Director of Corporate Compliance to discuss the effectiveness of the Company’s compliance program and received regular corporate compliance program status reports and updates.Four of the Audit Committee’s meetings included review of the Company’s planned public disclosures of quarterly financial results. These meetings included review with management and the independent registered public accounting firm of the financial statements and management’s discussion and analysis of financial condition and results of operations disclosures in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filings prior to filing with the SEC and of matters relating to the Company’s internal control over financial reporting and disclosure controls and procedures for such filings.
2023 Proxy Statement 33
Corporate Governance — Committee Reports
Numerous other informal meetings and communications among the Chair, various Audit Committee members, PricewaterhouseCoopers LLP, the Director of Corporate Audit Services, the Chief Information Officer, and other members of the Company’s management also occurred. The agenda for each of the Audit Committee’s meetings is established by the Audit Committee Chair.
Throughout the year, the Audit Committee reviewed with the Company’s financial management, PricewaterhouseCoopers LLP, and the Director of Corporate Audit Services the overall audit scope and plans, the results of internal and external audit examinations, evaluations by management and the independent registered public accounting firm of the Company’s internal controls over financial reporting, and the quality of the Company’s financial reporting.
Management has reviewed and discussed the audited financial statements and related disclosures in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, with the Audit Committee. This review and discussion included the quality of accounting principles, the reasonableness of the significant accounting judgments and estimates, the clarity of disclosures in and concerning the financial statements, and the internal controls and disclosure controls and procedures that support management’s accounting and disclosure judgments and the certifications of the Chief Executive Officer and the Chief Financial Officer that the financial statements of the Company fairly present, in all material respects, the financial condition, results of operations, and cash flows of the Company.
In its meetings with representatives of PricewaterhouseCoopers LLP, the Audit Committee asked them to address, and discussed their responses to, questions relevant to the Audit Committee’s oversight. These discussions included significant accounting judgments or estimates made by management in preparing the financial statements, fair presentation to investors in the financial statements of the Company’s financial position and performance in accordance with generally accepted accounting principles and SEC disclosure requirements, and implementation of internal controls and internal audit procedures that are appropriate for the Company.
The Audit Committee also discussed with PricewaterhouseCoopers LLP the matters required to be discussed by the standards of the Public Company Accounting Oversight Board (the “PCAOB”). The Audit Committee has received from PricewaterhouseCoopers LLP the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and discussed with them their independence from the Company and its management. In addition, the Audit Committee has received written materials addressing PricewaterhouseCoopers LLP internal quality control procedures.
In reliance on these reviews and discussions and the reports of PricewaterhouseCoopers LLP, the Audit Committee has recommended to the Board, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC.
Audit Committee
Humberto P. Alfonso (Chair)
Eric L. Butler
Edward L. Doheny II
Kim Ann Mink
Charles K. Stevens III
34 2023 Proxy Statement
Corporate Governance — Committee Reports
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the “Compensation Discussion and Analysis” which appears later in this proxy statement. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC and in this proxy statement.
Compensation and Management Development Committee
Brett D. Begemann (Chair)
Julie F. Holder
Renée J. Hornbaker
James J. O’Brien
David W. Raisbeck
2023 Proxy Statement 35
Corporate Governance — Compensation Consultant
Compensation Consultant
The Compensation Committee has directly engaged Aon’s Human Capital Solutions practice a division of Aon plc (“Aon”) as its external compensation consultant. Aon reports to, and receives its direction from, the Compensation Committee, and a representative of Aon attends each meeting of the Compensation Committee as its advisor. Aon provides the Compensation Committee with third-party survey information used in setting short- and long-term compensation levels, perspective on emerging compensation issues and trends, and expertise in incentive compensation structure, terms, and design. Aon also provides such services to the Nominating and Corporate Governance Committee for its recommendations to the Board regarding non-employee director compensation. Any other services provided by Aon and its affiliates to Eastman are approved by the Compensation Committee. Company management also uses the services of several other outside firms for compensation analysis, third-party surveys, and management pay research and analysis. None of these other firms provide any consulting services to the Compensation Committee or to the Nominating and Corporate Governance Committee.
In reviewing Aon’s performance in 2022 and considering its continued engagement for 2023, the Compensation Committee evaluated Aon’s independence from Company management and any conflicts of interest in accordance with applicable New York Stock Exchange listing requirements. The Compensation Committee considered Aon’s provision of other services to the Company, the fees paid by the Company to Aon as a percentage of the firm’s total revenue, Aon’s policies and procedures to prevent conflicts of interest, and the confirmation by Aon that it and its representatives have no business or personal relationship with any member of the Compensation Committee, do not own any stock of the Company, and have no business or personal relationship with any executive officer of the Company. The Compensation Committee concluded that Aon is independent of the Compensation Committee and of Company management and has no conflicts of interest in its performance of services to the Compensation Committee.
Key Areas of Board Oversight
Corporate Strategy and Business Performance
With the leadership of the Board Chair and Chief Executive Officer, the Board actively oversees development, implementation, and results of executive management’s corporate growth and business strategy, including the current innovation-driven growth model. Corporate strategy and business and financial results, expectations, prospects, and opportunities are reviewed and discussed with the Chief Executive Officer and senior management throughout the year at each Board meeting and at meetings of the Audit, Compensation and Management Development, Finance, and Environmental, Safety and Sustainability Committees, including in separate private (or “executive”) sessions with the Chief Executive Officer and other individual executive and senior managers. Risk Oversight
The Board maintains oversight responsibility for the management of the Company’s risks, and oversees an enterprise-wide approach to risk management, designed to provide a holistic view of organizational objectives, including strategic objectives, to improve long-term organizational performance, to prioritize and manage identified risks, and to enhance stockholder value. A fundamental part of risk management is not only understanding the risks the Company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the Company. The full Board reviews with management its process for managing enterprise risk. Additionally, the Audit Committee is charged with overseeing our risk assessment and management process each year to: (i) ensure that management has instituted processes to identify major risks and has developed plans to manage such risks; and (ii) review with management the most significant risks identified and management’s plans for addressing and mitigating the potential effects of such risks. During the Company’s risk management review process, risk is assessed throughout our entire
36 2023 Proxy Statement
Corporate Governance — Key Areas of Board Oversight
business, and is reported to a management corporate risk committee comprised of members of our various business units and control functions. Risks that are identified as “high-level” risks are reported to the Audit Committee and thereafter assigned, as appropriate, to various of the Board’s Committees, or to the Board as a whole, for further review, analysis, and development of appropriate plans for management and mitigation.
While the Board maintains the ultimate oversight responsibility for risk management and for oversight of certain specific risks, each of the various Committees of the Board have been assigned responsibility for risk management oversight of specific identified areas. In particular, and in addition to its responsibility to conduct an annual assessment of the risk management process and report its findings to the Board, the Audit Committee maintains responsibility for overseeing risks related to the Company’s financial reporting, audit process, internal controls over financial reporting and disclosure controls and procedures. In addition to these risks, the Audit Committee is also responsible for the oversight of cybersecurity risk, mitigation strategies (including review of the Company’s cyber insurance coverage) and the overall resiliency of the Company’s technology infrastructure. As part of its risk oversight responsibilities, the Audit Committee periodically reviews third-party assessments of information security standards, any incidents that could have a material impact on the Company’s network, and potential cybersecurity risk disclosures. In February 2023, Linnie Haynesworth joined the Board and the Audit Committee. She is a recognized expert in cybersecurity governance matters, as she previously served as Sector Vice President and General Manager of the Cyber and Intelligence Mission Solutions Division for Northrop Grumman Corporation’s Mission Systems Sector.
The Finance Committee has oversight responsibility related to the Company’s financial position and financing activities, including such areas as capital structure, raw material and energy costs, availability, and price volatility and hedging, large capital projects, pension obligations and funding, and acquisitions, divestitures, and joint ventures. The Environmental, Safety and Sustainability Committee assists the Board in fulfilling its oversight responsibility with respect to health, safety, environmental, security, public policy and political activities, and the Company’s sustainability strategy, GHG emission reduction goals and related climate disclosures. In addition, in setting compensation, the Compensation Committee endeavors to develop a program of incentives that encourage an appropriate level of risk-taking behavior consistent with the Company’s long-term business strategy and also reviews the employee development as part of the Company’s succession planning process. Finally, the Nominating and Corporate Governance Committee conducts an annual assessment of nominees to our Board and is charged with developing and recommending to the Board corporate governance principles and policies and Board Committees structure, leadership, and membership, including those related to, affecting, or concerning the Board’s and its Committees’ risk oversight.
Human Capital and Company Culture
The Board believes that effective attraction, development, and retention of our employees (or “human capital”), including workforce and management development, inclusion and diversity initiatives, succession planning, corporate culture, and compensation and benefits, are vital to the success of Eastman’s innovation-driven growth strategy. The Board regularly evaluates Eastman’s culture and monitors leadership quality, employee morale, and talent development through one-on-one meetings with key senior managers, senior manager presentations at Board and Committees meetings, and other meetings before and after Board and Committees meetings. Additional detail around human capital management can be found within the pages of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).
Succession Planning planning The Board oversees workforce and senior management development primarily through its Compensation Committee. In its oversight of senior management evaluation, development and compensation, as well as its evaluation of executive officer performance and determination of executive compensation, the Compensation Committee regularly reviews with management and the Board employee composition, talent, diversity, and senior management development and succession plans, and the Board regularly reviews management and employee I&D programs and initiatives. In addition, the Chief Executive Officer regularly reviews and discusses privately with the Board short-term and long-term executive succession plans, and the Lead Director and the Chair of the Compensation Committee at least annually privately review Chief Executive Officer and senior management succession plans with the independent directors.
| | | | Item 1 Election of Directors |
Risk oversight A fundamental part of risk management is not only understanding the risks the Company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the Company. During the Company’s risk management review process, risk is assessed throughout our entire business, and is reported to a management corporate risk committee comprised of members of our various business units and control functions. Risks that are identified as “high-level” risks are reported to the Audit Committee and thereafter assigned, as appropriate, to various Board’s Committees, or to the Board as a whole, for further review, analysis, and development of appropriate plans for management and mitigation. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Board | | | | | | | | | | | | | | | | | | | | | | | | | | | | •The Board maintains oversight responsibility for the management of the Company’s risks, and oversees an enterprise-wide approach to risk management, designed to provide a holistic view of organizational objectives, including strategic objectives, to improve long-term organizational performance, to prioritize and manage identified risks, and to enhance stockholder value. •The full Board reviews with management its process for managing enterprise risk. •While the Board maintains the ultimate oversight responsibility for risk management and for oversight of certain specific risks, each of the various Committees of the Board have been assigned responsibility for risk management oversight of specific identified areas. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Compensation Committee | | Finance Committee | | Environmental, Safety and Sustainability Committee | | | •The Compensation Committee endeavors to develop a program of incentives that encourage an appropriate level of risk-taking behavior consistent with the Company’s long-term business strategy and also reviews the employee development as part of the Company’s succession planning process. | | •The Finance Committee has oversight responsibility related to the Company’s financial position and financing activities, including such areas as capital structure, raw material and energy costs, availability, and price volatility and hedging, large capital projects, pension obligations and funding, and acquisitions, divestitures, and joint ventures. | | •The Environmental, Safety and Sustainability Committee assists the Board in fulfilling its oversight responsibility with respect to health, safety, environmental, security, public policy and political activities, and the Company’s sustainability strategy, GHG emission reduction goals and related climate disclosures. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Audit Committee | | | The Nominating and Corporate
Governance Committee | | | •The Audit Committee is charged with overseeing our risk assessment and management process each year to: (i)ensure that management has instituted processes to identify major risks and has developed plans to manage such risks; and (ii)review with management the most significant risks identified and management’s plans for addressing and mitigating the potential effects of such risks. •The Audit Committee maintains responsibility for overseeing risks related to the Company’s financial reporting, audit process, internal controls over financial reporting and disclosure controls and procedures. | | | •The Nominating and Corporate Governance Committee conducts an annual assessment of nominees to our Board and is charged with developing and recommending to the Board corporate governance principles and policies and Board Committees structure, leadership, and membership, including those related to, affecting, or concerning the Board’s and its Committees’ risk oversight. | | | | | | | | | | | | | | | | | | | | | |
| | | | Item 1 Election of Directors |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Cybersecurity Risk Oversight The Board is also responsible for the oversight of cybersecurity risk, mitigation strategies and the overall resiliency of the Company’s technology infrastructure. As part of their risk oversight responsibilities, the Board and Audit Committee periodically review third-party assessments of information security standards, any incidents that could have a material impact on the Company’s network, and potential cybersecurity risk disclosures. In 2023, the Board continued to broaden the director skill sets with the addition of a director who has extensive background and experience in cybersecurity governance. The Company has a dedicated Chief Information Officer (“CIO”) and an Information Security Director who are supported by a team of cybersecurity professionals that are responsible for leading the Company-wide cybersecurity program and risk mitigation efforts. The Company's internal audit team provides independent assurance on the overall operations of the Company's cybersecurity program. The Company also engages multiple external parties to conduct cybersecurity maturity and risk assessments. The Company ensures that all employees, including part-time and temporary employees, undergo cybersecurity training and compliance programs at least annually. | | | | | | | | | | | | |
Human Capital and Company Culture The Board believes that effective attraction, development, and retention of our employees (or “human capital”), including workforce and management development, inclusion and diversity initiatives, succession planning, corporate culture, and compensation and benefits, are vital to the success of Eastman’s innovation-driven growth strategy. The Board regularly evaluates Eastman’s culture and monitors leadership quality, employee morale, and talent development through one-on-one meetings with key senior managers, senior manager presentations at Board and Committees meetings, and other meetings before and after Board and Committees meetings. Additional detail around human capital management can be found under “Human Capital” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 Proxy Statement 37(the “2023 Form 10-K”). Inclusion and Diversity In 2023, we focused on building a more racially and ethnically diverse talent pool by increasing investments in diversity sourcing, requiring diverse candidate slates, and strengthening partnerships with universities, and racially/ethnically diverse campus organizations. We believe that creating an inclusive and diverse work environment is not only the right thing to do, but it also increases our competitiveness in a global economy and optimizes business performance. In addition, we are committed to fostering inclusive leadership behaviors at all levels within our organization. To address gaps in leadership representation, we prepare underrepresented colleagues for leadership roles through tailored development programs and inclusive talent review processes. Our goal is to create an environment where every team member can bring their authentic selves to work and make meaningful contributions.
| | | | Item 1 Election of Directors |
Workplace safety Management continues to drive workplace safety improvements by focusing on leadership's commitment to personal safety, process safety and asset integrity. These actions, which are outlined below, continue to drive critical personal and process safety performance improvements: •Corporate Governance — Key Areas of Board OversightAn executive-led process safety governance committee provided regular updates to the Board; •Increased expectations and opportunities for leaders at every level to spend more time “in the field” with our manufacturing and maintenance teams; •Recommitted to personal accountability for all Eastman employees through our basic safety expectations; •Reinforced operational excellence and procedure discipline through improved, standardized programs and enhanced training for leaders and front-line team members; •Addressed all identified actions needed to mitigate the most significant process safety risks across our global sites; and •Committed more capital resources to fund additional high-value safety projects. | | | | | | | | | | | | | | | | •2023 OSHA Recordable injury rate decreased by nearly 31% relative to 2022 performance. •2023 Tier 1 process safety incidents decreased by 57% relative to 2022 performance. •Year-over-year, serious injuries & fatalities were reduced by 66%. •Year-over-year, Days Away from Work injuries were reduced by 55%. | | | | | | | |
Board of Directorsdirectors At the highest level, the Board of Directors provides oversight to our growth strategy, which is founded in a model of innovating for a sustainable future. Chaired by Julie F. Holder,Dr. Kim Ann Mink, the Environmental, Safety and Sustainability Committee is a Board Committee of all the independent directors that oversees our sustainability strategy, initiatives, and performance. Eastman’s Chief Sustainability Officer meets regularly with the Environmental, Safety and Sustainability Committee to review sustainability initiatives and progress.
| | | | Item 1 Election of Directors |
Sustainability Councilcouncil and Executive Oversightexecutive oversight Eastman’s Sustainability Council is composed of executive team members and senior leaders to drive alignment of our commitments across the enterprise and address emerging opportunities. Eastman’s Chief Executive Officer and Board Chair has executive responsibility for the Company’s strategy and performance, including sustainability performance as it aligns to the corporate strategy. Sustainability goals are included in our Chief Executive Officer’s annual personal performance commitments, including environmental performance and safety. Eastman’s three sustainability sub-councils and their working groups proactively identify emerging issues, assess options, and make recommendations. The membership of the sub-councils is strategically selected for organizational representation and subject matter expertise to catalyze action on important issues. 
The Company’s sustainability program, and its relationship to our strategy for innovative growth, is described in our annual Sustainability Report, on“A Better Circle,” which can be found in the EastmanSustainability section of the Company’s website. 38 2023 Proxy Statement
| | | | Item 1 Election of Directors |
Board Practices, Processes,practices, processes, and Policiespolicies Board Practices, Processes,meetings and PoliciesBoard Meetings and Attendance
attendance The Board held seveneight meetings during 2022.2023. Each Board meeting included one or more “executive sessions” led by the Lead Director without the Chief Executive Officer or other management.management present. Each director attended at least 75%85% of the aggregate of the total number of meetings of the Board and the total number of meetings held by all Committees of the Board on which he or she served. The Board meets immediately before each annual meeting of stockholders, and the directors in attendance at such Board meeting attend the annual meeting of stockholders. All directors then serving on the Board attended the 20222023 virtual Annual Meeting of Stockholders. Board and Committees Performance EvaluationsCommittee performance evaluations Board and Committee evaluations play an important role in ensuring that the Board and its Committees’ function effectively and in the best interest of our stockholders. Each year, the Board and its Committees evaluates its ownevaluate their performance against the requirements of the Corporate Governance Guidelines and the applicable Committee charter. The self-evaluation process seeks to identify specific areas, if any, that need improvement or strengthening in order to increase the effectiveness of the Board, its members and its Committees. The Lead Director and the Chair of the Nominating and Corporate GovernanceNCG Committee annually review and agree on the evaluation process. In 2022, theThe Board conductedperiodically conducts a formal peer assessment.assessment with an external third-party facilitator. The Board last conducted these external assessments in 2019 and 2022. In 2022, the assessment was designed to ensure that the Board possesspossesses the independence, diversity, skills and expertise to provide strong and effective oversight and ensure that the Board functions effectively and in the best interest of our stockholders. The assessment was conducted by an independent external facilitator who encouraged participants to be introspective about themselves, their fellow Board members, and the operations of the Board and its Committees. | | | | | | | | | | 1 | | Process Initiated | | | 1. Process Initiated | | The Lead Director and the Chair of the Nominating and Corporate GovernanceNCG Committee initiated the evaluation process with the assistance of an independent third-party. | | | | | 2 | Survey | | 2. Survey | Each director completed an electronic survey with survey questions centered around five core areas of responsibility and oversight: (i) Board composition; (ii) talent oversight and CEO succession; (iii) Board processes and operations; (iv) strategy oversight; and (v) risk management. | | | | | 3 | Interviews | | 3. Interviews | The facilitator conducted individual interviews with each director eliciting candid feedback from the participants in an unrestrained and congenial setting. | | | | | 4 | Findings | | 4. Findings | The facilitator compiled all the quantitative and qualitative information, benchmarked the Board against national standards and research and provided a thorough and comprehensive written narrative report. The results of the assessment were reviewed with the Lead Director, Chair of the Nominating and Corporate GovernanceNCG Committee and Chair of the Board. Board Chair. | | | | | 5 | Feedback Incorporated | | 5. Feedback Incorporated | The Lead Director shared the results with the full Board and reviewed any recommended actions aligning on improvement opportunities for implementation. As a final step, the facilitator then conducted one-on-one conversations with each individual director. |
Individual directors are evaluated by the NominatingLead Director and Corporate Governancethe NCG Committee as part of consideration for nomination for election or re-election. This evaluation is conducted by
| | | | Item 1 Election of Directors |
Outside the Lead DirectorBoardroom As part of the Company’s efforts to ensure directors have the necessary resources to fulfill their responsibilities to stakeholders, the Company provides continuing education opportunities for directors to stay informed on trends and developments relevant to Eastman and our industry. Directors also periodically participate in visits to Eastman operating facilities, which provides opportunities to observe Company culture and develop a deeper understanding of the Nominating and Corporate Governance Committee.complexities of the Company’s manufacturing operations. Directors also regularly interact with non-executive management employees outside of the boardroom as part of the Board’s ongoing succession planning process. In addition, directors receive valuable input from stockholders that helps inform the Board's strategic planning efforts.
| | | | | | | | | | | | | | | | | | | | | | | | | Talent Development | | | | Stockholder Engagement | | | | | | | | The Board believes that talent management and employee development are vital to the success of Eastman’s innovation-driven growth strategy. Accordingly, the Board regularly monitors leadership quality, employee morale, and talent development through one-on-one meetings with key senior managers, senior management presentations at Board and Committees meetings, and other meetings before and after Board and Committees meetings. | | | The Board values input from stockholders on all matters related to Eastman. The Board receives periodic updates from management on stockholder engagement efforts that provide further insight to stockholder interests and concerns. To create opportunities for directors to receive feedback from the Company’s stockholders, directors may engage directly with stockholders of the Company from time to time. | | | | | | | | | | | | | | | | | | | | Director Orientation | | | | Continuing Education | | | | | | | | All new directors take part in a director orientation, which includes written material and presentations, individual meetings with fellow directors and key leaders and employees, to familiarize such directors with, among other things, the Company’s business, strategic plans, significant financial, accounting and risk management issues, compliance programs, Code of Business Conduct and Ethics, corporate governance guidelines, principal officers, independent auditors and advisors and securities trading and reporting. | | | The Board encourages all directors to stay abreast of developing trends for directors by attending director development programs and conferences that relate to director fiduciary duties, corporate governance topics or other topics relevant to the work of the Board. The Company compensates directors for attendance at such courses and pays the reasonable expenses thereof.
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Transactions with Directors, Executive Officers,directors, executive officers, and Related Personsrelated persons At least annually, the Board reviews and evaluates all current and recent past transactions involving the Company in which non-non-employeeemployee directors and their affiliates (including immediate family members and other firms, corporations, or entities with which the director has a relationship) have or had a direct or indirect interest. The Board also reviews any such transactions and relationships in which executive officers of the Company or members of their immediate families have or had an interest. Written Company policies require approval by the Board (in the case of the Chief Executive Officer) or senior management (in the case of all other employees) of each Company transaction in which an employee has a direct or indirect financial or other personal interest, and restrict reporting relationships between immediate family member employees. 2023 Proxy Statement 39
Corporate Governance — Board Practices, Processes, and Policies
In the most recent review, the Board considered purchases and sales of products and services in the ordinary course of business to and from companies of which non-employee directors are or were officers. Each such transaction was below the thresholds of the categorical standards listed above and determined by the Board not to be a material transaction or relationship.
| | | | Item 1 Election of Directors |
The Board also reviewed employment by the Company of fourthree immediate family members of executive officers. One of the immediate family members’ compensation was below the relevant dollar threshold of applicable SEC rules for disclosure in this proxy statement, and the terms of such employment, including compensation and benefits, were in all respects according to standard Company employment policies and practices. This executive’s immediate family members worked in an organization that was not in the executive’s line of management or the executive had no direct reporting relationship with his immediate family member, and the executive made no, and will not make any, hiring, compensation, promotion, or evaluation decisions regarding his immediately family member.Two immediate family members (husband and brother-in-law) of Michelle R. Stewart, the Company’s Vice President, Corporate Controller and Chief Accounting Officer and Corporate Controller (principal accounting officer) are employed by Eastman. The spouse of Travis Smith, Senior Vice President, Additives and Functional Products, is also employed by the Company. Each of these three individuals areis employed in non-executive officer positions and each received total compensation for 20222023 of less than $275,000.$250,000. The terms of the employment of Ms. Stewart’s and Mr. Smith’s immediate family members, including compensation and benefits, were in all respects according to standard Company employment policies and practices applicable to professional employees with comparable qualifications and responsibilities and holding similar positions. None of these three individuals workworks in the same internal organization, nor are they in the line of management, of their respective family member executive. In each case, neither Ms. Stewart nor Mr. Smith made, and will not make, any hiring, compensation, promotion, or evaluation decisions regarding their family members. Consistent with our related person transaction policy as described above, our Nominating and Corporate GovernanceNCG Committee and Board reviewed this matter. Board Corporate Governance Guidelines and CommitteesCommittee Charters; CodesCode of Business Conduct and Ethics The Nominating and Corporate GovernanceNCG Committee of the Board periodically reviews and assesses the Board’s Corporate Governance Guidelines and governance practices, and each Committee reviews and assesses its Charter,charter, and recommends any changes to the Board. We make available free of charge, through the “Investors — Governance” section of the Eastman website, the Board’s Corporate Governance Guidelines, the Charterscharters of each of the Committees of the Board, and the Codes of Business Conduct and Ethics for our directors, officers, and employees. Such materials are also available in print upon written request of any stockholder to Eastman Chemical Company, P.O. Box 431, Kingsport, Tennessee 37662-0431, Attention: Investor Relations. Communications to the Board of Directors and Investor Engagementinvestor engagement The Board believes that communication and engagement with the Company’s stockholders and other interested parties is an important component of the Company’s corporate governance practices. We have adopted a Board Stockholder Communication and Engagement Policy to facilitate communication between stockholders and other interested parties and the Board. Stockholders and other interested parties may send communications to the Board, any individual director, or the independent directors as a group in writing by mail or email to: Board of Directors, Eastman Chemical Company, c/o Corporate Secretary, P.O. Box 1976, Kingsport, Tennessee 37662-1976, email: corpsecy@eastman.com and leaddirector@eastman.com. Stockholders should indicate in the “ATTN:” line of the envelope or the subject line of the email, as applicable, whether the communication is directed to the Board, an individual director, or the independent directors as a group. The Board Stockholder Communication and Engagement Policy is available on the “Investors — Governance” section of the Company’s website. In addition, to create opportunities for directors and management to listen to the views of the Company’s stockholders and to provide an explanation of the Company’s publicly available material information, from time to time, directors and certain senior members of management meet with certain stockholders of the Company. 40 2023 Proxy Statement
Director Compensation
DIRECTOR COMPENSATION
Director compensation is determined by the Board based upon the recommendation of the Nominating and Corporate GovernanceNCG Committee and its compensation consultant. The Board uses a combination of cash and stock-based compensation to attract and retain qualified candidates to serve as directors. In setting the compensation of non-employee directors, the Nominating and Corporate GovernanceNCG Committee and the Board consider the significant amount of time that the Board and its Committees are expected to expend, the skills, knowledge, and understanding needed for service on the Board, and the types and amounts of director pay of similar public companies (including the compensation peer comparison companies discussed underin “Executive Compensation — Compensation Discussion and AnalysisAnalysis” later in this proxy statement). Cash retainers and event fees, as described below, are paid in two semi-annual payments. The Nominating and Corporate GovernanceNCG Committee and the Board annually review non-employee director compensation, and the Board, upon the recommendation of the Nominating and Corporate GovernanceNCG Committee, has from time to time changed the amounts and forms of director paycompensation to make the value of total non-employee director compensation closer to that ofconsistent with competitive peer director compensation benchmarking companies. Following an annual review of non-employee director compensation, the Board increased the annual director retainer, the annual restricted stock award, and the annual Audit Committee Chair retainer effective January 1, 2022, in each case to make the value of total non-employee director compensation closer to that of peer director compensation. In 2022, the annual director retainer fee increased to $120,000, the annual Audit Committee Chair retainer increased to $25,000 and the value of the annual restricted stock award increased to $110,000.data. The Nominating and CorporateNCG Governance Committee in late 2022 concluded that non-employee director total pay was in line with external market comparisons, and accordingly, the Board made no changes to non-employee director compensation for 2023. 2022
2023 Director Compensation Cash retainer
| | | | | | | Cash Retainer | | Cash fees for 2023 were paid according to the following schedule: | | Non-Employee Director Annual Retainer | $120,000 | | Lead Director Retainer | $40,000 | | Chair Retainer — Audit Committee | $25,000 | | Chair Retainer — Compensation and Management Development Committee | $20,000 | | Chair Retainer — Nominating and Corporate Governance Committee | $15,000 | | Chair Retainer — Finance Committee | | Chair Retainer — Environmental, Safety and Sustainability Committee | | “Event” Fee (Per Event)* | $1,500 | | Restricted Stock Awards | | Non-Employee Director Annual Award | $110,000 | | Director (one-time award upon initial election to the Board) | $10,000 |
•Event fees are paid in connection with significant time spent outside Board or Committee meetings for 2022 were paid according todirector training, interviewing director candidates, meeting with Company management, meeting with external auditors, meeting with investors and management, or other meetings or activities as directed by the following schedule:Board or one of its Committees. | | | | | | Non-Employee Director Annual Retainer | | $ | 120,000 | | | Lead Director Retainer | | | 40,000 | | | Chair Retainer — Audit Committee | | | 25,000 | | | Chair Retainer — Compensation and Management Development Committee | | | 20,000 | | | Chair Retainer — Nominating and Corporate Governance Committee | | | 15,000 | | | Chair Retainer — Finance Committee | | | 15,000 | | | Chair Retainer — Environmental, Safety and Sustainability Committee | | | 15,000 | | | “Event” Fee (Per Event)* | | | 1,500 | |
| * | | | | | | | | | Fees paid on an “event” basis for significant time spent outside Board or Committee meetings for director training, interviewing director candidates, meeting with Company management, meeting with external auditors, meeting with investors and management, or other meetings or activities as directed by the Board or one of its Committees.
2024 Proxy Statement | 41 |
2023 Proxy Statement 41
Director Compensation — Directors’ Deferred Compensation Plan
Restricted Stock Awards
Each non-employee director receives an annual award of restricted shares of common stock having a fair market value equal to $110,000 (with the number of restricted shares awarded rounded up in the case of fractional shares) made on the date of the Annual Meeting of Stockholders.Stockholders, which vests if the director is still serving as a director immediately prior to the election of directors at the next annual meeting of stockholders. In addition, upon initial election to the Board, a director receives a one-time award of restricted shares having a fair value equal to $10,000 (with the number of restricted shares awarded rounded up in the case of fractional shares). Such awards are made under the Director Stock Compensation Subplan (the “DSCS”) of the 2021 Omnibus Stock Compensation Plan (the “DSCS”“Omnibus Plan”). The restricted shares are not transferable (except by will or the laws of descent and distribution or as described below) and are subject to forfeiture until the earliest of: | (i) | the next Annual Meeting of Stockholders in the case of the annual awards and the one-year anniversary of the one-time awards (provided the grantee is still a director),
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| (ii) | death, disability, or resignation due to attaining retirement age or another approved reason during the restricted period, or
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| (iii) | departure from the Board at the end of the term of service to which elected (in the case of the annual awards) or failure to be re-elected as a director during the one-year term after the grant (in the case of the one-time awards).
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(i)the next Annual Meeting of Stockholders in the case of the annual awards or the one-year anniversary of the one-time awards (provided the grantee is still a director); (ii)death, disability, or resignation due to attaining retirement age or another approved reason during the restricted period; or (iii)departure from the Board at the end of the term of service to which elected (in the case of the annual awards) or failure to be re-elected as a director during the one-year term after the grant (in the case of the one-time awards). During the restricted period, the director has all of the rights of a stockholder with respect to the restricted shares (other than the right to transfer the shares), including voting and dividend rights. The DSCS contains provisions regarding the treatment of restricted shares in the event of a “change in control” (as defined in the DSCS, generally circumstances in which the Company is acquired by another entity or its controlling ownership is changed). In such an event, all outstanding restricted shares would immediately vest and become transferable, and would be valued and cashed out on the basis of the change in control price as soon as practicable, but in no event more than 90 days after the change in control. TheHowever, the Nominating and Corporate Governance Committee has the discretion even if a change in control event will occur, to determine that any such immediate vesting of restricted shares under the DSCS should not occur for thata change in control event, and thatin which case the restricted shares will not become fully vested when that event occurs. 2024 Director Compensation In late 2023, as a result of its annual review of non-employee director compensation, the Board increased the annual director retainer, the annual Lead Director retainer, and the value of the annual restricted stock award effective January 1, 2024, to more closely align with the competitive peer company data. In 2024, the annual director retainer fee will increase to $125,000, the annual Lead Director retainer fee will increase to $45,000, and the value of the annual restricted stock award will increase to $120,000. Directors’ Deferred Compensation Plan The Directors’ Deferred Compensation Plan (the “DDCP”) is an unfunded, nonqualified, deferred compensation plan under which each non-employee director may elect to defer compensation received as a director until he or she ceases to serve as a director. Non-employeePrior to the start of each year, non-employee directors may make an irrevocable, annual advance irrevocable election to defer compensation for services to be rendered the following year. Compensation that may be deferred isincludes: (i) all or a portion of cash compensation for service as a director, including retainer and “event”event fees andand/or (ii) the annual restricted stock award for service as a director. If a director elects to defer the annual restricted stock award, the value of the award is first converted to an unvested deferred cash equivalent amount in the director's Eastman phantom stock account of the DDCP, which is subject to forfeiture until it vests, if the director is still serving as a director immediately prior to the election of directors at the next annual meeting of stockholders, after which it remains deferred until the end of service as a director. In addition, $60,000 of each non-employee director receives a non-elective director's annual deferral of $60,000 thatcash retainer is initiallyautomatically deferred into the director’s Eastman phantom stock account of the DDCP. Directors may elect to credit deferred compensation accounts in the DDCP to individual hypothetical investment alternatives, including Eastman phantom stock. Upon completion of service as a director, the value of the director’s DDCP account is paid, in cash, in a single lump sum or in up to ten annual installments as elected in advance by the director. For 2022,2023, there were no preferential or above-market earnings on amounts in individual hypothetical investment accounts (defined as appreciation in value and dividend equivalents earned at a rate higher than appreciation in value and dividends on the underlying common stock or interest on amounts deferred at a rate exceeding 120% of the federal long-term rate). Eastman does not have a director pension plan. 42 2023 Proxy Statement
Director Compensation Table Director Compensation Table
The following table provides information concerning compensation paid to the Company’s non-employee directors for 2022.2023. The only director who is an employee of the Company (Mr. Costa)Costa, our CEO) received no additional compensation for his service on the Board. | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | All Other Compensation ($)(3) | Total
($) | | | | | | | | | | | | | | | Humberto P. Alfonso Audit Committee Chair | $145,000 | | $110,061 | | $60,000 | | $315,061 | | | | | | | | | | | | | | | | Brett D. Begemann Lead Independent Director | $156,667 | | $110,061 | | $60,000 | | $326,728 | | | | | | | | | | | | | | | | Eric L. Butler | $123,000 | | $110,061 | | $60,000 | | $293,061 | | | | | | | | | | | | | | |
| Edward L. Doheny II | $120,000 | | $110,061 | | $60,000 | | $290,061 | | | | | | | | | | | | | | | | Linnie M. Haynesworth | $111,729 | | $120,073 | | $54,365 | | $286,167 | | | | | | | | | | | | | |
| Julie F. Holder Nominating and Corporate Governance Committee Chair | $146,500 | | $110,061 | | $60,000 | | $316,561 | | | | | | | | | | | | | | | | Renée J. Hornbaker Finance Committee Chair | $141,000 | | $110,061 | | $60,000 | | $311,061 | | | | | | | | | | | | | | |
| Kim A. Mink Environmental, Safety and Sustainability Committee Chair | $131,500 | | $110,061 | | $60,000 | | $301,561 | | | | | | | | | | | | | | |
| James J. O’Brien Compensation and Management Development Committee Chair | $140,834 | | $110,061 | | $60,000 | | $310,895 | | | | | | | | | | | | | | |
| David W. Raisbeck | $140,000 | | $110,061 | | $60,000 | | $310,061 | | | | | | | | | | | | | | |
| Charles K. Stevens III | $120,000 | | $110,061 | | $60,000 | | $290,061 | | | | | | | |
(1)Compensation in this column consists of director retainer fees and, where applicable, Lead Director or Committee Chair retainer fees, as well as event fees paid in 2023 to Mr. Butler ($3,000), Ms. Haynesworth joined($3,000), Ms. Holder ($9,000), Ms. Hornbaker ($6,000), and Dr. Mink ($1,500).
(2)Represents the Eastmangrant date fair value, computed in accordance with the Financial Accounting Standards Board on February 3,(“FASB”) Accounting Standards Codification (“ASC”) Topic 718 (Stock Compensation). See note 18 to the Company’s consolidated financial statements in the Annual Report to Stockholders for 2023, mailed and is thereforedelivered electronically with this proxy statement, for a description of the assumptions made in the valuation of stock awards under FASB ASC Topic 718. Messrs. Alfonso, Begemann, and Doheny and Ms. Hornbaker, and Dr. Mink each elected to receive the annual restricted stock award as deferred phantom stock units pursuant to the DDCP. Ms. Haynesworth held 1,507 restricted shares, and Messrs. Butler, O’Brien, Raisbeck and Stevens and Ms. Holder each held 1,396 restricted shares as of December 31, 2023. Ms. Hornbaker, Dr. Mink and Messrs. Alfonso, Begemann, and Doheny, each held 1,396 unvested phantom stock units received in lieu of the annual restricted stock award. (3)Amount of annual retainer not included in the table below.Director Compensation“Fees Earned or Paid in Cash” column that was automatically deferred into the director’s Eastman phantom stock investment account of the DDCP. The value of non-employee director perquisites and personal benefits that have an incremental cost to the Company (personal liability insurance and Company-provided insurance for Year Ended December 31, 2022non-employee director travel) are not reported for 2023 since the total amount per individual was less than $10,000.
| | | | | | | | | | | | | | | | | | | | | | | | Name | | Fees
Earned or
Paid in
Cash
($)(1) | | | Stock
Awards
($)(2) | | | All Other
Compensation
($)(3) | | Total($) | | | | | | |  | | Humberto P. Alfonso | | $ | 145,000 | | | $ | 110,002 | | | $60,000 | | $315,002 | | | | | | |  | | Brett D. Begemann | | | 140,000 | | | | 110,002 | | | 60,000 | | 310,002 | | | | | | |  | | Eric L. Butler (4) | | | 48,913 | | | | 10,037 | | | 24,457 | | 83,407 | | | | | | |  | | Edward L. Doheny II | | | 120,000 | | | | 110,002 | | | 60,000 | | 290,002 | | | | | | |  | | Julie F. Holder | | | 139,500 | | | | 110,002 | | | 60,000 | | 309,502 | | | | | | |  | | Renée J. Hornbaker | | | 144,000 | | | | 110,002 | | | 60,000 | | 314,002 | | | | | | |  | | Kim A. Mink | | | 120,000 | | | | 110,002 | | | 60,000 | | 290,002 | | | | | | |  | | James J. O’Brien | | | 135,000 | | | | 110,002 | | | 60,000 | | 305,002 | | | | | | |  | | David W. Raisbeck | | | 160,000 | | | | 110,002 | | | 60,000 | | 330,002 | | | | | | |  | | Charles K. Stevens III | | | 120,000 | | | | 110,002 | | | 60,000 | | 290,002 |
| 1) | | | | | | | | | 44 | Compensation in this column consists of director retainer fees and, where applicable, Lead Director or Committee Chair retainer fees as well as event fees paid in 2022 to Ms. Holder ($4,500) and Ms. Hornbaker ($9,000).
2024 Proxy Statement | |
| 2) | | | | | | | | | | | ITEM 2 Ratification of Appointment of Independent Registered Public Accounting Firm | | Represents
| | | | | | The Audit Committee of the grant date fair value, computed in accordance with Financial Accounting Standards Board has appointed PricewaterhouseCoopers LLP (“FASB”PwC”) Accounting Standards Codification (“ASC”) Topic 718 (Stock Compensation). See note 18 to serve as the Company’s consolidated financial statementsindependent registered public accounting firm for the year ending December 31, 2024. In making this appointment, the Audit Committee has determined that the retention of PwC continues to be in the Annual Report to Stockholders for 2022, mailedbest interests of Eastman and delivered electronicallyits stockholders. PwC has served as the Company’s independent auditor since 1993. The Audit Committee believes PwC’s tenure as the Company’s independent registered public accounting firm has provided the firm with this proxy statement, for a descriptiondeep understanding of the assumptions madeCompany's business. PwC's tenure and knowledge of the Company's business has served to enhance the audit processes and overall audit quality, which are aided by: •Robust auditor independence controls; •Deep Company and industry knowledge; and •Annual evaluation of independence, performance, and qualifications. The stockholders are being asked to ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2024. If the stockholders fail to ratify this appointment, the Audit Committee may, but is not required to, reconsider whether to retain that firm. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different accounting firm at any time during the year if it determines that such a change would be in the valuationbest interests of stock awards under FASB ASC Topic 718.the Company and its stockholders. A representative of PwC is expected to attend the Annual Meeting and will have the opportunity to make a statement on behalf of the firm if he desires to do so. The representative is also expected to be available to respond to appropriate questions from stockholders. |
| | | | | | | Messrs. Alfonso, Begemann, Doheny, and O’Brien and Ms. Hornbaker, and Dr. Mink each elected to receive
The Board of Directors recommends that you vote “FOR” ratification of the annual restricted stock awardappointment of PricewaterhouseCoopers LLP as deferred phantom stock units pursuant toEastman’s independent registered public accounting firm for the DDCP. |
| Mr. Butler held 107 restricted shares and Messrs. Raisbeck and Stevens and Ms. Holder each held 1,041 restricted shares atyear ending December 31, 2022. Ms. Hornbaker, Dr. Mink and Messrs. Alfonso, Begemann, Doheny, and O’Brien, each held 1,041 unvested phantom stock units received in lieu2024.
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| | | Item 2 Ratification of the annual restricted stock award.appointment of independent registered public accounting firm |
3) | Amount of annual retainer not included in “Fees Earned or Paid in Cash” column that was automatically deferred into the director’s Eastman phantom stock investment account of the DDCP. The value of non-employee director perquisites and personal benefits that have an incremental cost to the Company (personal liability insurance and Company-provided insurance for non-employee director travel) are not reported for 2022 since the total amount per individual was less than $10,000.
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4) | Mr. Butler became a director in August 2022 and certain of his compensation was prorated for the time of service.
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2023 Proxy Statement 43
ITEM 2 — RatificationIndependence of AppointmentPricewaterhouseCoopers LLP
To ensure continued auditor independence, the Audit Committee considered factors that continue to support PwC’s independence, such as oversight by the Public Company Accounting Oversight Board (“PCAOB”) through audit, quality, ethics, and independence standards and audit inspections, and PCAOB requirements for audit partner rotation. Under the auditor independence rules, PwC reviews its independence each year and delivers to the Audit Committee a letter addressing matters prescribed under those rules. Regular rotation of Independent Registered Public Accounting Firm
primary engagement partner In accordance with applicable rules on partner rotation, PwC’s lead partner for our audit was changed in 2021, while PwC’s engagement quality review partner for our audit was most recently changed in 2023. The Audit Committee is involved in considering the selection of the Board has appointed PricewaterhouseCoopers LLP to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2023.PricewaterhouseCoopers LLP alsoPwC’s primary engagement partner when there is a rotation, which typically occurs every five years.
PwC served as the Company’s independent registered public accounting firm for the years ended December 31, 20212022 and 2022,2023, and has billed the Company the following amounts for fees and related expenses for professional services rendered during 20212022 and 2022: | | | | | | | | | | | (IN THOUSANDS) | | For the Year
Ended
December 31, 2021 | | For the Year
Ended
December 31, 2022 | Audit Fees and Expenses(1) | | | $ | 5,540 | | | | $ | 5,455 | | Audit-Related Fees and Expenses(2) | | | | 3,100 | | | | | 95 | | Tax Fees and Expenses(3) | | | | 4,554 | | | | | 3,808 | | All Other Fees and Expenses(4) | | | | 5 | | | | | 195 | | Total | | | $ | 13,199 | | | | $ | 9,553 | |
(1) | Audit fees and expenses represent fees and expenses for professional services rendered for the audits of the consolidated financial statements of the Company (including the audit of internal controls over financial reporting) and review of financial statements included in quarterly reports, statutory and subsidiary audits, issuance of comfort letters, and assistance with review of documents filed with the SEC.
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(2) | Audit-related fees and expenses consist primarily of assurance and related services, including audit and related procedures for possible mergers, acquisitions, and divestitures, and consultations concerning application of and compliance with financial accounting and reporting standards. In addition, certain of the Company’s employee benefit plans were billed for fees and related expenses of $65,000 for audits of their plan financial statements by PricewaterhouseCoopers LLP during 2021 and 2022. The decrease in fees in 2022 from 2021 was primarily due to audit-related services provided in relation to the divestitures of the Company’s tire additives business, and adhesives resins business, which services were incurred in 2021.
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(3) | Tax fees and expenses consist primarily of services related to domestic and international tax planning, tax compliance, including preparation of tax returns and claims for refunds, tax advice, assistance with respect to tax audits, and requests for rulings for technical advice from tax authorities.
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(4) | All other fees and expenses principally include ESG attestation services, research tools and software access licenses.
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2023: | | | | | | | | | | | | | | | | (IN THOUSANDS) | For the
Year Ended
December 31, 2022 | For the
Year Ended
December 31, 2023 | Audit Fees and Expenses(1) | | $ | 5,455 | | | $ | 5,599 | | Audit-Related Fees and Expenses(2) | | 95 | | | 85 | | Tax Fees and Expenses(3) | | 3,808 | | | 2,231 | | All Other Fees and Expenses(4) | | 195 | | | 270 | | | Total | | $ | 9,553 | | | $ | 8,185 | |
(1)Audit fees and expenses represent fees and expenses for professional services rendered for the audits of the consolidated financial statements of the Company (including the audit of internal controls over financial reporting), review of financial statements included in quarterly reports, statutory and subsidiary audits, issuance of comfort letters, and assistance with review of documents filed with the SEC. (2)Audit-related fees and expenses consist primarily of assurance and related services, including audit and related procedures for possible mergers, acquisitions, and divestitures, and consultations concerning application of and compliance with financial accounting and reporting standards. In addition, certain of the Company’s employee benefit plans were billed for fees and related expenses of $65,000 for audits of their plan financial statements by PricewaterhouseCoopers LLP during 2022 and 2023. (3)Tax fees and expenses consist primarily of services related to domestic and international tax planning, tax compliance, including preparation of tax returns and claims for refunds, tax advice, assistance with respect to tax audits, and requests for rulings for technical advice from tax authorities. (4)All other fees and expenses principally include ESG attestation services, research tools and software access licenses. As described below under “Committee Reports —“Report of the Audit Committee, Report” earlier in this proxy statement, all audit and non-audit services provided to the Company by PricewaterhouseCoopers LLP were pre-approved by the Audit Committee or by the Chair of the Audit Committee pursuant to delegated authority.
| | | | Item 2 Ratification of appointment of independent registered public accounting firm |
Report of the Audit Committee On behalf of the Board, the Audit Committee oversees the Company’s financial reporting process and its internal control over financial reporting and related disclosure controls and procedures, areas for which management has the primary responsibility. The independent registered public accounting firm is responsible for expressing an opinion on the conformity of the Company’s audited financial statements with accounting principles generally accepted in the United States and for issuing its report on the Company’s internal control over financial reporting. All audit and non-audit services provided to the Company by the independent registered public accounting firm are pre-approved by the Audit Committee or by the Chair of the Audit Committee pursuant to delegated authority, and the Audit Committee considers the compatibility of such non-audit services with the accounting firm’s independence. At the beginning of the year, the Audit Committee reviewed and approved all known audit and non-audit services and fees to be provided by and paid to PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm. During the year, specific audit and non-audit services or fees not previously approved by the Audit Committee were approved in advance by the Audit Committee or by the Chair of the Audit Committee pursuant to delegated authority. The Audit Committee evaluates the performance of the independent registered public accounting firm, including the senior audit engagement team, each year and determines whether to reengage the current independent registered public accounting firm or consider other independent registered public accounting firms. In doing so, the Audit Committee considers the quality and efficiency of the services provided by the firm, the firm’s global capabilities, and the firm’s technical expertise, tenure as the Company’s independent registered public accounting firm, and knowledge of the Company’s global operations and industry. Based on this evaluation, the Audit Committee decided to retain PricewaterhouseCoopers LLP to serve as independent registered public accounting firm for the year ending December 31, 2024. Although the Audit Committee has the sole authority to appoint the independent registered public accounting firm, the Audit Committee has continued its long-standing practice of recommending that the Board ask stockholders are being asked to ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP. If the stockholders fail to ratify this appointment,independent registered public accounting firm at the Annual Meeting (see “Item 2 — Ratification of Appointment of Independent Registered Public Accounting Firm”). The Audit Committee had nine meetings during 2023, five of which were regular meetings that included separate private (or “executive”) sessions of the Audit Committee may, but is not required to, reconsider whether to retain that firm. Even ifwith the appointment is ratified,Company’s independent registered public accounting firm and with Company management, including the Director of Corporate Audit Services, the Chief Legal Officer, the Chief Financial Officer, the Chief Accounting Officer and Corporate Controller, the Director of Global Business Conduct, the Chief Information Officer, and other financial and legal management employees. These executive sessions included discussion of specific financial management, legal, accounting, auditing, internal controls and disclosure controls, corporate compliance, and risk management matters. As part of its oversight of the Company’s risk management process, the Audit Committee reviewed and discussed management’s risk assessment and risk management program, including individual areas of risk and the overall risk management process. See “Risk Oversight” earlierin its discretion may directthis proxy statement. The Audit Committee also met with the appointmentChief Legal Officer and the Director of Global Business Conduct to discuss the effectiveness of the Company’s compliance program and received regular corporate compliance program status reports and updates. Four of the Audit Committee’s meetings included a differentreview of the Company’s planned public disclosures of quarterly financial results. These meetings included review with management and the independent registered public accounting firm at any time duringof the financial statements and management’s discussion and analysis of financial condition and results of operations disclosures in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filings prior to filing with the SEC and of matters relating to the Company’s internal control over financial reporting and disclosure controls and procedures for such filings. Numerous other informal meetings and communications among the Chair of the Audit Committee, various Audit Committee members, PricewaterhouseCoopers LLP, the Director of Corporate Audit Services, the Chief Information Officer, and other members of the Company’s management also occurred. The agenda for each of the Audit Committee’s meetings is established by the Chair of the Audit Committee. Throughout the year, if it determines that such a change would bethe Audit Committee reviewed with the Company’s financial management, PricewaterhouseCoopers LLP, and the Director of Corporate Audit Services the overall audit scope and plans, the results of internal and external audit examinations, evaluations by management and the independent registered public accounting firm of the Company’s internal controls over financial reporting, and the quality of the Company’s financial reporting.
| | | | Item 2 Ratification of appointment of independent registered public accounting firm |
Management has reviewed and discussed with the Audit Committee the audited financial statements and related disclosures in the best interestsCompany’s Annual Report on Form 10-K for the year ended December 31, 2023. This review and discussion included the quality of accounting principles, the reasonableness of the significant accounting judgments and estimates, the clarity of disclosures in and concerning the financial statements, and the internal controls and disclosure controls and procedures that support management’s accounting and disclosure judgments and the certifications of the Chief Executive Officer and the Chief Financial Officer that the financial statements of the Company fairly present, in all material respects, the financial condition, results of operations, and cash flows of the Company. In its meetings with representatives of PricewaterhouseCoopers LLP, the Audit Committee asked them to address, and discussed their responses to, questions relevant to the Audit Committee’s oversight. These discussions included significant accounting judgments or estimates made by management in preparing the financial statements, fair presentation to investors in the financial statements of the Company’s financial position and performance in accordance with generally accepted accounting principles and SEC disclosure requirements, and implementation of internal controls and internal audit procedures that are appropriate for the Company. The Audit Committee also discussed with PricewaterhouseCoopers LLP the matters required to be discussed by the standards of the Public Company Accounting Oversight Board (the “PCAOB”). The Audit Committee has received from PricewaterhouseCoopers LLP the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and discussed with them their independence from the Company and its stockholders.A representativemanagement. In addition, the Audit Committee has received written materials addressing PricewaterhouseCoopers LLP's internal quality control procedures.
In reliance on these reviews and discussions and the reports of PricewaterhouseCoopers LLP, is expectedthe Audit Committee has recommended to attend the Board, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, Annual Meeting and will havefiled with the opportunity to make a statement on behalf of the firm if he desires to do so. The representative is also expected to be available to respond to appropriate questions from stockholders.SEC. Audit Committee Humberto P. Alfonso (Chair) Eric L. Butler Edward L. Doheny II Linnie M. Haynesworth Kim Ann Mink Charles K. Stevens III
| | | | | | | | | | | | ITEM 3 Advisory Approval of Executive Compensation | | | | | | | | The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) provides stockholders with the right to vote to approve, on an advisory (nonbinding) basis, the compensation of the Company’s NEOs as disclosed pursuant to the compensation disclosure rules of the SEC. This advisory vote is commonly referred to as the “say-on-pay” vote. In the Company’s advisory say-on-pay vote at the 2023 Annual Meeting of Stockholders, 91.8% of votes cast were “for” approval of the executive compensation. The Compensation Committee considers the outcome of this vote in its establishment and oversight of the compensation of the executive officers, as further discussed in “Executive Compensation — Compensation Discussion and Analysis.” The Compensation Committee also considers input from investors as it designs and makes decisions with respect to the Company's executive compensation programs as described in “Executive Compensation — Compensation Discussion and Analysis —Investor Engagement and Say-on-Pay Vote Results.” The Company’s strategy for business and financial growth from sustainable innovation, market engagement, and differentiated technologies and applications development leverages the capabilities of our employees to innovate and execute our growth strategy while remaining committed to maintaining a strong financial position with appropriate financial flexibility and liquidity. Our pay-for-performance compensation philosophy supports this strategy by stressing the importance of corporate and individual performance (i) in meeting strategic and business goals for growth, (ii) creating value through innovation, and (iii) driving financial strength and flexibility, while remaining able to meet changing employee, business, and market conditions. Our executive compensation program is designed to attract and retain a talented and creative team of executives who will provide disciplined leadership for the Company’s success in dynamic, competitive markets. The Company seeks to accomplish this by motivating executives with an appropriate mix of compensation elements to drive value for all stakeholders. Please read the “Executive Compensation — Compensation Discussion and Analysis” section of this proxy statement for additional details about our executive compensation philosophy and programs, including information about the compensation of our NEOs for 2023, as detailed in the tables and narrative. The say-on-pay vote gives stockholders the opportunity to indicate their views on the compensation of our NEOs. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, objectives, and practices described in this proxy statement. Stockholders are being asked to approve the compensation of the NEOs as disclosed in the “Executive Compensation” section of this proxy statement, including the Compensation Discussion and Analysis, compensation tables, and related narrative disclosure. Because this vote is advisory, it will not be binding on the Compensation and Management Development Committee (the “Compensation Committee”), the Board, or the Company. However, the Compensation Committee and the Board value the opinions of the Company’s stockholders, and the Compensation Committee will consider the outcome of the vote in its establishment and oversight of the compensation of the executive officers. | | | | | | | | 
| | | The Board of Directors recommends that you vote “FOR” ratification“FOR” the advisory approval of the appointmentcompensation of PricewaterhouseCoopers LLPthe Company’s named executive officers as Eastman’s independent registered public accounting firm.disclosed in this proxy statement. | | | | |
44 2023 Proxy Statement
TABLE OF CONTENTSTABLE OF CONTENTS
Compensation Discussion and Analysis 2023 Proxy Statement 45
EXECUTIVE COMPENSATION
This Compensation Discussion and Analysis This “Compensation Discussion and Analysis” (“CD&A”) provides context for the executive compensation information detailed in the tables and narrative in the following sections of this proxy statement. The Compensation and Management Development Committee (the “Compensation Committee”) establishes and oversees the administration of the policies, programs, and procedures for evaluating, developing, and compensating our senior management, and determines the components, structure, forms, terms, and amounts of the compensation of our executive officers. What follows is a summary of compensation philosophy and objectives for executive officers, the relationship of corporate performance to executive compensation, and the basis for the compensation of executive officers. This CD&A provides compensation information for our named executive officers (“NEO”NEOs”), including our Chief Executive Officer (“CEO”), Mark J. Costa, our Chief Financial Officer (“CFO”), William T. McLain, Jr. and the three other most highly compensated executive officers who were serving as executive officers on December 31, 2022, Brad A. Lich, Stephen G. Crawford and Perry Stuckey III. Mr. Stuckey separated from the Company without cause effective January 1, 2023, pursuant to an involuntary separation agreement. For a discussion of the payments received by Mr. Stuckey under this agreement, see the “Summary Compensation Table.”
listed below. | | | | | | | | | | | | | | | | | Name | | Years of
Credited Service | | Position | | | | | | 
| | | | Mark J. Costa | | 1718 | | Chief Executive Officer | | | | | | 
| | | | William T. McLain, Jr. | 23 | 22 | | SeniorExecutive Vice President and Chief Financial Officer | | | | | | 
| | | | Brad A. Lich | | 2122 | | Executive Vice President and Chief Commercial Officer | | | | | | 
| | | | Stephen G. Crawford | | 3940 | | Executive Vice President, Manufacturing and Chief Sustainability Officer | | | | | | 
| | | | B. Travis Smith | Perry Stuckey III31 | | 12 | | Former Senior Vice President, Chief Human Resources Officer |
46 2023 Proxy Statement Additives & Functional Products
Executive Compensation — Compensation Discussion and Analysis
EXECUTIVE SUMMARY
In 2022, the Company faced a number of unique challenges - particularly in the second half of the year. The first and second quarter results reflected strong end-market demand and the ability to offset raw material increases through aggressive pricing actions. However, our volume growth was also limited by operational and supply chain disruptions, which prevented us from taking full advantage of the strong demand environment. As we moved into the second half of the year, significant inflationary pressures, and rising interest rates resulted in weakening economic conditions and softening demand. In the fourth quarter, demand across markets and regions slowed and customer destocking became more broad-based and severe, causing a significant decline in volume. A strong U.S. dollar was also a substantial headwind throughout the year.
Despite the significant challenges in the fourth quarter and throughout the year, the Company’s strong pricing efforts, progress on innovation-driven growth, operational processes and safety, and continued focus on cost management are expected to help position Eastman for growth going forward. During the year, we made significant progress on our circular platform highlighted by our plans to build three world-scale, material-to-material molecular recycling facilities. The first of these plants is located at our global headquarters in Kingsport, Tennessee where we expect to begin commissioning and start-up activities by summer 2023. In 2022, we announced plans to invest in a second molecular recycling facility in Normandy, France that will use Eastman’s polyester renewal technology to recycle up to 110,000 metric tons annually of hard-to-recycle plastic waste. We also reached a definitive supply agreement in 2022 for a planned third molecular recycling facility, which will be located in the United States. The advancement of these three projects reinforces our commitment towards making a significant contribution to the plastic waste and climate crises.
For 2022, Eastman’s sales revenue increased 1% to $10.58 billion, earnings before interest and taxes (“EBIT”) decreased nearly 10% to $1.16 billion and adjusted EBIT decreased 18% to $1.34 billion. The Company generated operating cash flow (“OCF”) of $975 million in 2022, and returned approximately $1.4 billion to stockholders through share repurchases and dividends. In addition, the Company’s innovation and market development platform enabled the Company to close more than $550 million of new business in 2022. Looking ahead, we believe the Company is well-positioned to capitalize on its growth strategy, as we expect the momentum from our innovation programs to further accelerate as leading brands continue to adopt our sustainable product offerings. See Annex A of this proxy statement for reconciliation of financial measures under accounting principles generally accepted in the United States (“GAAP”) to non-GAAP financial measures, description of excluded items, and related information.
As with past years, the Compensation Committee designed and implemented incentive compensation programs that support the Company’s long-term growth strategy and align payouts with Company performance. The Compensation Committee’s payout decisions with respect to the 2022 annual cash incentive compensation program and the 2020-2022 performance share awards, as detailed in the following pages, reflect a strong alignment between pay and performance.
Table of Contents
Executive Summary 2023 Highlights | | | | | | | | | | | | | | | | | | In 2023, the Company placed an emphasis on improving operating cash flow, operating processes and safety performance, cost management, as well as the completion and start-up of our new molecular recycling facility in Kingsport, Tennessee. For 2023, Eastman generated revenue of $9.2 billion, earnings before interest and taxes (“EBIT”) of $1.3 billion, adjusted EBIT of approximately $1.1 billion, and operating cash flow (“OCF”) of approximately $1.4 billion. The Company returned approximately $525 million to stockholders through dividends and share repurchases in 2023. In addition, the Company’s innovation and market development platform enabled the Company to close more than $600 million of new business in 2023. In addition to the new molecular recycling facility in Kingsport, Tennessee, the Company continues to make progress on two additional material-to-material molecular recycling facilities. A planned second molecular recycling facility in Normandy, France is expected to use Eastman’s polyester renewal technology to recycle up to 110,000 metric tons annually of hard-to-recycle plastic waste. The Company is also planning to build a third molecular recycling facility, which will be located in the United States. The advancement of these three projects reinforces our commitment towards making a significant contribution to the plastic waste and climate crises. | | | | | | | | | | | | Generated operating cash flow of approximately $1.4 billion in 2023 | | | | | | | | | | | | | | | | | | | | | | | | | Returned approximately $525 million to stockholders through dividends and share repurchases. | | | | | | | | | | | | | | | | | | | | | | | | | Reduced costs by approximately $200 million | | | | | | | | | | | | | | | Completed construction of groundbreaking methanolysis facility in Kingsport, Tennessee that is the centerpiece of the Company's innovative molecular recycling solution that builds on our strategy to enable a circular economy. | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Strong Pay and Performance Alignment | | The Compensation Committee believes that a significant portion of our executives’ total compensation should be “at risk” and performance-based. Consistent with this pay-for-performance philosophy and compensation program design, 100% of the incentive compensation approved by the Compensation Committee for the NEOs was performance-based and at-at-risk.risk. At-risk, performance-based compensation is only earned if the threshold level of targeted business and individual performance is met. The Compensation Committee believes it is also important to establish an appropriate balance between the short-term and long-term focus of executives, and in the types of performance incented and risks encouraged, as well as to align their interests with those of stockholders, by providing a meaningful portion of their compensation in the form of equity-based pay.
| | | | | | | | | | | | |
2023 Proxy Statement 47
2023 CEO Earned or Accrued Compensation — Compensation Discussion and AnalysisReflecting
We have included the Company’s strong pay for performance structure,tabular disclosure below to provide additional transparency around the compensation earned by, or accrued by the CEO in 2023, and the important distinctions from the disclosures required in the “Summary Compensation Table.” The difference in values for total compensation is solely attributable to the different valuation methodologies for the 2023 Performance Share Awards and the 2023 Option Grant. The 2023 CEO and other NEOs for 2022 was negatively impacted by: (i)Earned or Accrued Pay is designed to reflect the value of the 2023 Performance Shares based on performance against the financial targets set under the 2022 annual incentive compensation program;to-date and (ii) year-end stock price, and the Option Grant is designed to show the difference between the exercise price and stock price as of year-end. The “Summary Compensation Table” reflects values for the 2023 Performance Share Awards and Option Grant based on accounting and actuarial financial models to estimate the estimated worthgrant date fair value of the performance share awards and stock options granted in February 2022.awards. The table below shows the compensation earned by or accrued for the CEO for 2022,2023, and the estimated worth of the performance shares and stock options granted in 20222023, based on the differences between the grant date price and the stock price as of year-end. | | | | | | | | | | | | | | | | | | 2022 CEO Earned or Accrued Pay1 | | Summary Compensation Table | | | | | Actual Base Salary Paid | | | $ | 1,331,575 | | | | $ | 1,331,575 | | | | | | Actual Non-Equity Incentive Plan Paid | | | $ | 0 | | | | $ | 0 | | | | | | 2022 Performance Share Awards2 | | | $ | 4,918,080 | | | | $ | 11,996,462 | | | | | | 2022 Option Grant2,3 | | | $ | 0 | | | | $ | 2,825,667 | | | | | | Change in Pension Value and Nonqualified Deferred Compensation Earnings | | | $ | 305,653 | | | | $ | 305,653 | | | | | | All Other Compensation | | | $ | 608,774 | | | | $ | 608,774 | | | | | | Total | | | $ | 7,164,082 | | | | $ | 17,068,131 | |
1. Differences in Reported Pay The year-end share price was $89.82 and Earned or Accrued Pay.the grant date share price of the performance shares was $89.23 and the exercise price of the options was $83.84.
| | | | | | | | | | | | | | | | 2023 CEO Earned or Accrued Pay1 | Summary Compensation Table | | Actual Base Salary Paid | | $1,360,810 | | | $1,360,810 | | Actual Non-Equity Incentive Plan Paid | | $1,597,050 | | | $1,597,050 | 2023 Performance Share Awards2 | | $8,071,944 | | | $11,208,310 | 2023 Option Grant2,3 | | $682,426 | | | $2,472,937 | | Change in Pension Value and Nonqualified Deferred Compensation Earnings | | $543,510 | | | $543,510 | | All Other Compensation | | $415,273 | | | $415,273 | | Total | | $12,671,013 | | | $17,597,890 |
(1)The “Total” amount that is reported in the Summary“Summary Compensation TableTable” for the CEO (and each NEO) is a combination of actual amounts paid or earned for the year (base salary, annual incentive pay awards, Company contributions to defined contribution plans, and perquisites and personal benefits) and estimated values of appreciation, payouts, and payments in future years usingutilizing accounting and actuarial financial models to estimate possible future payments, all calculated in accordance with SEC rules. For the 20222023 CEO earned or accrued pay, (a) the amount listed for the 20222023 Performance Share Awards is the estimated worth of possible future payout of performance shares awarded in 2022,2023, as described in footnote 2, and (b) the amount listed for the 20222023 Option Grant is the difference in the per share option exercise price and the closing price on December 30, 2022,29, 2023, as described in footnote 3.2.
(2)The estimated worth of the 20222023 Performance Share Awards is based on target performance of such award through 20222023, and assuming a market value equal to the closing price of the Company’s common stock on the New York Stock Exchange on December 30, 2022,29, 2023, the last trading day of 2022,2023, which was $81.44.3. $89.82.
(3)The amount listed for the 20222023 Option Grant is the difference in the per share option exercise price, which is $120.80$83.84 per share, and the closing price of the Company’s common stock on the New York Stock Exchange on December 30, 2022,29, 2023, the last trading day of 2022,2023, which was $81.44. As such, Mr. Costa’s 2022 Option Grant is currently “underwater” (that is, the 2022 Option Grant has an exercise price above the market value of our shares).
48 2023 Proxy Statement $89.82.
| | | | | | | | | | | | | | | | | | | Salary | | Non-Equity Incentive Award | | Performance Shares | | Options | | Change in Pension value | | All Other Compensation |
Executive Compensation — Compensation Discussion and AnalysisEastman Compensation Objectives, Philosophy and Program Our Compensation Objectives. In designing the Company’s compensation program, the Compensation Committee’s primary objectives are to: attract and retain highly-qualified executives by providing incentive opportunities for the attainment of the Company’s strategic business objectives and to achieve superior performance;
provide appropriate short-term and long-term incentives to reward the attainment of short-term and long-term corporate and individual objectives consistent with corporate growth strategy and objectives;
ensure performance targets are appropriately challenging and properly aligned with business strategy and stockholder interests; and
maintain balance in the types of corporate and individual performance incented and the levels and types of risks managers are encouraged to evaluate and take.
Our Pay-for-Performance Compensation Philosophy. The Company’s strategy for growth from innovation, market development, and differentiated technologies leverages the capabilities of our employees while remaining committed to maintaining strong financial flexibility and liquidity to drive value for stakeholders. Our pay-for-performancepay-for-performance͏ compensation philosophy supports this strategy by stressing the importance of pay for: corporate and individual performance in meeting strategic and business goals for growth;
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Performance | | | Value Creation | | | Market Strength | | | | | | | | | | Corporate and individual performance in meeting strategic and business goals for growth | | Innovation that converts market complexity into sustainable value | | Financial strength and flexibility, while remaining able to meet changing employee, business, and market conditions |
innovative sustainable value creation; and
financial strength and flexibility, while remaining able to meet changing employee, business, and market conditions.
The Compensation Committee has designed the executive compensation program to provide a strong linkage between executive paycompensation and the Company's performance and each executive’sexecutive's individual performance using rigorous goal setting. Eastman recognizes employee contributions to business and financial performance through competitive total pay. For all employees, including executives, incentives and rewards are dependent on contributions to business objectives and successes. This includes: quantified
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Quantified
Performance | | | Inclusion and Diversity | | | Environment, Health and Safety | | | Stakeholder Interest | | | | | | | | | | | | | | | | | | | | | | | | Quantified corporate financial and business performance | | Eastman’s commitment to building and maintaining an inclusive and diverse workplace | | Promoting a strong culture of safety and sustainability | | Creating long-term value for all stakeholders | | | | | | | |
Pay for Performance Alignment As with past years, the Compensation Committee designed and business performance; Eastman’s commitmentimplemented incentive compensation programs that support the Company’s long-term growth strategy and align payouts with Company performance. The Compensation Committee’s payout decisions with respect to recruitingthe 2023 annual cash incentive compensation program and maintaining an inclusive and diverse workplace;
promotingthe 2021 - 2023 performance share awards, as detailed in the following pages, reflect a strong culture of safetyalignment between pay and sustainability; and
creating long-term value for all stakeholders.
As described below, our executive compensation program has been designed so that a significant portion of compensation isperformance based on performance measures that we believe are most relevant to our business strategyagainst established goals and significant to investors, including cumulative total shareholder return (“TSR”) and return on capital for multi-year periods, annual adjusted EBIT, OCF, and multi-year stockshare price appreciation.
Each year, the Compensation Committee, with the assistance of its independent compensation consultant, compares the relative mix of compensation components with those of peer benchmarking companies. The Compensation Committee does not have a fixed method for determining how the total mix of an executive officer’s total compensation should be allocated among these compensation components. Instead, the Compensation Committee uses a flexible approach to compensation to help us better achieve our business objectives from year to year and to attract and retain executive talent.
2023 Proxy Statement 49
change.
Executive Compensation — Compensation Discussion and Analysis
Compensation Best Practices Our compensation program incorporates the following practices and features: | | | | | | | | | | | | | | | | | | | | | What we do | | | | What we don’t do | | | | | | | What We Do | | | | |  | |  Oversight and decisions by a Compensation Committee comprised solely of independent directors with significant executive compensation and management experience who understand drivers of long-term corporate performance. | | | | | | | | Use an independent compensation consultant to the Compensation Committee with no conflicts of interest. | | | | | | | | Annual assessment by the Compensation Committee of potential risks associated with the compensation program. | | | | | | | | Benchmark executive pay and overall program design and use competitive peer company data in making decisions about all components of pay. | | | | | | | | Significant portion of pay based on corporate and individual performance. | | | | | | | | Robust stock ownership expectations. | | | | | | | | Executive pay recoupment (or “clawback”) policy. | | | | | | | | “Double“Double trigger” change-in-control vesting of outstanding stock-based pay awards.
| | | | | | | | Regular dialogue with investors and proxy advisory firms about executive pay program and practices. | | |
| | | | | | | What We Don’t Do | | | | | |  | | Target a specific percentile of competitive peer company pay to set executive pay. | | | | | | | | Reprice or change performance targets for stock options or other long-term stock-based incentive awards after those awards are granted. | | granted without stockholder approval. | | | | | | Include value of equity awards in pension benefit calculations. | | | | | Allow pledging or hedging of Company stock by our executive officers. | | | | | | | | “Gross-up”“Gross-up” taxes for any imputed income on limited executive perquisites.
| | | | | | | | “Gross-up”“Gross-up” tax payments, or accelerate equity vesting without termination following change-in-control, under limited change-in-control severance arrangements.
| | | | | | | |
Investor Engagement and Say-on-Pay Vote Results Eastman has a history of actively engaging with our stockholders. We believe that strong corporate governance should include engagement with our stockholders. We solicit feedback on our corporate governance, executive compensation programs, disclosure practices, and environmental and social impact programs and goals. Investor feedback is shared with our Compensation Committee.
As described in “Item 3 — Advisory Approval of Executive Compensation”, at the 2023 Annual Meeting stockholders will again have the opportunity to indicate their views on the compensation of our named executive officers by an advisory “say-on-pay” vote. At the Company’s 2022 Annual Meeting, 92.4% of the votes cast on the say-on-pay proposal were voted in favor of the proposal. The Compensation Committee considered this vote result as general approval of the Company’s approach to executive compensation. In 2022, the Company continued its practice
| | | | | | Eastman has a history of actively engaging with our stockholders. We believe that strong corporate governance should include consistent dialogue with investors. We solicit feedback on our corporate governance, executive compensation programs, disclosure practices, and environmental and social impact programs and goals. Investor feedback is shared with our Compensation Committee. As described in “Item 3 — Advisory Approval of Executive Compensation”, at the 2024 Annual Meeting, stockholders will again have the opportunity to indicate their views on the compensation of our NEOs by an advisory “say-on-pay” vote. At the Company’s 2023 Annual Meeting of Stockholders, 91.8% of the votes cast on the say-on-pay proposal were voted in favor of the proposal. The Compensation Committee considered the annual say-on-pay vote in its subsequent compensation design decisions. During our investor engagement in 2023, we received limited communications of concerns related to our current executive compensation program and practices. After considering the result of the say-on-pay vote and subsequent investor engagement meeting with multiple investors and received very limited communications, of concerns with current executive compensation program and practices. Accordingly, the Compensation Committee did not make any significant changes in the structure of the Company’s executive compensation program for 2022 as a result of the say-on-pay vote and subsequent investor communications.The Compensation Committee will continue to consider the results of future say-on-pay proposals and other investor input, and other appropriate executive compensation and corporate governance developments, when making compensation decisions for our executive officers.
50 2023 Proxy Statement
Executive Compensation — Compensation Discussion and Analysis
Analysis of Executive Compensation Risk
The balance of short-term and long-term compensation as tools to drive individual behaviors and risk management is carefully considered in the design and administration of the Company’s overall employee compensation programs. While a significant portion of our executive compensation is performance-based, we do not believe that our philosophy or objectives encourage excessive risk-taking. The Compensation Committee has focused our management compensation program on aligning compensation with the long-term interests of Eastman and its stockholders, and has designed the elements of our executive compensation program to discourage management decisions that could pose inappropriate long-term risks to the Company and its stockholders.
The compensation of our executive officers is not overly-weighted toward short-term incentives. For instance, our CEO’s and the other NEOs’ target annual cash compensation opportunities for 2022, as a percentage of total annual target compensation, ranged from 18% for the CEO to an average of 30% for all other NEOs. Annual cash incentive pay awards are capped at 200% of an executive’s target award opportunity to protect against disproportionately large short-term incentives, and the Compensation Committee has broad discretion in determining the amount of the variable cash payout to each executive based upon individual performance and other factors, including whether an executive has caused Eastman to take excessive risk.
| • | | Our stock ownership expectations are for the CEO to hold Eastman stock and stock-equivalents having a value of at least five times base annual pay and for the other executive officers to hold Eastman stock and stock-equivalents having a value of at least two-and-one-half times their respective base annual pay. We also prohibit our executive officers from entering into arrangements designed to hedge their exposure to changes in the market pricestructure of Eastman stock or from pledging Eastman stock as security or collateralthe Company’s executive compensation program for loans or in margin brokerage accounts. See “Information about Stock Ownership — Stock Ownership2023.The Compensation Committee will continue to consider the results of Directorsfuture say-on-pay proposals and Executive Officers — Directorother investor input, and Executive Stock Ownership Expectations; No Hedging or Pledging of Company Stock”. These policies ensure that eachother appropriate executive will have a significant amount of personal wealth tied to the long-term performance of Eastman stockcompensation and that their interests will remain aligned with those ofcorporate governance developments, when making compensation decisions for our stockholders.executive officers.
| |
The largest portion of total target executive pay is long-term, stock-based incentive compensation that vests, if earned, over a period of years. The stock payout opportunity combined with a multi-year vesting period encourages our executives to focus on maximizing Eastman’s long-term performance. These awards are made annually, so executives will continue to have unvested awards that will provide value only if our business continues to be appropriately managed and performing over the long term.
A significant portion of executives’ long-term incentive compensation opportunities consist of performance share awards. Performance share award payouts are tied to how Eastman performs on certain metrics identified by the Compensation Committee as appropriately driving long-term stockholder value over a three-year period. This approach focuses management on sustaining the Company’s long-term performance. These awards also have overlapping performance periods, thereby discouraging excessive risk-taking in the near-term because such behavior could jeopardize the potential long-term payouts under other awards. To further ensure that there is not incentive for excessive risk-taking, the payout of these awards has been capped at 250% of target for each of the three-year performance periods.
The variety of corporate and individual performance evaluated by the Compensation Committee to determine various forms of long-term and short-term incentive pay (including EBIT, EPS, cash flow, OCF, return on capital, employee safety, and TSR relative to peer companies) is designed to minimize the risk that executives will focus excessive attention on a single area of performance or performance measure.
2023 Proxy Statement 51
Executive Compensation — Compensation Discussion and Analysis
| • | | Company policies and the plan under which our long-term stock-based incentive compensation awards are made require repayment of certain variable and incentive compensation amounts in the event of an accounting restatement due to material noncompliance by the Company with financial reporting requirements. See “Compensation Recoupment ‘Clawback’ Policy” below.
|
We believe that this combination of factors and features encourages our executives to manage our businesses and execute our strategy for growth in a prudent manner.
In 2022, Aon, the Compensation Committee’s independent compensation consultant, conducted a risk assessment of our compensation policies, programs, and practices, including executive compensation and broad-based compensation programs for all employees. Based on the results of Aon’s assessment, the Compensation Committee concluded that the Company’s compensation programs and practices are well aligned with corporate strategy, contain appropriate risk balancing and mitigation features, and are not structured in a way that should incent risk taking that is reasonably likely to have a material adverse effect on the Company.
Review of 2022 Executive Compensation
The Compensation Committee reviewed overall compensation of the Chief Executive Officer and the other executive officers and determined each component of executive compensation for 2022 as described below. As part of this review, the Compensation Committee:
reviewed the design, terms, and value of each type of compensation and benefit for each executive officer, including annual incentive pay opportunities and long-term stock-based compensation awards, perquisites and personal benefits, deferred accounts, and retirement plans and determined that the amounts, individually and in the aggregate, were appropriate and in line with external market and internal comparisons;
considered the estimated value of outstanding unvested, unexercised, and unrealized stock-based awards in its review of the types and values of each executive officer’s compensation; and
determined the design, terms, amount, and forms of compensation considering:
Company and individual performance;
compensation relative to that for similar positions in other companies;
the mix of short- and long-term compensation, and total compensation, relative to other Eastman executive officers and employees;
whether the features of each form of compensation are appropriately balanced in terms of the types of corporate and individual performance being incented, the levels and types of risk they encourage managers to evaluate and take, and whether the compensation encourages managers to take unnecessary risks;
background information and recommendations from the Company’s management compensation organization and from the independent compensation consultant engaged by the Compensation Committee; and
the recommendations of the Chief Executive Officer regarding pay for the other executive officers.
52 2023 Proxy Statement
Executive Compensation — Compensation Discussion and Analysis
Peer Group
The Compensation Committee believes that performance should be the primary basis on which compensation decisions are made. In December 2021, the Compensation Committee reviewed its compensation benchmarking peer group with assistance from Aon, and made no changes for 2022. The Compensation Committee used the following criteria in considering the compensation peer group (the “Peer Group”):
size, including revenue, operating income, total assets, market capitalization, and enterprise value;
global manufacturing focus;
similar innovation-driven strategies;
companies with which we compete for executive talent; and
companies with a similar global workforce.
For 2022, the Compensation Committee compared total annual cash compensation opportunity (base salary and target incentive pay opportunity) design, terms, and levels and the design, terms, value, and mix of long-term stock-based incentive pay opportunity levels for the Company’s executive officers with previous year compensation of those of the following companies:
| | | Air Products and Chemicals, Inc.
| | FMC Corporation
At the Eastman 2023 Annual Meeting of Stockholders, the annual say-on pay vote was approved by stockholders with a 91.8% vote in favor of the proposal. | | Ashland Global Holdings Inc.
| The Goodyear Tire and Rubber Company
| | Ball Corporation
| | Mosaic Company
| | | | | | | Celanese Corporation
| 2024 Proxy Statement | Parker-Hannifin Corporation
55 |
| | | Danaher Corporation
| | PPG Industries Inc.
| Dover Corporation
| | Sealed Air Corporation
| DuPont de Nemours
| | Rockwell Automation, Inc.
| Eaton Corporation Plc
| | The Sherwin-Williams Company
| Ecolab Inc.
| | Trane Technologies Plc
Executive compensation |
2023 Proxy Statement 53
Executive Compensation — Overview
Compensation Discussion and AnalysismixElements of our Executive Compensation
Primary Components of our Management Compensation Program and How Each Component Complements our Pay-for-Performance Philosophy and Objectives. Our management compensation program has three primary components — annual base salary, annual cash incentive compensation opportunity, and long-term stock-based incentive compensation opportunity. The Compensation Committee, with input from management and the Compensation Committee’s independent compensation consultant, designs, administers, and assesses the effectiveness of all executive compensation elements considering the market and our overall compensation philosophy and objectives. The Compensation Committee’s assessment includes review of the value of each element of pay and of total pay on a recognized and a realizable basis. The table below describes each principal element of executive pay, how the Compensation Committee determines the amount or size of such compensation, and the primary compensation objectives applicable to each type of pay.
| | | | | | | | | Component
| | Form
| | Vesting or
Performance Period
| | How Pay is Determined
| | Why We Pay Each
Component
| | | | | | Annual Base
Salary
| | Cash | | Ongoing | | Comparable pay for similar jobs at comparator companies
Scope of responsibilities
Work experience
Comparable pay of other Eastman executives and for other Eastman jobs
Individual performance
| | Recognize job responsibilities and contributions
Attract and retain executive talent
| | | | | | Annual
Incentive
Compensation
Opportunity
| | Cash | | 1 year | | Target awards are set as a percent of salary based on competitive data for similar jobs
Payouts based on business and individual performance compared to pre-set expectations and targets
| | Motivate attainment of short-term business objectives and individual performance commitments consistent with long-term strategic plans | | | | | | Long-Term
Incentive
Compensation
Opportunity
| | Equity-Stock Options,
Performance Shares, and
Restricted
Stock Units | | 3 years
(performance shares and restricted stock units performance period and options vesting period) and 10 years (options exercise period) | | Target awards are a targeted dollar value based on competitive data; individual awards based on business and individual performance, contribution, and long-term potential
Payouts and appreciation based on long-term capital returns and stock price appreciation
| | Motivate attainment of long-term corporate performance resulting in stock price appreciation
Encourage ownership mindset by aligning interests with stockholders
Attract and retain executive talent
|
54 2023 Proxy Statement
Executive Compensation — Compensation Discussion and Analysis
Compensation Mix
The Compensation Committee believes that our mix of executive compensation components strikes an appropriate balance between the short- and long-term incentives for performance and risk taking.risk-taking. Eastman believes this mix aligns the interests of executive officers with those of other stockholders. For 2022, 93%2023, 92% of total target CEO compensation and 84% of total target compensation of the other named executive officersNEOs was at-risk and dependent on corporate and individual performance and relative total stockholder return. 
| * | | | | | | CEO Pay mix | Target cash payment for 2022 corporate and individual performance.
Other NEOs Pay mix | | |
** | Grant date fair value of stock options granted in 2022. See Note 1 to the Summary Compensation Table below.
|
*** | Grant date accounting valuation of shares of Eastman common stock underlying performance shares awarded for the 2022-2024 performance period. See Note 1 to the Summary Compensation Table below.
|
* Target cash payment for 2023 corporate and individual performance. ** Grant date fair value of stock options granted in 2023. See Note 1 to the Summary Compensation Table below. *** Grant date accounting valuation of shares of Eastman common stock underlying performance shares awarded for the 2023-2025 performance period. See Note 1 to the Summary Compensation Table below. How Base Salary and Annual IncentiveTotal Compensation Pay Levels Are Determined. For executive officers, targeted total cash compensation isand long-term incentive compensation are intended to be competitive with comparable pay levels for similar jobspositions when target levels of corporate, business, and functional organization, and individual performance are achieved. The targeted levels of cashtotal compensation take into account information provided by Aon's Human Capital Solutions Practice, a division of Aon plc (“Aon”), as independent compensation consultant, and from publicly available information. For 2022,2023, a significant portion of each executive officer’s total target compensation was variable, as shown above. Depending upon Company, business, and functional unit, and individual performance, executive officers could receive more or less than their target amount. As requested by the Compensation Committee, Aon provided benchmarking analyses of the total cash compensation for executives with similar positions at the comparable companies. Aon also advised the Compensation Committee of general market cash compensation practices and trends. In determining each executive officer’s targeted total cash compensation, the Compensation Committee considered this benchmarking data and applied its judgment in considering the competitive market for executive talent, comparative pay levels of other executive officers, relative cash compensation of other jobs in the Company, and differences between the Company’s executive positions and those of the comparator companies, but did not benchmark specific compensation elements or total compensation to any specific percentile relative to the peer companies or the broader U.S. market. For 2022,2023, the Compensation Committee set the targeted cash pay for executives taking into account not only competitive market data, but also factors such as Company, business, and individual performance, scope of responsibilities, critical needs and skill sets, leadership potential, and succession planning.
As described below, our executive compensation program has been designed so that a significant portion of compensation is based on performance measures that we believe are most relevant to our business strategy and significant to investors, including cumulative total stockholder return (“TSR”) and return on capital for multi-year periods, annual adjusted EBIT, OCF, and multi-year stock price appreciation. Each year, the Compensation Committee, with the assistance of its independent compensation consultant, compares the relative mix of compensation components with those of selected peer companies. The Compensation Committee does not have a fixed method for determining how the total mix of an executive officer’s total compensation should be allocated among short- and long-term compensation components. Instead, the Compensation Committee uses a flexible approach to compensation to help us better achieve our business objectives from year to year and to attract and retain executive talent. The Compensation Committee reviewed the overall compensation of the Chief Executive Officer and the other executive officers and determined each component of executive compensation for 2023, Proxy Statement 55as described below. As part of this review, the Compensation Committee: •reviewed the design, terms, and value of each type of compensation and benefit for each executive officer, including salary, annual incentive pay opportunities and long-term stock-based compensation awards, perquisites and personal benefits, deferred accounts, and retirement plans and determined that the amounts, individually and in the aggregate, were appropriate and in line with external market and internal comparisons; •considered the estimated value of outstanding unvested, unexercised, and unrealized stock-based awards in its review of the types and values of each executive officer’s compensation; and •determined the design, terms, amount, and forms of compensation considering: •Company and individual performance; •compensation relative to that for similar positions in other companies; •the mix of short- and long-term compensation, and total compensation, relative to other Eastman executive officers and employees; •whether the features of each form of compensation are appropriately balanced in terms of the types of corporate and individual performance being incented, the levels and types of risk they encourage managers to evaluate and take, and whether the compensation encourages managers to take unnecessary risks; •background information and recommendations from the Company’s management compensation organization and from the independent compensation consultant engaged by the Compensation Committee; and •the recommendations of the Chief Executive Officer regarding pay for the other executive officers (the CEO does not participate in discussions or decisions regarding his compensation). Peer Group The Compensation Committee believes that performance should be the primary basis on which compensation decisions are made. In December 2022, the Compensation Committee reviewed its compensation benchmarking peer group with assistance from Aon, and made no changes for 2023. The Compensation Committee used the following criteria in considering the compensation peer group (the “Peer Group”): •size, including revenue, operating income, total assets, market capitalization, and enterprise value; •global manufacturing focus; •similar innovation-driven strategies; •companies with which we compete for executive talent; and •companies with a similar global workforce.
For 2023, the Compensation Committee compared total annual cash compensation opportunity (base salary and target incentive pay opportunity) design, terms, and levels and the design, terms, value, and mix of long-term stock-based incentive pay opportunity levels for the Company’s executive officers with previous year compensation of those of the following companies: | | | | | | | | | | | | | | | | | | | | | | | | | | •Air Products and Chemicals, Inc. •Ashland Global Holdings Inc. •Ball Corporation •Celanese Corporation •Danaher Corporation •Dover Corporation | •DuPont de Nemours •Eaton Corporation Plc •Ecolab Inc. •FMC Corporation •The Goodyear Tire and Rubber Company •Mosaic Company | •Parker-Hannifin Corporation •PPG Industries Inc. •Sealed Air Corporation •Rockwell Automation, Inc. •The Sherwin-Williams Company •Trane Technologies Plc | | | | | | | | | | | |
In October 2023, the Compensation Committee updated the compensation peer group to: (i) add Albemarle Corporation, Axalta Coatings Systems Ltd., Corteva, Inc., International Flavors and Fragrances Inc., and RPM International Inc.; and (ii) remove Danaher Corporation, The Goodyear Tire and Rubber Company, Mosaic Company, and Rockwell Automation, Inc. The Compensation Committee used the updated Peer Group for compensation decisions for 2024. Role of the Compensation Consultant The Compensation Committee has directly engaged Aon as its independent compensation consultant. Aon reports to, and receives its direction from, the Compensation Committee, and a representative of Aon attends each meeting of the Compensation Committee as its advisor. Aon provides the Compensation Committee with third-party survey information used in setting short- and long-term compensation levels, perspective on emerging compensation issues and trends, and expertise in incentive compensation structure, terms, and design. Aon also provides such services to the NCG Committee for its recommendations to the Board regarding non-employee director compensation. Any other services provided by Aon and its affiliates to Eastman are approved by the Compensation Committee. Company management also uses the services of several other outside firms for compensation analysis, third-party surveys, and management pay research and analysis. None of these other firms provide any consulting services to the Compensation Committee or to the NCG Committee. In reviewing Aon’s performance in 2023 and considering its continued engagement for 2024, the Compensation Committee evaluated Aon’s independence from Company management and any conflicts of interest in accordance with applicable New York Stock Exchange listing requirements. The Compensation Committee considered Aon’s provision of other services to the Company, the fees paid by the Company to Aon as a percentage of the firm’s total revenue, Aon’s policies and procedures to prevent conflicts of interest, and the confirmation by Aon that it and its representatives have no business or personal relationships with any member of the Compensation Committee, do not own any stock of the Company, and have no business or personal relationships with any executive officer of the Company. The Compensation Committee concluded that Aon is independent of the Compensation Committee and of Company management and has no conflicts of interest in its performance of services to the Compensation Committee.
Elements of our Executive Compensation Program 2023 NEO compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mark J. Costa Chief Executive Officer | | | 2023 Target compensation: $17,093,747 | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | William T. McLain, Jr. Executive Vice President and Chief Financial Officer | | | 2023 Target compensation: $4,985,132 | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Brad A. Lich Executive Vice President and Chief Commercial Officer | | | 2023 Target compensation: $5,679,829 | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stephen G. Crawford Executive Vice President, Manufacturing and Chief Sustainability Officer | | | 2023 Target compensation: $4,361,029 | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | B. Travis Smith Senior Vice President , Additives & Functional Products | | | 2023 Target compensation: $3,403,755 | | | | | | | | |
Primary components of our executive compensation program Our management compensation program has three primary components — annual base salary, annual cash incentive compensation opportunity, and long-term stock-based incentive compensation opportunity. The Compensation DiscussionCommittee, with input from management and Analysisthe Compensation Committee’s independent compensation consultant, designs, administers, and assesses the effectiveness of all executive compensation elements considering the market and our overall compensation philosophy and objectives. The Compensation Committee’s assessment includes a review of the value of each element of pay and of total pay on a recognized and realizable basis. The table below describes each principal element of executive pay, how the Compensation Committee determines the amount or size of such compensation, and the primary compensation objectives applicable to each type of pay. | | | | | | | | | | | | | | | | Component | Vesting or Performance Period | How Pay is Determined | Why We Pay Each Component | | | | | | | Annual Base Salary | Ongoing | Comparable pay for similar jobs at comparator companies Scope of responsibilities Work experience Comparable pay of other Eastman executives and for other Eastman jobs Individual performance | Recognize job responsibilities and contributions Attract and retain executive talent | | | | | | | | | Annual Incentive Compensation Opportunity | 1 year | Target awards are set as a percent of salary based on competitive data for similar jobs Payouts based on business and individual performance compared to pre-set expectations and targets | Motivate attainment of short-term business objectives and individual performance commitments consistent with long-term strategic plans | | | | | | | | | | | | Long-Term Incentive Compensation Opportunity | 3 years
(performance shares and restricted stock units performance period and option vesting period) and 10 years (option exercise period) | Target awards are a targeted dollar value based on competitive data; individual awards based on business and individual performance, contribution, and long-term potential Payouts and appreciation based on long-term capital returns and stock price appreciation | Motivate attainment of long-term corporate performance resulting in stock price appreciation Encourage ownership mindset by aligning interests with stockholders Attract and retain executive talent | | | | | |
In early 2022,2023, after reviewing market competitive pay levels and the targeted total cash compensation of the executive officers, the Compensation Committee determinedconcluded that base salary increases were appropriate for executive officers, increasing executive officerNEO base salaries 3.48%from 3.0% to 6.45%7.5%. Mr. Costa’s base salary was not increased for 2022. In addition to external comparisons, the Compensation Committee considered the cash compensation levels of each executive officer relative to that of each other executive officer. The base salary amounts reported in the “Salary” column of the “Summary“Summary Compensation Table”Table” were determined by the Compensation Committee based on the Compensation Committee’s target total cash compensation decisions for 2022.2023. Annual Incentive Pay incentive pay For executives, the annual incentive plan is known as the Unit Performance Plan (“UPP”). Under the UPP, the Compensation Committee sets a cash payout pool target amount at the beginning of each year, with the total available payout ranging from 0% to 200% of the target amount depending on the Company’s financial performance. Although the payout pool calculated is based on actual corporate financial performance against the pre-set target measures, the Compensation Committee reserves discretion to adjust the total payout pool amount to reflect overall corporate performance, business and financial conditions, and other corporate objectives. The Committee did not make any adjustments to the total payout pool for 2023. The total UPP award pool is determined after the end of the performance year as the aggregate of the UPP payouts for each participant if the individual’s organizational and individual performance were at target levels, multiplied by a “performance factor” determined by calculated actual corporate performance compared to the pre-set performance goals, subject to adjustment for overall corporate performance and business and financial conditions. How the UPP works | | | | | | | | | | | | | | | HOW THE UPP WORKS
| | | | | | At the start of the year— | } | Throughout the year | } | After year end | | | | | Compensation Committee establishes corporate performance measures and targets and individual executive performance goals | |  | | Throughout the year — Compensation Committee tracks corporate and individual performance,performance; considers appropriate adjustments to GAAP corporate performance measures | | | | After year end — Compensation Committee determines corporate performance and any adjustments to calculated payout pool amount,amount; Compensation Committee and management evaluate individual performance, and payout pool funded and individual awards distributed | | | |
20222023 UPP Target Opportunities for Named Executive Officers.NEOs. Consistent with our compensation objectives, as employees assume greater responsibilities, more of their pay is linked to corporate and individual performance. Variable UPP cash pay targets (expressed as a percentage of base salary) are established at the beginning of the performance year based on job responsibilities, relative targets for other Company positions, and comparable company practices. For the named executive officers,NEOs, the target annual UPP incentive opportunities for 20222023 were as follows: | | | | | | | | | Name | | Title | | Target UPP
as % of
SalarySalary* | Mark J. Costa | | Chief Executive Officer | 150 | 150%% | William T. McLain, Jr. | | SeniorExecutive Vice President and Chief Financial Officer
| 100 | 100%% | Brad A. Lich | | Executive Vice President and Chief Commercial Officer | 100 | 100%% | Stephen G. Crawford | | Executive Vice President, Manufacturing and Chief Sustainability Officer | 85 | 85%% | Perry Stuckey III
B. Travis Smith | | Former Senior Vice President, Chief Human Resources Officer
Additives & Functional Products | 85 | 85%% |
56 2023 Proxy Statement
*There were no changes in the NEO's target UPP opportunities as a percentage of base salary for 2023.
Executive Compensation — Compensation Discussion and Analysis20222023 UPP Company Performance Measures and Targets.Measures. The Compensation Committee set the performance metrics, and related weightings and targets, for our 20222023 executive compensation program in February 2022.2023. The Compensation Committee believes that the performance targets it established were rigorous, while providing meaningful motivational value to our executives. The performance targets for 20222023 emphasized the importance of our earnings performance and cash generation focusing on managing our manufacturing, selling, administrative, and general costs, and the importance of bringing in future new business. Our compensation programs were designed to allow Eastman to achieve these performance targets andby meeting or exceeding challenging goals that will help ensure that we continue to be well positioned to meetare well-positioned for the challenges ahead.
Followingfuture.
At the beginning of 2023, following an evaluation of the alignment of the Company’s incentive pay program and compensation philosophy with the Company’s business, products, and strategy for growth, the Compensation Committee determined that the 20222023 UPP corporate performance and the corresponding payout pool should continue to be measured by adjusted EBIT (75%), the Company’s primary measure of operating performance, and by operating cash flow (25%). | • | | Adjusted EBIT under the 2022 UPP is GAAP earnings before interest and taxes as adjusted by the Compensation Committee for certain cost, charge, and income items that were not included in the Company’s targeted financial performance under management’s annual business plan as approved by the Board in early 2022 After evaluating macroeconomic developments and related impacts on customer inventory cycles, the Company shifted its priorities to focusing more on inventory reductions and cash flow generation to allow us to continue to advance our strategic initiatives. In order to more appropriately align the incentives under the UPP with these updated priorities, the Committee changed the weighting for the 2023 UPP mid-year to be equally-weighted between adjusted EBIT and operating cash flow (“OCF”). No changes were made to the goals themselves.
•Adjusted EBIT under the 2023 UPP is GAAP earnings before interest and taxes as adjusted by the Compensation Committee for certain costs, charges, and income items that were not included in the Company’s targeted financial performance under management’s annual business plan as approved by the Board in early 2023 (the “annual business plan”) and that were excluded from EBIT in the non-GAAP financial measures disclosed by the Company in its public disclosures of financial results as non-core or unusual items in its Quarterly Reports on Form 10-Q and Annual Report on Form 10-K SEC filings. See Annex A of this proxy statement for reconciliation of financial measures under accounting principles generally accepted in the United States (“GAAP”) to non-GAAP financial measures, description of excluded items, and related information. The selection of adjusted EBIT as a measure of 2023 corporate performance was intended to focus management level employees on both top-line revenues and bottom-line earnings and to allow measurement of UPP performance throughout the year based upon reported Company quarterly financial results. •non-GAAP financial measures disclosed by the Company in its public disclosures of financial results as non-core or unusual items in its Quarterly Reports on Form 10-Q and Annual Report on Form 10-K SEC filings. The selection of adjusted EBIT as a measure of 2022 corporate performance was intended to focus management level employees on both top-line revenues and bottom-line earnings and to allow measurement of UPP performance throughout the year based upon reported Company quarterly financial results. |
OCF under the 20222023 UPP is GAAP cash provided by operating activities. OCF reflects the cash generated in the current year that enables the Company to invest in innovation in the core businesses and inorganic growth through acquisitions, and allows measurement of performance throughout the year based upon reported Company quarterly financial results. In establishing the 20222023 UPP adjusted EBIT and OCF performance targets in early 2022,2023, the Compensation Committee considered the then-targeted 2022targeted 2023 financial and strategic performance under the annual business plan. 2022 UPP Company Performance Targets. For 2022, the adjusted EBIT target was $1.65 billion and the OCF target was $1.6 billion. The calculation of adjusted EBIT underCommittee also added a safety metric modifier that provided for possible upward (+10.0%) or downward (-5.0%) adjustments to the UPP for 2022 excluded from GAAP EBIT non-core items including asset impairments and restructuring charges, losspayouts based on divested businesses and related transaction costs, mark-to-market pension and other post-retirement benefit plans net loss, environmental and other costs, adjustments to contingent considerations and an unusual item costs, net of insurance proceeds, resulting from a January 31, 2022 operational incident at its Kingsport site as a result of a steam line failure (“steam line incident”). The 2022 UPP threshold, target, and maximum adjusted EBIT and OCF targets and corresponding payout multiples, actual adjusted EBIT and OCF, and resulting payout multiples for the portion of the UPP award pool applicable to executive officers are shown below.
2022 UPP Payouts. While adjusted non-GAAP EBIT was $1.34 billion for 2022, the expense associated with the minimum payout would have decreased adjusted non-GAAP EBIT below the threshold. The Company’s OCF for 2022 was $975 million, which also was below the threshold. After reviewing the Company’s overall corporate financial performance against these pre-establishedprior year results. targets and certain non-financial operational excellence metrics, the Compensation Committee determined that no payout pool should be established under the UPP for executive officers and other management-level employees for 2022.
2023 Proxy Statement 57
Executive Compensation — Compensation Discussion and Analysis
UPP Payout Process. Each year, the Compensation Committee evaluates the Company’s performance against the UPP performance measures established in February each year.February. Based on this evaluation, the Compensation Committee considers approval of an overall payout pool for the UPP. The Compensation Committee then determines the portions of the overall UPP award pool, if any, to be allocated to the CEO and other NEOs as a group. In determining UPP payouts for the CEO and other NEOs, the Compensation Committee also considers the individual performance commitments forof each executive. The CEO, in consultation with the other executive officers, then determines the allocation of the overall UPP award pool, if any, to the various organizations within the Company for payouts to other management-level employees. The allocation is then typically based on their assessment of the performance of each organization relative to objectives established at the beginning of the performance year. Once each organization’s portion of the overall award pool is determined, management within each organization then allocates the organization’s portion of the Company award pool for individual payouts, based upon individual performance against the financial, organizational, and strategic performance objectives and expectations established at the beginning of the performance year.
2023 UPP Company Performance Targets. For 2023, the adjusted EBIT target was $1.30 billion and the OCF target was $1.40 billion. The 2023 UPP threshold, target, and maximum adjusted EBIT and OCF targets and corresponding payout multiples, actual adjusted EBIT and OCF, and resulting payout multiples for the portion of the UPP award pool applicable to executive officers are shown below. For 2023, the UPP payout would be: (i) increased by 10% if the OSHA Recordable Incident Rate per Year was less than 0.40; (ii) decreased by 5% if the OSHA Recordable Incident Rate per Year was greater than 0.60; and (iii) unchanged if the OSHA Recordable Incident Rate per Year was greater than 0.40 and less than 0.60. | | | | | | | | | | | | | 2023 Adjusted earnings before interest and taxes (50%) | 0.78% of Target Performance | | | | | | | | | | | 2023 Operating cash flow (50%) | | | | | |
The weighted adjusted EBIT factor = 0.61*0.50 = 0.305 and the weighted adjusted OCF factor = 0.95*0.50 = 0.475. Thus, the total payout factor for the 2023 UPP is 0.305(adjusted EBIT) + 0.475(OCF) = 0.78 (78%) for the payout pool. 2023 UPP Payouts. For 2023, the Company's adjusted non-GAAP EBIT and OCF were $1.097 billion and $1.374 billion, respectively. The calculation of adjusted EBIT under the UPP for 2023 excluded from GAAP EBIT non-core items including asset impairments and restructuring charges and related accelerated depreciation costs, gain on divested business, mark-to-market pension and other post-retirement benefit plans net loss, environmental and other costs and insurance proceeds, resulting from a January 31, 2022 operational incident at the Kingsport site as a result of a steam line failure (“steam line incident”). The total adjustments (including the gain) decreased the calculated EBIT under the UPP by $205 million and resulted in a calculated UPP “performance factor” of 78% of the target. Based on the 2023 OSHA Recordable Incident Rate per year of 0.42, there was no adjustment based on the safety performance measure. Based on the Company’s performance against pre-established financial measures for 2022,2023, the Compensation Committee did not approveapproved a payout pool of 0.78% for the 20222023 UPP. As such, there was no UPP allocation to the CEO or other NEOs. The chart below shows the percentages of target UPP payouts to executives for each of the last five years.
Percentage of UPP Target Executive Payouts 2018-2022
58 2023 Proxy Statement
target executive payouts 2019-2023
Executive Compensation — Compensation Discussion and Analysis
Although
As part of the Compensation Committee did not approve a payout pool for the 2022 UPP,process, it also reviewed and evaluated the individual performance commitments and achievements for the CEO and other NEOs for 2022. This review helped inform2023. The individual achievements versus commitment could result in UPP payouts above or below the Compensation Committee’s decisions with respect to compensation targetsoverall payout pool percentage for 2023 for the CEO and other current NEOs. Below is a summary of the achievements against the individual performance goals, the UPP payout percentage, the target, and actual payouts for 2022each NEO for the continuing NEOs, some of which were adversely impacted by external factors that are described in the Company’s 2022 Form 10-K.2023. | | | | | | | | | | | | Named Executive OfficerNEO | Accomplishments | | Accomplishments / CommitmentsUPP Payout | | Mark J. Costa | | Given challenging market conditions, operating
•Provided critical leadership in driving the Company’s initiatives to improve overall safety performance and supply chain constraints, broad-based inflation andbuilding a culture with employee safety as a foundation of the Company’s operational strategy, which efforts resulted in significant currency headwinds, overall financial goals were not fully achievedyear-over-year safety performance improvements in 2022. | | | | | Under Mr. Costa’s leadership, Eastman: (i) made significant progress2023.
•Maintained the Company's strategic focus on its circular economy projectsinnovation, which resulted in 2022, which are expected to help position the Company for sustainable growth, and (ii) continued progress with its specialty innovation portfolio across the Company resulting in $550more than $600 million of new multi-year business revenue. | | wins from market development and innovations. •Managed challenges related to weak demand and aggressive customer de-stocking in 2023, and placed a strategic emphasis on cash flow generation, which efforts contributed to the Company delivering operating cash flow of approximately $1.4 billion for 2023. | | | | Mr. Costa led Company initiatives that significantly increased year-over-year diversity hiring and strengthened the Company’s succession pipeline including acceleration
UPP Payout as Percent of readiness for diverse talent for leadership roles. | | Target: 78%
Target Payout: $2,047,500
Actual Payout: $1,597,050 | | William T. McLain, Jr. | | Given market conditions and certain external events described in
•Helped lead organizational efforts across the Company’s Annual ReportFinance organization to Stockholders for 2022, goals related to earnings andgenerate strong operating cash flow (including OCF, variable cost margin, indirect cost savings, and operational budgets) were only partially achieved. | | | | | In 2022, Mr. McLain played aof approximately $1.4 billion, which was approximately $400 million higher than 2022.
•Provided key roleleadership in the successful completion of theand efficient divestiture of the Company’s adhesives resins business and continued to advance strategic growth opportunities through developmentTexas City, Texas operations for approximately $490 million, while maintaining operational flexibility. •Demonstrated strong cost management leadership across teams that helped achieve an overall cost savings of M&A portfolio opportunities. | | approximately $200 million. | | | | Mr. McLain led the development and implementation
UPP Payout as Percent of initiatives to reduce selling, general and administrative expenses in 2022, and to reduce costs by $200 million in 2023. | | Target: 86%
Target Payout: $800,000
Actual Payout: $686,400 | | Brad A. Lich | | Revenues increased
•Demonstrated the strength of the Eastman innovation driven growth model by delivering $765 million in theearnings in Advanced Materials and Fibers segments while navigating a challenging demand environment in 2022 (both segments under Mr. Lich’s leadership), but segment earnings were adversely impacted by significant declinecertain end markets in 2023. •Provided essential leadership in delivering margin improvements in key end markets that helped offset demand and destocking,weakness. •Effectively led inventory management efforts that helped the Company achieve its operating cash flow goal for 2023 | | UPP Payout as well as by operational, supply chain and inflation-related challenges during the year.Percent of Target: 78%
Target Payout: $830,000
Actual Payout: $647,400 | | Stephen G. Crawford | •Provided leadership and set expectations for an operations team that delivered significant improvements in safety performance in 2023, with best-ever performance in the personal and process safety metrics. •Despite project-related challenges, led the completion of construction, commissioning and start-up activities for the Company’s new molecular recycling facility in Kingsport, Tennessee. •Led an operations’ team that significantly improved global manufacturing facility reliability. | | UPP Payout as Percent of Target: 78%
Target Payout: $578,000
Actual Payout: $450,840 | | B. Travis Smith | | Mr. Lich played
•Led an essential leadership role in progressing our three projects in the circular economy. | | | | | Mr. Lich led a commercialAdditives & Functional Products (“AFP”) segment team that continued to buildprogress top growth programs in milestone realization and institutionalize its innovation capabilitiescustomer engagement despite the difficult external environment.
•Delivered on full year cost management commitments and led AFP segment team that delivered significant contributions to cash in 2023, exceeding internal targets, through its integrated operating model.aggressive inventory reductions. •Provided essential leadership to drive disciplined price management to help offset weak demand and deliver on cost reduction commitments. | | UPP Payout as Percent of Target: 78%
Target Payout: $527,000
Actual Payout: $411,060 |
| | | Stephen G. CrawfordExecutive compensation | | While the Company made significant strides in operational safety in 2022, unplanned operating outages and global logistics disruptions adversely impacted the Company’s business operations during the year.
| | | | | Under Mr. Crawford’s leadership, the Company made significant progress on advancing its circular platform initiatives including construction at Kingsport molecular recycling facility as well as development on two additional facilities.
| | | | | Mr. Crawford led sustainability initiatives that continued to make progress on the Company’s carbon emissions reduction commitment.
|
2023 Proxy Statement 59
Executive Compensation — Compensation Discussion and Analysis
20232024 Unit Performance Plan
In early 2023,2024, the Compensation Committee evaluated the alignment of the current design of our UPP short-term incentive pay program. Following this evaluation, the Compensation Committee approved our annual cash incentive pay structure so that 20232024 corporate performance and the corresponding payout pool will be measured by adjusted EBIT (75%(40%), OCF (40%) and by OCF (25%strategic measures (20%). comprised of new business generation, safety, and inclusion goals. Long-term incentive compensation The Committee also addedutilizes equity-based compensation as a safety metric modifier that provides for possible upward or downward adjustments tokey component of the UPP payouts based on performance against prior year results. Although the payout pool calculated is based on actual corporate financial performance against the pre-set target measures, the Compensation Committee continues to reserve discretion to adjust the total payout pool amount to reflectCompany’s overall corporate performance, business and financial conditions, and other corporate objectives.Long-Term Incentive Compensation
Equity-basedexecutive compensation is designed to facilitate stock ownership in orderprogram to link senior managers’executive pay to the Company’s long-term performance to furtherand align those managers’their interests with the intereststhose of other stockholders. Important elements of the executive equity-based compensation program are:
include: | | | | | | | |
| Stock Options | | Granted under the Company’s 2021 Omnibus Stock Compensation Plan, (the “Omnibus Plan”), stock options create a direct link between compensation of key Company managers and long-term performance of the Company through appreciation of stock price. | | | | | |
| Performance Shares | | Awarded under the Omnibus Plan to provide an incentive for key managers to earn stock awards by meeting specified multi-year business or individual performance goals. | | | | | |
| Other Stock-Based Incentive Pay | | Under the Omnibus Plan, the Compensation Committee may also award additional stock-based compensation (with or without restrictions), including restricted stock units, performance units, stock appreciation rights, and additional stock options with performance-based or other conditions to vesting. | | | | | |
| Stock Ownership Expectations | | Established for executive officers to encourage long-term stock ownership and the holding of shares awarded under the Omnibus Plan or acquired upon exercise of options. Over a five-year period, executive officers are expected to accumulate stock with a value of two and one-half times their annual base salary (five times base salary for the Chief Executive Officer) in Company stock and stock equivalents. See “Information“Information about Stock Ownership — Stock Ownership of Directors and Executive Officers — Director and Executive Stock Ownership Expectations; No Hedging or Pledging of Company Stock.Ownership.” All executive officers have met or are on schedule to meet their ownership expectations. | | |
Under the Company’s long-term incentive compensation program, executive officers receive stock option grants and performance share awards to directly link future compensation to stockholder and capital returns and as a retention incentive. TheFor 2023, the Compensation Committee has designed the currentapproved a long-term incentive compensation program so thatunder which the payouts are 100% at-risk. Since 2014, For 2023, the program has beenis comprised of 75% performance shares and 25% stock options. While the long-term incentive compensation mix for the Peer Group for 2022 is not yet available, the publicly available information from 2021 indicates that the Peer Group average long-term incentive compensation mix for named executive officers includes approximately 17% time-vested RSUs, which are not at-risk nor performance based.60 2023 Proxy Statement
Executive Compensation — Compensation Discussion and Analysis
How Stock-Based Incentive Pay Levels Are Determined. The Compensation Committee establishes the annual value and mix of total stock-based incentive pay opportunities by considering recommendations from Aon based on long-term compensation survey data for the comparator companies listed under “Review“Review of 20222023 Executive Compensation.Compensation.” As requested by the Compensation Committee, Aon, the Committee's independent compensation consultant, provides benchmarking analysis of total target compensation and long-term stock-based compensation information, and also advises the Compensation Committee of general market stock-based incentive compensation practices and trends. The Compensation Committee also regularly reviews with Aon the potential realizable value of each named executive officer’sNEO’s outstanding unvested, unexercised, and unrealized stock-based awards compared to similar pay of executives at the comparable companies in determining stock-based incentive pay opportunity levels. For 2022,2023, stock options and performance shares were awarded at a target opportunity level intended to align total stock-based compensation with the mid-range of comparable stock-based compensation of the Peer Group. The grant date values of these awards that are reported in the “Summary“Summary Compensation Table”Table” and “2022“2023 Grants of Plan-Based Awards”Awards” table are accounting valuations that are calculated as of the effective grant date. Actual payouts for performance shares are determined by actual performance at the end of the three-year performance period.
Stock OptionsOptions.. In February 2022,2023, the Compensation Committee approved stock options for each of the named executive officersNEOs comprising approximately 25% of the value of their respective long-term incentive compensation awards. The Compensation Committee grants time-vested stock options with an exercise price equal to the market price of the underlying stock on the grant date, and on the date of its authorization of grants it sets a grant date that is on or after the date of approval of the grant.date. In determining the size and terms of option awards, the Compensation Committee used the services of Aon to derive values of options using a variation of the Black-Scholes option-pricing model. In addition, Aon advises the Compensation Committee on the design of retention features of option grants. ComputationThe computation of the value of option awards is comparable to values determined underbased on FASB ASC Topic 718 and reported in the “2022“2023 Grants of Plan-Based Awards”Awards” table below. Long-Term Performance Shares. The otherIn February 2023, the Compensation Committee approved the grant of performance shares for each of the NEOs, which comprised approximately 75% of executive stock-basedthe value of their respective long-term incentive compensation awarded in February 2022 wasawards. Performance shares are paid out in the form of performance shares. Shares of CompanyEastman common stock are paid under performance shares based on the Company’s multi-year performance based on the following two measures: •a return on capital target established at the beginning of the three-year performance period; and •the Company’s TSR (change in stock price plus dividends declared during the performance period, assuming reinvestment of dividends) relative to a peer group of industrial companies as measured over a three-year period. If earned, awards are paid after the end of the performance period in unrestricted shares of Eastman common stock. Consistent with recent and ongoing changes to the Company’s business, products, and strategy for growth, the Compensation Committee designed the 2023 Proxy Statement 61performance shares with greater weight on relative TSR and less weight on return on capital. With respect to the TSR metric, the comparison companies for the 2023 - 2025 performance share awards include the group of companies within the S&P 500 “Materials Sector” that are classified by Standard & Poor’s as chemical companies, excluding the Chemours Company and Rayonier Advanced Materials and including Celanese Corporation, Westlake Chemical Corporation, and Huntsman Corporation (the “Comparison Companies”). The S&P “Materials Sector” index is an index of industrial companies selected from the S&P “Super Composite 1500” Index. In addition to the return on capital and relative TSR metrics for the 2023 - 2025 performance share awards, the Compensation Committee approved a performance modifier (“Modifier”) based on the attainment of certain ESG and I&D Goals. The Compensation Committee will determine the achievement of the ESG and I&D Goals, the relative weighting of the goals, and the resulting performance modifier.
Long-term compensation targets For the 2023 - 2025 performance period, the Compensation — Compensation Discussion and AnalysisCommittee approved a target for return on capital of 8.76%, which was driven by the same factors that impacted the Company’s EBIT, as described above. The return on capital target is established considering corporate and strategic business plans and expectations for the performance period. Performance relative to the TSR target is determined by the Company’s quintile placement relative to the peer group of industrial companies at the end of the three-year performance period. If earned, awards are paid after the end of the performance period in unrestricted shares of Eastman common stock. Consistent with recent and ongoing changes to the Company’s business, products, and strategy for growth, the Compensation Committee has designed performance shares awarded since 2015 with greater weight on relative TSR and less relative reward for higher levels of return on capital than for prior periods. The Compensation Committee has also updated the peer group of industrial companies to reflect the strategic emphasis on specialty businesses and products. The comparison companies for currently outstanding awards are the group of companies within the S&P 1500 “Materials Sector” that are classified by Standard & Poor’s as chemical companies, excluding The Chemours Company and Rayonier Advanced Materials and including Celanese Corporation, Westlake Chemical Corporation, and Huntsman Corporation. The S&P “Materials Sector” index is an index of industrial companies selected from the S&P “Super Composite 1500” Index.
Long-Term Compensation Targets
For the 2023-2025 performance period, the Compensation Committee approved a target for return on capital of 9.26%, which was driven by the same factors that impacted the Company’s EBIT, as described above. Performance relative TSR is determined by the Company’s quintile placement relative to the “Chemical Companies of the S&P 1500” at the end of the three-year performance period.
The Compensation Committee added a modifier element to the performance share awards for 2023-2025 to include parameters around I&D and ESG aligning executive compensation incentives with I&D and ESG goals (the “Modifier”). As the Company’s ESG and human capital management strategy and goal setting evolve and mature, the Compensation Committee expects to correspondingly evolve and mature these aspects of the executive compensation program.
The Modifier impacts the performance outcomes for the Company’s performance shares based on improvements in the I&D of employeescertain diversity metrics and in reduction of GHG over the 2023 – 2025 performance period, and is assessed by the following 4 measures: | | | | | | | ESG Goals | | Target | ESG Goals | | Target | Climate Change — Decrease Actual GHG Emissions | | Reduce by 17.1% to 25.2% or better from 2017 baseline target | Circularity — Millions of Pounds of Waste Plastic Recycled | | 215 — 250 million pounds or better in the aggregate by 2025 | | I&D Goals | | | U.S. Diversity Representation Total Professional (Business and Technical & Leadership) Population Goals (2024 # on track for 2030 Goals) | | 21% — 25% or better (People
(People of Color) | Gender Representation Total Professional (Business and Technical & Leadership) Population Goals (2024 # on track for 2030 Goals) | | 41% — 42% or better (Female) | The Compensation Committee will use its judgement in determining the Modifier to be applied to the 2023-2025 Performance Share Award, using the following guidelines: •Target or better performance in all 4 measures = +10% •Target or better performance in 3 of the 4 measures = +7.5% •Target or better performance in 2 of the 4 measures = +5% •Target or better performance in 1 of the 4 measures = +2.5% •If all measures are below targeted performance, then the award will be reduced by (-5.0%). |
62 2023 Proxy Statement
2023-2025 performance share awards
Executive Compensation — Compensation Discussion and Analysis
2022-2024 Performance Share Awards
The targeted number of 2022-20242023 - 2025 performance shares awarded to our named executive officersNEOs is provided below under “Stock-Based Incentive Awards in 2022.”the “2023 Grants of Plan-Based Awards” table. The actual payout for each performance share award will be determined following the end of the three-year performance period based on the following matrix used to establish an award multiplier for the performance share target awards: | | | | | | | | | | | | | | | | | | | | | | | | | | | 2022-2024 Performance Shares | | | | | Weighted Return on Capital | | Eastman TSR Relative
to Comparison Companies | | ≥ 6.51 to
7.50% | | | 7.51 to
8.50% | | | 8.51 to
9.50% | | | 9.51 to
10.50% | | | 10.51 to
11.50% | | | > 11.51% | | 0-19% (5th quintile) | | | 0.00 | | | | 0.00 | | | | 0.00 | | | | 0.20 | | | | 0.30 | | | | 0.40 | | 20-39% (4th quintile) | | | 0.00 | | | | 0.20 | | | | 0.40 | | | | 0.60 | | | | 0.80 | | | | 0.90 | | 40-49% (3rd quintile) | | | 0.40 | | | | 0.60 | | | | 0.80 | | | | 1.00 | | | | 1.20 | | | | 1.40 | | 50-59% (3rd quintile) | | | 0.60 | | | | 0.80 | | | | 1.00 | | | | 1.30 | | | | 1.50 | | | | 1.70 | | 60-79% (2nd quintile) | | | 1.00 | | | | 1.20 | | | | 1.40 | | | | 1.70 | | | | 1.90 | | | | 2.10 | | 80-99% (1st quintile) | | | 1.00 | | | | 1.80 | | | | 2.00 | | | | 2.30 | | | | 2.40 | | | | 2.50 | |
| | | | | | | | | | | | | | | | | | | | | Eastman TSR Relative to
Comparison Companies | | Weighted Return on Capital | | | ≥ 7.26 to 8.00% | 8.01 to 8.75% | 8.76 to 9.50% | 9.51 to 10.25% | 10.26 to 11.50% | > 11.01% | | 0-19% (5th quintile) | — | | — | | — | | 0.20 | | 0.30 | | 0.40 | | | 20-39% (4th quintile) | — | | 0.20 | | 0.40 | | 0.60 | | 0.80 | | 0.90 | | | 40-49% (3rd quintile) | 0.40 | | 0.60 | | 0.80 | | 1.00 | | 1.20 | | 1.40 | | | 50-59% (3rd quintile) | 0.60 | | 0.80 | | 1.00 | | 1.30 | | 1.50 | | 1.70 | | | 60-79% (2nd quintile) | 1.00 | | 1.20 | | 1.40 | | 1.70 | | 1.90 | | 2.10 | | | 80-99% (1st quintile) | 1.00 | | 1.80 | | 2.00 | | 2.30 | | 2.40 | | 2.50 | |
Return on capital performance is determined based on the arithmetic average for each of the years during the performance period of our average return on capital. •“Return on capital” is our earnings from continuing operations, adjusted to exclude the same non-core or unusual items as are excluded from earnings in the Company’s non-GAAP financial measures, divided by the average capital employed, each as defined in the form of the 2023 - 2025 performance share award filed as Exhibit 10.20 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC. The resulting ratio is multiplied by 100 in order to convert it to a percentage. | | | | | | | | | | 68 | •2024 Proxy Statement | | “Return on capital” is our earnings from continuing operations, adjusted to exclude the same
 non-core or unusual items as are excluded from earnings in the Company’s non-GAAP financial measures, divided by the average capital employed, each as defined in the form of the 2022-2024 performance share award filed as Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC. The resulting ratio is multiplied by 100 in order to convert it to a percentage. |
•TSR performance is determined based on our TSR during the performance period relative to the TSRs of the companies in the comparable groupComparison Companies during the performance period. Performance share TSR means total stockholder return as reflected by the sum of (i) change in stock price; plus (ii) dividends declared, assuming reinvestment of dividends, and expressed as a percentage return on a stockholder’s hypothetical investment. The change in stock price (measuredis measured as the difference betweenbetween: (a) the average of the closing prices of a company’s common stock in the period beginning on the tenth trading day preceding the beginning of the performance period and ending on the tenth trading day of the performance periodperiod; and (b) the average of such closing prices for such stock in the period beginning on the tenth trading day preceding the end of the performance period and ending on the tenth trading day following the end of the performance period) plus (ii) dividends declared, assuming reinvestment of dividends, and expressed as a percentage return on a stockholder’s hypothetical investment.period. Although the actual payout of the performance share awards in 20222023 will not be determinable until after the end of the performance period in 2024,2025, a grant date fair value of such awards (which is an accounting valuation that is calculated as of the award date) is reported in the 20222023 “Stock Awards” column of the Summary“Summary Compensation Table and theTable.” The range of possible share payouts is reported in the “Estimated Future Payouts Under Equity Incentive Plan Awards” column of the “2022“2023 Grants of Plan-Based Awards”Awards” table. These awards have challenging long-term targets for returns on capital and to investors.capital. Actual possible payouts are aligned with our pay-for-performance philosophy. TheAs required under GAAP, the accounting methodology for the valuation of performance shares in the compensation tables uses predictive financial models of companyCompany performance, and results in a valuation that may be substantially different than the actual payouts. 2023 Proxy Statement 63
Executive Compensation — Compensation Discussion and Analysis
2020-20222021-2023 Performance Share Payouts
share payouts In early 2023,2024, the Compensation Committee reviewed performance results and approved a payout of shares to the executive officers under performance shares previously awarded for the 2020-20222021 - 2023 performance period. The payouts to the named executive officersNEOs under the 2020-20222021 - 2023 performance shares are reported in the “Stock Awards” column of the “2022“2023 Option Exercises and Stock Vested”Vested” table below. The following tables show the targets and the payout matrix for the 2020-20222021 - 2023 performance shares: | | | | | | | | | | Performance Years | | Target Return on Capital | | Total Stockholder Return
(“TSR”) Target Quintile | 2020, 2021, 2022, and 20222023
| | 8.51% | | 3rd Quintile 50 — 59% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Weighted Return on Capital | | Eastman TSR Relative to Comparison Companies | | ≥ 6.51 to
7.50% | | | 7.51 to
8.50% | | | 8.51 to
9.50% | | | 9.51 to
10.50% | | | 10.51 to
11.50% | | | > 11.51% | | 0-19% (5th quintile) | | | 0.00 | | | | 0.00 | | | | 0.00 | | | | 0.20 | | | | 0.30 | | | | 0.40 | | 20-39% (4th quintile) | | | 0.00 | | | | 0.20 | | | | 0.40 | | | | 0.60 | | | | 0.80 | | | | 0.90 | | 40-49% (3rd quintile) | | | 0.40 | | | | 0.60 | | | | 0.80 | | | | 1.00 | | | | 1.20 | | | | 1.40 | | 50-59% (3rd quintile) | | | 0.60 | | | | 0.80 | | | | 1.00 | | | | 1.30 | | | | 1.50 | | | | 1.70 | | 60-79% (2nd quintile) | | | 1.00 | | | | 1.20 | | | | 1.40 | | | | 1.70 | | | | 1.90 | | | | 2.10 | | 80-99% (1st quintile) | | | 1.00 | | | | 1.80 | | | | 2.00 | | | | 2.30 | | | | 2.40 | | | | 2.50 | |
| | | | | | | | | | | | | | | | | | | | | | Weighted Return on Capital | Eastman TSR Relative
to Comparison Companies | ≥ 6.51 to 7.50% | 7.51 to 8.50% | 8.51 to 9.50% | 9.51 to 10.50% | 10.51 to 11.50% | > 11.51% | | 0-19% (5th quintile) | 0.00 | | 0.00 | | 0.00 | | 0.20 | | 0.30 | | 0.40 | | | 20-39% (4th quintile) | 0.00 | | 0.20 | | 0.40 | | 0.60 | | 0.80 | | 0.90 | | | 40-49% (3rd quintile) | 0.40 | | 0.60 | | 0.80 | | 1.00 | | 1.20 | | 1.40 | | | 50-59% (3rd quintile) | 0.60 | | 0.80 | | 1.00 | | 1.30 | | 1.50 | | 1.70 | | | 60-79% (2nd quintile) | 1.00 | | 1.20 | | 1.40 | | 1.70 | | 1.90 | | 2.10 | | | 80-99% (1st quintile) | 1.00 | | 1.80 | | 2.00 | | 2.30 | | 2.40 | | 2.50 | |
For the 2020 — 20222021 - 2023 performance share awards, the Committee approved payouts for the named executive officersNEOs at 100%80% of target award levels (of a possiblepossible 250% of the target award) based on the Company’s three year (2020-2022)(2021 - 2023) total stockholder ranking in the 3rd4th quintile (40-49%(20-39%) of compared companiesComparison Companies and the Company attaining an average return of 10.30%10.53% (compared to a target return goal of 8.51%). Measurement of return on capital under the performance shares was based on non-GAAP earnings excluding the same items as excluded in the non-GAAP financial measures disclosed by the Company for 2020, 2021, 2022 and 2022 (loss2023 (net (gain)/loss on divested businesses and related transaction costs, mark-to-market pension and other post-retirement benefit plans net (gain)/loss, asset impairments and restructuring charges and related accelerated depreciation costs, early debt extinguishment costs, environmental and other costs, adjustments to contingent considerations, net steam line incident (insurance proceeds) costs, net of insurance proceeds, and adjustments from tax law changes). These adjustments increased the calculated earnings from continuing operations by $361 million in 2020, $356 million in 2021 and $191 million in 2022 and decreased the calculated earnings from continuing operations by $(131) million in 2023, for the calculated payout multiple from 60%40% to 100%80%, aligning the payout with performance compared to the long-term forecast measure on which the target performance was based.See Annex A of this proxy statement for reconciliation of financial measures under accounting principles generally accepted in the United States (“GAAP”) to non-GAAP financial measures, description of excluded items, and related information. The Compensation Committee’sCommittee’s exclusion of non-core and unusual items from its measure of return on capital for purposes of determining three-year performance share payouts is intended to motivate and reward accomplishment of strategic decisions and actions in execution of the strategy for long-term growth.
The performance share values in the pay tables reflect the robust performance expectations underlying the targeted performance. Over the last three performance cycles the actual performance share payouts have been: | | | | | | | | | | | | | | | Performance Share Award Cycle | | 2018-2020 | | 2019-2021 | | 2020-2022 | | Average
Payout | Year of Payout | | 2021 | | 2022 | | 2023 | | | Payout Percentage of Target | | 130% | | 100% | | 100% | | 110% |
64 2023 Proxy Statement
| | | | | | | | | | | | | | | | Performance Share Award Cycle | 2019-2021 | 2020-2022 | 2021-2023 | Average Payout | | Year of Payout | 2022 | 2023 | 2024 | | | Payout Percentage of Target | 100 | % | 100 | % | 80 | % | 93 | % |
Executive Compensation — Compensation Discussion and Analysis
Other Compensation and Benefits. The Company’s executive officers also participate in benefits plans generally available to all other employees, including nonqualified supplemental retirement plans for U.S. employees with pay above Internal Revenue Code limits, and in a deferred compensation plan for management-level employees. These benefits are intended to keep us competitive in attracting and retaining executive and other management-level employees. See “Pension Benefits”“Pension Benefits” and “2022“2023 Nonqualified Deferred Compensation”Compensation” in the “Compensation Tables”“Compensation Tables” section below. We have also entered into limited change in controlchange-in-control severance agreements with certain of our executive officers and provide a modest program of executive perquisites and personal benefits, which serve the specific purposes described in this Compensation Discussion and AnalysisCD&A and under “Compensation“Compensation Tables — Summary Compensation Table,” “Executive perquisites and personal benefits,” and ““Executive termination and change-in-control agreements” below. TerminationExecutive perquisites and Change-in-Controlpersonal benefits Arrangements” below.Executive Perquisites and Personal Benefits
The Company provides only limited perquisites to our named executive officers,NEOs, and those perquisites are designed to provide specific benefits. The Compensation Committee annually reviews the types and amounts of perquisites provided to executive officers and the tax treatment of those perquisites for both the Company and the executive officers. Perquisites provided to executive officers for 20222023 were: •personal umbrella liability insurance coverage; | • | | •non-business travel on corporate aircraft by executives, their families, and invited guests when seats are available and the aircraft is otherwise being used for Company business, including added destination of a flight when the plane is otherwise in reasonable proximity to the added destination; •non-business travel on corporate aircraft by executives, their families, and invited guests when seats are available and the aircraft is otherwise being used for Company business, including added destination of a flight when the plane is otherwise in reasonable proximity to the added destination; |
financial planning services; and | • | | supplemental long-term disability insurance for a portion of executives’ annual cash compensation not replaced in the event of their disability under the all-employee long-term disability insurance plan.
|
•supplemental long-term disability insurance for a portion of executives’ annual cash compensation not replaced in the event of their disability under the all-employee long-term disability insurance plan. In addition, the Compensation Committee has determined that it is appropriate that the Chief Executive Officer use corporate aircraft whenever possible for both business and personal travel (and for his family when they are traveling with him). This is: (i) to allow travel time to be used productively for the Company, (ii) for security, health, and safety reasons (consistent with recommendations of a periodic, third-party Personal Vulnerability Security Assessment), and (iii) to be sureensure that Mr. Costa can be immediately available to respond to business priorities from any location around the world. This personal use is accounted for and periodically reviewed by the Compensation Committee. In connection therewith, the Nominating and Corporate GovernanceNCG Committee authorized the Company to enter into an aircraft time sharing agreement (the “Agreement”) with Mr. Costa in January 2023. Under the Agreement, Mr. Costa is permitted to utilize Company aircraft from time to time on an “as needed and as available” basis. For any personal flights operated under this Agreement, Mr. Costa will reimburse the Company for the aggregate incremental cost of his personal use of Company aircraft under the Agreement. All personal flights not reimbursed under the Agreement will be included in the “Summary Compensation Table” as a perquisite. See “Summary Compensation Table-All Other Compensation” for a summary of the aggregate incremental costs to the Company of Mr. Costa’s personal aircraft use in 2022.2023. There are no tax gross-up payments made by the Company for any imputed income to the executive officers on perquisites or personal benefits. 2023 Proxy Statement 65
Executive Compensation — Compensation Discussiontermination and Analysischange-in-control agreementsExecutive Termination and Change-in-Control Agreements
The Company recognizes that the occurrence, or potential occurrence, of a change-in-control transaction can create uncertainty regarding the continued employment of our executive officers. This uncertainty results from the fact that many change-in-control transactions result in significant organizational changes, particularly at the senior executive level. Accordingly, the Company believes that severance protections in the context of a change-in-control transaction can play a valuable role in attracting and retaining key executive officers. In order to encourage our executive officers to remain focused on maximizing stockholder value when their prospects for continued employment following a transaction are often uncertain, we provide certain of our executive officers with severance benefits if their employment is terminated by the Company without “cause” or by the executive for “good reason” in connection with a change-in-control. Detailed information regarding these change-in-control severance agreements and the benefits they provide is included in the “Termination“Termination and Change-in-Control Arrangements” Arrangements” section of this proxy statement.The Compensation Committee evaluates the level of severance benefits payable to each executive officer, and considers these severance protections an important part of executives’ compensation and consistent with practices of peer companies. Consistent with recommendations from Aon and current market and peer company practices, the Compensation Committee has approved and the Company has entered into change-in-control severance agreements with the named executive officersNEOs and certain other executive officers that provide for payments of no more than three-times base salary plus target annual variable cash pay opportunity for the Chief Executive Officer and two-times base salary plus target annual variable cash pay opportunity for other executive officers and which do not provide for any tax “gross up” payments to executives. Compensation Recoupment “Clawback” Policyrecoupment “clawback” policy The Sarbanes-Oxley Act of 2002, Company policy, and pending provisions of the Dodd-Frank Act govern the process for reimbursement by executive officers of certain cash bonus or other incentive-based or equity-based compensation (sometimes referred to as “clawback”) received following public disclosure of an accounting restatement due to material noncompliance by the Company with any financial reporting requirements. In addition, certain outstanding awards under our Omnibus Long-Term Compensation Plans require reimbursement of certain amounts from awards following an accounting restatement due to material noncompliance by the Company with any financial reporting requirement. The
In October 2023, the Compensation Committee has adopted an additional executive clawback policy, which is compliant with the Dodd-Frank Act and requires that, if the Company is required to prepare an accounting restatement due to material noncompliance with financial reporting requirements, then any current and former executive officers who willfully committed an act(as defined in Rule 16a-1(f) of fraud, dishonesty, or recklessness that contributed to the noncomplianceExchange Act) would be required to repay the amount of incentive-based compensation paid or granted to that executive within three years before the accounting restatement that was in excess of the amount that would have been paid or granted to that executive if the restated financial statements had originally been prepared and disclosed. In addition, the Company included a provision in the equity incentive award agreements for 2024 that provides for recoupment of compensation in the event of employee misconduct. Analysis of executive compensation risk The clawback policy was adoptedbalance of short-term and long-term compensation as tools to drive individual behaviors and risk management is carefully considered in advancethe design and administration of final rulesthe Company’s overall employee compensation programs. While a significant portion of our executive compensation is performance-based, we do not believe that our philosophy or regulations (“Final Regulations”) adoptedobjectives encourage excessive risk-taking. The Compensation Committee has focused our management compensation program on aligning compensation with the long-term interests of Eastman and its stockholders, and has designed the elements of our executive compensation program to discourage management decisions that could pose inappropriate long-term risks to the Company and its stockholders. •The compensation of our executive officers is not overly-weighted toward short-term incentives. For instance, our CEO’s and the other NEOs’ target annual cash compensation opportunities for 2023, as a percentage of total annual target compensation, ranged from 20% for the CEO to an average of 31% for all other NEOs. Annual cash incentive pay awards are capped at 200% of an executive’s target award opportunity to protect against disproportionately large short-term incentives, and the Compensation Committee has broad discretion in determining the amount of the variable cash payout to each executive based upon individual performance and other factors, including whether an executive has caused Eastman to take excessive risk.
•Our stock ownership expectations are for the CEO to hold Eastman stock and stock-equivalents having a value of at least five times base annual pay and for the other executive officers to hold Eastman stock and stock-equivalents having a value of at least two-and-one-half times their respective base annual pay. We also prohibit our executive officers from entering into arrangements designed to hedge their exposure to changes in the market price of Eastman stock or from pledging Eastman stock as security or collateral for loans or in margin brokerage accounts. See “Information about Stock Ownership — Stock Ownership of Directors and Executive Officers — Director and Executive Stock Ownership Expectations; No Hedging or Pledging of Company Stock.” These policies ensure that each executive will have a significant amount of personal wealth tied to the long-term performance of Eastman stock and that their interests will remain aligned with those of our stockholders. •The largest portion of total target executive pay is long-term, stock-based incentive compensation that vests, if earned, over a period of years. The stock payout opportunity combined with a multi-year vesting period encourages our executives to focus on maximizing Eastman’s long-term performance. These awards are made annually, so executives will continue to have unvested awards that will provide value only if our business continues to be appropriately managed and performing over the long term. •A significant portion of executives’ long-term incentive compensation opportunities consist of performance share awards. Performance share award payouts are tied to how Eastman performs on certain metrics identified by the SECCompensation Committee as appropriately driving long-term stockholder value over a three-year period. This approach focuses management on sustaining the Company’s long-term performance. These awards also have overlapping performance periods, thereby discouraging excessive risk-taking in the near-term because such behavior could jeopardize the potential long-term payouts under other awards. To further ensure that there is not an incentive for excessive risk-taking, the payout of these awards has been capped at 250% of target for each of the three-year performance periods. •The variety of corporate and listing requirements to be adoptedindividual performance metrics evaluated by the New York Stock ExchangeCompensation Committee to determine various forms of long-term and short-term incentive pay (including EBIT, cash flow, OCF, return on capital, employee safety, and TSR relative to peer companies) is designed to minimize the risk that would implementexecutives will focus excessive attention on a single area of performance or performance measure. •Company policies and the incentive-basedplan under which our long-term stock-based incentive compensation recovery requirementsawards are made require repayment of the Dodd-Frank Act. The clawback policy will remain operative until it is amended to conform to the requirements that are containedcertain variable and incentive compensation amounts in the Final Regulationsevent of an accounting restatement due to material noncompliance by the Company with financial reporting requirements. See “Compensation Recoupment ‘Clawback’ Policy” above. We believe that this combination of factors and if necessary,features encourages our executives to manage our businesses and execute our strategy for growth in a prudent manner. In 2023, Aon, the clawback policy will be interpretedCompensation Committee’s independent compensation consultant, conducted a risk assessment of our compensation policies, programs, and administered consistentpractices, including executive compensation and broad-based compensation programs for all employees. Based on the results of Aon’s assessment, the Compensation Committee concluded that the Company’s compensation programs and practices are well aligned with such Final Regulations.66 2023 Proxy Statement
corporate strategy, contain appropriate risk balancing and mitigation features, and are not structured in a way that should incent risk-taking that is reasonably likely to have a material adverse effect on the Company.
Compensation — Compensation TablesCompensation Tables
tables The following Summary Compensation Table provides information concerning compensation of the individuals serving as Eastman’s Chief Executive Officer and Chief Financial Officer during 20222023 and the Company’s three other most highly compensated executive officers who were serving as executive officers at December 31, 2022 (collectively2023, who are collectively the “named executive officers” (“NEOs”). Perry Stuckey III separated from the Company without cause effective January 1, 2023, pursuant to an involuntary separation agreement.SUMMARY COMPENSATION TABLESummary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | Year | Salary | Bonus | Stock Awards1,2 | Option Awards1 | Non-Equity Incentive Plan Compensation3 | Change in Pension Value And Nonqualified Deferred Compensation Earnings4 | All Other Compensation5 | Total | Mark J. Costa CEO | 2023 | $1,360,810 | | $0 | | $11,208,310 | | $2,472,937 | | $1,597,050 | | $543,510 | | $415,273 | | $17,597,890 | | | 2022 | 1,331,575 | | 0 | | 11,996,462 | | 2,825,667 | | 0 | | 305,653 | | 608,774 | | 17,068,131 | | | 2021 | 1,319,904 | | 0 | | 9,781,398 | | 2,601,291 | | 3,458,250 | | 172,210 | | 465,808 | | 17,798,861 | | William T. McLain, Jr. EVP and CFO | 2023 | 795,266 | | 0 | | 2,773,258 | | 611,874 | | 686,400 | | 250,610 | | 88,267 | | 5,205,675 | | | 2022 | 766,118 | | 0 | | 2,844,533 | | 670,003 | | 0 | | 233,768 | | 121,925 | | 4,636,347 | | | 2021 | 715,370 | | 0 | | 2,053,574 | | 546,142 | | 1,278,900 | | 519,732 | | 77,488 | | 5,191,206 | | Brad A. Lich EVP and CCO | 2023 | 827,160 | | 0 | | 3,293,234 | | 726,595 | | 647,400 | | 294,210 | | 63,256 | | 5,851,855 | | | 2022 | 800,655 | | 0 | | 2,844,533 | | 670,003 | | 0 | | 56,417 | | 126,585 | | 4,498,193 | | | 2021 | 765,322 | | 0 | | 4,486,011 | | 661,119 | | 1,271,000 | | 60,547 | | 99,138 | | 7,343,137 | | Stephen G. Crawford EVP - Mfg. and Chief Sustainability Officer | 2023 | 677,756 | | 0 | | 2,542,144 | | 560,885 | | 450,840 | | 412,118 | | 51,335 | | 4,695,078 | | | 2022 | 652,162 | | 0 | | 2,473,688 | | 582,621 | | 0 | | 351,690 | | 102,161 | | 4,162,322 | | | 2021 | 613,398 | | 0 | | 1,837,447 | | 488,653 | | 1,001,300 | | 78,338 | | 66,675 | | 4,085,811 | | B. Travis Smith SVP - Additives & Functional Products | 2023 | 615,689 | | 0 | | 1,848,839 | | 407,916 | | 411,060 | | 171,295 | | 44,353 | | 3,499,152 | | | | | | | | | | |
(1)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Year | | | Salary | | | Bonus | | | Stock
Awards1,2 | | | Option
Awards1 | | | Non-Equity
Incentive Plan
Compensation3 | | | Change in
Pension
Value And
Nonqualified
Deferred
Compensation
Earnings4 | | | All Other
Compensation5 | | | Total | | Mark J. Costa Chief Executive Officer | | | 2022 | | | $ | 1,331,575 | | | $ | 0 | | | $ | 11,996,462 | | | $ | 2,825,667 | | | $ | 0 | | | $ | 305,653 | | | $ | 608,774 | | | $ | 17,068,131 | | | | | 2021 | | | | 1,319,904 | | | | 0 | | | | 9,781,398 | | | | 2,601,291 | | | | 3,458,250 | | | | 172,210 | | | | 465,808 | | | | 17,798,861 | | | | | 2020 | | | | 1,303,312 | | | | 0 | | | | 8,032,588 | | | | 1,471,211 | | | | 1,950,000 | | | | 538,236 | | | | 266,643 | | | | 13,561,990 | | William T. McLain, Jr. Senior Vice President and Chief Financial Officer | | | 2022 | | | | 766,118 | | | | 0 | | | | 2,844,533 | | | | 670,003 | | | | 0 | | | | 233,768 | | | | 121,925 | | | | 4,636,347 | | | | | 2021 | | | | 715,370 | | | | 0 | | | | 2,053,574 | | | | 546,142 | | | | 1,278,900 | | | | 519,732 | | | | 77,488 | | | | 5,191,206 | | | | | 2020 | | | | 647,829 | | | | 0 | | | | 1,255,168 | | | | 229,878 | | | | 638,250 | | | | 359,466 | | | | 45,285 | | | | 3,175,876 | | Brad A. Lich Executive Vice President and Chief Commercial Officer | | | 2022 | | | | 800,655 | | | | 0 | | | | 2,844,533 | | | | 670,003 | | | | 0 | | | | 56,417 | | | | 126,585 | | | | 4,498,193 | | | | | 2021 | | | | 765,322 | | | | 0 | | | | 4,486,011 | | | | 661,119 | | | | 1,271,000 | | | | 60,547 | | | | 99,138 | | | | 7,343,137 | | | | | 2020 | | | | 727,756 | | | | 0 | | | | 2,008,147 | | | | 367,805 | | | | 900,000 | | | | 327,509 | | | | 59,092 | | | | 4,390,309 | | Stephen G. Crawford Executive Vice President, Manufacturing and Chief Sustainability Officer | | | 2022 | | | | 652,162 | | | | 0 | | | | 2,473,688 | | | | 582,621 | | | | 0 | | | | 351,690 | | | | 102,161 | | | | 4,162,322 | | | | | 2021 | | | | 613,398 | | | | 0 | | | | 1,837,447 | | | | 488,653 | | | | 1,001,300 | | | | 78,338 | | | | 66,675 | | | | 4,085,811 | | | | | 2020 | | | | 564,067 | | | | 0 | | | | 1,213,326 | | | | 222,219 | | | | 510,000 | | | | 312,809 | | | | 55,214 | | | | 2,877,635 | | Perry Stuckey III Former Senior Vice President, Chief Human Resources Officer | | | 2022 | | | | 596,030 | | | | 0 | | | | 1,978,786 | | | | 466,102 | | | | 0 | | | | 0 | | | | 1,201,014 | | | | 4,241,932 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) Grant date fair value of awards of performance shares (reported in the “Stock Awards” column) and options (reported in the “Option Awards” column) made in the year indicated, computed in accordance with FASB ASC Topic 718. The grant date fair values of performance share awards uses predictive financial models of Companythe Company's relative stock price and financial performance, including assumptions of potential of achievement of relative TSR and return on capital targets underlying the awards, calculated in accordance with FASB ASC Topic 718 based on a multi-factor Monte Carlo simulation. See note 18 to the Company’s consolidated financial statements in the Annual Report to Stockholders for 20222023 mailed and delivered electronically with this proxy statement for a description of the assumptions made in the valuation of 20222023 stock awards under FASB ASC Topic 718. For more information about stock and option awards, see “2022“2023 Grants of Plan-Based Awards”Awards” and “2022“2023 Option Exercises and Stock Vested”Vested” tables.
(2)(2) Value of contingent stock awards (“performance shares” and “restricted stock units”) with future payment subject to satisfaction of continued employment for specified time periods and the achievement of specified performance-based conditions. Performance share awards were made for performance periods beginning January 1, 2020 and ending December 31, 2022, beginning January 1, 2021 and ending December 31, 2023, and beginning January 1, 2022
2023 Proxy Statement 67
Executive Compensation — Compensation Tables
and ending December 31, 2024, and beginning January 1, 2023 and ending December 31, 2025, respectively. The potential maximum grant date value of the performance share awards assuming the highest level of performance, computed in accordance with FASB ASC Topic 718, were: Mr. Costa (2020 — $10,790,335, 2021(2021 — $12,727,966, 2022 — $13,879,095)$13,879,095, 2023 — $13,120,888); Mr. McLain (2020 — $1,686,091, 2021(2021 — $2,672,196, 2022 — $3,290,919)$3,290,919, 2023 — $3,246,482); Mr. Lich (2020 — $2,697,584, 2021(2021 — $3,234,856, 2022 — $3,290,919)$3,290,919, 2023 — $3,855,231); Mr. Crawford (2020 — $1,629,885,( 2021 — $2,390,964, 2022 — $2,861,794);$2,861,794, 2023 — $2,975,861 ); and Mr. Stuckey (2022Smith (2023 — $2,289,305). $2,164,321 ).(3)Cash payments made in the following year for performance in the year indicated under the UPP. As described in the “Compensation Discussion and Analysis” preceding these tables and in the “2023 Grants of Plan-Based Awards” table below, the UPP is the Company’s annual incentive pay program under which a portion of the total annual compensation of executive officers and other management-level employees is dependent upon corporate, organizational, and individual performance. | (3) | | | | | | | | | Cash payments made in the following year for performance in the year indicated under the UPP. As described in the “
2024Compensation Discussion and Analysis Proxy Statement” preceding these tables and in the “2022 Grants of Plan-Based Awards” table below, the UPP is the Company’s annual incentive pay program under which a portion of the total annual compensation of executive officers and other management-level employees is dependent upon corporate, organizational, and individual performance. | 73 |
| (4) | “Change in Pension Value” is the aggregate change in actuarial present value of the named executive officer’s accumulated benefit under all defined benefit and actuarial retirement plans, which are the Company’s |
tax-qualifiedExecutive compensation defined benefit pension plan (the Eastman Retirement Assistance Plan, or “ERAP”) and unfunded, nonqualified retirement plans supplemental to the ERAP that provide benefits in excess of those allowed under the ERAP (the Eastman Unfunded Retirement Income Plan, or “URIP”, and the Eastman Excess Retirement Income Plan, or “ERIP”). These changes in present value are not directly related to final payout potential, and can vary significantly year-over-year based on (i) promotions and corresponding changes in salary; (ii) other one-time adjustments to salary or other reasons; (iii) actual age versus predicted age at retirement; (iv) the interest (or “discount”) rate used to determine present value of benefit; and (v) other relevant factors. A decrease in the discount rate results in an increase in the present value of the accumulated benefit without any increase in the benefits payable to the named executive officer at retirement and an increase in the discount rate has the opposite effect. |
(4)“Change in Pension Value” is the aggregate change in actuarial present value of the NEO’s accumulated benefit under all defined benefit and actuarial retirement plans, which are the Company’s tax-qualified defined benefit pension plan (the Eastman Retirement Assistance Plan, or “ERAP”) and unfunded, nonqualified retirement plans supplemental to the ERAP that provide benefits in excess of those allowed under the ERAP (the Eastman Unfunded Retirement Income Plan, or “URIP”, and the Eastman Excess Retirement Income Plan, or “ERIP”). These changes in present value are not directly related to final payout potential, and can vary significantly year-over-year based on (i) promotions and corresponding changes in salary; (ii) other one-time adjustments to salary or other reasons; (iii) actual age versus predicted age at retirement; (iv) the interest (or “discount”) rate used to determine present value of benefit; and (v) other relevant factors. A decrease in the discount rate results in an increase in the present value of the accumulated benefit without any increase in the benefits payable to the NEOs at retirement and an increase in the discount rate has the opposite effect. The aggregate increase in actuarial value of the pension plans is computed as of the same pension plan measurement date used for financial statement reporting purposes with respect to the Company’s financial statements for 2023, 2022, 2021, and 2020.2021. The actuarial present value calculations are based on prescribed Internal Revenue Service (“IRS”) mortality tables and assume individual compensation and service through December 31, 2022,2023, December 31, 2021,2022, and December 31, 2020,2021, respectively, with benefit commencement at the normal retirement age of 65. Benefits are discountedwere discounted using a 5.22% discount rate for the ERAP and 5.21% for the ERIP/URIP for the 2023 calculation, a 5.58% discount rate for both the ERAP and the ERIP/URIP for the 2022 calculation, usingcalculation, and a 2.91% discount rate for the ERAP and a 2.87% discount rate for the ERIP/URIP for the 2021 calculation, and using a 2.52% discount rate for the ERAP and a 2.45% discount rate for the ERIP/URIP for the 2020 calculation. See the “Pension Benefits”“Pension Benefits” table for additional information about the named executive officers’NEOs' participation in and benefits under the pension plans. “Nonqualified Deferred Compensation Earnings” refers to above-market or preferential earnings on compensation that is deferred on a basis that is not tax-qualified, including such earnings on amounts in nonqualified defined contribution plans. The Company maintains the Executive Deferred Compensation Plan (the “EDCP”),EDCP, an unfunded, nonqualified deferred compensation plan into which executive officers can defer compensation until retirement or termination from the Company. For 2023, 2022, 2021, and 20202021, there were no preferential or above-market earnings on amounts in individual EDCP accounts (defined as appreciation in value and dividend equivalents earned at a rate higher than appreciation in value and dividends on common stock and interest on amounts deferred at a rate exceeding 120% of the federal long termlong-term rate). See the “2022“2023 Nonqualified Deferred Compensation”Compensation” table for additional information about the named executive officers’NEOs’ EDCP accounts. (5)(5) | The items of “All Other Compensation” reported for the NEOs for the named executive officers for 2022 are identified and quantified below: |
| • | | Annual Company contributions to defined contribution plans. The amounts reported for 2022 are the total annual Company contributions to the accounts of Messrs. Costa ($239,163), McLain ($102,157), Lich ($103,396), Crawford ($82,527), and Stuckey ($71,748) in the Eastman Investment Plan, a 401(k) retirement plan, and in the EDCP. Contributions to the Eastman Investment Plan equaled $15,250 for each named executive officer, with the remaining
|
68 2023 Proxy Statement are identified and quantified below:
•Annual Company contributions to defined contribution plans. The amounts reported for 2023 are the total annual Company contributions to the accounts of Messrs. Costa ($67,711), McLain ($39,664), Lich ($41,164), Crawford ($33,731), and Smith ($30,731) in the Eastman Investment Plan, a 401(k) retirement plan, and in the EDCP. Contributions to the Eastman Investment Plan equaled $16,500 for each NEO, with the remaining Company contributions to their respective EDCP accounts. See the “2023 Nonqualified Deferred Compensation” table for additional information about Company contributions into the NEOs’ EDCP accounts. Annual Company contributions were based upon actual compensation paid during the calendar year.
•Perquisites and other personal benefits. The amounts reported for 2023 are the aggregate values, based on the incremental cost to the Company, of perquisites and personal benefits to the NEOs (described in “Compensation Discussion and Analysis — Executive Compensation — Compensation TablesPerquisites and Personal Benefits”) as quantified in the following table: | Company contributions to their respective EDCP accounts. See the “2022 Nonqualified Deferred Compensation” table for additional information about Company contributions into the named executive officers’ EDCP accounts. Annual Company contributions were based upon actual compensation paid during the calendar year.
|
| • | | Amounts included for Perry Stuckey III. In addition to the perquisites listed in the table below, Mr. Stuckey’s involuntary separation agreement provides for: (i) payments equal to one year’s base salary ($600,000); (ii) an amount equivalent to his annual target bonus ($510,000); and (iii) direct payment or reimbursement of up to 12 months of COBRA premiums.
|
| • | | Perquisites and other personal benefits. The amounts reported for 2022 are the aggregate values, based on the incremental cost to the Company, of perquisites and personal benefits to the named executive officers (described in “Compensation Discussion and Analysis — Executive Perquisites and Personal Benefits”) as quantified in the following table:
|
Perquisites and Other Personal Benefits
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-Business
Use of
Corporate
Aircraft
($) | | | Personal
Umbrella
Liability
Insurance
($) | | | Home
Security
System
($) | | | Financial
Counseling
($) | | | Supplemental
Long-Term
Disability
Insurance
($) | | M. J. Costa | | $ | 303,583 | | | $ | 6,598 | | | $ | 40,763 | | | $ | 0 | | | $ | 18,667 | | W.T. McLain, Jr. | | | 0 | | | | 1,669 | | | | 0 | | | | 9,000 | | | | 9,099 | | B. A. Lich | | | 0 | | | | 1,669 | | | | 516 | | | | 9,000 | | | | 12,004 | | S. G. Crawford | | | 0 | | | | 1,669 | | | | 537 | | | | 9,000 | | | | 8,428 | | P. Stuckey III | | | 0 | | | | 1,669 | | | | 1,365 | | | | 9,000 | | | | 7,232 | |
| | | | | | | | | | | | | | | | | | | Name | Non-Business
Use of
Corporate
Aircraft
($) | Personal
Umbrella
Liability
Insurance
($) | Home
Security
System
($) | Financial
Counseling
($) | Supplemental
Long-Term
Disability
Insurance
($) | | M. J. Costa | $290,169 | | $1,260 | | $42,482 | | $0 | | $13,651 | | | W. T. McLain, Jr. | 0 | | 1,908 | | 31,162 | | 9,000 | | 6,533 | | | B. A. Lich | 0 | | 1,908 | | 1,896 | | 9,000 | | 9,288 | | | S. G. Crawford | 0 | | 1,260 | | 1,370 | | 9,000 | | 5,974 | | | B. T. Smith | 0 | | 1,908 | | 0 | | 9,000 | | 2,714 | |
The aggregate incremental cost to the Company for operating the corporate aircraft for non-business flights, including non-business added destination portions of business flights, is based upon calculation of direct operating costs including fuel, fuel additives, lubricants, maintenance, reserves for engine restoration and overhaul, landing and parking expenses, crew expenses, and miscellaneous supplies and catering (including for any “deadhead” segments of such flights when the aircraft flies empty before picking up or dropping off the executive). In 2022, inflation impacted the variable hourly operating costs of corporate aircraft, including fuel, maintenance cost, airport fees, parking, and crew travel costs. Fuel costs per hour increased more than 30% from 2021. The aggregate incremental cost to the Company for flying additional passengers on business flights is a de minimis amount, and no amount is included for any such flights for purposes of determining “All Other Compensation”.Compensation.” The aggregate incremental costs to the Company of the umbrella liability insurance, the home security system, financial counseling and supplemental long-term disability insurance are the actual amounts paid by the Company. 2023 Proxy Statement 69
Executive Compensation — Compensation Tables
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The following table provides certain information regarding the 20222023 award opportunities under the UPP and equity incentive awards made in 20222023 to the individuals named in the Summary“Summary Compensation Table. 2022”
2023 Grants of Plan-Based Awards | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | Approval Date(1) | Grant Date(2) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(3) | | Estimated Future Payouts Under Equity Incentive Plan Awards(4) | All Other Option Awards: Number of Securities Underlying Options
(#)(5) | Exercise or Base Price of Option Awards ($/Share)(6) | Grant Date Fair Value of Stock and Option Awards(7) | Threshold
($) | Target
($) | Maximum
($) | | Threshold (#) | Target
(#) | Maximum
(#) | | M. J. Costa | | 1/1/2023 | 511,875 | | 2,047,500 | | 4,095,000 | | | | | | | | | | 2/13/2023 | 1/1/2023 | | | | | 19,258 | | 89,868 | | 222,532 | | | | $11,208,310 | | | 2/13/2023 | 2/24/2023 | | | | | | | | 114,118 | | $83.84 | | 2,472,937 | | | W.T. McLain, Jr. | | 1/1/2023 | 200,000 | | 800,000 | | 1,600,000 | | | | | | | | | | 2/13/2023 | 1/1/2023 | | | | | 4,764 | | 22,236 | | 55,061 | | | | 2,773,258 | | | 2/13/2023 | 2/24/2023 | | | | | | | | 28,236 | | 83.84 | | 611,874 | | | B. A. Lich | | 1/1/2023 | 207,500 | | 830,000 | | 1,660,000 | | | | | | | | | | 2/13/2023 | 1/1/2023 | | | | | 5,659 | | 26,405 | | 65,385 | | | | 3,293,234 | | | 2/13/2023 | 2/24/2023 | | | | | | | | 33,530 | | 83.84 | | 726,595 | | | S. G. Crawford | | 1/1/2023 | 144,500 | | 578,000 | | 1,156,000 | | | | | | | | | | 2/13/2023 | 1/1/2023 | | | | | 4,367 | | 20,383 | | 50,471 | | | | 2,542,144 | | | 2/13/2023 | 2/24/2023 | | | | | | | | 25,883 | | 83.84 | | 560,885 | | | B.T. Smith | | 1/1/2023 | 131,750 | | 527,000 | | 1,054,000 | | | | | | | | | | 2/13/2023 | 1/1/2023 | | | | | 3,177 | | 14,824 | | 36,707 | | | | 1,848,839 | | | 2/13/2023 | 2/24/2023 | | | | | | | | 18,824 | | 83.84 | | 407,916 | |
(1)The Compensation Committee made stock option grants and performance share awards for the 2023 - 2025 performance period in February 2023.
(2)Performance share awards for 2023 - 2025 were effective as of the beginning of the performance period on January 1, 2023. The UPP award opportunities relate to 2023 performance. (3)Estimated possible payouts for 2023 under the UPP are as follows: the “Threshold” column reflects the 25% payout level if performance is at minimum of 40% of target levels. The “Target” column reflects the 100% payout level if performance is at 100% of target levels. The “Maximum” column reflects the 200% payout level if performance is at or above 115% of target levels for specified above-goal performance. Based on the Company’s performance against pre-established financial measures for 2023, the Compensation Committee approved a cash payout pool of 78% for the 2023 UPP. See “Compensation Discussion and Analysis” for a description of the UPP. (4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Approval
Date (1) | | | Grant Date (2) | | | Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards(3) | | | | | | Estimated Future
Payouts Under Equity
Incentive Plan Awards(4) | | | All Other
Option Awards:
Number of
Securities
Underlying
Options
(#)(5) | | | Exercise or
Base Price
of Option
Awards
($/Share)
(6) | | | Grant Date
Fair Value of
Stock and
Option
Awards (7) | | | | Threshold
($) | | | Target
($) | | | Maximum
($) | | | | | | Threshold
(#) | | | Target
(#) | | | Maximum
(#) | | M. J. Costa | | | | | | | 1/1/2022 | | | $ | 993,750 | | | $ | 1,987,500 | | | $ | 3,975,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/21/2022 | | | | 1/1/2022 | | | | | | | | | | | | | | | | | | | | 13,588 | | | | 63,408 | | | | 157,012 | | | | | | | | | | | $ | 11,996,462 | | | | | | 2/21/2022 | | | | 2/25/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 100,665 | | | $ | 120.80 | | | | 2,825,667 | | W.T. McLain, Jr. | | | | | | | 1/1/2022 | | | | 387,500 | | | | 775,000 | | | | 1,550,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/21/2022 | | | | 1/1/2022 | | | | | | | | | | | | | | | | | | | | 3,222 | | | | 15,035 | | | | 37,230 | | | | | | | | | | | | 2,844,533 | | | | | | 2/21/2022 | | | | 2/25/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 23,869 | | | | 120.80 | | | | 670,003 | | B. A. Lich | | | | | | | 1/1/2022 | | | | 402,500 | | | | 805,000 | | | | 1,610,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/21/2022 | | | | 1/1/2022 | | | | | | | | | | | | | | | | | | | | 3,222 | | | | 15,035 | | | | 37,230 | | | | | | | | | | | | 2,844,533 | | | | | | 2/21/2022 | | | | 2/25/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 23,869 | | | | 120.80 | | | | 670,003 | | S. G. Crawford | | | | | | | 1/1/2022 | | | | 280,500 | | | | 561,000 | | | | 1,122,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/21/2022 | | | | 1/1/2022 | | | | | | | | | | | | | | | | | | | | 2,801 | | | | 13,075 | | | | 32,375 | | | | | | | | | | | | 2,473,688 | | | | | | 2/21/2022 | | | | 2/25/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 20,756 | | | | 120.80 | | | | 582,621 | | P. Stuckey III | | | | | | | 1/1/2022 | | | | 255,000 | | | | 510,000 | | | | 1,020,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/21/2022 | | | | 1/1/2022 | | | | | | | | | | | | | | | | | | | | 2,241 | | | | 10,459 | | | | 25,899 | | | | | | | | | | | | 1,978,786 | | | | | | 2/21/2022 | | | | 2/25/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 16,605 | | | | 120.80 | | | | 466,102 | |
(5)Nonqualified stock options granted during 2023. Options granted in 2023 have an exercise price equal to the closing price on the New York Stock Exchange of the underlying common stock on the date of grant. The stock options vest and become exercisable in one-third increments on each of the first three anniversaries of the grant date, with acceleration of vesting if, following a “change in control”, (i) the grantee’s employment is terminated other than due to death, disability, cause, resignation, or retirement or (ii) the award cannot be continued or replaced with an award for another public company stock because Eastman common stock (or the stock of the successor company) ceases to be publicly traded in a national securities market. For more information about these “change in control” provisions, see “Omnibus Stock Compensation Plans” under “Termination and Change-in-Control Arrangements.” Stock options generally expire ten years from the date of grant. Upon termination by reason of death, disability, or retirement, the stock options remain exercisable for the lesser of five years following the date of termination or the expiration date. If an employee resigns, the stock options remain exercisable for the lesser of 90 days or the expiration date. Stock options not previously exercised are canceled and forfeited upon termination for cause. See “Summary Compensation Table,” “Outstanding Equity Awards at 2023 Year-End” and “2023 Option Exercises and Stock Vested” tables, and “Termination and Change-in-Control Arrangements.” (6)Per-share exercise prices of the stock options granted in 2023. The exercise price is the closing price of common stock on the New York Stock Exchange on the grant date. (7)Grant date fair value of each stock-based award was computed in accordance with FASB ASC Topic 718. | (1) | | | | | | | | | The Compensation Committee made stock option grants and performance share awards for the 2022-2024 performance period in February 2022.
2024 Proxy Statement | 75 |
| (2) | Performance share awards for 2022-2024 were effective as of the beginning of the performance period on January 1, 2022. The UPP award opportunities relate to 2022 performance.
| | Executive compensation |
(3) | Estimated possible payouts for 2022 under the UPP. The “Threshold” column reflects the 50% payout level if performance is at minimum of 80% of target levels. The “Target” column reflects the 100% payout level if performance is at 100% of target levels. The “Maximum” column reflects the 200% payout level if performance is at or above 115% of target levels for specified above-goal performance. Based on the Company’s performance against pre-established financial measures for 2022, the Compensation Committee did not approve a payout pool for the 2022 UPP. See “Compensation Discussion and Analysis” for a description of the UPP.
|
(4) | Estimated future share payouts at threshold, target, and maximum levels for performance shares for the 2022-2024 performance period, assuming performance conditions are satisfied. See also “Compensation Discussion and Analysis” for a description of how performance share payouts are determined, “Outstanding Equity Awards at 2022 Year-End” table, and “Termination and Change-in-Control Arrangements”.
|
(5) | Nonqualified stock options granted during 2022. Options granted in 2022 have an exercise price equal to the closing price on the New York Stock Exchange of the underlying common stock on the date of grant. The stock options vest and become exercisable in one-third increments on each of the first three anniversaries of the grant date, with acceleration of vesting if, following a “change in control”, (i) the grantee’s employment is terminated other than due to death, disability, cause, resignation, or retirement or (ii) the award cannot be continued or replaced with an award
|
70 2023 Proxy Statement
Executive Compensation — Compensation Tables
| for another public company stock because Eastman common stock (or the stock of the successor company) ceases to be publicly traded in a national securities market. For more information about these “change in control” provisions, see “Omnibus Stock Compensation Plans” under “Termination and Change-in-Control Arrangements”. Stock options generally expire ten years from the date of grant. Upon termination by reason of death, disability, or retirement, the stock options remain exercisable for the lesser of five years following the date of termination or the expiration date. If an employee resigns, the stock options remain exercisable for the lesser of 90 days or the expiration date. Stock options not previously exercised are canceled and forfeited upon termination for cause. See “Summary Compensation Table”, “Outstanding Equity Awards at 2022 Year-End” and “2022 Option Exercises and Stock Vested” tables, and “Termination and Change-in-Control Arrangements”.
|
(6) | Per-share exercise prices of the stock options granted in 2022. The exercise price is the closing price of common stock on the New York Stock Exchange on the grant date.
|
(7) | Grant date fair value of each stock-based award computed in accordance with FASB ASC Topic 718.
|
2023 Proxy Statement 71
Executive Compensation — Compensation Tables
The following table provides information regarding outstanding option grants and stock awards as of December 31, 2022,2023, held by individuals named in the Summary“Summary Compensation Table. ” Outstanding Equity Awards at 20222023 Fiscal Year-End 
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Options | | | | | | | | | Stock Awards | | | Name | | Number of
Securities
Underlying
Unexercised
Options(#)
Exercisable | | | Number of
Securities
Underlying
Unexercised
Options(#)
Unexercisable | | | Footnote | | Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unearned
Options (#) | | | Option
Exercise
Price ($) | | | Option
Expiration
Date | | | | | | Number of
Shares
or Units
of Stock
That
Have Not
Vested (#) | | | Footnote | | | Market Value
of Shares
or Units
of Stock That
Have Not
Vested ($)(1) | | | Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights
That
Have Not
Vested (#)(2) | | | Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares,
Units or
Other Rights
That
Have Not
Vested ($)(3) | | M. J. Costa | | | 57,580 | | | | | | | | | | | | | $ | 87.43 | | | | 2/27/2024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 102,390 | | | | | | | | | | | | | | 74.46 | | | | 2/26/2025 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 161,493 | | | | | | | | | | | | | | 65.16 | | | | 2/25/2026 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 167,959 | | | | | | | | | | | | | | 80.25 | | | | 2/27/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 185,310 | | | | | | | | | | | | | | 104.21 | | | | 2/25/2028 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 201,343 | | | | | | | | | | | | | | 82.69 | | | | 2/27/2029 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 123,839 | | | | 61,920 | | | (4) | | | | | | | 61.51 | | | | 2/27/2030 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 43,770 | | | | 87,542 | | | (5) | | | | | | | 109.26 | | | | 2/25/2031 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 100,665 | | | (6) | | | | | | | 120.80 | | | | 2/24/2032 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 71,558 | | | $ | 5,827,684 | | W. T. McLain, Jr. | | | 1,963 | | | | | | | | | | | | | | 74.46 | | | | 2/26/2025 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,013 | | | | | | | | | | | | | | 65.16 | | | | 2/25/2026 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,618 | | | | | | | | | | | | | | 80.25 | | | | 2/27/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 11,850 | | | | | | | | | | | | | | 80.25 | | | | 2/27/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5,167 | | | | | | | | | | | | | | 104.21 | | | | 2/25/2028 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5,513 | | | | | | | | | | | | | | 82.69 | | | | 2/27/2029 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 19,350 | | | | 9,675 | | | (4) | | | | | | | 61.51 | | | | 2/27/2030 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 9,189 | | | | 18,380 | | | (5) | | | | | | | 109.26 | | | | 2/25/2031 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 23,869 | | | (6) | | | | | | | 120.80 | | | | 2/24/2032 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 15,541 | | | $ | 1,265,659 | | B.A. Lich | | | 9,423 | | | | | | | | | | | | | | 87.43 | | | | 2/27/2024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 23,038 | | | | | | | | | | | | | | 74.46 | | | | 2/26/2025 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 36,377 | | | | | | | | | | | | | | 65.16 | | | | 2/25/2026 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 38,760 | | | | | | | | | | | | | | 80.25 | | | | 2/27/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 44,924 | | | | | | | | | | | | | | 104.21 | | | | 2/25/2028 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 50,336 | | | | | | | | | | | | | | 82.69 | | | | 2/27/2029 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 30,960 | | | | 15,480 | | | (4) | | | | | | | 61.51 | | | | 2/27/2030 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 11,124 | | | | 22,249 | | | (5) | | | | | | | 109.26 | | | | 2/25/2031 | | | | | | | | 11,922 | | | | (7 | ) | | $ | 970,928 | | | | | | | | | | | | | — | | | | 23,869 | | | (6) | | | | | | | 120.80 | | | | 2/24/2032 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 17,863 | | | $ | 1,454,763 | | S. G. Crawford | | | 10,504 | | | | | | | | | | | | | | 74.46 | | | | 2/26/2025 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 9,695 | | | | | | | | | | | | | | 65.16 | | | | 2/25/2026 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 18,304 | | | | | | | | | | | | | | 80.25 | | | | 2/27/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 22,462 | | | | | | | | | | | | | | 104.21 | | | | 2/25/2028 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 28,764 | | | | | | | | | | | | | | 82.69 | | | | 2/27/2029 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 18,705 | | | | 9,353 | | | (4) | | | | | | | 61.51 | | | | 2/27/2030 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 8,222 | | | | 16,445 | | | (5) | | | | | | | 109.26 | | | | 2/25/2031 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 20,756 | | | (6) | | | | | | | 120.80 | | | | 2/24/2032 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 13,792 | | | $ | 1,123,220 | |
72 2023 Proxy Statement
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | Number of
Securities
Underlying
Unexercised
Options(#)
Exercisable | Number of
Securities
Underlying
Unexercised
Options(#)
Unexercisable | Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unearned
Options (#) | Option
Exercise
Price
($) | Option
Expiration
Date | Number of
Shares
or Units
of Stock
That
Have Not
Vested
(#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(2) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | | M. J. Costa | 57,580 | | | | $87.43 | | 2/27/2024 | | | | | | 102,390 | | | | 74.46 | | 2/26/2025 | | | | | | 161,493 | | | | 65.16 | | 2/25/2026 | | | | | | 167,959 | | | | 80.25 | | 2/27/2027 | | | | | | 185,310 | | | | 104.21 | | 2/25/2028 | | | | | | 201,343 | | | | 82.69 | | 2/27/2029 | | | | | | 185,759 | | | | 61.51 | | 2/27/2030 | | | | | | 87,541 | | 43,771(4) | | 109.26 | | 2/25/2031 | | | | | | 33,555 | | 67,110(5) | | 120.80 | | 2/24/2032 | | | | | | - | | 114,118(6) | | 83.84 | | 2/23/2033 | | | | | | | | | | | | | 127,007 | | $11,407,769 | | | W. T. McLain, Jr. | 1,963 | | | | 74.46 | | 2/26/2025 | | | | | | 3,013 | | | | 65.16 | | 2/25/2026 | | | | | | 3,618 | | | | 80.25 | | 2/27/2027 | | | | | | 11,850 | | | | 80.25 | | 2/27/2027 | | | | | | 5,167 | | | | 104.21 | | 2/25/2028 | | | | | | 5,513 | | | | 82.69 | | 2/27/2029 | | | | | | 29,025 | | | | 61.51 | | 2/27/2030 | | | | | | 18,379 | | 9,190(4) | | 109.26 | | 2/25/2031 | | | | | | 7,956 | | 15,913(5) | | 120.80 | | 2/24/2032 | | | | | | - | | 28,236(6) | | 83.84 | | 2/23/2033 | | | | | | | | | | | | | 31,042 | | 2,788,192 | | | B.A. Lich | 9,423 | | | | 87.43 | | 2/27/2024 | | | | | | 23,038 | | | | 74.46 | | 2/26/2025 | | | | | | 36,377 | | | | 65.16 | | 2/25/2026 | | | | | | 38,760 | | | | 80.25 | | 2/27/2027 | | | | | | 44,924 | | | | 104.21 | | 2/25/2028 | | | | | | 50,336 | | | | 82.69 | | 2/27/2029 | | | | | | 46,440 | | | | 61.51 | | 2/27/2030 | | | | | | 22,248 | | 11,125(4) | | 109.26 | | 2/25/2031 | 11,922(7) | 1,070,834 | | | | | 7,956 | | 15,913(5) | | 120.80 | | 2/24/2032 | | | | | | - | | 33,530(6) | | 83.84 | | 2/23/2033 | | | 35,211 | | 3,162,652 | | | S. G. Crawford | 10,504 | | | | 74.46 | | 2/26/2025 | | | | | | 9,695 | | | | 65.16 | | 2/25/2026 | | | | | | 18,304 | | | | 80.25 | | 2/27/2027 | | | | | | 22,462 | | | | 104.21 | | 2/25/2028 | | | | | | 28,764 | | | | 82.69 | | 2/27/2029 | | | | | | 28,058 | | | | 61.51 | | 2/27/2030 | | | | | | 16,444 | | 8,223(4) | | 109.26 | | 2/25/2031 | | | | | | 6,918 | | 13,838(5) | | 120.80 | | 2/24/2032 | | | | | | - | | 25,883(6) | | 83.84 | | 2/23/2033 | | | | | | | | | | | | | 28,041 | | 2,518,643 | | | B. T. Smith | 2,639 | | | | 87.43 | | 2/27/2024 | | | | | | 7,520 | | | | 104.21 | | 2/25/2028 | | | | | | 2,862 | | | | 82.69 | | 2/27/2029 | | | | | | 10,289 | | | | 72.92 | | 10/14/2029 | | | | | | 4,794 | | | | 61.51 | | 2/27/2030 | | | | | | 3,738 | | 1,870(4) | | 109.26 | | 2/25/2031 | | | | | | 1,726 | | 3,452(5) | | 120.80 | | 2/24/2032 | | | | | | - | | 18,824(6) | | 83.84 | | 2/23/2033 | | | | | | | | | | | | | 16,735 | | 1,503,138 | |
Executive Compensation — Compensation Tables
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Options | | | | | | | | | Stock Awards | | | Name | | Number of
Securities
Underlying
Unexercised
Options(#)
Exercisable | | | Number of
Securities
Underlying
Unexercised
Options(#)
Unexercisable | | | Footnote | | Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unearned
Options (#) | | | Option
Exercise
Price ($) | | | Option
Expiration
Date | | | | | | Number of
Shares
or Units
of Stock
That
Have Not
Vested (#) | | | Footnote | | | Market Value
of Shares
or Units
of Stock That
Have Not
Vested ($)(1) | | | Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights
That
Have Not
Vested (#)(2) | | | Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares,
Units or
Other Rights
That
Have Not
Vested ($)(3) | | P. Stuckey III | | | 8,376 | | | | | | | | | | | | | | 87.43 | | | | 2/27/2024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 13,652 | | | | | | | | | | | | | | 74.46 | | | | 2/26/2025 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 17,227 | | | | | | | | | | | | | | 80.25 | | | | 2/27/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 20,216 | | | | | | | | | | | | | | 104.21 | | | | 2/25/2028 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 26,367 | | | | | | | | | | | | | | 82.69 | | | | 2/27/2029 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 17,092 | | | | 8,547 | | | (4) | | | | | | | 61.51 | | | | 2/27/2030 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7,738 | | | | 15,478 | | | (5) | | | | | | | 109.26 | | | | 2/25/2031 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 16,605 | | | (6) | | | | | | | 120.80 | | | | 2/24/2032 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 12,425 | | | $ | 1,011,892 | |
| (1) | Market value of shares of common stock payable under restricted stock units, based on the per share closing price of the common stock on the New York Stock Exchange on December 30, 2022, the last trading day of 2022.
| | Executive compensation |
(1)Market value of shares of common stock payable under restricted stock units, based on the per share closing price of the common stock on the New York Stock Exchange on December 29, 2023, the last trading day of 2023. (2)Number of shares of common stock to be paid under outstanding performance share awards, based upon the higher of threshold or actual performance through 2023, for 2022-2024 and 2023-2025 performance periods. See “Compensation Discussion and Analysis” for a description of how performance share payouts are determined. If earned, the awards will be paid after the end of the performance period in unrestricted shares of common stock (subject to proration if the executive’s employment is terminated during the performance period because of retirement, death, or disability, and to cancellation in the event of resignation or termination for cause). (3)Value of shares of common stock to be paid under outstanding performance share awards, based upon higher of threshold or actual performance through 2023, for 2022-2024 and 2023-2025 performance periods, assuming a market value equal to the closing price of the Company’s common stock on the New York Stock Exchange on December 29, 2023. Any payments under these performance share awards will be determined based on actual performance through 2024 and 2025, respectively, and not on any interim measure of performance. (4)Option became exercisable as to the remaining shares on February 26, 2024. (5)Option became exercisable as to one-half of the shares on February 25, 2024, and becomes exercisable for remaining shares on February 25, 2025. (6)Option became exercisable as to one-third of the shares on February 24, 2024, and becomes exercisable for remaining shares in equal amounts on February 24, 2025 and February 24, 2026. (7)Restricted stock units, representing the right to receive unrestricted shares of common stock on March 1, 2024, the third anniversary of the initial award date, subject to continued employment (other than termination by reason of death or disability) and, in the case of Mr. Lich, satisfactory performance, as determined in the sole discretion of the Compensation Committee based upon the evaluation and recommendation of the Chief Executive Officer, in leadership of (a) financial performance of business segments for which he has executive management responsibility; (b) effective implementation of ongoing changes of businesses and operations to improve cost structure, increase investment in growth, and strengthen execution capabilities, including specific initiatives to transform operations, work processes and systems and business structure alignment, scale, and integration; (c) achievement of Circular Economy initiatives milestones; and (d) senior management leadership development and succession planning for business segments for which he has executive management responsibility. An amount equal to cash dividends paid during the period that the restricted stock units are outstanding and unvested with respect to shares underlying restricted stock units which vest is payable in cash on the vesting date of the restricted stock units.
| (2) | | | | | | | | | Number of shares of common stock to be paid under outstanding performance share awards, based upon the higher of threshold or actual performance through 2022, for 2021-2023 and 2022-2024 performance periods. See “
2024Compensation Discussion and Analysis Proxy Statement” for a description of how performance share payouts are determined. If earned, the awards will be paid after the end of the performance period in unrestricted shares of common stock (subject to proration if the executive’s employment is terminated during the performance period because of retirement, death, or disability, and to cancellation in the event of resignation or termination for cause). Mr. Stuckey’s payout will be prorated for period of employment. | 77 |
| (3) | Value of shares of common stock to be paid under outstanding performance share awards, based upon higher of threshold or actual performance through 2022, for 2021-2023 and 2022-2024 performance periods, assuming a market value equal to the closing price of the Company’s common stock on the New York Stock Exchange on December 30, 2022. Any payments under these performance share awards will be determined based on actual performance through 2023 and 2024, respectively, and not on any interim measure of performance.
| | Executive compensation |
(4) | Option became exercisable as to the remaining shares on February 28, 2023.
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(5) | Option became exercisable as to one-half of the shares on February 26, 2023, and becomes exercisable for remaining shares on February 26, 2024.
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(6) | Option became exercisable as to one-third of the shares on February 25, 2023, and becomes exercisable for remaining shares in equal amounts on February 25, 2024 and February 25, 2025.
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(7) | Restricted stock units, representing the right to receive unrestricted shares of common stock on March 1, 2024, the third anniversary of the initial award date, subject to continued employment (other than termination by reason of death or disability) and, in the case of Mr. Lich, satisfactory performance, as determined in the sole discretion of the Compensation Committee based upon the evaluation and recommendation of the Chief Executive Officer, in leadership of (a) financial performance of business segments for which he has executive management responsibility; (b) effective implementation of ongoing changes of businesses and operations to improve cost structure, increase investment in growth, and strengthen execution capabilities, including specific initiatives to transform operations, work processes and systems and business structure alignment, scale, and integration; (c) achievement of Circular Economy initiatives milestones; and (d) senior management leadership development and succession planning for business segments for which he has executive management responsibility. An amount equal to cash dividends paid during the period that the restricted stock units are outstanding and unvested with respect to shares underlying restricted stock units which vest is payable in cash on the vesting date of the restricted stock units.
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2023 Proxy Statement 73
Executive Compensation — Compensation Tables
The following table summarizes aggregate values realized upon exercise of options by, and payouts of vested stock for 20222023 to, the individuals named in the Summary“Summary Compensation Table. 2022”
2023 Option Exercises and Stock Vested | | | | | | | | | | | | | | | | | | | | Options | | Stock Awards(1) | | Name | # of Shares
Acquired on
Exercise | $ Value
Realized on
Exercise | | # of Shares
Acquired on
Vesting | $ Value Realized on Vesting | | M. J. Costa | 0 | | $0 | | 52,535 | | $4,314,174 | | | W. T. McLain, Jr. | 0 | | 0 | | | 11,030 | | 905,784 | | | B. A. Lich | 0 | | 0 | | | 13,352 | | 1,096,466 | | | S. G. Crawford | 0 | | 0 | | | 9,869 | | 810,442 | | | B. T. Smith | 0 | | 0 | | | 12,368 | | 1,140,185 | |
(1)Number of shares received by each NEO upon payout under 2021 - 2023 performance share award and by Mr. Lich upon vesting and payout of restricted stock units and the aggregate value of such shares of common stock (including dividend equivalents) based upon the per share closing price of the common stock on the New York Stock Exchange on the payout date.
| | | | | | | | | | | | | | | | | | | | | | | | Options | | | Stock Awards (1) | | | Name | | # of Shares
Acquired on
Exercise | | | $ Value Realized
on Exercise | | | | | | # of Shares
Acquired on
Vesting | | | $ Value Realized
on Vesting | | M. J. Costa | | | — | | | $ | — | | | | | | | | 92,916 | | | $ | 8,277,886 | | W. T. McLain, Jr. | | | — | | | | — | | | | | | | | 14,519 | | | | 1,293,498 | | B. A. Lich | | | — | | | | — | | | | | | | | 29,190 | | | | 2,769,472 | | S. G. Crawford | | | 10,000 | | | | 598,400 | | | | | | | | 14,035 | | | | 1,250,378 | | P. Stuckey III | | | — | | | | — | | | | | | | | 12,825 | | | | 1,142,579 | |
(1) | Number of shares received by each named executive officer upon payout under 2020-2022 performance share award and by Mr. Lich upon vesting and payout of restricted stock units and the aggregate value of such shares of common stock (including dividend equivalents) based upon the per share closing price of the common stock on the New York Stock Exchange on the payout date.
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The following table summarizes the portion of post-employment benefits payable to the individuals named in the Summary“Summary Compensation TableTable” from Company pension plans as of December 31, 2022.2023. Pension Benefits | | | | | | | | | | | | | | | | Name | Plan Name(1)(2) | Number of
Years of Credited
Service (#) | Present Value
of Accumulated
Benefit ($)(3) | Payments
During
Last Fiscal Year($) | | M. J. Costa | ERAP | 18 | $320,687 | | $0 | | | ERIP/URIP | 18 | 3,919,362 | | 0 | | | W.T. McLain, Jr. | ERAP | 23 | 333,203 | | 0 | | | ERIP/URIP | 23 | 1,512,230 | | 0 | | | B. A. Lich | ERAP | 22 | 399,521 | | 0 | | | ERIP/URIP | 22 | 2,045,186 | | 0 | | | S.G. Crawford | ERAP | 40 | 809,171 | | 0 | | | ERIP/URIP | 40 | 2,324,751 | | 0 | | | B. T. Smith | ERAP | 31 | 374,967 | | 0 | | | ERIP/URIP | 31 | 544,365 | | 0 | |
(1)The ERAP is a tax-qualified, non-contributory defined benefit pension plan that generally covers employees who became employed on or before December 31, 2006. A participant’s total ERAP benefit consists of his or her “Pre-2000 Benefit” and “Pension Equity Benefit,” as described below:
| | | | | | | | | | | | | | | | | | Name | | Plan Name
(1)(2) | | | Number of
Years of Credited
Service (#) | | | Present Value
of Accumulated
Benefit ($)(3) | | | Payments
During
Last Year($) | | M. J. Costa | | | ERAP | | | | 17 | | | $ | 265,969 | | | $ | 0 | | | | | | ERIP/URIP | | | | 17 | | | | 3,430,570 | | | | 0 | | W.T. McLain, Jr. | | | ERAP | | | | 22 | | | | 274,005 | | | | 0 | | | | | | ERIP/URIP | | | | 22 | | | | 1,320,818 | | | | 0 | | B. A. Lich | | | ERAP | | | | 21 | | | | 333,944 | | | | 0 | | | | | | ERIP/URIP | | | | 21 | | | | 1,816,553 | | | | 0 | | S.G. Crawford | | | ERAP | | | | 39 | | | | 687,985 | | | | 0 | | | | | | ERIP/URIP | | | | 39 | | | | 2,033,819 | | | | 0 | | P. Stuckey III (4) | | | ERAP | | | | — | | | | 0 | | | | 0 | | | | | | ERIP/URIP | | | | — | | | | 0 | | | | 0 | |
(1) | The ERAP is a tax-qualified, non-contributory defined benefit pension plan that generally covers employees who became employed on or before December 31, 2006. A participant’s total ERAP benefit consists of his or her “Pre-2000 Benefit” and “Pension Equity Benefit,” as described below:
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Pre-2000 Benefit. Prior to 2000, the ERAP used a traditional pension formula which gave each participant a life annuity commencing at age 65. A participant is eligible for an unreduced Pre-2000 Benefit when such participant’s aggregate age plus years of eligible service totals 85, or at age 65. At retirement, the actuarial present value of the future annual Pre-2000 Benefit payments may at the election of the participant be paid in a lump sum. Benefits74 2023 Proxy Statement
Executive Compensation — Compensation Tables
earned during 1998 and 1999, upon the election of the participant, may be payable over five years. The Pre-2000 Benefits payable upon retirement are based upon the participant’s years of service with the Company and “average participating compensation,” which is the average of three years of those earnings described in the ERAP as “participating compensation.” “Participating compensation,” in the case of the named executive officersNEOs, consists of salary, bonus, and non-equity incentive plan compensation, including an allowance in lieu of salary for authorized periods of absence, such as illness, vacation, and holidays. To the extent that any participant’s annual Pre-2000 Benefit exceeds the amount payable under the ERAP, such excess will be paid from one or more unfunded, supplementary plans.
Pension Equity Benefit. Effective January 1, 2000, the Company redesigned the ERAP to use a pension equity formula. Under the pension equity formula, beginning January 1, 2000, a participant earns a certain percentage of final average earnings each year based upon age and total service with the Company. When a participant terminates employment, he or she is entitled to a pension amount, payable over five years. The amount may also be converted to various forms of annuities. To the extent that any participant’s Pension Equity Benefit exceeds the amount payable under the ERAP, such excess will be paid from one or more unfunded, supplementary plans.(2) | The Company maintains two unfunded, nonqualified plans, the URIP and the ERIP. The ERIP and the URIP will restore to participants in the ERAP benefits that cannot be paid under the ERAP because of applicable tax law limits, and benefits that are not accrued under the ERAP because of a voluntary deferral by the participant of compensation that would otherwise be counted for benefit calculation under the ERAP. The Company has established a “Rabbi Trust” to provide a degree of financial security for the participants’ unfunded account balances under the ERIP and URIP. See “Termination and Change-in-Control Arrangements — Benefit Security Trust.”
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(3) | Actuarial present value of the accumulated benefit, computed as of the same pension plan measurement date used for financial statement reporting purposes with respect to the Company’s audited financial statements for 2022. The actuarial present value calculation is based on the prescribed IRS mortality tables, and assumes individual compensation and service through December 31, 2022, with benefit commencement at normal retirement age of 65. Benefits are discounted to present value using a 5.58% discount rate for both the ERAP and the ERIP/URIP.
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(4) | Mr. Stuckey joined the Company on May 31, 2011. The ERAP and ERIP/URIP were closed to new participants on January 1, 2007. Therefore Mr. Stuckey is not eligible for benefits under these plans.
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(2)The Company maintains two unfunded, nonqualified plans, the URIP and the ERIP. The ERIP and the URIP will restore to participants in the ERAP benefits that cannot be paid under the ERAP because of applicable tax law limits, and benefits that are not accrued under the ERAP because of a voluntary deferral by the participant of compensation that would otherwise be counted for benefit calculation under the ERAP. The Company has established a “Rabbi Trust” to provide a degree of financial security for the participants’ unfunded account balances under the ERIP and URIP. See “Termination and Change-in-Control Arrangements — Benefit Security Trust.” (3)Actuarial present value of the accumulated benefit, computed as of the same pension plan measurement date used for financial statement reporting purposes with respect to the Company’s audited financial statements for 2023. The actuarial present value calculation is based on the prescribed IRS mortality tables, and assumes individual compensation and service through December 31, 2023, with benefit commencement at normal retirement age of 65. Benefits are discounted to present value using a 5.22% discount rate for the ERAP and 5.21% for the ERIP/URIP. The following table is a summary of participation by the individuals named in the Summary“Summary Compensation TableTable” in the EDCP, an unfunded, nonqualified deferred compensation plan into which executive officers and other management-level employees can defer compensation until retirement or termination from the Company. Annual base salary and incentive cash compensation, stock and stock-based awards, which are payable in cash and allowed to be deferred, and special compensation payable in connection with the employee’s initial employment with the Company may be deferred into the EDCP. Compensation deferred into the EDCP is credited at the election of the employee to multiple hypothetical investment alternatives, including an Eastman stock fund. Amounts deferred into the Eastman stock account increase or decrease in value depending on the market price of Eastman common stock. When cash dividends are declared on Eastman common stock, each stock account receives a dividend equivalent, which is used to hypothetically “purchase” additional shares. Upon retirement or termination of employment, the value of a participant’s EDCP account is paid, in cash, in a single lump sum or in up to ten annual installments as elected in advance by the participant. The EDCP also provides for early withdrawal by a participant of amounts in his or her EDCP account in certain limited circumstances. All amounts in the following table have been previously earned by the named executive officersNEOs and reported by the Company as compensation in this proxy statement or in annual meeting proxy statements for previous years, and are not new or additional compensation to the named executive officers. NEOs.
2023 Proxy Statement 75
Executive Compensation — Compensation Tables
2022 Nonqualified Deferred Compensation
| | | | | | | | | | | | | | | | | | | Name | Executive
Contributions
in Last
Fiscal Year
($) | Company Contributions in Last Fiscal Year ($)(1) | Aggregate Earnings (Loss) in Last Fiscal Year ($)(2) | Aggregate
Withdrawals/
Distributions
($) | Aggregate Balance at Last Fiscal Year-End ($)(3) | | M. J. Costa | $0 | | $51,212 | | $26,428 | | $0 | | $1,434,541 | | | W.T. McLain, Jr. | 0 | | 23,164 | | 25,158 | | 0 | | 208,978 | | | B. A. Lich | 0 | | 24,664 | | 310,622 | | 0 | | 2,266,173 | | | S.G. Crawford | 0 | | 17,231 | | 48,234 | | 0 | | 1,517,248 | | | B. T. Smith | 16,362 | | 14,231 | | 29,883 | | 0 | | 210,760 | |
(1)Annual Company contributions were made to the accounts of each NEO in the Eastman Investment Plan, a 401(k) retirement plan, and in the EDCP. Amounts shown are the amounts before provision for certain taxes contributed into the EDCP and represent amounts that could not be contributed into the 401(k) retirement plan of the individuals due to Internal Revenue Code restrictions. The total amount of the contributions for each NEO in the Eastman Investment Plan and the EDCP was 5% of their 2023 eligible compensation. In addition, for individuals who do not participate in the pension plan, a Company match of 50% of the amount of employee contribution up to 7% up to IRS limits is contributed. These contributions are included in the “Summary Compensation Table” in the “All Other Compensation” column.
| | | | | | | | | | | | | | | | | | | | | | Name | | Executive
Contributions
in Last
Year
($) | | | Company
Contributions
in Last
Year
($)(1) | | | Aggregate
Earnings
(Loss)
in Last
Year
($)(2) | | | Aggregate
Withdrawals/
Distributions
($) | | | Aggregate
Balance at
Last
Year-End($)(3) | | | | | | | | M. J. Costa | | $ | 0 | | | $ | 223,913 | | | $ | 17,084 | | | $ | 0 | | | $ | 1,191,026 | | | | | | | | W.T. McLain, Jr. | | | 0 | | | | 86,907 | | | | (18,225 | ) | | | 0 | | | | 104,195 | | | | | | | | B. A. Lich | | | 0 | | | | 88,146 | | | | (338,219 | ) | | | 0 | | | | 1,874,452 | | | | | | | | S.G. Crawford | | | 0 | | | | 67,277 | | | | (1,462 | ) | | | 0 | | | | 1,408,335 | | | | | | | | P. Stuckey III | | | 590,121 | | | | 56,498 | | | | (663,073 | ) | | | 0 | | | | 3,516,152 | |
| (1) | | | | | | | | | Annual Company contributions were made to the accounts of each named executive officer in the Eastman Investment Plan, a 401(k) retirement plan, and in the EDCP. Amounts shown are the amounts before provision for certain taxes contributed into the EDCP and represent amounts that could not be contributed into the 401(k) retirement plan of the individuals due to Internal Revenue Code restrictions. The total amount of the contributions for each named executive officer in the Eastman Investment Plan and the EDCP was 5% of their 2022 eligible compensation. In addition for individuals who do not participate in the pension plan, a Company match of 50% of the amount of employee contribution up to 7% up to IRS limits is contributed. These contributions are included in the “
2024Summary Compensation Table Proxy Statement” in the “All Other Compensation” column. | 79 |
| (2) | Aggregate amounts credited to participant EDCP accounts during 2022. No earnings on deferred amounts are included in the “ |
Summary Compensation TableExecutive compensation” in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column because there were no preferential or above-market earnings on any of the hypothetical investments. Quarterly dividend equivalents of 76 cents per hypothetical share for the first, second, and third quarters and of 79 cents per hypothetical share for the fourth quarter were credited to amounts in individual Eastman stock accounts. |
(3) | Balance in individual EDCP accounts as of December 31, 2022. The portions of the balances from annual Company contributions after provision for certain taxes ($1,064,088 for Mr. Costa, $103,896 for Mr. McLain, $383,550 for Mr. Lich, $220,035 for Mr. Crawford, and $214,333 for Mr. Stuckey) were reported as “All Other Compensation” in the “Summary Compensation Table” in this and applicable prior annual meeting proxy statements; the portions of the balances from deferred salary ($609,665 for Mr. Crawford) were included in the amounts reported as “Salary” in the “Summary Compensation Table” in this and prior applicable annual meeting proxy statements; the applicable portions of the balances from deferred annual incentive compensation and bonuses ($859,450 for Mr. Lich, $351,825 for Mr. Crawford, and $2,380,062 for Mr. Stuckey) were included in the amounts reported as “Non-Equity Incentive Plan Compensation” in the “Summary Compensation Table” in this and applicable prior annual meeting proxy statements; the portions of the balances from deferred stock-based awards are not reported in the “Summary Compensation Table” in this or certain prior annual meeting proxy statements but were previously reported as “Long-Term Incentive Plan Payouts” in the Summary Compensation Table in certain prior annual meeting proxy statements. The portions of the balances from earnings on deferred amounts were not reported in the “Summary Compensation Table” in this proxy statement or in the annual meeting proxy statements for previous years because there were no preferential or above-market earnings on any individual EDCP hypothetical investments. Amounts in the “Company Contributions in Last Year” column were paid in February 2023 and are not included in the aggregate balance as of December 31, 2022.
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(2)76 2023 Proxy Statement
ExecutiveAggregate amounts credited to participant EDCP accounts during 2023. No earnings on deferred amounts are included in the “Summary Compensation — Table” in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column because there were no preferential or above-market earnings on any of the hypothetical investments. Quarterly dividend equivalents of 79 cents per hypothetical share for the first, second, and third quarters and of 81 cents per hypothetical share for the fourth quarter were credited to amounts in individual Eastman stock accounts.
(3)Balance in individual EDCP accounts as of December 31, 2023. The portions of the balances from annual Company contributions after provision for certain taxes ($1,281,176 for Mr. Costa, $183,521 for Mr. McLain, $464,650 for Mr. Lich, $280,713 for Mr. Crawford, and $98,555 for Mr. Smith) were reported as “All Other Compensation” in the “Summary Compensation Table” in this and applicable prior proxy statements; the portions of the balances from deferred salary ($609,665 for Mr. Crawford and $54,027 for Mr. Smith) were included in the amounts reported as “Salary” in the “Summary Compensation Table” in this and prior applicable proxy statements; the applicable portions of the balances from deferred annual incentive compensation and bonuses ($859,450 for Mr. Lich, $351,825 for Mr. Crawford, and $17,828 for Mr. Smith) were included in the amounts reported as “Non-Equity Incentive Plan Compensation” in the “Summary Compensation Table” in this and applicable prior proxy statements; the portions of the balances from deferred stock-based awards are not reported in the “Summary Compensation Table” in this or certain prior proxy statements but were previously reported as “Long-Term Incentive Plan Payouts” in the “Summary Compensation Table” in certain prior proxy statements. The portions of the balances from earnings on deferred amounts were not reported in the “Summary Compensation Table” in this proxy statement or in the proxy statements for previous years because there were no preferential or above-market earnings on any individual EDCP hypothetical investments. Amounts in the “Company Contributions in Last Year” column were paid in February 2024, and are not included in the aggregate balance as of December 31, 2023. Termination and Change-in-Control Arrangements Termination and Change-in-Control Arrangements
The Company’s Change-in-Control Agreements with certain executive officers, including the individuals named in the Summary“Summary Compensation Table, ” and the Omnibus Long-Term Compensation Plans, provide for compensation and benefits in certain circumstances upon or following termination of the executive or a change-in-control of the Company. Circumstances that trigger compensation or provision of benefits related to termination or change in control, how such compensation and benefits are determined, and conditions or obligations applicable to the receipt of payments and benefits are described below.
Change-in-Control Agreements. For the reasons described in the “Compensation Discussion and Analysis”, the The Company has entered into Change-in-Control Agreements (the “Agreements”) with the individuals named in the Summary“Summary Compensation TableTable” and certain other executive officers of the Company. The Agreements provide for specified compensation and benefits following a “change-in-control”“change-in-control” of the Company. A “change-in-control”“change-in-control” is generally defined in the Agreements to include the following, subject to certain exceptions: (i) the acquisition by a person of 35% or more of the voting stock of the Company; (ii) the incumbent Board members (and subsequent directors approved by them) ceasing to constitute a majority of the Board; (iii) approval by the Company’s stockholders of a reorganization or merger unless, after such proposed transaction, the former stockholders of the Company will own more than 50% of the resulting corporation’s voting stock, no person will own 35% or more of the resulting corporation’s voting stock, and the incumbent Board members will continue to constitute at least a majority of the Board of the resulting corporation; or (iv) approval by the Company’s stockholders of a complete liquidation or dissolution of the Company. Under the Agreements, in the event that a change-in-control of the Company occurs during the “change-in-control“change-in-control period,” the Company agrees to continue to employ the executive for a period of two years after the occurrence of such change-in-control (the “Employment Period”). The “change-in-control“change-in-control period” means the period commencing on December 1, 2022,2023, and ending two years after such date; provided that on each anniversary of the Agreements, the “change-in-control”“change-in-control” period is automatically extended so as to terminate two years after such anniversary, unless the Company provides timely notice to the executive that it will not extend the period. During the Employment Period, the executive would be entitled to: (i) an annual base salary at a rate at least equal to the base salary in effect on the date of the change-in-control; (ii) an annual bonus at least equal to the executive’s target bonus opportunity for the last full fiscal year prior to the change-in-control; and (iii) continued participation in all incentive, savings, retirement, welfare benefit, and fringe benefit plans applicable to other peer executives of the Company on terms no less favorable than those in effect during the 120-day period preceding the change in control. The Agreements also specify the payments and benefits to which an executive would be entitled upon a termination of employment during the Employment Period for specified reasons, including death, retirement, disability, termination by the Company with or without cause, and termination by the executive for or without good reason (as such terms are defined in the Agreements).
If an executive’s employment were to be terminated by the Company for any reason other than for cause or disability, or by the executive for good reason, during the Employment Period, the Company would be required to: | (i) | pay to the executive a lump sum cash payment equal to his or her “accrued obligations” (unpaid base salary through the date of termination, a prorated target bonus for the year of termination, and any accrued vacation pay);
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| (ii) |
(i) pay to the executive a lump sum cash payment equal to his or her “accrued obligations” (unpaid base salary through the date of termination, a prorated target bonus for the year of termination, and any accrued vacation pay); (ii) pay to the executive a lump sum severance payment equal to three-times (in the case of the Chief Executive Officer) or two-times (in the case of the other executives) the sum of his or her then-current annual base salary plus the amount of his or her target annual bonus for the year in which the termination occurs; |
| (iii) | continue to provide all health and welfare benefits to the executive and his or her eligible dependents, subject to certain limitations, for 18 months following termination;
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2023 Proxy Statement 77
Executive Compensation — TerminationOfficer) or two-times (in the case of the other executives) the sum of his or her then-current annual base salary plus the amount of his or her target annual bonus for the year in which the termination occurs; (iii) continue to provide all health and Change-in-Control Arrangements | (iv) | accelerate the vesting of the executive’s unvested benefits under the Company’s retirement plans, and pay to the executive a lump sum cash payment equal to the value of such unvested benefits; and
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| (v) | pay or provide to the executive any other amounts or benefits to which he or she was entitled under any of the Company’s plans, programs, policies, practices, contracts, or agreements then in effect.
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welfare benefits to the executive and his or her eligible dependents, subject to certain limitations, for 18 months following termination; (iv) accelerate the vesting of the executive’s unvested benefits under the Company’s retirement plans, and pay to the executive a lump sum cash payment equal to the value of such unvested benefits; and (v) pay or provide to the executive any other amounts or benefits to which he or she was entitled under any of the Company’s plans, programs, policies, practices, contracts, or agreements then in effect. Upon the termination of an executive’s employment by reason of death, disability, or retirement, or upon a termination by the Company for cause or by the executive without good reason, the Agreements would terminate without further obligation of the Company other than the payment of base salary through the date of termination and any other amounts or benefits to which the executive was entitled under any of the Company’s plans, programs, policies, practices, contracts, or agreements then in effect. “Cause” is defined in the Agreements as a material breach by the executive of any provision of his or her agreement; the conviction of the executive of any criminal act that the Board deems to constitute cause; a material breach by the executive of a published Company code of conduct or code of ethics; or conduct by the executive in his or her office with the Company that is grossly inappropriate and demonstrably likely to lead to material injury to the Company, as determined by the Board. “Good reason” is defined in the Agreements as the assignment to the executive of any duties that are materially inconsistent with his or her position (including status, offices, titles, and reporting requirements), authority, duties, or responsibilities, or any other action by the Company, which results in a material diminution in such position, authority, duties, or responsibilities (excluding an isolated, insubstantial, and inadvertent action not taken in bad faith and which is remedied by the Company promptly after notice from the executive); a reduction by the Company in executive’s base salary or target annual bonus; any failure by the Company to comply with any provisions of his or her agreement (other than an isolated, insubstantial, and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after notice from the executive); the Company’s requiring the executive to be based at any office or location 50 miles or more from his or her current location; any failure by the Company to have a successor to the Company agree to assume the agreement; or a material breach by the Company of any other provision of the executive’s agreement. The Agreements contain certain other typical provisions for agreements of this type, including a requirement that the executive not disclose any confidential information of the Company following termination of employment, and providing that the Company will reimburse the executive on a then-current basis for reasonable fees and expenses in seeking to enforce the Agreement (subject to repayment if his or her claims are determined to be frivolous or in bad faith). Omnibus Stock Compensation Plans. The Company’s 2021 Omnibus Stock Compensation Plan (like its predecessor plans, collectively referred to as the “Omnibus Plans”) provides for grants to employees of nonqualified and incentive stock options, stock appreciation rights, stock awards, performance shares, and other stock and stock-based awards (collectively, “awards”). The Omnibus Plans contain provisions regarding the treatment of awards in the event of a “change-in-control”“change-in-control” (as defined, generally involving circumstances in which the Company is acquired by another entity or its controlling ownership is changed). Upon a change-in-control, the rules described below will generally apply to awards granted under the Omnibus Plans. However, the Compensation Committee has the discretion, notwithstanding any particular transaction constituting a change-in-control, either to determine that such transaction is of the type that does not warrant the described consequences with respect to awards (in which case such consequences would not occur) or to alter the way in which awards are treated from the consequences outlined in the Omnibus Plans. 78 2023 Proxy Statement
Executive Compensation — Termination and Change-in-Control Arrangements
In the event of a change-in-control (assuming the Compensation Committee has not exercised its discretion described above), if (i) a participant’s employment terminates within two years following the change-in-control, unless such termination is due to death, disability, cause, resignation (other than as a result of certain actions by the Company and any successor), or retirement or (ii) Eastman common stock (or the stock of any successor company received in exchange for Eastman common stock) is no longer publicly traded on a national securities market, participants will be entitled to the following treatment. All conditions, restrictions, and limitations in effect with respect to any unvested, unexercised, unpaid, or deferred awards will immediately lapse and no other terms or conditions will be applied. Any unexercised, unvested, unearned, or unpaid awards will automatically become 100% vested. For performance shares, the performance period will immediately terminate and, unless the Compensation Committee has already determined actual performance for the applicable performance period, the awards will be earned (pro rata for the number of completed performance periods months) based on (i) the target level of performance if the change in control occurs during the first half of the performance period or (ii) based on actual performance through the end of the last quarter prior to the change in control if the change in control occurs during the second half of the performance period. In order to comply with Section 409A of the Internal Revenue Code, it may be necessary for the Company to delay payments until six months following the officer’s separation from service with the Company. Potential Payments Under Termination and Change-in-Control Arrangements. The following table shows, for each of the named executive officersNEOs employed at December 31, 2022,2023, the payments and benefits that generally would have been provided under the Change-in-Control Agreements and the Omnibus Plans if the executive had been terminated without “cause” or had resigned for “good reason” on December 31, 2022,2023, following a change-in-control (or, in the case of awards under the Omnibus Plans, Eastman common stock or the stock of its successor is no longer publicly traded on a national securities exchange following the change-in-change-in-control)control). | | | | | | | | | | | | | | | | | | | Form of Payment | M.J. Costa
($) | W.T. McLain, Jr.
($) | B. A. Lich
($) | S.G. Crawford
($) | B. T. Smith
($) | Cash severance(1) | $10,237,500 | | $3,200,000 | | $3,320,000 | | $2,516,000 | | $2,294,000 | | Value of unvested stock-based awards at target(2) | 8,953,650 | | 2,060,353 | | 3,563,306 | | 1,848,163 | | 798,020 | | Health and welfare continuation(3) | 43,148 | | 33,809 | | 38,109 | | 37,477 | | 32,749 | | | Total Payments | $19,234,298 | | $5,294,162 | | $6,921,415 | | $4,401,640 | | $3,124,769 | |
(1) | | | | | | | | | | | | | | | | | | | | | | Form of Payment | | M.J. Costa
($) | | | W.T. McLain, Jr.
($) | | | B. A. Lich
($) | | | S.G. Crawford
($) | | | P. Stuckey III
($) | | Cash severance(1) | | $ | 9,937,500 | | | $ | 3,100,000 | | | $ | 3,220,000 | | | $ | 2,442,000 | | | $ | 2,220,000 | | Value of unvested stock-based awards at target(2) | | | 12,145,264 | | | | 2,090,698 | | | | 4,099,962 | | | | 1,966,635 | | | | 1,800,209 | | Health and welfare continuation(3) | | | 21,191 | | | | 21,191 | | | | 21,191 | | | | 21,191 | | | | 21,191 | | Total Payments | | $ | 22,103,955 | | | $ | 5,211,889 | | | $ | 7,341,153 | | | $ | 4,429,826 | | | $ | 4,041,400 | |
(1) | Lump sum cash severance payment under the Change-in-Control Agreement equal to three times the sum of annual base salary and the target UPP payout for Mr. Costa and two times the sum of annual base salary and the target UPP payout for the other NEOs. (2)Change-in-Control Agreement equal to three times the sum of annual base salary and the target UPP payout for Mr. Costa and two times the sum of annual base salary and the target UPP payout for the other named executive officers. |
(2) | Value of unvested awards at target, assuming the awards vest and are paid out under the Omnibus Plans following a change-in-control where there is a qualifying termination or the change in control results in Eastman common stock (or the stock of the successor) no longer being publicly traded on a national securities market. Awards are valued as of year-end 2022 based upon the closing price of Eastman common stock on the New York Stock Exchange on December 30, 2022. |
(3) | Value of continuation of health and welfare benefits for 18 months following termination under the Change-in-Control Agreement.
|
Proxy Statement 79based upon the closing price of Eastman common stock on the New York Stock Exchange on December 29, 2023.
(3)
Executive Compensation — TerminationValue of continuation of health and welfare benefits for 18 months following termination under the Change-in-Control Agreement. Arrangements
In addition to the payments described above, the named executive officersNEOs would also receive the following payments for amounts already earned or vested as the result of participation in compensation or benefit plans on the same basis as other Company employees: | • | | earned Company contribution to vested and unvested defined contribution plans (see “All Other Compensation” column in the “Summary Compensation Table”),
|
account balance in the Eastman Investment Plan, a 401(k) retirement plan, and the employee stock ownership plan, •account balance in the Executive Deferred Compensation Plan (see “Aggregate Balance at Last Year-End” column in the “2023 Nonqualified Deferred Compensation” table), and •lump sum present value of pension under the Company’s qualified and non-qualified pension arrangements (see “Present Value of Accumulated Benefit” column in the “Pension Benefits” table). | | | | | | | | | | 82 | •2024 Proxy Statement | | account balance in the Executive Deferred Compensation Plan (see “Aggregate Balance at Last
Year-End” column in the “2022 Nonqualified Deferred Compensation” table), and |
| | • | lump sum present value of pension under the Company’s qualified and non-qualifiedExecutive compensation pension arrangements (see “Present Value of Accumulated Benefit” column in the “Pension Benefits” table).
|
Benefit Security Trust. The Company has established a Benefit Security Trust (sometimes referred to as the “Rabbi Trust”) to provide a degree of financial security for its unfunded obligations under the EDCP, the supplemental ERAP plans, and the Agreements with the Company’s executives. The assets of the Rabbi Trust would be subject to the claims of the Company’s creditors in the event of insolvency. Upon the occurrence of a “change-in-control”“change-in-control” or a “potential change-in-control” (each as defined below), or if the Company fails to meet its payment obligations under the covered plans and Agreements, the Company would be required to transfer to the trustee cash or other liquid funds in an amount equal to the value of the Company’s obligations under the covered plans and Agreements. The Company has conveyed to the trustee rights to certain assets as partial security for the Company’s funding obligations under the Rabbi Trust. A “change-in-control”“change-in-control” for purposes of the Rabbi Trust is generally defined to include the following, subject to certain exceptions: (i) the acquisition by a person (other than the Company, certain affiliated entities, or certain institutional investors) of 19% or more of the voting stock of the Company; (ii) the incumbent Board members (and subsequent directors approved by them) ceasing to constitute a majority of the Board; (iii) approval by the Company’s stockholders of a reorganization or merger unless, after such proposed transaction, the former stockholders of the Company will own more than 75% of the resulting corporation’s voting stock; or (iv) approval by the Company’s stockholders of a complete liquidation and dissolution of the Company or the sale or other disposition of substantially all of the assets of the Company, other than to a subsidiary or in a spin-off transaction. A “potential change-in-control” will generally be deemed to have occurred if (i) the Company enters into an agreement, the consummation of which would result in the occurrence of a change-in-control; (ii) any person (including the Company) publicly announces an intention to take action which, if consummated, would constitute a change-in-control; or (iii) any person (other than the Company, certain affiliated entities, or certain institutional investors) becomes the beneficial owner of 10% or more of the combined voting power of the Company’s then-outstanding securities. The Rabbi Trust is irrevocable until participants and their beneficiaries are no longer entitled to payments under the covered plans and Agreements, but may be amended or revoked by agreement of the trustee, the Company, and a committee of individual beneficiaries of the Rabbi Trust. 80
Compensation Committee Report The Compensation Committee has reviewed and discussed with management the “Compensation Discussion and Analysis,” which appears earlier in this proxy statement. Based on this review and discussion, the Compensation Committee recommended to the Board that the “Compensation Discussion and Analysis” be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, Proxy Statement filed with the SEC and in this proxy statement.
Compensation and Management Development Committee James J. O’Brien (Chair) Brett D. Begemann Julie F. Holder Renée J. Hornbaker David W. Raisbeck
Pay Ratio Pay Ratio
The Dodd-Frank Act and
In accordance with SEC rules, we are providing the compensation disclosure rulesratio of the SEC require usannual total compensation of the CEO to disclose the ratio of the median of the annual total compensation of our employees (other than the Chief Executive Officer (the “CEO”)) and. For 2023, the annual total compensation of the CEO. For 2022,CEO was $17,597,890 and the median of the annual total compensation of all employees (other than the CEO) was $108,087 and the annual total compensation of the CEO was $17,068,131;$78,643; accordingly, the CEO’s annual total compensation was approximately 158224 times that of the median of the annual total compensation of all employees. This calculated “pay ratio” is a reasonable estimate determined in a manner consistent with SEC pay ratio disclosure requirements. We refer to the employee who received the median of the annual total compensation of all employees as the “median employee”.employee.” We used the following methodology to make the determinations for calculating the pay ratio: •As of October 31, 2022,2023, our employee population consistedconsisted of approximately 14,95914,611 individuals (14,422(13,864 full-time and 537747 other employees) working at our parent Company and consolidated subsidiaries, with 72%74% of these individuals located in the United States, 15%14% located in Europe (primarily Belgium, the Netherlands, and Germany), 10%8% located in Asia (primarily China, Malaysia, and Singapore) and 3%4% located in Latin America (primarily Mexico and Brazil). | – | | We selected October 31, 2022, as the date upon which we would identify the median employee to allow sufficient time to identify the median employee given the global scope of our operations.
|
•We selected October 31, 2023, as the date upon which we would identify the median employee to allow sufficient time to identify the median employee given the global scope of our operations. •To identify the median employee from our employee population, we conducted an analysis of our population of employees. | – | | Given the distribution of our employee population, we use a variety of pay elements to structure the compensation arrangements of our employees including participation in several annual cash short-term incentive plans. For purposes of measuring the compensation of all employees to determine the median employee, we selected total cash compensation (base salary for salaried employees and wages for hourly employees plus the most recent actual cash incentive payment for both hourly and salaried employees) as a consistently applied compensation measure that reasonably reflects the annual compensation of our employees.
|
| – | | In making this determination, we annualized the compensation of all permanent employees who were hired in 2022.
|
• | | Using this methodology, we determined that the median employee was a full-time, hourly, manufacturing operations employee with total compensation for 2022 consisting of wages, overtime pay, cash incentive payment, and annual Company contribution to defined contribution retirement plan determined and calculated in the same manner as compensation of the executive officers in the “Summary Compensation Table” earlier in this proxy statement.
|
• | | The annual total compensation of the CEO is the amount reported for 2022 in the “Total” column of the “Summary Compensation Table.”
|
•Given the distribution of our employee population, we use a variety of pay elements to structure the compensation arrangements of our employees including participation in several annual cash short-term incentive plans. For purposes of measuring the compensation of all employees to determine the median employee, we selected total cash compensation (base salary for salaried employees and wages for hourly employees plus the most recent actual cash incentive payment for both hourly and salaried employees) as a consistently applied compensation measure that reasonably reflects the annual compensation of our employees. •In making this determination, we annualized the compensation of all permanent employees who were hired in 2023. •Using this methodology, we determined that the median employee was a full-time, hourly, manufacturing operations employee with total compensation for 2023 consisting of wages, overtime pay, cash incentive payment, and annual Company contribution to defined contribution retirement plan determined and calculated in the same manner as compensation of the executive officers in the “Summary Compensation Table” earlier in this proxy statement. •The annual total compensation of the CEO is the amount reported for 2023 in the “Total” column of the “Summary Compensation Table.” The SEC’s rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios. 2023 Proxy Statement 81
Executive Compensation — Pay Versus Performance
Pay Versus Performance In accordance with rules adopted by the SEC pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we provide the following disclosure regarding executive compensation for our principal executive officer (“PEO”) and ourNon-PEO named executive officers (“Other NEOs”) and Company performance for the fiscal years listed below. The following tables and related disclosures provide information aboutabout: (i) the “total compensation” of our PEO and our Other NEOs as presented in theTable” on page 67,73, (ii) the “compensation actually paid” to our PEO and our Other NEOs, as calculated pursuant to the SEC’spay-versus-performance rules, (iii) certain financial performan
ceperformance measures, and (iv) the relatio
nshipthe relationship of the compensation actually paid to those financial performance measures. This disclosure has been prepared in accordance with Item 402(v) of RegulationS-K under the Exchange Act and does not necessarily reflect value actually realized by the executives or how our Compensation Committee evaluates compensation decisions in light of Company or individual performance. The Compensation Committee did not consider this pay versus performance disclosure below in making its pay decisions for any of the years shown. For discussion of how our Compensation Committee seeks to align pay with performance when making compensation decisions, please review Compensation Discussion and Analysisthe CD&A beginning on page 46.50. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Value of Initial Fixed $100
Investment Based On: | | | | Year (a) | Summary Compensation Table Total for PEO (b)1 | Compensation Actually Paid to PEO (c)1, 2 | Average Summary Compensation Table Total for Other NEOs (d)1 | Average Compensation Actually Paid to Other NEOs (e)1,2 | Total Shareholder Return (f) | Peer Group Total Shareholder Return (g)3 | Net Income ($ millions) (h) | Adjusted EBIT ($ millions) (i)4 | | 2023 | $17,597,890 | | | $16,978,885 | | $4,812,940 | | | $4,655,315 | | $130 | | $146 | | $896 | | $1,097 | | | 2022 | 17,068,131 | | | (12,049,295) | | 4,384,699 | | | (1,407,170) | | 113 | | 132 | | 796 | | 1,339 | | | 2021 | 17,798,861 | | | 33,704,535 | | 5,398,736 | | | 8,450,911 | | 163 | | 149 | | 867 | | 1,635 | | | 2020 | 13,561,990 | | | 30,582,035 | | 3,791,700 | | | 6,235,050 | | 131 | | 118 | | 489 | | 1,216 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Summary
Compensation
Table Total
for PEO
| | | Compensation
Actually Paid
to PEO
| | | Average
Summary
Compensation
Table Total for
Other NEOs
| | | Average
Compensation
Actually Paid
to Other
NEOs
| | | Value of Initial Fixed $100
Investment Based On: | | | | | | | | | |
|
|
| |
| Peer Group
Total
Shareholder
Return
|
| | | | | | | | | | | | 2022 | | $ | 17,068,131 | | | ($ | 12,049,295 | ) | | $ | 4,384,699 | | | ($ | 1,407,170 | ) | | $ | 113.16 | | | $ | 131.59 | | | $ | 793 | | | $ | 1,339 | | | | | | | | | | | | | 2021 | | $ | 17,798,861 | | | $ | 33,704,535 | | | $ | 5,398,736 | | | $ | 8,450,911 | | | $ | 162.50 | | | $ | 148.89 | | | $ | 857 | | | $ | 1,635 | | | | | | | | | | | | | 2020 | | $ | 13,561,990 | | | $ | 30,582,035 | | | $ | 3,791,700 | | | $ | 6,235,050 | | | $ | 131.49 | | | $ | 118.22 | | | $ | 478 | | | $ | 1,216 | |
1. (1)Mark J. Costa was our PEO for each year presented. The individuals comprising the Other NEOs for each year presented are listed below.
| | | | | | | | | | | | | 2020 | 2021 | 2022 | 2023 | | Curtis E. Espeland | William T. McLain, Jr. | William T. McLain, Jr. | William T. McLain, Jr. | | Brad A. Lich | Brad A. Lich | Brad A. Lich | Brad A. Lich | | Lucian Boldea | Lucian Boldea | Stephen G. Crawford | Stephen G. Crawford | | William T. McLain, Jr. | Stephen G. Crawford | Perry Stuckey III | B. Travis Smith | | Kellye L. Walker | | | |
| | | | | | | | | | | | | | | Curtis E. Espeland | | William T. McLain, Jr. | | William T. McLain, Jr. | | Brad A. Lich | | Brad A. Lich | | Brad A. Lich | | Lucian Boldea | | Lucian Boldea | | Stephen G. Crawford | | William T. McLain, Jr. | | Stephen G. Crawford | | Perry Stuckey III | | Kellye L. Walker | | | | |
2. (2)The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of RegulationS-K and do not reflect compensation actually earned, realized, or received by the Company’s NEOs. These amounts reflect theTable” Total with certain adjustments. Compensation Actually Paid reflects the exclusions and inclusions of certain amounts for the PEO and the Other NEOs as prescribed by SEC rules and as set forth below. Equity values are calculated in accordance with FASB ASC Topic 718. Amounts in the Exclusion of Stock Awards and Option Awards columns are the totals from the Stock Awards and Option Awards columns set forth in the.Table.” Amounts in the Exclusion of Change in Pension Value column reflect the amounts attributable to the Change in
82 2023 Proxy Statement
Pension Value reported in the .Table.” Amounts in the Inclusion of Pension Service Cost are based on the service cost for services rendered during the listed year.
| | | | | | | | | | | | | | | | | | Summary
Compensation
Table Total for
Mark J. Costa
($) | | | Exclusion of
Change in
Pension Value
for Mark J. Costa
($) | | Exclusion of
Stock Awards
and Option Awards for Mark
J. Costa
($) | | Inclusion of
Pension Service
Cost for Mark J.
Costa
($) | | Inclusion of
Equity Values for
Mark J. Costa
($) | | Compensation
Actually Paid to
Mark J. Costa
($) | | 2022 | | | $17,068,131 | | | $305,653 | | $14,822,129 | | $301,111 | | ($14,290,755) | | ($12,049,295) | | 2021 | | | 17,798,861 | | | 172,210 | | 12,382,689 | | 312,228 | | 28,148,345 | | 33,704,535 | | 2020 | | | 13,561,990 | | | 538,236 | | 9,503,799 | | 274,591 | | 26,787,489 | | 30,582,035 |
| | | | | | | | | | | | | | | Average
Summary
Compensation
Table Total for
Other NEOs
($) | | Average
Exclusion of
Change in
Pension Value
for Other NEOs
($) | | Average
Exclusion of
Stock Awards
and Options
Awards for Other NEOs
($) | | Average
Inclusion of
Pension Service
Cost for Other NEOs
($) | | Average
Inclusion of
Equity Values for
Other NEOs
($) | | Average
Compensation
Actually Paid to
Other NEOs
($) | | 2022 | | $4,384,699 | | $160,469 | | $3,132,567 | | $123,170 | | ($2,622,003) | | ($1,407,170) | | 2021 | | 5,398,736 | | 213,311 | | 3,202,386 | | 128,802 | | 6,339,070 | | 8,450,911 | | 2020 | | 3,791,700 | | 215,708 | | 2,347,855 | | 80,866 | | 4,926,047 | | 6,235,050 |
The following table describes the adjustments, each of which is prescribed by SEC rule, to calculate the CAP amounts from the “Summary Compensation Table” amounts. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year | Summary
Compensation
Table Total for
Mark J. Costa
($) | Exclusion of
Change in
Pension Value
for Mark J. Costa
($) | Exclusion of
Stock Awards
and Option
Awards for Mark
J. Costa
($) | Inclusion of
Pension Service
Cost for
Mark J. Costa
($) | Inclusion of
Equity Values for
Mark J. Costa
($) | Compensation
Actually Paid to
Mark J. Costa
($) | | 2023 | | $ | 17,597,890 | | | $ | 543,510 | | | $ | 13,681,247 | | | $ | 244,054 | | $13,361,698 | | $16,978,885 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year | Average
Summary
Compensation
Table Total for
Other NEOs
($) | Average
Exclusion of
Change in
Pension Value
for Other NEOs
($) | Average
Exclusion of
Stock Awards
and Options
Awards for
Other NEOs
($) | Average
Inclusion of
Pension Service
Cost for
Other NEOs
($) | Average
Inclusion of
Equity Values for
Other NEOs
($) | Average
Compensation
Actually Paid to
Other NEOs
($) | | 2023 | | $ | 4,812,940 | | | $ | 282,058 | | | $3,191,187 | | | $ | 131,337 | | $3,184,283 | | $4,655,315 | |
The amounts in the Inclusion of Equity Values in the tables above are derived from the amounts set forth in the following tables: | | | | | | | | | | | | | | | | | | | Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Mark J. Costa ($) | | | Change in Fair
Value from
Last Day of
Prior Year to
Last Day of
Year of
Unvested
Equity Awards
for Mark J.
Costa
($) | | Vesting-Date
Fair Value of
Equity Awards
Granted
During Year
that Vested
During Year
for Mark J.
Costa
($) | | Change in Fair
Value from
Last Day of
Prior Year to
Vesting Date
of Unvested
Equity Awards
that Vested
During Year
for Mark J.
Costa
($) | | Fair Value at
Last Day of
Prior Year of
Equity Awards
Forfeited
During Year
for Mark J.
Costa
($) | | Value of
Dividends or
Other
Earnings Paid
on Stock or
Option
Awards Not
Otherwise
Included for
Mark J. Costa
($) | | Total -
Inclusion of
Equity Values
for Mark J.
Costa
($) | | 2022 | | $ | 7,154,574 | | | ($10,318,276) | | $0 | | ($11,127,053) | | $0 | | $0 | | ($14,290,755) | | 2021 | | | 16,317,961 | | | 9,270,244 | | 0 | | 2,560,140 | | 0 | | 0 | | 28,148,345 | | 2020 | | | 20,245,424 | | | 5,183,609 | | 0 | | 1,358,456 | | 0 | | 0 | | 26,787,489 |
| | | | | | | | | | | | | | | | | Average Year- End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Other NEOs ($) | | Average
Change in Fair
Value from
Last Day of
Prior Year to
Last Day of
Year of
Unvested
Equity Awards
for Other
NEOs
($) | | Average
Vesting-Date
Fair Value of
Equity Awards
Granted
During Year
that Vested
During Year
for Other
NEOs
($) | | Average
Change in Fair
Value from
Last Day of
Prior Year to
Vesting Date
of Unvested
Equity Awards
that Vested
During Year
for Other
NEOs
($) | | Average Fair
Value at Last
Day of Prior
Year of Equity
Awards
Forfeited
During Year
for Other
NEOs
($) | | Average Value
of Dividends
or Other
Earnings Paid
on Stock or
Option
Awards Not
Otherwise
Included for
Other
NEOs
($) | | Total -
Average
Inclusion of
Equity Values
for Other
NEOs
($) | | 2022 | | $1,512,081 | | ($2,191,529) | | $0 | | ($1,942,555) | | $0 | | $0 | | ($2,622,003) | | 2021 | | 4,101,763 | | 1,772,446 | | 0 | | 464,861 | | 0 | | 0 | | 6,339,070 | | 2020 | | 4,194,758 | | 774,091 | | 0 | | 161,806 | | (204,608) | | 0 | | 4,926,047 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year | Year-End Fair
Value of
Equity Awards
Granted
During Covered Fiscal Year
That Remained
Unvested as
of Last Day of
Covered Fiscal Year for Mark
J. Costa
($) | Change in Fair
Value from
Last Day of
Prior Fiscal Year to
Last Day of
Covered Fiscal Year of Unvested
Equity Awards Granted in Any Prior Fiscal Year
for Mark J.
Costa
($) | Vesting-Date
Fair Value of
Equity Awards Granted During
Year that Vested
During Year
for Mark J.
Costa
($) | Change in Fair
Value from
Last Day of
Prior Fiscal Year to
Vesting Date
of Unvested
Equity Awards Granted in Any Prior Fiscal Year
that Vested
During Covered Fiscal Year
for Mark J.
Costa
($) | Fair Value at
Last Day of
Prior Fiscal Year of
Equity Awards
Forfeited
During Covered Fiscal Year
for Mark J.
Costa
($) | Value of
Dividends or
Other Earnings Paid on Stock
or Option
Awards During the Covered Fiscal Year Prior to the Vesting Date Not
Otherwise
Included for
Mark J. Costa
($) | Total - Inclusion of
Equity Values
for Mark J. Costa
($) | | 2023 | | $14,043,473 | | ($358,143) | | | $ | 0 | | | ($323,632) | | | $ | 0 | | | $ | 0 | | $13,361,698 | |
2023 Proxy Statement 83 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year | Average Year-
End Fair Value
of Equity
Awards
Granted
During Covered Fiscal Year
That
Remained
Unvested as
of Last Day of
Covered Fiscal Year for Other
NEOs
($) | Average
Change in Fair
Value from
Last Day of
Prior Fiscal Year to
Last Day of
Covered Fiscal Year of
Unvested
Equity Awards Granted in Any Prior Fiscal Year
for Other
NEOs
($) | Average
Vesting-Date
Fair Value of
Equity Awards
Granted
During Year
that Vested
During Year
for Other
NEOs
($) | Average
Change in Fair
Value from
Last Day of
Prior Fiscal Year to
Vesting Date
of Unvested
Equity Awards Granted in Any Prior Fiscal Year
that Vested
During Covered Fiscal Year
for Other
NEOs
($) | Average Fair
Value at Last
Day of Prior
Fiscal Year of Equity
Awards
Forfeited
During Covered Fiscal Year
for Other
NEOs
($) | Average Value
of Dividends
or Other
Earnings Paid
on Stock or
Option
Awards During the Covered Fiscal Year Prior to the Vesting Date Not
Otherwise
Included for
Other
NEOs
($) | Total -
Average
Inclusion of
Equity Values
for Other
NEOs
($) | | 2023 | | $ | 3,275,676 | | ($41,433) | | | $ | 0 | | ($49,960) | | | $0 | | $ | 0 | | $3,184,283 | |
3. (3)The Peer Group TSR set forth in this table utilizes the Company’s peer group, the S&P 1500 Chemicals Industry Index, which we also utilize in the stock performance graph required by Item 201(e) of RegulationS-K included in our Annual Report for the year ended December 31, 2022.2023. The comparison assumes $100 was invested for the period starting December 31, 2019, through the end of the listed year in the Company and in the S&P 1500 Chemicals Industry Index. Historical stock performance is not necessarily indicative of future stock performance.4. (4)We determined Adjusted EBIT, a Non-GAAP measure, to be the most important financial performance measure used to link Company performance to Compensation Actually Paid to our PEO and Other NEOs in 2022.2022 and 2023. This performance measure may not have been the most important financial performance measure for years 2021 and 2020, and we may determine a different financial performance measure to be the most important financial performance measure in future years. Adjusted EBIT is defined as set forth above under “Compensation Discussion and Analysis — Elements of Our Executive Compensation.” See Annex A of this proxy statement for a reconciliation of financial measures under accounting principles generally accepted in the United States (“GAAP”) to Adjusted EBIT, a description of excluded items, and related information.
Tabular list of Relationship Betweenmost important financial performance measures The following table presents the financial performance measures that the Company considered the most important in linking Compensation Actually Paid to our PEO and Other NEOs Compensation Actually Paidfor 2023 to Company performance. The measures in this table are not ranked. | | | | Adjusted Earnings Before Interest and Taxes (EBIT) | | Operating Cash Flow | | Relative Total Shareholder Return | | Return on Invested Capital |
Description of relationship between PEO and other NEOs compensation actually paid and Company TSR The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our Other NEOs, and the Company’s cumulative TSR over the threefour most recently completed fiscal years. 84 2023 Proxy Statement
Description of Relationship Betweenrelationship between PEO and Otherother NEO Compensation Actually Paidcompensation actually paid and Net Income net incomeThe following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our Other NEOs, and our Net Income during the threefour most recently completed fiscal years. Description of Relationship Betweenrelationship between PEO and Otherother NEO Compensation Actually Paidcompensation actually paid and Eastman Chemicalchemical Company Adjustedadjusted EBIT The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our Other NEOs, and Eastman Chemical Adjusted EBIT during the threefour most recently completed fiscal years. 2023 Proxy Statement 85
DescriptionStock ownership of Relationship Between Company TSR and Peer Group TSR
The following chart compares our cumulative TSR over the three most recently completed fiscal years to that of the S&P1500 Chemicals Index over the same period.
Tabular List of Most Important Financial Performance Measures
The following table presents the financial performance measures that the Company considered the most important in linking Compensation Actually Paid to our PEO and Other NEOs for 2022 to Company performance. The measures in this table are not ranked.
| | Adjusted Earnings Before Interest and Taxes (EBIT)
| | | | Relative Total Shareholder Return
| | Return on Invested Capital
|
86 2023 Proxy Statement
Item 3 — Advisory Approval of Executive
Compensation
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) provides stockholders with the right to vote to approve, on an advisory (nonbinding) basis, the compensation of the Company’s named executive officers as disclosed pursuant to the compensation disclosure rules of the SEC. This advisory vote is commonly referred to as the “say-on-pay” vote. In the Company’s advisory say-on-pay vote at the 2022 Annual Meeting, 92.4% of votes cast were “for” approval of the executive compensation. The Compensation Committee considers the outcome of this vote in its establishment and oversight of the compensation of the executive officers, as further discussed in “Executive Compensation — Compensation Discussion and Analysis”, and management continued to consider input of investors in its description of the terms of executive compensation and of the Compensation Committee’s executive compensation decisions in “Executive Compensation” as described in “Executive Compensation — Compensation Discussion and Analysis — Evaluation of Stockholder Say-on-Pay Vote Results and Investor Engagement.”
The Company’s strategy for business and financial growth from sustainable innovation, market engagement, and differentiated technologies and applications development leverages the capabilities of our employees to innovate and execute our growth strategy while remaining committed to maintaining a strong financial position with appropriate financial flexibility and liquidity. Our compensation philosophy supports this strategy by stressing the importance of pay for corporate and individual performance in meeting strategic and business goals for growth, innovative value creation, and financial strength and flexibility, while remaining able to meet changing employee, business, and market conditions. Our executive compensation program is designed to attract and retain a talented and creative team of executives who will provide disciplined leadership for the Company’s success in dynamic, competitive markets. The Company seeks to accomplish this by motivating executives with an appropriate mix of compensation elements to drive value for all stakeholders. Please read the “Executive Compensation — Compensation Discussion and Analysis” section of this proxy statement for additional details about our executive compensation philosophy and programs, including information about the compensation of our named executive officers for 2022 as detailed in the tables and narrative.
The say-on-pay vote gives stockholders the opportunity to indicate their views on the compensation of our named executive officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, objectives, and practices described in this proxy statement.
Stockholders are being asked to approve the compensation of the named executive officers as disclosed in the “Executive Compensation” section of this proxy statement, including the Compensation Discussion and Analysis, compensation tables, and narrative. Because this vote is advisory, it will not be binding on the Compensation Committee, the Board, or the Company. However, the Compensation Committee and the Board value the opinions of the Company’s stockholders, and the Compensation Committee will consider the outcome of the vote in its establishment and oversight of the compensation of the executive officers.
| | |
| | The Board recommends that you vote “FOR” the advisory approval of the compensation of the Company’s named executive officers as disclosed in this proxy statement.
|
2023 Proxy Statement 87
ITEM 4 — Advisory Vote on Frequency of Advisory
Approval of Executive Compensation
The Dodd-Frank Act provides stockholders with the right to vote, every six years, on an advisory (nonbinding) basis, on the frequency with which the Company should include a “say-on-pay” vote on executive compensation at future annual meetings of stockholders. The last such advisory vote on the frequency of say-on-pay votes was at the 2017 Annual Meeting of Stockholders.
At the Company’s 2017 Annual Meeting, 87.5% of votes cast in the advisory vote on the frequency of future say-on-pay votes were for such vote to occur every year, supporting the Board of Directors’ recommendation that say-on-pay be included in the Company’s proxy statement for, and be voted on by stockholders at, each annual meeting of stockholders. The Company has had a say-on-pay vote at each annual meeting of stockholders since the 2017 Annual Meeting.
The Board recommends that an advisory say-on-pay stockholder vote, similar to that contained in Item 3, continue to be included in the Company’s proxy statement for, and voted on by stockholders at, each annual meeting of stockholders. The Board believes that an advisory say-on-pay vote every year by stockholders provides the highest level of accountability and direct communication by having such vote correspond with the related information presented in the proxy statement for the applicable meeting of stockholders.
You may cast your vote on a preferred frequency with which the Company is to hold the advisory say-on-pay stockholder vote by selecting your preference of one year, two years, or three years, or abstaining from voting.
Because this vote is advisory, it will not be binding on the Board or the Company. Notwithstanding the results of such vote, and while the Company currently plans to continue to have an annual stockholder say-on-pay vote, the Board may decide that it is in the best interests of stockholders and the Company to hold an advisory vote on executive compensation more or less frequently than the preference chosen by the plurality (that is, the largest number) of votes cast by stockholders.
| | |
| | The Board recommends that you vote for “ONE YEAR” on the advisory approval vote on executive compensation.
|
88 2023 Proxy Statement
ITEM 5 — Advisory Vote on Stockholder Proposal
Regarding an Independent Board Chair
Stockholder John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, owner of 50 shares of Eastman common stock, has given notice that he intends to submit the following proposal and supporting statement. The Company has reproduced the proposal and supporting statement as provided to the Company by stockholder John Chevedden and has not sought to correct or address all of the statements with which the Company disagrees:
Proposal 5 — Independent Board Chairman
Shareholders request that the Board of Directors adopt an enduring policy, and amend the governing documents as necessary in order that 2 separate people hold the office of the Chairman and the office of the CEO as follows:
Whenever possible, the Chairman of the Board shall be an Independent Director.
The Board has the discretion to select a Temporary Chairman of the Board who is not an Independent Director to serve while the Board is seeking an Independent Chairman of the Board.
Although it is a best practice to adopt this proposal soon, this policy could be phased in when there is a leadership transition.
This proposal topic won 52% support at Boeing and 54% support at Baxter International. Boeing then adopted this proposal topic in June 2020. The roles of Chairman and CEO are fundamentally different and should be held by 2 directors, a CEO and a Chairman who is completely independent of the CEO and our company.
Eastman Chemical is Exhibit A in why the Lead Director role is an empty suit compared to an independent Board Chairman.
Our so-called Lead Director, Mr. David Raisbeck violates the most important attribute of a Lead Director — independence. As director tenure goes up director independence goes down. Mr. Raisbeck has 23-years of excessive director tenure. And Mr. Raisbeck has not had a day job for 15-years. Mr. Raisbeck’s long tenure makes him a prime candidate to retire. It is time for a change.
A lead director is no substitute for an independent board chairman. With the current CEO serving as Chair this means giving up a substantial check and balance safeguard that can only occur with an independent Board Chairman. A lead director cannot call a special shareholder meeting.
A lead director can delegate many details of his lead director duties to others and then simply rubber-stamp it. Management has not explained how shareholders can be sure of what goes on in regard to lead director delegation.
A lead director with long tenure can also give excessive deference to the Eastman Chemical CEO.
The increased complexities of companies of more than $10 Billion in annual revenue, like Eastman Chemical, demand that 2 persons fill the 2 most important jobs in the company.
Please vote yes:
Independent Board Chairman — Proposal 5
2023 Proxy Statement 89
Executive Compensation — Termination and Change-in-Control Arrangements
Response of the Company
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL
The Board of Directors has carefully considered the stockholder proposal and unanimously believes that the action requested by this proposal is unnecessary and not in the best interests of the Company or its stockholders.
The Board should be able to select its leadership structure — including its Chair and CEO — based upon its determination of the structure that best serves the interests of stockholders. The Board believes that our stockholders’ interests are best served when we retain the ability to select the appropriate person to serve in the Chair role and that our current leadership structure is effective in its independent oversight of Eastman.
As described in “Board Leadership Structure” on page 28, Chief Executive Officer and director Mark J. Costa has served as Chair since 2014, the Board having determined that this is the most efficient manner to facilitate effective communication between management and the Board and provide strong and consistent leadership as well as a unified voice for the Company. In addition, the Board believes that combining the roles of Chair and Chief Executive Officer helps ensure that the Chief Executive Officer understands and can effectively and efficiently manage the implementation of the recommendations and decisions of the Board.
Our Lead Director Provides Meaningful Independent Leadership and Oversight at the Board Level. In order to give a significant voice to our non-employee, independent directors and to reinforce effective, independent leadership on the Board, the Company’s Bylaws and Corporate Governance Guidelines provide that the Company shall have an independent Lead Director if the same person holds the Chief Executive Officer and Chair positions or if the Chair is not otherwise independent.
Contrary to the proponent’s various assertions about the powers of a lead director, none of which are specific to Eastman, the Company’s Lead Director has substantial authority and helps ensure appropriate oversight of the Chief Executive Officer by the independent directors. The Lead Director’s responsibilities, which are described in more detail in the Company’s Corporate Governance Guidelines, include:
| • | | calling, setting agendas for, and presiding over executive sessions of the executive officers
non-employee, independent directors at each regularly scheduled meeting of the Board, or at such other times as the non-employee, independent directors may determine;
|
| • | | calling special meetings of the full Board or the non-employee, independent directors;
|
presiding over Board meetings in the absence of the Chair;
collaborating and consulting with Committee chairs concerning schedules, agendas, and written materials;
acting as a liaison between the independent directors and the Chair; and
being available with the Chair for consultation and direct communication with stockholders.
The governance concerns expressed by the proponent are unfounded and do not reflect the Company’s leadership and governance practices. The proponent makes a number of inaccurate and/or unfounded assertions about the Company’s governance and, in particular, our Lead Director. Among these is the assertion that our independent Lead Director “violates the most important attribute of a Lead Director — independence” because of his years of service on the Board. This is not the case. In fact, Mr. Raisbeck is independent under all applicable independence standards. Mr. Raisbeck’s years with the Company and experience enable him to bring valuable and independent views to the boardroom, where he provides thoughtful leadership for both fellow directors and senior management.
90 2023 Proxy Statement
Item 5 — Advisory Vote on Stockholder Proposal Regarding an Independent Board Chair
The proponent further asserts that Mr. Raisbeck’s “long tenure makes him a prime candidate to retire.” Our Corporate Governance Guidelines set forth the standard for director retirement, under which a director will not be eligible for nomination, appointment, or election (or re-election) to the Board. Mr. Raisbeck’s continued role on the Board is entirely consistent with the Company’s Corporate Governance Guidelines and, moreover, he has continuously received strong support from stockholders in his annual election to the Board, including 93.62% support at the 2022 Annual Meeting. In addition, the Lead Director is nominated and elected by the non-employee, independent directors on an annual basis. Eastman also has a history of rotating the Lead Director every three to five years. Mr. Raisbeck has been Lead Director since May 2020.
Finally, the proponent asserts that a lead director can “delegate many details of his lead director duties to management and then simply rubber-stamp it.” As described above, the Lead Director’s duties are set out in the Company’s Corporate Governance Guidelines, which are readily available on the Company’s website, and which include no express provisions for delegation of the Lead Director’s duties to management.
We have implemented strong corporate governance practices and regularly review and update these practices as appropriate. Eastman maintains strong corporate governance practices, which assure management accountability and effective independent oversight. Among other things, all Eastman directors, with the exception of the CEO, meet the independence requirements of the New York Stock Exchange, and the Board’s standing Committees are each chaired by independent directors and are 100% independent. Directors are elected annually and, as described above, the Company has a Lead Director with clear and substantive authority and responsibilities.
The Board maintains its demonstrated commitment to corporate governance policies that are in the best interests of the Company and its stockholders by regularly reviewing the Company’s governance structure, policies, and practices, including considering input from stockholders and others.
Consistent with its commitment to strong corporate governance, over the years, the Board has made changes to the Company’s governance structure, policies, and practices that it determined to be in the best interests of the Company and its stockholders. Past changes include the adoption of a proxy access bylaw provision that allows qualifying stockholders to include their director nominees in the Company’s proxy materials and a Board stockholder communication and engagement policy. Past changes also include the implementation of majority voting in the election of directors, repeal of the Company’s “poison pill” stockholder rights plan, declassification of the Board, implementation of the existing right of stockholders to call special meetings, and removal of certain supermajority voting requirements from the Company’s Certificate of Incorporation and Bylaws. Most recently, changes to the composition of the Board of Directors have significantly reduced the average tenure of the directors.
These actions demonstrate that the Board is not reluctant to make changes in its governance practices when it determines that a change is in the best interests of the Company and its stockholders. The requested change to a fixed policy requiring a separation of the roles of Chair and CEO is not, however, such a change.
Given the strong leadership of the Company’s Chair and CEO, the counter-balancing role of the Lead Director and a Board comprised of experienced and independent directors, the Board continues to believe it is in the best long-term interests of the Company and its stockholders to maintain the combined role of Chair and CEO.
| | | 
| | The Board of Directors recommends that you vote “AGAINST” this proposal.
|
2023 Proxy Statement 91
INFORMATION ABOUT STOCK OWNERSHIP
Stock Ownership of Directors and Executive Officers
Common Stock
Unless otherwise noted, the table below sets forth certain information regarding the beneficial ownership of Eastman common stock as of March 1, 2023,2024, by each director (which includes each director nominee) and by each executive officer named in the Summary“Summary Compensation TableTable” (under “Executive Compensation — Compensation Tables” earlier in this proxy statement, referred to as the “named executive officers”“NEOs”) and by the directors and executive officers as a group.
| | | | | | | | | | | | Name | | Number of Shares of Common Stock Beneficially Owned(1)(2) | | Percent
of
Class | Mark J. Costa | | | | 1,559,808 | (3) | | | | 1.289 | % | William T. McLain, Jr. | | | | 165,640 | (4) | | | | * | | Brad A. Lich | | | | 334,565 | (5) | | | | * | | Stephen G. Crawford | | | | 233,333 | (6) | | | | * | | Perry Stuckey III | | | | 180,908 | (7) | | | | * | | Humberto P. Alfonso | | | | 9,878 | | | | | * | | Brett D. Begemann | | | | 8,020 | | | | | * | | Eric L. Butler | | | | 2,107 | (8) | | | | * | | Edward L. Doheny II | | | | 133 | | | | | * | | Linnie M. Haynesworth | | | | 111 | (9) | | | | * | | Julie F. Holder | | | | 11,870 | (10) | | | | * | | Renée J. Hornbaker | | | | 20,688 | | | | | * | | Kim A. Mink | | | | 1,390 | | | | | * | | James J. O’Brien | | | | 2,177 | | | | | * | | David W. Raisbeck | | | | 40,209 | (10) | | | | * | | Charles K. Stevens III | | | | 3,643 | (10) | | | | * | | Directors and executive officers as a group (21 persons) | | | | 2,753,440 | (11) | | | | 2.275 | % |
| * | | | | | | | | | Name | Represents beneficial ownership
Number of less than 1%Shares of our outstanding shares Common Stock Beneficially Owned(1)(2) | Percent of common stock.Class |
(1)Mark J. Costa | Information relating to beneficial ownership is based upon information furnished by each person using “beneficial ownership” concepts set forth in rules of the SEC. Under those rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of, or to direct the disposition of, such security. A person is also deemed to be the beneficial owner of any security of which that person has a right to acquire beneficial ownership (such as by exercise of options) within 60 days (on or before April 29, 2023). Under such rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may disclaim any beneficial interest. Except as
1,639,393(3) | 1.4% |
92 2023 Proxy Statement
Information about Stock Ownership — Stock Ownership of Directors and Executive Officers
| William T. McLain, Jr. | indicated in other notes to this table, directors, named executive officers and other executive officers possessed sole voting and investment power with respect to all of their respective shares of common stock in the table.
200,530(4) | * |
(2)Brad A. Lich | The total number of shares of common stock beneficially owned by the directors
372,678(5) | * | | Stephen G. Crawford | 264,597(6) | * | | B. Travis Smith | 52,821(7) | * | | Humberto P. Alfonso | 9,878 | * | | Brett D. Begemann | 8,020 | * | | Eric L. Butler | 3,503(8) | * | | Edward L. Doheny II | 133 | * | | Linnie M. Haynesworth | 1,507(8) | * | | Julie F. Holder | 13,266(8) | * | | Renée J. Hornbaker | 20,688 | * | | Kim A. Mink | 1,390 | * | | James J. O’Brien | 3,573(8) | * | | David W. Raisbeck | 41,605(8) | * | | Charles K. Stevens III | 5,039(8) | * | Directors and executive officers as a group is 2.275% of the(21 persons) | 2,863,309(9) | 2.4% |
* Represents beneficial ownership of less than 1% of our outstanding shares of common stock. (1)Information relating to beneficial ownership is based upon information furnished by each person using “beneficial ownership” concepts set forth in rules of the SEC. Under those rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of, or to direct the disposition of, such security. A person is also deemed to be the beneficial owner of any security of which that person has a right to acquire beneficial ownership (such as by exercise of options) within 60 days (on or before April 29, 2024). Under such rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may disclaim any beneficial interest. Except as indicated in other notes to this table, directors, NEOs and other executive officers possessed sole voting and investment power with respect to all of their respective shares of common stock in the table.
| | | Information about stock outstanding as of March 15, 2023. The number of shares beneficially owned by each director and named executive officer other than Mr. Costa (who beneficially owned approximately 1.289% of the outstanding shares) is less than one percent of the shares of common stock outstanding as of March 15, 2023. Shares not outstanding which are subject to options exercisable within 60 days by persons in the group or a named individual are deemed to be outstanding for the purpose of computing the percentage of outstanding shares of common stock owned by each individual and the group.ownership |
(3) | Includes 1,182,930 shares that may be acquired upon exercise of options.
|
(4) | Includes 86,484 shares that may be acquired upon exercise of options. Also includes 50,798 shares owned by the Eastman Foundation (the “Foundation”), of which shares Mr. McLain may also be deemed a beneficial owner by virtue of his shared voting and investment power as a director of the Foundation but in which he had no pecuniary interest.
|
(5) | Includes 279,502 shares that may be acquired upon exercise of options.
|
(6) | Includes 141,149 shares that may be acquired upon exercise of options. Also includes 50,798 shares owned by the Foundation of which Mr. Crawford may also be deemed a beneficial owner by virtue of his shared voting and investment power as a director of the Foundation but in which he had no pecuniary interest. Includes 57 shares held indirectly by spouse in 401(k) plan and 263 shares held indirectly by spouse in the Employee Stock Ownership Plan.
|
(7) | Mr. Stuckey separated from the Company on January 1, 2023, and his beneficial ownership is as of the date of his departure. Includes 132,489 shares that may be acquired upon exercise of options.
|
(8) | Includes 107 restricted shares held by Mr. Butler that generally vest on August 4, 2023, subject to conditions related to continued service as a director.
|
(9) | Represents 111 restricted shares held by Ms. Haynesworth that generally vest on February 3, 2024, subject to conditions related to continued service as a director.
|
(10) | Includes 1,041 restricted shares held by Messrs. Raisbeck and Stevens and Ms. Holder that generally vest in May 2023, but as to which the director has voting powers.
|
(11) | Includes a total of 1,908,637 shares that may be acquired upon exercise of options and 3,341 restricted shares as to which directors had voting power but no investment power. Also includes 50,798 shares owned by the Eastman Foundation, of which shares three executive officers each may have been deemed a beneficial owner by virtue of shared voting and investment power as a director of the Foundation but as to which they have no pecuniary interest.
|
(2)The total number of shares of common stock beneficially owned by the directors and executive officers as a group is 2.4% of the shares of common stock outstanding as of March 1, 2024. The number of shares beneficially owned by each director and NEO other than. Mr. Costa (who beneficially owned approximately 1.4% of the outstanding shares), is less than one percent of the shares of common stock outstanding as of March 1, 2024. Shares not outstanding that are subject to options exercisable within 60 days by persons in the group or a named individual are deemed to be outstanding for the purpose of computing the percentage of outstanding shares of common stock owned by each individual and the group. (3)Includes 1,240,715 shares that may be acquired upon exercise of options. (4)Includes 113,042 shares that may be acquired upon exercise of options. Also includes 50,798 shares owned by the Eastman Foundation (the “Foundation”), of which shares Mr. McLain may also be deemed a beneficial owner by virtue of his shared voting and investment power as a director of the Foundation, but in which he had no pecuniary interest. (5)Includes 300,336 shares that may be acquired upon exercise of options. (6)Includes 164,918 shares that may be acquired upon exercise of options. Also includes 50,798 shares owned by the Foundation of which Mr. Crawford may also be deemed a beneficial owner by virtue of his shared voting and investment power as a director of the Foundation but in which he had no pecuniary interest. Includes 59 shares held indirectly by his spouse in a 401(k) plan and 273 shares held indirectly by his spouse in the Employee Stock Ownership Plan. (7)Includes 40,779 shares that may be acquired upon the exercise of options. (8)Includes 1,396 restricted shares held by Messrs. Butler, O'Brien, Raisbeck and Stevens and Mses. Haynesworth and Holder that generally vest in May 2024, but as to which the director has voting powers. (9)Includes a total of 1,967,381 shares that may be acquired upon exercise of options and 8,376 restricted shares as to which directors had voting power but no investment power. Also includes 50,798 shares owned by the Foundation, of which three executive officers, including Messrs. McClain and Crawford, each may have been deemed a beneficial owner by virtue of shared voting and investment power as a director of the Foundation but as to which they have no pecuniary interest. Director and Executive Stock Ownership Expectations; No Hedgingexecutive stock ownership expectations; no hedging or Pledgingpledging of Company Stockcompany stock Eastman has stock ownership expectations for its directors and executive officers. These persons are expected to acquire and maintain a stake in the Company valuedvalued at $600,000 for non-employee directors (fivefive times the annual retainer fee),fee for directors, five times annual base pay for the Chief Executive Officer, and two and one-half times annual base pay for the other executive officers. Directors and executive officers are expected to attain these levels of stock ownership within five years of first becoming a director or an executive officer. Hypothetical units of the Eastman common stock fund that are credited to an executive’s account under the EDCPExecutive Deferred Compensation Plan (“EDCP”) and to a director’s account under the DDCP are counted with shares of common stock actually owned for purposes of determining stock ownership under the director and executive ownership expectations. See “Director“Director Compensation — Directors’ Deferred Compensation Plan”Plan” and “Executive“Executive Compensation — Compensation Tables — 20222023 Nonqualified Deferred CompensationCompensation.””. 2023 Proxy Statement 93
Information about Stock Ownership — Stock Ownership of Directors and Executive Officers
Company directors and executive officers, and all employees, are prohibited by Eastman policies from use of derivative financial instruments to hedge or mitigate their exposure to changes in the market price of Eastman common stock. In addition, directors and executive officers are prohibited from pledging Eastman common stock as security or collateral for loans or in margin brokerage accounts.
| | | | Information about stock ownership |
The table below shows the number of shares of common stock and EDCP and DDCP common stock units owned under the ownership expectations as of March 1, 2023 (other than as noted below),2024, by each director and each named executive officer.NEO. All directors and current executive officers have met or are on schedule to meet their ownership expectations.
expectations within the required timeframe. | | | | | | | Name | | Number of Shares of Common Stock
and Common
Stock Units Owned | Mark J. Costa | | | | 376,878 | 398,678 | William T. McLain, Jr. | | | | 28,358 | 36,690 | Brad A. Lich | | | | 57,647 | 72,342 | Stephen G. Crawford | | | | 41,386 | 48,881 | Perry Stuckey III (1)
B. Travis Smith | | | | 50,894 | 12,022 | Humberto P. Alfonso | | | | 46,503 | 51,512 | Brett D. Begemann | | | | 46,022 | 51,230 | Eric L. Butler | | | | 2,446 | 4,636 | Edward L. Doheny II | | | | 10,068 | 14,078 | Linnie M. Haynesworth (2) | | | | 111 | 2,219 | Julie F. Holder | | | | 22,529 | 25,002 | Renée J. Hornbaker | | | | 61,516 | 64,808 | Kim A. Mink | | | | 8,758 | 11,130 | James J. O’Brien | | | | 15,539 | 18,076 | David W. Raisbeck | | | | 87,329 | 90,806 | Charles K. Stevens III | | | | 5,948 | 8,191 |
(1) | Mr. Stuckey separated from the Company on January 1, 2023, and his ownership is as of the date of his departure.
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(2) | Ms. Haynesworth was elected to the Board of Directors on February 3, 2023. Represents 111 restricted shares held by Ms. Haynesworth that generally vest on February 3, 2024, subject to conditions related to continued service as a director.
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94 2023 Proxy Statement
Information about Stock Ownership — Stock Ownership of Directors and Executive Officers
Principal Stockholders The followingstockholders
Unless otherwise noted, the table below sets forth certain information aboutregarding the beneficial ownership of Eastman common stock as of March 1, 2024 by persons we know to be the beneficial owners of more than five percent of Eastman common stock asstock. | | | | | | | | | | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | | | | The Vanguard Group 100 Vanguard Boulevard Malvern, Pennsylvania 19355 | 14,839,678(1) | 12.52% | | | | | | | BlackRock, Inc. 50 Hudson Yards New York, New York 10001 | 8,383,444(2) | 7.1% | | | |
(1)As of December 31, 2022.
2023, based on a Schedule 13G/A filed with the SEC on February 13, 2024 by The Vanguard Group, Inc., an investment adviser. According to the Schedule 13G/A, The Vanguard Group has sole dispositive power with respect to 14,323,259 of such shares, shared dispositive power with respect to 516,419 of such shares, and shared voting power with respect to 152,639 of such shares. (2)As of December 31, 2023, based on a Schedule 13G/A filed with the SEC on January 26, 2024 by BlackRock, Inc. as parent holding company of certain broker-dealer and investment adviser entities, including certain non-U.S. institutions. According to the Schedule 13G/A, BlackRock and such affiliated entities together have sole dispositive power with respect to 8,383,444 shares and sole voting power with respect to 7,445,770 shares. | | | | | | | | | | | | Name and Address of Beneficial Owner | | | | Amount and Nature of
Beneficial Ownership | | | Percent of
Class(1) | | The Vanguard Group
100 Vanguard Boulevard
Malvern, Pennsylvania 19355 | | | | | 14,994,249 | (2) | | | 12.59 | % | JP Morgan Chase & Co.
383 Madison Avenue
New York, New York 10179 | | | | | 9,862,144 | (3) | | | 8.28 | % | BlackRock, Inc.
55 East 52nd Street
New York, New York 10055 | | | | | 8,615,723 | (4) | | | 7.23 | % |
| (1) | | | | | | | | | 92 | Based upon the number of shares of common stock outstanding
2024 Proxy Statement | |
 | | | | | | | | | Q | What Is A Proxy Statement, and entitled to be votedHow Do I Attend and Vote at the meeting as of March 15, 2023, the record date for the Annual Meeting.Meeting? |
| (2) | As of December 30, 2022, based on a Schedule 13G/A filed with the SEC by The Vanguard Group, Inc., an investment adviser. According to the Schedule 13G/A, The Vanguard Group has sole dispositive power with respect to 14,491,339 of such shares, shared dispositive power with respect to 502,910 of such shares, and shared voting power with respect to 168,702 of such shares.
(3) | As of December 30, 2022, based on a Schedule 13G/A filed with the SEC by JP Morgan Chase & Co. as parent holding company of certain broker-dealer and investment manager entities, including certain non-U.S. institutions. According to the Schedule 13G/A, JP Morgan Chase and such affiliated entities together have sole dispositive power with respect to 9,838,226 of such shares, shared dispositive power with respect to 13,857 of such shares, sole voting power with respect to 8,807,306 of such shares, and shared voting power with respect to 66,612 of such shares.
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(4) | As of December 31, 2022, based on a Schedule 13G/A filed with the SEC by BlackRock, Inc. as parent holding company of certain broker-dealer and investment adviser entities, including certain non-U.S. institutions. According to the Schedule 13G/A, BlackRock and such affiliated entities together have sole dispositive power with respect to 8,615,723 shares and sole voting power with respect to 7,530,041 shares.
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2023 Proxy Statement 95
ADDITIONAL INFORMATION ABOUT THE ANNUAL
MEETING
 What Is A Proxy Statement, and How Do I Attend and Vote at the Annual Meeting?
A. This proxy statement is dated March 22, 2023,21, 2024, and is first being mailed and delivered electronically to Eastman stockholders, and made available on the Internet at the Company’s website (www.eastman.com) and at www.ReadMaterial.com/EMN, on or about March 22, 2023.21, 2024. Our Board is furnishing you this proxy statement in connection with its solicitation of proxies to be voted at the 2023 Annual Meeting of the Company to be held on May 4, 2023, and2, 2024, and at any adjournments or postponements of the meeting. A proxy statement is a document that SEC regulations require us to give you when we ask you to vote your stock by proxy. At the meeting, stockholders will be asked to consider and vote on the items of business listed and described in this proxy statement. We have decided to hold our Annual Meeting virtually on the Internet via live webcast. Stockholders will be able to attend and participate online. We have structured our virtual meeting to provide stockholders the same rights as if the meeting were held in person, including the ability to vote shares electronically during the meeting and submit questions in advance of and during the meeting in accordance with the rules of conduct for the meeting. The rules of the meeting and other information about participation and voting will be available in the Annual Meeting section of our website. As always, we encourage you to submit a proxy to vote your shares prior to the Annual Meeting so that your shares will be represented and voted at the meeting whether or not you attend virtually. To attend the Annual Meeting virtually, stockholders must register using their control number and other information to identify such stockholder, at https://register.proxypush.com/emn. Upon completing registration, stockholders will receive further instructions by e-mail, including links that will allow them to access the Annual Meeting, vote online, and submit questions. If you are a beneficial stockholder, you may contact the bank, broker, or other institution where you hold your account if you have questions about obtaining your control number. The Annual Meeting will begin promptly at 11:30 a.m. (EDT) on May 4, 2023,2, 2024, though stockholders may log-in beginning at 11:15 a.m. (EDT). We encourage you to access the Annual Meeting prior to the start time. The Annual Meeting virtual platform is fully supported across browsers (Edge, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Stockholders should ensure that they have a strong internet connection if they intend to attend or vote at the Annual Meeting. Attendees should allow plenty of time to log-in and ensure that they can hear streaming audio prior to the start of the Annual Meeting. Additional information regarding the rules of conduct and other materials for the Annual Meeting will be available, via link, during the Annual Meeting. In addition, we will make available a list of stockholders of record as of the record date for inspection by stockholders for any purpose germane to the Annual Meeting for ten days preceding the Annual Meeting. To access the stockholders of record list during this time, please send your request, and proof of Eastman stock ownership, by email to corpsecy@eastman.com. If you encounter technical andor logistical issues, including any difficulties accessing the virtual Annual Meeting during the log-in or meeting time, please callrefer to the FAQ page linked in the e-mailed instructions where you will find answers to common questions as well as a live support team at the numbers listed on the number. e-mailed
instructions.96 2023 Proxy Statement
Additional Information About the Annual Meeting
What is a Proxy, and How do I Vote by Proxy at the Annual Meeting?
| | | | Additional information about the annual meeting |
| | | | | | | | | Q | What is a Proxy, and How do I Vote by Proxy at the Annual Meeting? | | |
A. A proxy is a legal designation of another person to vote stock you own. That other person is called a proxy. If you designate someone as your proxy in a written or electronic document, that document is also called a proxy, a proxy card, or a form of proxy. By completing and returning your proxy (either by returning the paper proxy card, by submitting your proxy electronically by Internet, or by telephone), you appoint William T. McLain, Jr., the Company’s Chief Financial Officer, and Kellye L. Walker, the Company’s Corporate Secretary, to represent you at the Annual Meeting and direct them to vote your shares at the Annual Meeting. Shares of common stock represented by proxy will be voted by the proxy holders at the Annual Meeting in accordance with your instructions as indicated in the proxy.If you properly execute and return your proxy (in paper form, electronically by the Internet, or by telephone) but do not indicate any voting instructions, your shares will be voted in accordance with the recommendations of the Board as to the matters identified in this proxy statement and in the best judgment of the proxy holders as to any other matters. If your shares are registered in your name, you are a stockholder of record.Stockholders of record may vote by proxy in one of three ways: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 
By Internet: visit the website www.cesvote.com and follow the instructions on your proxy card or electronic form of proxy. | | | | | | 
By telephone: call (888) 693-8683 and follow the instructions on your proxy card or electronic form of proxy. | | | | | | 
By mail (if you received a paper proxy card): mark, sign, date, and mail your proxy card in the enclosed postage-paid envelope. | | | | | | | | | | | | | | | |
If you received the “Important Notice Regarding the Availability of Proxy Materials”, follow the instructions on that notice to access an electronic form of proxy. Internet and telephone voting procedures are designed to authenticate stockholder identities, to allow stockholders to give voting instructions, and to confirm that stockholders’ instructions have been recorded properly. If your shares are held in “street name” through a broker, bank, or other holder of record, you will receive instructions from that registered holder that you must follow in order for your shares to be voted for you by that record holder. Telephone and Internet voting may be offered to stockholders who own their shares through certain brokers or banks. If stockholders submit a proxy to vote their shares prior to the Annual Meeting, their shares will be voted at the Annual Meeting according to their instructions and they do not need to vote their shares at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, we urge you to vote in advance of the Annual Meeting by proxy in one of the ways described above. How Do I Revoke My Proxy?
| | | | | | | | | Q | How Do I Revoke My Proxy? | | |
A. Stockholders of Record: If you give a proxy, you may revoke it at any time before its exercise at the meeting by: •giving written notice of revocation to the Corporate Secretary of the Company; •executing and delivering a later-dated, signed proxy card or submitting a later-dated proxy by Internet or by telephone before the meeting; or •voting in person virtually at the meeting. All written notices of revocation or other communications with respect to revocation of proxies should be sent to Eastman Chemical Company, P.O. Box 431, Kingsport, Tennessee 37662-0431, Attention: Corporate Secretary, so that they are received before the Annual Meeting. 2023 Proxy Statement 97
Additional Information About the Annual Meeting
Beneficial OwnersOwners:: If you are a beneficial owner of your shares, you must contact the bank, broker, or other nominee holding your shares and follow their instructions for revoking or changing your vote. What is the Record Date for the Annual Meeting? Which Stockholders Are Entitled to Vote?
| | | | Additional information about the annual meeting |
| | | | | | | | | Q | What is the Record Date for the Annual Meeting? Which Stockholders Are Entitled to Vote? | | |
A. The record date for the 2023 Annual Meeting is March 15, 2023.12, 2024. Stockholders of record of common stock at the close of business on the record date are entitled to receive notice of the meeting and to vote at the meeting. The record date is established by the Board as required by Delaware law. If your shares are held in “street name” through a broker, bank, or other holder of record, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote in person virtually at the meeting. On the record date, there were 119,138,025117,603,461 shares of common stock issued and outstanding. Holders of common stock are entitled to one vote on each of the twelveten director-nominees and one vote on each other matter voted upon at the Annual Meeting for each share of common stock they hold of record on the record date. What is A Quorum to Conduct Business at the Meeting? How Are Abstentions and Broker
Non-Votes Counted at the Annual Meeting?
| | | | | | | | | Q | What is A Quorum to Conduct Business at the Annual Meeting? How Are Abstentions and Broker Non-Votes Counted at the Annual Meeting? | | |
A. The presence, in person virtually or by proxy, of the holders of a majority of the shares of common stock entitled to vote at the Annual Meeting is necessary to constitute a quorum to conduct business. Abstentions and “broker non-votes” will be counted as present and entitled to vote for purposes of determining a quorum. A “broker non-vote” occurs when a registered holder holding shares in “street name” for a beneficial owner does not vote on a particular proposal because the registered holder does not have discretionary voting power for that particular item and has not received voting instructions from the beneficial owner. Brokers which have not received voting instructions from their clients cannot vote on their clients’ behalf on the election of directors or the advisory approval of executive compensation, the advisory vote on the frequency of the vote on executive compensation, or the advisory vote on the stockholder proposal, but may, although they are not required to, vote their clients’ shares on the ratification of the appointment of the independent registered public accounting firm. What Votes Are Required for Approval of the Matters to be Considered at the Annual
Meeting?
| | | | | | | | | Q | What Votes Are Required for Approval of the Matters to be Considered at the Annual Meeting? | | |
A. Each director nominee who receives a majority of votes cast (number of shares voted “for” exceeds 50% of the number of votes cast with respect to that director’s election) will be elected as a director. With respect to the election of directors, stockholders may (1) vote “for” all twelveten of the nominees, (2) vote “against” all twelveten of the nominees, (3) vote “against” any individual nominee or nominees but vote “for” the other nominee(s), or (4) “abstain” from voting on one or more nominees. Shares not present, in person or by proxy, at the Annual Meeting and abstentions will have no effect on the outcome of the election of directors. Similarly, broker non-votes will not be considered to be votes cast and therefore will have no effect on the outcome of the election of directors. The affirmative vote of a majority of the votes cast is required for the ratification of the appointment of the independent registered public accounting firm and the advisory approval of executive compensation, the advisory approval of the frequency of the vote on executive compensation, and the advisory vote on the stockholder proposal.compensation. With respect to each of these items, other than the advisory approval of the frequency of the vote on executive compensation, stockholders may (1) vote “for,” (2) vote “against,” or (3) “abstain” from voting. With respect to the advisory approval of the frequency of the vote on executive compensation, stockholders may (1) vote for “one year”, (2) vote for “two years”, (3) vote for “three years”, or (4) “abstain” from voting. Abstentions and broker non-votes will not be considered to be votes cast and therefore will have no effect on the outcome of the vote on these matters. 98 2023 Proxy Statement
| | | | | | | | | Q | What Are Proxy Solicitation Costs, and Who Pays Them? | | |
Additional Information About the Annual Meeting
What Are Proxy Solicitation Costs, and Who Pays Them?
A. We will bear the cost of soliciting proxies and the cost of the Annual Meeting. In addition to the solicitation of stockholders by mail and electronic means, proxies may be solicited by telephone, facsimile, personal contact, and similar means by our directors, officers, or employees, none of whom will be specially compensated for these activities. We have also contacted brokerage houses, banks, nominees, custodians, and fiduciaries which can be identified as record holders of common stock. Such holders, after inquiry by us, have provided certain information concerning beneficial owners not objecting to the disclosure of such information and the quantities of proxy materials and annual reports needed to supply such materials to beneficial owners, and we will reimburse such record holders for the expense of providing such beneficial ownership information and of mailing or otherwise delivering proxy materials and annual reports to beneficial owners. We have retained Georgeson LLC to assist with the solicitation of proxies and vote projections for a fee of $20,500 plus reimbursement of out-of-pocket expenses. out-of-pocket
expenses. What About Matters Not Included in This Proxy Statement?
| | | | Additional information about the annual meeting |
| | | | | | | | | Q | What About Matters Not Included in This Proxy Statement? | | |
A. We do not expect any business to be acted upon at the Annual Meeting other than as described in this proxy statement. If, however, other matters are properly brought before the Annual Meeting, the persons appointed as proxies will have the discretion to vote or act on those matters for you according to their best judgment. What Is the Deadline for Submission of Stockholder Proposals for the 2024 Annual Meeting
of Stockholders?
| | | | | | | | | Q | What Is the Deadline for Submission of Stockholder Proposals for the 2025 Annual Meeting of Stockholders? | | |
A. In accordance with the rules of the SEC, if you wish to submit a proposal for presentation at Eastman’s 20242025 Annual Meeting of Stockholders, it must be received by the Company at its principal executive offices no later than November 23, 2023,21, 2024, in order to be included in the Company’s proxy materials for its 20242025 Annual Meeting of Stockholders under SEC Rule 14a-8. Any such proposal should be sent to Eastman Chemical Company, P.O. Box 431, Kingsport, Tennessee 37662-0431, Attention: Corporate Secretary. In addition, our Bylaws require that other proposals to be submitted by a stockholder for a vote of the Company’s stockholders at an annual meeting of stockholders must be preceded by adequate and timely notice to the Corporate Secretary of the Company. To be adequate, the notice must set forth certain information specified in our Bylaws about the stockholder and the proposal. The Bylaws are available through the “Investors — Governance” section of the Company’s website and also will be provided to any stockholder upon written request to Eastman Chemical Company, P.O. Box 431, Kingsport, Tennessee 37662-0431, Attention: Investor Relations. To be timely, the notice must be delivered to the Corporate Secretary of the Company no earlier than 150 days and not later than 120 days prior to the day of the month on which the notice of the immediately preceding year’s annual meeting of stockholders was first sent to the stockholders of the Company. If, as expected, notice of the 2023 Annual Meeting is first sent to stockholders on March 22, 2023,21, 2024, then such advance notice must be delivered no earlier than October 24, 2023,22, 2024, and not later than November 23, 2023. 2023 Proxy Statement 99
21, 2024. | | | | | | | | | Q | What Are the Requirements for Nominations by Stockholders for Election to the Board of Directors and Stockholder Nomination Proxy Access? | | |
Additional Information About the Annual Meeting
What Are the Requirements for Nominations by Stockholders for Election to the Board of
Directors and Stockholder Nomination Proxy Access?
A. Our Bylaws provide that nominations by stockholders of persons for election to the Board may be made by giving adequate and timely notice to the Corporate Secretary of the Company. To be adequate, the nomination notice or the notice of proxy access nomination, as applicable, must set forth certain information specified in our Bylaws about each stockholder submitting a nomination and each person being nominated, including, as applicable, the information required by Rule 14a-19. The Bylaws are available through the “Investors — Corporate Governance” section of the Company’s website, and also will be provided to any stockholder upon written request to Eastman Chemical Company, P.O. Box 431, Kingsport, Tennessee 37662-0431, Attention: Investor Relations. To be timely, the nomination notice and the notice of proxy access nomination each must be delivered to the Corporate Secretary of the Company no earlier than 150 days and not later than 120 days prior to the day of the month on which the notice of the immediately preceding year’s annual meeting of stockholders was first sent to the stockholders of the Company. If, as expected, notice of the 20232024 Annual Meeting is first sent to stockholders on March 22, 2023,21, 2024, then such notice must be delivered no earlier than October 24, 2023,22, 2024, and not later than November 23, 2023. How Do I Access the Company’s Annual Report to Stockholders and Annual Report on
Form 10-K?
21, 2024. | | | | | | | | | Q | Q. How Do I Access the Company’s Annual Report to Stockholders and Annual Report on
Form 10-K? | | |
A. Our Annual Report to Stockholders for 2022,2023, including our consolidated financial statements for the year ended December 31, 2022,2023, is being mailed and delivered electronically to stockholders, and made available on the Internet at the Company’s website (www.eastman.com) and at www.ReadMaterial.com/EMN, concurrently with this proxy statement. The Company’s Annual Report on Form 10-K for the year ended December 31, 20222023 as filed with the SEC is also available on the Internet on the Company’s website and on the SEC’s website (www.sec.gov). 100 2023
| | | | Additional information about the annual meeting |
Householding of Proxy Statement Materials We have adopted a procedure called “householding.” Under this procedure, stockholders of record who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of the Notice of Internet Availability of Proxy Materials or the printed proxy materials, unless we have received contrary instructions from one or all of such stockholders. This procedure reduces our printing costs and postage fees and is environmentally friendly. If you and another stockholder of record with whom you share an address are receiving multiple copies of the Notice of Internet Availability of Proxy Materials or the printed proxy materials, you can request to receive a single copy of the printed proxy materials in the future by calling (423) 229-4647 or writing to Investor Relations at Eastman Chemical Company, P.O. Box 431, Kingsport, Tennessee 37662-0431, Attention: Investor Relations. If you and another stockholder of record with whom you share an address wish to receive a separate Notice of Internet Availability of Proxy Materials or separate printed proxy materials, we will promptly deliver them to you if you request them by contacting us in the same manner described above. Stockholders who participate in householding and who receive printed proxy materials will continue to receive separate proxy cards. If you are a street name stockholder, you can request householding by contacting your bank, broker or other holder of record through which you hold your shares.
ANNEX A
Reconciliation of Non-GAAP Financial Measures
Company GAAP and non-GAAP performance 2023 versus 2022 Non-GAAP Performance 2022 verses 2021Non-GAAP financial measures, and the accompanying reconciliations of the non-GAAP financial measures to the most comparable GAAP measures, are presented below.
| | | | | | | | | (In millions, except per share amounts) | | 2022 | | | 2021 | | Sales revenue | | $ | 10,580 | | | $ | 10,476 | | Earnings before interest and taxes (“EBIT”) | | $ | 1,159 | | | $ | 1,281 | | Adjusted EBIT* | | $ | 1,339 | | | $ | 1,635 | | Earnings per diluted share | | $ | 6.35 | | | $ | 6.25 | | Adjusted earnings per diluted share* | | $ | 7.88 | | | $ | 8.85 | | Net cash provided by operating activities | | $ | 975 | | | $ | 1,619 | |
* | For non-core or unusual items excluded from adjusted earnings and for adjusted provision for income taxes, and reconciliations to reported company earnings and to cash provided by operating activities for all periods presented, see Tables 1 and 2 below.
|
| | | | | | | | | | (In millions, except per share amounts) | 2023 | 2022 | | Sales revenue | $9,210 | | $10,580 | | | Earnings before interest and taxes (“EBIT”) | 1,302 | | 1,159 | | | Adjusted EBIT* | 1,097 | | 1,339 | | | Earnings per diluted share | 7.49 | 6.35 | | Adjusted earnings per diluted share* | 6.40 | 7.88 | | Net cash provided by operating activities | 1,374 | 975 |
* For non-core or unusual items excluded from adjusted earnings and for adjusted provision for income taxes, and reconciliations to reported company earnings for all periods presented, see Tables 1 and 2 below. We provide non-GAAP financial measures in the proxy statement, and the related reconciliations to the most comparable GAAP financial measures, because we believe our stockholders use these metrics in evaluating longer termlonger-term period-over-period performance, and to allow stockholders to better understand and evaluate the information used by us to assess the Company’s performance, make resource allocation decisions, and evaluate organizational and individual performances in determining certain performance-based compensation. Non-GAAP financial measures do not have definitions under GAAP, and may be defined differently by, and not be comparable to, similarly titled measures used by other companies. As a result, we caution stockholders not to place undue reliance on any non-GAAP financial measure, but to consider such measures alongside the most directly comparable GAAP financial measure. Because non-core, unusual, or non-recurring transactions, costs, and losses or gains may materially affect the Company’s financial condition or results in a specific period in which they are recognized, management believes it is appropriate to evaluate the financial measures prepared and calculated in accordance with both GAAP and the related non-GAAP financial measures excluding the effect on the Company’s results of these non-core, unusual, or non-recurring items. In addition to using such measures to evaluate results in a specific period, management evaluates such non-GAAP measures, and believes that investors may also evaluate such measures, because such measures may provide more complete and consistent comparisons of the Company’s, and its segments’, operational performance on a period-over-period historical basis and, as a result, provide a better indication of expected future trends. 2023 Proxy Statement A-1
ANNEX A — Reconciliation of Non-GAAP Financial Measures
Non-Core Items
Non-core items or any Unusualunusual or Non-Recurring Items Excludednon-recurring items excluded from Non-GAAP Earningsnon-GAAP earnings In addition to evaluating Eastman’s financial condition, results of operations, liquidity, and cash flows as reported in accordance with GAAP, management also evaluates Company and operating segment performance, and makes resource allocation and performance evaluation decisions, excluding the effect of transactions, costs, and losses or gains that do not directly result from Eastman’s normal, or “core”, business, and operations, or are otherwise of an unusual or non-recurring nature. In 2022, the Company recognizedNon-GAAP financial measures — non-core or unusual costs, net of insurance proceeds,items excluded from the previously reported January 31, 2022 operational incident at its Kingsport site as a result of a steam line failure (the “steam line incident”). Management considered the operational incident unusual because of the Company’s operational and safety history and the magnitude of the unplanned disruption.
earningsIn 2021, the Company decreased the provision for income taxes due to adjustment of the amount recognized in prior years resulting from the 2017 Tax Cuts and Jobs Act (“Tax Reform Act”). As with the prior years’ item to which this relates, management considers this decrease unusual because of the infrequent nature of the underlying change in tax law and resulting impacts on earnings.
| | | | | | | | | | | | | (Dollars in millions) | 2023 | 2022 | | Non-core items impacting EBIT: | | | | | Mark-to-market pension and other postretirement benefits loss, net | $ | 53 | | | $ | 19 | | | Asset impairments and restructuring charges, net | 37 | | 52 | | | Environmental and other costs | 13 | | 15 | | | Net (gain) loss on divested businesses and transaction costs | (323) | | | 61 | | | Adjustments to contingent considerations | — | | | (6) | | | Accelerated depreciation | 23 | | — | | | Unusual item impacting EBIT: | | | | | Steam line incident (insurance proceeds) costs, net | (8) | | | 39 | | | Total non-core or unusual items impacting EBIT | (205) | | | 180 | | | Less: Items impacting provision for income taxes: | | | | | Tax effect for non-core or unusual items | (74) | | | (11) | | | Adjustments from tax law changes | — | | | — | | | Total items impacting provision for income taxes | (74) | | | (11) | | | Total items impacting net earnings attributable to Eastman | $ | (131) | | | $ | 191 | |
Non-GAAP Financial Measures — Non-Core or Unusual Items Excluded from Earnings
| | | | | | | | | (Dollars in millions) | | 2022 | | | 2021 | | Non-core items impacting EBIT: | | | | | | | | | Mark-to-market pension and other postretirement benefits loss (gain), net | | $ | 19 | | | $ | (267 | ) | Asset impairments and restructuring charges, net | | | 52 | | | | 47 | | Environmental and other costs | | | 15 | | | | — | | Loss on divested businesses and related transaction costs | | | 61 | | | | 570 | | Adjustments to contingent considerations | | | (6 | ) | | | — | | Accelerated depreciation | | | — | | | | 4 | | Unusual item impacting EBIT: | | | | | | | | | Steam line incident costs, net of insurance proceeds | | | 39 | | | | — | | Total non-core or unusual items impacting EBIT | | | 180 | | | | 354 | | Non-core item impacting earnings before income taxes: | | | | | | | | | Early debt extinguishment costs | | | — | | | | 1 | | Total non-core item impacting earnings before income taxes | | | — | | | | 1 | | Less: Items impacting provision for income taxes: | | | | | | | | | Tax effect for non-core or unusual items | | | (11 | ) | | | (16 | ) | Adjustments from tax law changes | | | — | | | | 15 | | Total items impacting provision for income taxes | | | (11 | ) | | | (1 | ) | Total items impacting net earnings attributable to Eastman | | $ | 191 | | | $ | 356 | |
A-2 2023 Proxy Statement
ANNEX A — Reconciliation of Non-GAAP Financial Measures
Table 1: Non-GAAP Earnings Before Interest earnings before interest and Taxes Reconciliation | | | | | | | | | (Dollars in millions, unaudited) | | 2022 | | | 2021 | | Earnings before interest and taxes | | $ | 1,159 | | | $ | 1,281 | | Mark-to-market pension and other postretirement benefit plans loss (gain), net | | | 19 | | | | (267 | ) | Asset impairments and restructuring charges, net | | | 52 | | | | 47 | | Environmental and other costs | | | 15 | | | | — | | Loss on divested businesses and related transaction costs | | | 61 | | | | 570 | | Adjustments to contingent considerations | | | (6 | ) | | | — | | Accelerated depreciation | | | — | | | | 4 | | Steam line incident costs, net of insurance proceeds | | | 39 | | | | — | | Total earnings before interest and taxes excluding non-core and unusual items | | $ | 1,339 | | | $ | 1,635 | | | | | Non-GAAP Earnings Before Interest and Taxes Reconciliations by Line Items | | | | | | | | | Earnings before interest and taxes | | $ | 1,159 | | | $ | 1,281 | | Costs of sales | | | 39 | | | | 4 | | Selling, general and administrative expenses | | | 18 | | | | 18 | | Asset impairments and restructuring charges, net | | | 52 | | | | 47 | | Other components of post-employment (benefit) cost, net | | | 19 | | | | (267 | ) | Other (income) charges, net | | | 9 | | | | — | | Loss on divested businesses | | | 43 | | | | 552 | | Total earnings before interest and taxes excluding non-core and unusual items | | $ | 1,339 | | | $ | 1,635 | |
taxes reconciliation | | | | | | | | | | | | | (Dollars in millions, unaudited) | 2023 | 2022 | | Earnings before interest and taxes | $ | 1,302 | | | $ | 1,159 | | | Mark-to-market pension and other postretirement benefit plans loss, net | 53 | | | 19 | | | Asset impairments and restructuring charges, net | 37 | | | 52 | | | Environmental and other costs | 13 | | | 15 | | | Net (gain) loss on divested businesses and transaction costs | (323) | | | 61 | | | Adjustments to contingent considerations | — | | | (6) | | | Accelerated depreciation | 23 | | | — | | | Steam line incident (insurance proceeds) costs, net | (8) | | | 39 | | | Total earnings before interest and taxes excluding non-core and unusual items | $ | 1,097 | | | $ | 1,339 | | | Non-GAAP Earnings Before Interest and Taxes Reconciliations by Line Items | | | | | Earnings before interest and taxes | $ | 1,302 | | | $ | 1,159 | | | Costs of sales | 15 | | | 39 | | | Selling, general and administrative expenses | — | | | 18 | | | Asset impairments and restructuring charges, net | 37 | | | 52 | | | Other components of post-employment (benefit) cost, net | 53 | | | 19 | | | Other (income) charges, net | 13 | | | 9 | | | Net (gain) loss on divested businesses | (323) | | | 43 | | | Total earnings before interest and taxes excluding non-core and unusual items | $ | 1,097 | | | $ | 1,339 | |
Table 2: Non-GAAP Earnings Before Interest earnings before interest and Taxes, Net Earnings,taxes, net earnings, and Earnings Per Share Reconciliations | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2022 | | | | | Earnings
Before
Interest and
Taxes | | | Earnings
Before Income
Taxes | | | Provision
for Income
Taxes | | | Effective Income
Tax Rate | | | Net Earnings
Attributable to Eastman | | | (Dollars in millions, except per share amounts, unaudited) | | After
Tax | | | Per Diluted
Share | | | | | | | | | As reported (GAAP) | | $ | 1,159 | | | $ | 977 | | | $ | 181 | | | | 19 | % | | $ | 793 | | | $ | 6.35 | | Non-Core or Unusual Items: | | | | | | | | | | | | | | | | | | | | | | | | | Asset impairments and restructuring charges, net | | | 52 | | | | 52 | | | | 4 | | | | | | | | 48 | | | | 0.39 | | Loss on divested businesses and related transaction costs | | | 61 | | | | 61 | | | | (32 | ) | | | | | | | 93 | | | | 0.74 | | Mark-to-market pension and other postretirement benefit plans loss, net | | | 19 | | | | 19 | | | | 5 | | | | | | | | 14 | | | | 0.12 | | Environmental and other costs | | | 15 | | | | 15 | | | | 4 | | | | | | | | 11 | | | | 0.09 | | Adjustments to contingent considerations | | | (6 | ) | | | (6 | ) | | | (2 | ) | | | | | | | (4 | ) | | | (0.04 | ) | Steam line incident costs, net of insurance proceeds | | | 39 | | | | 39 | | | | 10 | | | | | | | | 29 | | | | 0.23 | | | | | | | | | Non-GAAP (Excluding non-core and unusual items) | | $ | 1,339 | | | $ | 1,157 | | | $ | 170 | | | | 15 | % | | $ | 984 | | | $ | 7.88 | |
2023 Proxy Statement A-3
earnings per share reconciliations | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2023 | | (Dollars in millions, except per share amounts, unaudited) | Earnings Before Interest and Taxes | Earnings Before Income Taxes | Provision for Income Taxes | Effective Income Tax Rate | Net Earnings Attributable to Eastman | After Tax | Per Diluted Share | | As reported (GAAP) | | $ | 1,302 | | | $ | 1,087 | | | $ | 191 | | 18 | % | | $ | 894 | | | $ | 7.49 | | | Non-Core or Unusual Items: | | | | | | | | | | | | | Asset impairments and restructuring charges, net | | 37 | | | 37 | | | 5 | | | | 32 | | | 0.26 | | | Gain on divested business | | (323) | | | (323) | | | (98) | | | | (225) | | | (1.88) | | | Accelerated depreciation | | 23 | | | 23 | | | 3 | | | | 20 | | | 0.17 | | | Steam line incident (insurance proceeds) costs, net | | (8) | | | (8) | | | (2) | | | | (6) | | | (0.05) | | | Mark-to-market pension and other postretirement benefit plans loss, net | | 53 | | | 53 | | | 14 | | | | 39 | | | 0.33 | | | Environmental and other costs | | 13 | | | 13 | | | 4 | | | | 9 | | | 0.08 | | | Non-GAAP (Excluding non-core and unusual items) | | $ | 1,097 | | | $ | 882 | | | $ | 117 | | 13 | % | | $ | 763 | | | $ | 6.40 | |
ANNEX A — Reconciliation of Non-GAAP Financial Measures
| | | | | | | | | | | | | | | | | | | | | | | | | | | | 2021 | | | | | Earnings
Before
Interest and
Taxes | | | Earnings
Before Income
Taxes | | | Provision
for Income
Taxes | | | Effective Income
Tax Rate | | | Net Earnings
Attributable to Eastman | | | (Dollars in millions, except per share amounts, unaudited) | | After
Tax | | | Per Diluted
Share | | | | | | | | | As reported (GAAP) | | $ | 1,281 | | | $ | 1,082 | | | $ | 215 | | | | 20 | % | | $ | 857 | | | $ | 6.25 | | Non-Core or Unusual Items: | | | | | | | | | | | | | | | | | | | | | | | | | Asset impairments and restructuring charges, net | | | 47 | | | | 47 | | | | 8 | | | | | | | | 39 | | | | 0.28 | | Loss on divested businesses and related transaction costs | | | 570 | | | | 570 | | | | 40 | | | | | | | | 530 | | | | 3.86 | | Accelerated depreciation | | | 4 | | | | 4 | | | | 1 | | | | | | | | 3 | | | | 0.02 | | Mark-to-market pension and other postretirement benefit plans (gain), net | | | (267 | ) | | | (267 | ) | | | (65 | ) | | | | | | | (202 | ) | | | (1.46 | ) | Early debt extinguishment costs | | | — | | | | 1 | | | | — | | | | | | | | 1 | | | | 0.01 | | Adjustments from tax law changes | | | — | | | | — | | | | 15 | | | | | | | | (15 | ) | | | (0.11 | ) | | | | | | | | Non-GAAP (Excluding non-core and unusual items) | | $ | 1,635 | | | $ | 1,437 | | | $ | 214 | | | | 15 | % | | $ | 1,213 | | | $ | 8.85 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | | | | Earnings
Before
Interest and
Taxes | | | Earnings
Before Income
Taxes | | | Provision
for Income
Taxes | | | Effective Income
Tax Rate | | | Net Earnings
Attributable to Eastman | | | (Dollars in millions, except per share amounts, unaudited) | | After
Tax | | | Per Diluted
Share | | | | | | | | | As reported (GAAP) | | $ | 741 | | | $ | 530 | | | $ | 41 | | | | 8 | % | | $ | 478 | | | $ | 3.50 | | Non-Core Items: | | | | | | | | | | | | | | | | | | | | | | | | | Asset impairments and restructuring charges, net | | | 227 | | | | 227 | | | | 53 | | | | | | | | 174 | | | | 1.28 | | Accelerated depreciation | | | 8 | | | | 8 | | | | 2 | | | | | | | | 6 | | | | 0.05 | | Mark-to-market pension and other postretirement benefit plans loss, net | | | 240 | | | | 240 | | | | 60 | | | | | | | | 180 | | | | 1.32 | | Early debt extinguishment costs | | | — | | | | 1 | | | | — | | | | | | | | 1 | | | | — | | | | | | | | | Non-GAAP (Excluding non-core items) | | $ | 1,216 | | | $ | 1,006 | | | $ | 156 | | | | 16 | % | | $ | 839 | | | $ | 6.15 | |
A-4 2023 Proxy Statement
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2022 | | (Dollars in millions, except per share amounts, unaudited) | Earnings Before Interest and Taxes | Earnings Before Income Taxes | Provision for Income Taxes | Effective Income Tax Rate | Net Earnings Attributable to Eastman | After Tax | Per Diluted Share | | As reported (GAAP) | | $ | 1,159 | | | $ | 977 | | | $ | 181 | | 19 | % | | $ | 793 | | | $ | 6.35 | | | Non-Core or Unusual Items: | | | | | | | | | | | | | Asset impairments and restructuring charges, net | | 52 | | | 52 | | | 4 | | | | 48 | | | 0.39 | | | Loss on divested business and transaction costs | | 61 | | | 61 | | | (32) | | | | 93 | | | 0.74 | | | Mark-to-market pension and other postretirement benefit plans loss, net | | 19 | | | 19 | | | 5 | | | | 14 | | | 0.12 | | | Environmental and other costs | | 15 | | | 15 | | | 4 | | | | 11 | | | 0.09 | | | Adjustments to contingent considerations | | (6) | | | (6) | | | (2) | | | | (4) | | | (0.04) | | | Steam line incident costs, net of insurance proceeds | | 39 | | | 39 | | | 10 | | | | 29 | | | 0.23 | | | Non-GAAP (Excluding non-core and unusual items) | | $ | 1,339 | | | $ | 1,157 | | | $ | 170 | | 15 | % | | $ | 984 | | | $ | 7.88 | |
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[FORM OF PAPER PROXY - PAGE 1] c/o Corporate Election Services  Vote by Telephone or Internet  Quick « « « Easy « «« Immediate Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. | | | | | | | To Vote by Phone: | | Call anytime toll free 1-888-693-8683 | | | There is no charge for this call. | | | Follow the simple instructions to record your vote. | | | | To Vote by Internet or | | Access www.cesvote.com | | Review the Proxy Statement | | Follow the simple instructions presented to record your vote. |
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 4, 2023.2, 2024. The undersigned hereby appoints William T. McLain, Jr. and Kellye L. Walker as proxies with power to act without the other and with power of substitution, and hereby authorizes them to represent and vote, as designated on the other side of this proxy card, all the shares of stock of Eastman Chemical Company held of record as of March 15, 202312, 2024 by the undersigned with all the powers that the undersigned would possess if present at the Annual Meeting of Stockholders of the Company to be held May 4, 2023,2, 2024, or any adjournment or postponement thereof. SAID PROXIES WILL VOTE ON THE PROPOSALS SET FORTH IN THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT AS SPECIFIED ON THE REVERSE SIDE OF THIS CARD AND ARE AUTHORIZED TO VOTE IN THEIR DISCRETION, AS PERMITTED BY APPLICABLE LAW, ON ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING. IF A VOTE IS NOT SPECIFIED, SAID PROXIES WILL VOTE FOR EACH OF THE NOMINEES IN ITEM 1, FOR ITEM 2 AND FOR ITEM 3, FOR ONE YEAR IN ITEM 4 AND AGAINST ITEM 5.3. | | | | | | | | Signature(s) | Signature(s) | | | Signature(s) | Signature(s) | | | Date: | | Date: | | | | Please sign exactly as your name(s) appears on this proxy. If shares are held jointly, all joint owners should sign. If signing as executor, administrator, attorney, trustee, guardian, or in any other representative capacity, please also give your full title. |
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[FORM OF PAPER PROXY - PAGE 2] Annual Meeting of Stockholders Thursday, May 4, 20232, 2024 Virtually Via Live Webcast at https://register.proxypush.com/emn Important Notice Regarding Internet Availability of Proxy Materials for the Stockholder Meeting To Be Held on May 2, 2024: 4, 2023: The proxy materials, including the 20232024 Proxy Statement and 20222023 Annual Report, are available at www.ReadMaterial.com/EMN. | | | | | | | | | | | Please fold and detach card at perforation before mailing. | | |
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS INDICATED. IF NO SPECIFICATION IS MADE, IT WILL BE VOTED FOR EACH OF THE NOMINEES IN ITEM 1 AND FOR ITEMS 2 AND 3, FOR ONE YEAR IN ITEM 4, AND AGAINST ITEM 5.3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES IN ITEM 1.
1. Elect Directors: Nominees for election of twelveten directors to serve until the Annual Meeting of Stockholders in 2024 and their successors are duly elected and qualified: | | | | | | | | | | | | | | | | | | | | | | | | | | FOR | | AGAINST | | ABSTAIN | | | | | | | | FOR | | AGAINST | | ABSTAIN | | (1) | | HUMBERTO P. ALFONSO | | ❑ | | ❑ | | ❑ | | | | (7) | | JULIE F. HOLDER | | ❑ | | ❑ | | ❑ | | (2) | | BRETT D. BEGEMANN | | ❑ | | ❑ | | ❑ | | | | (8) | | RENÉE J. HORNBAKER | | ❑ | | ❑ | | ❑ | | (3) | | ERIC L. BUTLER | | ❑ | | ❑ | | ❑ | | | | (9) | | KIM ANN MINK | | ❑ | | ❑ | | ❑ | | (4) | | MARK J. COSTA | | ❑ | | ❑ | | ❑ | | | | (10) | | JAMES J. O’BRIEN | | ❑ | | ❑ | | ❑ | | (5) | | EDWARD L. DOHENY II | | ❑ | | ❑ | | ❑ | | | | (11) | | DAVID W. RAISBECK | | ❑ | | ❑ | | ❑ | | (6) | | LINNIE M. HAYNESWORTH | | ❑ | | ❑ | | ❑ | | | | (12) | | CHARLES K. STEVENS III | | ❑ | | ❑ | | ❑ |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | FOR | AGAINST | ABSTAIN | | | FOR | AGAINST | ABSTAIN | | (1) | HUMBERTO P. ALFONSO | ❑ | ❑ | ❑ | (6) | JULIE F. HOLDER | ❑ | ❑ | ❑ | | (2) | BRETT D. BEGEMANN | ❑ | ❑ | ❑ | (7) | RENÉE J. HORNBAKER | ❑ | ❑ | ❑ | | (3) | ERIC L. BUTLER | ❑ | ❑ | ❑ | (8) | KIM ANN MINK | ❑ | ❑ | ❑ | | (4) | MARK J. COSTA | ❑ | ❑ | ❑ | (9) | JAMES J. O’BRIEN | ❑ | ❑ | ❑ | | (5) | LINNIE M. HAYNESWORTH | ❑ | ❑ | ❑ | (10) | DAVID W. RAISBECK | ❑ | ❑ | ❑ |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 2 AND 3. 2. Ratify Appointment of PricewaterhouseCoopers LLP as the Company's Independent Registered Public Accounting Firm for the Year Ending December 31, 2024 | | 2. | Ratify Appointment of PricewaterhouseCoopers LLP as Independent Registered Public Accounting Firm
3. Advisory Approval of Executive Compensation as Disclosed in Proxy Statement | | 3. | Advisory Approval of Executive Compensation as Disclosed in Proxy Statement
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
ONE YEAR
IN ITEM 4. | 4. | Advisory Vote on Frequency of Advisory Approval of Executive Compensation
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| | | | | | | ❑ ONE YEAR | | ❑ TWO YEARS | | ❑ THREE YEARS | | ❑ ABSTAIN |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST
ITEM 5. | 5. | Advisory Vote on Stockholder Proposal Regarding an Independent Board Chair
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(CONTINUED, AND TO BE SIGNED AND DATED, ON THE OTHER SIDE.)
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Integrity, honesty, and demonstrated adherence to high ethical standards;
Experience and Skills 
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