UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section
PROXY STATEMENT PURSUANT TO SECTION 14(a) of theSecurities Exchange Act of
OF THE SECURITIES EXCHANGE ACT OF 1934 (Amendment
(Amendment No. )
Filed by the Registrant | Filed by a Party other than the Registrant |
Preliminary Proxy Statement | ||
Confidential, | ||
Definitive Proxy Statement | ||
Definitive Additional Materials | ||
Soliciting Material |
Caterpillar Inc.CATERPILLAR INC
(Name of Registrant as Specified Inin Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Thanother than the Registrant)
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Table“Caterpillar’s Values in Action guide our business conduct with our customers, partners and one another as we fulfill our purpose of Contentshelping our customers build a better, more sustainable world.”
D. James Umpleby III
Chairman and Chief Executive Officer
We are sending you these proxy materials in connection with Caterpillar’s solicitation of proxies, on behalf of its Boardboard of Directors,directors, for the 20162023 Annual Meeting ofStockholders Shareholders (Annual Meeting). Distribution of these materials is scheduled to begin on May 2, 2016.5, 2023. Please submit your vote andor proxy by telephone, mobile device, Internet,internet or, if you received your materials by mail, you can also complete and return your proxy or voting instruction form by mail.
Frequently Asked Questions Regarding Meeting Attendance and Voting | |
2023 PROXY STATEMENT3
D. JAMES UMPLEBY III
Chairman and Chief Executive Officer
“OUR VALUES IN ACTION – INTEGRITY, EXCELLENCE, TEAMWORK, COMMITMENT AND SUSTAINABILITY – ARE THE FOUNDATION OF OUR STRATEGY FOR LONG-TERM PROFITABLE GROWTH. THEY ALIGN OUR FOCUS ON WINNING THE RIGHT WAY AND UPHOLDING OUR SHARED COMMITMENT TO THE HIGHEST ETHICAL STANDARDS.”
On behalf of the Boardboard of Directors, thankdirectors and our entire company, I cordially invite you to attend the Annual Meeting of Shareholders on June 14, 2023, at 8 a.m. Central Time. This year’s meeting will be held virtually.
In addition to an update on the company’s performance, we ask for your investmentvote on several items related to our business. Please refer to page 90 for information on participating in Caterpillar. As Caterpillar’s Presiding Director, I help guide the Board in its independent oversightthis year’s shareholder meeting.
Please review this proxy statement to learn more about your board of the Company and work to ensure the Board and management are aligned with the Company’s strategy. I want to share the Board’s current areas of focus with you.
Business Strategy and Operational Oversight
Many of Caterpillar’s customers continue to face challenging business environments, which has resulted in lower sales ofdirectors, our machines and engines. While the management team has little control over external factors affecting industry sales volumes, the Board is helping to ensure the Company continues to make improvements to those items it can control, such as manufacturing efficiencies, inventory levels, market position, product quality and safety. The Board has reviewed and endorses the business strategies described in the accompanying CEO letter.
The Board also supports the major restructuring actions management promptly initiated in response to the prolonged business downturn. These actions have helped Caterpillar maintain a strong balance sheet, allowing for continued investment in innovation and digital technologies, and are expected to substantially lower annual operating costs, with much of the savings expected to be realized in 2016. The necessary cost reductions are being thoughtfully implemented such that impacted employees are treated fairly and our manufacturing capacity will not be constrained when industry conditions improve.
Leadership and Executive Compensation
The Board has actively reshaped itself and the executive team to meet the Company’s evolving needs. Since 2011, a majority of the Board’s composition has changed and new leaders have taken charge of each of the Company’s business segments. Executivegovernance practices, compensation programs were recently restructured to better align employee incentives with business goals and to ensure executive pay reflects both Companyphilosophy, and individual performance. We have the right team in place to manage operations successfully todayand prepare Caterpillar for the next business upturn.
Corporate Governance and Compliance
The Board stays mindful of and responsive to corporate governance developments. We are also responsible for the oversight and review of the Company’s safety initiatives and compliance programs and consider these to be best-in-class. Caterpillar has recently increased emphasis on sustainability, social responsibility and human rights. We are proud Caterpillar was named to the Dow Jones Sustainability Index again in 2015 – recognizing the Company’s leadership across a broad range of social, environmental, human rights and corporate governance measures.
The Board of Directorsother key items. Your vote is honored to represent your interests.important. We encourage you to vote your shares atby virtually attending the Annual Meeting.annual meeting, by voting online separately, via your mobile phone, by telephone, or by mail.
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DEAR FELLOW STOCKHOLDERS,directors extends our sincere appreciation for his many years of dedicated service to our company.
Our Company is financially strongWe also welcome our newest board members, Judy Marks, Chair, CEO and successfully managing through a periodPresident of weak global economicOtis Worldwide Corporation, and Jim Fish, Jr., President and CEO of Waste Management. They joined the board March 1, 2023.
Thank you for your ongoing investment and support of Caterpillar as we continue to execute our enterprise strategy for long-term profitable growth and depressed commodity prices. These external factors are affecting salescreate shareholder value.
Sincerely,
D. James Umpleby III
Chairman and revenues, but our core businesses – the machines and engines criticalChief Executive Officer
2023 PROXY STATEMENT5
Investing in the Future
We’re continuing rapid deployment of Lean manufacturing from top to bottom in our operations, addressing the root causes of delays, defects and inefficiencies. This is already showing good results in quality, gross margins and productivity.Research and development spending levels are being maintained as we lead the technology transformation that will increase efficiency, productivity and sustainability across the industries Caterpillar serves. Our factories are modern and prepared to take full advantage of the recovery when it comes.
Serving our Customers
Every part of our strategy is dedicated to serving our customers, to help them make more money with our products than with our competitors’. There are many aspects to this, but I’ll focus on two primary ones here. First, we are in the midst of a multi-year initiative to further strengthen the capabilities of Cat dealers that are the front-line of customer service and support around the world. Multiple projects are underway, from pricing consistency to expanded e-business. Second, our continuing commitment to digital technology advancements will create even more value for our customers, reducing downtime and lowering owning and operating costs by preventing failures and increasing fuel economy and operator efficiency.
Prepared for the Challenges and Opportunities Ahead
Caterpillar has been through many downcycles in our 90-year history and I believe we will, as we have in the past, emerge stronger and able to compete very effectively around the world. In 2016 we will stay focused on serving our customers, on reducing costs to align with demand and developing the products of the future. As you read the accompanying proxy statement, you’ll see our Board of Directors has deep expertise in manufacturing, services, leadership, government and relevant industries. Not only are our products made of iron, so is our will to adapt and succeed in whatever environment we face.
For additional information about our Company’s performance and strategy, please see the Chairman’s Message in the 2015 Year in Review at reports.caterpillar.com.
I look forward to discussing this more with you at the Annual Meeting.
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This summary does not contain all of the information you should consider.consider when casting your vote. You should read the complete proxy statement before voting.
TIME & DATE | PLACE | RECORD DATE | ADMISSION |
8 a.m. Central Time June 14, 2023 | Virtual Meeting www.meetnow.global/MCP5W5Q | The close of business | |
To attend and to register for the Virtual Meeting, please follow |
Proposal | Board’s Voting Recommendation | Page Reference | |
1 | Election of 11 Directors Named in this Proxy Statement | FOR Each Nominee | 10 |
2 | Ratification of our Independent Registered Public Accounting Firm | FOR | 36 |
3 | Advisory Vote to Approve Executive Compensation | FOR | 39 |
4 | Advisory Vote on the Frequency of Executive Compensation Votes | ONE YEAR | 40 |
5 | Approval of Caterpillar Inc. 2023 Long-Term Incentive Plan | FOR | 68 |
6 | Shareholder Proposal - Report on Corporate Climate Lobbying in Line with Paris Agreement | AGAINST | 75 |
7 | Shareholder Proposal - Lobbying Disclosure | AGAINST | 78 |
8 | Shareholder Proposal - Report on Activities in Conflict-Affected Areas | AGAINST | 81 |
9 | Shareholder Proposal - Civil Rights, Non-Discrimination and Returns to Merit Audit | AGAINST | 84 |
PROPOSAL | BOARD’S VOTING | PAGE | ||||
1 | Election of twelve Directors named in this Proxy Statement | FOR each Nominee | 5 | |||
2 | Ratification of our Independent Registered Public Accounting Firm | FOR | 19 | |||
3 | Advisory Vote to approve Executive Compensation | FOR | 21 | |||
4 | Stockholder Proposal – Lobbying Report | AGAINST | 50 | |||
5 | Stockholder Proposal – Written Consent | AGAINST | 51 | |||
6 | Stockholder Proposal – Independent Board Chairman | AGAINST | 53 |
2023 PROXY STATEMENT6
Nominee and Principal Occupation | Independent | Age | Director Since | Other Public Company Boards | Caterpillar Committees | ||||
AC | CHRC | SPPC | NGC | EC | |||||
Kelly A. Ayotte | Yes | 54 | 2017 | Blackstone Inc. |
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David L. Calhoun | Yes | 65 | 2011 | The Boeing Company
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Daniel M. Dickinson | Yes | 61 | 2006 | None |
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James C. Fish, Jr. | Yes | 60 | 2023 | Waste Management, Inc. |
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Gerald Johnson | Yes | 60 | 2021 | None |
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David W. MacLennan | Yes | 63 | 2021 | Ecolab Inc. |
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Judith F. Marks | Yes | 59 | 2023 | Otis Worldwide Corporation
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Debra L. Reed-Klages | Yes | 66 | 2015 | Chevron Corporation |
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Susan C. Schwab | Yes | 68 | 2009 | FedEx Corporation
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D. James Umpleby III | No | 65 | 2017 | Chevron Corporation |
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Rayford Wilkins, Jr. | Yes | 71 | 2017 | Morgan Stanley |
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DIRECTOR | CAT COMMITTEES | ||||||
NOMINEE AND PRINCIPAL OCCUPATION | INDEPENDENT | AGE | SINCE | OTHER PUBLIC COMPANY BOARDS | AC | CC | PPGC |
David L. Calhoun | Yes | 58 | 2011 | Nielsen Holdings PLC | |||
Daniel M. Dickinson | Yes | 54 | 2006 | None | |||
Juan Gallardo | Yes | 68 | 1998 | Grupo Aeroportuario del Pacifico, | |||
Jesse J. Greene, Jr. | Yes | 71 | 2011 | None | |||
Jon M. Huntsman, Jr. | Yes | 56 | 2012 | Chevron Corporation | |||
Dennis A. Muilenburg | Yes | 52 | 2011 | The Boeing Company | |||
Douglas R. Oberhelman | No | 63 | 2010 | Exxon Mobil Corporation | |||
William A. Osborn | Yes | 68 | 2000 | Abbott Laboratories | |||
Debra L. Reed | Yes | 59 | 2015 | Halliburton Company | |||
Edward B. Rust, Jr., Presiding Director | Yes | 65 | 2003 | Helmerich & Payne, Inc. | |||
Susan C. Schwab | Yes | 61 | 2009 | FedEx Corporation | |||
Miles D. White | Yes | 61 | 2011 | Abbott Laboratories |
AC:Audit Committee |
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NGC: Nominating and Governance Committee |
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2023 PROXY STATEMENT7
Our commitment to good corporate governance stems from our belief that a strong governance framework creates long-term value for our stockholders,shareholders, strengthens Boardboard and management accountability, and builds trust in the Company and its brand. Our governance framework includes, but is not limited to, the following highlights:
Board and Governance Information* | Board and Governance Information | ||||
Size of the Board | 11 | ||||
Code of Conduct for Directors, Officers and Employees | Yes | ||||
Number of Independent Directors | 10 | Supermajority Voting | No | ||
Average Age of Directors | 63 | Proxy Access | Yes | ||
Average Director | 6.6 | Shareholder Action by Written Consent | No | ||
Annual Election of Directors | Yes | Shareholder Ability to Call Special Meetings | Yes | ||
Mandatory Retirement Age | 74 | Poison Pill | No | ||
Women | 36% | Stock Ownership Guidelines for Directors and Executive Officers | Yes | ||
Ethnic/Racial Diversity | 18% | Anti-Hedging and Pledging Policies | |||
Additionally, we took the followingactions in 2015:
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Clawback Policy | ||||||
Yes | ||||||
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OPERATING | PROFIT | OPERATING | STRONG |
13.3% | $12.64 | $7.8 billion | $6.7 billion |
Delivered operating profit margin of 13.3% and adjusted operating profit margin(1) of 15.4%. | Profit per share was $12.64 in 2022, compared with $11.83 in 2021. Adjusted profit per share(2) was $13.84 in 2022, compared with $10.81 in 2021. | ME&T free cash flow(3) was $5.8 billion in 2022, which was in line with the Company’s full-year target of $4 billion to $8 billion annually. We continue to expect to return substantially all ME&T free cash flow(3) to shareholders over time. | Returned $6.7 billion to shareholders through share repurchases and dividends. The enterprise cash balance at the end of 2022 was $7.0 billion. |
Adjusted operating profit margin is a non-GAAP measure, and a reconciliation to the most directly comparable GAAP measure is included on page 89.
Adjusted Profit Per Share is a non-GAAP measure, and a reconciliation to the most directly comparable GAAP measure is included on page 89.
ME&T free cash flow is a non-GAAP measure, and a reconciliation to the most directly comparable GAAP measure is included on page 89.
2023 PROXY STATEMENT8
5205 N. O’Connor Boulevard, Suite 100 NE Adams StreetPeoria, Illinois 61629
Irving, TX 75039
Phone (309) 675-1000
(972) 891-7700
www.caterpillar.com
NOTICE OF ANNUAL MEETING
SHAREHOLDERS
OF STOCKHOLDERS
The board of directors, after careful consideration, has decided to hold this year’s Annual Meeting exclusively online. If you plan to participate in the virtual meeting, please see the information below as well as the attendance and registration instructions on page 90. There will be no physical location for the Annual Meeting this year.
MEETING INFORMATION
JUNE 14, 2023
8 a.m. Central Time
Website: www.meetnow.global/MCP5W5Q
MEETING AGENDA
Elect 11 director nominees named in this Proxy Statement
Ratify our independent registered public accounting firm for 2023
Approve, by non-binding vote, executive compensation
Approve, by non-binding vote, the frequency of executive compensation votes
Approval of Caterpillar Inc. 2023 Long-Term Incentive Plan
Vote on shareholder proposals
Address any other business that properly comes before the meeting
RECORD DATE
April 17, 2023
By Order of the Board of Directors
Nicole M. Puza
Corporate Secretary
May 5, 2023
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PLEASE VOTE YOUR | SHARES: | ||||||||||||||
We encourage You may vote in the following ways: | |||||||||||||||
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BY INTERNET | BY MOBILE DEVICE | BY TELEPHONE | BY MAIL | ||||||||||||
vote onlineat | scanthis QR code | callthe number | mailyour signed | ||||||||||||
By Order of the Board of Directors
Christopher M. ReitzCorporate SecretaryMay 2, 2016
Important Notice Regarding the Availability of Proxy Materials | ||
for the Annual Shareholder meeting to be held on June 14, 2023. This Notice of Annual Meeting and Proxy Statement and the | ||
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2023 PROXY STATEMENT9
DIRECTORS & GOVERNANCE
PROPOSAL 1 – ELECTION OF DIRECTORS
What am I voting on? | ||
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Board Voting Recommendation: | ||
FORthe election of each of the |
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2023 PROXY STATEMENT10
*Ms. Reed became a director of the Company in June 2015 and has attended all Board and Compensation Committeemeetings held during her tenure.
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Board | 6 | 6 | 6 | 6 | 6 | 6 | 6 | 6 | 6 | 6 | 6 |
| 100% |
Audit | 10 |
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Compensation and Human Resources | 5 |
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| 2(2) | 3(1) |
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Public Policy and Governance (3) | 3 | 3 | 3 |
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Sustainability and other Public Policy (3) | 3 | 3 | 3 |
| 3 | 3 |
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Nominating and Governance (3) | 3 | 3 | 3 |
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Executive (3) | 1 | 1 |
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(1) Mr. Dickinson, Mr. Johnson and Mr. Rust were appointed to the Compensation and Human Resources Committee on June 8, 2022, and attended all of the Compensation and Human Resources Committee meetings held thereafter; Mr. Wilkins was appointed to the Audit Committee on June 8, 2022, and attended all of the Audit Committee meetings held thereafter. (2) Ms. Reed-Klages left the CHRC committee on June 8, 2022, when she assumed the Presiding Director role. (3) Beginning June 2022, a new Executive Committee was established, and the Public Policy and Governance Committee was restructured to form the Sustainability and other Public Policy Committee and the Nominating and Governance Committee. Each director attended all of the meetings of their respective committees and of the board held in 2022.
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The Board’sboard’s policy is to encourage and expect that all directors should attend the annual stockholder meeting.each Annual Meeting of Shareholders. All then-serving directors attended the 2015 stockholder meeting.2022 Annual Meeting. The independent directors generally meet in an executive session as part of each regularly scheduled Board meeting, with theboard meeting. The board’s independent Presiding Director serving as Chairman.presided over the board’s executive sessions in 2022.
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BOARD EVOLUTION SINCE
20162011
✓Reduced Board size by four directors✓SixSeven new directors elected✓Full rotation
Rotation of Boardboard committee chairs
Restructured committees by creating the Sustainability and other Public Policy Committee and the Nominating and Governance Committee
Presiding Director elected✓Reallocation of committee responsibilities
rotation
Expanded qualifications and diversity represented on Boardboard
2023 PROXY STATEMENT11
The following skills matrix displays the most significant skills and qualifications that each director nominee possesses. The board does not assign a specific weight to any particular skill. Rather, the NGC regularly reviews the composition of the board as a whole to ensure that the board maintains a balance of knowledge and experience and to assess the skills and characteristics that the board may find valuable in the future in light of strategic plans and operating requirements of the Company and the best interests of shareholders.
Caterpillar Board | 6 | 12 | 17 | 0 | 2 | 2 | 0 | 8 | 14 | 6 | 6 | 6.6 years | |
Board of Directors Experience | • | • | • | • |
| • | • | • | • | • | • | 91% | |
Audit Committee Financial Expert |
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| • | • | 100% of | |
CEO |
| • |
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| • | • | • |
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| 55% | |
Leadership | • | • | • | • | • | • | • | • | • | • | • | 100% | |
Business Development |
| • | • | • | • | • | • | • | • | • | • | 91% | |
Government/Regulatory Affairs | • | • |
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| • | 55% |
Our
2023 PROXY STATEMENT12
Customer and Product Support Services |
| • | • |
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| • | • | 64% | |
Finance & Accounting |
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| • | • | 73% | |
Risk Management | • | • | • | • |
| • | • | • | • | • | • | 91% | |
Technology | • | • |
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Global Experience | • | • | • |
| • | • | • | • | • | • | • | 91% | |
Manufacturing/Logistics |
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Women | • |
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Racial/Ethnic Diversity |
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Age | 54 | 65 | 61 | 60 | 60 | 63 | 59 | 66 | 68 | 65 | 71 | 63 years | |
2023 PROXY STATEMENT13
The Company places high importance on the continuous development of its board.
Directors benefit from access to various governance and directorship organizations and publications to which Caterpillar subscribes. They also have ongoing education and development opportunities through participation in meetings and attendance at activities and professional development training offered by associations such as the National Association of Corporate Directors and Lead Director Network. They also receive a weekly digest of news articles related to Caterpillar.
Directors receive specialized presentations from experts in the Company’s various businesses in the course of their service. Since the last annual shareholder meeting, these presentations have included:
updates on technology and digital
retail customer aftermarket
strategic focus areas and regular updates concerning the operations of certain businesses within our operating segments
sustainability
talent management
cybersecurity
the Cat® dealer network
Directors are also given development and education opportunities through facility visits, product demonstrations and speaking or meeting directly with members of management and other employees. For example, since the last annual shareholder meeting, the directors visited the Tucson, Arizona, facility and observed new products designed to help our customers achieve their climate-related goals. The directors had the opportunity to observe and operate products such as the battery electric, zero-exhaust-emissions mini excavator. Directors also speak with Company dealers and customers to better understand the Company’s operations and business, and also attend industry trade shows such as CONEXPO.
These opportunities allow directors to be well-informed and to expand their knowledge of trends and issues relevant to their role.
The board has an active role in overseeing the Company’s strategy. The board regularly reviews management’s progress in executing the strategy. In 2022, the board initiated annual strategic reviews that included individual strategy reviews with members of the Executive Office. These reviews included discussions of the key geopolitical policies, economic, technological, environmental, talent and competitive challenges and opportunities of the Company’s business. The board plans to continue this practice going forward.
The board has oversight for risk management with a focus on the most significant risks facing the Company, including strategic, operational, financial and legal compliance risks. The board’s risk oversight process builds upon management’s risk assessment and mitigation processes, which include an enterprise risk management program, regular internal management disclosure compliance committee meetings, a Code of Conduct that applies to all employees, executives and directors, quality standards and processes, an ethics and compliance program, and comprehensive internal audit processes. The board’s risk oversight role also includes the selection and oversight of the independent Board nominees offerauditors. The board implements its risk oversight function both as a diverseboard and through delegation to board committees, which meet regularly and report back to the board. The board has delegated the oversight of specific risks to board committees that align with their functional responsibilities.
The Audit Committee (AC) assists the board in overseeing the enterprise risk management program and evaluates and monitors risks related to the Company’s financial reporting requirements, system of internal controls, the internal audit program, the independent auditor, the compliance program and the information security program. The AC assesses cybersecurity and information technology risks and the controls implemented to monitor and mitigate these risks. The Chief Information Officer attends all bimonthly AC meetings and provides cybersecurity updates to the AC and board.
The Compensation and Human Resources Committee (CHRC) monitors and assesses risks associated with the Company’s employment and compensation policies and practices.
The Nominating and Governance Committee (NGC) oversees various governance matters and the Sustainability and other Public Policy Committee (SPPC) oversees risks related to sustainability and other public policy issues that affect the Company, including health and safety, lobbying and political contributions, and human rights.
2023 PROXY STATEMENT14
The Nominating and Governance Committee (NGC) solicits and receives recommendations for potential director candidates from shareholders, management, directors, professional search firms and other sources. In its assessment of each potential candidate, the NGC considers each candidate’s professional experience, integrity, honesty, judgment, independence, accountability, willingness to express independent thought, understanding of the Company’s business and other factors that the NGC determines are pertinent in light of the current needs of the board. Candidates must have successful leadership experience and stature in their primary fields, with a background that demonstrates an understanding of business affairs as well as the complexities of a large, publicly held company. In addition, candidates must have demonstrated an ability to think strategically and make decisions with a forward-looking focus and the ability to assimilate relevant information on a broad range of complex topics. In evaluating director candidates, the NGC also considers key skills and experience related to the Company’s strategy for long-term profitable growth, which identifies services, expanded offerings, operational excellence and sustainability as primary focus areas. Moreover, candidates must have the ability to devote the time necessary to meet a director’s responsibilities and serve on no more than four public company boards in relevant areas.addition to Caterpillar.
The board values diversity of talents, skills, abilities and experiences and believes that board diversity of all types enhances the performance of the board and provides significant benefits to the Company. Accordingly, the NGC takes into account the diversity of the board in selecting new director candidates.
DIRECTOR RECRUITMENT PROCESS
CANDIDATE RECOMMENDATIONS | NGC | BOARD OF DIRECTORS | SHAREHOLDERS | |||
from Shareholders, Management, Directors, professional search firms and other sources | Discusses & Reviews Qualifications and Expertise Enterprise Strategy Board Needs Diversity Interviews Recommends Nominees | Discusses NGC Recommendations Analyzes Independence Selects Nominees | Vote on Nominees at Annual Meeting |
The following table summarizes certain key characteristics of the Company’s businesses and the associatedqualifications, skills and experience that the NGC believes should be represented on the board.
BUSINESS CHARACTERISTICS | QUALIFICATIONS, SKILLS AND EXPERIENCE | |
■ The Company is a global manufacturer with products sold around the world. | ■ Manufacturing or logistics operations experience ■ Broad international exposure | |
■ Technology and customer and product support services are important. | ■ Technology experience ■ Customer and product support experience | |
■ The Company’s businesses undertake numerous transactions in many countries and in many currencies. | ■ Diversity of race, ethnicity, gender, cultural background or professional experience ■ High level of financial literacy ■ Mergers and acquisitions experience | |
■ Demand for many of the Company’s products is tied to conditions in the global commodity, energy, construction and transportation markets. | ■ Experience in the evaluation of global economic conditions ■ Knowledge of commodity, energy, construction or transportation markets | |
■ The Company’s businesses are impacted by regulatory requirements and policies of various governmental entities around the world. | ■ Governmental and international trade experience | |
■ The board’s responsibilities include understanding and overseeing the various risks facing the Company and ensuring that appropriate policies and procedures are in place to effectively manage risk. | ■ Risk oversight/management expertise ■ Relevant executive and leadership experience ■ Cybersecurity experience |
As shown
2023 PROXY STATEMENT15
The NGC considers unsolicited inquiries and director nominees recommended by the yellow highlighted areasshareholders in the map below,same manner as nominees from all other sources. Recommendations should be sent to the Corporate Secretary, 5205 N. O’Connor Boulevard, Suite 100, Irving, TX 75039. Shareholders may nominate a director candidate to serve on the board by following the procedures described in our independentbylaws. Deadlines for shareholder nominations for Caterpillar’s 2024 Annual Meeting of Shareholders are included in the “Shareholder Proposals and Director Nominations for the 2024 Annual Meeting” section on page 86.
The number of persons comprising the Caterpillar board of directors is currently established as 12. All of the board’s nominees have international experience that aligns with Caterpillar’s global presence.consented to being named in this proxy statement and to serve if elected. If all nominees are elected, the number of persons comprising the board will be 11 following the Annual Meeting. If any of the board’s nominees should become unavailable to serve as a Director prior to the Annual Meeting, the size of the board and number of board nominees will be reduced accordingly.
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2023 PROXY STATEMENT16
The Board has nominated the following individuals to stand for election for a one-year term expiring at the annual meeting of stockholders in 2017.
DIRECTOR CANDIDATE BIOGRAPHIES AND QUALIFICATIONS
Directors have been in their current positions for the past five years unless otherwise noted. Information is as of April 1, 2016.2023. The board has nominated the following individuals to stand for election for a one-year term expiring at the Annual Meeting of Shareholders in 2024.
The experiences and qualifications of each of the director nominees enable each of them to provide meaningful input and guidance to the board.
KELLY A. AYOTTE Former U.S. Senator representing New Hampshire Age: 54 Director since: 2017 INDEPENDENT | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: ■ Blackstone Inc. ■ Boston Properties, Inc. ■ News Corporation | CATERPILLAR BOARD COMMITTEES: ■ Sustainability and other Public Policy, Chair ■ Executive ■ Nominating and Governance | |||||
OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | |||||||
■ Bloom Energy Corporation | |||||||
Experience ■ U.S. Senator representing the State of New Hampshire (2011–2016) ■ Attorney General (2004–2009), Deputy Attorney General (2003–2004), State of New Hampshire | |||||||
Qualifications ■ Leadership, Government/Regulatory Affairs and Global Experience – obtained from her service as Attorney General, Deputy Attorney General and Chief of the Homicide Prosecution Unit for New Hampshire and as a U.S. Senator. As a U.S. Senator, she gained especially valuable insights on important public policy issues from serving on the Senate Commerce, Science and Transportation Committee and the Senate Budget Committee. She championed policies for cleaner energy production, preservation of outdoor spaces and advocated for the U.S. to be a world leader in reducing greenhouse gas emissions. As New Hampshire’s Attorney General, she worked to preserve and strengthen the Clean Air Act and other important environmental regulations. She also served as a Senior Advisor to Citizens for Responsible Energy Solutions. ■ Board of Directors Experience (other boards), Risk Management and Technology – gained while serving on the boards of multiple public companies, including as Lead Independent Director of Boston Properties, as well as currently serving on two private boards, including as Chair of BAE Systems, Inc., and three nonprofit boards that focus on human rights and other global issues. |
2023 PROXY STATEMENT17
DAVID L. CALHOUN President and CEO of The Boeing Company (aviation and defense) Age: 65 Director since: 2011 INDEPENDENT | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: ■ The Boeing Company | CATERPILLAR BOARD COMMITTEES: ■ Sustainability and other Public Policy ■ Nominating and Governance | ||
OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | ||||
■ Gates Industrial Corporation plc ■ Nielsen Holdings plc | ||||
Experience ■ President and CEO (2020–present), The Boeing Company ■ Senior Managing Director and |
■ Executive Chairman (2014–2016), Chief Executive Officer (2006–2013), | |||
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Qualifications ■ CEO, Leadership, and Business Development and Strategy – gained from his almost 30 years in leadership positions at Boeing, where as CEO, he oversees more than 140,000 people worldwide and operations involving a wide variety of ■ Government/Regulatory Affairs, Customer and Product Support Services, Risk Management and Global Experience – developed over his more than 40-year career in global positions that ■ Audit Committee Financial Expert and Finance & Accounting – gained while serving as Senior Managing Director and Head of Portfolio Operations at Blackstone, where he focused on creating and driving added-value initiatives with Blackstone’s portfolio company CEOs, which allows him to bring a unique perspective ■ Technology and ■ Board of Directors Experience (other boards) – gained while serving on numerous public company boards, including Gates Industrial, where he served as |
2023 PROXY STATEMENT18
DANIEL M. DICKINSON | |||||||
Managing Partner of HCI Age: 61 Director since: 2006 INDEPENDENT |
OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS:
None
CATERPILLAR BOARD COMMITTEES:
Audit, Chair
Compensation and Human Resources ■ | |||
Executive |
OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | ||||
■ None | ||||
Experience ■ Co-Founder and Managing Partner (2001–present), HCI Equity Partners ■ Held roles including Co-Head of Global M&A, Head of European M&A and Head of Global Manufacturing and Services M&A (1993–2001), Merrill Lynch ■ Vice President, M&A Group (1987–1993), The | ||||
Qualifications ■ Audit Committee Financial Expert, Leadership, Business Development and Strategy, Finance & Accounting, Risk Management and Business Development and Strategy – obtained during his over 35-year career in mergers and acquisitions, private equity business and ■ Customer and Product Support Services and Manufacturing/Logistics – gained while serving as Head of Global Manufacturing and Services M&A at Merrill Lynch. ■ Board of Directors Experience (other boards) – gained while serving on various public company boards, including on the |
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2023 PROXY STATEMENT19
JAMES C. FISH, JR. President and CEO of Waste Management, Inc. (waste and environmental services) Age: 60 Director since: 2023 INDEPENDENT | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: ■ Waste Management, Inc. | ||||||
CATERPILLAR BOARD COMMITTEES: ■ | |||||||
Audit ■ Sustainability and other Public Policy |
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Mr. |
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■ Vice President – Finance (1999–2001), Westex ■ Vice President – Revenue Management (1995–1999), Trans World Airlines, Inc. ■ Director of | ||||
Qualifications ■ CEO, Leadership, Business Development and Strategy, and Risk Management – obtained while serving in leadership roles, including CEO, of Waste Management, North America’s largest comprehensive waste management environmental solutions provider. As President and CEO of Waste Management, he has shifted the company’s sustainability strategy to focus on minimizing its environmental impact by reducing carbon emissions, investing in differentiated, innovative technologies and automation, and expanding recycling and renewable energy infrastructure to help Waste Management’s customers achieve their sustainability goals. As CEO of a heavily regulated business, he leads a large government affairs team that interacts with all levels of government. ■ Audit Committee Financial Expert and Finance & ■ Board of Directors Experience (other boards) – gained while serving as a director of Waste Management. |
2023 PROXY STATEMENT20
GERALD JOHNSON
Age: 60 Director since: 2021 INDEPENDENT | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: ■ None | CATERPILLAR BOARD COMMITTEES: ■ Compensation and Human Resources ■ Sustainability and other Public Policy | ||
OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | ||||
■ None | ||||
Experience ■ Executive Vice President, Global Manufacturing and Sustainability (2019–present), Vice President North America Manufacturing and Labor Relations (2017–2019), Vice President Global Operational Excellence (2014–2017), joined in the company 1980, General Motors Company (GM) | ||||
Qualifications ■ Audit Committee Financial Expert, Leadership, Business Development and Strategy, Customer and Product Support Services, Technology, Global Experience and Manufacturing/Logistics – obtained during his over 40-year career at GM, including his current role, where he is responsible for the quality and safety performance for 103,000 employees, representing more than 129 manufacturing facilities in 16 countries on five continents, which allows him to provide valuable insight and perspective to the Board on strategic and business |
2023 PROXY STATEMENT21
| DAVID W. MACLENNAN Executive Chair of the Board of Cargill, Inc. (food and agriculture) Age: 63 Director since: 2021 INDEPENDENT | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: ■ Ecolab Inc. | CATERPILLAR BOARD COMMITTEES: ■ Audit ■ Sustainability and other Public Policy | ||
OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | |||||
■ None | |||||
Experience ■ Executive Chair (2023–present), Chair (2015–2022), Chief Executive Officer (2013–2022), Chief Operating Officer (2011–2013), Chief Financial Officer (2008–2011), joined the company in 1991, Cargill, Inc. | |||||
Qualifications ■ CEO, Leadership, Business Development and Strategy, Government/Regulatory Affairs, Risk Management, Technology, Global Experience and Manufacturing/Logistics – obtained while serving in leadership roles at and as former CEO of Cargill, a large multinational corporation, where he helped develop a business model and culture to position Cargill for long-term success. He oversaw Cargill’s building of expertise in alternative proteins and development of technologies and digital solutions to transform farming, supply chains and food delivery, and undertook several large acquisitions during his tenure. As CEO of Cargill, he worked to address climate change and water risks by investing in renewable diesel; decarbonize maritime shipping by developing new wind propulsion technology that aimed to reduce shipping carbon dioxide emissions by as much as 30% and strengthen the food system by training over five million farmers globally on regenerative agriculture practices that sequester carbon, improve soil health and increase crop yields. He also directed numerous diversity, equity and inclusion initiatives including establishing specific time bound goals for gender and ethnic representation in senior management and helped establish the most diverse top leadership team in Cargill’s history. He created a particular focus on safety and reduction of injuries in Cargill’s facilities. His CEO responsibilities also included frequent interaction with government officials throughout the world and he also served on Cargill’s Business Conduct Committee. ■ Finance & Accounting and Audit Committee Financial Expert – developed while serving as CFO of Cargill, where he was responsible for all financial aspects of the business, including financing, internal controls and reporting, capital investments and budgeting. ■ Board of Directors Experience (other boards) – gained while serving as a director on the board of Ecolab since 2016 where he is a member of the Audit Committee and the Governance Committee and where he will serve as Lead Director beginning on May 4, 2023. He also serves as Chairman of the Board at Cargill. |
2023 PROXY STATEMENT22
| JUDITH F. MARKS Chair, CEO and President of Otis Worldwide Corporation (elevator and escalator manufacturing, installation and service) Age: 59 Director since: 2023 INDEPENDENT | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: ■ Otis Worldwide Corporation | CATERPILLAR BOARD COMMITTEES: ■ Audit ■ Compensation and Human Resources | ||||
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■ Hubbell Incorporated | |||||||
Ms. Marks was brought to the attention of the board through a professional search firm. | |||||||
Experience ■ Chair of the Board (2022–present), Chief Executive Officer (2019–present), President (2017–present), Otis Worldwide Corporation ■ Chief Executive Officer (2017), Executive Vice President of New Equipment Solutions (2016–2017), Executive Vice President of Global Solutions (2015–2016), Dresser-Rand Group, Inc. ■ Chief Executive Officer (2017), Siemens USA, President and Chief Executive ■ Vice President of | |||||||
Qualifications ■ Audit Committee Financial Expert, CEO, Leadership, Business Development and Strategy, Customer and Product Support Services, Finance & Accounting, Risk Management, Technology, Global Experience and Manufacturing/Logistics – gained from her experience in executive positions at Otis Worldwide Corporation, the world’s leading provider and maintainer of elevators, escalators and moving walkways; as Executive Vice President of New Equipment Solutions and Executive Vice President of Global Solutions of Dresser-Rand Group, Inc.; as President and CEO of Siemens USA and Siemens Government Technologies, Inc.; and in various senior leadership positions at Lockheed Martin Corporation.During her current tenure at Otis, she led the successful spin-off of Otis to an independent publicly traded company, and prioritized and advanced Otis’ sustainability program by embedding it into the company strategy as a key element to drive added value for all stakeholders; oversaw the company announcing that 100% of global factories achieved ISO certification four years ahead of the company goal and launching the Otis Gen360 connected elevator designed to offer higher energy efficiency and a light carbon footprint comparable Gen2 configurations. She also sponsored Made to Move Communities, Otis’ signature corporate social responsibility program that focuses on advancing youth STEM education and inclusive mobility solutions and serves as Chair of Otis’ Diversity, Equity and Inclusion Advisory Group. In her role as CEO of Siemens USA, she led a $24B global organization in the areas of electrification, automation and digitalization with 50,000 employees and 60 manufacturing locations. ■ Board of Directors Experience (other boards) – gained while serving as a director and Chair of the Board of Otis Worldwide Corporation. She also previously served as a director on the boards of AdvanceCT, Hubbell Incorporated and Siemens Government Technologies, Inc. |
2023 PROXY STATEMENT23
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Former Chairman and CEO of Age: 66 Director since: 2015 INDEPENDENT Presiding Director | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: ■ Chevron Corporation |
Lockheed Martin Corporation | |||
CATERPILLAR BOARD COMMITTEES: ■ | |||
Nominating and | |||
Governance, Chair ■ Executive | |||
OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | |||
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■ Oncor Electric Delivery Company LLC ■ Sempra Energy |
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■ Chairman of the Board |
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Qualifications ■ Audit Committee Financial Expert, CEO, Leadership, Business Development and Strategy, Customer and Product Support Services, Finance & Accounting, Risk Management, Technology and Global Experience – gained over her three decades of
■ Government/Regulatory Affairs – gained while in leadership roles at Sempra while serving four years on the National Petroleum Council, an advisory committee to the United States Secretary of Energy to study energy policy. In her leadership roles at Sempra, she led highly regulated energy businesses in numerous states and internationally and worked extensively with a wide array of government entities and regulators. ■ Board |
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2023 PROXY STATEMENT24
SUSAN C. SCHWAB Professor Emerita at the | |||||||
Age: 68 Director since: 2009 INDEPENDENT | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: ■ FedEx Corporation ■ Marriott International, Inc. |
CATERPILLAR BOARD COMMITTEES: ■ Sustainability and | ||||
other Public Policy ■ Nominating and Governance | ||||
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■ The Boeing Company | ||||
Experience ■ Board Chair (2022–present), National Foreign Trade Council ■ Professor Emerita (2019–present), Professor (2009–2019), University of ■ Strategic Advisor (2010–present), Mayer Brown LLP ■ U.S. Trade Representative (2006–2009), Deputy U.S. Trade Representative (2005–2006), United States Government ■ President and Chief Executive Officer (2004–2005), University System of ■ Consultant (2003), U.S. Department of
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■ Dean (1995–2003), | |||
■ Director of Corporate Business Development (1993–1995), Motorola, Inc. ■ Assistant Secretary of Commerce (1989–1993), U.S. and |
Qualifications ■ | |||||||
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2023 PROXY STATEMENT25
D. JAMES UMPLEBY III Chairman and CEO of Caterpillar Inc. Age: 65 Director since: 2017 MANAGEMENT | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: ■ Chevron Corporation | CATERPILLAR BOARD COMMITTEES: ■ None | ||
OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | ||||
■ None | ||||
Experience ■ Chairman (2018–present), Chief Executive Officer (2017–present), Group President, Energy & Transportation segment (2013–2016), Vice President and President of Solar Turbines (2010–2012), joined a company subsidiary in 1980, Caterpillar Inc. | ||||
Qualifications ■ Audit Committee Financial Expert, CEO, Leadership, Business Development and Strategy, Finance & Accounting and Risk Management – obtained during his more than three decades of experience in senior management and executive positions and more than a decade of financial responsibility and experience at Caterpillar. This includes oversight of all aspects of Caterpillar’s environmental and sustainability policies and strategies, such as the introduction of new products and services that contribute to ■ Customer and Product Support Services, Technology, Global Experience and Manufacturing/Logistics – developed during his long career at Caterpillar, the world’s leading manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives with extensive international operations. ■ Board of Directors Experience (other boards) – gained while serving as a director Chevron Corporation, where he is a member of the Board Nominating and Governance Committee and the |
2023 PROXY STATEMENT26
| RAYFORD WILKINS, JR. Former CEO of Diversified Businesses at AT&T Inc. (telecommunications) Age: 71 Director since: 2017 INDEPENDENT | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: ■ Morgan Stanley ■ Valero Energy Corporation | CATERPILLAR BOARD COMMITTEES: ■ Compensation and Human Resources, Chair ■ Audit ■ Executive | ||
OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | |||||
■ None | |||||
Experience ■ CEO of Diversified Businesses (2007–2012), held other leadership roles including Group President of Marketing and Sales, SBC Communications, President and CEO, SBC and Pacific Bell, and President and CEO Southwestern Bell Telephone, joined in 1974, AT&T Inc. | |||||
Qualifications ■ Audit Committee Financial Expert, Leadership, Business Development & Strategy, Government/Regulatory Affairs, Customer and Product Support Services, Finance & Accounting, Risk Management, Technology and Global Experience – gained while in leadership roles at AT&T, where he was responsible for international investments, AT&T Interactive, AT&T Advertising Solutions, customer information services and the consumer wireless initiative in India; his service on the Advisory Council of the McCombs School of Business at the University of Texas at Austin and his service as a director at Valero Energy Corporation and Morgan Stanley. As chair of Valero’s Human Resources and Compensation Committee, he was integral to Valero’s progress in linking pay with HSE (health, safety and environmental) and ESG performance. He also served on the Institute for Inclusion Advisory Board at Morgan Stanley, which aims to develop and accelerate an integrated and transparent diversity, equity and inclusion strategy. ■ Board of Directors Experience (other boards) – gained while a director and committee chair of other large, publicly traded corporations, including as chair of the Governance and Sustainability Committee at Morgan Stanley and chair of the Human Resources and Compensation Committee and the newly established Sustainability and Public Policy Committee at Valero Energy Corporation. |
2023 PROXY STATEMENT27
The following table sets forth information concerning the compensation for our non-employee directors during the year ended December 31, 2022. Mr. Umpleby, who served as Chairman and CEO during 2022, did not receive separate compensation for his service on the board.
CompensationAnnual compensation for non-employee directors for 20152022 was comprised of the following components:
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Restricted Stock Units (1 Year Vesting) | $ | 150,000 |
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Cash Retainer | $ | 150,000 |
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Cash Stipends: |
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Presiding Director (Executive Committee Chair) | $ | 50,000 |
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Audit Committee Chair | $ | 30,000 |
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Compensation and Human Resources Committee Chair | $ | 25,000 |
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Nominating and Governance Committee Chair | $ | 20,000 | 1 |
Sustainability and other Public Policy Committee Chair | $ | 20,000 | 1 |
(1) Cash Stipend Effective June 8, 2022
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Directors are required to own Caterpillar common stock equal to five times their annual cash retainer. Directors have a five-year period from the date of their election or appointment to meet the target ownership guidelines.
Directors All directors are in compliance with these guidelines. Under the Company’s Directors’ Deferred Compensation Plan, directors may defer 50 percent50% or more of their annual cash retainer and stipend into an interest-bearing account or an account representing phantom shares of Caterpillar stock.
Directors may also defer 50% or more of any stock-based compensation (effective for grants other than options and stock appreciation rights made on or after January 1, 2019) upon vesting into an account representing phantom shares of Caterpillar stock. Directors that joined the Boardboard prior to April 1, 2008,also are able to participate in a Charitable Award Program, under which aProgram. A donation of up to $500,000 will be made by the Company in the director’s name to charitable organizationsselected by the directorand a donation of up to $500,000 also will be made by the Company in the director’s name to the Caterpillar Foundation. Directors derive no financial benefit from the program.
DIRECTOR COMPENSATION FOR 2015 | |||||||||||||||||||
DIRECTOR | FEES EARNED OR PAID IN CASH | RESTRICTED STOCK UNITS1 | ALL OTHER COMPENSATION2 | TOTAL | |||||||||||||||
David L. Calhoun | $ | 150,000 | $ | 124,998 | $ | 5,000 | $ | 279,998 | |||||||||||
Daniel M. Dickinson | $ | 150,000 | $ | 124,998 | $ | 35,441 | $ | 310,439 | |||||||||||
Juan Gallardo | $ | 150,000 | $ | 124,998 | $ | 12,170 | $ | 287,168 | |||||||||||
Jesse J. Greene, Jr. | $ | 150,000 | $ | 124,998 | $ | 9,000 | $ | 283,998 | |||||||||||
Jon M. Huntsman, Jr. | $ | 150,000 | $ | 124,998 | $ | — | $ | 274,998 | |||||||||||
Dennis A. Muilenburg | $ | 150,000 | $ | 124,998 | $ | — | $ | 274,998 | |||||||||||
William A. Osborn | $ | 170,000 | $ | 124,998 | $ | 17,170 | $ | 312,168 | |||||||||||
Debra L. Reed | $ | 87,500 | $ | 72,996 | $ | 2,000 | $ | 162,496 | |||||||||||
Edward B. Rust, Jr. | $ | 175,000 | $ | 124,998 | $ | 21,465 | $ | 321,463 | |||||||||||
Susan C. Schwab | $ | 150,000 | $ | 124,998 | $ | 12,000 | $ | 286,998 | |||||||||||
Miles D. White | $ | 170,000 | $ | 124,998 | $ | 10,000 | $ | 304,998 |
1 As of December 31, 2015, the number of vested and non-vested options (NQs), RSUs and Phantom Shares held by each individual serving as a non-employee director during 2015 was: Mr. Calhoun: 9,842 (which consists of 1,506 RSUs and 8,336 Phantom Shares); Mr. Dickinson: 26,113 (which consists of 2,916 SARs, 1,506 RSUs and 21,691 Phantom Shares); Mr. Gallardo: 38,314 (which consists of 12,833 SARs, 1,506 RSUs and 23,975 Phantom Shares); Mr. Greene: 1,506 RSUs; Mr. Huntsman: 1,506 RSUs; Mr. Muilenburg: 1,506 RSUs; Mr. Osborn: 1,828 (which consists of 1,506 RSUs and 322 Phantom Shares); Ms. Reed: 2,151 (which consists of 825 RSUs and 1,326 Phantom Shares); Mr. Rust: 43,400 (which consists of 12,833 SARs, 1,506 RSUs and 29,061 Phantom Shares); Ms. Schwab: 8,780 (which consists of 1,506 RSUs and 7,274 Phantom Shares); and Mr. White: 5,385 (which consists of 1,506 RSUs and 3,879 Phantom Shares). Mr. Calhoun, Mr. Dickinson, Mr. Gallardo, Ms. Reed, Ms. Schwab and Mr. Rust deferred 100 percent of their 2015 retainer fee into phantom stock in the Directors’ Deferred Compensation Plan. Mr. White deferred 50 percent of his 2015 retainer fee into phantom stock in the Directors’ Deferred Compensation Plan.2All Other Compensation represents amounts paid in connection with the Caterpillar Foundation’s Directors’ Charitable Award Program and the Caterpillar Political Action Committee Charitable Matching Program (CATPAC’s PACMATCH program) and administrative fees associated with the Directors’ Charitable Award Program. All outside directors are eligible
2023 PROXY STATEMENT28
DIRECTOR COMPENSATION FOR 2022
Director |
| Fees Earned or Paid in Cash |
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| Restricted Stock Units(1) (2) |
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| All Other Compensation(3) |
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| Total |
Kelly A. Ayotte | $ | 161,209 | (4) | $ | 187,517 |
| $ | — |
| $ | 348,726 |
David L. Calhoun | $ | 185,000 | (4) | $ | 187,517 |
| $ | 5,000 |
| $ | 377,517 |
Daniel M. Dickinson | $ | 180,000 |
| $ | 187,517 |
| $ | 20,656 |
| $ | 388,173 |
Gerald Johnson | $ | 150,000 |
| $ | 187,517 |
| $ | — |
| $ | 337,517 |
David W. MacLennan | $ | 150,000 |
| $ | 187,517 |
| $ | — |
| $ | 337,517 |
Debra L. Reed-Klages | $ | 201,731 | (4) | $ | 187,517 |
| $ | — |
| $ | 389,248 |
Edward B. Rust, Jr. | $ | 150,000 |
| $ | 187,517 |
| $ | 25,574 |
| $ | 363,091 |
Susan C. Schwab | $ | 150,000 |
| $ | 187,517 |
| $ | — |
| $ | 337,517 |
Miles D. White | $ | 65,934 | (5) | $ | — |
| $ | 11,000 |
| $ | 76,934 |
Rayford Wilkins, Jr. | $ | 164,011 | (4) | $ | 187,517 |
| $ | 5,000 |
| $ | 356,528 |
(1) Restricted stock units awarded in 2022 include a one-time adjustment to reflect the change in annual grant date from March to June that was implemented in 2022. (2) As of December 31, 2022, the number of RSUs (including accrued dividend equivalent units) and Phantom Shares held by those serving as non-employee directors during 2022 were: Ms. Ayotte: 3,256 (which consists of 825 RSUs and 2,431 Phantom Shares); Mr. Calhoun: 24,347 (which consists of 825 RSUs and 23,522 Phantom Shares); Mr. Dickinson: 30,762 (which consists of 825 RSUs and 29,937 Phantom Shares); Mr. Johnson: 825 RSUs; Mr. MacLennan: 1,069 (which consists of 825 RSUs and 244 Phantom Shares); Ms. Reed-Klages: 11,629 (which consists of 825 RSUs and 10,804 Phantom Shares); Mr. Rust: 40,239 (which consists of 825 RSUs and 39,414 Phantom Shares); Ms. Schwab: 21,489 (which consists of 825 RSUs and 20,664 Phantom Shares); Mr. White: 12,909 Phantom Shares; and Mr. Wilkins: 825 RSUs. Mr. Calhoun and Ms. Schwab elected to defer 100% of their 2022 Cash Retainer and Cash Stipend (as applicable) into Phantom Shares of Caterpillar stock in the Directors’ Deferred Compensation Plan. These deferrals, plus the accumulated value of previous retainer deferrals for each of Ms. Ayotte, Mr. Dickinson, Ms. Reed-Klages, Mr. Rust and Mr. White, are included in the Phantom Shares totals above. Mr. Johnson elected to defer 100% of his 2022 Cash Retainer into the Interest Fund in the Directors’ Deferred Compensation Plan. Ms. Ayotte, Mr. Calhoun, Mr. MacLennan, Ms. Reed-Klages and Ms. Schwab elected to defer a portion of their equity award that vested on March 1, 2022, into the Directors’ Deferred Compensation Plan. These deferrals, plus the accumulated deferrals of previous equity awards, are also included in the Phantom Share totals above. Ms. Ayotte and Mr. MacLennan elected to defer 50%, and Mr. Calhoun, Ms. Reed-Klages and Ms. Schwab elected to defer 100% of the equity award granted on June 8, 2022. (3) All Other Compensation represents amounts paid in connection with the Directors’ Charitable Award Program, Caterpillar Foundation’s Matching Gifts Program and the Caterpillar Political Action Committee Charitable Matching Program (CATPAC’s PACMATCH program). For directors eligible to participate in the Directors Charitable Award Program, the amounts listed include the insurance premium and administrative fees as follows: Mr. Dickinson $20,656 and Mr. Rust $20,574. In 2022, the Caterpillar Foundation matched contributions to eligible 501(c)(3) nonprofits and accredited U.S. public/private preK-12 schools or school districts to which contributions are tax-deductible, up to a maximum match of $10,000 per participant per calendar year. Additionally in 2022, the Caterpillar Foundation also provided a 2:1 match program for a period of time in support of the Foundation’s 70th Anniversary and Giving Tuesday that allowed participants to donate up to $500 to be matched at a 2:1 ratio. The amounts listed include Charitable Foundation matching gifts as follows: Mr. White $11,000. As part of CATPAC’s PACMATCH program, Caterpillar Inc. will contribute to up to four charities on behalf of eligible members who contribute at the suggested giving level. The annual CATPAC contribution limit is $5,000. Mr. Calhoun, Mr. Rust and Mr. Wilkins had contributions matched. (4) Total fees earned or paid in 2022 include pro-rated Cash Retainer and/or Cash Stipends for directors who ceased board service or transitioned between committee chair positions over the course of the year. The cash compensation for Ms. Ayotte, Mr. Calhoun, Ms. Reed-Klages and Mr. Wilkins reflect pro-ration of chair stipends for the transition of roles on June 8, 2022. (5) Mr. White did not stand for re-election, thereby concluding his board service June 8, 2022. His cash compensation includes pro-ration to the date his board service ceased. |
2023 PROXY STATEMENT29
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BOARD ELECTION AND LEADERSHIP STRUCTURE
Directors are elected at each annual meeting to serve for a one-year term. In uncontested elections, directors are elected by a majority of the votes cast for such director.directorship. If an incumbent director does not receive a greater number of “for” votes than “against” votes, then such director must tender his or her resignation to the Board.board. In contested elections, directors are elected by a plurality vote. Directors must retire at the end of the calendar year in which they reach
The mandatory retirement age for directors is 74. Each director who will have reached the age of 72.74, on or before the date of the next shareholders’ meeting, shall not stand for re-election at that annual meeting of the shareholders without an express waiver by the board.
Under Caterpillar’s bylaws, the directors annually elect a Chairman. The Boardboard has electedno fixed policy on whether to have an executive or non-executive chairman and believes this determination should be made based on the Chief Executive Officerbest interests of the Company and its shareholders in light of the circumstances at the time. As previously disclosed, the board determined to appoint Ms. Reed-Klages as its Presiding Director, effective June 8, 2022.
In the role of Presiding Director, Ms. Reed-Klages has provided strong independent oversight of management and served as a liaison between the independent directors and the Chairman of the Board. The Board believes that having a single person as both Chairman of the Board and CEO, ensures thatas further described below. Ms. Reed-Klages also led the Company is represented by a single voice to dealers, stockholders, employeesboard’s annual evaluation of Mr. Umpleby, and other stakeholders. Thethe independent members of the Board have further electedboard set Mr. Umpleby’s compensation annually based on the Chairmanrecommendation of the Public PolicyCompensation and Governance Committee (PPGC) as the Presiding Director.Human Resources Committee.
Preside at all meetings of the board at which the Chairman & CEO is not present, including executive sessions of the independent directors.
Serve as a liaison between the Chairman & CEO and the independent directors.
Approve the type of information sent to the board.
Provide input and approve meeting agendas for the board.
Approve meeting schedules, in consultation with the Chairman & CEO and the independent directors, to assure that there is sufficient time for discussion of all agenda items.
Has the authority to call meetings of the independent directors.
If requested by major shareholders, is available, when appropriate, for consultation and direct communication.
Provide the Chairman & CEO with the results of his/her annual performance review in conjunction with the chairman of the Compensation and Human Resources Committee.
The board believes it is important to maintain flexibility as to the board’s leadership structure. The board will continue to regularly review its leadership structure and exercise its discretion in adopting an appropriate and effective framework to ensure effective governance and accountability, taking into consideration the needs of the board and the Company.
Our Boardboard has adopted Guidelines on Corporate Governance Issues (Corporate Governance Guidelines), which are available on our website at www.caterpillar.com/governance.governance. The guidelines reflect the Board’sboard’s commitment to oversee the effectiveness of policy and decision-making both at the Boardboard and management level, with a view to enhancing stockholderenhance shareholder value over the long-term.long term.
Caterpillar’s codeCode of conductConduct is called Our Values in Action.Integrity, Excellence, Teamwork,Commitment and Sustainability are the core values identified in the code and are the foundation for Caterpillar’s corporate existence.code. Our Values in Action apply to all members of the Boardboard and to management and employees worldwide. These values embody the high ethical standards that Caterpillar has upheld since its formation in 1925. Our Values in Action isare available on our website at www.caterpillar.com/code.
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2023 PROXY STATEMENT30
The board conducts an annual self-evaluation to determine whether the board and its committees are functioning effectively. In 2022, the Chair of Contentsthe NGC interviewed each board member to solicit their feedback. The NGC Chair then led a discussion during the board’s executive session. Each of the committees of the board followed a similar process and reported to the board on the outcome of their self-evaluations. The self-evaluation provides the board with actionable feedback to enhance its performance and effectiveness.
Starting in 2022, the board enhanced its self-evaluation process through the addition of individual director assessments. Pursuant to this part of the process, each director sends a confidential performance evaluation with respect to each other individual director to outside counsel retained by the Company at the request of the Nominating and Governance Committee. Outside counsel reviews and compiles the results and provides summaries of each director’s performance evaluation to the Presiding Director, other than her own review, which summary is instead provided to the Chair of the Audit Committee. The Presiding Director then has an individual conversation with each director, reviewing the results and feedback received as well as providing recommendations for improvement, if any (with the Chair of the Audit Committee undertaking such review with the Presiding Director). The Nominating and Governance Committee also reviews the collective results and makes any further recommendations or improvements. In concert with the broader annual board self-evaluation, the board believes it has proper processes in place to evaluate the board, its committees and each individual director’s effectiveness and potential areas of improvement.
The Boardboard currently hasthree five standing committees: Audit; Compensation;Audit, Compensation and Human Resources, Sustainability and other Public Policy, Nominating and Governance.Governance, and Executive. Each committee meets periodicallyregularly throughout the year, reports its actions and recommendations to the Board,board, receives reports from management, annually evaluates its performance and has the authority to retain outside advisors at its discretion. The current primary responsibilities of each committee are summarized below and set forth in more detail ineachin each committee’s written charter, which can be found on Caterpillar’s website at www.caterpillar.com/governance.governance. All committee members are independent under Company, NYSE and SEC standards applicable to Boardboard and committee service, and the Boardboard has determined that each member of the Audit Committee is “financially literate” and an “audit committee financial expert” as defined under SEC rules.
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Committee Members: Daniel M. Dickinson, Chair Number of Meetings in 2022: 10 | COMMITTEE ROLES AND RESPONSIBILITIES |
■ Selects and oversees | |
■ Oversees our financial reporting activities, including our financial statements, annual report and accounting standards and | |
■ Reviews with management the Company’s risk assessment and risk management | |
framework. ■ Approves audit and non-audit services provided by the independent | |
auditors. ■ Reviews the organization, scope and effectiveness of the Company’s internal audit function, disclosures and internal | |
controls. ■ Sets parameters for and monitors the Company’s hedging and derivatives | |
practices. ■ Provides oversight for the Company’s | |
Code of Conduct. ■ Monitors | |
matters. ■ Oversees information technology systems and related security. ■ Reviews with management cybersecurity risks and strategy to mitigate these risks. |
2023 PROXY STATEMENT31
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Committee Members: Rayford Wilkins, Jr., Chair Number of Meetings in 2022: 5 | COMMITTEE ROLES AND RESPONSIBILITIES |
■ Recommends the CEO’s compensation to the | |
■ Establishes, | |
■ Reviews incentive compensation arrangements to ensure that incentive pay does not encourage unnecessary risk-taking, and reviews and discusses the relationship between risk management policies and practices, corporate strategy and executive | |
■ Recommends to the | |
independent directors. ■ Provides general oversight of the Company’s approach to talent management, succession planning and diversity and | |
inclusion for senior leaders. ■ Furnishes an annual | |
statement. |
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Committee Members: Kelly A. Ayotte, Chair Number of Meetings in 2022: 3 | COMMITTEE ROLES AND RESPONSIBILITIES |
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■ Annually reviews the Company’s charitable contributions to the Caterpillar Foundation and political contributions and policies, including lobbying activities. ■ Oversees investor, customer, community and government relations. |
2023 PROXY STATEMENT32
Committee Members: Debra L. Reed-Klages, Chair Number of Meetings in 2022: 3 | COMMITTEE ROLES AND RESPONSIBILITIES |
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BOARD’S ROLE IN RISK OVERSIGHT
The Board has oversight for risk management with a focus on the most significant risks facing the Company, including strategic, operational, financial and legal compliance risks. The Board’s risk oversight process builds upon management’s risk assessment and mitigation processes, which include an enterprise risk management program, regular internal management disclosure and compliance committee meetings, code of business conduct, quality standards and processes, an ethics and compliance officeand comprehensive internal audit processes. The Board’s risk oversight role also includes the selection and oversight of the independent auditors. The Board implements its risk oversight function both as a full Board and through delegation to Board committees, which meet regularly and report back to the full Board.The Board has delegated the oversight of specific risks to Board committees that align with their functional responsibilities.
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DIRECTOR NOMINATIONS AND EVALUATIONS
The Public Policy and Governance Committee (PPGC) solicits and receives recommendations for potential director candidates from the Board, management and other sources. In its assessment of each potential candidate, the PPGC considers each candidate’s integrity, honesty, judgment, independence, accountability, willingness to express independent thought, understanding of the Company’s business and other factors that the PPGC determines are pertinent in light of the current needs of the Board. Candidates must have successful leadership experience and stature in their primary fields,with a background that demonstrates an understanding of business affairs as well as the complexities of a large, publicly held company. In addition, candidates must have a demonstrated ability to think strategically and make decisions with a forward-looking focus and the ability to assimilate relevant information on a broad range of complex topics. Moreover, candidates must have the ability to devote the time necessary to meet director responsibilities and serve on no more than fourpublic company boards in addition to the Company’s Board.
DIRECTOR RECRUITMENT PROCESS
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The following table summarizes certain key characteristics of the Company’s businesses and the associated qualifications, skills and experience that the PPGC believes should be represented on the Board.
■ Discusses and | ||
■ Leads the board in | ||
■ Oversees the Company’s corporate governance. ■ Oversees the Guidelines on Corporate Governance Issues adopted by the board and annually reviews the guidelines and recommends changes to the board as appropriate. ■ Reviews related person transactions and annually reviews the relationships between directors, the Company and members of management and recommends to the board whether each director is independent. ■ Reviews directorships in other public companies held by or offered to directors and senior officers of the ■ Recommends candidates for Company officer positions. |
Committee Members: Debra L. Reed-Klages, Chair Number of Meetings in 2022: 1 | COMMITTEE ROLES AND RESPONSIBILITIES | |
■ Acts with the | ||
■ Has the authority to approve dividends, authorize share repurchases and | ||
■ Oversees the succession management processes for Chairman of the board and |
The Board values diversity of talents, skills, abilities and experiences and believes that Board diversity of all types provides significant benefits to the Company. Although the Board has no specific diversity policy, the PPGC considers the diversity of the Board and potential director candidates in selecting new director candidates.
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The PPGC considers unsolicited inquiries and director nominees recommended by stockholdersin the same manner as nominees from all other sources. Recommendations should be sent to the Corporate Secretary at 100 NE Adams Street, Peoria, Illinois 61629. Stockholders may nominate a director candidate to serve on the Board byfollowing the procedures described in our bylaws. Deadlines for stockholder nominations for Caterpillar’s 2017 annual meeting of stockholders are included in the “Stockholder Proposals and Director Nominations for the 2017 Annual Meeting” section on page 57.
The Company’s Guidelines on Corporate Governance GuidelinesIssues establish that no more than two non-independent directors may serve on the Boardboard at any point in time. A director is “independent” if he or she has no direct or indirect material relationship with the Company or with senior management of the Company and their respective affiliates. Annually, the Boardboard makes an affirmative determination regarding the independence of each director based upon the recommendation of the PPGCandNGC and in accordance with the standards in the Company’s Guidelines on Corporate Governance Guidelines,Issues, which are available on our website at www.caterpillar.com/governance.governance.
Applying these standards, the Boardboard determined that each of the director nominees, and all other directors who served during 2022, met the independence standards except Mr. Oberhelman,Umpleby, who is a current employee of the Company.
Stockholders,Shareholders, employees and all other Caterpillar stakeholdersinterested parties may communicate with any of our directors individually, our Boardboard as a group, our independent directors as a group or any Boardboard committee as a group by email or regular mail:
BY EMAILsend an email toDirectors@CAT.com
BY EMAIL | BY MAIL |
send an email to directors@cat.com | mail to Caterpillar Inc. |
BY MAIL
2023 mailPROXY STATEMENT33
Back to Caterpillar Inc.c/o Corporate Secretary100 NE Adams StreetPeoria, Illinois 61629Contents
All communications regarding personal grievances, administrative matters, the conduct of the Company’s ordinary business operations, billing issues, product or service related inquiries, order requests and similar issues will be directed to the appropriate individual within the Company. The Presiding Director has instructed the Corporate Secretary to consult with him if he is unsure who should receive the communication. If a legitimate communication is sent, you will receive a written acknowledgement from the Corporate Secretary’s office confirming receipt of your communication.
Contacting Caterpillar.While the Boardboard oversees management, it does not participate in day-to-day management functions or business operations. If you wish to submit questions or comments relating to these matters, please use the Contact Us form on our website at www.caterpillar.com/contact, which will help you to direct your message to the appropriate area of our Company.
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TableAll communications regarding personal grievances, administrative matters, the conduct of Contentsthe Company’s ordinary business operations, billing issues, product or service-related inquiries, order requests and similar issues will be directed to the appropriate individual within the Company. The Chairman of the board has instructed the Corporate Secretary to consult with him if she is unsure who should receive the communication.
We conduct an annual governance review and stockholdershareholder outreach throughout the year to ensure that management and the Boardboard understand and consider the issues that matter most to our stockholders and to help ensure our corporate governance practices continue to evolveshareholders and reflect the insights and perspectives of our many stakeholders. We greatly value our relationships with our shareholders and hearing their feedback directly. The governance engagements summarized below are in addition to the regular discussions that our senior leadership and Investor Relations teams have with many institutional and retail shareholders which may also include governance, sustainability and similar matters.
In 2022, we met with shareholders representing approximately 42% of total outstanding shares |
| INTEGRATED ENGAGEMENT TEAM | TYPES OF ENGAGEMENT | |
■ Independent Director ■ Chairman and CEO ■ Sustainability ■ Total Rewards ■ Investor Relations ■ Corporate Secretary |
| One-on-One Meetings Investor Conferences Earnings Calls Investor and Analyst Calls |
In response to shareholder feedback we received, we have taken various actions, including:
KEY AREAS OF FOCUS | TAKING ACTIONS INFORMED BY SHAREHOLDER FEEDBACK | |
Lobbying and other public policy matters |
| We prepared our inaugural annual lobbying report (published in February 2023). The 2022 reporting threshold for our contributions to U.S. trade and industry associations was decreased from $50,000 or more per year to $25,000 or more per year. Beginning in the second half of 2023, we will report all U.S. trade and industry association memberships regardless of level of contribution. |
Sustainability matters such as the energy transition and climate change |
| We released our estimated Scope 3 GHG emissions data in our 2022 Sustainability Report (published in April 2023). We released our first-ever report aligned with certain recommendations of the Task Force on Climate-related Financial Disclosures. |
Human capital, including diversity | We prepared an annual diversity and inclusion report that contains links to our EEO-1 reports. | |
Company strategy | We updated our enterprise strategy to include sustainability as a strategic focus area, together with operational excellence, expanded offerings and services to highlight our work helping our customers build a better, more sustainable world. | |
Executive compensation | We incorporated ESG into the 2022 incentive plan for executive officers. |
2023 PROXY STATEMENT34
KEY AREAS OF FOCUS |
| TAKING ACTIONS INFORMED BY SHAREHOLDER FEEDBACK |
Board oversight and governance |
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We enhanced the director skills matrix to provide a description of each skill to help shareholders understand how each skill helps contribute to effective oversight. We enhanced biographies of director nominees to correspond directly to the skills matrix and include specific ESG-related experience. |
and workplace satisfaction. We are pleased to highlight some of these 2015 awards here.
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Caterpillar has set aspirational goals for its operations and product stewardship. We believe these standards affirm our determination to lead our industry to a more sustainable future. You can track our progress towards achieving these goals by visiting our website www.caterpillar.com/sustainability.
POLITICAL CONTRIBUTIONS AND LOBBYING
As a responsible corporate citizen, Caterpillar participates in the public policy process, advocating for a broad range of issues that advance our strategy and purpose while providing value to shareholders and other stakeholders. Our commitment to transparency and disclosure in our advocacy activities has long been recognized.
We currently discloseThe Company provides disclosure relating to our advocacy efforts; political engagements; political contribution activities, including the Caterpillar Inc. Political Action Committee (CATPAC); and global issues of importance to the Company, including detailed information on the Company’s position with respect to such issues. This information is disclosed in our inaugural 2022 Lobbying Report: The Purpose of Engagement, and on our website at www.caterpillar.com/contributionsa description of our oversight process for political contributions,politicalengagement. The website also includes an itemized list of corporateorganizations and employee PACindividuals that received political contributions from Caterpillar or the CATPAC.
Our Lobbying Report and website also provide a summary of some of the public policy areas that are driven by our enterprise strategy for profitable growth and where we see positive value in our engagement and the ability to make an impact.
Caterpillar’s state, federal and stateinternational activities on legislative and regulatory priorities significant to the company’s business are managed by the Senior Vice President, Global Government & Corporate Affairs, who coordinates and reviews with senior management.
Our board of directors has direct oversight of political candidatescontributions and a listlobbying activities. To ensure appropriate oversight of political engagement activities, including lobbying, the Sustainability and other Public Policy Committee reviews the Company’s political spending policy and its political activities at least annually, including corporate political contributions, CATPAC’s political contribution activities, U.S. trade associationsand industry association participation and alignment with Caterpillar’s Values and policy objectives, and Caterpillar’s significant lobbying priorities.
Additional information, including more details on U.S. trade and industry association memberships, our lobbying priorities, our management governance and board oversight of these activities, and our approach to which we provided more than $50,000.any misalignments between Caterpillar’s priorities and trade associations’ positions can be found in our Lobbying Report.
Caterpillar’s BoardCaterpillar has adopted a written processpolicy governing the approval of transactions with the Company that are expected to exceed $120,000 in any calendar year and that involve both the Company andin which any director, executive officer or their immediate family members.members will have a direct or indirect material interest. Under the process,policy, all such transactions must be approved in advance by the PPGC.NGC.
Prior to entering into such a transaction, theThe director or officer must submit the details of the proposed transaction to the Company’s Chief Legal Officer & General Counsel and the Corporate Secretary, including whether the relatedpersonrelated person or his or her immediate family member has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10 percent10% beneficial owner of an entity involved in the transaction). The Chief Legal Officer & General Counsel and the Corporate Secretary will then submit the matter to the PPGCNGC for its consideration.
Based on information providedFrom time to time, related persons of Caterpillar may purchase products or services of the Company and its subsidiaries. In connection with these purchases, Caterpillar may provide marketing support directly or indirectly through independent dealers, consistent with sales under similar circumstances to unaffiliated third parties.
Mr. Joseph Creed’s brother-in-law is employed by the directors,Company as a Production Supply Network Engineer and, consistent with the executive officersCompany’s compensation policies applicable to other employees of similar title and the Chief Legal Officer, the PPGC determined that there are no related party transactions requiredresponsibility, earned aggregate annual compensation of approximately $187,000 for fiscal 2022.
2023 PROXY STATEMENT35
Back to be disclosed in this proxy statement.Contents
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AUDIT
PROPOSAL 2– RATIFICATION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PROPOSAL SNAPSHOT | ||
What am I voting on? | ||
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Board Voting Recommendation: | ||
FORthe ratification of our independent registered public accounting firm. |
PricewaterhouseCoopers
The Audit Committee (AC) is directly responsible for the appointment, compensation, retention and oversight of the Company’s independent auditor. PwC has been ourCaterpillar’s independent auditor since 1925. Through its extensive experience with the Company, PwC has gained institutional knowledge and a deep understanding of the Company’s operations and business, accounting policies and practices and internal control over financial reporting. The AC believes that the retention of PwC to serve as the Company’s independent auditor is in the best interests of the Company and its shareholders. If the appointment of PricewaterhouseCoopersPwC is not approved by the stockholders,shareholders, the Audit CommitteeAC will consider whether it is appropriate to select another independent auditor. Even if the appointment of PwC is ratified, the AC, in its discretion, may direct the appointment of a different independent auditor at any time during the year if it determines that such a change would be in the Company’s best interests.
Representatives of PricewaterhouseCoopersPwC will be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so. The representatives will alsoso and are expected to be available to respond to questions at the meeting.appropriate questions.
The Audit CommitteeAC pre-approves all audit and non-audit services to be performed by the independent auditors in compliance withthe Sarbanes-Oxley Act and the SECSecurities and Exchange Commission (SEC) rules regarding auditor independence. The policies and procedures are detailed as to the particular service and do not delegate the Audit Committee’sAC’s responsibility to management. Thepolicies and procedures address any service provided by theindependent auditors and any audit or audit-related services to be provided by any other audit service provider. The pre-approval process includes an annual and interim component.
Annually, not later than February of each year, management and the independent auditors jointly submit a service matrix of the types of audit and non-audit services that management may wish to have the independent auditorsauditor perform for the current year. The service matrix categorizes the types of services byaudit,by audit, audit-related, tax and all other services. Management and the independent auditors jointly submit an annual pre-approval limits request. The request lists aggregate pre-approval limits by service category. The request also lists known or anticipated services and associated fees. The Audit CommitteeAC approves or rejects the pre-approval limits and each of the listed services on the service matrix.
During the course of the year, the Audit Committee chairmanChair of the AC has the authority to pre-approve requests for services that were not approved in the annual pre-approval process. However, all services, regardless of fee amounts, are subject to restrictions on the services allowable under the Sarbanes-Oxley Act and SEC rules regarding auditor independence. In addition, all fees are subject to ongoing monitoring by the Audit Committee.AC.
2023 PROXY STATEMENT36
Fees for professional services provided by our independent auditorsauditor included the following (in millions):
2015 | 2014 | |||
Audit Fees1 | $32.0 | $32.7 | ||
Audit-Related Fees2 | 1.3 | 1.2 | ||
Tax Compliance Fees3 | 0.4 | 0.6 | ||
Tax Planning And Consulting Fees4 | 0.2 | 0.2 | ||
All Other Fees5 | 19.8 | 23.5 | ||
TOTAL | $53.7 | $58.2 |
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Audit Fees(1) |
| $ | 33.3 |
| 32.5 |
Audit-Related Fees(2) |
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| 0.8 |
Tax Compliance Fees(3) |
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Tax Planning and Consulting Fees(4) |
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All Other Fees(5) |
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| 0.1 |
TOTAL |
| $ | 34.6 |
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(1) “Audit Fees” principally includes audit and review of financial statements (including internal control over financial reporting), statutory and subsidiary audits, SEC registration statements, comfort letters and consents. (2) “Audit-Related Fees” principally includes attestation services requested by management, accounting consultations, pre- or post-implementation reviews of processes or systems and audits of employee benefit plan financial statements. Total fees paid directly by the benefit plans, and not by the Company, were $0.2 million in 2022 and $0.2 million in 2021 and are not included in the amounts shown above. (3) “Tax Compliance Fees” includes, among other things, statutory tax return preparation and review and advice on the impact of changes in local tax laws. (4) “Tax Planning and Consulting Fees” includes, among other things, tax planning and advice and assistance with respect to transfer pricing issues. (5) “All Other Fees” consists principally of license-based services for statutory audit monitoring and accounting and reporting literature research. |
1 “Audit Fees” principally includes audit and review of financial statements (including internal control over financial reporting), statutory and subsidiary audits, SEC registration statements, comfort letters and consents.2 “Audit-Related Fees” principally includes attestation services requested by management, accounting consultations, pre- or post- implementation reviews of processes or systems and audits of employee benefit plan financial statements. Total fees paid directly by the benefit plans, and not by the Company, were $1.0 million in 2015 and $0.9 million in 2014 and are not included in the amounts shown above.3 “Tax Compliance Fees” includes, among other things, statutory tax return preparation and review and advice on the impact of changes in local tax laws.4 “Tax Planning and Consulting Fees” includes, among other things, tax planning and advice and assistance with respect to transfer pricing issues.5On April 2, 2014, Booz & Company combined with PricewaterhouseCoopers, our independent registered public accounting firm, and was renamed Strategy&. As of the date of the combination, Strategy& was providing strategy consulting services to the Company, however the Company stopped engaging Strategy& during 2015. Included in “All Other Fees” are fees of $23.5 million for strategy consulting services provided by Strategy& to the Company for the period from April 2, 2014 through December 31, 2014 and $19.5 million for 2015.
ANONYMOUS REPORTING OF ACCOUNTING AND OTHER CONCERNS
The Audit CommitteeAC has established a means for the anonymous and other reporting (where permitted by law) of (i) suspected or actual violations of the codeCode of conduct,Conduct, our enterprise policies or applicable laws, including those related to accounting practices, internal controls or auditing matters and procedures; (ii) theft or fraud of any amount; (iii) insider trading; (iv) issues with respect to the performance and execution of contracts; (v) conflicts of interest; (vi) violations of securities and antitrust laws; and (vii) violations of the Foreign Corrupt Practices Act.prohibited harassment policy; and (viii) violations of any applicable anti-bribery law.
Any employee, supplier, customer, stockholdershareholder or other interested party can submit a report via the following methods:
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Toll-free Helpline (US, Canada, and US Virgin Islands): 1-800-300-7898
Call Collect Helpline: 770-582-5275 (language translation available)
Email: BusinessPractices@cat.com
Internet: www.caterpillar.com/obp
2023 PROXY STATEMENT37
The AC operates under a written charter adopted by the board of Directors, and each of its members meets the independence and financial literacy standards contained in the NYSE Listed Company rules, SEC rules and Caterpillar’s Guidelines on Corporate Governance Issues. The board has determined that each member of the AC qualifies as an audit committee financial expert under SEC rules and has accounting or related financial management expertise.
Management is responsible for the Company’s internal controls and the financial reporting process. ThePwC, acting as independent auditors areauditor, is responsible for performing an independent audit of the Company’s consolidated financial statements and internal control over financial reporting in accordance with standards established by the Public Company Accounting Oversight Board (PCAOB).
The Audit CommitteeAC has discussed with the Company’s independent auditorsauditor the overall scope and execution of the independent audit and has reviewed and discussed the audited financial statements with management.The Audit CommitteeAC also discussed with the independent auditors other matters required by PCAOB auditing standards.standards and SEC rules.
The independent auditors provided to the Audit CommitteeAC the written communications required by applicable standards of the PCAOB regarding the independent accountant’s communications with the Audit CommitteeAC concerning independence, and the Audit CommitteeAC discussed the independent auditors’ independence with management and the auditors. The Audit CommitteeAC also considered whether the provision of other non-audit services by the Company’s independent auditors to the Company is compatible with maintaining independence.
The AC concluded that the independent auditors’ independence had not been impaired.
Based onthe reviews and discussion referred to above, the Audit CommitteeAC recommended to the Boardboard that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.2022.
By the members of the Audit Committee consisting of:Committee:
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Daniel M. Dickinson, Chairman
James C. Fish, Jr.
David W. MacLennan
Judith F. Marks
Edward B. Rust, Jr.
Rayford Wilkins, Jr.
2023 PROXY STATEMENT38
COMPENSATION
PROPOSAL 3– ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
PROPOSAL SNAPSHOT | ||
What am I voting on? | ||
Shareholders are being asked to approve, on an advisory basis, the compensation of named executive officers as disclosed in this proxy statement. | ||
Board Voting Recommendation: | ||
FOR approval of executive compensation. |
On an annual basis, and in compliance with Section 14A of the Securities Exchange Act of 1934, stockholdersshareholders are being asked to vote on the following advisory resolution:
“RESOLVED, that the compensation of Caterpillar’s named executive officers as described under “Compensation‘Compensation Discussion and Analysis,”’ the compensation tables and the narrative discussion associated with the compensation tables in Caterpillar’s proxy statement for its 20162023 Annual Meeting of StockholdersShareholders is hereby APPROVED.”
At the Company’s 2017 annual meeting of shareholders, our shareholders indicated their preference to hold the non-binding shareholder vote to approve the compensation of our named executive officers each year. This year, we will again ask shareholders to vote on the frequency of advisory votes to approve executive compensation. This vote is advisory and therefore not binding on Caterpillar, the Compensation and Human Resources Committee (Committee)(CHRC) or the Board.board. The Boardboard and the CommitteeCHRC value the opinionof Caterpillar’s stockholders,shareholders, and to the extent there is any significant vote against Caterpillar’s named executive officer compensation, the Boardboard will consider the reasons for such a vote, and the CommitteeCHRC will evaluate whether any actions are necessary to address those concerns.
2023 PROXY STATEMENT39
PROPOSAL SNAPSHOT |
What am I voting on? |
Shareholders are being asked to indicate whether they prefer an advisory vote on executive compensation every one, two or three years. |
Board Voting Recommendation: |
FOR one year. |
The Dodd-Frank Act requires Caterpillar shareholders to vote, on an advisory or non-binding basis, on how frequently they would like to cast an advisory vote on the compensation of the Company’s named executive officers. By voting on this proposal, shareholders may indicate whether they would prefer an advisory vote on named executive officer compensation once every one, two or three years.
2023 PROXY STATEMENT40
EXECUTIVE SUMMARY
The Compensation and Human Resources Committee (the Committee)(CHRC) believes the executive compensation program at Caterpillar should be structured to align the interests of executives and stockholdersto encourage value creation over both the short and longterm. 2015 was another difficult year for Caterpillar and its stockholders. As a result, the CEO and other NEOs did not receive an annual incentive payment. In addition, the payout for the 3-year long-term incentive plan (2013-2015) paid30percentwith those of target.our shareholders. These reductions based on 2015 performanceinterests are reflectedaligned in the 2015 proxy compensation tables.
Following last year’s Say on Pay vote, management and the Committee engaged with stockholders and undertook a careful analysis of the value drivers at Caterpillar to improve the alignment between pay and performance. The Committee believes that the changes made to the program going forward will better align executive compensation with stockholder interests and encouragerewarding value creation at Caterpillar.
Atall stages of the Company’s 2015 annual meeting,business cycle and providing an increasing percentage of performance-based compensation at higher levels of executive responsibility. This performance-based compensation should be both market competitive and internally equitable.
Changes made over the advisoryyears to further align pay with performance have received favorable feedback from our shareholders, and support for our 2022 “say on pay” vote of 94 percent reflects this positive response.
In 2022, we continued our shareholder outreach on environmental, social and governance (including sustainability, climate and diversity & inclusion), and executive compensation received support from 65topics, with holders of approximately 42 percent of shares voted.our outstanding shares. In the three years priorthese meetings, our shareholders generally expressed a continued positive view with respect to 2015, stockholder support averaged more than 95percent. As a result of the decline in support for Say on Pay, managementour executive compensation program and our diversity & inclusion disclosure.
SAY ON PAY SUPPORT | ||
94% | 94% | 93% |
2022 | 2021 | 2020 |
After considering feedback received from our shareholders through our outreach efforts and the Committee conducted a robust stockholder engagement effort, reaching out to stockholders representing nearly half of2022 “say on pay” results, the shares outstanding. The purpose of the outreach was to better understand stockholder perspectives and evaluate concerns regardingCHRC determined that the Company’s executive compensation program.
The Company found the added stockholder engagementphilosophy, compensation objectives and compensation elements continued to be helpful and intends to continue it going forward. Stockholder feedback overappropriate. As previously communicated, the past year was focused onboard incorporated ESG into the following themes:annual incentive plan in 2022 for executive officers, see pages 51-52 for details.
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As a result of the feedback from stockholders, some changes were made in 2015. The remainder were made for 2016 going forward. Although many of these changes are discussed here, the full impact of these decisions will be reflected in 2016 pay and next year’s proxy statement.
SUMMARY OF KEY MESSAGES AND ACTIONS RELATED TO STOCKHOLDER OUTREACH AND RESPONSE TO 2015 SAY ON PAY VOTE
Pay for Performance Alignment and the Consistency of Performance Goals
Incentive Compensation Components and Design
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Mix and Structure of Performance Metrics
BUSINESS ENVIRONMENT AND MANAGEMENT’S RESPONSE
Financial results were negatively impacted by severe weakness in mining, the steep drop in oil prices and difficulties in emerging market economies, particularly China and Brazil. These economic factors weighed on sales, profit and TSR. In the opinion of the Committee, management’s response to these difficult market conditions was both aggressive and effective. Management has taken significant restructuring and operating actions to reduce costs and maintain variable margins, gain marketpositionand expand the Company’s servicebusinesses to preserve value for Caterpillar stockholders and dealers and maintain ample liquidity for the future.
STOCKHOLDERS
Low commodity prices and weakness in emerging economies have been negative for stock prices in general, and Caterpillar in particular. As a result, Caterpillar’s TSR in 2015 was in the bottom quartile of the S&P Industrials and the compensation peer group. That was despite about $2 billion of share repurchases, a 10percent increase in the quarterly dividendand a dividend yield near 5percent.
TOTAL SHAREHOLDER RETURN | |||
1 YEAR | 3 YEAR | 5 YEAR | |
Caterpillar Inc. | -23% | -6% | -4% |
Direct Competitors – Median | -24% | -2% | -2% |
Compensation Peer Group – Median | -10% | 11% | 8% |
S&P Industrials – Median | -7% | 14% | 11% |
Table represents Total Shareholder Return for the Company and the median of the comparator groups that the Committee considers. They include the Compensation peer group (reference page 35), the S&P Industrialsand the Company’s competitor peer group (reference page 36).
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2015 OPERATIONAL PERFORMANCE
Dealing with peaks and troughsis a key part of the Company’s strategy. Managing the cost structure and maintaining a strong balance sheet throughout business cycles are important elements. That was certainly important in 2015 with sales and revenues down nearly 15 percent from 2014.
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INVESTING FOR THE LONG TERM
Despite difficult economic conditions across Caterpillar’s businesses, the Company remains focused on investment for the longterm. Broadly, the Company’s strategy is based on the Caterpillar Business Modeland is focused on helping customers be more successful with Caterpillar than with our competitors.
The Caterpillar Business Model is based on:
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The Company has continued to commit resources to support the Caterpillar Business Model and drive long-term stockholder value:
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The executive compensation program is based on a mix of variable and fixed compensation with a focus on performance-based annual and long-term incentives. It includes:
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The Committee engages inCHRC conducts an ongoing review of the Company’s executive compensation programsprogram to evaluate whether the structureprogram supports the Company’s compensation philosophy and objectives and is closely aligned to monitor the Company’sprogram’s alignment with its strategic business objectives. In connection with this ongoing review, and based on feedback received through stockholderour shareholder outreach, the CommitteeCHRC continues to implement and maintain what the Committeeit believes to beare best practices for executive compensation eachand governance. Below is a summary of which reinforces the Company’s compensation philosophy.those practices:
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2023 PROXY STATEMENT41
COMPENSATION
PROGRAM STRUCTUREDISCUSSION & ANALYSIS IN DETAIL
The objectives of the Company’s executive compensation program are to attract and retain talented executive officers and to incentivize NEOs to improve Company performance and provide strategic leadership over the longterm. The majority of targeted annual compensation is equity-based, vests over multiple years and is tied directly to long-term value creation for stockholders.
We are committed to developing and implementing an executive compensation program that directly aligns the interests of the NEOsour Named Executive Officers (NEOs) with the long-term interests of stockholders.
NAMED EXECUTIVE OFFICERS FOR 2015
This CD&A discussesshareholders. To that end, the compensationobjectives of the following NEOs.
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Company’s executive compensation program are to attract, motivate and retain talented executive officers who will improve the Company’s performance and provide long-term strategic leadership. The majority of targeted total compensation for our NEOs is equity-based, vests over multiple years and is tied directly to long-term value creation for shareholders.NEO compensation is delivered incomposed of three primary forms: base salary, annual incentivescomponents:
BASE SALARY | ANNUAL INCENTIVE PLAN (AIP) | LONG-TERM INCENTIVE | ||
Competitive pay to attract and retain talented executives | An opportunity to earn an annual cash award based on the Company’s financial performance and strategic business objectives | A mix of performance-based restricted stock units (PRSUs) and stock options to align management’s interests with long-term shareholders’ interests |
Approximately 91 percentand of our CEO’s 2022 total targeted compensation was variable and/or at-risk compensation, including 50 percent of long-term incentives with a focus on variable compensation tied to Company performance. Approximately 85percent of the CEO’stargeted annual total compensation is variable, at-risk compensation, with 50percent of long-term incentivesdelivered in the form of performance-based restricted stock units beginning in 2016.
NEOs receive a mix of fixed and variable compensationPRSUs with a focusReturn on components that are performance-based. This section describes each componentEquity (ROE) performance metric and demonstrates that approximately 85percent of NEO compensation is targeted to be variable and tied to Company performance.
BASE SALARY
Base salary is the only fixed component of the Company’s NEOs’ cash compensation. The Committee targets the base salary midpoint at the size-adjusted median level of the peer group. An NEO’s base salary is related to the individual’s level of responsibility and historic performance with reference to the market median. Annual increases, if any, are based on achievement of individual and Company objectives, contributions to Caterpillar’s performance and leadership accomplishmentsother 50 percentand a comparison of executive base salaries to those in comparable positions at peer companies.
The CEO’s base salary has not increased since 2012 and remains in line with the median base salary of CEOs delivered in the Company’s peer group. Other NEOs’ base salaries are below the peer group median except for Mr. Rapp’s base salary. Mr. Rapp isform of stock options.
2022 CEO COMPENSATION ELEMENTS
50% of long-term incentives have performance-based vesting conditions.
2023 PROXY STATEMENT42
In 2022, Caterpillar achieved one of the longest tenured NEOsbest years in our nearly 100-year history, including full-year adjusted profit per share(1) of $13.84. Despite supply chain challenges, Caterpillar achieved double-digit top-line growth of 17% and has had multiple years of exceptional performance.
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Table of Contentsgenerated strong Machinery, Energy & Transportation (ME&T) free cash flow(2).
ANNUAL INCENTIVE
2015 ANNUAL INCENTIVE AWARD
The 2015 annual incentive was designedWe remained committed to provide NEOs with an annual cash payout based on the short-term performance of the Companyserving our customers, executing our strategy and their respective business units. The annual incentive places the majority of each NEO’s annual cash compensation at risk and is designed to align the interests of executives and stockholders.
The CEO and other NEOs did not receive an annual incentive paymentinvesting for 2015 based primarily on severe market downturns in mining, energy and oil and gas and the Committee’s assessment of the Company’s declining financial performance.
CHANGES TO DETERMINATION OF ANNUAL INCENTIVE AWARD (EXAMPLE: 2016)
As summarized below, the Committee has enhanced the annual incentive award following extensive stockholder engagement. Beginning in 2016, if the targeted operating profit performance level for the year is set below the prior year’s actual results, the target award opportunity for all NEOs will be reduced proportionately and payouts, if any, will be capped at the target level as described below. For example, in 2016, the CEO’s annual incentive award will be based on Company financial and operating performance metrics and will have performance adjustments as described below:
METRICS AND WEIGHTING
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For all NEOs, the largest portion of their annual incentive award opportunity (ranging from 50 percent to 90 percent of the award) will be based on the profitability of the total enterprise and an NEO’s respective business segment. For this component, the Committee reviews the Company’s OPACC performance and business plan in establishinglong-term profitable growth. In 2022, we achieved an operating profit performance targetmargin of 13.3% and an adjusted operating profit margin(3) of 15.4%. We also generated strong operating cash flow and were able to return $6.7 billion to shareholders through dividends and share repurchases, which represented 115% of ME&T free cash flow(2). Our total cumulative shareholder return for the year.five-year period ended December 31, 2022, outperformed the S&P 500 and related indexes. We also increased our dividend in 2022 and paid dividends of $2.4 billion, continuing our status as a Dividend Aristocrat.
Our key financial and business results for 2022 included the following:
Adjusted Profit Per Share is a non-GAAP measure, and a reconciliation to the most directly comparable GAAP measure is included on page 89.
ME&T free cash flow is a non-GAAP measure, and a reconciliation to the most directly comparable GAAP measure is included on page 89.
Adjusted Operating Profit Margin is a non-GAAP measure, and a reconciliation to the most directly comparable GAAP measure is included on page 89.
Enterprise Operating Profit was used in determining performance under our Annual Incentive Plan for 2022.
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Year-end enterprise cash balance$7.0 billion |
This graph shows the cumulative shareholder return assuming an investment of $100 on Dec. 31, 2017, and reinvestment of dividends issued thereafter.
2023 PROXY STATEMENT43
Consistent with the CHRC’s pay-for-performance philosophy, business results were reflected in the resulting pay decisions made for our CEO and the other NEOs in 2022. Compensation outcomes for 2022 included the following items:
| ■ Named Executive Officers (other than the CEO) received an average base salary adjustment of 4.75%. |
ANNUAL | ■ Annual incentive awards for 2022 paid out, on average, at 155% of target. |
LONG-TERM |
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Long-Term Incentive Grant Sizing detail is provided on page 53.
CEO COMPENSATION
In 2022, the CHRC and the board approved the following compensation for the CEO:
LONG-TERM INCENTIVE
Base salary.
HISTORICAL PERSPECTIVE
In years before 2015, long-term incentive compensation design 3% increase to Mr. Umpleby’s base salary. This increase was basedin recognition of Mr. Umpleby’s operational, financial and safety performance and his continued focus on two components – a rolling 3-year cash planservices growth, despite the unprecedented supply chain challenges and market-based stock optiongrants. As described below, starting in 2015, the Committee revised the long-term incentive plan, eliminating the cash portion and replacing it with PRSUs.
While the Committee believes PRSUs are better aligned with stockholder interests going forward, NEOs’ pay in 2015 includes resultspersistence of the legacy 2013-2015 performance-based cash plan, as well as PRSUs granted in 2015. Next year’s NEO compensation will include results from the 2014-2016 performance-based cash plan which will be the final year for maturing 3-year cash plans.
The Committee recognizes that there have been numerous changes to the long-term incentive plan design over the past four cycles. Stockholder outreach over the past year has confirmed that simple, easy to understand plans that align with stockholder interestsglobal pandemic throughout 2021, and are stable yeartoyear are preferred. Consequently, no further changes are expected at this time.
The Committee’s objective in providing long-term incentive compensation is to align the interests of the Company’s NEOs with the interests of the Company’s stockholders. Stock options reward increasing stockholder valueand PRSUs only vest upon attainment of an ROE hurdle. The Committee believes that ROE is an appropriate vesting hurdle because it is an effective measure of capital allocation and value received by stockholders. In addition, long-term incentive awards, as a significant portion of total direct compensation, and stock ownership guidelines are structured to align management with risk management principles and to maintain focus on the Company’s long-term success.
LONG-TERM AWARD – SIZING
The Committee bases long-term incentive grants for NEOs by startinghis base salary with the peer group medianmedian.
Annual incentive award. Annual incentive target award was set at 175% of long-term incentive awards, then adjusts award sizing fromMr. Umpleby’s base salary, which reflects the peer group median based on relativemedian. For 2022, Mr. Umpleby received an annual incentive award equal to 1.56 times his target annual incentive. This payout reflects the Company’s strong results in 2022 against pre-determined annual performance and current business conditions. The Committee considers financial results; 1, 3and 5-year TSR; operational performance; market conditionsand strategy execution when sizing awards. Individual adjustments may be made by the Committee to reflect individual performance, takinginto consideration the consistency of performance against goals and strategic goal performance as assessed by the CEO.goals.
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LONG-TERM AWARD – FORM OF PAYMENTLong-term incentive award.
Starting in 2015 and continuing in 2016, An annual long-term incentive compensation is awarded with two forms of equity – PRSUs and stock options. In the 2015 plan, 33percent of the award value was in PRSUs and 67percent stock options. Based on feedback from stockholderengagement over the past year, the Committee changed the weighting in 2016 to 50percent PRSUs and 50percent stock options.
At Target Grant
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DESIGN AND STATUS OF LONG-TERM PLANS
2013 – 2015 CYCLE
This 3-year cycle concluded in 2015 with a weighted-average performance factor well below target at 0.30. The plan for this 3-year cycle was based on two components –ME&T Return on Assets (ROA) andrelativevalue equal to $13.5 million, slightly above peer group median. This size of award reflects the Company’s overall TSR(versus S&P 500). As a result of substantial declines in mining activity and generally weak conditions in many of the industries the Company serves, performance for both metrics was well below target. The ROA metric result was below target, but was above the minimum performance threshold. Relative TSR was in the 11th percentile of the S&P 500 and, as a result, was below the minimum required for a payout.
Performance-Based Cash Award (1/3) / Stock Options (2/3)
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WEIGHTING | 0.3 THRESHOLD | 1.0 TARGET | 2.0 MAXIMUM | RESULT | FACTOR | |
ME&T ROA | 50% | 4.0% | 8.3% | 10.2% | 5.9% | 0.60 |
Relative TSR vs. S&P 500 | 50% | 25th Percentile | 55th Percentile | 75th Percentile | 11th Percentile | 0.00 |
Overall Weighted Factor: | 0.30 |
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PAYOUTS FOR NEOs FROM THE 2013 – 2015 CYCLE (Included in the 2015 Summary Compensation Table)
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2014 – 2016 CYCLE
This 3-year cycle will conclude in 2016 and is currently tracking, after two years, at a weighted-average performance factor well below target at 0.40,and is not reflected in 2015 NEO compensation. The plan for this 3-year cycle was based on two components –EPS andrelative TSR(versus S&P Industrials). As in the 2013-2015 cycle, declines in mining activity and economic conditions in many of the industries the Company serves are well below expectations. As a result, performance for both metrics, after completing the first two years of the 3-year cycle, are well below target. Should this 3-year cycle pay out, the results would be included in NEO compensation in 2016.
Performance-Based Cash Award (1/3) / Stock Options (2/3)
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The 2014–2016 factor to date includes 2014 and 2015 actual results and the 2016 profit outlookas provided on January 28, 2016.performance achievements in 2021.
WEIGHTING | 0.3 THRESHOLD | 1.0 TARGET | 2.0 MAXIMUM | RESULTS/OUTLOOK | FACTOR | |
EPS | 75% | $3.50 | $5.85 | $7.02 | $4.29 | 0.54 |
Relative TSR vs. S&P Industrials | 25% | 25th Percentile | 55th Percentile | 75th Percentile | 17th Percentile | 0.00 |
Overall Weighted Factor: | 0.40 |
2015 – 2017 CYCLE
In 2015, the cash portion
Target Value Includes: Salary of long-term$1,700,000; annual incentive was replaced with PRSUs. For the 2015of $2,953,425 and LTI grant one-third of the PRSUs is eligible$13,050,000. Total Target Value: $17,703,425
Actual Value Includes: Salary of $1,687,500 (due to vest annually based on threeproration); annual 18percent ROE hurdles. In addition, PRSUs that do not vest based on the annual performance hurdle have the opportunity to vest based on the achievementincentive of an average 18 percent ROE performance hurdle over the 3-year performance period. In setting this ROE hurdle percentage, the Committee considered the Company’s history, current business conditions$4,614,800 and the long-term forecast. The Company’s long-term forecast takes into account many financial and operational factors, including share repurchases.
For 2015, the Company did not achieve the ROE performance hurdle and accordinglynoneLTI grant of the PRSUs vested based on 2015 actual ROE performance. However, the value of the PRSUs is included in 2015 NEO compensation$13,500,000. Total Actual Value: $19,802,300
2023 . In light of the first year results and the Company’s current outlook for 2016, provided on January 28, 2016, the degree of difficulty in achieving the 3-year hurdle has increased significantly. The annual vesting opportunity was eliminated in the 2016-2018 plan.PROXY STATEMENT44
PRSUs with an ROE Performance Hurdle (1/3) / Stock Options (2/3)
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2016 – 2018 CYCLE
The plan was modified in 2016 based on feedback from stockholder outreach that was conducted over the past year and to reflect the cyclicality of the Company’s business and long-term business drivers.
NEO PERFORMANCE GOALS AND RESULTS FOR 2015
Douglas R. Oberhelman
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THE COMPENSATION PROCESS
The CommitteeCHRC is responsible for the executive compensation program design and decision-making process for NEO compensation. The Committee regularlyCHRC conducts regular reviews of the Company’s executive compensation practices, including the methodologies for setting NEO total compensation, the goals of the program and the underlying compensation philosophy. The Committee also considers theindependent compensation consultant provides recommendations and market data provided by its independent compensation consultant and makesthat the CHRC considers when making decisions, as it deems appropriate, on executiveregarding NEO compensation based on itsthe assessment of performance and achievement of Company goals. The CommitteeCHRC also exercises its judgment in setting NEO compensation as to what is in the best interests of the Company and its stockholders. shareholders.
The responsibilitiesCHRC, with the support of its independent compensation consultant and management, considers many aspects of the Committee are described more fully in its charter, which is available at www.caterpillar.com/governance.Company’s financial and operational performance and other factors when making executive compensation decisions including, but not limited to:
Long-term shareholder value creation
The cyclical nature of the business
Performance relative to financial guidance provided throughout the year
Enterprise and Business Unit operational performance
Performance relative to peers and competitors
Historic absolute and relative performance
Key areas management can influence over the short- and long-term
Development and retention of diverse top talent
Skills, experience and tenure of executive incumbents
Market values for comparably situated executives among our peer group as well as internal equity
Environmental, social & governance considerations
The CommitteeCHRC retained Meridian Compensation Partners, LLC (“Meridian”) as its independent compensation consultant.consultant during 2022. Meridian provides executive and director compensation consulting services, to the Committee, including advice regarding the design and implementation of compensation programs, market information, regulatory updates and analyses, and trends on
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executive base salary, short-term incentives, long-term incentives, benefitscompensation and perquisites.benefits. Interactions between Meridian and management are generally limited to discussions on behalf of the CommitteeCHRC or as required to compile informationfulfill requests at the Committee’sCHRC’s direction. During 2015,2022, Meridian did not provide any other services to the Company. Based on these factors, its ownthe CHRC’s evaluation of Meridian’s independence pursuant to the requirements approved and adopted by the SEC and NYSE, and information provided by Meridian, the Committee hasCHRC determined that the work performed by Meridian doesdid not raise any conflicts of interest.
2023 PROXY STATEMENT45
Peer Group Selection – The CommitteeCHRC regularly assesses the market competitiveness of the Company’s executive compensation programs based on peer group data. The 2015 peer group2022 Compensation Peer Group was established based on the following criteria:criteria and remained unchanged from the prior year:
Total sales and revenues and market capitalization of the peer companies relative to Caterpillar;
Competitors and industry segment;
Potential sources for top talent;
Global presence with a significant portion of revenues coming from non-U.S. operations; and
Geographic footprint.
2022 Compensation Peer Group | ||
3M Company |
The peer group used for 2015 compensation decisions is shown below, which was changed from the 2014 peer group by the removal of Dell, Inc. as it ceased to be a public company:
Ford Motor Company
Archer-Daniels-Midland Company | General Electric Company | ||
The Boeing Company | Halliburton Company | ||
Cisco Systems, Inc. | Honeywell International Inc. | ||
Cummins Inc. | Intel Corporation | ||
Deere & Company | Johnson Controls International plc | ||
Emerson Electric Co. | PACCAR Inc. | ||
FedEx Corporation | Raytheon Technologies Corporation | ||
*The 2016 peer group has been modified to add Paccar Inc. and remove Parker-Hannifin Corporation and United Technologies Corporation.
Benchmarking to Similarly Sized Firms and Adjusting for Large Variances – To account for differences in the size of the compensation peer group companies, market data is statistically adjusted (using a regression analysis) by the Committee’s independent compensation consultant allowing for a comparison of the compensation levels to similarly sizedsimilarly-sized companies. Market data provided by the independent consultant is sourced from the Aon Total Compensation Measurement Database, and size-adjusted to Caterpillar’s three-year average revenues using regression analysis. Each element of the Company’sour NEOs’ compensation is then targeted to the median of the peer group.group and adjusted above or below based on performance. To the extent an NEO’s total actual compensation exceeds the peer group median, it is due to outstanding performance, critical skills experience and tenure.notable experience. If an NEO’s compensation is below the median, it is generally due to underperformance against relevant metrics or reflective of an individual who is newer in his or her role.
For 2022, the role.
2016 Direct Competitor Peer Group Selection for Performance Comparisons–For 2016, the CommitteeCHRC also assessed the market competitiveness of the Company’s executive compensation programsbusiness performance against a group of competitors that it deems to compete directly with the Company. The Committee noted that althoughAlthough the Company’s peer group described above is an appropriate benchmark for executive compensation at other similarly sizedsimilarly-sized companies, the peer group data does not always provide useful comparisons to other companies that might be experiencing similar business conditions. To that end, and consistent with itsthe Company’s pay-for-performance philosophy, in 2016, the Committee further sought to compare the Company’s business performance with that of ouris compared to its competitors by establishing a “Competitor Peer Group.”
The Committee formedCHRC uses the 2016 Direct Competitor Peer Group by selecting sevenof(along with the Company’s competitors that, inCompensation Peer Group and S&P 500 Industrials) to assess relative performance using TSR when awarding long-term incentive awards. However, the opinion ofCompetitor Peer Group is not used to benchmark compensation. The 2022 Competitor Peer Group was established based on the Committee, competefollowing criteria:
Compete in the same markets as the Company, or offerCompany;
Offer similar products and services as the Company,Company; or serve
Serve the same, or similar, industries or end-usersand end users as the Company.
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The competitor peer group used for 2016 performance comparisons is shown below:
Cummins Inc. | Siemens Energy |
Deere & Company | Volvo AB |
Hitachi Construction Machinery Co., Ltd. | Wabtec Corporation |
Komatsu Ltd. | |
ROLE OF EXECUTIVE OFFICERS IN DETERMINING EXECUTIVE COMPENSATION2023 PROXY STATEMENT46
The Board,board, excluding the CEO, all of whom are independent directors, annually conducts the CEO’s performance evaluation. Prior to the Board’sboard’s evaluation of the CEO’s performance and its approval of CEO compensation, the CommitteeCHRC makes a preliminary compensation recommendation to the Boardboard based on the Committee’sits initial evaluation and performance review of the CEO. In February 2016, the Board reviewed the Committee’s assessment of Mr. Oberhelman’s performance and ratified the decision not to award an annual incentive payment.
OTHER NEO PERFORMANCE CONSIDERATIONS
For each NEO, theThe board then makes its final determination for CEO presents a performance evaluation and makes compensation recommendations to the Committee.compensation.
COMPENSATION DETERMINATION: PERFORMANCE THAT REFLECTS ALIGNMENT WITH BUSINESS ENVIRONMENT
The Committee, with the support of management and the independent compensation consultant, considers the Company’s financial and market performance in the context of global market conditions when making executive compensation decisions including the payouts under the annual incentive plan.
CONSIDERATIONS WHEN DETERMINING COMPENSATION
In setting compensation levels for the year, the Committee considered many factors, including:
EXECUTIVE COMPENSATION AND RISK MANAGEMENT
The CommitteeEach year, the CHRC assesses the Company’s risk profile relative to the executive compensation program and confirms that NEOsits compensation programs and policies do not create or encourage excessive risks that are reasonably likely to have a material adverse impact on the Company. Also, the CHRC has concluded that the total compensation structure for senior leadership does not incentivized to focus oninappropriately emphasize short-term stock price performance or take excessive risk in managingat the business.expense of longer-term value creation. In particular, long-term incentive awards, as a significant portion of total direct compensation, and target stock ownership guidelines which NEOs are required to maintain are structured to align managementmanagement’s compensation with the principles of risk management and to maintainby maintaining a focus on the longterm.long-term performance of the Company.
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NEOs receive a mix of fixed and variable compensation with a focus on long-term and performance-based components:
Base salary is the only fixed component of NEO compensation. The CHRC targets base salaries at the size-adjusted median level of the peer group. Each NEO’s base salary is determined by the individual’s level of responsibility and historic performance with reference to the market median. Base salary increases, if any, are based on achievement of individual and Company objectives, contributions to Caterpillar’s performance and culture, leadership accomplishments and a comparison to those in comparable positions at peer companies.
In 2022, Mr. Rapp will be retiringUmpleby’s salary was increased from $1.65 million to $1.7 million in recognition of his performance and to align his target compensation with the Company in 2016 and will be stepping down as the Group President with responsibilitypeer group median.
Salary adjustments for Resource Industries as ofall NEOs were made effective April 1, 2016. He will remain2022.
NEO Base Salary
Name | Dec 31, 2022 | Dec 31, 2021 |
Umpleby | $1,700,000 | $1,650,000 |
Bonfield | $890,100 | $860,000 |
Johnson | $884,900 | $855,000 |
De Lange | $830,800 | $795,000 |
Creed | $714,900 | $665,000 |
2023 PROXY STATEMENT47
The Company’s Annual Incentive Plan (AIP) is designed to provide each NEO with the opportunity to earn an annual cash payout based on special assignment until his retirement on June 30, 2016.
TRANSFER AND RELOCATION PAYMENT FOR ROBERT B. CHARTER
The Committee approved a transfer and relocation payment in connection with Mr. Charter’s appointment to Group Presidentthe short-term performance of the Company and his transfer from Singaporeeach NEO’s respective business. The AIP places a significant percentage of each NEO’s annual cash compensation at risk and aligns the interests of executives and shareholders.
The AIP design continues to closely align pay outcomes with business performance by annually comparing the Company’s forecasted Enterprise Operating Profit to the United States dueprior year’s actual Enterprise Operating Profit. The comparison is conducted to his required relocationdetermine whether the current year will be an “up year” (improved performance) or “down year” (weaker performance) versus the prior year’s actual Enterprise Operating Profit results.
The 2022 AIP design also includes two strategic objectives modifiers, including Services Growth, which was also utilized similarly in the 2021 AIP for the NEOs. The Services Growth modifier focuses on the execution of services revenue growth plans across the enterprise working with our independent dealer network.
As previously communicated, we incorporated ESG as an element of incentive compensation in 2022. The CHRC determined that ESG Strategy would serve as the second of two strategic objectives modifiers in 2022 AIP. This modifier prioritizes focus on climate-related objectives as an important element of how Caterpillar is strategically addressing evolving customer demand and stakeholder expectations for a range of ESG considerations. More information about the modifiers and the assessed performance levels can be found in the section entitled Strategic Objectives Modifiers found on pages 51-52.
The AIP performance measures and weightings, as well as the strategic objectives modifiers, were communicated to Peoria, Illinois.the NEOs at the beginning of the performance period. All NEOs participated in AIP in 2022.
For 2022, the CHRC approved the following annual incentive performance measures (1) Enterprise Operating Profit (2) Operating Profit After Capital Charge (OPACC) and (3) Services Revenues, and the Strategic Objectives Modifiers, described on page 51-52. Consistent with this design process, after reviewing the Company’s 2022 business plan, the CHRC determined that 2022 would be an “up year,” as Enterprise Operating Profit was forecasted to be above 2021. As a result, there were no adjustments to the target annual incentive opportunity for NEOs.
2023 PROXY STATEMENT48
The largest portion of financial measures (ranging from 50 percent to 70 percent) of each NEO’s 2022 annual incentive opportunity was based on Enterprise Operating Profit and the OPACC for their respective business, where applicable. The remaining portion of each NEO’s annual incentive award opportunity was determined by the Services Revenues metric for the enterprise or their respective businesses. Consistent with the Operating & Execution model, Services Revenues align the Company’s emphasis on the services growth strategy with variable incentive opportunity.
When establishing the performance targets for 2022, the CHRC reviewed the Company’s business plan, historical performance, management recommendations and feedback provided by the independent compensation consultant. Targets were set for each of the performance measures at levels that were designed to be reasonably achievable with strong management performance. Maximum performance levels were designed to be difficult to achieve in 2015, Mr. Charter received a paymentlight of $300,000. In approving this payment,historical performance and the Committee considered that the transfer and relocation were expected to result in adverse income tax consequences to Mr. Charter, an Australian citizen, who wasCompany’s business forecast at the time an International Service Employee (ISE) in Singapore. Providing this payment was more cost effectivethe measures were approved. The business forecast includes consideration of market, economic and geopolitical factors. The performance measures were also weighted according to the Company than placing Mr. Charter as an ISE in Peoria, which customarily includes housing, mobility premiums, home leaveCompany’s business priorities and tax allowances. This ensures employeesthe responsibilities of each NEO.
The charts below and the text that follows summarize the performance measures, weightings, strategic objectives modifiers, and results that the CHRC reviewed and approved for the 2022 annual incentive for each NEO.
PERFORMANCE MEASURE | DEFINITION | RATIONALE | |
ENTERPRISE OPERATING PROFIT | Enterprise Operating Profit measures the overall profitability of all of Caterpillar’s operations (including Machine, Energy & Transportation (ME&T) and Financial Products) before taxes, interest and other non-operating items. For AIP purposes, the Enterprise Operating Profit metric will be calculated as Caterpillar Consolidated Operating Profit excluding restructuring costs and a goodwill impairment charge. | The CHRC approved Enterprise Operating Profit as a performance measure to incentivize management to enhance the overall profitability of the Company. The CHRC believes that Enterprise Operating Profit is an important corporate metric for shareholders to be able to assess the financial health of the Company. | |
ENTERPRISE OPERATING PROFIT AFTER CAPITAL CHARGE (OPACC) | Enterprise Operating Profit After Capital Charge (OPACC) measures how productively and efficiently Caterpillar is utilizing assets to generate shareholder value. For AIP purposes, Enterprise OPACC is calculated as ME&T adjusted operating profit excluding restructuring costs and a goodwill impairment charge less the capital charge. For Enterprise OPACC, the capital charge equals average quarterly ME&T net assets multiplied by a pre-tax capital charge rate of 13 percent. | OPACC is designed to measure how productively and efficiently the Company’s assets are being utilized by examining the relationship between the value of the Company’s assets and the operating profit that those assets generate. An increase in OPACC means that the Company’s management is utilizing assets more efficiently to generate shareholder value, which the CHRC views as key to Caterpillar’s long-term success. | |
SEGMENT OPERATING PROFIT AFTER CAPITAL CHARGE (OPACC) | For each segment, OPACC is calculated as segment profit less the capital charge. The capital charge is calculated as the average monthly net accountable assets multiplied by a pre-tax capital charge rate of 13 percent. | OPACC is designed to measure how productively and efficiently the Company’s assets are being utilized by examining the relationship between the value of the Company’s assets and the operating profit that those assets generate. An increase in OPACC means that the Company’s management is utilizing assets more efficiently to generate shareholder value, which the CHRC views as key to Caterpillar’s long-term success. | |
SERVICES REVENUES | ME&T Services Revenues include, but are not limited to, aftermarket parts and other service-related revenues and exclude most Financial Products’ revenues, discontinued products and captive dealer services. Price realization above target has been excluded, given extraordinary inflation. Due to the competitively sensitive nature of this measure, the threshold, target and result levels have all been indexed and reported as such. | The CHRC approved Services Revenues as an important measure intended to further strengthen profitability realized by growth in aftermarket parts and services. |
2023 PROXY STATEMENT49
Adjusted for approved items
2023 PROXY STATEMENT50
In addition to the financial performance measures included in the same approximateAIP, the CHRC identified certain objectives to further focus management’s efforts on the Company’s services growth and ESG strategy. These elements of AIP, called Strategic Objectives, were included as modifiers in 2022. While these modifiers utilize a qualitative assessment by the CHRC to determine the actual impact on annual incentive payments, both strategic objectives are designed with pre-defined quantitative and qualitative elements as the basis of performance assessment, resulting in a maximum adjustment of plus or minus 10% for each modifier (maximum aggregate adjustment of plus or minus 20%).
Caterpillar’s enterprise strategy for long-term profitable growth is directly linked to value creation for our shareholders. An important element of our strategy is the growth of ME&T Services Revenues. Services growth is intended to further strengthen profitability realized by growth in aftermarket parts and services for Caterpillar and its global network of dealers. In addition, our services focus is intended to reduce cyclicality of the Company’s sales and revenues while increasing customer value.
In evaluating 2022 Services growth, the CHRC considered quantitative and qualitative elements of performance, including:
Overall ME&T Services revenues grew 17% to $22 billion, contributing to the Company’s double-digit top-line growth in 2022 to $59 billion.
Caterpillar now has more than 1.4 million connected assets, an increase of 14% from 1.2 million in 2021, and we delivered over 60% of new equipment with a Customer Value Agreement.
We saw significant increases in eCommerce sales to users, and we launched our new Cat® Central app, which will help drive even more eCommerce growth with retail customers.
Our Company demonstrated its highest level of parts availability in our history and Cat Reman now has more than 470 new product offerings.
Caterpillar communicated an aspirational growth goal to double Services Revenues between 2016 and 2026 and, based in part on actions taken by management in 2022, our confidence continues to increase that we’ll achieve our $28 billion Services Revenues goal in 2026.
Based on the foregoing evaluation, the CHRC determined the Services growth modifier percentage allocated to each NEO. The CHRC’s determinations are included in the 2022 Incentive Payments chart found on page 52.
Caterpillar believes the energy transition represents a significant opportunity for long-term profitable growth, leading our Company to add sustainability as a focus area of our enterprise strategy. To further strengthen the alignment of NEO compensation with shareholder interests and to continue demonstrating responsiveness to stakeholder feedback, the Company’s board of Directors elected to incorporate ESG considerations into incentive compensation for its NEOs in 2022.
In its first year of inclusion, the ESG Strategy modifier was designed to support certain elements of the Company’s enterprise strategy and to drive executive leadership accountability for climate-related elements that reflect Caterpillar’s ongoing focus on both short- and long-term ESG considerations, which are also of importance to our shareholders.
As part of its oversight, the board’s Sustainability and other Public Policy Committee (SPPC) reviews and monitors the development and implementation of sustainability goals established by the Company, and also reviews and monitors performance and progress against sustainability objectives and initiatives. In 2022, the SPPC provided a qualitative and quantitative assessment of performance against pre-defined objectives to the CHRC. The CHRC then evaluated the individualized contributions and determined the ESG modifier percentages allocated to each NEO. The CHRC’s determinations are included in the 2022 Incentive Payments chart found on page 52.
In evaluating 2022 ESG Strategy, the CHRC considered quantitative and qualitative elements of performance, including:
Five of six quantitative objectives measured for progress toward Caterpillar’s 2030 sustainability goals were assessed as on target, including continued reduction of Scope 1 and Scope 2 greenhouse gas (GHG) emissions from our own operations (three of six quantitative goals are subject to limited assurance, as described below).
Employee health and safety was assessed at less than target performance based on quantitative and qualitative expectations.
Five of five qualitative elements were assessed as meeting expectations, with the achievement of product development milestones highlighted as exceeding expectations.
Each of Caterpillar’s three segments contributed notable sustainability-related progress in their operating focus, highlighted by the demonstration of the prototype battery electric 793 large mining truck operated at rated specifications, a battery electric machine launched in China and four battery electric machine prototypes displayed at bauma 2022.
Other qualitative elements included completing the comprehensive field work and preparation needed to fulfill our Company’s commitment to disclose estimated Scope 3 GHG emissions data for the first time in 2023, as well as the extensive project work completed in preparation for disclosing Caterpillar’s first-ever report aligned with the Task Force on Climate-related Financial Disclosures (TCFD) framework in 2023.
Our Company continued to help our customers achieve their climate-related objectives throughout 2022, demonstrated through a number of projects involving
2023 PROXY STATEMENT51
Caterpillar, Cat dealers and with our customers, which will help contribute to a lower-carbon future.
For more information about our Company’s performance and progress toward our 2030 sustainability goals, or for further information highlighting how we are helping our customers build a better, more sustainable world, please refer to Caterpillar’s annual Sustainability Report.
Caterpillar’s quantitative environmental (emissions and water) and safety data undergoes independent, third-party limited assurance by ERM Certification and Verification Services, Inc. (ERMCVS) and the resulting assurance statement is included in our Company’s annual Sustainability Report.
The information in our Sustainability Report is not incorporated by reference into, and does not form part of, this proxy statement.
In early 2023, the results for each performance measure noted above were converted into a performance factor, which was then multiplied by the respective weightings and base salary to determine the amount before any adjustment for each NEO.
Then, the CHRC, with input from the Sustainability and other Public Policy Committee (for ESG), assessed the individual contributions for each NEO against the two strategic objectives and applied a maximum adjustment of plus or minus 10% for each modifier (aggregate maximum adjustment of plus or minus 20%).
The CHRC’s modifier decisions were then applied to determine the AIP payouts for each NEO.
The following are the 2022 cash incentive payments made to the NEOs:
| Strategic Modifiers |
|
| ||||||||||||
|
| Base Salary(1) |
| Target Opportunity |
| Performance Factor |
| Result | Services Growth Adj. % | ESG Strategy Adj. % | Total Adj.% |
$ Value Adj. |
| AIP Payment(2) |
|
Umpleby | $ | 1,687,671 | X | 175% | X | 1.38 | = | $4,083,810 | 8% | 5% | 13% | $530,895 | = | $4,614,800 |
|
Bonfield | $ | 882,678 | X | 115% | X | 1.38 | = | $1,403,588 | 4% | 3% | 7% | $ 98,251 | = | $1,501,900 |
|
Johnson | $ | 877,527 | X | 115% | X | 1.32 | = | $1,331,723 | 8% | 8% | 16% | $213,076 | = | $1,544,800 |
|
De Lange | $ | 821,973 | X | 115% | X | 1.34 | = | $1,263,600 | 10% | 4% | 14% | $176,904 | = | $1,440,600 |
|
Creed | $ | 702,596 | X | 115% | X | 1.42 | = | $1,148,572 | 10% | 5% | 15% | $172,286 | = | $1,320,900 |
|
(1) All payments were calculated using a daily weighted average salary. (2) Payments were rounded up to the nearest hundred; may not recalculate exactly due to rounding. |
In 2022, the CHRC granted one-half of each NEO’s total long-term incentive (LTI) value in Performance-based Restricted Stock Units (PRSUs), and one-half in non-qualified stock options (stock options). The stock options vest equally in one-third increments beginning on the first anniversary of the grant date and expire after ten years from grant. The PRSUs fully vest if the 3-year performance hurdle established by the CHRC is met or exceeded. If the performance hurdle is not attained, the PRSU awards do not vest. Dividend Equivalent Units (DEUs) accrue on unvested PRSUs, but are settled only if the vesting requirements are met. The DEUs will settle in additional shares, rounded to the nearest whole unit.
For the 2022 PRSU grants, the CHRC selected Return on Equity (ROE) as the performance measure because it aligns the interests of the NEOs with those of our shareholders by measuring and rewarding profitability relative to shareholders’ investment in the business. The use of the ROE metric and the determination of the performance hurdle for each performance cycle are calibrated with historical performance of the compensation and competitor peer groups (as well as S&P 500 Industrials more broadly) and are intended to reward for the achievement of sustained, long-term returns throughout the cycles in the Company’s business. The ROE performance hurdle was designed to be reasonably achievable with strong management performance. The CHRC believes that a strong focus on ROE reinforces effective capital management along with the need to deliver returns above the cost of capital even in a highly cyclical and often challenging macro-economic operating environment, thus aligning leadership priorities with long-term shareholder interests. The Company’s ROE performance is annually reviewed including any one-time, non-operational or other special items that might impact the ROE result. Although certain items may significantly impact the Company’s reported financial positionresults, they are not always indicative of the underlying operational performance of the Company or its management. To that end, in its evaluation of the Company’s ROE results, the CHRC may use its discretion to make adjustments to ROE to align compensation outcomes with the operating performance of the Company.
2023 PROXY STATEMENT52
The CHRC follows a consistent process for sizing and awarding LTI grant values for NEOs, which is described and illustrated below:
1 | Benchmark the median LTI value for the Company’s Compensation Peer Group |
2 | Review and consider financial results: 1-, 3- and 5-year TSR (vs. the Compensation Peer Group and Competitor Peer Group and the S&P 500 Industrials); operational performance; market conditions; and strategy execution |
3 | Adjust award values to reflect individual performance, including consistency of performance against goals, leadership contributions, time in role and other relevant factors |
In determining grant sizing for 2022, the Committee was consistent with the methodology used in previous years and its pay for performance philosophy; and assessed the 1-, 3- and 5-year relative TSR performance for the period ending December 31, 2021, as they would have been absentwell as operating performance and strategy execution during these periods. Based on this process, the CHRC set the 2022 LTI award for the CEO at slightly above the 50th percentile of the benchmarked LTI values of the Company’s compensation peer group and at the 50th - 65th percentile for the other NEOs.
Performance Period | Compensation Peer Group | Competitor Peer Group | S&P 500 Industrials |
1-Year | 50th | 43rd | 35th |
3-Year | 81st | 67th | 43rd |
5-Year | 94th | 83rd | 59th |
Grant Sizing | 50th - 65thPercentile |
For the 2020 – 2022 performance period, adjustments were made to the ROE to exclude the impact of restructuring costs, pension and other post-employment benefits (OPEB) mark-to-market gains/losses resulting from plan remeasurements and a goodwill impairment charge. In each case, the CHRC determined that these adjustments were an international assignment.appropriate use of its discretion and in the best interests of the Company and its shareholders.
For the 2020 grant, the PRSUs cliff vested based on a three-year average adjusted ROE result of 35.5 percent, which exceeded the goal of 18 percent. The chart below describes the Company’s ROE performance and results for the 2020 – 2022 performance period:
2023 PROXY STATEMENT53
The Company’s change in control provisions are subject to a “double trigger”, and when both a change in control and involuntary termination of employment without cause occur, provide accelerated vesting and maximum payouts under the incentive plans.
Except for customary provisions in employee benefit plans and as required by applicable law, the NEOs do not have any pre-existing executive severance packages or contracts; however, the CommitteeCHRC will consider the particular facts and circumstances of an NEO’s separation to determine whether payment of any severance or other benefit to such NEO is appropriate. Change in control benefits are provided under the Company’s long-term and annual incentive plans and represent customary provisions for these types of plans and have no direct correlation with other compensation decisions. There is no cash severance or other benefits for a termination related to change in control beyond what is provided for under the long-termand annual incentive plans.
The Company’s change in control provisions are subject to a “double trigger” and, when both a change in control and involuntary termination of employment without cause occur, provide accelerated vesting and target payouts under the incentive plans, as described further below.
In the event of a qualifying termination of employment following a change in control, target payouts are provided under the incentive plans.
All unvested stock options, performance-based restricted stock units and restricted stock units vest immediately.
Stock options remain exercisable over the normal life of the grant.
The annual incentive plan allows for the target award opportunity, prorated based on the individual’s time of employment from the beginning of the performance period through the latter of: (1) the change in control or (2) termination of employment.
Additional information is disclosed in the “Potential Payments Upon Termination or Change in Control” section on page 47 of this proxy statement.
In the event of a qualifying termination of employment following a change in control, maximum payouts are provided under the long-term incentive plan and annual incentive plan.
In addition to the annual and long-term components of compensation, NEOs participate in health and welfare benefit plans generally available to U.S.-based management and salaried employees to provide competitive benefits.
The defined contribution and defined benefit retirement plans available to the NEOs are also available to many U.S. CaterpillarU.S.-based management and salaried employees. Under the defined benefit pension plans, the benefit is calculated based on years of service and final average monthly earnings. All of the NEOs participate in one or more of the U.S. retirement plans described in the tablebelow:
| Title |
Description
below, except that Mr. Umpleby participates in the Solar Turbines Incorporated sponsored non-qualified defined benefit pension plan, which is similar to the SERP described below, and Mr. Charter participates in the Company’s Australian-based defined benefit programs.
|
| Defined benefit pension plan under which benefit amounts are | |||
| Non-qualified defined benefit pension plan that works in tandem with the Solar RP supplement to RIP. | ||||
|
| (401(k) PLAN) | All | ||
| All | ||||
SUPPLEMENTAL (SEIP) AND DEFERRED (DEIP) EMPLOYEES’ INVESTMENT PLAN |
|
| |||
CHANGE IN PENSION VALUES IN 2015
The Summary Compensation Table (SCT) includes a reportable amount for ‘‘Change in Pension Value.’’ This number reflects the change between the present value of each NEOs total accumulated pension benefit between December 31, 2014 and December 31, 2015.
The change in pension values are driven by three main elements:
|
2023 PROXY STATEMENT54
The Company provides NEOs a limited number of perquisites that the CommitteeCHRC believes are reasonable and consistent with the overall compensation program and those commonly provided in the marketplace. The Committee annually reviewsThese perquisites are intended to provide for the levelssecurity and safety of perquisites providedour executives as well as to the NEOs whichallow additional time to devote to Caterpillar business. Perquisites include executive physicals, financial planning, home and personal security, systems, parking and limited personal use of the Companycompany aircraft and ground transportation. These perquisites are provided to attract and retain talented executive officers, for security purposes and to allow the NEOs to devote additional time to Caterpillar business. CostsThe costs associated with these perquisites are included in the “2015“2022 All Other Compensation Table” on page 41.Table.”
Additionally, in connection with the Company’s relocation of its global headquarters to Irving, Texas, all of the NEOs, except Mr. Creed, relocated to the Irving area and received benefits in 2022 pursuant to the Company’s corporate relocation program for management-level employees. Mr. Creed, who relocated to the Irving area prior to the global headquarters move, also received benefits in 2022 pursuant to the policy. These relocation benefits were determined to be important in retaining our NEOs.
Under the Company’s compensation clawback policy,provision, the Boardboard may require reimbursement of any bonus or incentive compensation awarded to an officer or cancel unvested restricted or deferred stock awards previously granted to the officer if all of the following apply:
| |
| |
|
The amount of the bonus, incentive compensation or stock award was calculated based on the achievement of certain financial results that were subsequently the subject of a restatement.
The officer engaged in intentional misconduct that caused or partially caused the need for the restatement.
The amount of the bonus, incentive compensation or stock award that would have been awarded to the officer had the financial results been properly reported would have been lower than the amount actually awarded.
The SEC recently adopted final rulemaking with respect to issuer recoupment policies subject to further rulemaking by the NYSE. The Company intends to revisit its clawback policy when NYSE rulemaking regarding recoupment policies becomes effective.
The Company’s insider trading policy prohibits directors, officers and employees from engaging in hedging transactions, holding Company securities in a margin account or otherwise pledging Company securities.
Under Section 162(m) of the Internal Revenue Code, generally NEO compensation over $1.0$1 million for any year is not deductible for United States income tax purposes. However,Historically, there was an exemption from this $1 million deduction limit for compensation payments that qualified as “performance-based” under applicable IRS regulations. With the enactment of the 2017 Tax Cuts and Jobs Act, the performance-based compensation is exempt from the deduction limit if certain requirements are met. One of the goals of the Committee is to structure compensation to take advantage of this exemption was eliminated under Section 162(m) of the Internal Revenue Code, except with respect to certain grandfathered arrangements. The CHRC believes that it must maintain flexibility in its approach to executive compensation in order to structure a program that it considers to be the extent practicable. However,most effective in attracting, motivating and retaining the Committee may elect to provideCompany’s key executives, and therefore, the deductibility of compensation outside those requirementsis one of several factors considered when necessary to achieve itsmaking executive compensation objectives.decisions.
The Compensation and Human Resources Committee (CHRC) has reviewed and discussed the CD&ACompensation Discussion & Analysis (CD&A) included in this proxy statement with management and is satisfied that the CD&A fairly and completely represents the philosophy, intent and actions of the CommitteeCHRC with regard to executive compensation. Based on such review and discussion, we recommend to the Boardboard that the CD&A be included in this proxy statement and the Company’s Annual Report on Form 10-K for filing with the SEC.
By the members of the Compensation Committee consisting of:and Human Resources Committee:
|
Rayford Wilkins, Jr., Chair
Daniel M. Dickinson
Gerald Johnson
Judith F. Marks
Edward B. Rust, Jr.
2023 PROXY STATEMENT55
In years before 2015, long-term incentive compensation design was based on two components – a rolling 3-year cash plan and market based stock option grants. Beginning in 2015, the Committee revised the long-term incentive plan, eliminating the cash portion and replacing it with stock-settled PRSUs.
While the Committee believes PRSUs are better aligned with stockholder interests going forward, NEO’s pay in 2015 includes results of the legacy 2013-2015 performance-based cash plan as well as PRSUs granted in 2015. SEC executive compensation disclosure rules require the grant date fair valueof PRSUs to be reported in the year of grant in the Stock Awards column below, rather than after the completion of the 3-year performance period that commenced in 2015. Because the payment for the 2013-2015 performance-based cash plan is also included in the Non-Equity Incentive Plan Compensation column, the Summary Compensation Table in effect double counts the NEO’s long-term incentive compensation for 2015. Next year’s NEO compensation will include results from the 2014-2016 cash plan which will be the final year for this legacy performance-based cash plan.
20152022 SUMMARY COMPENSATION TABLE
Name and Principal Position | Year |
| Salary |
|
| Bonus |
| Stock Awards(1) |
| Option Awards(2) | Non-equity Incentive Plan Compensation(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(4) | All Other Compensation(5) |
| Total Compensation | Total Without Change in Pension Value(6) | ||||
D. James Umpleby III | 2022 | $ | 1,687,500 |
| $ | — | $ | 6,749,957 | $ | 6,749,994 | $ | 4,614,800 | $ | — | $ | 805,349 | $ | 20,607,600 | $ | 20,607,600 |
2021 | $ | 1,637,500 |
| $ | — | $ | 8,749,964 | $ | 8,750,028 | $ | 4,792,980 | $ | — | $ | 367,560 | $ | 24,298,032 | $ | 24,298,032 | |
2020 | $ | 1,600,000 |
| $ | — | $ | 5,899,969 | $ | 5,900,000 | $ | — | $ | — | $ | 276,582 | $ | 13,676,551 | $ | 13,676,551 | |
Andrew R. J. Bonfield | 2022 | $ | 882,575 |
| $ | — | $ | 2,200,090 | $ | 2,199,994 | $ | 1,501,900 | $ | — | $ | 438,984 | $ | 7,223,543 | $ | 7,223,543 |
2021 | $ | 853,000 |
| $ | — | $ | 2,599,981 | $ | 2,599,993 | $ | 1,524,600 | $ | — | $ | 118,062 | $ | 7,695,636 | $ | 7,695,636 | |
2020 | $ | 832,000 |
| $ | — | $ | 1,800,053 | $ | 1,800,009 | $ | — | $ | — | $ | 152,520 | $ | 4,584,582 | $ | 4,584,582 | |
Denise C. Johnson | 2022 | $ | 877,425 |
| $ | — | $ | 1,849,964 | $ | 1,849,982 | $ | 1,544,800 | $ | — | $ | 464,372 | $ | 6,586,543 | $ | 6,586,543 |
2021 | $ | 846,375 |
| $ | — | $ | 2,550,095 | $ | 2,549,997 | $ | 1,771,100 | $ | — | $ | 138,799 | $ | 7,856,366 | $ | 7,856,366 | |
2020 | $ | 820,500 |
| $ | — | $ | 1,849,945 | $ | 1,849,993 | $ | — | $ | — | $ | 222,421 | $ | 4,742,859 | $ | 4,742,859 | |
Bob De Lange | 2022 | $ | 821,850 |
| $ | — | $ | 1,849,964 | $ | 1,849,982 | $ | 1,440,600 | $ | — | $ | 689,900 | $ | 6,652,296 | $ | 6,652,296 |
2021 | $ | 788,100 |
| $ | — | $ | 2,499,990 | $ | 2,500,000 | $ | 1,772,000 | $ | — | $ | 146,620 | $ | 7,706,710 | $ | 7,706,710 | |
2020 | $ | 767,400 |
| $ | — | $ | 1,849,945 | $ | 1,849,993 | $ | — | $ | — | $ | 213,557 | $ | 4,680,895 | $ | 4,680,895 | |
Joseph E. Creed | 2022 | $ | 702,425 |
| $ | — | $ | 1,849,964 | $ | 1,849,982 | $ | 1,320,900 | $ | — | $ | 257,654 | $ | 5,980,925 | $ | 5,980,925 |
2021 | $ | 665,000 |
| $ | — | $ | 2,499,990 | $ | 2,500,000 | $ | 1,227,300 | $ | — | $ | 289,991 | $ | 7,182,281 | $ | 7,182,281 | |
(1) The amounts reported in this column represent PRSUs granted in 2022 under the Caterpillar Inc. 2014 Long-Term Incentive Plan (LTIP) and are valued based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, assuming the highest level of performance is achieved for the PRSUs, which at the time of grant reflected the probable level of achievement. Assumptions made in the calculation of these amounts are included in Note 3 “Stock-based compensation” to the Company’s consolidated financial statements for the fiscal year ended December 31, 2022, included in the Company’s Form 10-K filed with the SEC on February 15, 2023. | ||||||||||||||||||||
(2) The amounts reported in this column represent non-qualified stock options granted under the LTIP that are valued based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. Assumptions made in the calculation of these amounts are included in Note 3 “Stock-based compensation” to the Company’s consolidated financial statements for the fiscal year ended December 31, 2022, included in the Company’s Form 10-K filed with the SEC on February 15, 2023. | ||||||||||||||||||||
(3) The amounts in this column reflect the AIP payments for 2022, paid in 2023, for all NEOs. | ||||||||||||||||||||
(4) No NEO receives preferential or above market earnings on nonqualified deferred compensation. Amounts above reflect the actuarial present value of the NEO’s change in accrued benefit under all defined benefit pension plans year over year using the pension plan measurement dates for financial statement reporting purposes. See Retirement and Other Benefits on page 54 for descriptions of the pension plans, and the 2022 Pension Benefits table and related footnotes on page 60 for the present value of each NEO’s accumulated pension benefits and information regarding actuarial assumptions used. | ||||||||||||||||||||
(5) All Other Compensation detail for 2022 is shown in a separate table appearing on the next page. | ||||||||||||||||||||
(6) To demonstrate how year-over-year changes in pension value impact total compensation, as determined under SEC rules, we have included this column to show total compensation without pension value changes. The amounts reported in this column are calculated by subtracting the change in pension value reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column, from the amounts reported in the Total Compensation column. The amounts reported in this column differ from, and are not a substitute for, the amounts reported in the Total Compensation column. | ||||||||||||||||||||
|
2023 PROXY STATEMENT56
NAME AND | YEAR | SALARY | BONUS1 | STOCK AWARDS2 | OPTION | NON-EQUITY | CHANGE IN | ALL OTHER | SEC TOTAL | SEC TOTAL WITHOUT CHANGE IN PENSION VALUE7 | |||||||||||||||||||||||||||||||
Douglas R. Oberhelman Chairman & CEO | 2015 | $ | 1,600,008 | $ | — | $ | 3,031,479 | $ | 9,959,588 | $ | 822,804 | $ | 2,091,814 | $ | 398,144 | $ | 17,903,837 | $ | 15,812,023 | ||||||||||||||||||||||
2014 | $ | 1,600,008 | $ | — | $ | — | $ | 8,377,481 | $ | 4,913,288 | $ | 1,998,805 | $ | 241,866 | $ | 17,131,448 | $ | 15,132,643 | |||||||||||||||||||||||
2013 | $ | 1,600,008 | $ | — | $ | — | $ | 7,966,091 | $ | 2,241,766 | $ | 2,964,405 | $ | 217,299 | $ | 14,989,569 | $ | 12,025,164 | |||||||||||||||||||||||
Bradley M. Halverson Group President & CFO | 2015 | $ | 786,312 | $ | — | $ | 1,127,963 | $ | 3,705,673 | $ | 244,440 | $ | 2,293,173 | $ | 90,933 | $ | 8,248,494 | $ | 5,955,321 | ||||||||||||||||||||||
2014 | $ | 755,202 | $ | — | $ | — | $ | 2,392,921 | $ | 1,501,537 | $ | 595,014 | $ | 42,294 | $ | 5,286,968 | $ | 4,691,954 | |||||||||||||||||||||||
2013 | $ | 661,872 | $ | — | $ | — | $ | 2,266,520 | $ | 747,012 | $ | 348,392 | $ | 46,107 | $ | 4,069,903 | $ | 3,721,511 | |||||||||||||||||||||||
Robert B. Charter8 Group President | 2015 | $ | 729,768 | $ | 300,000 | $ | 1,046,232 | $ | 3,437,148 | $ | 190,994 | $ | 845,918 | 9 | $ | 541,566 | $ | 7,091,626 | $ | 6,245,708 | |||||||||||||||||||||
Edward J. Rapp Group President | 2015 | $ | 913,935 | $ | — | $ | 1,264,698 | $ | 4,154,987 | $ | 292,114 | $ | 1,927,253 | $ | 1,554,073 | $ | 10,107,060 | $ | 8,179,807 | ||||||||||||||||||||||
2014 | $ | 872,424 | $ | 50,000 | $ | — | $ | 2,560,624 | $ | 1,961,564 | $ | 565,770 | $ | 944,315 | $ | 6,954,697 | $ | 6,388,927 | |||||||||||||||||||||||
2013 | $ | 847,008 | $ | — | $ | — | $ | 2,266,520 | $ | 883,667 | $ | 1,129,584 | $ | 296,280 | $ | 5,423,059 | $ | 4,293,475 | |||||||||||||||||||||||
D. James Umpleby III Group President | 2015 | $ | 815,805 | $ | — | $ | 1,264,698 | $ | 4,154,987 | $ | 247,726 | $ | 2,582,073 | $ | 83,085 | $ | 9,148,374 | $ | 6,566,301 | ||||||||||||||||||||||
2014 | $ | 755,202 | $ | — | $ | — | $ | 2,527,089 | $ | 1,847,136 | $ | 1,484,122 | $ | 57,772 | $ | 6,671,321 | $ | 5,187,199 | |||||||||||||||||||||||
2013 | $ | 661,872 | $ | — | $ | — | $ | 2,266,520 | $ | 964,041 | $ | 4,181,546 | $ | 52,857 | $ | 8,126,836 | $ | 3,945,290 |
|
Name |
| Company Contributions 401(k) |
| Company Contributions SDCP |
| Corporate Aircraft/ Transportation(1) |
| Personal Security(2) |
| Other(3) |
| Total All Other Compensation |
D. James Umpleby III | $ | 32,400 | $ | 437,904 | $ | 77,756 | $ | 94,281 | $ | 163,008 | $ | 805,349 |
Andrew R. J. Bonfield | $ | 29,395 | $ | 148,651 | $ | 14,427 | $ | 407 | $ | 246,104 | $ | 438,984 |
Denise C. Johnson | $ | 32,567 | $ | 168,430 | $ | 1,776 | $ | 32,636 | $ | 228,963 | $ | 464,372 |
Bob De Lange | $ | 32,505 | $ | 162,236 | $ | 58,078 | $ | 18,245 | $ | 418,836 | $ | 689,900 |
Joseph E. Creed | $ | 32,817 | $ | 116,234 | $ | 12,420 | $ | 37,381 | $ | 58,802 | $ | 257,654 |
(1) Values in this column include the value of personal aircraft usage based on Caterpillar’s incremental cost per flight hour, including the weighted average variable operating cost of fuel, oil, aircraft maintenance, landing and parking fees, related ground transportation, catering and other smaller variable costs. Mr. Umpleby and the Company have a time-sharing lease agreement, pursuant to which certain costs associated with personal flights are reimbursed by Mr. Umpleby to the Company in accordance with the agreement. The 2022 amount listed includes personal use of corporate aircraft as follows: Mr. Umpleby $77,457, Mr. Bonfield $13,344, Mr. De Lange $56,242 and Mr. Creed $12,216. Values in this column also include the value of personal use of executive ground transportation service based on Caterpillar’s incremental cost per mile and trip hour, or as invoiced by a third-party service provider. The 2022 amount listed includes personal ground transportation usage as follows: Mr. Umpleby $299, Mr. Bonfield $1,083, Ms. Johnson $1,776, Mr. De Lange $1,836 and Mr. Creed $204. (2) Amounts reported for personal security include the cost for services provided by outside security providers for installation, monitoring and maintenance of home security and smart home services and for reputation and identity theft protection. The incremental cost associated with the security services is determined based upon the amounts paid to these outside service providers. (3) Values in this column include the cost for executive physicals and financial planning and tax preparation services. The incremental cost associated with these services is determined based upon the amounts paid to the approved service providers. Values in this column also include relocation benefits provided to the NEOs as follows: Mr. Umpleby $145,213 (including a tax gross-up of $33,883), Mr. Bonfield $246,104 (including a tax gross-up of $46,722), Ms. Johnson $211,168 (including a tax gross-up of $37,086), Mr. De Lange $401,004 (including a tax gross-up of $52,211) and Mr. Creed $40,302 (including a tax gross-up of $15,837). All of the NEOs, except Mr. Creed, relocated to the Irving, Texas, area in connection with the Company’s relocation of its global headquarters and received benefits in 2022. Mr. Creed, who relocated to the Irving area prior to the global headquarters move, also received benefits in 2022. All NEOs were subject to the same policies and received the same benefits as other U.S.-based management employees who experienced a U.S. domestic relocation for the Company. The incremental cost for these relocation benefits is determined based on the actual costs or charges incurred. Mr. De Lange was previously an International Service Employee (ISE), and the amount reported also includes tax preparation fees of $1,536 (including a tax gross-up of $36) incurred in 2022 related to his ISE service in accordance with the Company’s tax equalization policy for ISEs. | ||||||||||||
2023 PROXY STATEMENT57
NAME | MATCHING | MATCHING | CORPORATE AIRCRAFT/ TRANSPORTATION1 | HOME SECURITY2 | OTHER3 | TOTAL ALL OTHER COMPENSATION | ||||||||||||||||||||||||
Douglas R. Oberhelman | $ | 8,100 | $ | 160,050 | $ | 143,806 | $ | 86,188 | $ | — | $ | 398,144 | ||||||||||||||||||
Bradley M. Halverson | $ | 8,733 | $ | 53,912 | $ | 1,200 | $ | 27,088 | $ | — | $ | 90,933 | ||||||||||||||||||
Robert B. Charter | $ | 4,301 | $ | — | $ | — | $ | — | $ | 537,265 | $ | 541,566 | ||||||||||||||||||
Edward J. Rapp | $ | 7,950 | $ | 70,333 | $ | 27,280 | $ | 2,872 | $ | 1,445,638 | $ | 1,554,073 | ||||||||||||||||||
D. James Umpleby III | $ | 8,820 | $ | 65,164 | $ | — | $ | 9,101 | $ | — | $ | 83,085 |
1The value of personal aircraft usage reported above is based on Caterpillar’s incremental cost per flight hour, including the weighted average variable operating cost of fuel, oil, aircraft maintenance, landing and parking fees, related ground transportation, catering and other smaller variable costs.Mr. Oberhelman and the Company have a time-sharing lease agreement, pursuantBack to which certain costs associated with personal flights are reimbursed by Mr. Oberhelman to the Company in accordance with the agreement.2Amounts reported for home security represent the cost provided by an outside security provider for hardware and monitoring service. The incremental cost associated with the home security services is determined based upon the amounts paid to the outside service provider.3Mr. Charter and Mr. Rapp were previously International Service Employees (ISEs) based in Singapore. The amount shown includes foreign service allowances typically paid by the Company on behalf of ISEs, including allowances paid for moving expenses, housing, mobility premium, home leave, foreign and U.S. taxes. Company paid taxes, relating to their ISE assignment, of $394,127 for Mr. Charter and $1,338,213 for Mr. Rapp were included in this amount, pursuant to the Company’s tax equalization policy for ISEs. These allowances are intended to ensure the Company’s ISEs are in the same approximate financial position as they would have been if they lived in their home country during the time of their international service. These ISE related expenses were valued on the basis of the aggregate incremental cost to the Company and represent the amount accrued for payment or paid to the service provider or the NEO, as applicable.Contents
|
GRANTS OF PLAN-BASED AWARDS IN
20222015
|
|
|
|
|
|
|
|
|
|
|
|
|
Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) |
| Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options (3) |
| Exercise or Base Price of Option Awards ($/Share) |
| Grant Date Fair Value of Stock and Option Awards ($)(4) | ||
Threshold ($)
| Target ($)
| Maximum ($) | Target (#)
| |||||||||
D. James Umpleby III | 3/7/2022 |
|
|
|
| 34,316 | — | — | $ | — | $ | 6,749,957 |
3/7/2022 |
|
|
|
| — | — | 130,579 | $ | 196.70 | $ | 6,749,994 | |
AIP(5) | 1,476,712 | 2,953,425 | 5,906,849 |
|
|
|
|
|
|
|
| |
Andrew R. J. Bonfield | 3/7/2022 |
|
|
|
| 11,185 | — | — | $ | — | $ | 2,200,090 |
3/7/2022 |
|
|
|
| — | — | 42,559 | $ | 196.70 | $ | 2,199,994 | |
AIP(5) | 507,540 | 1,015,080 | 2,030,160 |
|
|
|
|
|
|
|
| |
Denise C. Johnson | 3/7/2022 |
|
|
|
| 9,405 | — | — | $ | — | $ | 1,849,964 |
3/7/2022 |
|
|
|
| — | — | 35,788 | $ | 196.70 | $ | 1,849,982 | |
AIP(5) | 504,578 | 1,009,157 | 2,018,313 |
|
|
|
|
|
|
|
| |
Bob De Lange | 3/7/2022 |
|
|
|
| 9,405 | — | — | $ | — | $ | 1,849,964 |
3/7/2022 |
|
|
|
| — | — | 35,788 | $ | 196.70 | $ | 1,849,982 | |
AIP(5) | 472,634 | 945,268 | 1,890,537 |
|
|
|
|
|
|
|
| |
Joseph E. Creed | 3/7/2022 |
|
|
|
| 9,405 | — | — | $ | — | $ | 1,849,964 |
3/7/2022 |
|
|
|
| — | — | 35,788 | $ | 196.70 | $ | 1,849,982 | |
AIP(5) | 403,993 | 807,985 | 1,615,971 |
|
|
|
|
|
|
|
| |
(1) The amounts reported represent estimated potential awards under the 2022 AIP. | ||||||||||||
(2) The amounts reported in this column represent estimated potential awards under the LTIP. PRSUs were granted on March 7, 2022, under the LTIP for the 2022-2024 performance period. PRSUs vest at the end of the three-year performance period subject to the Company’s achievement of an average ROE performance hurdle during that period. There is no threshold or maximum payout opportunity with respect to these PRSUs. | ||||||||||||
(3) Amounts reported represent stock options granted under the LTIP. The exercise price for all stock options granted to the NEOs is the closing price of Caterpillar stock on the grant date, March 7, 2022. All stock options granted to the NEOs will vest in one-third increments on March 7, 2023, March 7, 2024, and March 7, 2025. | ||||||||||||
(4) The amounts shown do not reflect realized compensation by the NEO. As reported in this column, the value of PRSUs granted in 2022 under the LTIP are based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, assuming the highest level of performance is achieved for the PRSUs, which at the time of the grant reflected the probable level of achievement. | ||||||||||||
(5) The 2022 AIP estimates shown are based on each executive’s base salary for 2022. The actual payout was based on the achievement of corporate and business unit performance metrics and the Strategic Objectives Modifiers. Please refer to page 49 of the CD&A for a detailed explanation of the various performance metrics. Payments under AIP are limited by a plan cap set at $15 million. The cash payouts for the 2022 plan year are included in the column “Non-Equity Incentive Plan Compensation” of the “2022 Summary Compensation Table.” | ||||||||||||
|
2023 PROXY STATEMENT58
ESTIMATED FUTURE PAYOUTS UNDER EQUITY INCENTIVE PLAN AWARDS1 | ALL OTHER STOCK AWARDS: NUMBER OF SHARES OF STOCK OR UNITS (#) | ALL OTHER OPTION AWARDS: NUMBER OF SECURITIES UNDERLYING OPTIONS2 (#) | EXERCISE OR BASE PRICE OF OPTION AWARDS ($/SHARE) | GRANT DATE FAIR VALUE OF STOCK AND OPTION AWARDS ($)3 | ||||||||||||||||||||
NAME | GRANT DATE | THRESHOLD (#) | TARGET (#) | MAXIMUM (#) | ||||||||||||||||||||
Douglas R. Oberhelman | 02/27/2015 | 13,044 | 39,131 | — | — | — | $ | — | $ | 3,031,479 | ||||||||||||||
03/02/2015 | — | — | — | — | 413,776 | $ | 83.00 | $ | 9,959,588 | |||||||||||||||
Bradley M. Halverson | 02/27/2015 | 4,853 | 14,560 | — | — | — | $ | — | $ | 1,127,963 | ||||||||||||||
03/02/2015 | — | — | — | — | 153,954 | $ | 83.00 | $ | 3,705,673 | |||||||||||||||
Robert B. Charter | 02/27/2015 | 4,502 | 13,505 | — | — | — | $ | — | $ | 1,046,232 | ||||||||||||||
03/02/2015 | — | — | — | — | 142,798 | $ | 83.00 | $ | 3,437,148 | |||||||||||||||
Edward J. Rapp | 02/27/2015 | 5,442 | 16,325 | — | — | — | $ | — | $ | 1,264,698 | ||||||||||||||
03/02/2015 | — | — | — | — | 172,621 | $ | 83.00 | $ | 4,154,987 | |||||||||||||||
D. James Umpleby III | 02/27/2015 | 5,442 | 16,325 | — | — | — | $ | — | $ | 1,264,698 | ||||||||||||||
03/02/2015 | — | — | — | — | 172,621 | $ | 83.00 | $ | 4,154,987 |
1PRSUs were granted on February 27, 2015, for the 2015-2017 performance cycle. PRSUs vest over a 3-year performance cycle with one-third scheduledBack to vest on each anniversary of the grant date, subject to the achievement of an ROE performance hurdle for the prior calendar year. Any PRSUs that do not vest based on the annual performance cycle will remain eligible for vesting on the third anniversary of the grant date, subject to the Company’s achievement of an average ROE performance hurdle during the 3-year performance cycle. The amounts reported in the threshold column reflect the minimum number of PRSUs that would vest if the ROE performance hurdle is achieved in only one annual performance cycle. The amounts reported in the target column reflect the number of PRSUs that would vestif the Company’s average ROE performance during the 3-year performance cycle meets or exceeds the ROE performance hurdle.2Amounts reported represent stock options granted under the LTIP. The exercise price for all stock options granted to the NEOs is the closing price of Caterpillar stock on the grant date ($83.00). All stock options granted to the NEOs will vest in one-third increments on each of the first through third year anniversaries of the date of grant. The actual realizable value of the options will depend on the fair market value of Caterpillar stock at the time of exercise.3The amounts shown do not reflect realized compensation by the NEO. As reported in this column, the value of PRSUs granted in 2015 under the LTIP are based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, assuming the highest level of performance is achieved for the PRSUs, which at the time of the grant reflected the probable level of achievement.Contents
|
OUTSTANDING EQUITY AWARDS AT
20152022 FISCAL YEAR END
OPTION AWARDS | STOCK AWARDS | ||||||||||||||||||||||||||||||
NUMBER OF SECURITIES | MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED3 | EQUITY INCENTIVE | |||||||||||||||||||||||||||||
NAME | GRANT DATE | EXERCISABLE | UNEXERCISABLE | SAR / OPTION EXERCISE PRICE | SAR / OPTION EXPIRATION DATE1 | NUMBER OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED2 | NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED4 | MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED5 | |||||||||||||||||||||||
Douglas R. | 02/17/2006 | 110,000 | — | $ | 72.05 | 02/17/2016 | — | $ | — | — | $ | — | |||||||||||||||||||
Oberhelman | 03/02/2007 | 125,884 | — | $ | 63.04 | 03/02/2017 | — | $ | — | — | $ | — | |||||||||||||||||||
03/03/2008 | 115,484 | — | $ | 73.20 | 03/03/2018 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/02/2009 | 166,252 | — | $ | 22.17 | 03/02/2019 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/01/2010 | 272,282 | — | $ | 57.85 | 03/01/2020 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/07/2011 | 226,224 | — | $ | 102.13 | 03/07/2021 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/05/2012 | 275,000 | — | $ | 110.09 | 03/05/2022 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/04/2013 | — | 281,090 | $ | 89.75 | 03/04/2023 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/03/2014 | — | 283,790 | $ | 96.31 | 03/03/2024 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/02/2015 | — | 413,776 | $ | 83.00 | 03/02/2025 | — | $ | — | — | $ | — | ||||||||||||||||||||
02/27/2015 | — | — | $ | — | — | — | $ | — | 39,131 | 6 | $ | 2,659,343 | |||||||||||||||||||
Bradley M. | 03/03/2008 | 9,306 | — | $ | 73.20 | 03/03/2018 | — | $ | — | — | $ | — | |||||||||||||||||||
Halverson | 03/01/2010 | 9,449 | — | $ | 57.85 | 03/01/2020 | — | $ | — | — | $ | — | |||||||||||||||||||
03/07/2011 | 22,696 | — | $ | 102.13 | 03/07/2021 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/05/2012 | 21,416 | — | $ | 110.09 | 03/05/2022 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/04/2013 | — | 79,976 | $ | 89.75 | 03/04/2023 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/03/2014 | — | 81,061 | $ | 96.31 | 03/03/2024 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/02/2015 | — | 153,954 | $ | 83.00 | 03/02/2025 | — | $ | — | — | $ | — | ||||||||||||||||||||
— | — | — | $ | — | — | 1,666 | 7 | $ | 113,221 | — | $ | — | |||||||||||||||||||
02/27/2015 | — | — | $ | — | — | — | $ | — | 14,560 | 6 | $ | 989,498 | |||||||||||||||||||
Robert B. | 03/07/2011 | 23,379 | — | $ | 102.13 | 03/07/2021 | — | $ | — | — | $ | — | |||||||||||||||||||
Charter | 03/05/2012 | 20,534 | — | $ | 110.09 | 03/05/2022 | — | $ | — | — | $ | — | |||||||||||||||||||
03/04/2013 | — | 25,369 | $ | 89.75 | 03/04/2023 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/03/2014 | — | 27,045 | $ | 96.31 | 03/03/2024 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/02/2015 | — | 142,798 | $ | 83.00 | 03/02/2025 | — | $ | — | — | $ | — | ||||||||||||||||||||
02/27/2015 | — | — | $ | — | — | — | $ | — | 13,505 | 6 | $ | 917,800 | |||||||||||||||||||
Edward J. | 02/17/2006 | 48,000 | — | $ | 72.05 | 02/17/2016 | — | $ | — | — | $ | — | |||||||||||||||||||
Rapp | 03/02/2007 | 47,044 | — | $ | 63.04 | 03/02/2017 | — | $ | — | — | $ | — | |||||||||||||||||||
03/03/2008 | 109,898 | — | $ | 73.20 | 03/03/2018 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/02/2009 | 148,722 | — | $ | 22.17 | 03/02/2019 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/01/2010 | 145,765 | — | $ | 57.85 | 03/01/2020 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/07/2011 | 56,228 | — | $ | 102.13 | 03/07/2021 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/05/2012 | 60,515 | — | $ | 110.09 | 03/05/2022 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/04/2013 | — | 79,976 | $ | 89.75 | 03/04/2023 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/03/2014 | — | 86,742 | $ | 96.31 | 03/03/2024 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/02/2015 | — | 172,621 | $ | 83.00 | 03/02/2025 | — | $ | — | — | $ | — | ||||||||||||||||||||
— | — | — | $ | — | — | 1,998 | 8 | $ | 135,784 | — | $ | — | |||||||||||||||||||
02/27/2015 | — | — | $ | — | — | — | $ | — | 16,325 | 6 | $ | 1,109,447 |
Option Awards |
| Stock Awards | ||||||||||||
| Number of Securities Underlying Unexercised Options | Option Exercise Price | Option Expiration Date(1) | Number of Shares or Units of Stock that have not Vested | Market Value of Shares or Units of Stock that have not Vested | Equity Incentive Plan Awards | ||||||||
| Grant Date | Exercisable | Unexercisable | Number of Unearned Shares, Units or other Rights that have not Vested(2) | Market or Payout Value of Unearned Share, Units or other Rights that have not Vested(3) | |||||||||
D. James Umpleby III | 3/5/2018 | 182,944 | — | $ | 151.12 | 3/5/2028 |
| — | $ | — | — |
| $ | — |
3/4/2019 | 163,615 | — | $ | 138.35 | 3/4/2029 |
| — | $ | — | — |
| $ | — | |
3/2/2020 | — | — | $ | — |
|
| — | $ | — | 49,260 | (4) | $ | 11,800,726 | |
3/2/2020 | — | 75,701 | $ | 127.60 | 3/2/2030 |
| — | $ | — | — |
| $ | — | |
3/1/2021 | — | — | $ | — |
|
| — | $ | — | 41,327 | (5) | $ | 9,900,296 | |
3/1/2021 | 51,804 | 103,607 | $ | 219.76 | 3/1/2031 |
| — | $ | — | — |
| $ | — | |
3/7/2022 | — | — | $ | — |
|
| — | $ | — | 34,896 | (5) | $ | 8,359,686 | |
3/7/2022 | — | 130,579 | $ | 196.70 | 3/7/2032 |
| — | $ | — | — |
| $ | — | |
Andrew R. J. Bonfield | 3/2/2020 | — | — | $ | — |
|
| — | $ | — | 15,029 | (4) | $ | 3,600,347 |
3/2/2020 | — | 23,095 | $ | 127.60 | 3/2/2030 |
| — | $ | — | — |
| $ | — | |
3/1/2021 | — | — | $ | — |
|
| — | $ | — | 12,280 | (5) | $ | 2,941,797 | |
3/1/2021 | 15,393 | 30,786 | $ | 219.76 | 3/1/2031 |
| — | $ | — | — |
| $ | — | |
3/7/2022 | — | — | $ | — |
|
| — | $ | — | 11,374 | (5) | $ | 2,724,755 | |
3/7/2022 | — | 42,559 | $ | 196.70 | 3/7/2032 |
| — | $ | — | — |
| $ | — | |
Denise C. Johnson | 3/4/2019 | 18,012 | — | $ | 138.35 | 3/4/2029 |
| — | $ | — | — |
| $ | — |
3/2/2020 | — | — | $ | — |
|
| — | $ | — | 15,446 | (4) | $ | 3,700,244 | |
3/2/2020 | — | 23,736 | $ | 127.60 | 3/2/2030 |
| — | $ | — | — |
| $ | — | |
3/1/2021 | — | — | $ | — |
|
| — | $ | — | 12,044 | (5) | $ | 2,885,261 | |
3/1/2021 | 15,097 | 30,194 | $ | 219.76 | 3/1/2031 |
| — | $ | — | — |
| $ | — | |
3/7/2022 | — | — | $ | — |
|
| — | $ | — | 9,564 | (5) | $ | 2,291,152 | |
3/7/2022 | — | 35,788 | $ | 196.70 | 3/7/2032 |
| — | $ | — | — |
| $ | — | |
Bob De Lange | 3/7/2016 | 11,717 | — | $ | 74.77 | 3/7/2026 |
| — | $ | — | — |
| $ | — |
3/6/2017 | 79,834 | — | $ | 95.66 | 3/6/2027 |
| — | $ | — | — |
| $ | — | |
3/5/2018 | 60,512 | — | $ | 151.12 | 3/5/2028 |
| — | $ | — | — |
| $ | — | |
3/4/2019 | 48,034 | — | $ | 138.35 | 3/4/2029 |
| — | $ | — | — |
| $ | — | |
3/2/2020 | — | — | $ | — |
|
| — | $ | — | 15,446 | (4) | $ | 3,700,244 | |
3/2/2020 | 47,474 | 23,736 | $ | 127.60 | 3/2/2030 |
| — | $ | — | — |
| $ | — | |
3/1/2021 | — | — | $ | — |
|
| — | $ | — | 11,808 | (5) | $ | 2,828,724 | |
3/1/2021 | 14,801 | 29,602 | $ | 219.76 | 3/1/2031 |
| — | $ | — | — |
| $ | — | |
3/7/2022 | — | — | $ | — |
|
| — | $ | — | 9,564 | (5) | $ | 2,291,152 | |
3/7/2022 | — | 35,788 | $ | 196.70 | 3/7/2032 |
| — | $ | — | — |
| $ | — | |
Joseph E. Creed | 3/5/2018 | 18,294 | — | $ | 151.12 | 3/5/2028 |
| — | $ | — | — |
| $ | — |
3/2/2020 | — | — | $ | — |
|
| — | $ | — | 5,009 | (4) | $ | 1,199,956 | |
3/2/2020 | — | 7,698 | $ | 127.60 | 3/2/2030 |
| — | $ | — | — |
| $ | — | |
3/1/2021 | — | — | $ | — |
|
| — | $ | — | 11,808 | (5) | $ | 2,828,724 | |
3/1/2021 | 14,801 | 29,602 | $ | 219.76 | 3/1/2031 |
| — | $ | — | — |
| $ | — | |
3/7/2022 | — | — | $ |
|
|
| — | $ | — | 9,564 | (5) | $ | 2,291,152 | |
3/7/2022 | — | 35,788 | $ | 196.70 | 3/7/2032 |
| — | $ | — | — |
| $ | — |
(1)
| |
(2) The amounts shown include the portion of any prior PRSU grants that were not vested as of December 31, 2022. The grants provide for DEUs to accrue on unvested PRSUs when a dividend is paid by the Company. The amount shown includes any applicable DEUs accrued as of December 31, 2022, (rounded to the nearest whole unit). | |
2023 PROXY STATEMENT59
OPTION AWARDS | STOCK AWARDS | ||||||||||||||||||||||||||||||
NUMBER OF SECURITIES UNDERLYING UNEXERCISED SARs/OPTIONS | MARKET | EQUITY INCENTIVE PLAN AWARDS: | |||||||||||||||||||||||||||||
NAME | GRANT DATE | EXERCISABLE | UNEXERCISABLE | SAR / | SAR / OPTION EXPIRATION DATE1 | NUMBER OF | NUMBER OF | MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED5 | |||||||||||||||||||||||
D. James | 02/17/2006 | 7,150 | — | $ | 72.05 | 02/17/2016 | — | $ | — | — | $ | — | |||||||||||||||||||
Umpleby III | 03/02/2007 | 3,341 | — | $ | 63.04 | 03/02/2017 | — | $ | — | — | $ | — | |||||||||||||||||||
03/03/2008 | 4,661 | — | $ | 73.20 | 03/03/2018 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/02/2009 | 6,619 | — | $ | 22.17 | 03/02/2019 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/01/2010 | 6,781 | — | $ | 57.85 | 03/01/2020 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/07/2011 | 22,696 | — | $ | 102.13 | 03/07/2021 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/05/2012 | 21,416 | — | $ | 110.09 | 03/05/2022 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/04/2013 | — | 79,976 | $ | 89.75 | 03/04/2023 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/03/2014 | — | 85,606 | $ | 96.31 | 03/03/2024 | — | $ | — | — | $ | — | ||||||||||||||||||||
03/02/2015 | — | 172,621 | $ | 83.00 | 03/02/2025 | — | $ | — | — | $ | — | ||||||||||||||||||||
— | — | — | $ | — | — | 1,666 | 9 | $ | 113,221 | — | $ | — | |||||||||||||||||||
02/27/2015 | — | — | $ | — | — | $ | — | 16,325 | 6 | $ | 1,109,447 |
1Stock options granted in 2013 and 2014 are exercisable three years after the grant date. Stock options granted in 2015 are exercisable in one-third increments on each of the first through third year anniversaries of the date of grant. Stock options expire 10 years from the grant date for an active employee.2The amounts shown include the portion of any prior RSU grants that were not vested as of December 31, 2015.3The market value of the non-vested RSUs is calculated using the closing price of Caterpillar common stock on December 31, 2015 ($67.96 per share).4The amounts shown include the portion of any prior PRSU grants that were not vested as of December 31, 2015.5The market value of the non-vested PRSUs is calculated using the closing price of Caterpillar common stock on December 31, 2015 ($67.96 per share).6Represents the PRSUs that are scheduled to vest in one-third increments on February 27, 2016, February 27, 2017 and February 27, 2018 based on the Company’s achievement of an annual ROE performance hurdle or, PRSUs that do not vest based on the annual performance hurdle, but may vest based on the achievement of an average ROE performance hurdle over the 3-year performance cycle. For 2015, the Company did not achieve the ROE performance hurdle and, accordingly, none of the PRSUs vested based on 2015 performance. The number of PRSUs reported in this table assumes the aggregate ROE performance hurdle is achieved for the 3-year performance cycle.7This amount includes 833 RSUs scheduled to vest on May 1, 2016 and 833 RSUs scheduled to vest on May 1, 2017.8This amount includes 833 RSUs scheduled to vest on May 1, 2016, 332 RSUs scheduled to vest on May 2, 2016 and 833 RSUs scheduled to vest on May 1, 2017.9This amount includes 833 RSUs scheduled to vest on May 1, 2016 and 833 RSUs scheduled to vest on May 1, 2017.
Market value is based on the number of PRSUs, including, when applicable, DEUs that have not vested (rounded to the nearest whole unit) multiplied by $239.56, the closing price of Caterpillar’s common stock on December 30, 2022. This amount represents the PRSUs that vested based on the achievement of an average ROE performance hurdle over the three-year performance cycle. The Company achieved the ROE performance hurdle and, accordingly, the PRSUs vested and the shares were released February 7, 2023. This amount represents the PRSUs that are scheduled to vest following the end of the performance period in 2023 and 2024, respectively, based on the Company’s achievement of an average ROE performance hurdle over the three-year performance period. The number of PRSUs reported in this table assumes the aggregate ROE performance hurdle is achieved for the three-year performance period.2022 OPTION EXERCISES AND STOCK VESTED
Name | Option Awards(1) |
| Stock Awards(2) | ||||
Number of Shares Acquired on Exercise |
| Value Realized on Exercise | Number of Shares Acquired on Vesting |
| Value Realized on Vesting | ||
D. James Umpleby III | 151,402 | $ | 34,769,469 |
| 42,281 | $ | 8,488,756 |
Andrew R. J. Bonfield | 41,107 | $ | 8,654,051 |
| 13,964 | $ | 2,803,552 |
Denise C. Johnson | 23,737 | $ | 5,700,203 |
| 13,964 | $ | 2,803,552 |
Bob De Lange | 35,153 | $ | 8,052,971 |
| 12,413 | $ | 2,492,158 |
Joseph E. Creed | 22,709 | $ | 5,395,886 |
| 3,879 | $ | 778,787 |
(1) Upon exercise, options may have been withheld to satisfy income tax obligations. The amounts shown are gross amounts. (2) Upon vesting of RSUs or PRSUs, units may have been withheld to satisfy income tax obligations. The amounts shown are gross amounts. | |||||||
Name | Plan Name(1) | Number of Years of Credited Service(2) |
| Present Value of Accumulated Benefit(3,4) |
| Payments During Last Fiscal Year |
D. James Umpleby III | RIP - Solar RP | 25 | $ | 1,816,932 | $ | — |
| Solar MRO | 25 | $ | 29,875,976 | $ | — |
Andrew R. J. Bonfield |
| — | $ | — | $ | — |
Denise C. Johnson |
| — | $ | — | $ | — |
Bob De Lange |
| — | $ | — | $ | — |
Joseph E. Creed | RIP | 13.58 | $ | 197,483 | $ | — |
(1) Upon his initial hire with Solar Turbines Inc, a wholly owned subsidiary of Caterpillar, on July 7, 1980, Mr. Umpleby became eligible to participate in the Solar Turbines Inc. Retirement Plan (Solar RP) and the Solar Turbines Incorporated Managerial Retirement Objective Plan (Solar MRO). Mr. Creed participates in the Caterpillar, Inc. Retirement Income Plan (RIP). The Solar RP was merged into RIP as of January 1, 2015; however, all benefit and eligibility provisions of Solar RP remain unchanged. The RIP is a noncontributory U.S. qualified defined benefit pension plan and the Solar MRO is a U.S. non-qualified pension plan. Mr. Bonfield, Ms. Johnson and Mr. De Lange do not participate in a pension plan. (2) Mr. Umpleby has more than 42 years of service with the Company and meets the early retirement eligibility requirement of age 55 with at least ten years of service. The Solar RP was merged into RIP as of January 1, 2015; however, all benefit and eligibility provisions of Solar RP remain unchanged. The total benefit formula for the Solar RP is 60 percent of final average salary prorated for years of service less than 25 minus 65 percent of the monthly Social Security benefit. Final average salary is the average base salary for the highest consecutive 36-month period during the 120-month period prior to the determination date. The Solar MRO provides a benefit under the same benefit formula but includes base salary and annual cash incentive pay. Amounts payable under both Solar RP and Solar MRO are based upon a maximum of 25 years of service. Mr. Creed has more than 25 years of service with the Company. The Traditional benefit formula for the RIP is 1.5 percent of final average salary times years of service as of the freeze date of the plan (up to 35). Final average salary is the average base and incentive salary for the 5 highest 12-month periods during the 120-month period prior to the determination date. Mr. Creed does not currently meet early retirement eligibility requirement criteria as defined under RIP but would be eligible upon attainment of 30 years of service or age 55, whichever comes first. The employees’ annual retirement income benefits under the RIP and Solar RP are restricted by the Internal Revenue Code limitations and the excess benefit is paid from the Solar MRO for Mr. Umpleby. Solar MRO is not funded. (3) The present value of accumulated benefits payable is determined assuming commencement on the NEO’s earliest unreduced retirement date using a discount rate of 5.35% and the PRI-2012 White Collar separate annuitant and non-annuitant mortality table with a load factor of 93.6% and projected forward using Scale MP-2021 fully generational. Mr. Umpleby satisfies the plans’ unreduced early retirement criteria, attainment of age 62 with at least 10 years of service. Mr. Creed does not satisfy unreduced early retirement criteria; his benefit is valued at his normal retirement age. (4) Mr. Umpleby’s pension benefit is based on the average of the highest consecutive 36 months of pensionable earnings in the 120-month period prior to the determination date of December 31, 2019, the date on which the Solar RP and Solar MRO were frozen for all sunset employees. Mr. Creed’s pension benefit under RIP is based on the average of the 5 highest 12-month periods within the 120-month period preceding the determination date of December 31, 2010, the date on which RIP was frozen for all non-sunset employees. Pensionable earnings under these plans include base salary and annual cash incentive pay. Although Mr. Umpleby and Mr. Creed no longer accrue additional benefits under these plans, the present value of the accumulated benefit as reported may increase or decrease each year based on the actuarial and interest rate assumptions used to calculate the benefits for financial reporting purposes. |
2023 PROXY STATEMENT60
OPTION AWARDS1 | STOCK AWARDS2 | |||||||||||||||||
NAME | NUMBER OF SHARES ACQUIRED ON EXERCISE | VALUE REALIZED ON EXERCISE | NUMBER OF SHARES ACQUIRED ON VESTING | VALUE REALIZED ON VESTING | ||||||||||||||
Douglas R. Oberhelman | — | $ | — | — | $ | — | ||||||||||||
Bradley M. Halverson | 11,867 | $ | 915,922 | 834 | $ | 72,992 | ||||||||||||
Robert B. Charter | — | $ | — | — | $ | — | ||||||||||||
Edward J. Rapp | — | $ | — | 1,559 | $ | 133,501 | ||||||||||||
D. James Umpleby III | — | $ | — | 834 | $ | 72,992 |
1Upon exerciseof the stock appreciation rights shares are surrenderedBack to satisfy the income tax withholding requirement. The amounts shown are net amounts after surrendering shares for income tax.2Upon vesting of the RSUs, shares are surrendered to satisfy income tax withholding requirements. The amounts shown are gross amounts absent netting for shares surrendered.Contents
|
AGGREGATE The Name Plan Name(1) Executive Contributions in 2022(2) Registrant Contributions in 2022(2) Aggregate Earnings in 2022(3) Aggregate Balance At 12/31/2022(4) D. James Umpleby III SDCP $ 370,529 $ 437,904 $ 472,128 $ 9,961,511 SEIP $ — $ — $ (10,773) $ 54,373 DEIP $ — $ — $ (659,160) $ 5,427,873 Andrew R. J. Bonfield SDCP $ 175,908 $ 148,651 $ (97,181) $ 823,424 Denise C. Johnson SDCP $ 140,612 $ 168,430 $ 941,851 $ 6,089,022 Bob De Lange SDCP $ 137,331 $ 162,236 $ 177,431 $ 1,808,149 Joseph E. Creed SDCP $ 97,484 $ 116,234 $ 240,345 $ 1,577,752 The Supplemental Deferred Compensation Plan (SDCP) is a non-qualified deferred compensation plan, which effectively replaced the Supplemental Employees’ Investment Plan (SEIP) and Deferred Employees’ Investment Plan (DEIP). SDCP allows eligible U.S. employees, including all NEOs, to voluntarily defer a portion of their base salary and annual incentive pay into the plan and receive a Company matching contribution. Amounts deferred by executives in 2022 for base salary and annual incentive pay are included in the “2022 Summary Compensation Table.” Eligible U.S. employees, including all NEOs, also receive an annual non-elective contribution to SDCP by the Company regardless of employee deferrals. Annual non-elective contributions and/or matching contributions to SDCP made by Caterpillar in 2022 are included in the “2022 All Other Compensation Table” under the “Company Contributions SDCP” column. SDCP participants may elect to receive a lump sum payment, or installment payments payable for up to 15 years, following their separation from service. Aggregate earnings comprise interest, dividends, capital gains and appreciation/depreciation of notional investment results. The investment choices available to the participant mirror those of the Company’s 401(k) plans. Amounts in this column include the following amounts that have been reported in the “Summary Compensation Table” for the years 2020–2022 as follows: Mr. Umpleby $2,054,986, Mr. Bonfield $842,048, Ms. Johnson $1,072,979, Mr. De Lange $838,512, Mr. Creed $423,282. 2023 PROXY STATEMENT61 Except for customary provisions in employee compensation plans or as required by law, there are no pre-existing severance or change in control agreements with the NEOs. The following is a summary of the compensation that would become payable under the existing compensation plans if an NEO’s employment had terminated on December 31, 2022, in each of the following scenarios: Voluntary Separation, including retirement that does not qualify as Long-Service Separation Long-Service Separation (separation after age 55 with five or more years of Company service) Termination for Cause Termination without Cause or for Good Reason within one year following a change in control (termination following CIC) EQUITY AWARDS Voluntary Separation Stock Options: Vested awards are exercisable until the earlier of the expiration date or 60 days from the separation date; unvested awards are forfeited PRSUs: Unvested awards are forfeited Long-Service Separation Stock Options granted in 2016: Remain exercisable for the remaining term of the award Stock Options granted in 2017 and after: Vest over the normal vesting schedule and become exercisable for the remaining term of the award PRSUs: Remain outstanding and vest if and to the extent performance goal is achieved Termination for Cause Stock Options: Vested but unexercised awards and unvested awards are forfeited PRSUs: Unvested awards are forfeited Termination following CIC Stock Options: Vest and become immediately exercisable for remaining term of the award PRSUs: Accelerated vesting of outstanding awards ANNUAL INCENTIVE AWARDS Voluntary Separation Payment is forfeited Long-Service Separation Payment for a pro-rated service period based on actual results Termination for Cause Payment is forfeited Termination following CIC Payment for a pro-rated service period assuming achievement of target opportunity Back to TERMS The following tabular information quantifies certain payments that would become payable under existing plans and arrangements if the NEO’s employment had terminated on December 31, Name Termination Scenario(1) Equity Awards Annual Incentive(4) Total Stock Options(2) PRSUs/ RSUs(3) D. James Umpleby III Voluntary Separation $ 16,123,519 $ 30,060,708 $ 4,614,800 $ 50,799,027 Termination for Cause $ — $ — $ — $ — Termination Following CIC $ 16,123,519 $ 30,060,708 $ 2,953,425 $ 49,137,652 Andrew R. J. Bonfield Voluntary Separation $ — $ — $ — $ — Termination for Cause $ — $ — $ — $ — Termination Following CIC $ 5,019,358 $ 9,266,899 $ 1,015,080 $ 15,301,337 Denise C. Johnson Voluntary Separation $ 4,789,198 $ 8,876,657 $ 1,544,800 $ 15,210,655 Termination for Cause $ — $ — $ — $ — Termination Following CIC $ 4,789,198 $ 8,876,657 $ 1,009,157 $ 14,675,012 Bob De Lange Voluntary Separation $ — $ — $ — $ — Termination for Cause $ — $ — $ — $ — Termination Following CIC $ 4,777,477 $ 8,820,120 $ 945,268 $ 14,542,865 Joseph E. Creed Voluntary Separation $ — $ — $ — $ — Termination for Cause $ — $ — $ — $ — Termination Following CIC $ 2,981,862 $ 6,319,832 $ 807,985 $ 10,109,679 If a NEO qualifies for Long-Service Separation and voluntarily separates from the company, Long-Service Separation rules will apply. In 2022, Mr. Umpleby and Ms. Johnson qualified for Long-Service Separation and would therefore receive the amounts reported under “Voluntary Separation.” For valuation purposes, as of December 31, 2022, the option exercise price was lower than the year-end closing price of $239.56 for all outstanding options. The 2020, 2021 and 2022 grants were not fully vested as of December 31, 2022. The valuation shown is based on the number of PRSUs and RSUs, including any applicable DEUs, that would vest multiplied by the closing price of Caterpillar common stock on December 30, 2022, which was $239.56 per share. The AIP provisions limit the payout to a maximum of $15.0 million per participant in any single year. Amounts shown for “Termination following CIC” represent the target payout available under the AIP. 2023 PROXY STATEMENT63 The The Company is providing the following disclosure about the relationship of the annual total compensation of its employees to the annual total compensation of Mr. Umpleby, the Chairman and CEO. To better understand this disclosure, it is important to emphasize that the Company’s compensation programs are designed to reflect local market practices across our global operations. The Company strives to create a competitive global compensation program in terms of both the position and the geographic location in which Caterpillar employees are located. As a result, the Company’s compensation programs vary among each local market to provide for a competitive compensation package. The median annual total compensation of all Caterpillar employees, other than Mr. Umpleby, was $56,930. Mr. Umpleby’s annual total compensation, as reported in the Summary Compensation Table, was $20,607,600. The ratio of Mr. Umpleby’s annual total compensation compared to the median of the annual total compensation of all employees was 362 to 1. A new median employee was identified by including all full-and part-time employees as of October 1, 2022, of which approximately 44 percent were in the U.S. and 56 percent were outside the U.S. The Company did not exclude any of its employees when determining the employee population from which to identify the median employee. For purposes of identifying the Company’s median employee, the Company considered the base salary and annual cash incentive. Base salary and annual cash incentive were chosen because (i)they represent the principal forms of compensation delivered to all employees and (ii) this information is readily available in each country. In addition, compensation was measured using the 12-month period ending December 31, 2022. The Company’s median employee’s total compensation for 2022 was calculated in accordance with Item 402(c)(2)(x) of Regulation S-K, as required pursuant to the SEC executive compensation disclosure rules. 2023 PROXY STATEMENT64 As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between “compensation actually paid” as determined under SEC requirements to our CEO and to our other NEOs and certain financial performance of the Company. Compensation actually paid does not reflect the actual amount of compensation earned by or paid to our executive officers during a covered year. For further information concerning the Company’s pay-for-performance philosophy and how the Company aligns executive compensation with Company’s performance, see the Compensation Discussion and Analysis. PAY VERSUS PERFORMANCE TABLE Year(1) Value of Initial Fixed $100 Investment Based On: SCT Total Compensation for CEO Compensation Actually Paid(2) to CEO Average SCT Total Compensation for Other NEOs Average Compensation Actually Paid(2) to Other NEOs Cumulative TSR(3) Cumulative Peer Group TSR (S&P 500 Industrials)(3) Net Income Return on Equity (4) 2022 $ 20,607,600 $ 25,529,692 $ 6,610,827 $ 9,756,542 $ 174.60 $ 127.15 $ 6,705m 45.3 % 2021 $ 24,298,032 $ 25,003,543 $ 7,610,248 $ 9,775,102 $ 147.22 $ 134.52 $ 6,489m 37.2 % 2020 $ 13,676,551 $ 22,734,659 $ 4,749,102 $ 8,894,074 $ 126.97 $ 111.06 $ 2,998m 24.0 % For each covered year, D. James Umpleby III served as our Chief Executive Officer. For 2022 and 2021, our other Named Executive Officers were Andrew Bonfield, Denise Johnson, Bob De Lange and Joe Creed and, for 2020, our other Named Executive Officers were Andrew Bonfield, William Ainsworth, Bob De Lange and Denise Johnson. Amounts reported in this column are based on total compensation reported for our CEO and for other NEOs, respectively, in the Summary Compensation Table for the indicated fiscal years and adjusted as shown in the table below. Fair value of equity awards was computed in accordance with the Company’s methodology used for financial reporting purposes. SCT Total Compensation Grant Date fair value of current year grants as disclosed in the SCT Year-End fair value of awards granted in current year and unvested at year-end Vest Date fair value of awards granted and vested in current year Change in fair value of awards granted in prior years and unvested at year-end Change in fair value of awards granted in prior years and vested in current year Prior Year-End fair value of any awards forfeited during current year Compensation Actually Paid 2022 CEO(1) $ 20,607,600 $ (13,499,951) $ 8,316,746 $ 6,837,116 $ 1,492,890 $ 1,775,291 $ 0 $ 25,529,692 NEO Average(1) $ 6,610,827 $ (3,874,981) $ 4,864,143 $ 468,465 $ 1,539,808 $ 148,280 $ 0 $ 9,756,542 2021 CEO(1) $ 24,298,032 $ (17,499,992) $ 8,357,495 $ 7,294,993 $ 1,362,453 $ 1,190,562 $ 0 $ 25,003,543 NEO Average(1) $ 7,610,248 $ (5,075,011) $ 4,093,237 $ 556,254 $ 1,043,735 $ 1,546,639 $ 0 $ 9,775,102 2020 CEO(1) $ 13,676,551 $ (11,799,969) $ 8,605,145 $ 8,872,914 $ 1,598,662 $ 1,781,356 $ 0 $ 22,734,659 NEO Average(1) $ 4,749,102 $ (3,799,993) $ 5,991,911 $ 789,536 $ 1,341,267 $ (177,749) $ 0 $ 8,894,074 Total shareholder return amounts assume an initial investment of $100 on December 31, 2019. In accordance with SEC rules, the Company is required to include in the Pay Versus Performance Table the “most important” financial performance measure (as determined by the Company) used to link compensation actually paid to our executive officers to Company performance for the most recently completed fiscal year. The Company determined Return on Equity, which is a metric included in our incentive program, meets this requirement, and therefore, we have included this performance measure in the Pay Versus Performance Table. See page 53 for information regarding adjustments made to ROE. 2023 PROXY STATEMENT65 The graphs below provide descriptions of the relationship between compensation actually paid (CAP) to our CEO and the average of the CAP to our other NEOs and our total shareholder return (TSR), net income and ROE for the period indicated. In addition, the first graph below describes the relationship between Caterpillar’s TSR and our peer group’s TSR (S&P 500 Industrials) for the period indicated. 2023 PROXY STATEMENT66 COMPANY’S MOST IMPORTANT FINANCIAL PERFORMANCE MEASURES The following are the most important financial performance measures (shown in alphabetical order), as determined by the Company, that link compensation actually paid to our CEO and other NEOs to the Company’s performance for the most recently completed fiscal year. Adjusted Profit Per Share Enterprise Services Revenues Enterprise Operating Profit Margin Relative Average TSR Enterprise Operating Profit Return on Equity Enterprise Operating Profit After Capital Charge (OPACC) 2023 PROXY STATEMENT67 PROPOSAL SNAPSHOT What am I voting on? Shareholders are being asked to approve the Caterpillar Inc. 2023 Long-Term Incentive Plan (2023 LTIP). Board Voting Recommendation: FOR approval of the 2023 LTIP The board adopted the 2023 LTIP on April 12, 2023, subject to shareholder approval at the Annual Meeting, to replace the Caterpillar Inc. 2014 Long-Term Incentive Plan as most recently approved by our shareholders on June 14, 2017, amended and restated October 8, 2019, and further amended effective July 1, 2022 (Existing Plan). An aggregate of 13 million shares will be initially available for issuance pursuant to the 2023 LTIP, in addition to shares that will be transferred from the Existing Plan, as further described under the “Share Reserve” heading in the summary below. If approved by shareholders, the 2023 LTIP will become effective on the first business day after shareholder approval (Effective Date). No further awards will be granted pursuant to the Existing Plan on or after the Effective Date, except that full-value awards providing for dividend equivalents that were outstanding as of the Effective Date will continue to accrue dividend equivalents in accordance with the provisions of the awards. The terms and conditions of outstanding awards under the Existing Plan will not be affected by the adoption or approval of the 2023 LTIP, and the Existing Plan will remain in effect with respect to such awards. The 2023 LTIP will allow us to continue to grant equity incentive awards to our executive officers, employees, non-employee board members and other service providers. We believe that a comprehensive equity incentive compensation program serves as a necessary and significant tool to attract and retain key employees, encourage participants to contribute materially to the growth of Caterpillar and align the interests of our participants with those of our shareholders. The 2023 LTIP includes features that consider our shareholders’ interests, including: Variety of equity award types. The 2023 LTIP provides for a variety of equity and equity-based awards, including stock options, stock appreciation rights (SARs), stock, restricted stock and restricted stock units to provide flexibility to the board to structure appropriate incentives and respond to changes in the marketplace. No “evergreen” provision. The 2023 LTIP does not contain an “evergreen” provision that automatically replenishes the share reserve. Shareholder approval is required to increase the share reserve. Administration by independent directors. The 2023 LTIP is administered by the CHRC whose members satisfy the independence standards of the New York Stock Exchange and who qualify as non-employee directors under the Exchange Act. No discounted options or SARs. No stock option or SAR may be granted with an exercise price lower than the grant date fair market value. Annual limit on non-employee director awards. The aggregate grant date fair market value of equity awards granted to any non-employee director in any calendar year, together with all cash-based compensation payable to that director in that year, is limited to $1 million. No repricing or cash buyouts of options or SARs. Repricing of stock options and SARs and cash buyouts of underwater stock options and SARs is prohibited without shareholder approval. 2023 PROXY STATEMENT68 Limitations on share reuse. Shares tendered or withheld for payment of the exercise price of a stock option or shares tendered or withheld to satisfy the tax withholding obligations under a stock option or stock appreciation right, shares not issued upon a net settlement or net exercise of an option or stock appreciation right and shares repurchased on the open market with proceeds from the exercise of stock options will not be returned to the share reserve. No dividends on unvested awards. No dividends or dividend equivalents will be paid on awards unless the award vests. Fungible share counting. For each share of stock issued in connection with a full-value award, the number of shares available for future issuance is reduced by 2.75 shares, and for each share of stock issued in connection with an option or stock-settled SAR, by one share. No “single trigger” vesting upon a change in control. There is no single trigger vesting for awards that continue or are assumed in connection with a CIC, but upon a participant’s qualifying termination of employment within two years following a change in control, outstanding awards will vest in full (i.e. “double trigger”). Clawback. Awards are subject to forfeiture and clawback under the Company’s policy, including as a result of a restatement of financial statements, and as may otherwise be required under applicable law. Maximum ten-year term. The term of stock options and SARs is limited to ten years. We are committed to using equity incentive awards prudently and within reasonable limits. In setting the proposed number of shares reserved and issuable under the 2023 LTIP, the board considered several factors, including the Company’s equity usage, its overhang, and the expected duration of the 2023 LTIP. In reviewing our historical grant practices, we determined that, excluding the effect of our share counting rules, we have issued 6,713,073 shares over the last three fiscal years. The table below summarizes our equity grant practices during the most recent three fiscal years: Fiscal Year RSA and RSU Awards Granted Stock Options Granted Fully Diluted Weighted Average Shares Outstanding Annualized Burn Rate (1) 2022 784,476 1,029,202 530,400,000 0.34 % 2021 757,754 1,084,821 548,500,000 0.34 % 2020 1,142,932 1,913,888 548,600,000 0.56 % Burn rate is calculated as of December 31 of each fiscal year using a 1:1 ratio for each type of award. See below for additional information regarding the calculation. Our three-year average burn rate was 0.41% for fiscal year 2020 through fiscal year 2022 and our one-year burn rate for fiscal year 2022 was 0.34%. We define burn rate as the total number of stock options and full-value shares granted to participants over one fiscal year expressed as a percent of the fully diluted weighted average common shares outstanding. We average our burn rate over three fiscal years to determine our three-year average burn rate. We believe our historical burn rates are reasonable for a company of our size in our industry. As of March 31, 2023, our overhang was 6.96%. Assuming our shareholders approve the 2023 LTIP, the 2023 LTIP would increase our overhang by 2.13 percentage points and our total potential overhang would be 9.09% on a fully diluted basis. For this purpose, “overhang” is defined as (A) the amount of shares awarded to key employees and directors, plus (B) shares available for future grant, divided by the sum of shares outstanding plus the amounts described in clauses (A) and (B). We believe that the total potential overhang that will result from the 2023 LTIP is reasonable for a company of our size in our industry. Based on a review of our historical grant practices, we believe that the shares reserved for grant under the 2023 LTIP will meet the Company’s equity grant needs for approximately 10 years, but not more than the ten-year term in which grants may be made under the 2023 LTIP. However, the actual duration of the share reserve will depend on currently unknown factors, such as the number of grant recipients, future grant practices and the Company’s share price. 2023 PROXY STATEMENT69 Information on Equity Compensation Plans as of March 31, 2023 The information included in this Proxy Statement and our 2022 Annual Report is updated by the following information regarding all existing equity compensation plans as of March 31, 2023 (except as noted otherwise): Total number of stock options outstanding(1) 6,806,631 Weighted-average exercise price of stock options outstanding 162.95 Weighted-average remaining term of stock options outstanding 6.46 Total number of full-value awards outstanding (includes restricted stock and RSUs)(2) 2,109,598 Total number of shares remaining available for future grant under the Existing Plan(3) 29,658,925 Total number of shares of common stock outstanding as of the Record Date 515,355,647 The number of outstanding RSUs with performance-based vesting conditions (PRSUs) assumes performance at 100% performance level. The Existing Plan is our only active employee equity incentive plan. The number of shares remaining available for future grant under the Existing Plan reflects PRSUs at 100% payout. Caterpillar expects to grant a maximum of 175,000 shares under the Existing Plan between March 31, 2023, and the Effective Date. The following is a summary of the principal features of the 2023 LTIP. The summary, however, is not a complete description of all the terms of the 2023 LTIP and is qualified in its entirety by reference to the complete text of the 2023 LTIP appended to this Proxy Statement. To the extent there is a conflict between this summary and the actual terms of the 2023 LTIP, the terms of the 2023 LTIP will govern. Shareholders are urged to review the 2023 LTIP together with the following summary. Administration. The CHRC will have the exclusive authority to administer the 2023 LTIP with respect to awards made to our executive officers. The CHRC will also have the authority to make awards to all other eligible individuals. Subject to applicable law, the CHRC may at any time appoint a secondary committee of one or more directors to have separate but concurrent authority with the CHRC to make awards to such other eligible individuals. The CHRC may also delegate authority to one or more officers or employees of Caterpillar with respect to awards to such other individuals. The term “plan administrator,” as used in this summary, will mean the CHRC and any delegates, to the extent they are acting within the scope of their administrative authority under the 2023 LTIP. Eligibility. Persons that are or are expected to become officers or employees, non-employee directors, consultants and independent contractors of the Company, or one of our subsidiaries will be eligible to participate in the 2023 LTIP. Historically, the CHRC has selected management level employees to receive equity grants and our non-employee directors receive equity grants pursuant to our director compensation program. As of April 17, 2023, we (including our subsidiaries) had approximately 110,000 employees and 11 non-employee directors eligible to participate in the plan. Share Reserve. Subject to capitalization adjustments described below, the aggregate number of shares of common stock available for all awards under the 2023 LTIP will be equal to the sum of (a) 13 million shares of common stock, plus (b) any shares of common stock that, as of the Effective Date, are available for issuance under the Existing Plan, plus (c) any shares of common stock subject to awards under the Existing Plan that, on or after the Effective Date, are returned to the Existing Plan under its provisions allowing shares to be reused for new grants and which are the same as the provisions contained in the 2023 LTIP described below under the “Reuse of Shares” heading. The shares of common stock issuable under the 2023 LTIP may be drawn from shares of our authorized but unissued common stock or authorized and issued shares of common stock reacquired and held as treasury shares (including shares of our common stock that we purchase on the open market or in private transactions) or otherwise or a combination thereof. Fungible Share Counting. The number of shares of common stock reserved for issuance under the 2023 LTIP shall be reduced: (i) on a 1-for-1 basis for each share of common stock subject to an option or stock-settled free-standing stock appreciation right, and (ii) by a fixed ratio of 2.75 shares of common stock for each share of common stock issued pursuant to a stock award, restricted stock award, restricted stock unit or other full-value award. Director Compensation Limit. The Plan includes a provision that limits the aggregate value of all compensation granted or paid to any non-employee director with respect to any fiscal year to $1,000,000. Reuse of Shares. Shares subject to any outstanding awards under the 2023 Plan that are not issued because of the expiration, termination, cancellation or forfeiture of an award or the settlement of an award in cash will be added back to the number of shares reserved for issuance under the 2023 LTIP and will accordingly be available for subsequent issuance as follows: (i) one share for each share of common 2023 PROXY STATEMENT70 stock subject to an option or free-standing stock appreciation right and (ii) 2.75 shares for each share of common stock subject to a full-value award. Should the exercise price of an option or stock appreciation right be paid in shares of our common stock (whether by delivery or withholding of shares), including a net exercise or net settlement, then the number of shares reserved for issuance under the 2023 LTIP, will be reduced by the gross number of shares for which that option or stock appreciation right is exercised, and not by the net number of shares issued under the exercised option or stock appreciation right. Should shares of common stock be withheld by us in satisfaction of the withholding taxes incurred in connection with the issuance or vesting of a full-value award (but not in connection with a stock option or stock appreciation right), or should the participant pay such withholding taxes by delivering shares of our common stock, then the number of shares of common stock available for issuance under the 2023 LTIP will be reduced by the net number of shares issuable pursuant to that award, as calculated after any such share withholding or delivery. Shares repurchased on the open market with the proceeds of the exercise price of options will not be available for issuance under the 2023 LTIP. However, shares subject to awards settled in cash will again be available in the ratios described above. Awards. Under the 2023 LTIP, eligible persons may be granted options, stock appreciation rights, stock awards, restricted stock awards and restricted stock units. For any award made pursuant to the 2023 LTIP, unless otherwise determined by the CHRC, the fair market value per share of our common stock as of any date will be deemed to be equal to the closing price of the Company’s common stock as reported on the New York Stock Exchange on such date, or if no closing price is reported for that date, the closing price on the next preceding date for which transactions were reported. As of April 17, 2023, the closing price of our common stock as reported on the New York Stock Exchange was $225.24 per share. The plan administrator will, subject to the terms of the 2023 LTIP, have complete discretion to determine which eligible individuals are to receive awards, the type of awards to be granted, the time or times when those awards are to be granted, the number of shares subject to each such grant, the vesting and issuance schedule (if any) to be in effect for the grant, the exercise price or other consideration for the shares, the maximum term for which the granted option or stock appreciation right is to remain outstanding and the status of any granted option as either an incentive stock option or a nonqualified option under the federal tax laws, subject to the following provisions. Stock Options and Stock Appreciation Rights. The exercise price of a stock option will not be less than one hundred percent of the fair market value of the option shares on the grant date and no option will have a term in excess of ten years, except that the term of a nonqualified option will continue if the option would otherwise expire during a blackout period in which trading in our stock is restricted. A stock appreciation right will allow the holder to exercise that right as to a specific number of shares of common stock and receive in exchange an appreciation distribution in an amount equal to the excess of (i) the fair market value of the shares of common stock as to which the right is exercised over (ii) the aggregate base price in effect for those shares. The base price per share may not be less than the fair market value per share of common stock on the date the stock appreciation right is granted, and the right may not have a term in excess of ten years, except that the term of a stock appreciation right will continue if the stock appreciation right would otherwise expire during a blackout period in which trading in our stock is restricted. Stock appreciation rights may also be granted in tandem with options; such tandem stock appreciation rights will provide the holders with the right to surrender all or part of their options for an appreciation distribution in an amount equal to the excess of (i) the fair market value of the shares of common stock subject to the surrendered option over (ii) the aggregate base price payable for those shares. The applicable award agreement will specify whether the appreciation distribution on any exercised stock appreciation right will be paid in cash or in shares of common stock or a combination thereof. Repricing/Cash-Out. The plan administrator may not implement any of the following repricing or cash-out programs without obtaining shareholder approval: (i) a reduction in the exercise price or base price of any previously granted option or stock appreciation right, (ii) a cancellation of any previously granted option or stock appreciation right in exchange for another option or stock appreciation right with a lower exercise price or base price or (iii) a cancellation of any previously granted option or stock appreciation rights in exchange for cash or another award if the exercise price of the option or the base price of the stock appreciation right exceeds the fair market value of a share of our common stock on the date of such cancellation, in each case other than in connection with a change in control or the capitalization adjustment provisions in the 2023 LTIP. Stock Awards, Restricted Stock Awards and Restricted Stock Units. Stock awards may be issued subject to performance or service vesting requirements or as fully vested shares. The number of fully vested shares granted under the 2023 LTIP is limited to (i) awards to non-employee directors, (ii) awards to newly hired employees, (iii) awards made in lieu of a cash bonus and (iv) awards for shares that, in the aggregate, do not exceed five percent of the total number of shares available under the 2023 LTIP. Restricted stock units will entitle an award recipient to receive shares (or cash or a combination thereof) upon the attainment of designated performance goals and/or the completion of a prescribed service period. Stock awards may provide for the payment of dividends or 2023 PROXY STATEMENT71 dividend equivalents, provided that no dividends or dividend equivalents will be paid on awards unless the award vests. The plan administrator may grant awards so that those awards will vest only upon the achievement of performance goals. The 2023 LTIP contains a representative list of performance measures. Each performance goal may be expressed on an absolute or relative basis and may include comparisons based on current internal targets, the past performance of the Company (including the performance of one or more subsidiaries, divisions, or operating units) or the past or current performance of other companies (or a combination of such past and current performance). The performance measures may be applied on a pre- or post-tax basis and may be established or adjusted to include or exclude components of any performance measure, including, without limitation, special charges such as restructuring or impairment charges, debt refinancing costs, extraordinary or noncash items, unusual, nonrecurring, infrequent or one-time events affecting the Company or its financial statements or changes in law or accounting principles. In the sole discretion of the CHRC, the CHRC may amend or adjust the performance measures or other terms and conditions of an outstanding award in recognition of any of the permitted adjustment events. Registration with the SEC. If the 2023 LTIP is approved by shareholders, we intend to file, when administratively practicable, a registration statement on Form S-8 pursuant to the Securities Act of 1933, as amended, to register shares of common stock available for issuance under the 2023 LTIP. Change in Control and Vesting Acceleration. A change in control will be deemed to occur if (i) there are certain changes in the composition of our board of directors, (ii) any person or group of related persons becomes directly or indirectly the beneficial owner of more than twenty percent of the total combined voting power of our stock, (iii) we are acquired in a merger or other business combination or (iv) our shareholders approve a complete liquidation, dissolution or sale of substantially all of our assets, unless otherwise provided in an award agreement. If, upon a change in control, unless otherwise provided in an award agreement, the existing awards remain outstanding or are replaced with substantially equivalent awards of a successor, then the existing or substitute awards will remain governed by their respective terms; provided, however, that if a participant’s service with us or a successor entity is terminated without cause or for good reason within two years following a change in control, then all awards held by such participant will vest, and any restrictions will lapse. If, following a change of control, unless otherwise provided in an award agreement, the existing awards do not remain outstanding or are not continued, assumed or replaced with substantially equivalent awards, then all awards will vest, any restrictions will lapse and uncompleted performance measures will be deemed satisfied at the target level of performance. The plan administrator may further cancel (A) any option or stock appreciation right in exchange for cash equal to the excess of the aggregate fair market value of the common stock subject to the award over the aggregate exercise price and (B) restricted stock awards, restricted stock units, performance share awards or other awards denominated in shares of stock, in exchange for the cash value of the award as determined by the stock price and the actual or deemed satisfaction of the performance measures. The acceleration of vesting in the event of a change in control may be seen as an anti-takeover provision and may have the effect of discouraging a merger proposal, a takeover attempt or other efforts to gain control of us. Changes in Capitalization. If an equity restructuring causes the per share value of our common stock to change, such as by reason of a stock dividend, extraordinary cash dividend, stock split, spinoff, rights offering, recapitalization or otherwise, equitable adjustments will be made to the number and class of shares available for issuance under the plan and to the terms of outstanding awards in a manner designed to preclude any dilution or enlargement of the rights of participants. Shareholder Rights and Transferability. No participant will have any shareholder rights with respect to the shares subject to an option or stock appreciation right until such participant has exercised the option or stock appreciation right and paid the exercise price for the purchased shares, and any related withholding taxes. Subject to the terms of the applicable award agreement, a participant will have full shareholder rights with respect to any shares of common stock issued under the 2023 LTIP, whether or not his or her interest in those shares is vested. A participant will not have any shareholder rights with respect to the shares of common stock subject to a restricted stock unit until that award vests and the shares of common stock are actually issued thereunder. Awards generally are not assignable or transferable other than by will or the laws of inheritance, pursuant to Company-approved beneficiary designation procedures, or a domestic relations order. However, the plan administrator may structure one or more awards to be transferable during a participant’s lifetime to one or more members of the participant’s family or to an estate planning trust or charity. Withholding. The Company has the right to require, before issuing or delivering any shares of common stock or paying any cash under an award, payment by the award holder of any federal, state, local or other taxes which may 2023 PROXY STATEMENT72 be required to be withheld or paid in connection with the award. The plan administrator may provide that the Company will withhold cash or a portion of the shares otherwise issuable to such individuals in satisfaction of the withholding taxes to which they become subject in connection with the exercise, vesting or settlement of the awards. Alternatively, the plan administrator may allow award holders to deliver cash or previously acquired shares of our common stock in payment of such withholding tax liability, or other methods set forth in the 2023 LTIP. Deferral Programs. The plan administrator may defer, or may structure one or more awards so that the participants may be provided with an election to defer, the compensation associated with those awards on the terms and conditions the plan administrator may determine in its sole discretion, subject to applicable law. Clawback/Repayment. Awards granted under the 2023 LTIP will be subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to facilitate compliance with the Caterpillar Inc. Guidelines on Corporate Governance Issues, as adopted on December 7, 2013, and any subsequent amendments, including without limitation any such amendments which the Company may be required to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act and guidance thereunder, or as otherwise required by law. Further, to the extent that a participant receives any amount in excess of the amount that the participant should otherwise have received under the terms of the award for any reason, as determined in the Company’s sole discretion, the participant shall be required to repay any such excess amount to the Company. Amendment and Termination. The plan administrator will have the discretionary authority at any time to amend or accelerate the vesting of any and all stock options, stock appreciation rights, restricted stock awards and restricted stock units. The CHRC may terminate, amend or modify the 2023 LTIP at any time, subject to any shareholder approval requirements under applicable law or regulation or pursuant to the listing standards of the stock exchange on which our shares of common stock are at the time primarily traded. No awards may be granted under the 2023 LTIP after June 15, 2033, and no incentive stock options may be granted after April 12, 2033. The following is a summary of the United States Federal income taxation treatment applicable to the Company and the participants who receive awards under the 2023 LTIP. This discussion does not address all aspects of the United States Federal income tax consequences of participating in the 2023 LTIP that may be relevant to participants in light of their personal investment or tax circumstances and does not discuss any state, local or non-United States tax consequences of participating in the 2023 LTIP. Each participant is advised to consult his or her legal, financial, or tax advisors concerning the application of the United States Federal income tax laws to such participant’s particular situation, as well as the applicability and effect of any state, local or non-United States tax laws before taking any actions with respect to any awards. Option Grants. Options granted under the 2023 LTIP may be either incentive stock options, which satisfy the requirements of Section 422 of the Code, or nonqualified options, which are not intended to meet such requirements. The Federal income tax treatment for the two types of options differs as follows: Incentive Stock Options. No taxable income is recognized by the participant at the time of the grant, and no taxable income is recognized for regular tax purposes at the time the option is exercised, although taxable income may arise upon exercise for alternative minimum tax purposes. The participant will recognize taxable income in the year in which the purchased shares are sold or otherwise made the subject of certain other dispositions. For Federal tax purposes, dispositions are divided into two categories: (i) qualifying, and (ii) disqualifying. A qualifying disposition occurs if the sale or other disposition is made more than two years after the date the related option was granted and more than one year after the date such option was exercised for those shares. If the sale or disposition occurs before both of these two periods are satisfied, then a disqualifying disposition will result. Upon a qualifying disposition, the participant will recognize long-term capital gain in an amount equal to the excess of (i) the amount realized upon the sale or other disposition of the purchased shares over (ii) the exercise price paid for the shares. If there is a disqualifying disposition of the shares, then the excess of (i) the fair market value of those shares on the exercise date or (if less) the amount realized upon such sale or disposition over (ii) the exercise price paid for the shares will be taxable as ordinary income to the participant. Any additional gain recognized upon the disposition will be a capital gain. We will not be entitled to any income tax deduction if the participant makes a qualifying disposition of the shares. If the participant makes a disqualifying disposition of the purchased shares, then we will be entitled to an income tax deduction (subject to the deductibility limitations of Code Section 162(m)), for the taxable year in which such disposition occurs, equal to the amount of ordinary income recognized by the participant as a result of the disposition. Nonqualified Options. No taxable income is recognized by a participant upon the grant of a nonqualified option. The participant will recognize ordinary income in the year in 2023 PROXY STATEMENT73 which the option is exercised, equal to the excess of the fair market value of the purchased shares on the exercise date over the exercise price paid for the shares (and subject to income tax withholding in respect of an employee). Subject to the deductibility limitations of Code Section 162(m), we will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the participant with respect to the exercised nonqualified option. Stock Appreciation Rights. No taxable income is recognized upon receipt of a stock appreciation right. The holder will recognize ordinary income in the year in which the stock appreciation right is exercised, in an amount equal to the fair market value of the shares issued to the holder or the amount of the cash payment made to the holder (and subject to income tax withholding in respect of an employee). Subject to the deductibility limitations of Code Section 162(m), we will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the holder in connection with the exercise of the stock appreciation right. Restricted Stock Awards. No taxable income is recognized upon receipt of restricted stock, unless the participant makes an election to be taxed at the time of grant pursuant to Section 83(b) of the Code. If such election is made, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) at the time of the grant in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for those shares. If such election is not made, the holder will recognize ordinary income when those shares subsequently vest in an amount equal to the excess of the fair market value of the shares on the vesting date over the amount, if any, paid for the shares (and subject to income tax withholding in respect of an employee). Subject to the deductibility limitations of Code Section 162(m), we will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the recipient with respect to the restricted stock award. The deduction will be allowed for the taxable year in which such ordinary income is recognized by the recipient. In addition, a participant receiving dividends with respect to restricted stock for which the above-described election has not been made and prior to the time the restrictions lapse will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee), rather than dividend income, in an amount equal to the dividends paid and we will be entitled to a corresponding deduction, except to the extent the deduction limits of Code Section 162(m) apply. Restricted Stock Units. No taxable income is recognized upon receipt of restricted stock units. The holder will recognize ordinary income in the year in which the shares or cash subject to the awards are actually issued to the holder or a dividend equivalent is paid to the holder, in an amount equal to the fair market value of the shares on the issuance date and the amount of any cash on the payment date (and subject to income tax withholding in respect of an employee). Subject to the deductibility limitations of Code Section 162(m), we will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the holder at the time the shares are issued. Parachute Payments. To the extent that compensation provided under the 2023 LTIP may be deemed to be contingent upon a change in control (including, e.g., the vesting of any portion of an award that is accelerated due to the occurrence of a change in control), a portion of such payments may be treated as “parachute payments” as defined in the Code. Any such parachute payments may be non-deductible to us, in whole or in part, under Section 280G of the Code, and may subject the recipient to a non-deductible 20% federal excise tax on all or a portion of such payment (in addition to other taxes ordinarily payable). Section 409A. Certain types of awards under the 2023 LTIP may constitute, or provide for, a deferral of compensation subject to Section 409A of the Code. Unless certain requirements set forth in Section 409A of the Code are complied with, holders of such awards may be taxed earlier than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and may be subject to an additional 20% penalty tax (and, potentially, certain interest penalties). All awards to persons that are or are expected to become officers or employees, non-employee directors, consultants and independent contractors of the Company or one of our subsidiaries under the 2023 LTIP will be made entirely in the discretion of the CHRC. Therefore, the benefits and amounts that will be received or allocated under the 2023 LTIP in the future are not determinable at this time. 2023 PROXY STATEMENT74 PROPOSAL SNAPSHOT What am I voting on? Shareholders are being asked to vote on a Who submitted the proposal? This proposal was submitted by John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, CA 90278, who has represented that he is the owner of no fewer than 20 shares of Caterpillar Inc. common stock. Board Voting Recommendation: AGAINST proposal Caterpillar Inc. is not responsible for the content of this shareholder proposal or supporting statement. WHEREAS: United Nations Climate Change asserts that greenhouse gas emissions must decline by 45% from 2010 levels by 2030 to limit global warming to 1.5 degrees Celsius. If that goal is not met, even more rapid reductions, at greater cost, will be required to compensate for the slow start on the path to global net zero emissions.(1) Even with the recent passage of the Inflation Reduction Act, critical gaps remain between Nationally Determined Contributions set by the U.S. government and the actions required to prevent the worst effects of climate change. Domestically and internationally, companies have an important and constructive role to play in enabling policymakers to close these gaps. Corporate lobbying that is inconsistent with the Paris Agreement presents increasing material risks to companies and their shareholders, as delays in emissions reductions undermine political stability, damage infrastructure, impair access to finance and insurance, and exacerbate health risks and costs. Further, companies face increasing reputational risks from consumers, investors, and other stakeholders if they appear to delay or block effective climate policy. Of particular concern are trade associations and other politically active organizations that say they speak for business but too often present forceful obstacles to addressing the climate crisis. Shareholders appreciate that Caterpillar has disclosed its memberships in trade associations(2). This is an important first https://unfccc.int/news/updated-ndc-synthesis-report-worrying-trends-confirmed https://www.caterpillar.com/en/company/governance/political-engagement.html 2023 PROXY STATEMENT75 step in bringing transparency to their policy engagement. Shareholders believe that enhancing this with reporting on the alignment of the company’s lobbying with the internationally agreed goals of the Paris Agreement would fill an important gap. Resolved: Shareholders request that the Board of Directors conduct an evaluation and issue a report (at reasonable cost, omitting confidential or proprietary information) describing if, and how, Caterpillar lobbying and policy influence activities (both direct and indirect through trade associations, coalitions, alliances, and other organizations) align with the goal of the Paris Agreement to limit average global warming to well below 2°C above pre-industrial levels, and to pursue efforts to limit temperature increase to 1.5°C, and how Caterpillar plans to mitigate the risks presented by any misalignment. The Climate Action 100+ Benchmark finds that Caterpillar lacks a Paris Agreement-aligned climate lobbying position and does not ensure that lobbying activities are aligned with Paris(3). In evaluating the degree of alignment between the Paris Agreement goals and the Company’s lobbying, Caterpillar should consider not only its policy positions and those of organizations of which it is a member, but also the actual lobbying and policy influence activities, such as comment submissions, with regard to climate provisions of key international, federal and state legislation and regulation. Shareholders believe this request is generally consistent with the investor expectations described in the Global Standard on Responsible Climate Lobbying, and that this Standard is a useful resource for implementation.(4) After careful consideration, the Board recommends a vote AGAINST this proposal for the reasons provided below: Caterpillar supports the goals of the Paris Agreement to limit global temperature rise, and we are committed to contributing to a reduced-carbon future. Caterpillar is deeply committed to helping our customers build a better, more sustainable world. Caterpillar demonstrates this commitment in a variety of ways, including by setting and achieving meaningful sustainability targets and disclosing progress toward these goals. We announced our first sustainability goals in 2006 and refined them in 2013 to include a 50% reduction in Scope 1 and 2 GHG emissions intensity from 2006 to 2020. After achieving a 51% reduction against this goal by 2020, in 2021, we set seven new, far-reaching sustainability goals for 2030, including a goal to further reduce absolute Scope 1 and 2 GHG emissions by 30% between 2018 and 2030. In 2021, we also further emphasized our commitment to reducing product-related emissions by disclosing an additional new goal that 100% of our new products through 2030 will be more sustainable than the previous generation. Our innovative and diverse product and service portfolio enables emissions reductions and addresses unique customer needs in the rapidly evolving pathway to a lower-carbon future. Our advancements and efforts include: Successful demonstration of a prototype battery electric Cat 793 large mining truck operated at rated specifications with proprietary “charging while moving” system; Four new electric machine prototypes for Construction Industries, including battery prototypes with an onboard AC charger (with plans to offer an offboard DC fast charging option); A battery-powered, zero-emissions switcher locomotive; A battery electric-powered, zero-emissions underground loader; Cat generator sets capable of operating on 100% hydrogen on a design-to-order basis and standby power units capable of running on renewable liquid fuel; Gas turbines that can operate on 100% hydrogen; Reciprocating engines that burn hydrogen blends, landfill and other biogases; Machines and generator sets equipped with reciprocating engines that can utilize hydrotreated vegetable oil (HVO) as a drop-in replacement for diesel, with 45% to 85% reduced carbon intensity vs. diesel; Cat Energy storage system and bi-directional power inverters to support continuous, reliable electric power that can be integrated with solar panels, hydroelectricity or other renewable energy sources as part of a single, controllable microgrid system; Technology to concentrate and capture CO2 for utilization and sequestration; Energy-as-a-Service (EaaS) offerings which provide customers with turnkey solutions for reducing energy costs, increasing energy efficiency, reducing emissions, monetizing electric grid support and providing resiliency for customer operations; Battery-electric locomotives that will support a customer investing in the world’s largest battery-electric locomotive fleet; and Development of an all-electric mining fleet for the world’s first zero-emissions mine in Canada. https://www.climateaction100.org/company/caterpillar-inc/ https://climate-lobbying.com/wp-content/uploads/2022/03/2022_global-standard-responsible-climate-lobbying_APPENDIX.pdf 2023 PROXY STATEMENT76 Caterpillar already publishes transparent and extensive lobbying disclosures, including the disclosures contained in our inaugural Lobbying Report. Caterpillar understands that actions taken by governments around the world can have a significant impact, both positive or negative, on Caterpillar, its employees, dealers, suppliers and customers. Caterpillar believes that transparency in its lobbying expenditures and political activities is important and, therefore, provides both required and voluntary disclosures that meet or exceed any legal requirements with respect to its lobbying expenditures and political activities. Following engagement with our shareholders after our 2022 annual meeting, we enhanced our existing disclosures about our lobbying and political activities by publishing our inaugural Lobbying Report, which was released in February 2023. This report, which we plan to update on an annual basis, is designed to provide even greater transparency and disclosure of our advocacy efforts and political engagement and includes a detailed description of the oversight and management of these activities. In particular, addressing the concerns raised by the proposal, our Lobbying Report includes transparent disclosure on instances where we have engaged in lobbying activity specifically on climate-related issues such as the Infrastructure Investment and Jobs Act, Creating Helpful Incentives to Produce Semiconductors and Science Act and the Water Resources Development Act. Additionally, the Lobbying Report also contains a list of select trade associations of which we are members and the climate-related lobbying efforts of such trade associations. Given our existing disclosure, the additional detail contemplated by the proposal would not provide any incremental benefit to shareholders. Caterpillar has robust governance practices in place to ensure effective oversight of our sustainability efforts and lobbying and political activities. Caterpillar has consistently recognized the importance of Board oversight of Caterpillar’s sustainability efforts and political activities and expenditures. Historically, the company’s Public Policy and Governance Committee (PPGC), comprised wholly of independent directors, was tasked with oversight of the Company’s environmental, health and safety activities, including climate and sustainability, among other responsibilities. In addition, the PPGC reviewed the Company’s policy on political activities and contributions and Caterpillar’s significant political activities, including corporate political contributions, political contribution activities of the Caterpillar Political Action Committee, trade association participation and Caterpillar’s legislative and regulatory priorities. In June 2022, the Board restructured certain of its committees to better address the changing needs of the Company and the evolving regulatory and governance landscape. The Board accordingly split the PPGC into two separate committees, each wholly comprised of independent directors: the Nominating and Governance Committee and the Sustainability and other Public Policy Committee (SPPC). As a result of this restructuring, which the Board determined would provide enhanced oversight of crucial and evolving activities, the SPPC retained oversight responsibilities of all public policy matters previously exercised by the PPGC along with enhanced oversight responsibility over sustainability, social and public policy matters, including those related to the environment, climate change and lobbying. Consistent with its charter, the SPPC assists the Board of Directors in oversight of Caterpillar’s sustainability efforts through, for example, regular review and discussion with Caterpillar’s Chief Sustainability Officer and other members of management of: (1) Caterpillar’s corporate social responsibility goals, strategies, and programs, including with respect to sustainability; (2) the Company’s annual Sustainability Report and progress against sustainability goals; and (3) the management of sustainability and climate-related risks. With respect to its oversight of Caterpillar’s political activities and expenditures, SPPC regularly reviews and discusses with Caterpillar’s Senior Vice President of Global Government & Corporate Affairs and other members of management: (1) public policy, political, and legislative trends and matters that affect or may affect Caterpillar’s business, performance, strategies or reputation; (2) Caterpillar’s political activities and participation in the political process, including direct and indirect political spending and lobbying activities and expenditures; (3) Caterpillar’s contributions to trade associations that engage in political activities; (4) the steps management has taken to identify, assess, and manage risks relating to the Company’s political activities and expenditures; and (5) Caterpillar’s reporting of its political activities and expenditures. In summary, Caterpillar’s robust lobbying disclosures, including our inaugural Lobbying Report, and the oversight of lobbying activities by our Board, provide the information needed by our shareholders to understand the scope of these activities, including as it relates to our positions on climate change and the Paris Agreement. Publishing an additional report narrowly focused on climate-related lobbying would be duplicative and would not provide any additional meaningful information to our shareholders. 2023 PROXY STATEMENT77 PROPOSAL SNAPSHOT What am I voting on? Shareholders are being asked to vote on a proposal that asks Caterpillar to annually provide additional disclosure on its direct and indirect lobbying and grassroots policy and procedures, payments and decision-making processes. Who submitted the proposal? The proposal was submitted by Board Voting Recommendation: AGAINSTproposal Caterpillar is not responsible for the content of this shareholder proposal or the supporting statement. Whereas Resolved, 1. Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications. 2. Payments by Caterpillar used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case, including the amount of the payment and the recipient. 3. Caterpillar’s membership in and payments to any tax-exempt organization that writes and endorses model legislation. 4. Description of management’s and the Board’s decision-making process and oversight for making payments described in sections 2 and 3 above. For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation or Both “direct and indirect lobbying” and “grassroots lobbying communications” include The report shall be presented to the 2023 PROXY STATEMENT78 Caterpillar Companies can give unlimited amounts to third-party groups that spend millions on lobbying and undisclosed grassroots activity. These groups may be spending “at least double what’s publicly reported.”(2) Caterpillar Caterpillar belongs to the Business Roundtable, National Association of Manufacturers, and Caterpillar’s lack of disclosure presents reputational risks when its lobbying contradicts company public positions. For example, Caterpillar supports diversity and inclusion, yet groups have asked companies Enhance Shareholder Value, Vote FOR After careful consideration, the Board recommends a vote AGAINST this proposal for the reasons provided Caterpillar understands that actions taken by governments around the world can have a significant impact, both positive or negative, on Caterpillar, its employees, dealers, suppliers and Following engagement with our shareholders after our 2022 annual meeting, we enhanced our existing disclosures about our lobbying and political activities by publishing our inaugural Lobbying Report, which was released in February 2023. This report, which we plan to update on Previously, for example, Caterpillar voluntarily reported each U.S. trade association In addition to our comprehensive Lobbying Report, Caterpillar also files required federal Lobbying Disclosure Act reports with Congress. These reports are publicly available at http://disclosures.house.gov and provide Caterpillar’s federal lobbying activities and expenses for the preceding quarter as well as contributions to candidates by the Caterpillar Political Action Committee on a semiannual basis. These reports also include Caterpillar’s total federal lobbying expenditures, the issue that was the topic of communication, disclosure of the Caterpillar individuals who act as lobbyists on behalf of Caterpillar and identification of the legislative body or executive branch agency that was contacted. Beginning with our 2023 quarterly reports, Caterpillar will also provide direct links to review the most recent report in the Disclosures section of Caterpillar.com. https://gizmodo.com/the-biden-administration-is-ready-to-go-to-war-over-ri-1847240802. https://theintercept.com/2019/08/06/business-group-spending-on-lobbying-in-washington-is-at-least-double-whats-publicly-reported/. https://www.washingtonpost.com/us-policy/2021/08/31/business-lobbying-democrats-reconciliation/. https://www.thenation.com/article/politics/alec-corporations-democracy/. https://www.desmog.com/2021/10/22/corporate-tech-giants-climate-action-oil-lobbyists-state-capitols/. 2023 PROXY STATEMENT79 In the European Union, Caterpillar voluntarily participates in the Transparency Register operated by the European Parliament and the European Commission. Through this publicly available resource available at https://ec.europa.eu/transparencyregister, Caterpillar discloses its engagement with policymakers in the European Union regarding issues of interest to Caterpillar’s business and reports such information as to its membership in trade associations and annual expenses associated with activities identified in the Register. Moreover, in our Lobbying Report and on our website, Caterpillar posts information about political expenditures by Caterpillar and disbursements by Caterpillar’s Political Action Committee and describes policies and procedures for Company political contributions. Caterpillar also makes As described in our Lobbying Report, Caterpillar’s political and advocacy activities at the state, federal and international levels are managed by the Senior Vice President, Global Government & Corporate Affairs who coordinates and reviews with the Executive Office and relevant business leaders the legislative and regulatory priorities that are significant to the Company’s business and shareholders, as well as related advocacy activities. Furthermore, to ensure appropriate Board In summary, the Board believes that Caterpillar’s existing Lobbying Report and website disclosures provide shareholders with significant transparency and visibility into the Company’s political engagement activities and its management and oversight of such activities. Preparation and publication of an additional, 2023 PROXY STATEMENT80 PROPOSAL SNAPSHOT What am I voting on? Shareholders are being asked to vote on a proposal that Who submitted the proposal? The proposal was submitted by Board Voting Recommendation: Caterpillar is not responsible for the content of this shareholder proposal or the supporting statement. WHEREAS: Caterpillar’s CoC commits the company to respecting human rights across global operations and its HRP is informed by the UN Guiding Principles on Business and Human Rights (UNGPs).(1) Caterpillar’s Slavery and Human Trafficking Statement indicates that slavery is “inconsistent with our Russian aggression risks: In September, President Putin ordered a ‘partial mobilization,’ requiring organizations in Russia to assist in the conscription of Value chain risks: In 2020, Caterpillar’s exclusive wholesaler for branded retail clothing received multiple shipments from Chinese companies involved in that https://www.caterpillar.com/en/company/governance/political-engagement/human-rights.html https://s7d2.scene7.com/is/content/Caterpillar/CM20210622-bd91e-6d42a#:~:text=Slavery%20and%20Human%20Trafficking%20are,training%20on%20an%20annual%20basis https://www.bnnbloomberg.ca/caterpillar-still-ships-through-russia-after-halting-production-1.1737953 https://www.axios.com/caterpillar-xinjiang-uighur-labor-a6ec73df-b75e-4aea-ae76-cc8182ad6a3c.html https://swedwatch.org/wp-content/uploads/2020/06/97_Myanmar_200610_uppslag_NY.pdf https://www.hrw.org/news/2004/10/28/human-rights-watch-letter-caterpillar-inc https://www.amnesty.org/en/location/middle-east-and-north-africa/israel-and-occupied-palestinian-territories/report-israel-and-occupied-palestinian-territories/ https://wsrw.org/en/archive/4380 2023 PROXY STATEMENT81 Legal/reputational risks: The U.S. Government is imposing sanctions and trade controls against Russia,(9) Myanmar,(10) and China.(11) The EU and its members are passing mandatory human rights due diligence (HRDD) laws,(12) and companies are being held liable for contributions to violations of international law.(13) Investors, representing $18 trillion in assets under management, view human rights and conflict as material risks, evidenced by public statements on Ukraine,(14) Myanmar,(15) and Xinjiang(16); Caterpillar and its customers’ activities in conflict-affected and high-risk areas (CAHRA) may result in heightened material risks through potential violations of Caterpillar’s CoC, HRP, and UNGPs. Should Caterpillar subsidiaries participate in the Caterpillar trails industry peers that have adopted measures to mitigate these risks, including John Deere’s human rights risk-based assessments,(19) Komatsu’s HRDD process,(20) and Volvo’s responsible sales policy.(21) To mitigate risks associated with operations and customers in CAHRA, companies undertake heightened HRDD. Shareholders seek information, at board and management discretion, through a Discusses how human rights risks in CAHRA are assessed and After careful consideration, the Respect for human rights is engrained in Caterpillar culture – demonstrated by our Values in Action. Our commitment is governed by policies and standards that allow us to deliver on our Values of Integrity, Excellence, Teamwork, Commitment and Sustainability. These Values define what we stand for and how we conduct ourselves with our customers, suppliers and employees. To ensure we operate with our Values in Action, Caterpillar already has robust policies in effect, compliance mechanisms in place and reports to illustrate our commitments and processes regarding human rights globally, including in conflict-affected areas of the world. Caterpillar is committed to respecting fundamental human rights principles throughout our global operations and has developed and implemented robust standards and policies. Caterpillar is committed to operating under the values outlined in our Code of Conduct and to complying with all applicable laws and regulations, including conducting activities in a manner that respects human rights. We deploy sustainable standards and policies that apply globally, including within conflict-affected areas, to define the behavior we expect from our directors, officers, employees and business partners. Our values reflect how we conduct ourselves with our customers, suppliers and communities we serve, as well as what Caterpillar believes is the ethical approach to various work situations. Within the framework of our Code of Conduct, we proactively identify, assess and mitigate potential adverse human rights impacts wherever we do business. https://www.state.gov/holding-russia-and-belarus-to-account/ https://www.state.gov/burma-sanctions/ https://www.state.gov/implementation-of-the-uyghur-forced-labor-prevention-act/ https://www.business-humanrights.org/en/big-issues/mandatory-due-diligence/ https://www.justsecurity.org/78097/corporate-criminal-liability-for-human-rights-violations-france-and-sweden-are-poised-to-take-historic-steps-forward/ https://media.business-humanrights.org/media/documents/Investor_Statement_on_the_Crisis_in_Ukraine_16_May_2022.pdf https://investorsforhumanrights.org/investor-statement-myanmar-human-rights-and-business-activities-supporting-military-junta https://investorsforhumanrights.org/sites/default/files/attachments/2021-03/XUAR%20Investor%20Expectations%20Statement.pdf https://fortune.com/2022/10/13/russia-putin-foreign-owned-companies-conscription-campaign-sanctions-ukraine-war-international-europe-popovych-freeman/ https://www.ifc.org/wps/wcm/connect/07cb32dd-d775-4577-9d5f-d254cc52b61a/201902-IFC-FCS-Study.pdf?MOD=AJPERES&CVID=mzeJewf https://s22.q4cdn.com/253594569/files/doc https://www.komatsu.jp/en/ir/library/annual/pdf/annual_06b.pdf https://www.volvogroup.com/en/sustainability/social-responsibility/business-ethics/responsible-sales.html 2023 PROXY STATEMENT82 We have implemented a governance structure to drive compliance with our Code of Conduct and Human Rights Policy. Caterpillar’s Chief Legal Officer has responsibility for compliance and public policy matters, including human rights. The Board The Company maintains a compliance program designed to ensure adherence to all applicable international conventions and U.S. regulations, including export controls and economic sanctions adopted by the U.S. and other countries. That program prohibits, among other things, sales to countries, entities and individuals that would violate applicable export controls or economic sanctions. We require all In addition to our Code of Conduct, Caterpillar’s Human Rights Policy is informed by and We have developed risk oversight mechanisms to ensure our suppliers uphold the sound business practices we embrace, follow the law and conduct activities in a manner that Caterpillar’s Supplier Code of Conduct is publicly accessible on our website and our self-reporting includes an ongoing assessment of the impact our operations have on human rights, due diligence, performance tracking, mechanisms to report grievances and remediation processes. Caterpillar has a large and diverse network of business partners and suppliers, and as of 2022, 100% of our top suppliers have affirmed their alignment with our Supplier Code of Conduct. Caterpillar takes seriously any alleged illegal or unethical behavior engaged by its suppliers, business partners or employees. Our Supplier Code of Conduct includes feedback channels for workers, including third-party anonymous hotlines and the ability to contact the Office of Business Practices directly at any time and in any language. This allows unfettered access for individuals to raise concerns of potential human rights impact. Caterpillar will assess and escalate human rights issues and concerns regarding our business activity within the informed context of law, policy and our Code of Conduct, and when doing so, we will act We develop and evolve our reports according to what is in the Since 2011, Caterpillar has publicly released reports that contain extensive information and disclosures about the extent to which our policies and procedures effectively protect workers in our supply chain. We have demonstrated our intent to continually improve and expand these reports over time. Our reports, listed below, provide detailed, relevant and comprehensive information for stakeholders, which are all available publicly on caterpillar.com. Code of Conduct Human Rights Policy Supplier Code of Conduct Slavery and Human Trafficking Statement Annual Conflict Minerals Report Annual Diversity & Inclusion Report Annual Sustainability Report, which was certified and verified by an A formal report as contemplated by the In summary, the Board remains committed to human rights and ensuring that Caterpillar continues to adhere to the high standard for human rights to which it holds itself, our employees, our suppliers and our business partners. We do not believe the report called for by the proposal would enhance those objectives and we believe we already deploy the right policies, processes and governance to ensure that we make the right decisions about where and how we conduct our business aligned with 2023 PROXY STATEMENT83 PROPOSAL SNAPSHOT What am I voting on? Shareholders are being asked to vote on a proposal that Who submitted the proposal? This proposal was submitted by Board Voting Recommendation: Caterpillar is not responsible for the content of this shareholder proposal or the supporting statement. Shareholders of Caterpillar Inc. (“the Company”) request Under the guise of Many companies — including Bank of https://www.city-journal.org/bank-of-america-racial-reeducation-program; https://www.sec.gov/Archives/edgar/data/1048911/000120677421002182/fdx3894361-def14a.htm#StockholderProposals88; https://www.americanexperiment.org/survey-says-americans-oppose-critical-race-theory/; 2023 PROXY STATEMENT84 After careful consideration, the Board recommends a vote AGAINST this proposal for the reasons provided Caterpillar is committed to diversity and inclusion, and Caterpillar’s existing policies promote fair and equitable treatment of its workforce. At Caterpillar, we believe in The Power of Everyone as a source of innovation and competitive advantage. We are proud that our people come from across the globe, with diverse backgrounds, experiences and perspectives united by our Values in Action and collectively committed to our purpose of helping our customers build a better, more sustainable world. Company policies ensure employment decisions are based upon qualifications for the work to be performed, without regard to race, religion, national origin, color, gender, gender identity, sexual orientation, age and/or physical or mental disability. Caterpillar is committed to operating under the values outlined in our Code of Conduct, and we support and obey laws that prohibit discrimination everywhere we do business. In plain terms, Caterpillar does not tolerate discrimination or harassment of any kind against anyone. Caterpillar is transparent in demonstrating support of racial equity for all individuals with whom we do business. Our Our Values In Action, Caterpillar’s Code of Conduct Human Capital Management Disclosure Annual Diversity & Inclusion Report D&I Website, caterpillar.com/diversity Caterpillar’s Pay for Performance strategy recognizes individual effort to The Caterpillar employees have mechanisms for reporting their views without reprisal. The proposal suggests that “too many employers have established stances that silence employees who disagree with the In addition, Caterpillar takes concrete steps to both measure and continuously improve employee engagement by providing employees opportunities to voice concerns through voluntary engagement surveys. For example, Caterpillar’s Annual Employee Insights survey provides all employees an opportunity to confidentially share their perspectives and engages leaders to listen, learn and respond to employee feedback. Caterpillar is committed to promoting and maintaining a diverse and inclusive culture in our company and in our communities. In 2021, we formalized and introduced our strategic approach to diversity and inclusion with our five-pillar D&I Framework, which weaves diversity and inclusion seamlessly into the 2023 PROXY STATEMENT85 We do not know of any matters to be acted upon at the 2023 Annual Meeting other than those discussed in this statement. If any other matter is properly presented, proxy holders will vote on the matter in their discretion. A proposal for action or the nomination of a director to be presented by any Rule 14a-8 proposals: If the proposal is to be included in our proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, the proposal must be received at the office of the Corporate Secretary on or before January 6, 2024. Proposals or nominations not to be included in our proxy: If the proposal or the nomination of a director is not to be included in the proxy statement, the proposal must be received at the office of the Corporate Secretary no earlier than February 15, 2024, and no later than April 15, 2024. Proxy access nominations: If the proposal is for the nomination of directors to be included in our proxy statement pursuant to proxy access under Article II, Section 4 of Caterpillar’s bylaws, the proposal must be received at the office of the Corporate Secretary no earlier than December 7, 2023, and no later than January 6, 2024. Universal proxy rules: In addition to satisfying the foregoing requirements under our bylaws, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Our bylaws are available on our website at www.caterpillar.com/governance. Shareholder proposals, director nominations and requests for copies of our bylaws should be delivered to Caterpillar Inc. c/o Corporate Secretary, 2023 PROXY STATEMENT86 The following table lists those persons or groups (based on a review of Schedule 13Gs filed with the SEC) who beneficially own more than five percent of Caterpillar common stock as of December 31, 2022: Name and Address Voting Authority Dispositive Authority Total Amount of Beneficial Ownership Percent of class Sole Shared Sole Shared BlackRock, Inc. 32,597,552 0 36,459,646 0 36,459,646 7.0 Capital World Investors 333 South Hope Street, 55th Floor Los Angeles, CA 90071 29,275,266 0 29,381,792 0 29,381,792 5.6 State Street Corporation and 0 19,288,660 0 39,778,535 39,841,238 7.66 The Vanguard Group 0 772,345 46,441,936 2,259,646 48,701,582 9.36 2023 PROXY STATEMENT87 Security ownership (as of January 1, 2023) of Caterpillar’s executive officers, board of directors and nominees to the board of directors is included in the following table: Common Stock(1) Shares Underlying Stock Options/ SARs/RSUs Exercisable within 60 Days Additional Stock Options/SARs/RSUs Exercisable upon Retirement(2) Total Kelly A. Ayotte 4,565 (4) 0 0 4,565 Andrew R. J. Bonfield 53,487 30,786 0 84,273 David L. Calhoun 48,217 (5) 0 0 48,217 Joseph E. Creed 10,597 47,896 0 58,493 Bob De Lange 44,559 277,173 0 321,732 Daniel M. Dickinson 10,283 0 0 10,283 Denise C. Johnson 8,605 48,206 0 56,811 Gerald Johnson 569 0 0 569 David W. MacLennan 2,484 (6) 0 0 2,484 Debra L. Reed-Klages 9,898 (5) 0 0 9,898 Edward B. Rust, Jr. 46,580 0 0 46,580 Susan C. Schwab 21,541 (5) 0 0 21,541 D. James Umpleby III 349,806 450,166 0 799,972 Rayford Wilkins, Jr. 5,296 0 0 5,296 All current directors and executive officers as a group(3) (17 persons) 653,007 1,065,458 0 1,718,465 Each person listed in the table has beneficial ownership of less than 1%. Common stock that is directly or indirectly beneficially owned, including stock that is individually or jointly owned and shares over which the individual has either sole or shared investment or voting authority. Stock Options, SARs or RSUs that are not presently exercisable within 60 days, but that would become immediately exercisable if such individual was eligible to retire and elected to retire pursuant to Long-Service Separation. None of the shares held by the group has been pledged. Includes 1,578 shares that the holder has the right to acquire within 60 days under the Directors’ Deferred Compensation Plan. Includes 3,156 shares that the holder has the right to acquire within 60 days under the Directors’ Deferred Compensation Plan. Includes 244 shares that the holder has the right to acquire within 60 days under the Directors’ Deferred Compensation Plan. Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers, directors and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC and the NYSE, and to furnish Caterpillar with copies of such forms. Based on our 2023 PROXY STATEMENT88 We provide the following definitions for the non-GAAP financial measures used in this report. These non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to the calculation of similar measures for other companies. Management does not intend these items to be considered in isolation or as a substitute for the related GAAP measures. We believe it is important to separately quantify the profit impact of three significant items in order for our results to be meaningful to our readers. These items consist of (i) goodwill impairment, (ii) restructuring (income) costs, and (iii) pension and OPEB mark-to-market (gains) losses resulting from plan remeasurements. We do not consider these items indicative of earnings from ongoing business activities and believe the non-GAAP measures will provide investors with useful perspective on underlying business results and trends and aid with assessing our period-over-period results. In addition, we provide a calculation of ME&T free cash flow as we believe it is an important measure for investors to determine the cash generation available for financing activities including debt repayments, dividends and share repurchases. Reconciliations of adjusted results to the most directly comparable GAAP measures are as follows: (Dollars in millions except per share data) Operating Profit Operating Profit Margin Profit Before Taxes Provision (Benefit) for Income Taxes Effective Tax Rate Profit Profit per Share Three Months Ended December 31, 2022 - U.S. GAAP $ 1,680 10.1 % $ 2,099 $ 644 30.7 % $ 1,454 $ 2.79 Goodwill impairment 925 5.6 % 925 36 3.9 % 889 1.71 Restructuring (income) costs 209 1.3 % 209 59 28.2 % 150 0.29 Pension/OPEB mark-to-market (gains) losses — — % (606) (124) 20.5 % (482) (0.93) Three Months Ended December 31, 2022 - Adjusted $ 2,814 17.0 % $ 2,627 $ 615 23.4 % $ 2,011 $ 3.86 Three Months Ended December 31, 2021 - U.S. GAAP $ 1,611 11.7 % 2,562 $ 429 16.7 % $ 2,120 $ 3.91 Restructuring (income) costs (34) (0.2) % (34) (15) 44.1 % (19) (0.03) Pension/OPEB mark-to-market (gains) losses — — % (833) (190) 22.8 % (643) (1.19) Three Months Ended December 31, 2021 - Adjusted 1,577 11.4 % $ 1,695 $ 224 13.2 % $ 1,458 $ 2.69 Twelve Months Ended December 31, 2022 - U.S. GAAP $ 7,904 13.3 % $ 8,752 $ 2,067 23.6 % $ 6,705 $ 12.64 Goodwill impairment 925 1.6 % 925 36 3.9 % 889 1.68 Restructuring (income) costs 299 0.5 % 299 72 24.0 % 227 0.43 Pension/OPEB mark-to-market (gains) losses — — % (606) (124) 20.5 % (482) (0.91) Twelve Months Ended December 31, 2022 - Adjusted $ 9,128 15.4 % $ 9,370 $ 2,051 21.9 % $ 7,339 $ 13.84 Twelve Months Ended December 31, 2021 - U.S. GAAP $ 6,878 13.5 % $ 8,204 $ 1,742 21.2 % $ 6,489 $ 11.83 Restructuring (income) costs 90 0.2 % 90 4 4.4 % 86 0.15 Pension/OPEB mark-to-market (gains) losses — — % (833) (190) 22.8 % (643) (1.17) Twelve Months Ended December 31, 2021 - Adjusted $ 6,968 13.7 % $ 7,461 $ 1,556 20.9 % $ 5,932 $ 10.81 Reconciliations of ME&T free cash flow to the most directly comparable GAAP measure, net cash provided by operating activities are as follows: Millions of dollars Twelve Months Ended December 31, 2022 2021 ME&T net cash provided by operating activities $ 6,358 $ 7,177 ME&T discretionary pension contributions — — ME&T capital expenditures (1,298 ) (1,129 ) Cash payments related to settlements with the U.S. Internal Revenue Service 717 — ME&T free cash flow $ 5,777 $ 6,048 2023 PROXY STATEMENT892015 PENSION BENEFITSNAME PLAN NAME1 NUMBER OF YEARS OF
CREDITED SERVICE2 PRESENT VALUE OF
ACCUMULATED BENEFIT3Douglas R. Oberhelman RIP 35.00 $ 2,982,817 SERP 35.00 $ 22,557,058 Bradley M. Halverson RIP 27.83 $ 1,833,801 SERP 27.83 $ 4,118,102 Robert B. Charter CatSuper Plan 26.67 $ 3,218,440 Edward J. Rapp RIP 35.00 $ 2,641,850 SERP 35.00 $ 9,291,016 D. James Umpleby III RIP 25.00 $ 1,669,706 Solar MRO 25.00 $ 10,187,255 1Caterpillar Inc. Retirement Income Plan (RIP) is a noncontributory U.S. qualified defined benefit pension plan and the Supplemental Retirement Plan (SERP) is a U.S. non-qualified pension plan. The total benefit formula across both plans is 1.5 percent for each year of service (capped at 35 years) multiplied by the final average earnings during the highest five of the final ten years of employment. Final average earnings include base salary and annual incentive compensation, including amounts deferred. The employee’s annual retirement income benefit under the qualified plan is restricted by the Internal Revenue Code limitations, and the excess benefits are paid from SERP. SERP is not funded. Mr. Charter participates in the Caterpillar of Australia PTY LTD Retirement Plan (CatSuper Plan), a defined benefit plan. The total benefit formula in the plan is 17.5 percent for each year of service multiplied by final average salary during the highest three of the final ten years of employment. Final average salary for this plan includes base salary and annual incentive compensation, including amounts deferred, without any limitation on the dollar amounts covered. The plan formula produces a lump sum amount. Mr. Umpleby participated in the Solar Turbines Incorporated Retirement Plan (Solar RP) through December 31, 2014, and participates in the Solar Turbines Incorporated Managerial Retirement Objective Plan (Solar MRO) because he was originally hired by Solar Turbines Incorporated, a wholly owned subsidiary of Caterpillar. The Solar RP was merged into RIP as of January 1, 2015; however, all benefit and eligibility provisions of Solar RP remain unchanged. The Solar RP is a noncontributory U.S. qualified defined benefit pension plan and the Solar MRO is a U.S. non-qualified pension plan. The total benefit formula for the Solar RP is 60 percent of final average salary prorated for years of service less than 25 minus 65 percent of the monthly Social Security benefit. Final average salary is the average base salary for the highest consecutive 36 month period during the 120 month period prior to retirement. Amounts payable under both Solar RP and Solar MRO are based upon a maximum of 25 years of service. Mr. Umpleby meets the early retirement eligibility requirement of age 55.The Solar MRO provides a benefit under the same benefit formula and includes base salary and annual incentive pay. The employee’s annual retirement income benefit under the Solar RP is restricted by the Internal Revenue Code limitations and the excess benefits are paid from the Solar MRO. The Solar MRO is not funded.2Mr. Oberhelman, Mr. Halverson and Mr. Rapp participate in RIP and SERP. Mr. Oberhelman and Mr. Rapp have more than 35 years of service with the Company. Amounts payable under both RIP and SERP are based upon a maximum of 35 years of service. All RIP participants may receive their benefit immediately following termination of employment after reaching early retirement eligibility, or may defer benefit payments until any time between early retirement age and normal retirement age. SERP and Solar MRO participants receive their benefit six months after their retirement date. Normal retirement age is defined as age 65 with five years of service. For RIP and SERP participants, early retirement is defined as: any age with 30 years of service, age 55 with 15 years of service or age 60 with 10 years of service. If a participant elects early retirement, benefits are reduced by four percent per year, before age 62. In 2015, Mr. Oberhelman and the Company agreed to amend the Company’s SERP to provide that if Mr. Oberhelman terminates employment prior to age 65, his benefit under the SERP will be reduced for early retirement. Prior to the amendment, Mr. Oberhelman was entitled to an unreduced benefit under the SERP for any retirement after attainment of age 62. As current RIP and SERP participants, Mr. Oberhelman is eligible for early retirement, with a four percent reduction per year under age 65, while Mr. Rapp and Mr. Halverson are eligible for early retirement, with a four percent reduction per year under age 62. Mr. Charter, who participates in the CatSuper Plan, is currently vested in a benefit attributable to 17.75 years of his service. He also has a benefit under the same plan formula based on an additional 8.92 years of service which will vest if he remains employed with the Company until age 55. This additional benefit would result in $1,626,317 pension increase once fully vested. Normal retirement in the CatSuper Plan is defined as age 65 and early retirement is available at age 55, with no reduction to the lump sum earned. Mr. Umpleby, who participates in the Solar RP and Solar MRO, has more than 25 years of service with the Company and meets the early retirement eligibility requirement of age 55 with at least 10 years of service. Early retirement benefits paid under Solar RP and Solar MRO have a three percent reduction per year under age 62. The Solar RP was merged into RIP as of January 1, 2015; however, all benefit and eligibility provisions of Solar RP remain unchanged.3The amount in this column represents the actuarial present value for each NEO’s accumulated pension benefit on December 31, 2015. For each NEO, it assumes benefits are payable at each NEO’s earliest unreduced retirement age based upon current level of pensionable income. The interest rate of 4.17 percent and the RP-2014 mortality table, adjusted with a lead factor of 113.2 percent and using projected scale BB-2D in years 2011 and beyond used in the calculations, are based upon the FASB ASC 715 disclosure on December 31, 2015. The amount reported for Mr. Charter has been converted to U.S. dollars using the exchange rate in effect on December 31, 2015 (1 Australian dollar = 0.7286 U.S. dollar).2016 Proxy Statement | 4520152022 NONQUALIFIED DEFERRED COMPENSATIONNAME PLAN NAME EXECUTIVE
CONTRIBUTIONS
IN 20151 REGISTRANT
CONTRIBUTIONS
IN 20152
EARNINGS IN
20153 AGGREGATE
BALANCE
AT 12/31/154Douglas R. Oberhelman SDCP $ 320,100 $ 160,050 $ (797,275 ) $ 2,948,856 SEIP $ — $ — $ (203,695 ) $ 693,124 DEIP $ — $ — $ (375,004 ) $ 1,412,140 Bradley M. Halverson SDCP $ 107,823 $ 53,912 $ (232,643 ) $ 873,008 SEIP $ — $ — $ (947 ) $ 3,222 DEIP $ — $ — $ (17,923 ) $ 60,994 Robert B. Charter5 SDCP $ — $ — $ — $ — Edward J. Rapp SDCP $ 140,665 $ 70,333 $ (507,452 ) $ 2,578,357 SEIP $ — $ — $ (14,449 ) $ 49,169 DEIP $ — $ — $ (96,095 ) $ 767,451 D. James Umpleby III SDCP $ 130,329 $ 65,164 $ (169,757 ) $ 1,850,259 SEIP $ — $ — $ (229 ) $ 30,239 DEIP $ — $ — $ (49,921 ) $ 2,359,598 1The Supplemental Deferred Compensation Plan (SDCP) is a non-qualified deferred compensation plan created in March of 2007 with a retroactive effective date of January 1, 2005, which effectively replaced the Supplemental Employees’ Investment Plan (SEIP) and Deferred Employees’ Investment Plan (DEIP).2SDCP allows eligible U.S. employees, including all NEOs, to voluntarily defer a portion of their base salary and AIP pay into the plan and receive a Company matching contribution. SPP pay may also be deferred, but does not qualify for any Company matching contributions. Amounts deferred by executives in 2015 for base salary, AIP pay and/or SPP payouts are included in the “2015 Summary Compensation Table.” Matching contributions in non-qualified deferred compensation plans made by Caterpillar in 2015 are also included in the “2015 All Other Compensation Table” under the Matching Contributions SDCP column. SDCP participants may elect a lump sum payment, or an installment distribution payable for up to 15 years after separation.3Aggregate earnings comprise interest, dividends, capital gains and appreciation/depreciation of investment results. The investment choices available to the participant mirror those of the Company’s 401(k) plan.4Amounts in this column were previously reported in the “Summary Compensation Table” for the years 2013–2015 as follows: Mr. Oberhelman $1,022,586; Mr. Halverson $359,410; Mr. Rapp $451,556; and Mr. Umpleby $382,412.5Mr. Charter began participation in SDCP on January 1, 2016.46 | 2016 Proxy StatementPOTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROLExcept for customary provisions in employee compensation plans and as required by law, there are no pre-existing severance or change in control agreements with the NEOs.following is a summary of the compensation that would become payable under the existing compensation plans if an NEO’s employment had terminated on December 31, 2015 in each of the following scenarios:●Voluntary Separation, including retirement that does not qualify as Long-Service Separation●Long-Service Separation (separation after age 55 with 5 or more years of Company service effective with the 2011 equity grant, and age 55 with 10 or more years of service for prior year grants)●Termination for Cause●Termination without Cause or for Good Reason within one year following a change in control (Termination following CIC)EQUITY AWARDSVoluntary Separation●Stock Options and SARs: Vested awards are exercisable until the earlier of the expiration date or 60 days from the separation date; unvested awards are forfeited●PRSUs and RSUs: ForfeitedLong-Service Separation●Stock Options and SARs granted prior to 2016:Vest and are exercisable until the earlier of the expiration date or 60 months from the separationdate●Stock Options and SARs granted in 2016 or after: Vest and become immediately exercisable for the remaining term of the award●RSUs: Accelerated vesting; Chairman’s RSU Awards granted prior to May 2014 are not eligible for Long-Service Separation treatment●PRSUs: Remain outstanding and vest if and to the extent performance goals are achievedTermination for Cause●Stock Options and SARs: Vested and unvested awards are forfeited●PRSUs and RSUs: ForfeitedTermination following CIC●Stock Options and SARs: Vest and become immediately exercisable for remaining term of the award●PRSUs and RSUs: Accelerated vesting of outstanding awardsANNUAL INCENTIVE PLANVoluntary Separation●Payment is forfeitedLong-Service Separation●Payment for a pro-rated service period based on actual resultsTermination for Cause●Payment is forfeitedTermination following CIC●Payment for a pro-rated service period assuming achievement of target opportunitySTRATEGIC PERFORMANCE PLANVoluntary Separation●Payment is forfeitedLong-Service Separation●Payment for a pro-rated service period based on actual resultsTermination for Cause●Payment is forfeitedTermination following CIC●Payment for entire performance period assuming achievement of maximum opportunity2016 Proxy Statement | 47DEFERRED COMPENSATIONThe “2015“2022 Nonqualified Deferred Compensation” table on page 46 describes unfunded, non-qualified deferred compensation plans that permit the deferral of salary, bonus and short-term cash performance awards by NEOs. These plans also provide for matching and/or annual non-elective contributions by the Company. NEOs are eligible to receive the amount in their deferred compensation accounts following termination under any termination scenario unless the NEO elected to further defer the payment as permitted by the plans.POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
SEVERANCE PAYThe Company is not obligated 2023 PROXY STATEMENT62provide any special severance payments to any NEOs.ContentsPOTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
RETIREMENT OF EDWARD J. RAPPMr. Rapp will be retiring from the Company in 2016 and will be stepping down as the Group President with responsibility for Resource Industries as of April 1, 2016. He will remain on special assignment receiving his current salary until his retirement on June 30, 2016.&AND POTENTIAL PAYMENTS – CHANGE IN CONTROL2015.2022. The information is provided relative to the NEO’s compensation and service levels as of the date specified. If applicable, they are based on the Company’s closing stock price on December 31, 2015.30, 2022.48 | 2016 Proxy StatementPOTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROLEQUITY AWARDS INCENTIVE NAME TERMINATION SCENARIO STOCK
OPTIONS/
SARs1 PRSUs/ RSUs2 SHORT-TERM
INCENTIVE3 LONG-TERM
INCENTIVE4 POST
TERMINATION
BENEFITS TOTAL Douglas R. Oberhelman Voluntary Separation $ — $ — $ — $ — — $ — Long-Service Separation $ — $ 2,659,343 $ 2,800,014 $ 2,850,143 — $ 8,309,500 Termination for Cause $ — $ — $ — $ — — $ — Termination following CIC $ — $ 2,659,343 $ 5,600,028 $ 8,550,000 — $ 16,809,371 Bradley M. Halverson Voluntary Separation $ — $ — $ — $ — — $ — Long-Service Separation $ — $ 1,102,719 $ 904,259 $ 766,705 — $ 2,773,683 Termination for Cause $ — $ — $ — $ — — $ — Termination following CIC $ — $ 1,102,719 $ 1,808,518 $ 2,300,000 — $ 5,211,237 Robert B. Charter Voluntary Separation $ — $ — $ — $ — — $ — Long-Service Separation $ — $ 917,800 $ 839,233 $ 766,705 — $ 2,523,738 Termination for Cause $ — $ — $ — $ — — $ — Termination following CIC $ — $ 917,800 $ 1,678,466 $ 2,300,000 — $ 4,896,266 Edward J. Rapp Voluntary Separation $ — $ — $ — $ — — $ — Long-Service Separation $ — $ 1,245,231 $ 1,051,025 $ 766,705 — $ 3,062,961 Termination for Cause $ — $ — $ — $ — — $ — Termination following CIC $ — $ 1,245,231 $ 2,102,051 $ 2,300,000 — $ 5,647,282 D. James Umpleby III Voluntary Separation $ — $ — $ — $ — — $ — Long-Service Separation $ — $ 1,222,668 $ 938,176 $ 766,705 — $ 2,927,549 Termination for Cause $ — $ — $ — $ — — $ — Termination following CIC $ — $ 1,222,668 $ 1,876,352 $ 2,300,000 — $ 5,399,020 1For valuation purposes, as of December 31, 2015, when the closing price of Caterpillar common stock was $67.96, the 2013, 2014 and 2015 option exercise prices were higher than the year end closing price. Thus all three grants were underwater as December 31, 2015. The 2013, 2014 and 2015 grants were not fully vested as of December 31, 2015.2The valuation shown is based upon the number of PRSUs and RSUs that would vest multiplied by the closing price of Caterpillar common stock on December 31, 2015, which was $67.96 per share.3The plan provisions limit the payout to a maximum of $15.0 million in any single year. Amounts shown for Termination following CIC represent the maximum payout available under AIP for all NEOs.4Termination following CIC amounts shown for all NEOs represent the maximum payout for the 2014-2016 performance period, which was the only outstanding performance period as of December 31, 2015. Plan provisions in effect for the 2014-2016 performance cycle restrict Mr. Oberhelman’s payout to $20.0 million. The amount shown for long-service separation is the NEO’s prorated benefit based on a target payout for 2014-2016performance cycle, which was the only outstanding performance cycle under the SPP as of December 31, 2015.Compensation CommitteeCHRC regularly reviews the Company’s compensation policies and practices, including the risks created by the Company’s compensation plans. In addition, the Company also conducted a review of its compensation plans and related risks to the Company. The Company reviewed its analysis with the CommitteeCHRC and the Committee’s independent compensation consultant, and the CommitteeCHRC concluded that the compensation plans reflected the appropriate compensation goals and philosophy.philosophy and do not incentivize excessive or inappropriate risk taking. Based on this review and analysis, the Company has concluded that any risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.CEO PAY RATIO
PAY VERSUS PERFORMANCE
2016 Proxy Statement Most Important Financial Measures | 49Some of the following stockholder proposals contain assertions that we believe are incorrect or do not reflect all of the facts related to these issues. We have not attempted to refute all inaccuracies.PROPOSAL 4 – STOCKHOLDER PROPOSAL – LOBBYING REPORTPROPOSAL SNAPSHOTPROPOSAL 5– APPROVAL OF CATERPILLAR INC. 2023 LONG-TERM INCENTIVE PLAN
●INTRODUCTION
DETERMINATION OF THE SHARE RESERVE
StockholdersNo stock appreciation rights were outstanding as of March 31, 2023.SUMMARY OF 2023 LTIP
GENERAL PROVISIONS APPLICABLE TO ALL AWARDS
SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES OF AWARDS GRANTED UNDER THE 2023 LTIP
FUTURE PLAN BENEFITS
SHAREHOLDER PROPOSALS
PROPOSAL 6 – SHAREHOLDER PROPOSAL - REPORT ON CORPORATE CLIMATE LOBBYING IN LINE WITH PARIS AGREEMENT
stockholdershareholder proposal calling for additional disclosurethe Company to issue a report describing if, and how, Caterpillar lobbying and policy influence activities align with the goal of Caterpillar’s lobbying activity.the Paris Agreement to limit average global warming.●PROPOSAL
PROPOSAL 6 - REPORT ON CORPORATE CLIMATE LOBBYING IN LINE WITH PARIS AGREEMENT
SUPPORTING STATEMENT
COMPANY RESPONSE
PROPOSAL 7– SHAREHOLDER PROPOSAL - LOBBYING DISCLOSURE
The Firefighters’ Pension System of the City of Kansas City, Missouri, Trust, 10th Floor, City Hall, 414 East 12th Street, Kansas City, MO 64106,Myra K. Young, 9295 Yorkship Court, Elk Grove, CA 95758, who has represented that itshe is the ownerof 10050 shares of Caterpillar Inc. common stock.☒PROPOSALPROPOSAL
PROPOSAL 7 — LOBBYING DISCLOSURE
we believe in full disclosure of Caterpillar’s direct and indirect lobbying activities and expenditures to assess whether Caterpillar’s lobbying is consistent with Caterpillar’sits expressed goals and in thestockholders’ best interests of stockholders.interests: the stockholders of Caterpillar request the preparation of a report, updated annually, disclosing:1.Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications.2.Payments by Caterpillar used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient.3.Caterpillar’s membership in and payments to any tax-exempt organization that writes and endorses model legislation.4.Description of management’s and the Board’s decision making process and oversight for making payments described in sections 2 and 3 above.regulation,regulations, (b) reflects a view on the legislation or regulation, and(c)and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. “Indirect lobbying” is lobbying engaged in by a trade association or other organization of which Caterpillar is a member.efforts at the local, state, and federal levels.efforts.AuditPublic Policy and Governance Committee or other relevant oversight committees and posted on Caterpillar’s website.SUPPORTING STATEMENT
As stockholders, we encourage transparency and accountability in Caterpillar’s use of corporate funds to influence legislation and regulation. Caterpillar spent $11 million in 2013 and 2014$42,850,000 from 2010 - 2020 on federal lobbying (opensecrets.org). These figures dolobbying. This does not include state lobbying, expenditures, where Caterpillar also lobbies, but disclosure is uneven or absent. For example, Caterpillar spent $176,000 lobbying in California for 2013 and 2014 (http://cal-access.ss.ca.gov/). Caterpillar’s lobbying against EPA greenhouse gas regulationsright-to-repair laws in states like New York has attracted mediadrawn attention (“Half a Billion Dollars Gets You a Gentler Climate Plan,”Bloomberg, Aug. 5, 2015)(1).50 | 2016 Proxy Statementservesalso lobbies abroad, spending between €100,000 - 199,000 on the board of the Chamber of Commerce, which spent $124 million lobbying in 2014.Europe for 2020.is also a memberfails to disclose any of its payments to trade associations and social welfare organizations, nor amounts used for lobbying, including grassroots.Business Roundtable,Chamber Commerce, which together spent $47 million$108,148,000 on 2020 lobbying and drew attention for 2013 and 2014.a “massive lobbying blitz” against raising corporate taxes to pay for infrastructure.(3) Caterpillar does not disclose its payments to trade associations, or the amounts used for lobbying. Absent a system of accountability and disclosure, corporate assets may be used for objectives that pose risks to the Company.Nor does Caterpillar disclose its membershipcontributions in or contributions to tax-exempt organizations that write and endorse model legislation, such as being a member of the American Legislative Exchange Council (ALEC). More than 100have publicly leftto leave ALEC including 3M, John Deere, Emerson Electric, McDonald’s“because of its voter restriction efforts.”(4) Caterpillar supports mitigating climate change, yet the Chamber and Walgreens.Transparent reporting would reveal whether Company assets are being usedBusiness Roundtable lobby to block climate action(5). Caterpillar supports government investments to modernize infrastructure, yet its trade associations lobbied against raising corporate taxes to pay for objectives contrary to Caterpillar’s long-term interests.it.COMPANY RESPONSETheThis topic won 44% of the vote last year.
Lobbying Disclosure - Proposal 7COMPANY RESPONSE
below.below:Caterpillar’s political and advocacy activities, at both the state and federal levels, are managed by the Vice President, Global Government & Corporate Affairs who coordinates and reviewsCaterpillar already provides its shareholders with senior management the legislativeextensive information on its lobbying and regulatory priorities that are significant to the Company’s business and stockholders, as well as related advocacy activities. To ensure appropriate Board oversight of political activities through its inaugural annual Lobbying Report and the Board’s Public Policyinformation made available on its website.Governance Committeecustomers. Caterpillar believes that transparency in its lobbying expenditures and political activities is briefed annuallyimportant and, therefore, provides both required and voluntary disclosures that meet or exceed any legal requirements with respect to its lobbying expenditures and political activities.bothan annual basis, is designed to provide even greater transparency and enhanced disclosure of our advocacy efforts and political engagement and includes a detailed description of the Company’s political spendingoversight and management of these activities. expenditures.Caterpillar belongs to a number of trade associations representing the interests of the manufacturing industry. These organizations work to represent the industry and advocate on major policy issues of importance to Caterpillar and its customers. Caterpillar’s participation as a member of any trade association comes with the understanding that we maynot always agree with all of the positions of the organization or other members. Each quarter Caterpillar discloses in a publicly available report the Company’s total federal lobbying expenditures for the quarter which includes the portion of all trade association payments that are used for lobbying. To provide greater transparency regarding Caterpillar’s trade association memberships, Caterpillar voluntarily reports on its website each trade association that engages in lobbying and other political activity that has received more than $50,000 from Caterpillar in the most recently completed fiscal year. In our Lobbying Report, we announced that, for fiscal year 2022, we are reducing this threshold to $25,000. Beginning in 2023, we will report all U.S. trade and industry association memberships, regardless of amount, on a biannual basis. In our Lobbying Report, we also reported, for each trade association, the percentage of 2022 dues they collected from Caterpillar that were utilized by that organization for federal lobbying, and we plan to update this information on an annual basis. Furthermore, our Lobbying Report contains a detailed description of management and Board oversight of our advocacy efforts and political engagement, including how any misalignment is handled.additional voluntary website disclosures regarding its engagement in public policy issues, political contributions and global issues of global importance to the Company, including detailed information on the Company’s position with respect to such issues. All such policies and voluntary reports, in addition to information about Caterpillar’s policy positions and advocacy efforts on various issues, are available either in our Lobbying Report or on Caterpillar’s website at www.caterpillar.com/politicalengagement.TheCaterpillar’s governance policies, which are publicly disclosed, provide effective oversight of its political activities.does not believeoversight of political activities, consistent with its charter, the Sustainability and other Public Policy Committee reviews Caterpillar’s political spending policy and its political activities including: corporate political contributions, political contribution activities of the Caterpillar Political Action Committee, trade association participation and alignment with Caterpillar’s Values in Action and policy objectives and Caterpillar’s significant lobbying priorities.detailed disclosure of these amountsduplicative report as contemplatedrequested by this proposal would be beneficialwill divert resources away from our focus on executing our strategy and supporting our customers without providing any additional meaningful information to stockholders.PROPOSAL 5 – STOCKHOLDER PROPOSAL – STOCKHOLDER ACTION BY WRITTEN CONSENTshareholders.PROPOSAL
SNAPSHOT8– SHAREHOLDER PROPOSAL - REPORT ON ACTIVITIES IN CONFLICT-AFFECTED AREAS●Stockholderswould allow stockholdersasks Caterpillar to take action without a meeting if a specified number of stockholders consent to the actionreport on business activities in writing.conflict-affected and high-risk areas.●Myra K. Young, 9295 Yorkship Court, EIK Grove, CA 95758, whoWespath Benefits and Investments, 1901 Chestnut Avenue, Glenview, Illinois 60625, which has represented that sheit is the owner of 5049,316 shares of Caterpillar Inc. common stock. The proposal was also submitted by other co-filers. Pursuant to Rule 14a-8(I)(1) promulgated under the Securities Exchange Act of 1934, the Company will provide the name, address and number of Company securities held by the co-filers of this shareholder proposal promptly upon receipt of a written or oral request.☒ Voting Recommendation: AGAINSTproposal2016 Proxy Statement | 51Table of ContentsPROPOSALPROPOSAL 8 — REPORT ON ACTIVITIES IN CONFLICT-AFFECTED AREAS
PROPOSAL 5 — RIGHT TO ACT BY WRITTEN CONSENTRESOLVED: Resolved, Shareholders request that Caterpillar commission an independent third-party report, at reasonable expense and excluding proprietary information, assessing the effectiveness of the company’s due diligence process in determining if its operations or customers’ use of its products contribute to violations of its Code of Conduct (CoC) and Human Rights Policy (HRP).boardValues and will not be tolerated at Caterpillar, or anywhere in our supply chain.”(2) However, investors lack transparency regarding Caterpillar’s compliance with its policies pursuant to the following:directors undertake such stepseligible employees and provide material support to the war effort. Caterpillar risks involvement in mobilization efforts through its subsidiaries and distributors, including Caterpillar Eurasia, Caterpillar Tosno, and Caterpillar Distribution, which employed over 2,350 staff and generated $800 million in revenue in 2021 and continue operations in Russia. Caterpillar continues to use Russia as may be necessary to permit written consent by shareholders entitled to cast the minimum number of votesa supply chain route;(3)would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were presentgovernment’s forced labor program in Xinjiang.(4) Equipment purchased from Caterpillar and voting. This written consent isits authorized dealers has long been reported to be consistent with applicableused in violations of international law in Myanmar,(5) Occupied Palestinian Territory; (6) (7)and consistent with giving shareholdersWestern Sahara;(8)fullest power to act by written consent consistent with applicable law. This includes shareholder ability to initiate any topic for written consent consistent with applicable law.This proposal topic won majority shareholder support at 13 majorRussian mobilization, it may make the company complicit in war crimes.(17) The International Finance Corporation notes that companies in CAHRA “face business risks that are much greater than those in other emerging markets,” including destruction of physical capital, deaths, and supply-chain disruptions.(18)SUPPORTING STATEMENT
single year. This included 67%-support at both Allstatereport that:Sprint. Hundreds of major companies enable shareholder action by written consent.addressed; andTaking action by written consentAssesses whether additional policies are needed to avoid causing or contributing to violations in lieu of a meeting is a means shareholders can use to raise important matters outsideCAHRA.COMPANY RESPONSE
normal annual meeting cycle. A shareholder right to act by written consent and to call a special meeting are 2 complimentary ways to bring an important matter to the attention of both management and shareholders outside the annual meeting cycle.A shareholder right to act by written consent is one method to equalize our limited provisions for shareholders to call a special meeting. Delaware law allows 10% of shareholders to call a special meeting. However 25% of Caterpillar shareholders are required to call a special meeting.This proposal topic previously won 40% support at the Caterpillar annual meeting — in spite of the fact that Caterpillar management spent our money in a campaign against this proposal topic.Please vote to enhance shareholder value:Right to Act By Written Consent — Proposal 5COMPANY RESPONSEThe Board recommends a vote AGAINST this proposal for the reasons provided below.below:believesof Directors has ultimate oversight over human rights through its Sustainability & other Public Policy Committee (SPPC). The SPPC was created in June 2022 to oversee all public policy matters, including human rights.stockholders shouldCaterpillar employees to annually complete Code of Conduct training and certify that they have read, understand and agree to comply with the opportunityCode of Conduct. Additional compliance training is also provided to deliberateemployees based on risk identified in their specific roles.voteincorporates many elements of internationally recognized human rights standards, including the Universal Declaration of Human Rights, United Nations Guiding Principles (UNGP) on pending stockholder actions,Business and Human Rights and the International Labor Organization’s (ILO) Declaration on Fundamental Principles and Rights at Work. We work collaboratively with relevant internal and external stakeholders to understand human rights-related concerns to maintain compliance with the Human Rights Policy.therefore stockholders should generallyrespects human rights.onlyin accordance with our Values in Action.contextbest interest of the Company and its shareholders.annual or special meeting. To that end,independent third partyCompany’s organizational documents allow holders of 25 percent or more,proposal is not necessary because we already disclose robust standards and policies, compliance mechanisms and reports outlining our continued commitment towards human rights. It would not provide any meaningful additional information, and furthermore, it would detract from our continued initiatives, including in the aggregate,area of Caterpillar’s shares to call a special stockholder meeting. This practice allows our stockholders to bring important matters before all stockholders for consideration, while providinghuman rights.an adequate opportunity to examine any proposed action and provide a carefully considered recommendation to our stockholders. In addition,values. Accordingly, for the Company has affordedstockholders numerous ways to contact membersreasons set forth above, we believe the report requested is neither necessary nor in the best interests of the Board and share thoughts, opinions and concerns about the Company.shareholders.The Board believes that action by written consent can be used52 | 2016 Proxy StatementPROPOSAL
- CIVIL RIGHTS,6 9– STOCKHOLDERSHAREHOLDER PROPOSAL – INDEPENDENT BOARD CHAIRMAN
NON-DISCRIMINATION AND RETURNS TO MERIT AUDITPROPOSAL SNAPSHOT●Stockholderswould require, whenever possible, the Chair ofasks the Board to becommission an independent director.audit analyzing the impacts of the Company’s Diversity, Equity & Inclusion policies.●TheJohn Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, CA 90278The National Center for Public Policy Research, 2005 Massachusetts Ave. NW, Washington, DC 20036 who has represented that he isthey are the owner of at leastmore than $2,000 market value in shares of Caterpillar Inc. common stock.☒ Voting Recommendation: AGAINSTproposalPROPOSAL
PROPOSALPROPOSAL 9 — CIVIL RIGHTS, NON-DISCRIMINATION AND RETURNS TO MERIT AUDIT
PROPOSAL 6 — INDEPENDENT BOARD CHAIRMANRESOLVED: our Board of Directors to adopt as policy, and amend our governing documents as necessary, to require the Chair ofthat the Board of Directors whenever possible, to becommission an independent memberaudit analyzing the impacts of the Board.Company’s Diversity, Equity & Inclusion policies on civil rights, non-discrimination and returns to merit, and the impacts of those issues on the Company’s business. The Board would have the discretion to phase in this policy for the next CEO transition, implemented so it does not violate any existing agreement. If the Board determines that a Chair who was independent when selected is no longer independent, the Board shall select a new Chair who satisfies the requirements of the policy within a reasonable amount of time. Compliance with this policy is waived if no independent director is available and willing to serve as Chair. This proposal requests that all the necessary steps be taken to accomplish the above.According to Institutional Shareholder Services 53% of the Standard & Poors 1,500 firms separate these 2 positions — “2015 Board Practices,” April 12, 2015. This proposal topic won 50%-plus support at 5 major U.S. companies in 2013 including 73%-support at Netflix.It is the responsibility of the Board of Directors to protect shareholders’ long-term interests by providing independent oversight of management. By setting agendas, priorities and procedures, the Chairman is critical in shaping the work of the Board.A board of directors is less likely to provide rigorous independent oversight of management if the Chairman is also the CEO, as is the case with our Company. Having a board chairman who is independent of management is a practicethat will promote greater management accountability to shareholders and lead to a more objective evaluation of management.According to the Millstein Center for Corporate Governance and Performance (Yale School of Management), “The independent chair curbs conflicts of interest, promotes oversight of risk, manages the relationship between the board and CEO, serves as a conduit for regular communication with shareowners, and is a logical next stepaudit may, in the development of an independent board.”An NACD Blue Ribbon Commission on Directors’ Professionalism recommended that an independent director shouldBoard’s discretion, be charged with “organizing the board’s evaluation of the CEO and provide ongoing feedback; chairing executive sessions of the board; setting the agenda and leading the board in anticipating and responding to crises.” A blue-ribbon report from The Conference Board also supported this position.A number of institutional investors said that a strong, objective board leader can best provide the necessary oversight of management. Thus, the California Public Employees’ Retirement System’s Global Principles of Accountable Corporate Governance recommends that a company’s board should be chairedconducted by an independent director, as doesand unbiased third party with input from civil rights organizations, public-interest litigation groups, employees and shareholders of a wide spectrum of viewpoints and perspectives. A report on the Councilaudit, prepared at reasonable cost and omitting confidential or proprietary information, should be publicly disclosed on the Company’s website.SUPPORTING STATEMENT
Institutional Investors.An independent director serving as chairman can help ensureESG, corporations have allocated significant resources and attention towards implementing social justice into workplace practices and hiring. Across the functioningpolitical spectrum, all agree that employee success should be fostered and that no employees should face discrimination, but there is much disagreement about what non-discrimination means.an effective board. Please voteAmerica, American Express, Verizon, Pfizer, CVS and Caterpillar itself(1) — have adopted “Diversity, Equity & Inclusion” (DEI) programs, trainings and officers that seek to enhance shareholder value:establish racial and social “equity.” But in practice, what “equity” really means is the distribution of pay and authority on the basis of race, sex, orientation and ethnicity rather than by merit.(2)Independent Board Chairman — Proposal 6Where adopted, such programs have raised significant objections, including the concern that the programs and practices themselves are deeply racist, sexist, otherwise discriminatory and potentially in violation of the Civil Rights Act of 1964.(3) And that by devaluing merit, corporations have sacrificed employee competence, moral and productivity to the altar of “diversity.”2016 Proxy Statement | 53
https://www.city-journal.org/verizon-critical-race-theory-training;
https://nypost.com/2021/08/11/american-express-tells-its-workers-capitalism-is-racist/;
https://www.foxbusiness.com/politics/cvs-inclusion-training-critical-race-theory;
https://www.msn.com/en-us/money/other/pfizer-sets-race-based-hiring-goals-in-the-name-of-fighting-systemic-racism-gender-equity-challenges/ar-AAOiSwJ;
https://www.caterpillar.com/en/careers/why-caterpillar/diversity-inclusion.html
https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/asyousownike051421-14a8-incoming.pdf;
https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/nyscrfamazon012521-14a8-incoming.pdf;
https://www.sec.gov/Archives/edgar/data/1666700/000119312521079533/dl08785ddefl4a.htm#rom108785_58
https://www.newsweek.com/majority-americans-hold-negative-view-critical-race-theory-amid-controversy-1601337;
https://www.newsweek.com/coca-cola-facing-backlash-says-less-white-learning-plan-was-about-workplace-inclusion-1570875;
https://nypost.com/2021/08/11/american-express-tells-its-workers-capitalism-is-racist/; https://www.city-journal.org/verizon-critical-race-theory-trainingCOMPANY RESPONSETheCOMPANY RESPONSE
below.below:stockholders rejected similar proposals each time presented in the past several years. The Board believes that having a single person as both Chairman of the Boardreports, listed below and CEO ensures thatavailable at caterpillar.com, provide detailed, relevant and comprehensive information to establish the Company is represented by a single voicehas robust human capital management practices in effect.dealers, stockholders, employees and other stakeholders.achieve business results.directorsproposal suggests inherent risk that devaluation of merit compensation awarded to employees occurs on account of diversity. Merit-based pay awards have unanimously elected, fromalways been part of Caterpillar’s pay-for-performance philosophy that aligns employee’s individual contributions, behaviors and business results with individual rewards. Our comprehensive Total Health programs focus on purpose, as well as physical, emotional, financial and social health. Providing competitive benefits and compensation underpins our commitment to all of our engaged and productive employees working as part of a high-performing, diverse global team to execute our enterprise strategy of long-term profitable growth.rankscompany’s asserted positions.” A key component of Caterpillar’s D&I strategy is to foster an inclusive environment where people feel valued, respected and have a sense of belonging. Caterpillar employees are encouraged to share their unique perspectives, to speak up and our policies support this principle. In addition, any individual may confidentially report suspected or actual violations of Our Values in Action, company policies and applicable law, including workplace discrimination. Company policy prohibits any reprisal by any individual against an employee for raising a concern or making a report in good faith.independent directors, the Chairmanbusiness. As a result of the Public Policyour diversity and Governance Committeeemployee engagement efforts, Caterpillar has recently been recognized by numerous third-parties as, the Board’s Presiding Director. The Presiding Director’s dutiesfor example, one of America’s best employers for diversity (Forbes), one of America’s most trusted companies (Newsweek) and responsibilitiesinclude: (i) presiding at all meetingsone of the Board at which the Chairman is not present; (ii) serving as a liaison between the Chairman and the independent directors; (iii) approving information sent to the Board; (iv) approving meeting agendas for the Board; (v) approving meeting schedules to assure that there is sufficient time for discussion of all agenda items; (vi) authority to call meetings of the independent directors; and (vii) if requested by major stockholders, ensuring that he is available for consultation and direct communication.Europe’s diversity leaders (Financial Times).Based on these duties and responsibilities,In summary, the Board believes that Our Values in Action make it clear that all Caterpillar employees will be treated fairly and equitably. The company, from the Presiding Director provides an effective “counter-balance”top down, values differing perspectives and opinions on the topics that impact its business, workforce and communities. Caterpillar has a robust human capital management and a transparent D&I strategy with clear policies and practices in effect to create a diverse and inclusive workplace where employees can share their feedback and views without reprisal. Accordingly, for the combined role of CEO and Chairman.54 | 2016 Proxy StatementPERSONS OWNING MORE THAN FIVE PERCENT OF CATERPILLAR COMMON STOCKThe following table lists those personsreasons set forth above, we do not believe the actions requested by this proposal are necessary or groups (based on a review of Schedules 13G filed with the SEC) who beneficially own more than five percent of Caterpillar common stock as of December 31, 2015.VOTING AUTHORITY DISPOSITIVE AUTHORITY TOTAL AMOUNT
OF BENEFICIAL
OWNERSHIP PERCENT
OF CLASS NAME AND ADDRESS SOLE SHARED SOLE SHARED State Street Corporation and 0 31,202,928 0 57,584,574 57,584,574 9.9 various direct and indirect subsidiaries1 State Street Financial Center One Lincoln Street Boston, MA 02111 The Vanguard Group 1,087,438 57,600 35,653,124 1,146,402 36,799,526 6.32 100 Vanguard Blvd. Malvern, PA 19355 BlackRock, Inc. 25,173,971 29,145 29,962,142 29,145 29,991,287 5.2 55 East 52ndStreet New York, NY 10055 1State Street Bank and Trust Company serves as investment manager for certain Caterpillar defined contribution plans (26,381,646 shares).2016 Proxy Statement | 55SECURITY OWNERSHIP OF EXECUTIVE OFFICERS AND DIRECTORSSecurity ownership of Caterpillar’s Executive Officers, Board of Directors and Nominees to the Board of Directors (as of December 31, 2015) is included in the following table. COMMON
STOCK1 SHARES UNDERLYING
STOCK OPTIONS/SARs
EXERCISABLE WITHIN
60 DAYS ADDITIONAL STOCK
OPTIONS/SARs
EXERCISABLE UPON
RETIREMENT2 PERCENT
OF
CLASS David L. Calhoun 4,951 – – * Robert B. Charter 25,966 43,913 – * Daniel M. Dickinson 11,382 2,916 – * Juan Gallardo 266,746 12,833 1,506 * Jesse J. Greene, Jr. 10,422 – – * Bradley M. Halverson 20,949 62,867 316,657 * Jon M. Huntsman, Jr. 2,413 – – * Dennis A. Muilenburg 3,322 – – * Douglas R. Oberhelman 224,003 1,291,126 978,656 * William A. Osborn 53,766 – 1,506 * Edward J. Rapp 84,539 616,172 341,337 * Debra L. Reed 1,250 – – * Edward B. Rust, Jr. 23,622 12,833 1,506 * Susan C. Schwab 11,290 – 1,506 * D. James Umpleby III 33,309 72,664 339,869 * Miles D. White 3,481 – – * All directors and executive officers as a group3 871,848 2,420,148 2,227,288 * 1Common stock that is directly or indirectly beneficially owned, including stock that is individually or jointly owned and shares over which the individual has either sole or shared investment or voting authority.2SARs or RSUs that are not presently exercisable within 60 days but that would become immediately exercisable if such individual was eligible to retire and elected to retire pursuant to long-service separation.3This group includes directors, named executive officers and four additional officers subject to Section 16 filing requirements (group). Amount includes 2,504 shares for which voting and investment power is shared. No individual within the group beneficially owns more than one percentbest interests of our stock. The group beneficially owns 0.15 percent of the Company’s outstanding common stock. None of the shares held by the group has been pledged.
shareholders.OTHER IMPORTANT INFORMATION
*Less than 1 percent.SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEBased on a review of our records, we believe that all reports required to be filed during 2015 pursuant to Section 16(a) of the Securities Exchange Act of 1934 were filed on a timely basis.MATTERS RAISED AT THE ANNUAL MEETING NOT INCLUDED IN THIS STATEMENT
56 | 2016 Proxy StatementSHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR THE
20172024 ANNUAL MEETINGstockholdershareholder at the 20172024 annual meeting of stockholders will be acted on only:●If the proposal is to be included in our proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, the proposal is received at the office of the Corporate Secretary on or before January 3, 2017;●If the proposal or the nomination of a director is not to be included in the proxy statement, the proposal is received at the office of the Corporate Secretary no earlier than February 11, 2017, and no later than April 11, 2017.●If the proposal is for the nomination of directors to be included in our proxy statement pursuant to proxy access under Article II, Section 4 of Caterpillar’s bylaws,the proposal is received at the office of the Corporate Secretary no earlier than December 5, 2016, and no later than January 3, 2017.In each case, your proposal or nominationshareholders must be delivered in the manner and accompanied by the information required in our bylaws. You may request a copywritingRule 14a-19 under the Exchange Act no later than April 15, 2024.at5205 N. O’Connor Boulevard, Suite 100, NE Adams Street, Peoria, Illinois 61629. They are also availableIrving, TX 75039.PERSONS OWNING MORE THAN FIVE PERCENT OF CATERPILLAR COMMON STOCK
55 East 52nd Street
New York, NY 10055
various direct and indirect subsidiaries
State Street Financial Center
One Lincoln Street
Boston, MA 02111
100 Vanguard Blvd.
Malvern, PA 19355SECURITY OWNERSHIP OF EXECUTIVE OFFICERS AND DIRECTORS*
DELINQUENT SECTION 16(a) REPORTS
website at www.caterpillar.com/governance. Stockholder proposalsreview of the forms we have received, or director nominations should also be sentwritten representations from reporting persons, we believe that, during the current fiscal year and in prior fiscal years, each of our executive officers and directors complied with all such filing requirements, with the exception of one late Form 4 filing by Joseph E. Creed, which disclosed one transaction and was filed late due to the Corporate Secretary at the above address. Additionally, we request that you send a copy to the following facsimile number: 309-675-6620.an administrative error.ACCESS TO FORM 10-K
OnUpon written request, we will provide, without charge to each record or beneficial holder of Caterpillar common stock as of April 11, 2016,17, 2023, we will provide a copy of our Annual Report on Form 10-K for the year ended December 31, 2015,2022, as filed with the SEC,including the financial statements and schedules.SEC. Written requests should be directed to Caterpillar Inc. c/o Corporate Secretary, at5205 N. O’Connor Boulevard, Suite 100, NE Adams Street, Peoria, Illinois 61629.Irving, TX 75039.2016 Proxy Statement | 57TableNON-GAAP FINANCIAL MEASURES FREQUENTLY ASKED QUESTIONS REGARDING MEETING ATTENDANCE AND VOTING