We recently implemented several changes that demonstrate our ongoing commitment to strong corporate governance practices:
We regularly add directors to infuse new ideas and fresh perspectives into the boardroom. InFive out of the past five years, seven new10 independent directorsdirector nominees standing for this year’s election have joined our Board.Board within the past four years. In recruiting directors, we focus on how the experience and skill set of each individual complements those of their fellow directors to create a balanced board with diverse viewpoints and backgrounds, deep expertise, and strong leadership experience. Amy E. Hood joined the Board in August 2017. Amy Hood is Executive Vice President and Chief Financial Officer of Microsoft Corporation, responsible for leading the worldwide finance organization, including acquisitions, treasury activities, tax planning, accounting and reporting, and internal audit and investor relations. She brings tremendous skill and experience to the Board, especially in strategic business development, finance and digitization.
Our compensation program is designed to provide appropriate performance incentives and avoid compensation practices that do not promote the interests of our stockholders.shareholders.
The Nominating and Governance Committee reviewed the Board Membership Criteria (described on page 13)19) and the specific experience, qualifications, attributes, and skills of each nominee, including membership(s) on the boards of directors of other public companies. The following pages contain biographical and other information about the nominees. Following each nominee’s biographical information, we have provided information concerning the particular experience, qualifications, attributes, and skills that are deemed most critical to 3M’s long-term success and led the Nominating and Governance Committee and the Board to determine that each nominee should serve as a director. In addition, the majority of our directors serve or have served on boards and board committees (including as committee chairs) of other public companies, which the Board believes provides them with additional board leadership and governance experience, exposure to best practices, and substantial knowledge and skills that further enhance the functioning of our Board.
In addition to these minimum requirements, the Committee will also evaluate whether the nominee’s skills are complementary to the existing Board members’ skills, the Board’s needs for particular expertise in certain areas, and will assess the nominee’s impact on Board dynamics, effectiveness, and diversity of experience and perspectives.
The diagram below summarizes the director nominees’ key skills and experiences in the areas that are most relevant to 3M and shows the number of director nominees (in parentheses) who possess each of the skills and experiences:
For 3M, diversity, in its myriad manifestations, is fundamental to innovation, performance, and relevancy. 3M employees reflect that diversity. The Board of Directors regards diversity as an important factor in selecting board nominees to serve on the board.Board. Although the Board has no specificformal diversity policy, when selecting nominees, it actively considers diversity in recruitment and nomination of directors, such as gender, race, ethnicity, and national origin. The current composition of our Board reflects those ongoing efforts and the continued importance of diversity to the Board.
The Committee may from time to time retain a director search firm to help the Committee identify qualified director nominees for consideration by the Committee.
The Board has adopted a formal set of Director Independence Guidelines with respect to the determination of director independence, which either conform to or are more exacting than the independence requirements of the New York Stock Exchange (“NYSE”) listing standards, and the full text of which is available on our website atwww.3M.com, under Investor Relations — Governance. In accordance with these Guidelines, a director or nominee for director must be determined to have no material relationship with the Company other than as a director. The Guidelines specify the criteria by which the independence of our directors will be determined, including strict guidelines for directors and their immediate family members with respect to past employment or affiliation with the Company or its independent registered public accounting firm. The Guidelines also prohibit Audit and Compensation Committee members from having any direct or indirect financial relationship with the Company, and restrict both commercial and not-for-profit relationships of all directors with the Company. Directors may not be given personal loans or extensions of credit by the Company, and all directors are required to deal at arm’s length with the Company and its subsidiaries, and to disclose any circumstance that might be perceived as a conflict of interest.
In accordance with these Guidelines, the Board undertook its annual review of director independence. During this review, the Board considered transactions and relationships between each director, or any member of his or her immediate family and the Company and its subsidiaries and affiliates in each of the most recent three completed fiscal years. The Board also considered whether there were any transactions or relationships between the Company and a director or any members of a director’s immediate family (or any entity of which a director or an immediate family member is an executive officer, general partner, or significant equity holder). The Board considered that in the ordinary course of business, transactions may occur between the Company and its subsidiaries and companies at which some of our directors are or have been officers. In particular, the Board considered the annual amount of sales to 3M for each of the most recent three completed fiscal years by each of the companies where directors serve or have served as an executive officer, as well as purchases by those companies from 3M. The Board determined that the amount of sales and purchases in each fiscal year was below one percent of the annual revenues of each of those companies, the threshold set forth in the Director Independence Guidelines. The Board also considered charitable contributions to not-for-profit organizations with which our directors or immediate family members are affiliated, none of which approached the threshold set forth in our Director Independence Guidelines.
As a result of this review, the Board affirmatively determined that the following directors are independent under these Guidelines: Sondra L. Barbour, Thomas “Tony” K. Brown, Vance D. Coffman,Pamela J. Craig, David B. Dillon,
Michael L. Eskew, Herbert L. Henkel, Amy E. Hood, Muhtar Kent, Edward M. Liddy, Dambisa F. Moyo, Gregory R. Page, and Patricia A. Woertz. The Board has also determined that members of the Audit Committee and Compensation Committee received no compensation from the Company other than for service as a director. Inge G. Thulin,Michael F. Roman, Chairman of the Board, President and Chief Executive Officer, is considered to not be independent because of his employment by the Company.
Further, pursuant to the proxy access Bylaw adopted by the Board in November 2015, a stockholder,shareholder, or a group of up to 20 stockholders,shareholders, continuously owning for three years at least three percent of our outstanding common shares may nominate and include in our proxy materials up to the greater of two directors and 20 percent of the number of directors currently serving, if the stockholder(s)shareholder(s) and nominee(s) satisfy the Bylaw requirements. For eligible stockholdersshareholders to include in our proxy materials nominees for the 20192021 Annual Meeting, proxy access nomination notices must be received by the Company no earlier than November 21, 2018,25, 2020, and no later than December 21, 2018.25, 2020. The notice must contain the information required by the Bylaws.
The Company believes that good corporate governance practices serve the long-term interests of stockholders,shareholders, strengthen the Board and management, and further enhance the public trust 3M has earned from more than a century of operating with uncompromising integrity and doing business the right way. The following sections provide an overview of 3M’s corporate governance practices, which are published on the Company’s website, including the Corporate Governance Guidelines, the Board’s leadership structure and the responsibilities of the independent Lead Director, communication with directors, director independence, the director nomination process, the Board’s role in risk oversight, the Codes of Conduct for directors and employees, public policy engagement, and the Company’s commitment to the environment and sustainability.
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Environmental Stewardship andCommitment to Sustainability |
 | Long-standing3M has a long-standing commitment to sustainability. | | | • 3M’s Strategic Sustainability Framework provides a guiding structure and focus for our ongoing environmental stewardship and sustainability. |
| 2025 Sustainability Goals for raw materials, water,social commitments and energy and climate, including increasing wind and solar renewable energy to 25 percent of total electricity use by 2025. |
| actions. Our Sustainability Report and 2025 Sustainability Goals are availablealigned with our Strategic Sustainability Framework and organized to help advance our efforts under each pillar: Science for Circular, Science for Climate and Science for Community.• Our Sustainability Value Commitment, implemented in December 2018, requires that all new products entering our new product commercialization process demonstrate how they drive impact for the greater good. • Through membership in the RE100, we are committed to transitioning our global operations to 100 percent renewable electricity by 2050, and have increased our interim target for energy sourced from renewables to 50 percent by 2025, having achieved the prior goal of 25 percent. • In December 2019, we increased our commitment to improving lives around the world with an additional 2025 Sustainability Goal. Through expansion of 3M Impact, a skills-based employee volunteer program, 3M committed to 300,000 work hours of service across the globe by 2025. • Sustainability at 3M is guided by our Innovation Steering Committee and overseen by the newly established Science, Technology & Sustainability Committee of our Company’s Board of Directors. • Our sustainability progress is reported publicly in our annual Sustainability Report, and more information on our websitecurrent initiatives can be found atwww.3M.com, under About 3M — Sustainability. www.3M.com/Sustainability. |
| |
| Executive Compensation |
| Annual advisory approval of executive compensation with approximately 9695 percent of the votes cast in favor of the Company’s executive compensation program in 2017. |
| | | • Strong pay-for-performance philosophy. |
| • Incentive compensation subject to clawback policy. |
| policy that includes provisions addressing reputational and financial risk as well as risk management failures. • Robust stock ownership guidelines for executive officers and stock retention policy for directors. |
| • Prohibition of hedging or pledging 3M stock by directors and executive officers. |
| • No employment severance, or change in control agreements with any senior executives, including the CEO. |
| • Long-term incentive compensation linked to financial objectives of earnings per share growth, relative organic volume growth, return on invested capital, and free cash flow conversion. |
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Corporate Governance Guidelinesgovernance guidelines
The Board has adopted Corporate Governance Guidelines which provide a framework for the effective governance of the Company. The guidelines address matters such as the respective roles and responsibilities of the Board and management, the Board’s leadership structure, the responsibilities of the independent Lead Director, director independence, the Board Membership Criteria, Board committees, and Board and management evaluation. The Board’s Nominating and Governance Committee is responsible for overseeing and reviewing the Guidelines at least annually and recommending any proposed changes to the Board for approval. The Corporate Governance Guidelines, the Certificate of Incorporation and Bylaws, the charters of the Board committees, the Director Independence Guidelines, and the Codes of Conduct provide the framework for the governance of the Company and are available on our website atwww.3M.com, under Investor Relations — Governance.
Board’s Rolerole in the Company’s Long-Term Strategycompany’s long-term strategy
Each year management presents to the Board, and the Board discusses and approves, detailed long-term strategic plans for the Company. In addition to the overall strategic plan for the Company the international business, and each of the Company’s business groups. Each presentation includes an overview of the business group,groups, the financial performance, an assessmentdiscussions also focused on breakout sessions with the directors on strategic corporate-wide themes of the portfolio for growth opportunities using a SWOT analysis (i.e., strengths, weaknesses, opportunities,management, innovation, commercial transformation, manufacturing and threats); strategic priorities to drive the three key value creation levers—Portfolio Management, Investing in Innovation,supply chain transformation, and Business Transformation; plans to drive the four corporate fundamental strengths—Technology, Manufacturing, Global Capabilities,people and Brand; and the projected long-term financial performance.culture.
Our Company’s long-term strategy is outlined in the 3M Playbook, which consists of fiveValue Model.
3M VALUE MODEL
The 3M Value Model is what differentiates our company in the marketplace. It’s how we create extraordinary value for customers, and premium returns for shareholders. The model is built around four elements: our Vision, Strategies, Code of Conduct, Leadership Behaviors,vision, our strengths, our priorities, and Key Levers.our values.
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THE 3M PLAYBOOKTable of Contents
Our Vision captures our aspirations and guides our corporate direction - vision drives everything we do:3M Technology Advancing Every Company, 3M Products Enhancing Every Home, 3M Innovation Improving Every Life. For 115 years,Life. It is aspirational and authentic to 3M, and is an important part of the purpose that drives us as an enterprise.
Our strengths
Our strengths help us continually innovate to create differentiated value for customers at above-market growth rates. They also enable us to take advantages of the changes in customers, technology and commercial channels.
In our Customer Inspired Innovation approach, we have advanced, enhancedcombine close engagement with customers, deep domain expertise in markets and improved companies, homesthe science behind our technology platforms to develop unique insights into the critical needs of our customers.
We then leverage our fundamental strengths. In technology, we leverage our deep intellectual property and livesbroad range of technology platforms. In manufacturing, we leverage our unique capabilities in process engineering. Our global capabilities enable us to take that technology and manufacturing strength and deliver through our go-to-market models to serve customers around the world. Our six strategies provideAnd finally, our brand adds value in each of our businesses.
We do this while maintaining a focus on our customers – the roadmap for achievingend users of our goals. They guide ussolutions. Most of our sales are specified or designed into customer applications. While the channel to actively identifyour end user may change over time, our global commerce strategy is to connect directly with end users while leveraging the go-to-market model that will deliver where, when and align to external opportunities including customers, markets, and macro trends while continuously investing in our internal capabilities such as technology, manufacturing, global reach, andhow the 3M Brand. Our Leadership Behaviors (Play to win, Innovate, Foster collaboration and teamwork, Prioritize and execute, Develop others and self, Act with integrity and transparency) describe how leaders lead at 3M.end user wants.
Our Code of Conduct serves as a constant reminderpriorities
We have four priorities that are positioning us for long-term growth and value creation: Portfolio, Transformation, Innovation, and People & Culture. The first three are levers that have been proven to create extraordinary value over time. They form the foundation of our core values. The Code is structured around six core values - Be Good, Be Honest, Be Fair, Be Loyal, Be Accurate,priorities moving forward. They depend on our efforts to advance people and Be Respectful.culture. Our focus on advancing people and culture supports the entire value model.
Our Playbook also defines three Key Levers that we use to operationalizeNew phase of our Playbook throughout the Company and create value across 3M - Portfolio Management, Investing in Innovation, and Business Transformation.transformation journey
Portfolio Management seeksOn our journey of transformation – one of our strategic priorities – we have taken concrete actions to streamline and improve our operations, including the implementation of a new enterprise resource planning (ERP) system and the April 2019 move from five to four business groups. Enabled by the success of these initiatives, we are now entering a new phase of our transformation journey by implementing, at the beginning of 2020, a new global operating model to further align resources behindour four business groups – Safety and Industrial, Transportation and Electronics, Health Care, and Consumer – with the best opportunities, investing in attractive, high-value markets, while de-emphasizing or exiting less attractive spaces. Investing in Innovationcompany’s customers and go-to-market models. In this new model, 3M’s business groups now have full responsibility for all facets of strategy, portfolio optimization and resource prioritization across their entire global operations. We continue to transform how we operate and build a more streamlined and customer-driven organization for the future. This latest phase of our transformation journey is an important element in delivering premiumdesigned to improve growth and operational efficiency, and will enable us to create even more value for our customers and premium returns forshareholders.
Our values
Our values bind us together as one 3M – across business groups and geographies. They include our shareholders. Business Transformation starts and ends with our customers and is fundamentally transforming the Company andleadership behaviors – how we do business.want our leaders to act to drive performance, develop others, and continue to win in the marketplace. Then our Code of Conduct; great companies are built on trust from customers, shareholders, employees, communities. We’ve earned that trust and our reputation for integrity over many decades. No one at 3M is free to compromise it. We also have four values that will be a priority moving forward. We are optimizingworking to make 3M the most inclusive enterprise we can be. This will help us become even more diverse and standardizing our global business processesenable us to generate scalebecome an even more creative and leverage, deployinginnovative company. We have long been a single instance global ERP system that provides data transparencyleader in sustainability and we will continue to advance this across the enterprise,company. Finally, we will do even more to encourage and creating a global service modelchallenge every 3M employee to optimize our supply chain and business services operations. All of these activities significantly enhance customers’ experiences with 3M, making our customers more efficient and competitive, while also improving our internal efficiency and productivity in everything that we do, in a sustainable way – making us more competitive and profitable.
In combination, the five elements outlined in the Playbook serve as the foundation for our strategy. We are focused on succeeding in attractive global markets ensuring we deliver value to our customers, shareholders, and employees.be their best.
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Board’s Rolerole in Risk Oversightrisk oversight
The Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, both as a whole Board and through its committees. At least annually, the Board reviews enterprise risks facing the Company and certain of its businesses. Other important categories of risk are assigned to designated Board committees (which are comprised solely of independent directors) that report back to the full Board. The Board has delegated to the Audit Committee through its charter the primary responsibility for the oversight of risks facing the Company, including cybersecurity. The Audit Committee’s charter provides that the Audit Committee shall “discuss policies and procedures with respect to risk assessment and risk management, the Company’s major risk exposures and the steps management has taken to monitor and mitigate such exposures.”
The Vice President and General Auditor, Corporate Auditing (the “Auditor”), whose appointment and performance is reviewed and evaluated by the Audit Committee and who has direct reporting obligations to the Committee, is responsible for leading the formal risk assessment and management process within the Company. The Auditor, through consultation with the Company’s senior management, periodically assesses the major risks facing the Company and works with those executives responsible for managing each specific risk. The Auditor periodically reviews with the Audit Committee the major risks facing the Company and the steps management has taken to monitor and mitigate those risks. The Auditor’s risk management report, which is provided in advance of the meeting, is reviewed with the entire Board by either the chair of the Audit Committee or the Auditor. The executive responsible for managing a particular risk may also report to the full Board on how the risk is being managed and mitigated. With the establishment of the new Science, Technology & Sustainability Committee and the sunsetting of the Finance Committee in November 2019, the Audit Committee has assumed from the Finance Committee the oversight responsibilities over risks associated with the Company’s capital structure, credit ratings and cost of capital, long-term benefit obligations, and use of or investment in financial products, such as derivatives to manage risk related to foreign currencies, commodities, and interest rates.
The Board has delegated to other committees the oversight of risks within their areas of responsibility and expertise. For example, the Compensation Committee oversees risks associated with the Company’s compensation practices, including by performing an annual review of the Company’s risk assessment of its compensation policies and practices for its employees. The Finance Committee oversees risks associated with the Company’s capital structure, credit ratings and cost of capital, long-term benefit obligations, and use of or investment in financial products, such as derivatives to manage risk related to foreign currencies, commodities, and interest rates. The Nominating and Governance Committee oversees risks associated with the Company’s overall governance and its succession planning process to ensure that the Company has a slate of future, qualified candidates for key management positions. The Science, Technology & Sustainability Committee oversees risks associated with the Company’s environmental and product stewardship efforts, including environmental, health and safety (EHS) legal and regulatory compliance, as well as significant emerging science and technology, disruptive innovations, materials vulnerability, and geopolitical issues that my impact the company’s overall strategy, global business continuity and financial results.
The Board believes that its oversight of risks, primarily through delegation to the Audit Committee, but also through delegation to other committees to oversee specific risks within their areas of responsibility and expertise, and the sharing of information with the full Board, is appropriate for a diversified technology and manufacturing company like 3M. The chair of each committee that oversees risk provides a summary of the matters discussed with the committee to the full Board following each committee meeting. The minutes of each committee meeting are also provided to all Board members. The Board also believes its oversight of risk is enhanced by its current leadership structure (further discussed below) because the CEO, who is ultimately responsible for the Company’s management of risk, also chairs regular Board meetings. Given his in-depth knowledge and understanding of the Company, the CEO is best able to bring key business issues and risks to the Board’s attention.
Management Succession Planningsuccession planning
The Board plans the succession to the position of Chairman/Chairman, CEO and other senior management positions. To assist the Board, the Chairman/Chairman, CEO and Senior Vice President of Human Resources annually assess senior managers and their succession potential for the position of Chairman/CEO and other senior management positions. As a result of a thorough and thoughtful succession planning process, on March 5, 2018,in February 2019, Inge G. Thulin, Executive Chairman of the Board, appointedannounced his intention not to stand for reelection at the 2019 Annual Shareholder Meeting. The Board nominated Michael F. Roman, CEO and a Board member, to serve as Chairman of the Board, effective July 1, 2018, succeeding Inge G. Thulin.May 14, 2019, following his election as a director by shareholders at the 2019 Annual Shareholder Meeting.
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Communication with Directorsdirectors
The Board of Directors has adopted the following process for stockholdersshareholders and other interested parties to send communications to members of the Board. StockholdersShareholders and other interested parties may communicate with the Lead Director, the chairs of the Audit, Compensation, Finance, and Nominating and Governance, and Science, Technology & Sustainability Committees of the Board, or with any of our other independent directors, or all of them as a group, by sending a letter to the following address: Corporate Secretary, 3M Company, 3M Center, Building 220-13E-26A, St. Paul, MN 55144-1000. The Corporate Secretary reviews communications to the independent directors and forwards those
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communications to the independent directors as discussed below. Communications involving substantive accounting or auditing matters will be immediately forwarded to the Chair of the Audit Committee and the Company’s Chief Compliance Officer consistent with time frames established by the Audit Committee for the receipt of communications dealing with these matters. Communications that pertain to non-financial matters will be forwarded promptly. Items that are unrelated to the duties and responsibilities of the Board will not be forwarded, such as: business solicitation or advertisements; product-related inquiries; junk mail or mass mailings; resumes or other job-related inquiries; and spam.unsolicited commercial emails.
Compliance
3M’s Codescodes of Conductconduct
More than a century of operating with uncompromising integrity has earned 3M trust from our customers, credibility with our communities, and dedication from our employees. All of our employees, including our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, are required to abide by 3M’s Code of Conduct to ensure that our business is conducted in a consistently legal and ethical manner. These policies formThe Code forms the foundation of a comprehensive process that includes compliance with corporate policies and procedures and a Company-wide focus on uncompromising integrity in every aspect of our operations. Our Code of Conduct covers many topics, including antitrust and competition law, conflicts of interest, financial reporting, protection of confidential information, and compliance with all laws and regulations applicable to the conduct of our business.
Employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of the Code of Conduct. The Audit Committee has adopted procedures to receive, retain, and treat complaints received regarding accounting, internal accounting controls, or auditing matters, and to allow for the confidential and anonymous submission by employees or others of concerns regarding questionable accounting or auditing matters. Information on how to submit any such communications can be found on 3M’s Investor Relations website, under Governance — Governance Documents — Employee Business Conduct Policies — “Report a concern or ask a question.” Our Chief Compliance Officer, who has direct reporting obligations to the Audit Committee, periodically reports to the Audit Committee on compliance with the Company’s Code of Conduct, including the effectiveness of the Company’s compliance program.
The Board also has adopted a Code of Business Conduct and Ethics for Directors of the Company. This Code incorporates long-standing principles of conduct the Company and the Board follow to ensure the Company’s business and the activities of the Board are conducted with integrity and adherence to the highest ethical standards, and in compliance with the law. The Company’s Code of Conduct for employees and the Code of Business Conduct and Ethics for Directors are available on our website atwww.3M.comunder Investor Relations — Governance — Governance Documents.
Public Policy Engagementpolicy engagement
The Company believes that transparency with respect to the consideration, processes, and oversight of our engagement with lawmakers is important to our stockholders,shareholders, and continuously makes efforts to give our stockholdersshareholders useful information about our public policy engagement. Since 2007, the Company has voluntarily published a detailed explanation of the Company’s political activities which is available on our website atwww.3M.comunder Investor Relations — Governance — Governance Documents — “Political Activities and Issue Advocacy.” There, the Company sets out in detail its positions on important public policy issues, the factors we consider when making political contributions, and the processes we use for legal, financial, executive, and Board oversight of our political activities and contributions. We also provide links to the reports the 3M Political Action Committee files monthly with the
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Federal Election Commission and the Company’s quarterly Lobbying Disclosure reports, as well as a detailed list of our contributions to state candidates and political parties, and contributions to “527” political organizations. The Company also discloses on its website the trade associations the Company joined where $25,000 or more of the dues are allocated for lobbying purposes by the trade association. The Company believes that these disclosures on our website, which exceed the disclosures required by law, offer transparency respecting the Company’s public policy engagement and political activities.
Commitment to the Environment and Sustainabilitysustainability
At 3M, we are working hard to advanceinspired and motivated by Our Vision of advancing every company, enhanceenhancing every home and improveimproving every life. WeIn collaboration with our employees, customers, partners, government and communities, we apply our expertise and technology to help solve problems collaboratively, and with a focus on long term, sustainable solutions that demonstrate our commitment and societal purpose.shared global challenges. Sustainability is fundamentalat the heart of our company. It anchors our purpose-driven innovation in products, manufacturing processes and new technologies—and we’re always trying to do more. It is our business — from sustainability-inspired innovationambition to product stewardshipmeet the increasing expectations of our customers, employees, investors, and stakeholders—and grow our business—by continuing to make bold sustainability commitments and taking stronger actions.
3M has a long-standing commitment to sustainability, infrom our operations. As we seek to improve every life, we see partnerships to help our customers and communities achieve their sustainability goals as key to that ambition.
For more than 40 years, 3M has been a leader among global corporations in sustainability actions and measures, beginning with the creation of its groundbreaking Pollution Prevention Pays (3P) Programprogram that began in 1975.1975 to our increasingly ambitious set of 2025 Sustainability Goals, which are designed to improve the footprint of our own operations, help our customers meet their own sustainability goals and drive action on global environmental and social issues. We report on these efforts annually in our Sustainability Report. As a global corporation, contributing to society through diverse markets, we believe that we have a significant responsibility to society globally,advance the United Nations Sustainable Development Goals across the world. We are also a participant of the United Nations Global Compact, a policy initiative for businesses to demonstrate their commitment to ten principles in the areas of human rights, labor, environment, and responsibilityanti-corruption. We align our Sustainability Report to the local communities in which we liveguidelines of the Sustainability Accounting Standards Board (SASB), and work. Our corporate vision states: “3M technology advancing every company... 3M products enhancing every home... and 3M innovationthe Task Force for Climate-Related Financial Disclosures (TCFD) recommendations for helping businesses disclose climate-related financial information. Together with our ambition of improving every life.” It islife and our strong set of 3M values, these commitments drive and inform our formalized approach to sustainability—the 3M Strategic Sustainability Framework. Announced by CEO Mike Roman on Investor Day in November 2018, the Framework directs our efforts to areas where we can make the greatest impact: Science for Circular, Science for Climate, and Science for Community.
To advance Science for Circular, we design solutions that vision — carried outdo more with less material to advance a global circular economy. To help accomplish this, in collaborationDecember 2018, at the United Nations Climate Conference (COP24), CTO John Banovetz announced 3M’s Sustainability Value Commitment—requiring all new products entering 3M’s new product commercialization process to demonstrate how they drive impact for the greater good. This commitment builds on 3M’s history of creating more sustainable products and collaborating with our customers communities,to help them reach their own sustainability goals. Additional initiatives to drive circularity include moving more than 30 percent of our manufacturing sites to zero waste to landfill status, membership in the Ellen MacArthur Foundation CE100 and partners —establishing Circular Economy Working Groups to increase use of renewable and recycled materials. We’ve also announced significant product innovations, like 3M’s iconic yellow and green Scotch-Brite®Heavy Duty scrub sponge with scrubbing fibers made from 100 percent recycled content and 3M™ Thinsulate™ 100% Recycled Featherless Insulation that guidesmimics the warmth and performance of down through tiny fibers made from post-consumer recycled plastic.
To advance Science for Climate, we are innovating to decarbonize industry, accelerating global climate solutions and improving 3M’s environmental footprint. We believe that climate change is one of the greatest challenges we face as a society and now is the time to lead and take action—for our sustainabilityclimate, and our communities. Since 2002, we’ve achieved a 63.7 percent reduction in Scope 1 and Scope 2 location-based greenhouse gas emissions and have helped our customers avoid emitting over 41 million metric tons CO2 through use of select 3M product platforms in the last three years alone. In 2019, we developed methodologies around Scope 3 Categories 9-12, providing a holistic map of relevant categories for 3M and identifying new opportunities to reduce emissions. We also advanced efforts to better understand our climate risks and are incorporating this analysis into business strategies and goalsactions. In February 2019, CEO Mike Roman committed to moving our entire global operations to 100 percent renewable electricity and aspirations.increased our interim target to 50 percent by 2025, having already achieved the prior goal of 25 percent. On March 1, 2019, 3M flipped the switch to 100 percent renewable sources of energy at our global headquarters in St. Paul, Minnesota. From a product perspective, our portfolio of window films retain heat in the winter and cool air in the summer, resulting in
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reduced energy use and cost savings. Our sustainability efforts improve 3M operationsinnovative 3M™ Smog-reducing Granules and 3M™ Cool Roofing Granules are helping resident and commercial property owners address poor air quality and the operationsurban heat island effect by turning pollution in contact with roofs into water-soluble ions that wash away and reflect sunlight.
To advance Science for Community, we aim to create a more positive world through science, and inspire people to join us. This begins with 3M’s culture, which is rooted in a community of scientists who are driven to create positive impact. We deliver through a variety of products, solutions and services across 3M’s 51 technology platforms and core business groups—Safety and Industrial, Transportation and Electronics, Health Care and Consumer. Examples include the Fluency Direct™ speech recognition system from M*Modal, which increases physician productivity while capturing a more complete, informative patient narrative; School Zone Safety programs that engage key stakeholders in improving the routes children take to school; and personal safety equipment, such as the 3M 8210 (N95) and 3M 8511 (N95) respirators, which can save lives when disaster strikes. To give our customers. Our productemployees the space and freedom to innovate these solutions, help customers managewe have a program that encourages them to spend 15 percent of their environmental footprint - from paint systems that reduce the need for cleaning solvents to window films that ease energy consumption. Our life cycle management process enables teams to select more sustainable components and encourage more sustainable processes.working time on projects of their own choosing. In addition to maintaining and expanding its diverse and inclusive work environment, 3M strives to help employees grow in their career. In December 2019, 3M unveiled a new 2025 Sustainability Goal and committed to providing 300,000 work hours of service across the globe through the expansion of 3M Impact, our skills-based employee volunteer program. This program joins existing philanthropic and social sustainability programs that support the workforce of the future – future—both in Science, Technology, EducationEngineering and Math (STEM), disciplines, as well as the skilled trades. For example,It is this unique innovation culture, ambition for improving every life and dedicated scientific community that allows 3M to advance the greater good.
Our continued work across the Strategic Sustainability Framework helps advance 3M’s progress toward our skills-based volunteering programs for employees encourage sustainability thinking inside the company while supporting the environmental and social needs2025 Sustainability Goals, which is reported on in our local communities. Our 2025 sustainability goals provide us with a holistic approach to driving sustainability inannual Sustainability Report. Sustainability at 3M is also guided by our own operations, in our communities, and for the needs of our customers.
In January 2013,Innovation Steering Committee which includes our CEO, elevated the company’s focus on sustainability, with emphasis in two areas: (1) developingCTO and commercializing products which help our customers solve their sustainability challenges; and, (2) driving sustainability within 3M operations and supply chain. Sustainability is now embedded across the company with dedicated teams in R&D, Supply Chain, business groups, and regions across the globe. Recently, the establishment of an executive committee, the Science, Technology, and SustainabilityGeneral Counsel. The Committee provides leadership, oversight and strategy to encourage and ensure sustainability opportunities are recognized, and strong policies and procedures are in place. In addition,November 2019, the 3M Board of Directors established a new board-level committee to provide general oversight of the significant scientific and technological aspects of 3M Company’s businesses and the Company’s sustainability and stewardship activities: The Science, Technology & Sustainability Committee. The Committee will review the company’s sustainability policies and programs, identifying and analyzing significant sustainability, materials vulnerability and geopolitical issues that may impact our Corporate EHSoverall business strategy, global business continuity and Business Conduct Committee ensures our sustainability principles are embedded throughout the company.financial results.
As part of our sustainability efforts, we are a signatory to the United Nations Global Compact on Human Rights — a policy initiative for businesses to demonstrate their commitment to ten principles in the areas of human rights, labor, environment, and anti-corruption. We also align our goals and programs to the United Nations Sustainable Development Goals. We report annually on these efforts in our Sustainability Report. To learn more, please visitwww.3M.com/Sustainability.
Related Person Transaction Policyperson transaction policy and Proceduresprocedures
The Board of Directors has adopted a written Related Person Transaction Policy and Procedures which is administered by the Nominating and Governance Committee. This Policy applies to any transaction or series of transactions in which the Company or a subsidiary is a participant, the amount involved exceeds $120,000, and a Related Person (as that term is defined in the Policy) has a direct or indirect material interest and which is required to be disclosed under Item 404(a) of Regulation S-K. Transactions that fall within this definition are referred to the Committee for approval, ratification, or other action. Based on its consideration of all of the relevant facts and circumstances, the Committee decides whether or not to approve a transaction and approves only those transactions that are in the best interests of the Company. In the course of its review and approval or ratification of a transaction, the Committee considers:
| • | ● | theThe nature of the Related Person’s interest in the transaction; |
| • | | |
| ● | theThe material terms of the transaction, including whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances; |
| • | | |
| ● | theThe significance of the transaction to the Related Person; |
| • | | |
| ● | theThe significance of the transaction to the Company; |
| • | | |
| ● | whetherWhether the transaction would impair the judgment of a director or executive officer to act in the best interest of the Company; and |
| • | | |
| ● | anyAny other matters the Committee deems appropriate. |
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Any Committee member who is a Related Person with respect to a transaction under review may not participate in the deliberations or vote respecting such approval or ratification, except that such a director may be counted in determining the presence of a quorum at a meeting at which the Committee considers the transaction. There were no Related Person Transactions that were referred to the Committee in 2017.2019.
2018 Proxy Statement | | 23 |
Policy on Adoptionadoption of a Rights Planrights plan
In 2002 and 2003, a 3M stockholdershareholder submitted a stockholdershareholder proposal to 3M regarding the approval process for adopting a stockholders’shareholders’ rights plan (also known as a “poison pill”). 3M does not have a rights plan and is not currently considering adopting one. The Board continues to believe, however, that there may be circumstances under which adoption of a rights plan would give the Board the negotiating power and leverage necessary to obtain the best result for 3M stockholdersshareholders in the context of a takeover effort.
Following consideration of the favorable vote the stockholdershareholder proposal received and in light of this belief, the Board adopted and has reaffirmed a statement of policy on this topic. The Board’s policy is that it will only adopt a rights plan if eithereither: (1) stockholdersshareholders have approved adoption of the rights planplan; or (2) the Board (including a majority of the independent members of the Board), in its exercise of its fiduciary responsibilities, makes a determination that, under the circumstances existing at the time, it is in the best interests of 3M’s stockholdersshareholders to adopt a rights plan without the delay in adoption resulting from seeking stockholdershareholder approval.
The Board has directed the Nominating and Governance Committee to review this policy statement on an annual basis and to report to the Board on any recommendations it may have concerning the policy. The terms of the policy, as in effect, are included in 3M’s published Corporate Governance Guidelines and its Proxy Statement.
Board Structurestructure and Processesprocesses
Board’s Leadership Structureleadership structure
Following his election to directorship at the Company’s Annual Meeting of Shareholders on May 14, 2019, CEO Michael Roman was nominated and elected to serve as Chairman of the Board.
The Board’s current leadership structure is characterized by:
| • | ● | aA combined Chairman of the Board and CEO; |
| • | | |
| ● | aA strong, independent, and highly experienced Lead Director with well-defined responsibilities that support the Board’s oversight responsibilities; |
| • | | |
| ● | aA robust committee structure consisting entirely of independent directors with oversight of various types of risks; and |
| • | | |
| ● | anAn engaged and independent Board. |
The Board of Directors believes that this leadership structure provides independent board leadership and engagement while deriving the benefits of having our CEO also serve as Chairman of the Board. As the individual with primary responsibility for managing the Company’s day-to-day operations and with in-depth knowledge and understanding of the Company, ourthe CEO is best positioned to chair regular Board meetings as the directors discuss key business and strategic issues. Coupled with an independent Lead Director, this combined structure provides independent oversight while avoiding unnecessary confusion regarding the Board’s oversight responsibilities and the day-to-day management of business operations.
The Board believes that adopting a rigid policy on whether to separate or combine the positions of Chairman of the Board and CEO would inhibit the Board’s ability to provide for a leadership structure that would best serve stockholders.shareholders. As a result, the Board has rejected adopting a policy permanently separating or combining the positions of Chairman and CEO in its Corporate Governance Guidelines, which are reviewed at least annually and available on our website atwww.3M.com, under Investor Relations — Governance. Instead, the Board adopted an approach that allows it, in representing the stockholders’shareholders’ best interests, to decide who should serve as Chairman or CEO, or both, under present or anticipated future circumstances.
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The Board believes that combining the roles of CEO and Chairman contributes to an efficient and effective Board. The Board believes that to drive change and continuous improvement within the Company, tempered by respect for 3M’s traditions and values, the CEO must have maximum authority. The CEO is primarily responsible for effectively leading significant change, improving operational efficiency, driving growth, managing the Company’s day-to-day business, managing the various risks facing the Company, and reinforcing the expectation for all employees of continuing to build on 3M’s century-old tradition of uncompromising integrity and doing business the right way.
The Board believes that the Company’s corporate governance measures ensure that strong, independent directors continue to effectively oversee the Company’s management and key issues related to executive compensation, CEO evaluation and succession planning, strategy, risk, and integrity. The Corporate Governance Guidelines provide, in part, that:
| ●• | Independent directors comprise a substantial majority of the Board; |
| | |
| ●• | Directors are elected annually by a majority vote in uncontested director elections; |
| ●• | Only independent directors serve on the Audit, Compensation, Finance, and Nominating and Governance, and Science, Technology & Sustainability Committees; |
| | |
| ●• | The committee chairs establish their respective agendas; |
| | |
| ●• | The Board and committees may retain their own advisors; |
| | |
| ●• | The independent directors have complete access to management and employees; |
| | |
| ●• | The independent directors meet in executive session without the CEO or other employees during each regular Board meeting; and |
| | |
| ●• | The Board and each committee regularly conduct a self-evaluation to determine whether it and its committees function effectively. |
The Board has also designated one of its members to serve as Lead Director, with responsibilities (described in the next section) that are similar to those typically performed by an independent chairman.
On March 5, 2018, the Board appointed Michael F. Roman CEO, effective July 1, 2018. He succeeds Inge G. Thulin, who is appointed to a newly created position, executive chairman of the Board, also effective July 1, 2018.
Independent Lead Directorlead director
The Board has designated one of its members to serve as a Lead Director, with responsibilities that are similar to those typically performed by an independent chairman (“Lead Director”). Michael L. Eskew was appointed Lead Director by the independent directors effective November 12, 2012, succeeding Dr. Vance Coffman who had served as Lead Director since 2006. Michael Eskew is a highly experienced director, currently serving on the boards of The Allstate Corporation, Eli Lilly and Company, and International Business Machines Corporation, and is the former Chairman and CEO of United Parcel Service, Inc. His responsibilities include, but are not limited to, the following:
| ●• | Presides at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors; |
| | |
| ●• | Acts as a key liaison between the Chairman/CEO and the independent directors; |
| | |
| ●• | Approves the meeting agendas for the Board, and approves the meeting schedules to assure that there is sufficient time for discussion of all agenda items; |
| | |
| ●• | Has the authority to approve the materials to be delivered to the directors in advance of each Board meeting and provides feedback regarding the quality, quantity, and timeliness of those materials (this duty not only gives the Lead Director approval authority with respect to materials to be delivered to the directors in advance of each Board meeting but also provides a feedback mechanism so that the materials may be improved for future meetings); |
| | |
| ●• | Has the authority to call meetings of the independent directors; |
| | |
| ●• | Communicates Board member feedback to the Chairman/CEO (except that the chair of the Compensation Committee leads the discussion of the Chairman/CEO’s performance and communicates the Board’s evaluation of that performance to the Chairman/CEO); |
| | |
| ●• | If requested by major stockholders,shareholders, ensures that he is available, when appropriate, for consultation and direct communication; and |
| | |
| ●• | Performs such other duties as requested by the independent directors. |
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Executive Sessionssessions
As an agenda item for every regularly scheduled Board and committee meeting, independent directors regularly meet in executive session, without the Chairman/CEO or other members of management present, to consider such matters as they deem appropriate. The Lead Director presides over the Board’s executive sessions.
Board Committeescommittees
Board, Committees,committees, and Director Evaluationsdirector evaluations
The Board conducts an annual self-evaluation to determine whether it and its committees are functioning effectively and consider opportunities for continual enhancement. The Chair of the Nominating and Governance Committee solicits and receives comments from all directors and shares those comments with the Committee and the Board. Based on the comments and further discussion and reflection, the Board makes an assessment reviewing areas in which the Board believes improvements could be made to increase the effectiveness of the Board and its committees as well as
2018 Proxy Statement | | 25 |
identifying existing practices which have contributed to high effectiveness and accordingly should be continued. Self-evaluation items requiring follow-up and/or the development and execution of implementation and action plans are monitored on a going-forward basis by the full Board, as well as by individual committees and the chairs thereof, as applicable. While this formal self-evaluation is conducted on an annual basis, directors share perspectives, feedback, and suggestions year-round. The Board and each committee conducted an evaluation of its performance in 2017.2019.
Before the November Board meeting, the Chairman/CEO, Lead Director, and chair of the Nominating and Governance Committee meet to discuss the performance and contributions of each director. As part of the nomination process, the Nominating and Governance Committee considers the performance and contributions of each director and evaluates each of the directors to ensure our directors continue to possess the necessary skills and experience to effectively oversee the Company. On occasion, the Nominating and Governance Committee has not renominated a director based on this individual director evaluation process.
Board and Committee Informationcommittee information
The Board currently has twelve directors and the following four committees: Audit, Compensation, Finance, and Nominating and Governance.Governance, and Science, Technology & Sustainability. The Board had a Finance Committee until November 12, 2019, when the Science, Technology & Sustainability Committee was established. The membership and the function of each committee, both before and after the November committee structural update, are described below.
During 2017,2019, the Board of Directors held five regularly scheduled meetings and twothree telephonic meetings. Overall attendance at Board and committee meetings was 9896 percent. During 2017,2019, all of our directors attended at least 75 percent of all Board and Committee meetings on which they served.
The Company has a long-standing policy that directors are expected to attend the Annual Meeting of StockholdersShareholders unless extenuating circumstances prevent them from attending. Eleven directors attended last year’s Annual Meeting of Stockholders, which constituted allAll directors who were members of the Board as of the 2017May 2019 attended last year’s Annual Meeting date.of Shareholders. Sondra Barbour was not present at the meeting as she did not seek re-election and ended her service on the Board on May 14, 2019, when her term expired.
NAME OF NON-EMPLOYEE DIRECTOR36 | 3M Company |
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BOARD COMMITTEE COMPOSITION (JANUARY 1 – NOVEMBER 12, 2019)
| Name of Non-employee Director | | AUDITAudit | | COMPENSATIONCompensation | | FINANCEFinance | | NOMINATINGNominating
ANDand
GOVERNANCEGovernance |
Sondra L. Barbour
(retired from the Board, effective May 14, 2019) | |   | | | | | | |
| Thomas “Tony” K. Brown | | | | | | | | |
Vance D. CoffmanPamela J. Craig
(elected to the Board, effective May 14, 2019) | | | | | | | | | | |
| David B. Dillon | |   | | | | | | |
| Michael L. Eskew | | | | | | | | |
| Herbert L. Henkel | | | | | | | | |
| Amy E. Hood | | | | | | | | |
| Muhtar Kent | | | | | | | | |
| Edward M. Liddy | | | | | | | | |
| Dambisa F. Moyo | | | | | | | | |
| Gregory R. Page | | | | | | | | | | |
| Patricia A. Woertz | | | | | | | | |
= Committee Member; = Chair
BOARD COMMITTEE COMPOSITION (SINCE NOVEMBER 12, 2019)
| Name of Non-employee Director | | Audit | | Compensation | | Nominating
and
Governance | | Science,
Technology &
Sustainability |
= Committee Member; = ChairThomas “Tony” K. Brown | | | | | | | | | | |
| Pamela J. Craig | | | | | | | | |
| David B. Dillon | | | | | | | | |
| Michael L. Eskew | | | | | | | | |
| Herbert L. Henkel | | | | | | | | |
| Amy E. Hood | | | | | | | | |
| Muhtar Kent | | | | | | | | |
| Edward M. Liddy* | | | | | | | | |
| Dambisa F. Moyo | | | | | | | | |
| Gregory R. Page | | | | | | | | |
| Patricia A. Woertz | | | | | | | | |
= Committee Member; = Chair
26* | | 3MMr. Liddy has reached the mandatory retirement age and will retire from the Board on May 12, 2020. |
AUDIT COMMITTEE
MEMBERS
Sondra L. Barbour
Thomas “Tony” K. Brown
David B. Dillon (chair)
Gregory R. Page
MEETINGS IN 2017 8
The BoardTable of Directors has determined that all of the Audit Committee members are “independent” and “financially literate” under the NYSE listing standards and that members of the Audit Committee received no compensation from the Company other than for service as a director.
The Board has also determined that the following Audit Committee members — David B. Dillon (chair), Sondra L. Barbour, and Gregory R. Page — have “accounting or related financial management expertise” under the NYSE listing standards and are “audit committee financial experts” as that term is defined by applicable Securities and Exchange Commission regulations.
The Audit Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities.
AUDIT COMMITTEE CHARTER
www.3M.com > Investor Relations > Governance > Governance Documents > Committee Charters
INTRODUCTION
The Audit Committee assists the Board in its oversight of the integrity of the Company’s financial statements, compliance with legal and regulatory requirements, the qualifications, independence, and performance of the Company’s independent registered public accounting firm (the “Independent Accounting Firm”), the performance of the Company’s internal auditing department, and furnishes a report for inclusion in the Company’s Proxy Statement.
ROLES AND RESPONSIBILITIESContents
Members Sondra L. Barbour
(until 5/14/2019)
Thomas “Tony” K. Brown
Pamela J. Craig
(from 5/14/2019)
David B. Dillon (chair)
Dambisa F. Moyo
Gregory R. Page Meetings in 201910 The Board of Directors has determined that all Audit Committee members are “independent” and “financially literate” under the NYSE listing standards and that members of the Audit Committee received no compensation from the Company other than for service as a director. The Board has also determined that the following Audit Committee members — David B. Dillon (chair), Sondra L. Barbour, Pamela J. Craig, Dambisa F. Moyo and Gregory R. Page — have “accounting or related financial management expertise” under the NYSE listing standards and are “audit committee financial experts” as that term is defined by applicable Securities and Exchange Commission regulations. The Audit Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities. Audit Committee Charter www.3M.com> Investor Relations > Governance > Governance Documents > Committee Charters | Introduction The Audit Committee assists the Board in its oversight of the integrity of the Company’s financial statements, compliance with legal and regulatory requirements, the qualifications, independence, and performance of the Company’s independent registered public accounting firm (the “Independent Accounting Firm”), the performance of the Company’s internal auditing department, the Company’s financial risk assessment and management, and furnishes a report for inclusion in the Company’s Proxy Statement. Roles and Responsibilities • Reviews the Company’s annual audited and quarterly consolidated financial statements and internal controls over financial reporting; |
● | • Reviews the Company’s financial reporting process and internal controls over financial reporting, including any major issues regarding accounting principles and financial statement presentation, and critical accounting policies to be used in the consolidated financial statements; |
● | • Reviews and discusses with management and the Independent Accounting Firm the Company’s report on internal controls over financial reporting and the Independent Accounting Firm’s audit of internal controls over financial reporting; |
● | By delegation to the chair, reviews• Reviews earnings press releases prior to issuance; |
● | • Appoints, oversees, and approves compensation of the Independent Accounting Firm; |
● | • Reviews with the Independent Accounting Firm the scope of the annual audit, including fees and staffing, and approves all audit and permissible non-audit services provided by the Independent Accounting Firm; |
● | • Reviews findings and recommendations of the Independent Accounting Firm and management’s response to the recommendations of the Independent Accounting Firm; |
● | • Discusses policies with respect to risk assessment and risk management, the Company’s major risk exposures, and the steps management has taken to monitor and mitigate such exposures; |
● | • Periodically obtainreviews the Company’s capital allocation and capital structure strategies, insurance coverage, funding for pension and other post-retirement benefit plans, and global tax planning; • Periodically reviews the Company’s global Treasury activities, including risks associated with cash investments, counterparties, and use of derivatives and other financial instruments for risk management purposes; • Periodically reviews and approves the Company’s use of swaps exemption pursuant to Dodd-Frank derivatives clearing policy; • Periodically obtains reports from senior management, including the Chief Information Officer, regarding the progress on the phased implementation of the global enterprise resource planning system, information technology networks and systems, and the adequacy and effectiveness of the Company’s information security policies and internal controls regarding information security; |
● | • Periodically obtains reports from the Company’s senior internal auditing executive, who has direct reporting obligations to the Committee, on the annual audit plan, scope of work, and the results of internal audits and management’s response thereto; |
● | • Periodically obtains reports from the Company’s Chief Compliance Officer, who has direct reporting obligations to the Committee, on compliance with the Company’s Code of Conduct, and at least annually, on the implementation and effectiveness of the Company’s compliance and ethics program; |
● | • Reviews with the Company’s General Counsel legal matters that may have a material impact on the consolidated financial statements and any material reports or inquiries received from regulators or government agencies regarding compliance; and |
● | • Establishes procedures for (i) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and (ii) the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters and periodically review with the Chief Compliance Officer and the Company’s senior internal auditing executive these procedures and any significant complaints received. |
2018 Proxy Statement | 38 | 273M Company |
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COMPENSATION COMMITTEE
MEMBERS
Vance D. Coffman
Michael L. Eskew (chair)
Herbert L. Henkel
Muhtar Kent
Edward M. Liddy
Patricia A. Woertz
MEETINGS IN 2017 7
The Board of Directors has determined that all Compensation Committee members are “independent” under the NYSE listing standards, including the listing standards applicable to compensation committee members.
The Board has also determined that each Compensation Committee member qualifies as a “Non-Employee Director” under Rule 16b-3 of the Securities Exchange Act of 1934, and that each member qualifies as an “outside director” under Section 162(m) of the Internal Revenue Code.
The Compensation Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities.
COMPENSATION COMMITTEE CHARTER
www.3M.com > Investor Relations > Governance > Governance Documents > Committee Charters
INTRODUCTION
The Compensation Committee reviews the Company’s compensation practices and policies, annually reviews and approves (subject to ratification by the independent directors of the Board) the compensation for the CEO, annually reviews and approves the compensation for the other senior executives, evaluates CEO performance, reviews and discusses with management of the Company the Compensation Discussion and Analysis prepared in accordance with the Securities and Exchange Commission’s disclosure rules for executive compensation, and furnishes a report for inclusion in the Company’s Proxy Statement.
ROLES AND RESPONSIBILITIES
●Members Michael L. Eskew
(until 11/12/2019)
Herbert L. Henkel (chair)
Amy Hood
Muhtar Kent
Edward M. Liddy
Patricia A. Woertz Meetings in 20195 The Board of Directors has determined that all Compensation Committee members are “independent” under the NYSE listing standards, including the listing standards applicable to compensation committee members. The Board has also determined that each Compensation Committee member qualifies as a “Non-Employee Director” under Rule 16b-3 of the Securities Exchange Act of 1934, and that each member qualifies as an “outside director” under Section 162(m) of the Internal Revenue Code. The Compensation Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities. Compensation Committee Charter www.3M.com> Investor Relations > Governance > Governance Documents > Committee Charters | Introduction The Compensation Committee reviews the Company’s compensation practices and policies, annually reviews and approves (subject to ratification by the independent directors of the Board) the compensation for the CEO, annually reviews and approves the compensation for the other senior executives, evaluates CEO performance, reviews and discusses with management of the Company the Compensation Discussion and Analysis prepared in accordance with the Securities and Exchange Commission’s disclosure rules for executive compensation, and furnishes a report for inclusion in the Company’s Proxy Statement. Roles and Responsibilities • Reviews disclosures in the Company’s Proxy Statement regarding advisory votes on executive compensation and the frequency of such votes; |
● | • Approves the adoption, amendment, and termination of incentive compensation and deferred compensation programs for employees of the Company; |
● | • Approves the adoption, amendment, or termination of equity compensation programs or, if stockholdershareholder approval would be required, recommends such actions to the Board; |
● | • Approves, subject to ratification by the independent directors of the Board, employment agreements and severance arrangements for the CEO, as appropriate; |
● | • Approves employment agreements and severance arrangements for the senior executives of the Company (other than the CEO), as appropriate; |
● | • Oversees the administration of the Company’s stock and long-term incentive compensation programs, and determines the employees who receive awards and the size of their awards under such programs; |
● | • Approves the adoption and amendment of Company guidelines covering ownership of Company common stock by executives, and annually reviews compliance with these guidelines; |
● | • Reviews and makes recommendations to the Board of Directors concerning any amendment to a retirement benefit plan that would require Board approval; |
● | • Annually reviews a risk assessment of the Company’s compensation policies and practices for its employees; |
● | • Periodically reviews and discusses with the Company’s management matters relating to internal pay equity; • Reviews stockholdershareholder proposals relating to executive compensation matters and makes recommendations to the Board regarding responses; |
● | • Periodically reviews human resource issues relating to the Company’s policies and practices with respect to workforce diversity and equal employment opportunities; and |
● | • Has the authority to retain compensation consultants, counsel, or other advisors as it deems appropriate, including the authority to approve such advisors’ fees and retention terms. The Committee may delegate its authority to subcommittees of one or more Committee members or to senior executives of the Company as it deems appropriate, subject to compliance with applicable laws, rules, regulations, and plan requirements. The Committee has delegated authority to the Company’s Chief Executive Officer and to its Senior Vice President, Human Resources, to grant certain stock-based awards to eligible, non-executive employees, subject to certain limits. |
282020 Proxy Statement | | 3M39 |
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FINANCE COMMITTEE (until 11/12/2019)*
MEMBERS
Sondra L. Barbour
Thomas “Tony” K. Brown
Vance D. Coffman
Amy E. Hood
Muhtar Kent (chair)
Patricia A. Woertz
MEETINGS IN 2017 5
The Board of Directors has determined that all Finance Committee members are “independent” under the NYSE listing standards.
The Finance Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities.
FINANCE COMMITTEE CHARTER
www.3M.com > Investor Relations > Governance > Governance Documents > Committee Charters
INTRODUCTION
The Finance Committee assists the Board with its oversight of the Company’s financial structure, including its overall capital structure, sources and uses of funds and related cash and financing plans, the Company’s financial condition and capital strategy, and financial risk management.
ROLES AND RESPONSIBILITIES
●Members Sondra L. Barbour
(until 5/14/2019)
Pamela J. Craig
(from 5/14/2019)
Amy E. Hood
Muhtar Kent (chair)
Dambisa F. Moyo
Patricia A. Woertz Meetings in 20194 The Board of Directors has determined that all Finance Committee members are “independent” under the NYSE listing standards. The Finance Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities. Finance Committee Charter www.3M.com> Investor Relations > Governance > Governance Documents > Committee Charters | Introduction The Finance Committee assists the Board with its oversight of the Company’s financial structure, including its overall capital structure, sources and uses of funds and related cash and financing plans, the Company’s financial condition and capital strategy, and financial risk management. Roles and Responsibilities • Reviews and recommends for approval by the Board the dividend policy and the declaration of dividends or other forms of distributions on the Company’s stock, such as stock splits in the form of a stock dividend; |
● | • Reviews and recommends for approval by the Board the authorization for repurchase of the Company’s stock and periodically reviews repurchase activities; |
● | • Reviews and recommends for approval by the Board the Company’s authorization limit for cumulative short- and long-term borrowings; |
● | • Reviews and recommends for approval by the Board the registration and issuance of the Company’s debt or equity securities, except in the case of the issuance of debt or equity securities in connection with a merger or acquisition transaction which is presented to the Board; |
● | • Periodically reviews the Company’s capital allocation and capital structure strategies and related metrics from a credit rating agency and investor perspective; |
● | • Reviews and recommends for approval by the Board an annual capital expenditure budget and revisions to that budget; |
● | • Reviews and recommends for approval by the Board capital expenditures in excess of $75,000,000; |
● | • Periodically reviews the Company’s global treasury and tax planning activities; |
● | • Reviews and evaluates risks associated with the Company’s policies and activities related to cash investments, counterparty risks, and use of derivatives as part of hedging programs to manage risk related to foreign currencies, commodity prices, and interest rates; |
● | • Periodically reviews and approves the Company’s decision to enter into derivative swaps, including swaps exempt from an otherwise applicable clearing or trading mandate, and other governance matters related to derivatives trading; |
● | • Periodically reviews the Company’s insurance coverage; |
● | • Periodically reviews the funding, asset performance, and strategies for the Company’s pension and other postretirement benefit plans; and |
● | • Periodically reviews the Company’s funding and liquidity strategies for achievement of financing objectives. |
2018 Proxy Statement | * | 29The responsibilities of the Finance Committee have been assumed by the Audit Committee and the full Board since November 12, 2019. |
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NOMINATING AND GOVERNANCE COMMITTEE
MEMBERS
David B. Dillon
Michael L. Eskew
Herbert L. Henkel
Edward M. Liddy (chair)
Gregory R. Page
MEETINGS IN 2017 6
The Board of Directors has determined that all Nominating and Governance Committee members are “independent” under the NYSE listing standards.
The Nominating and Governance Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities.
NOMINATING AND GOVERNANCE COMMITTEE CHARTER
www.3M.com > Investor
Relations > Governance >
Governance Documents >
Committee Charters
INTRODUCTION
The Nominating and Governance Committee establishes the Board Membership Criteria, assists the Board by identifying individuals qualified to become Board members, recommends to the Board matters of corporate governance, facilitates the annual review of the performance of the Board and its committees, and periodically reviews CEO and management succession plans.
ROLES AND RESPONSIBILITIES
●Members Thomas “Tony” K. Brown
David B. Dillon
Michael L. Eskew
(chair until 11/12/2019)
Herbert L. Henkel
(until 11/12/2019)
Muhtar Kent (chair from
11/12/2019)
Edward M. Liddy
Dambisa F. Moyo
(from 11/12/2019)
Gregory R. Page
(until 11/12/2019) Meetings in 20194 The Board of Directors has determined that all Nominating and Governance Committee members are “independent” under the NYSE listing standards. The Nominating and Governance Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities. Nominating and Governance Committee Charter www.3M.com> Investor Relations > Governance > Governance Documents > Committee Charters | Introduction The Nominating and Governance Committee establishes the Board Membership Criteria, assists the Board by identifying individuals qualified to become Board members, recommends to the Board matters of corporate governance, facilitates the annual review of the performance of the Board and its committees, and periodically reviews CEO and management succession plans. Roles and Responsibilities • Selects and recommends director candidates to the Board of Directors, in light of the Board Membership Criteria adopted by the Board, either to be submitted for election at the Annual Meeting or to fill any vacancies on the Board, including consideration of any stockholdershareholder nominees for director (submitted in accordance with the Company’s Bylaws); |
● | • Reviews and makes recommendations to the Board of Directors concerning the composition and size of the Board and its committees, the Board membership criteria,Membership Criteria, frequency of meetings, and changes in compensation for non-employee directors; |
● | • Reviews the Company’s Corporate Governance Guidelines at least annually, and recommends any proposed changes to the Board for approval; |
● | • Develops and recommends to the Board standards to be applied in making determinations on the types of relationships that constitute material relationships between the Company and a director for purposes of determining director independence; |
● | • Reviews and approves or ratifies any transaction between the Company and any related person, which is required to be disclosed under the rules of the Securities and Exchange Commission; |
● | • Develops and recommends to the Board for its approval an annual self-assessment process of the Board and its committees and oversees the process; |
● | • Reviews periodically with the Chairman/CEO succession plans relating to positions held by elected corporate officers, and makes recommendations to the Board with respect to the selection of individuals to occupy these positions; |
● | • Periodically reviews the corporate contribution program (3Mgives) and the contribution activities of the 3M Foundation, which is funded by the Company; and |
● | • Periodically reviews the Company’s positions and engagement on important public policy and corporate governance issues affecting its business, including Sustainability and the political contributions ofby 3M and its Political Action Committee.Committee, and shareholder engagement. |
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SCIENCE, TECHNOLOGY & SUSTAINABILITY COMMITTEE (from 11/12/2019)
Members Pamela J. Craig
Herbert L. Henkel
Amy E. Hood
Gregory R. Page (chair)
Patricia A. Woertz
Meetings in 20190 The Board of Directors has determined that all Science, Technology & Sustainability Committee members are “independent” under the NYSE listing standards. The Science, Technology & Sustainability Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities. Science, Technology & Sustainability Committee Charter
www.3M.com> Investor Relations > Governance > Governance Documents > Committee Charters | Introduction The responsibility of the Science, Technology & Sustainability Committee (the “Committee”) of the 3M Board of Directors is to oversee the twin demands of developing products to meet the ever-changing needs of our customers while ensuring that those products cause no harm to people or to our planet. The Committee is responsible for providing the general oversight of the significant scientific and technological aspects of 3M’s businesses and the Company’s sustainability and stewardship activities. Roles and Responsibilities • Monitors and reviews the overall strategy, direction and effectiveness of the Company’s research and development activities; • Reviews management’s strategy and allocation of resources for research and development activities, including product line extensions and new product platforms; • Reviews the Company’s policies and programs on sustainability; environmental and product stewardship; and environmental, health and safety, including for compliance with all applicable laws and regulations; • Assists the Board in identifying and analyzing significant emerging science and technology, disruptive innovations, sustainability, materials vulnerability, and geopolitical issues that may impact the Company’s overall business strategy, global business continuity and financial results; and • Annually reviews the Company’s Sustainability Report. |
Director Compensationcompensation and Stock Ownership Guidelinesstock ownership guidelines
Director Compensation Philosophycompensation philosophy and Elementselements
The Nominating and Governance Committee periodically receives reports on the status of Board compensation in relation to other large U.S. companies and is responsible for recommending to the Board changes in compensation for non-employee directors. In developing its recommendations, the Committee is guided by the following goals:
• Compensation should fairly pay directors for work required in a company of 3M’s size and scope;
| ● | Compensation should fairly pay directors for work required in a company of 3M’s size and scope; |
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| ● | A significant portion of the total compensation should be paid in common stock to align directors’ interests with the long-term interests of stockholders; and |
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| ● | The structure of the compensation should be simple and transparent. |
• A significant portion of the total compensation should be paid in common stock to align directors’ interests with the long-term interests of shareholders; and
• The structure of the compensation should be simple and transparent.
The Nominating and Governance Committee works with an independent compensation consultant to support its objectives of maintaining a reasonable and appropriate program. For 2017,2019, Frederic W. Cook & Co., Inc. (“FW Cook”) provided the Committee with expert advice on the compensation of non-employee directors, in addition to analyzing market data on director compensation at the same peer group of 1817 companies approved by the Compensation Committee for evaluating Named Executive Officer compensation. Neither the Company nor the Nominating and Governance Committee has any arrangement with any other compensation consultant who has a role in determining or recommending the amount or form of director compensation.
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Our director program is comprised of a mix of cash and equity that is intended to approximate the peer-group median mix. Our directors’ overall target total direct compensation is consistent with 3M’s size and market-capitalization value relative to its peers. In addition, our hold-until-termination requirement on equity has resulted in ownership levels that are relatively high versusthe annual stock retainer is rigorous relative to the holding requirement of our peers. For more information on the peer group, please see the section entitled “Executive Peer Group”peer group” beginning on page 4662 of this Proxy Statement. Non-employee directors’ compensation includes the following compensation elements:
Annual Compensation —In May 2017,2019, the Nominating and Governance Committee considered a board compensation study prepared by Frederic W. Cook & Co., Inc.FW Cook. After reviewing that study, the Committee recommended andno changes in the Board approved an increase of $10,000 incompensation for non-employee directors. As a result, the 2019 annual compensation for non-employee directors from $285,000 to $295,000, effective January 1, 2017. The annual cash retainer was increased $5,000 (from $125,000 to $130,000). The annual stock retainer was also increased $5,000 (from $160,000 to $165,000).$305,000. Approximately 44 percent of the annual compensation (or $130,000)$135,000) is payable in cash in four quarterly installments and approximately 56 percent of the annual compensation (or $165,000)$170,000) is payable in 3M common stock equivalents (“Deferred Stock Units”) granted after the Annual Meeting.Meeting (referred to as the “annual stock retainer”). In addition, the Lead Director receives an annual fee of $35,000, the chair of the Audit Committee receives an additional annual fee of $25,000, and the chairchairs of the Compensation, Committee receivesFinance (before it was ended), Nominating and Governance, and Science, Technology & Sustainability Committees each receive an additional annual fee of $20,000. The chairs of the Finance and Nominating and Governance Committees each receive additional annual fee of $20,000 (an increase of $5,000). The Lead Director receives an additional annual fee of $30,000.and committee chair fees are payable in cash in four quarterly installments. There are no meeting fees. In lieu of receiving the Deferred Stock Units, a director may elect to receive 3M common shares on a current basis, but such shares must be retained until the director leaves the Board. Similarly, in lieu of cash fees, a director may elect to receive 3M common stock of the Company.shares or Deferred Stock Units. Non-employee directors also may also voluntarilyelect to defer all or part of their annual cash fees or stock awardscompensation until they cease to be members of the Board.
Deferred Stock —For directorseach director who have elected to defer theirreceives all or a portion of the annual stock awards or annual cash fees into a commonin deferred stock, equivalents account (“Deferred Stock”), the Company credits their accountshis or her account with a number of 3M common stock equivalents (including fractional share equivalents)Deferred Stock Units equal to the number of actual shares (including fractional shares) of 3M common stock whichthat otherwise could have been purchased with such deferred amounts on the first day of the calendar quarter,fees, as determined using the closing sales price for a share of 3M common stock on the NYSE onfor the last businesstrading day immediately preceding the earliest date such date. In addition,amount otherwise could have been be paid to the director if taken on a current basis. For each payment date for dividendsordinary cash dividend paid on 3Mthe shares of the Company’s common stock, the Company also credits to the directors’ accounts awith an additional number of 3M common stock equivalents having a value equalDeferred Stock Units on the dividend payment date. The number of additional Deferred Stock Units credited to each directors’ account is calculated by dividing the aggregate dividends that otherwise would have been paid on the shares underlying the aggregate number of Deferred Stock Units credited to the director’s account on the relevant dividend determinedrecord date by using the closing sales price for a share of 3M common stock on the NYSE onfor the sixth businesslast trading day immediately preceding the applicable dividend recordpayment date. The Deferred Stock isUnits are fully vested upon grant but doesdo not have voting rights. Appropriate adjustments to the amountnumber of Deferred Stock shallUnits credited to each director’s account will be made to the accounts for stock splits, stock dividends, merger, consolidation, paymentmergers, consolidations, payments of dividends other than in cash, and similar circumstances affecting 3M common stock. The shares of 3M common stock underlying the Deferred Stock Units will be distributed in a single lump sum during the month of January in the first year after the director leaves the Board, unless the non-employee director elects an alternative distribution schedule prior to the beginning of the year in which the fees are earned. Non-employee directors may elect to receive distribution of the shares of 3M common stock to non-employee directors beginning onunderlying his or her Deferred Stock Units for a year in a single lump sum during the month of January 1 ofin the first or second year following the year in which they leave the Board eitheror in a lump sumseries of three, five, or in up to ten annual installments pursuant tobeginning on the first business day of January in the first year following their deferral elections.termination of Board service.
All Other Compensation —The column below showing “All Other Compensation” includes the incremental cost of complimentary products and matching gifts. The non-employee directors are eligible to participate in the Company’s matching gift program on the same terms as 3M employees. Under this program, the 3M Foundation will match up to a total of $5,000 a year in contributions by the director to eligible educational institutions and, effective January 1, 2020, up to a total of higher education.$1,000 a year in contributions by the director to eligible charitable organizations.
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Table of Contents2017 Director Compensation Table
2019 director compensation table
The total 20172019 compensation of our non-employee directors is shown in the following table:
| NON-EMPLOYEE DIRECTORS | | FEES EARNED OR
PAID IN CASH
($)(1) | | STOCK
AWARDS
($)(2) | | ALL OTHER
COMPENSATION
($)(3) | | TOTAL
($) |
| Sondra L. Barbour | | | 130,000 | | | | 165,000 | | | | 0 | | | | 295,000 | |
| Thomas “Tony” K. Brown | | | 130,000 | | | | 165,000 | | | | 0 | | | | 295,000 | |
| Vance D. Coffman | | | 130,000 | | | | 165,000 | | | | 5,000 | | | | 300,000 | |
| David B. Dillon*, ** | | | 148,750 | | | | 165,000 | | | | 0 | | | | 313,750 | |
| Michael L. Eskew* | | | 180,000 | | | | 165,000 | | | | 0 | | | | 345,000 | |
| Herbert L. Henkel** | | | 136,250 | | | | 165,000 | | | | 0 | | | | 301,250 | |
| Amy E. Hood (elected August 13, 2017)*** | | | 49,810 | | | | 63,740 | | | | 0 | | | | 113,550 | |
| Muhtar Kent* | | | 150,000 | | | | 165,000 | | | | 0 | | | | 315,000 | |
| Edward M. Liddy* | | | 150,000 | | | | 165,000 | | | | 0 | | | | 315,000 | |
| Gregory R. Page | | | 130,000 | | | | 165,000 | | | | 0 | | | | 295,000 | |
| Robert J. Ulrich (retired May 9, 2017)*** | | | 46,429 | | | | 58,315 | | | | 0 | | | | 104,744 | |
| Patricia A. Woertz | | | 130,000 | | | | 165,000 | | | | 0 | | | | 295,000 | |
| Non-Employee Directors | | Fees
Earned or
Paid in
Cash
($)(1) | | Stock
Awards
($)(2) | | All Other
Compensation
($)(3) | | Total
($) |
| Sondra L. Barbour(retired from the Board, effective May 14, 2019)** | | 49,697 | | — | | — | | 49,697 |
| Thomas “Tony” K. Brown | | 135,000 | | 170,000 | | 5,389 | | 310,389 |
| Pamela J. Craig (elected to the Board, effective May 14, 2019)** | | 85,303 | | 170,000 | | 5,262 | | 260,565 |
| David B. Dillon* | | 160,000 | | 170,000 | | 5,757 | | 335,757 |
| Michael L. Eskew* | | 187,283 | | 170,000 | | 270 | | 357,553 |
| Herbert L. Henkel* | | 155,000 | | 170,000 | | 588 | | 325,588 |
| Amy E. Hood | | 135,000 | | 170,000 | | 834 | | 305,834 |
| Muhtar Kent* | | 155,000 | | 170,000 | | 752 | | 325,752 |
| Edward M. Liddy* | | 135,000 | | 170,000 | | — | | 305,000 |
| Dambisa F. Moyo | | 135,000 | | 170,000 | | 767 | | 305,767 |
| Gregory R. Page* | | 137,717 | | 170,000 | | 398 | | 308,115 |
| Patricia A. Woertz | | 135,000 | | 170,000 | | 411 | | 305,411 |
* Committee Chair
** Mr. Dillon succeeded Mr. Henkel as Chair of the Audit Committee, effective as of April 1, 2017. Accordingly, each received a pro rata portion of the additional annual fee provided to the Chair of the Audit Committee.
*** Director compensation prorated according to effective date of election or retirement.
(1) This column represents the amount of all fees earned or paid in cash for services as a director.
(2) This column represents the grant date fair value of the stock awards made in 2017, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures. The Company does not grant stock options to non-employee directors. Since all stock awards vest on the grant date, there are no unvested stock awards outstanding at year end.
(3) This column includes matching gifts. Non-employee directors are eligible to participate in the Company’s matching gift program on the same terms as 3M employees. Under this program, the 3M Foundation will match up to a total of $5,000 a year in contributions by the director to eligible institutions of higher education.
| * | Lead Director or Committee Chair during all or a portion of 2019. |
| ** | Director compensation prorated according to effective date of election or retirement. |
| (1) | This column represents the amount of all fees earned or paid in cash for services as a director. |
| (2) | This column represents the grant date fair value of the stock awards made in 2019, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation. The Company does not grant stock options to non-employee directors. Since all stock awards vest on the grant date, there are no unvested stock awards outstanding at year end. |
| (3) | This column includes the incremental cost of complimentary products and matching gifts. Non-employee directors are eligible to participate in the Company’s matching gift program on the same terms as 3M employees. Under this program, the 3M Foundation will match up to a total of $5,000 a year in contributions by the director to eligible educational institutions and, effective January 1, 2020, up to a total of $1,000 a year in contributions by the director to eligible charitable organizations. |
Reasonableness of Non-Employee Director Compensationnon-employee director compensation
As described above, our philosophy on director compensation is to pay directors fairly for work required in a company of our size and complexity, make a significant portion of the total compensation equity-basedequity based to align directors’ interests with those of our stockholdersshareholders and structure compensation in a simple and transparent manner. We believe that the application of this philosophy has resulted in a non-employee director compensation program that reflects best-in-class design with the following provisions:
| ●• | Retainer-only cash compensation with no fees for attending meetings that are an expected part of board service. |
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| ●• | Additional retainers for special roles having greater responsibilities, such as Lead Director and committee chairs, to recognize the incremental additional time and effort required. |
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| ●• | Equity delivered in the form of current or deferred full-value shares, where annual grants are based on a competitive fixed-value formula and immediate vesting helps avoid director entrenchment. |
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| ●• | A requirement to retain the stock retainer portion of annual compensation issued on or after October 1, 2007, until termination from Board service, which includes net after-tax shares attributable to current payments and pre-tax shares attributable to deferrals. |
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| ●• | Flexible voluntary deferral provisions and no material benefits or perquisites. |
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| ●• | Our 2016 Long-Term Incentive Plan, approved by shareholders at the 2016 Annual Meeting, includes a $600,000 annual compensation limit on all forms of compensation for non-employee directors. |
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Stock Ownership Guidelinesownership guidelines
The Board requires that each director retain the stock retainer portion (currently valued at $165,000)$170,000) of the annual compensation issued on or after October 1, 2007, until the director leaves the Board. Information regarding accumulated stock and deferred stock units is set forth in the section entitled “Security Ownershipownership of Management”management” beginning on page 7592 of this Proxy Statement.
Hedging and Pledging Policiespledging policies
The Company’s stock trading policies prohibit directors and the Company’s executive officers from (i) purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of the Company’s common stock, including prepaid variable forward contracts, equity swaps, collars and exchange funds; (ii) engaging in short sales related to the Company’s common stock; (iii) placing standing orders; (iv) maintaining margin accounts; and (v) pledging 3M securities as collateral for a loan. All transactions in 3M securities by directors and executive officers must be pre-cleared with the DeputyCompany’s General Counsel.
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AUDIT COMMITTEE
MATTERS
Proposal No. 2: Ratification of the Appointment of Independent Registered Public Accounting Firm for 2018
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PROPOSAL 
2 | Ratification of the Appointment of Independent Registered Public Accounting Firm for 2020 • Ratify the appointment of PricewaterhouseCoopers LLP as 3M’s independent registered public accounting firm for 2020. • Based on its assessment of the qualifications and performance of PricewaterhouseCoopers LLP (“PwC”), the Audit Committee believes that it is in the best interests of the Company and its shareholders to retain PwC. |
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The Audit Committee is directly responsible for the appointment, compensation (including approval of all fees), retention, and oversight of the Company’s independent registered public accounting firm (“Independent Accounting Firm”) retained to perform the audit of our financial statements and our internal control over financial reporting.
The Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) to serve as 3M’s Independent Accounting Firm for 2018.2020. PwC has been 3M’s Independent Accounting Firm since 1998. Prior to that, 3M’s Independent Accounting Firm was Coopers & Lybrand from 1975 until its merger with Price Waterhouse in 1998. In accordance with SEC rules and PwC policy, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide service to our Company. For lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five years. The process for selection of the Company’s lead audit partner pursuant to this rotation policy involves a meeting between the Chair of the Audit Committee and the candidate for the role, as well as discussion by the full Committee and with management.
The Audit Committee annually reviews PwC’s independence and performance in connection with the Audit Committee’s determination of whether to retain PwC or engage another firm as our Independent Accounting Firm. In the course of these reviews, the Audit Committee considers, among other things:
| ●• | PwC’s historical and recent performance on the 3M audit, including input from those 3M employees with substantial contact with PwC throughout the year about PwC’s quality of service provided, and the independence, objectivity, and professional skepticism demonstrated throughout the engagement by PwC and its audit team; |
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| ●• | an analysis of PwC’s known legal risks and significant proceedings; |
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| ●• | external data relating to audit quality and performance, including recent Public Company Accounting Oversight Board (“PCAOB”) reports on PwC and its peer firms; |
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| ●• | PwC’s independence; |
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| ●• | the appropriateness of PwC’s fees, on both an absolute basis and as compared to its peer firms; |
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| ●• | PwC’s tenure as our independent auditor and its familiarity with our global operations and businesses, accounting policies and practices and internal control over financial reporting; and |
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| ●• | PwC’s capability and expertise in handling the breadth and complexity of our global operations, including the Company’s phased implementation of an enterprise resource planning system on a worldwide basis over the next several years. |
Based on this evaluation, the Audit Committee believes that PwC is independent and that it is in the best interests of the Company and our stockholdersshareholders to retain PwC to serve as our Independent Accounting Firm for 2018.2020.
We are asking our stockholdersshareholders to ratify the selection of PwC as our Independent Accounting Firm for 2018.2020. Although ratification is not required by our Bylaws or otherwise, the Board is submitting the selection of PwC to our stockholdersshareholders for ratification as a matter of good corporate governance. If the selection of PwC is not ratified, the Audit Committee will consider whether it is appropriate to select another Independent Accounting Firm. Even if the selection is ratified, the Audit Committee may in its discretion select a different Independent Accounting Firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.shareholders.
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PwC representatives are expected to attend the Annual Meeting where they will be available to respond to appropriate questions and, if they desire, to make a statement.
RECOMMENDATION OF THE AUDIT COMMITTEE |
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  | The Audit Committee of the Board of Directors unanimously recommends a vote “FOR” “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2018.2020. Proxies solicited by the Board of Directors will be voted “FOR” “FOR” ratification unless a stockholdershareholder indicates otherwise in voting the proxy. |
Audit Committee Reportreport
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. The management of the Company is responsible for (i) the preparation of complete and accurate annual and quarterly consolidated financial statements (“financial statements”) in accordance with generally accepted accounting principles in the United States, (ii) maintaining appropriate accounting and financial reporting principles and policies and internal controls designed to assure compliance with accounting standards and laws and regulations, and (iii) an assessment of the effectiveness of internal control over financial reporting. The Independent Accounting Firm is responsible for planning and conducting in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”) an audit of the Company’s annual consolidated financial statements and a review of the Company’s quarterly financial statements and expressing opinions on the Company’s financial statements and internal control over financial reporting based on the integrated audits.
In this context, the Audit Committee has met and held discussions with management and the Independent Accounting Firm regarding the fair and complete presentation of the Company’s results and the assessment of the Company’s internal control over financial reporting. The Audit Committee has discussed significant accounting policies applied by the Company in its financial statements, as well as alternative treatments. Management has represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States, and the Audit Committee has reviewed and discussed the consolidated audited financial statements with management and the Independent Accounting Firm. The Audit Committee has discussed with the Independent Accounting Firm matters required to be discussed pursuant to the PCAOB’s Auditing Standards on Communicationsapplicable requirements of the PCAOB and the Securities and Exchange Commission with Audit Committees, as currently in effect.Committees.
In addition, the Audit Committee has reviewed and discussed with the Independent Accounting Firm the auditor’s independence from the Company and its management. As part of that review, the Audit Committee has received the written disclosures and the letters required by applicable requirements of the PCAOB regarding the Independent Accounting Firm’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed the Independent Accounting Firm’s independence from the Company.
The Audit Committee also has considered whether the Independent Accounting Firm’s provision of non-audit services to the Company is compatible with the auditor’s independence. The Audit Committee has concluded that the Independent Accounting Firm is independent from the Company and its management.
The Audit Committee has discussed with the Company’s Internal Audit Department and Independent Accounting Firm the overall scope of and plans for their respective audits. The Audit Committee meets with the Internal Auditor, Chief Compliance Officer, the General Counsel, and representatives of the Independent Accounting Firm in regular and executive sessions, to discuss the results of their examinations, the evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting and compliance programs.
In reliance on the reviews and discussions referred to above, the Audit Committee has recommended to the Board of Directors, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017,2019, for filing with the SEC.
Submitted by the Audit Committee
David B. Dillon, Chair
Sondra L. Barbour
Thomas “Tony” K. Brown
Pamela J. Craig
Dambisa F. Moyo
Gregory R. Page
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Audit Committee Policypolicy on Pre-Approvalpre-approval of Auditaudit and Permissible Non-Audit Servicespermissible non-audit services of the Independent Accounting Firmindependent accounting firm
The Audit Committee is responsible for appointing and overseeing the work of the Independent Accounting Firm. The Audit Committee has established a policy requiring its pre-approval of all audit and permissible non-audit services provided by the Independent Accounting Firm.
The policy identifies the guiding principles that must be considered by the Audit Committee in approving services to ensure that the Independent Accounting Firm’s independence is not impaired; describes the Audit, Audit-Related, Tax and All Other services that may be provided and the non-audit services that may not be performed; and sets forth the pre-approval requirements for all permitted services. The policy provides for the general pre-approval of specific types of Audit, Audit-Related, Tax and TaxOther services and a limited fee estimate range for such services on an annual basis as set forth in the engagement letter with the Independent Accounting Firm.basis. The policy also requires specific pre-approval of all other permitted services.services not already included in the annual pre-approval. The Independent Accounting Firm is required to report periodically to the Audit Committee regarding the extent of services provided in accordance with their pre-approval and the fees for the services performed to date.
The Audit Committee’s policy delegates to its Chair the authority to address requests for pre-approval of services in certain limited circumstances between Audit Committee meetings. The chair, in his discretion, must either seek immediate approval by emaile-mail from the other Audit Committee members, or report any pre-approval decisions to the Audit Committee for its approval at its next scheduled meeting.
The Audit Committee may not delegate to management the Audit Committee’s responsibility to pre-approve permitted services of the Independent Accounting Firm.
All Audit, Audit-Related, Tax and All Other services described below were approved by the Audit Committee before services were rendered.
Fees of the Independent Accounting Firmindependent accounting firm
The following table represents fees billed for professional services rendered by PricewaterhouseCoopers LLP (“PwC”) for the audit of the Company’s consolidated financial statements for the years ended December 31, 20162018 and 2017,2019, and fees billed for other services rendered by PwC during those periods.
Audit and Non-Audit FeesAUDIT AND NON-AUDIT FEES ($ in Millions)IN MILLIONS)
| | 2016 | | 2017 |
| Audit Fees: | $15.1 | | $17.4 |
| Audit-Related Fees: | 0.5 | | 1.2 |
| Tax Fees: | 1.0 | | 0.9 |
| All Other Fees: | 0.2 | | 0.1 |
| Total | $16.8 | | $19.7 |
| | | 2018 | | | 2019 | |
| Audit Fee: | | $ 18.6 | | | $ 18.8 | |
| Audit-Related Fee: | | 1.3 | | | 1.3 | |
| Tax Fee: | | 0.7 | | | 0.7 | |
| All Other Fee: | | 0.2 | | | 0.1 | |
| Total | | $ 20.8 | | | $ 20.9 | |
| | | | | | | |
In the above table, in accordance with SEC rules, “Audit” fees consisted of audit work and review services, as well as work generally only the independent registered public accounting firm can reasonably be expected to provide, such as statutory audits, comfort letters, consents, and review of documents filed with the Securities and Exchange Commission. “Audit-related” fees consisted principally of carve out audit procedures, procedures related to the adoption of new accounting standards in future years, internal control and system audit procedures for periods prior to the rollout of the ERP system, agreed-upon procedures, employee benefit plan audits, and other attestation services. “Tax” fees consisted principally of tax compliance services in foreign jurisdictions, assistance with transfer pricing documentation, assistance with excise tax filings, and advice on foreign and domestic tax related matters. “All Other” fees consisted of general industry and accounting training, information security vendor assessments, licenses for accounting research software, and other permissible services that do not fall into the three categories listed above.
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Audit Committee Restrictionsrestrictions on Hiring Employeeshiring employees of the Independent Accounting Firmindependent accounting firm
The Audit Committee has adopted restrictions on the hiring by the Company of any PwC partner, director, manager, staff, reviewing actuary, reviewing tax professional, and any other persons having responsibility for providing audit assurance on any aspect of PwC’s certification of the Company’s financial statements. Audit assurance includes all work that results in the expression of an opinion on financial statements, including audits of statutory accounts.
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EXECUTIVE
COMPENSATION
Proposal No. 3: Advisory Approval of Executive Compensation
| | |
PROPOSAL
| Advisory Approval of Executive Compensation • Approve, on an advisory basis, the compensation of our Named Executive Officers. • Our executive compensation program appropriately aligns our executives’ compensation with the performance of the Company and its business units as well as their individual performance. |
| | |
Section 14A of the Securities Exchange Act provides our stockholdersshareholders with the opportunity to approve, on an advisory basis, the compensation of our named executive officers as described in this Proxy Statement. This is the seventhtenth year that the Company is asking stockholdersshareholders to vote on this type of proposal, known as a “say-on-pay” proposal.
We believe that our executive compensation program is consistent with our core compensation principles and is structured to assure that those principles are implemented. At the Annual Meeting of StockholdersShareholders held on May 9, 2017,14, 2019, approximately 9695 percent of the votes cast on this issue voted to approve the compensation of the Company’s named executive officers as disclosed in last year’s Proxy Statement. Although the vote was non-binding, the Compensation Committee believes this level of approval percentage indicates that our stockholdersshareholders strongly support our core compensation principles and our executive compensation program, and we believe our stockholders as a whole should support them as well.program.
Thus, the Company is submitting to stockholdersshareholders the following resolution for their consideration and approval:
“RESOLVED, that the stockholdersshareholders approve, on an advisory basis, the compensation of the Company’s Named Executive Officers as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission (including in the Compensation Discussion and Analysis, the accompanying compensation tables and related narrative).”
As described inWe encourage you to read the entire Compensation Discussion and Analysis portion of this Proxy Statement 3M delivered another year of strongto learn more about our executive compensation program and the impact that our financial performance in 2017. These results reflectedhas on the strong performance of the Company’s leadership team, including the Named Executive Officers, which impacted their annual and long-term incentive compensation earned during 2017.by our leadership team.
While the Board of Directors and the Compensation Committee intend to carefully consider the results of the voting on this proposal when making future decisions regarding executive compensation, the vote is not binding on the Company or the Board and is advisory in nature. The Company currently holds advisory votes on the compensation of named executive officers annually. Accordingly, the next such advisory vote is expected to occur at the 20192021 Annual Meeting.
RECOMMENDATION OF THE BOARD |
|
 | The Board of Directors unanimously recommends a vote “FOR” this proposal for the reasons discussed above. Proxies solicited by the Board of Directors will be voted “FOR” this proposal unless a stockholdershareholder indicates otherwise in voting the proxy. |
2018 Proxy Statement | 50 | 373M Company |
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Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes 3M’s executive compensation program, explains how 3M’s Compensation Committee oversees and implements this program, and reviews the 20172019 compensation for the current and former executive officers identified below. Throughout this Compensation Discussion and Analysis and elsewhere in this Proxy Statement, we refer to this group of individuals as the “Named Executive Officers.”
NAMEName | | TITLETitle(1) |
Inge G. ThulinMichael F. Roman | | Chairman of the Board, President and Chief Executive Officer |
| Inge G. Thulin(2) | | Former Executive Chairman of the Board |
| Nicholas C. Gangestad | | Senior Vice President and Chief Financial Officer |
Frank R. LittleAshish K. Khandpur | | Executive Vice President, Transportation and Electronics Business Group |
| Julie L. Bushman(3) | | Executive Vice President, International Operations |
| Joaquin Delgado(4) | | Former Executive Vice President, Consumer Business Group |
| Michael G. Vale | | Executive Vice President, Safety and GraphicsIndustrial Business Group |
Michael F. Roman | | Chief Operating Officer and Executive Vice President |
Hak Cheol Shin | | Vice Chair and Executive Vice President |
The table above reflects the title of each Named Executive Officer as of March 13, 2018. As part of the Board’s ongoing leadership succession planning process, two of the named executive officers held multiple positions during 2017:
| (1) | ● | Mr. Roman was appointed Chief OperatingReflects the title of each Named Executive Officer and Executive Vice President, effective Julyas of March 1, 2017. In this role, he is responsible for the Company’s five Business Groups and International Operations. Prior to this time, he served as Executive Vice President, Industrial Business Group.2020. |
| | |
| (2) | Mr. Thulin retired from employment with the Company, effective June 1, 2019. |
| | ● |
| (3) | Mr. Shin was appointed Vice ChairMs. Bushman has announced her intention to retire and Executive Vice President,is expected to separate from employment with the Company, effective April 1, 2020. |
| |
| (4) | Dr. Delgado separated from employment with the Company on July 1, 2017. In this role, he oversees critical global functional teams, including Research & Development; Strategy and Business Development; Supply Chain Operations; and Business Transformation and Information Technology. Prior to this time, he served as Executive Vice President, International Operations.2019. |
As announced on March 5, 2018, the Board of Directors appointed Mr. Roman Chief Executive Officer and appointed Mr. Thulin Executive Chairman of the Board of Directors, in each case, effective as of July 1, 2018.
To enable quicker navigation of the information provided, this Compensation Discussion and Analysis is organized into four distinct sections:
| Section I: Executive Summary | 38 | 51 |
| Section II: How We Determine Compensation | 42 | 57 |
Section III: How We Paid our Named Executive Officers in 20172019 | 49 | 65 |
| Section IV: Ways in Which We Address Risk and Governance | 55 | 71 |
For the meaning of certain capitalized terms used throughout this Compensation Discussion and Analysis, see “Meaning of Certain Terms”certain terms” on page 4864 of this Proxy Statement.
SECTIONSection I: Executive summaryExecutive Summary |
2017 Financial Performance and Business Highlights
For 3M, 2017 was a year of strongSelected 2019 financial performance and business highlights
3M’s 2019 financial performance was achieved through solid growthdisciplined execution, impacted by weakness in certain end markets (China, automotive and disciplined execution. Given the impact that the U.S. Tax Reform Legislationelectronics) and a related $600 million pension contribution had onchannel inventory adjustments. The table below reflects the Company’s 2017 financial performance our results are shown belowagainst the key metrics underlying the Company’s performance share awards, both as determined in accordance with GAAP (toand as adjusted to better reflect the extent applicable) and excludingCommittee’s view of the impact of certain items stemming from the U.S. Tax Reform Legislation and 3M’s related pension contribution.Company’s 2019 operating performance.
| | | Results Determined in
Accordance with GAAP
(to the Extent Applicable) | | Results as Adjusted to Better
Reflect the Committee’s
View of the Company’s 2019
Operating Performance |
| Earnings Per Share Growth | | -12.1% | | -6.9%* |
| Organic Local Currency Sales Growth | | -1.5% | | -1.5% |
| Return on Invested Capital | | 17.5%* | | 22.9%* |
| Free Cash Flow Conversion | | 117.5%* | | 106.0%* |
38* | | 3MSee Appendix A to this Proxy Statement for a reconciliation of earnings per share, operating margin performance, free cash flow and free cash flow conversion to our results for the most directly comparable financial measures as reported under generally accepted accounting principles in the United States, and the calculation of return on invested capital. See “Adjustments for certain special items” on page 60 below for additional information concerning the Committee’s general approach to adjustments. |
| | RESULTSTable of Contents
DETERMINED IN
ACCORDANCE
WITH GAAP (TO THE
EXTENT APPLICABLE) | | RESULTS EXCLUDING
IMPACT OF TAX
REFORM AND
RELATED PENSION
CONTRIBUTION | | |
EARNINGS PER
SHARE GROWTH | | -2.8% | | +12.4%* | | ● Excluding the impact of the U.S. Tax Reform Legislation, earnings per share grew from $8.16 in 2016 to $9.17 in 2017
● Expanded full-year operating income margins 70 basis points to 24.7 percent
|
ORGANIC LOCAL
CURRENCY SALES
GROWTH | | +5.2% | | +5.2% | | ● Strong growth exceeding the external market
● Positive organic growth across all Business Groups and geographic areas
|
RETURN ON
INVESTED CAPITAL | | 21.3%* | | 24.5%* | | ● Efficiently deploying capital across the business
● Fifth consecutive year of at least 20 percent
|
FREE CASH
FLOW CONVERSION | | 100.2%* | | 97.3%* | | ● Including the impact of the U.S. Tax Reform Legislation and 3M’s related pension contribution, fourth consecutive year of 100 percent or above |
* See Appendix A to this Proxy Statement for a reconciliation of earnings per share, free cash flowBased on the Company’s financial performance and free cash flow conversion toconsistent with our results forpay-for-performance philosophy, the most directly comparable financial measures as reported under generally accepted accounting principles in the United States and the calculation of return on invested capital as shown here.
We believe2019 annual incentive payments that our ability to deliver consistent results over time is reflected in our total stockholder return, which was in the top half of our executive compensation peer group for the one-, three-,Named Executive Officers received and five-year periods endingtheir performance share accruals based on December 31, 2017.2019 performance were below targeted levels. For additional information, see “Total Stockholder Return”“Impact of company performance on page 41incentive compensation and real pay delivery,” “2019 annual incentive” and “Performance share accruals based on 2019 performance” beginning on pages 53, 66 and 70, respectively. The stock, stock options and other long-term incentive compensation awards held by our Named Executive Officers throughout 2019 also decreased in value during the year with the decline in the market value of this Proxy Statement.our shares.
Other noteworthyNoteworthy accomplishments from January 1, 2019, through March 1, 2020, include the following:
| • | ● | Enhanced 3M’s array of safety productsRealigned our organizational structure and solutions through the acquisition of Scott Safety, making us even more relevantstreamlined our global operating model around four new business groups to ourfurther align to customers worldwide;and go-to-market models for improved growth, operating agility, and accountability; |
| | |
| • | Completed the acquisition of M*Modal to strengthen our Health Information Systems portfolio and complement organic growth; |
| | ● |
| • | Completed the acquisition of Acelity, Inc. to bolster our Medical Solutions business and support our growth strategy to offer comprehensive advanced and surgical wound care solutions; |
| |
| • | Strengthened our portfolio going forward by completing the divestitures of our gas and flame detection business and advanced ballistics-protection business; and announced the divestiture of substantially all of the drug delivery business; |
| |
| • | Awarded a record total of 4,1683,616 patents from patent offices around the world in 2017,2019, including 708700 patents granted to 3M by the United States Patent and Trademark Office, which brings to more than 113,000121,000 the total number of patents awarded to 3M in its corporate history; |
| | | |
| • | ● | Strengthened our portfolio going forward by completing or announcingEstablished a new Board committee to provide oversight of the divestiture of all or substantially all of four businessesCompany’s strategies related to research and development, commercialization, sustainability, environmental stewardship, and other related activities, which will help ensure that no longer align with our strategic objectives: identity management, electronic monitoring, tolling and automated license/number plate recognition and optical fiber and copper passive connectivity solutions for the telecommunications industry;Company is building on its strong innovation capabilities while maintaining the Company’s high product stewardship standards; |
| | | |
| ● | Recognized by Ethisphere® as one of the World’s Most™ Ethical Companies®for the fifth consecutive year; |
| | |
| ● | Nearly completed the rollout of the enterprise resource planning (ERP) system in West Europe, and successfully started the initial deployment in the United States; |
| | |
| ●• | Over 100 consecutive years of paying dividends to stockholders;shareholders and 62 consecutive years of annual increases; |
| |
| • | Reported an all-time high free cash flow of $5.4 billion for 2019, up 10 percent over 2018; |
| |
| • | Returned $4.7 billion to shareholders via dividends and gross share repurchases; and |
| | | |
| • | ● | Returned $4.9 billionRecognized by FORTUNE®magazine as one of the “World’s Most Admired Companies,” which 3M management believes is a recognition of our ability to stockholders via dividends and gross share repurchases.create a foundation of trust with all of our stakeholders. |
Factors Creating Alignment Between Paycreating alignment between pay and Performanceperformance
3M’s executive compensation program is designed to maintain a strong alignment between corporate performance and executive compensation by tying incentive compensation to the achievement of performance metrics that we believe increase the Company’s long-term value. For 2017,2019, highlights of the program include:
| ●• | A large portion of each executive’s target Total Direct Compensation (cash plus long-term incentives) is performance-based, varying from 90 percent for Chief Executive Officer Inge ThulinMichael Roman to a range of 79-8572-86 percent for the other Named Executive Officers; and |
| | | |
| ●• | The incentive compensation opportunities provided to the Named Executive Officers utilize multiple performance-based metrics focused primarily on revenue and earnings performance, increase in 3M’s common stock price, efficient use of capital, and free cash flow conversion. |
2018 Proxy Statement | 52 | 393M Company |
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Impact of Company Performancecompany performance on Incentive Compensationincentive compensation and Real Pay Deliveryreal pay delivery
One objective of our incentive compensation program is to align our Named Executive Officer’sOfficers’ real pay delivery with performance. The Company’s performance directly impacted incentive compensation pay outcomes for our Named Executive Officers as follows:
2017 Annual Incentive Compensation
For the Named Executive Officers paid on the basis of the Company’s overall performance, the 20172019 annual incentive compensation payout (before any adjustment for individual performance) was 130 percent of the target amount. The payouts reflect our solid performance against the goals established for 2017 (as shown below) and were calculated excluding the impact of the U.S. Tax Reform Legislation and 3M’s related pension contribution, gains associated with the divestiture of the Electronic Monitoring and Identity Management businesses, and costs associated with special actions.
For the Named Executive Officers paid on the basis of the Company’s overall performance, the 2019 annual incentive compensation payout (before any adjustment for individual performance) was 62 percent of the target amount. The payouts reflect the Committee’s view of our performance against the goals established for 2019, as shown below. | ● |  |
| • | Local currency sales achieved 10496 percent of plan; |
| plan, which resulted in an 80 percent payout for this metric (40 percent of target after adjusting for weighting); | |
| ●• | 3M economic profit achieved 10984 percent of plan;plan, which was below the threshold required to receive a payment based on this metric; and |
| | |
| ●• | 3M’s 20172019 economic profit represented 11586 percent of its 2016 results.2018 results, which resulted in a 72 percent payout for this metric (22 percent of target after adjusting for weighting). |
The achievement levels described above reflect certain adjustments that the Committee believed were appropriate to better reflect the Company’s performance against its 2019 operating plan. See Appendix A to this Proxy Statement for a reconciliation of local currency sales to our results for the most directly comparable financial measure as reported under GAAP, and the calculation of 2018 and 2019 economic profit.
Performance Share Awards (Long-Term Incentive Compensation)share award payouts and accruals (long-term incentive compensation)
The number of shares delivered pursuant tothree-year performance period for the performance share awards2017 Performance Share Awards issued to the Named Executive Officers ended on December 31, 2019. Based on the financial results achieved during 2017 – 2019 and excluding dividend equivalents, the Named Executive Officers received 1.189 shares of 3M common stock for the 2015-2017each target performance period equaled 99 percent of the target number of shares awarded.
Earnings Per
Share Growth
(20% Weighting) | | Relative Organic
Volume Growth
(40% Weighting) | | Return on
Invested Capital
(20% Weighting) | | Free Cash
Flow Conversion
(20% Weighting) |
| | | | | | |
 | |  | |  | |  |
| | | | | | |
● 2017 performance excludes the impact of the U.S. Tax Reform Legislation
● 2017 performance exceeded the maximum level established for these awards
| | ● 2017 performance achieved the maximum level established for these awards
● No shares were earned based on 2016 performance for this metric
| | ● Numbers shown exclude the impact of acquisitions in the year of the transaction
● 2017 excludes the impact of U.S. Tax Reform Legislation and 3M’s related pension contribution
| | ● 2017 excludes the impact of the U.S. Tax Reform Legislation and 3M’s related pension contribution |
share subject to their 2017 Performance Share Awards. After considering the appreciationchange in the pricemarket value of 3M’s common stock over the three-year performance period and the additional shares delivered pursuant to the dividend equivalent rights granted as part of the 2017 Performance Share Awards, the value of the total number of 3M shares delivered to the Named Executive Officers in settlement of these awards (determined using the closing price of a share of 3M common stock on the NYSE for December 29, 2017)31, 2019) equaled 146120 percent of the value of the target number of performance shares subject to such awards (determined using the closing price of a share of 3M common stock on the NYSE for March 2, 2015,1, 2017, the initial grant date of 2015for the 2017 performance share awards).
When evaluating the payouts for these awards against the Company’s performance, it is important to keep in mind the weightings applied to each year (2017 – 50 percent; 2018 – 30 percent; and 2019 – 20 percent) and each metric (Relative Organic Volume Growth – 40 percent; Return on Invested Capital – 20 percent; Earnings per Share Growth – 20 percent; and Free Cash Flow Conversion – 20 percent). As illustrated in the charts below, the above target payout of these awards was driven primarily by the Company’s strong 2017 Relative Organic Volume Growth, Return on Invested Capital, and Earnings per Share Growth, which was partially offset by the Company’s below target performance on certain metrics for 2018 and 2019.
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The attainment levels described above reflect certain adjustments that the Committee believed were appropriate to better reflect the Company’s performance during the performance period. See Appendix A to this Proxy Statement for a reconciliation of earnings per share, operating margin performance, free cash flow and free cash flow conversion to our results for the most directly comparable financial measures as reported under GAAP, and the calculation of return on invested capital.
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The Company’s 2019 performance will have a more pronounced impact on the payouts for the 2018 Performance Share Awards and 2019 Performance Share Awards, where the weighting of 2019 performance is 30 percent and 50 percent, respectively. To illustrate this point, the table below shows the number of shares of 3M common stock accrued per target performance share based on the Company’s performance for the performance share awards that were outstanding at December 31, 2019.
For additional information concerning the overall status of the performance share awards that were outstanding at December 31, 2019, and the impact that the Company’s 2019 performance had on such awards, see “Status of outstanding performance share awards” and “Performance share accruals based on 2019 performance” beginning on pages 68 and 70, respectively.
Stock and Long-Term Incentive Compensationlong-term incentive compensation
The performance of 3M’s stock has a material impact on the amount of compensation actually realized by our Named Executive Officers. Our stock ownership guidelines require covered executives, including the Named Executive Officers, to own amounts of Company stock having a value exceeding a specified multiple of their base salary. If the market price of 3M’s stock declines, so does the value of the stock they own.
Similarly, stock options and other long-term incentive awards held by our Named Executive Officers increase or decrease in value along with increases and decreases in the value of 3M’s common stock.
The stock, stock options and other long-term incentive compensation granted toawards held by our Named Executive Officers in years prior to 2017 increasedthroughout 2019 decreased in value during 2017the year as the closing price for a share of the Company’s common stock on the NYSE increaseddecreased from $178.57$190.54 on December 30, 2016,31, 2018, to $235.37$176.42 on December 29, 2017.31, 2019.
Total Stockholder Returnshareholder return
As reflected in theThe graphs below illustrate 3M’s stock performance continuesrelative to compare favorably with the stock performance of the S&P 500 and the peer companies included in the Company’s executive peer group (excluding DuPont de Nemours, Inc., formerly DowDuPont Inc., which was excluded due to its spinoff of two independent public companies during 2019 – Dow Inc. and Corteva, Inc.), as described under “Competitive Pay”pay” beginning on page 4661 of this Proxy Statement.
ANNUALIZED TOTAL STOCKHOLDER RETURN PERFORMANCE
5-YEAR PERIOD | | 3-YEAR PERIOD | | 1-YEAR PERIOD |
 | |  | |  |
| TSR = Share Price Appreciation + Dividend Yield (annualized) | |
Note: 5-Year Return5-year period = Five years ending 12/31/17; 3-Year Return19; 3-year period = Three years ending 12/31/17; 1-Year Return19; 1-year period = One year ending 12/31/1719 Source: Bloomberg.
2017 SayTable of Contents
2019 say on Paypay
In 2017,2019, approximately 9695 percent of the votes cast on our say-on-pay proposal approved the compensation of our named executive officers as disclosed in last year’s Proxy Statement. Although the vote was non-binding, the Committee believes this level of approval indicates that stockholdersshareholders strongly support our executive compensation programs and policies. The Committee will consider the results of this year’s say-on-pay proposal, as well as feedback from our stockholders,shareholders, when making future executive compensation decisions.
For information concerning our investor outreach efforts, please refer to the section entitled “Stockholder“Shareholder Outreach and Engagement” on page 1724 of this Proxy Statement.
Noteworthy Compensation Actions for 2017 and Early 2018compensation program actions since January 1, 2019
During 2017Since January 1, 2019, 3M and the first two months of 2018, the Company took a number of actions that were intended to create a more unified program structure that applies to all eligible employees throughout the organization and simplify the design and administration of our compensation programs. Effective as of January 1, 2017, to encourage performance that exceeds targets and better align incentive compensation opportunities between those employees compensated on the basis of corporate performance and those employees compensated based on the performance of one or more businesses, we adjusted our approach to setting financial performance targets for the Annual Incentive Plan. In addition, the CompanyCommittee took the noteworthy actions listeddescribed below effective as part of January 1, 2018.the Company’s executive compensation program.
| • | ●Approved participation of all executive officers in the broad-based Annual Incentive Plan (as opposed to the Executive Annual Incentive Plan), effective for plan years beginning on or after January 1, 2020. |
| • | IncreasedRecalculated the payout slopesnumber of shares required to be beneficially owned by our executive officers in order to maintain compliance with our stock ownership guidelines, effective December 31, 2019. |
| • | Approved a new severance plan for certain U.S. executives (including the Named Executive Officers) to provide separation payments and further adjusted ourbenefits upon a qualifying termination of employment. Among other things, the new plan is intended to help support talent recruitment and retention objectives and provide a consistent approach to setting financial performance targets forexecutive departures. For more information concerning the Annual Incentive Plan. These changes are intended, among other things, to better align payout opportunities with thosenew severance plan, see “New severance plan” and “Rights and payments upon a qualifying termination under the severance plan” beginning on pages 61 and 85 of the Company’s executive compensation peer group by strengthening “rewards” for participants when plan targets are exceeded and consequences when they are not. |
2018this Proxy Statement, | | 41 |
| ● | Eliminated the Company’s historical practice of granting prorated performance share awards to newly appointed or promoted members of the Company’s senior management (which generally consists of approximately 100 of our top employees), and aligned the retirement vesting provisions of performance share awards for newly appointed executives with those provided to other executives who did not receive prorated grants.respectively. |
Compensation Policiespolicies and Practicespractices
Our compensation program is designed to provide appropriate performance incentives and avoid compensation practices that do not promote the interests of our stockholders.shareholders.
| WE DOWe do | | | | WE DO NOTWe do not | |
| | | | | |
|  Maintain a strong alignment between corporate performance and our executive officers’ compensation by having a majority of Total Direct Compensation consist of performance-based compensation.
Conduct an annual assessment for the purpose of identifying and mitigating significant economic and reputational risks in the design of our incentive compensation programs.
Have a comprehensive clawback policy. policy that covers both cash and equity compensation and includes provisions addressing reputational and financial risk as well as risk management failures.
Use an independent compensation consultant retained by, and reporting directly to, the Compensation Committee.
Limit the number and amount of executive perquisites.
Prohibit our executive officers from hedging or pledging 3M common stock.
Maintain robust stock ownership guidelines applicable to all of our executive officers.
Conduct competitive benchmarking to align executive compensation with the market. | | 
| xHave employment severance, or change in control agreements with any of our executive officers.
xProvide tax gross-ups on executive perquisites.
xHave agreements that would provide automatic “single-trigger” accelerated vesting of equity compensation or excise tax gross-up payments to any of our executive officers upon a change in control. Provide
xPay dividends or dividend equivalents on unearned equity awards.
xReprice stock options without the approval of 3M stockholders,shareholders, except for “anti-dilution” adjustments (such as adjustments in connection with a stock split, spinoff, etc.) |
SECTION II:How We Determine Compensation56 | 3M Company |
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Section II: How we determine executive compensation
Principles of Our Executive Compensation Program
The Company maintains global compensation principles that are intended to ensure that its compensation practices are fair and reasonable as applied to both executive and non-executive employees. These principles align with the Company’s vision and strategies, balance both individual and enterprise-wide performance and seek to provide competitive wages and benefits with consistent positioning in the median range of the most-relevant markets to employees based on roles, responsibilities, skills, and performance. 3M also believes that the compensation of its executives should be closely tied to the performance of the Company, so that their interests are aligned with the interests of long-term 3M stockholders.shareholders. Consistent with this philosophy, the following core principles provide a framework for the Company’s executive compensation program:
| ●• | Total Direct Compensation should be competitive to attract the best talent to 3M, motivate executives to perform at their highest levels, reward individual contributions that improve the Company’s ability to deliver outstanding performance, and retain those executives with the leadership abilities and skills necessary for building long-term stockholdershareholder value; |
| | |
| ●• | The portion of Total Direct Compensation that is performance-based and is, therefore, at risk should increase with the level of an individual’s responsibility; |
| | |
| ●• | The program should balance incentives for delivering outstanding long-term, sustainable performance against the potential to encourage inappropriate risk-taking; |
| | |
| ●• | The metrics and targets for earning performance-based incentives should be consistent with, and aligned to, increasing stockholdershareholder value over the long term; and |
| | |
| ●• | A significant portion of each executive’s personal net worth should be tied to the value of 3M common stock as further motivation to build long-term stockholdershareholder value and mitigate the risk of inappropriate risk-taking. |
To monitor and support the effectiveness of this program, the Committee periodically reviews the compensation principles used for setting annual total cash compensation for the Company’s global workforce and approves the methodology for determining annual long-term incentive target grant values for employees eligible to receive such awards. The Company also periodically compares its pay components to those of other premier companies and adjusts them as necessary to stay competitive and attract, retain, and motivate a highly qualified, diverse workforce at all levels throughout the organization, not just for its executives.
Roles and Responsibilitiesresponsibilities
The Company believes that a collaborative process best ensures that compensation decisions reflect the principles of our executive compensation program. Set forth below is a summary of the roles and responsibilities of the key participants that were involved in making decisions relating to the compensation that our Named Executive Officers earned in 2017.2019.
RESPONSIBLE PARTYResponsible Party | | PRIMARY ROLES AND RESPONSIBILITIES RELATING TO
COMPENSATION DECISIONSPrimary Roles and Responsibilities Relating to Compensation Decisions |
Compensation Committee
(Composed solely of independent, non-employeenon- employee directors and reports to the Board) | | ●• Reviews the design of, and risks associated with, the Company’s compensation policies and practices; |
| |
| ●• Approves the compensation of our Chief Executive Officer and Executive Chairman (including performance metrics and goals for performance-based long-term and short-term incentive compensation), subject to ratification by the independent members of the Board of Directors; |
| | |
| | ●• Approves annual performance goals and objectives for our Chief Executive Officer; |
| | |
| | ●Officer and Executive Chairman;• Acting through the Committee’s Chairman, conducts an annual evaluation of our Chief Executive Officer’s and Executive Chairman’s performance and reviews such evaluation withthewith the independent members of the Board of Directors; |
| | |
| | ●• Approves the compensation of our other Named Executive Officers (including (including performance metrics and goals for performance-based long-termandlong-term and short-term incentive compensation); and |
| | |
| | ●• Approves all changes to the composition of the executive peer group. |
| | |
Independent Non-employeeNon- employee Members of the Board of Directors | | ●• Considers the Committee’s annual evaluation of our Chief Executive Officer’s and Executive Chairman’s performance; and |
| ●• Considers the Committee’s recommendationactions regarding the compensation of our Chief Executive Officer and Executive Chairman and, if deemed appropriate, approvessuch compensation.ratifies such actions. |
| | |
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| Responsible Party | | Primary Roles and Responsibilities Relating to Compensation Decisions |
Independent Consultant to theCompensation Committee*
(Frederic W. Cook & Co., Inc.) | | ●• Provides the Committee with advice regarding the design of all elements of the Company’s executive compensation program; |
| ●• Reviews and provides an assessment of the material economic and reputational risks associated with the Company’s incentivecompensationincentive compensation programs; |
| | |
| | ●• Reviews and provides an independent assessment of materials provided to the Committee by management of the Company; |
| | |
| | ●• Provides advice and recommendations to the Committee regarding the composition of the compensation peer groups; |
| | |
| | ●• Provides expert knowledge of regulatory developments, marketplace trends and best practices relating to executive compensation and competitivepaycompetitive pay levels; |
| | |
| | ●• Makes recommendations regarding the compensation of the Named Executive Officers (including our Chief Executive Officer)Officer and Executive Chairman); and |
| | |
| | ●• Regularly attends and actively participates in meetings of the Committee, including executive sessions. |
| | |
Chief Executive Officer
(Assisted by our Senior Vice President, Human Resources, and other Company employees) | | ●• Approves annual performance goals and objectives for the Named Executive Officers (other than himself)himself and our Executive Chairman); |
| ●• Conducts an annual performance evaluation for each of the Named Executive Officers (other than himself)himself and our Executive Chairman) and presents the results to the Committee; and |
| ●• Makes recommendations to the Committee with respect to the compensation of the Named Executive Officers (other than himself) basedonhimself and our Executive Chairman) based on the final assessment of their performance. |
| | |
| * | During 2019, the Committee was assisted by its independent compensation consultant, George B. Paulin of FW Cook. Other than the support that it provided to the Committee, FW Cook provided no other services to the Company or 3M management, with the exception of independent advisory support to the Nominating and Governance Committee on the compensation of 3M’s non-employee directors so that valuation methodologies and peer groups are consistent with those used for executives and other employees. During the year, the Committee considered an evaluation of the independence of Mr. Paulin and his firm based on the relevant regulations of the Securities and Exchange Commission and the NYSE listing standards. The Committee concluded that the services performed by Mr. Paulin and his firm did not raise any noteworthy conflicts of interest. |
* During 2017, the Committee was assisted by its independent compensation consultant, George B. Paulin of Frederic W. Cook & Co., Inc. (“FW Cook”). Other than the support that it provided to the Committee, FW Cook provided no other services to the Company or 3M management, with the exception of independent advisory support to the Nominating and Governance Committee on the compensation of 3M’s non-employee directors so that valuation methodologies and peer groups are consistent with those used for executives and other employees. During the year, the Committee conducted an evaluation of the independence of Mr. Paulin and his firm considering the relevant regulations of the Securities and Exchange Commission and the NYSE listing standards. The Committee concluded that the services performed by Mr. Paulin and his firm did not raise any noteworthy conflicts of interest.
2018 Proxy Statement | | 43 |
Elements of Target 2017 Total Direct Compensationtarget 2019 total direct compensation
The illustration below and the discussion that follows show how the target Total Direct Compensation of the Named Executive Officers (excluding our former Executive Chairman) was apportioned among base salary, annual incentives, performance share awards and stock options for 2017,2019, and how these elements relate to the strategic business goals of the Company.
Abbreviations: AIP = Annual incentive pay; PSAs = Performance share awards.
| * | Numbers do not add to 100 percent due to rounding. |
| ** | Amounts shown reflect the average apportionment for all Named Executive Officers other than Mr. Roman and Mr. Thulin. Including Mr. Thulin, the average apportionment for the other Named Executive Officers would be as follows: base salary — 18 percent; AIP — 18 percent; stock options — 29 percent; performance shares — 35 percent; and performance-based pay — 82 percent. |
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BASE SALARY
CEOPercentage of Target 2019 Total Direct Compensation: | Other NEOs (Average) |
| |
 | |
| Other NEOs – 19% | |
Note: Numbers do not add to 100 percent due to rounding.
Base Salary
Percentage of Target 2017 Total
Direct Compensation:
CEO – 10%
Other NEOs – 18%
3M pays each of its executives a base salary in cash on a monthly basis. The amount of this base salary is reviewed at least annually and does not vary with the performance of the Company. Base salaries are designed to compensate the executives for their normal day-to-day responsibilities, and it is the only component of their compensation that is considered to be fixed rather than variable in nature.
ANNUAL INCENTIVE
Annual Incentive | |
Percentage of Target 20172019 Total Direct Compensation: | | Performance Metrics and Weighting: |
Direct Compensation:
CEO – 15%
Other NEOs – 17%
| | - • 50% Local Currency Sales (of 3M or a business unit, as applicable) vs. Plan
|
| - • 20% Economic Profit (of 3M or a business unit, as applicable) vs. Plan
|
| - • 30% Economic Profit of 3M vs. Prior Year |
3M provides its executives with annual incentive compensation through plans that are intended to align a significant portion of their Total Cash Compensation with the financial performance of the Company and its business units. Each executive is assigned a target amount of annual incentive compensation as part of his or her target Total Cash Compensation, but the amount of annual incentive compensation actually paid depends on the performance of 3M and its relevant business units as well as each executive’s individual performance.
3M’s AIP offers eligible employees an opportunity to earn short-term incentive compensation based on three performance metrics, which were weighted for 20172019 as indicated above. All 20172019 performance targets for our Corporate AIP plan were set at or above 20162018 results.
The actual amount paid to an eligible employee for a particular year may range from 0 percent to 200 percent of the employee’s target amount for that year, depending on the performance of the Company and its business units compared to the performance goals approved by the Compensation Committee. The amount of annual incentive compensation paid to an eligible employee also may be increased (up to 30 percent), reduced or eliminated entirely based on the employee’s individual performance during that year. Individual performance takes into account both quantitative (financial results, for example) and qualitative (market and economic circumstances, for example) factors. In no event, however, may the total amount paid to an eligible employee exceed 200 percent of the employee’s target amount for the year.
In determining the amount of annual incentive compensation paid to a Named Executive Officer, the Named Executive Officer’s individual performance is considered based upon the annual performance evaluation that Mr. Thulin,Roman, assisted by 3M’s Senior Vice President, Human Resources, and other Company employees, completed for each Named Executive Officer (other than himself)himself and Mr. Thulin) and the annual performance evaluation that the Compensation Committee (acting through its Chairman) completed for each of Mr. Roman and Mr. Thulin. These performance evaluations are done according to 3M’s overall performance assessment and management processes, which involve setting annual financial and non-financial goals and objectives for each individual and then assessing the individual’s overall performance against these goals and objectives at the end of the year. While the annual incentive compensation earned by eligible 3M employees generally is determined under the AIP, the annual incentive compensation earned during 20172019 by the senior executives whose compensation is decided by the Committee (including all of the Named Executive Officers) was determined under the Executive Plan approved by 3M’s stockholdersshareholders at the 2007 Annual Meeting. A total of 1820 senior executives participated in this Executive Plan during 2017.2019. The Company utilized the Executive Plan which isin 2019 to provide performance-based compensation that, at the time action was taken to designate the plan participants for 2019, was intended to provide compensation that isbe exempt from the $1 million annual deduction limit of state tax laws that are similar to Section 162(m) of the Internal Revenue Code, as in effect prior to the Tax Cuts and similar state laws, providesJobs Act of 2017. Given the number of states that have eliminated the performance-based compensation for whichexception to the performance goal isannual deduction limit since the enactment of the Tax Cuts and Jobs Act of 2017, the Committee decided to include the Company’s Adjusted Net Income.senior executives in the broad-based AIP beginning in 2020.
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Assuming the Company meets the Adjusted Net Income goal, the Executive Plan provides the Committee with discretion to determine the amount of annual incentive compensation paid to 3M’s Named Executive Officers and its other senior executives. The Executive Plan establishes a maximum amount of annual incentive compensation that may be earned by each covered executive for a year (a percentage of the Company’s Adjusted Net Income for such year) and then the Committee utilizes this discretion to pay each covered executive less than this maximum amount based on such factors as it deems relevant. Since the Executive Plan was first adopted in 2007, the Committee has rarely used this discretion to pay a covered executive (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the broad-based AIP (including the individual performance multiplier).
LONG-TERM INCENTIVES
Long-Term Incentives | |
Percentage of Target 20172019 Total Direct Compensation: | | Performance Metrics and Weighting: |
Direct Compensation: | - 20% Earnings per Share Growth
- 40% Relative Organic Volume Growth
- 20% Return on Invested Capital
- 20% Free Cash Flow Conversion |
| CEO – 38% Stock Options | | • 20% Earnings per Share Growth |
| 38% Performance Shares | | • 40% Relative Organic Volume Growth |
Other NEOs – 33%32% Stock Options | | • 20% Return on Invested Capital |
33%32% Performance Shares | | • 20% Free Cash Flow Conversion |
3M provides long-term incentive compensation to its executives through an incentive plan approved by the Company’s stockholders.shareholders. This is a typical omnibus-type plan that authorizes the Committee to grant stock options, restricted stock, restricted stock units, stock appreciation rights, performance shares, and other stock awards to employees of the Company and its subsidiaries. The Company provides its executives with this long-term incentive compensation based on 3M common stock in order to effectively motivate such executives to build long-term stockholdershareholder value.
In determining the initialperformance-adjusted target grant value of the stock options and performance shares provided to our Named Executive Officers, the Compensation Committee considers the individual performance of our Named Executive Officers using the performance evaluations described under “Annual Incentive” above.on page 59.
Our Named Executive Officers also may receive special equity awards on an ad hoc basis as new hires or for recognition and retention, promotions, or other purposes.
Benefits and PerquisitesAdjustments for certain special items
OurIn determining the level of achievement of the performance goals established under the AIP and the performance share awards for any given period, the costs, sales and impact on assets and liabilities from acquisitions are excluded in the year that the acquisition is completed. The Committee also makes other adjustments from time to time for special items that it believes are unrelated to the operational performance of the Company for the relevant measurement period (e.g., changes in tax laws or accounting principles, asset write-downs, the impact of restructurings, divestitures or asset sales in which net gains or losses exceed certain thresholds, unusual tax transactions, litigation or claim judgments and settlements, and other special items described in management’s discussion and analysis of financial conditions and results of operations appearing in the Company’s annual/quarterly report to shareholders for the applicable period). These adjustments can have either a positive or negative impact on award payouts.
See Appendix A to this Proxy Statement for additional details concerning the adjustments made to certain metrics under the AIP and the outstanding performance share awards.
Benefits and perquisites
The Company’s Named Executive Officers participate in the same health care, disability, life insurance, pension, and 401(k) benefit plans available to most of the Company’s U.S. employees.
They also are also eligible to receive certain additional benefits and perquisites that are provided for the convenience (financial planning assistance and meals when attending to 3M business, for example), financial security (nonqualified deferred compensation plans and premiums for additional life insurance coverage, for example), or personal security (travel on corporate aircraft and home(home security equipment/monitoring, for example) or personal health (on-site exercise facilities and physical exams, for example) of the executives.
Subject Our Named Executive Officers and other employees also may receive Company tickets for sporting or other events. The Company believes that the benefits and perquisites offered generally are similar to a few exceptions (travel on corporate aircraft, for example), 3M generally providesthose of our peers and assist in attracting and retaining executives. In some cases, there is no incremental cost to the Company associated with providing these additional benefits and perquisites (physical exams and certain tickets to events, for example) or the executives pay all or a substantial portion of our executives on a consistent basis, although the type of additional lifeincremental costs incurred by the Company (on-site exercise facilities, for example).
2018 Proxy Statement | 60 | 453M Company |
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These additional benefits and perquisites generally are provided on a consistent basis only to a limited group of our most senior U.S. employees (including all of the Named Executive Officers), although enhanced personal security equipment and monitoring is provided only to our Chief Executive Officer and the type of additional life insurance coverage provided varies based on the date the executiveemployee was first appointed to an executive position. Individuals first appointed to an executive position on or before August 31, 2003, receive additional life insurance coverage that is provided through a whole life insurance policy or a universal life insurance policy. Individuals first appointed on or after September 1, 2003, including our Chief Executive Officer, receive group term life insurance coverage.
TheseThe Company also operates aircraft that are used by our senior officers and other employees to conduct company business. For personal security reasons, the Board of Directors requires our Chief Executive Officer to use the Company’s aircraft for all air travel, both business and personal. Our Chief Executive Officer’s spouse and other guests also may accompany him on flights.
The incremental cost to the Company of providing these additional benefits are describedto the Named Executive Officers is reflected in the All Other Compensation Table. No tax gross-ups are provided on any of these additional benefits and perquisites. The entire program applied
New severance plan
In the first half of 2019, the Committee’s independent compensation consultant, FW Cook, conducted an analysis of the benefits and perquisites offered to approximately 100 membersexecutives at companies in the executive peer group. Following completion of senior management during 2017,its work, FW Cook informed the Compensation Committee that maintenance of formal severance arrangements for some or all of their executives was a common practice among executive peer group members. Based upon the results of its analysis, FW Cook recommended that the Committee consider implementing a new executive severance plan in order to support talent recruitment and retention objectives (especially at times when there are uncertainties around restructurings and reductions in force) and to provide a consistent approach to executive departures. With FW Cook’s assistance, the Committee then discussed the pros and cons associated with adoption of a formal severance plan and other related issues over the course of the next nine months, including allthe benefits that a formal plan would provide the Company, the scope of eligible employees, the various termination scenarios that would be covered, and the compensation and benefits that would be offered. After considering the issues, the Committee recommended that the Board adopt a new 3M Executive Severance Plan to provide separation pay and benefits to certain U.S. employees (including each of the Named Executive Officers.Officers) in the event of a qualifying termination of employment. Upon the Committee’s recommendation, the independent members of the Board of Directors unanimously approved the 3M Executive Severance Plan, which became effective on February 3, 2020. Additional details concerning the benefits made available under the plan and the circumstances under which benefits will be made available can be found under “Rights and payments upon a qualifying termination under the severance plan” beginning on page 85.
Separation pay
In 2019, we entered into an agreement with Dr. Delgado under which he received $1,750,000 upon the Company’s separation of his employment without cause and his execution of a release of all claims against the Company and its affiliates. In accordance with the terms of the applicable plans and award agreements, Dr. Delgado remained eligible to receive a prorated annual incentive payment for 2019 based upon 3M’s actual performance and continues to vest in his outstanding stock options and performance shares, except that his 2019 performance shares were prorated based on the portion of the year worked. Dr. Delgado remains subject to existing non-competition, non-solicitation, and confidentiality obligations.
Competitive Paypay
We compete for executive talent in a global market. In order to ensure that we are providing Total Direct Compensation that is competitive, the Committee annually conducts a rigorous benchmarking process with the help of its independent compensation consultant, FW Cook. During this process, the Committee generally considers available pay data for two peer groups: an executive peer group and a survey peer group.
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Executive Peer Grouppeer group
For 2017,2019, the executive peer group consisted of the companies identified below (which remained the same as in the previous year, except for the replacement of Tyco International with Johnson Controls International plc discussed below)year), as recommended by the Committee’s independent compensation consultant and approved by the Committee. The companies in this executive peer group were selected because (1) their performance was monitored regularly by the same market analysts who monitor the performance of 3M (investment peers), and/or (2) they met criteria based on similarity of their business and pay models, market capitalization (based on an eight-quarter rolling average), and annual revenues.revenues and compete with 3M for talent or capital.
| (Dollars in millions) | | | | | | | | Trailing Eight-Quarter | | |
| LATEST FOUR QUARTERS | | | TRAILING EIGHT-QUARTER | | |
| REVENUES | | | AVERAGE MARKET CAPITALIZATION | | |
| Latest Four Quarters Revenues | | | | | Average Market Capitalization | | |
| General Electric Company | $121,252 | | Johnson & Johnson | $342,131 | | $95,214 | | Johnson & Johnson | | $357,993 |
| Johnson & Johnson | $76,450 | | General Electric Company | $226,465 | | $82,059 | | The Procter & Gamble Company | | $258,771 |
| United Technologies | | | $77,046 | | Medtronic plc | | $132,027 |
| The Procter & Gamble Company | $65,732 | | The Procter & Gamble Company | $225,827 | | $69,594 | | Honeywell International, Inc. | | $116,945 |
| DowDuPont Inc. | $62,484 | | DowDuPont Inc. | $164,035 | |
| United Technologies Corporation | $59,837 | | 3M Company | $120,563 | |
| Caterpillar Inc. | $45,462 | | Medtronic plc | $111,503 | | $53,800 | | United Technologies Corporation | | $109,629 |
| Deere & Company | | | $38,880 | | 3M Company | | $106,606 |
| Honeywell International, Inc. | $40,534 | | Honeywell International, Inc. | $99,970 | | $36,709 | | General Electric Company | | $ 91,417 |
| 3M Company | $31,657 | | United Technologies Corporation | $93,908 | | $32,136 | | Danaher Corporation | | $ 91,106 |
| Medtronic plc | | | $31,062 | | Caterpillar Inc. | | $ 77,953 |
| Johnson Controls International plc | $30,521 | | Caterpillar Inc. | $65,994 | | $24,080 | | Deere & Company | | $ 50,140 |
| Deere & Company | $30,419 | | Danaher Corporation | $60,971 | |
| Medtronic plc | $29,725 | | Illinois Tool Works Inc. | $47,682 | |
| Eaton Corporation plc | $20,404 | | Kimberly-Clark Corporation | $43,915 | | $21,390 | | Illinois Tool Works Inc. | | $ 49,275 |
| Danaher Corporation | $18,330 | | Emerson Electric Co. | $38,930 | |
| Kimberly-Clark Corporation | $18,259 | | Johnson Controls International plc | $38,469 | | $18,450 | | Kimberly-Clark Corporation | | $ 43,137 |
| Emerson Electric Co. | $15,864 | | Deere & Company | $37,747 | | $18,376 | | Emerson Electric Co. | | $ 42,392 |
| Danaher Corporation | | | $17,911 | | Eaton Corporation plc | | $ 35,127 |
| Illinois Tool Works Inc. | $14,314 | | Eaton Corporation plc | $32,513 | | $14,109 | | Johnson Controls International plc | | $ 31,431 |
| TE Connectivity Ltd. | $13,530 | | TE Connectivity Ltd. | $27,672 | | $13,269 | | TE Connectivity Ltd. | | $ 29,847 |
| Corning Incorporated | $10,116 | | Corning Incorporated | $25,238 | | $11,503 | | Corning Incorporated | | $ 23,820 |
| 75th Percentile | $59,837 | | 75th Percentile | $111,503 | | $57,749 | | 75th Percentile | | $111,458 |
| Mean | $39,602 | | Mean | $98,998 | | $38,966 | | Mean | | $ 96,313 |
| Median | $30,419 | | Median | $60,971 | | $27,571 | | Median | | $ 64,047 |
| 25th Percentile | $18,259 | | 25th Percentile | $38,469 | | $18,260 | | 25th Percentile | | $ 40,576 |
| 3M Percentile Rank | 57% | | 3M Percentile Rank | 76% | | 55% | | 3M Percentile Rank | | 72% |
All data shown was obtained from Standard & Poor’s Capital IQ. Revenues are stated in millions for the latest available four quarters disclosed as of February 28, 2018.2020. Market Capitalizations are stated in millions as of February 28, 2018. Market2020. Given the significant impact that the spinoffs of two independent public companies (Dow Inc. and Corteva, Inc.) had on the revenues and market capitalization for DowDuPont represents a three-quarter average and for Johnson Controls represents a seven-quarter average due to lack of market financial data over the complete eight-quarter period. No information is shown for Dow Chemical Company or E. I. du PontDuPont de Nemours, and Company, each of which ceased trading after August 31, 2017, and combined to formInc. (formerly DowDuPont Inc.), the table above does not include information for such entity.
The Committee, with assistance from its independent compensation consultant, periodically reviews the composition of the executive peer group to determine whether any changes are appropriate. Following the completion of Tyco International’s combination with Johnson Controls and its related restructuring,review in August 2019, the Committee replaced Tyco International with Johnson Controls International plc in January 2017, as recommended by the Committee’s independent compensation consultant.determined that no changes were needed at that time.
The Company receives pay data and information on the executive compensation practices at the companies in 3M’s executive peer group from Aon Hewitt and FW Cook.
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Survey Peer Grouppeer group
For 2017,2019, there were approximately 170250 comparator companies in the survey peer group. Although the number and identity of the companies varies from year to year and from survey to survey, each of the companies included in the survey peer group had annual revenue exceeding $10 billion. All of the companies in the survey peer group also participate in one or more executive compensation surveys obtained from three consulting firms (Aon, Hewitt, FW Cook, and Willis Towers Watson). Pay data for the survey peer group is statistically regressed to recognize the different sizes of the comparator companies (based on annual revenues) as compared to the size of 3M. The Committee does not review the identity of the companies in the survey peer group.
How the Committee Uses Competitive Pay Dataestablishes target compensation levels using competitive pay data
The Committee considers the pay data from the Peer Groups as a reference point when establishing the target Total Cash Compensation and the initial target value of long-term incentive compensation to be provided to our executives in any given year.year before consideration of individual circumstances. For each executive,Named Executive Officer, the Committee generally triesCommittee’s general approach is to set such amounts at or very near the median for the corresponding items of compensation provided to similarly situated executives in the executive peer group. In situations where the Committee believes that there is insufficient market data for one or more positions, the Committee starts with the median amount for a similar position and adjusts that amount up or down (generally not more than 15 percent) to arrive at a number that it uses as the “median” for that position. The final amounts of target amountsTotal Cash Compensation established by the Committee for each executive may vary (generallybased on individual circumstances, but generally are set between 80 and 120 percent of the relevant median) based on individual circumstances.applicable median. When setting the target amounts for any individual executive, the Committee may consider the breadth and complexity of the executive’s duties and responsibilities, the scores assigned to the executive for his or her leadership behaviors (e.g., customer focus, strategic mindset, operational leadership), the financial and operational performance of the business activities for which the executive is responsible, experience and time in their current position, internal pay equity, individual performance, and such other factors as the Committee determines to be appropriate. The pay data for the survey peer group is used by the Committee to assess the reasonableness of the benchmarking results for each executive position benchmarked, helping to ensure that the Company’s compensation objectives are being met.
The Committee also uses information on the executive compensation practices at companies in the executive peer group when considering design changes to the Company’s executive compensation program. Overall, the Company believes that use of this information from the Peer Groups enables the Committee to create better alignment between executive pay and performance and to help ensure that 3M can attract and retain high-performing executive leaders.
Tally Sheetssheets
The Committee periodically reviews a report comparing the amounts of compensation actually received by the Company’s Named Executive Officers to the amounts reported in its annual proxy statement and summarizing the compensation that would be owed to such individuals in the event of the termination of their employment under various circumstances. Reviewing this report helps the Committee better understand the Company’s potential obligations to the Named Executive Officers following the termination of their employment. It also helps the Committee better assess the risk of any of the Named Executive Officers leaving the Company prematurely because the Company is not providing sufficient retention incentives.
Tax Considerationsconsiderations
Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”), disallows a tax deduction to public companies for compensation paid per year in excess of $1 million to “covered employees” (generally, a company’s chief executive officercertain current and its three other highest paidformer executive officers other than its chief financial officer). Prior to enactment of the U.S. Tax Reform Legislation,Company (although there historically was an exception to this $1 million annual limitation for performance-based compensation if certain requirements set forth in Section 162(m) and the applicable regulations were met. The Committee has historically designed its compensation programs based on its belief that a substantial portion of the compensation payable to NEOs should be based on the achievement of
2018 Proxy Statement | | 47 |
performance-based targets or otherwise be designed with the intent that such compensation qualifies as deductible performance-based compensation under Section 162(m). As a result, annual incentive compensationmet and certain equity-based compensation arrangements granted to our covered employees were intended to qualify as performance-based compensation under Section 162(m).
Effective for taxable years beginning after December 31, 2017, the U.S. Tax Reform Legislation amended Section 162(m) to eliminate the exception for performance-based compensation and expand the definition of “covered employee” to include a company’s chief financial officer and certain individuals who were covered employees in years other than the then-current taxable year. Although some transition relief may apply with respect toformer executive officers). As a result, we expect that compensation paid pursuantper year to our Named Executive Officers and certain contracts in effect as of November 2, 2017, ambiguities in the U.S. Tax Reform Legislation prevent the Committee from being able to definitively ascertain what compensation payable to the covered employeesother current and former executive officers in excess of $1 million if any,generally will not be deductible, in future years.subject to limited exceptions. Interpretations of and changes in applicable tax laws and regulations as well as other factors beyond the control of the Committee can affect deductibility of compensation, and there can be no assurance that compensation paid to our executive officers who are considered covered employees for purposes of Section 162(m) will be tax deductible.
The Committee will continue to considerhas in prior years considered the tax implications (including the potential lack of deductibility under Section 162(m)) when making compensation decisions but reserves the right to make future compensation decisions based on other factorsfactors. The Committee also reserves the right to make changes or amendments to existing compensation programs and arrangements, including changes or amendments that may result in the loss of tax deductions, if the Committee believes it is in the best interests of the Company and its stockholdersshareholders to do so. The Committee also reserves the right to make changes or amendments to existing compensation programs, including changes or amendments that are intended to modify or eliminate aspects
Table of such arrangements that were intended to take advantage of the former exception to Section 162(m) for performance-based compensation but that the Committee no longer believes are in the best interests of the Company and its stockholders.
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Meaning of Certain Termscertain terms
Except as otherwise noted, capitalized terms used in this Compensation Discussion and Analysis have the meaning specified below.
ADJUSTED NET INCOMEAdjusted Net Income | | means the net income of 3M as reported in its Consolidated Statement of Income, asadjustedas adjusted to exclude special items. |
| AIP | | means the broad-based Annual Incentive Plan by which the Company provides annualincentiveannual incentive compensation to approximately 33,00035,000 eligible employees. |
COMMITTEECommittee | | means the Compensation Committee of the Board of Directors of 3M Company. |
ECONOMIC PROFITEconomic Profit | | means the adjusted net income of 3M (net income including non-controlling interestplusinterest plus after-tax interest expense, as reported in its Consolidated Statement of Income) or abusinessa business unit operating income, plus interest income and minus income taxes, adjustedtoadjusted to exclude certain special items and the impact of acquisitions or divestitures in the year eachacquisitioneach acquisition or divestiture is completed (unless such acquisition or divestiture is included inthein the operating plan for the business unit), less a charge (10 percent in 2017)2019) for the capitalusedcapital used to generate such operating income. The Economic Profit of 3Mmetric measured versus 3M’s prior year results is calculated usingtotalusing total Company average invested capital (equity plus debt, as reported in its ConsolidatedBalanceConsolidated Balance Sheet), while the Economic Profit of a business unitmetric measured versus plan is calculated using onlyaccountsonly accounts receivable and inventories of such business unit as capital. |
EPS GROWTHEarnings per Share (EPS) Growth | | means the percentage increase or decrease in 3M’s diluted earnings per share attributabletoattributable to 3M common stockholdersshareholders (as reported in its Consolidated Statement of Income) for ayeara year as compared to the previous year, in each case, as adjusted to exclude certain special items. |
EXECUTIVE PLANExecutive Plan | | means the Executive Annual Incentive Plan by which the Company providesannualprovides annual incentive compensation to the Named Executive Officers as well as certainothercertain other executives. |
FREE CASH FLOWCONVERSIONFree Cash Flow Conversion | | means the sum of 3M’s operating cash flows minus capital expenditures, divided bynet income.by net income, as adjusted to exclude certain special items. |
| GAAP | | means generally accepted accounting principles in the United States. |
LOCALCURRENCY SALESLocal Currency Sales | | means the net sales of 3M (as reported in its Consolidated Statement of Income)or a business unit, in local currency, adjusted to exclude the impact of acquisitionsoracquisitions or divestitures in the year each acquisition or divestiture is completed (unless suchacquisitionsuch acquisition or divestiture is included in the operating plan for the business unit). |
ORGANIC LOCALCURRENCY SALESGROWTHOrganic Local Currency Sales Growth | | means the percentage amount by which the percentage increase or decrease in 3M’snet3M’s net sales (as reported in its Consolidated Statement of Income) for a year increase or decrease as comparedtocompared to the previous year, in each case, adjusted to excludeneutralize the sales attributable to acquisitions ordivestituresor divestitures for the 12 months12-month period following the date each acquisition or divestiture iscompleted,is completed and to exclude currency effects. |
PEER GROUPSPeer Groups | | means both 3M’s executive peer group and the survey peer group, each as describedindescribed in the “Competitive Pay”pay” section of this Compensation Discussion and Analysis. |
RELATIVE ORGANICVOLUME GROWTHRelative Organic Volume Growth | | means the percentage amount by which the percentage increase or decrease in 3M’snet3M’s net sales (as reported in its Consolidated Statement of Income) for a year as comparedtocompared to the previous year adjusted to excludeexceeds the percentage increase or decrease in worldwide real sales attributable to acquisitions ordivestitures forgrowth over the 12 months following the date each acquisition or divestiture iscompleted, and to exclude price and currency effects, exceeds Worldwide real salesgrowthsame period, as reflected in the Worldwide Industrial Production Index as published byGlobalby Global Insight. For this purpose, 3M’s net sales are adjusted to neutralize price and currency effects and, during the 12-month period following the date of each acquisition or divestiture, the sales attributable to such acquired or divested business or products. |
RETURN ON INVESTEDCAPITALReturn on Invested Capital | | means the operating income of 3M (as reported in its Consolidated Statement ofIncome)of Income), plus interest income and minus income taxes, adjusted to exclude specialitemscertain special items and the impact of acquisitions in the year each acquisition is completed,divided by the average invested capital (equity plus debt, as reported in its ConsolidatedBalanceConsolidated Balance Sheet). |
TOTAL CASHCOMPENSATIONTotal Cash Compensation | | means the total of an individual’s base salary and annual incentive compensation. |
TOTAL DIRECTCOMPENSATIONTotal Direct Compensation | | means the total of an individual’s Total Cash Compensation plus the compensationvaluecompensation value of their annual long-term incentive compensation awards (which is based ontheiron their grant date fair value as measured under accounting standards). |
SECTION III:How We Paid Our Named Executive Officers in 201764 | 3M Company |
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Section III: How we paid our named executive officers in 2019
2017 Base Salary2019 base salary and Target Total Cash Compensationtarget total cash compensation
The Committee considers changes in the base salaries and target Total Cash Compensation of the Named Executive Officers at least annually. As part of its normal process to progress senior executives to a level of compensation that is commensurate with their responsibilities, the Committee also periodically considers adjustments to the base salaries and target Total Cash Compensation of senior executives whose rate of pay is set below the market median. All adjustments are made only after considering the most recent compensation data available to the Committee for executives with similar responsibilities at companies in the Peer Groups, each individual’s place in the salarytarget total cash compensation range for his or her position, and the individual’s job performance.
In February 2017,2019, the Committee approved (and, in the case of Mr. Thulin,Roman, the independent members of the Board of Directors ratified) the increases in the base salaries and target Total Cash Compensation shown below for the Named Executive Officers following completion of their annual performance evaluations. No changes were made to Mr. Gangestad’s increase was based on a combination of strong operational performance and market adjustment to bring hisThulin’s, Ms. Bushman’s, Dr. Delgado’s or Mr. Vale’s base salary or target Total Cash Compensation at that time. The adjustments to Mr. Roman’s compensation primarily were intended to progress his compensation closer to the market median.
| Name | | Previous
Base Salary
($) | | New
Base Salary
Effective
4/1/19
($) | | %
Increase | | Previous
Target
Total Cash
Compensation
($) | | New Target
Total Cash
Compensation
Effective
4/1/19
($) | | %
Increase |
| Michael F. Roman | | 1,199,952 | | 1,299,948 | | 8% | | 3,120,000 | | 3,380,000 | | 8% |
| Nicholas C. Gangestad | | 841,495 | | 870,105 | | 3% | | 1,682,989 | | 1,740,211 | | 3% |
| Ashish K. Khandpur | | 614,386 | | 638,962 | | 4% | | 1,136,700 | | 1,182,168 | | 4% |
As a result of these increases, Mr. Roman’s target Total Cash Compensation represented 90 percent of the median value of the corresponding compensation provided to executives serving in similar positionschief executive officers at companies in the executive peer group.
| NAME | | PREVIOUS
BASE
SALARY | | | NEW BASE
SALARY
EFFECTIVE
4/1/17 | | | %
INCREASE | | PREVIOUS TARGET
TOTAL CASH
COMPENSATION | | | NEW TARGET
TOTAL CASH
COMPENSATION
EFFECTIVE
4/1/17 | | | %
INCREASE |
| Inge G. Thulin | | | $1,491,180 | | | | $1,538,400 | | | | 3 | % | | | $3,877,224 | | | | $4,000,000 | | | | 3 | % |
| Nicholas C. Gangestad | | | $713,925 | | | | $799,495 | | | | 12 | % | | | $1,427,850 | | | | $1,598,990 | | | | 12 | % |
| Frank R. Little | | | $670,328 | | | | $697,409 | | | | 4 | % | | | $1,240,200 | | | | $1,290,304 | | | | 4 | % |
| Michael F. Roman | | | $771,435 | | | | $786,864 | | | | 2 | % | | | $1,427,262 | | | | $1,455,807 | | | | 2 | % |
| Hak Cheol Shin | | | $794,557 | | | | $810,448 | | | | 2 | % | | | $1,470,040 | | | | $1,499,441 | | | | 2 | % |
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As a result of these increases,group, and the target Total Cash Compensation of these Named Executive Officers ranged from 98Mr. Gangestad and Mr. Khandpur represented 102 percent to 114and 94 percent, respectively, of the median value of the corresponding compensation provided to executives with similar responsibilities at companies in the executive peer group.
In June 2017,March 2019, the Committee approved the increasesadjustments in the base salarysalaries and target Total Cash Compensation shown below in connection with Mr. Roman’sKhandpur’s appointment to Chief Operating Officer and Executive Vice President, Transportation and Electronics Business Group, and Mr. Shin’sVale’s appointment to Vice Chair and Executive Vice President.President, Safety and Industrial Business Group. The increasesadjustments were intended to better align the target Total Cash Compensation of each executive with the breadth of responsibilities accompanying their expanded roles after the responsibilities that accompany their new roles.realignment of the Company from five to four business groups.
| NAME | | PREVIOUS
BASE
SALARY | | NEW BASE
SALARY
EFFECTIVE
7/1/17 | | %
INCREASE | | PREVIOUS TARGET
TOTAL CASH
COMPENSATION | | NEW TARGET
TOTAL CASH
COMPENSATION
EFFECTIVE
7/1/17 | | %
INCREASE |
| Michael F. Roman | | $786,864 | | $900,000 | | 14% | | $1,455,807 | | $2,000,000 | | 37% |
| Hak Cheol Shin | | $810,448 | | $875,000 | | 8% | | $1,499,441 | | $1,750,000 | | 17% |
| Name | | Previous
Base Salary
($) | | New
Base Salary
Effective
7/1/19
($) | | %
Increase | | Previous
Target
Total Cash
Compensation
($) | | New Target
Total Cash
Compensation
Effective
7/1/19
($) | | %
Increase |
| Ashish K. Khandpur | | 638,962 | | 706,434 | | 11% | | 1,182,168 | | 1,307,000 | | 11% |
| Michael G. Vale | | 710,703 | | 745,890 | | 5% | | 1,314,899 | | 1,380,000 | | 5% |
As a result of these increases, each of the executives’ target Total Cash Compensation was at or nearof these Named Executive Officers represented 90 percent and 95 percent, respectively, of the median value of the corresponding compensation provided to executives with similar responsibilities at companies in the executive peer group.
2017 Annual IncentiveTable of Contents
2019 annual incentive
During 2017,2019, the Committee provided the Named Executive Officers with the opportunity to earn short-term incentive compensation under the Executive Plan. Each Named Executive Officer’s target annual incentive for the year was equal to the difference between his or her target Total Cash Compensation and annual base salary. Each of the Named Executive Officers was assigned to an appropriate business unit (the entire Company, in some cases) established under the AIP for the purpose of measuring business performance during 20172019 and converting that performance into a payout determined in accordance with the terms of the AIP. While none of the Named Executive Officers arewere covered by the AIP during 2019, the Committee rarely uses its discretion under the Executive Plan to pay the covered executives (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the AIP (including the individual performance multiplier).
The amounts payable under the AIP for 20172019 were based on the following performance results for the Company and, as applicable, the respective business units to which the Named Executive Officers were assigned for all or part of the year:
| | | LOCAL CURRENCY SALES
(50%) | | ECONOMIC PROFIT
(20%) | | TOTAL 3M ECONOMIC
PROFIT VS. PRIOR YEAR
(30%) | WEIGHTED
AVERAGE
PAYOUT %
BASED ON
PAYOUT
CURVE |
(DOLLAR AMOUNTS IN MILLIONS)
BUSINESS UNIT | | PLAN | ACTUAL | ACTUAL
VS.
PLAN | | PLAN | ACTUAL | ACTUAL
VS.
PLAN | |
PRIOR YEAR | ACTUAL | ACTUAL
VS.
PRIOR
YEAR |
| Total Company | | 30,342 | 31,611 | 104% | | 3,060 | 3,323 | 109% | | 2,897 | 3,323 | 115% | 130% |
| Industrial Business Group | | 10,456 | 10,855 | 104% | | 1,476 | 1,360 | 92% | | 2,897 | 3,323 | 115% | 114% |
| Safety and Graphics Business Group | | 5,940 | 6,227 | 105% | | 959 | 1,365 | 142% | | 2,897 | 3,323 | 115% | 141% |
| International Operations | | 18,023 | 19,183 | 106% | | 2,770 | 2,949 | 106% | | 2,897 | 3,323 | 115% | 133% |
| | | Local Currency Sales
(50%) | | Economic Profit
(20%) | | Total 3M Economic
Profit vs. Prior Year
(30%) | | Weighted
Average
Payout % |
(Dollar Amounts in Millions)
Business Unit | | Plan | | Actual | | Actual
vs.
Plan | | Plan | | Actual | | Actual
vs.
Plan | | Prior Year | | Actual | Actual
vs.
Prior Year | | Based On
Payout
Curve |
| Total Company | | 33,402 | | 32,114 | | 96% | | 5,693 | | 4,808 | | 84% | | 3,752 | | 3,229 | 86% | | 62% |
| International Operations | | 20,293 | | 19,468 | | 96% | | 3,751 | | 3,208 | | 86% | | 3,752 | | 3,229 | 86% | | 75% |
| Transportation and Electronics Business Group | | 10,351 | | 9,754 | | 94% | | 2,063 | | 1,573 | | 76% | | 3,752 | | 3,229 | 86% | | 57% |
| Safety and Industrial Business Group | | 12,653 | | 11,910 | | 94% | | 2,166 | | 1,791 | | 83% | | 3,752 | | 3,229 | 86% | | 57% |
| Health Care Business Group | | 7,100 | | 6,927 | | 98% | | 1,481 | | 1,421 | | 96% | | 3,752 | | 3,229 | 86% | | 85% |
| Consumer Business Group | | 5,189 | | 5,512 | | 99% | | 750 | | 721 | | 96% | | 3,752 | | 3,229 | 86% | | 87% |
Since the Company satisfied the Executive Plan’s performance objective by earning Adjusted Net Income of $5.6$5.3 billion for 2017,2019, the plan authorized the Committee to approve payments of annual incentive compensation to each Named Executive Officer equal to a maximum of one-quarter of one percent of such Adjusted Net Income ($1413 million), subject to the Committee’s negative discretion to pay each covered executive any amount less than this maximum based on such factors as it deems relevant, including the goals set forth under the AIP. At its meeting in February 20182020 and consistent with its past practice, the Committee approved (and with respect to Mr. Roman and Mr. Thulin, the independent members of the Board of Directors ratified) a payment to each executive equal to the amount such executive would have received had he or she been participating in the broad-based AIP (including the individual performance multiplier).
| NAME | | TARGET 2017
ANNUAL
INCENTIVE* | | ACTUAL 2017
ANNUAL
INCENTIVE | | PAYOUT AS A %
OF TARGET | |
| Name | | | Target 2019
Annual
Incentive*
($) | | Actual 2019
Annual
Incentive
($) | | Payout
as a %
of Target |
| Michael F. Roman | | | 2,040,051 | | 1,256,671 | | 62% |
| Inge G. Thulin | | $2,442,711 | | $4,121,830 | | 169% | | 620,548 | | 382,259 | | 62% |
| Nicholas C. Gangestad | | $778,102 | | $1,110,975 | | 143% | | 862,953 | | 531,579 | | 62% |
| Frank R. Little | | $587,139 | | $1,077,371 | | 184% | |
| Michael F. Roman | | $881,193 | | $1,090,797 | | 124% | |
| Hak Cheol Shin | | $778,619 | | $1,121,844 | | 144% | |
| Ashish K. Khandpur | | | 581,003 | | 325,583 | | 56% |
| Julie L. Bushman | | | 680,538 | | 507,681 | | 75% |
| Joaquin Delgado | | | 294,066 | | 256,137 | | 87% |
| Michael G. Vale | | | 626,632 | | 396,967 | | 63% |
* | * | These amounts are prorated to reflect the increases in Total Cash Compensation described above that resulted in corresponding increases (if any) in each individual’s target annual incentive compensation. The amounts shown for Mr. Thulin and Dr. Delgado have been prorated to reflect their separation from the Company, effective as of June 1, 2019, and July 1, 2019, respectively. |
Table of Contents
Long-term incentives — 2019 annual incentive compensation.
Long-Term Incentives — 2017 Annual Grantsgrants
After considering the most recent long-term incentive compensation data available from companies in the Peer Groups and after taking into account its evaluation of their individual performance during 2016,2018 and Mr. Thulin’s anticipated retirement in 2019, the Committee approved (and in the case of Mr. Roman and Mr. Thulin, the independent members of the Board of Directors ratified) the following performance-adjusted target compensation values for the Named Executive Officers’ 20172019 long-term incentive compensation awards. For ease of comparison, the following table below also shows the performance-adjusted target compensation values of the Named Executive Officers’ 20162018 long-term incentive compensation awards.
| NAME | | TARGET GRANT
VALUE OF 2016
ANNUAL AWARDS | | TARGET GRANT
VALUE OF 2017
ANNUAL AWARDS | |
| Name | | | Performance-
Adjusted
Target Grant
Value of 2018
Annual Awards
($) | | Performance-
Adjusted
Target Grant
Value of 2019
Annual Awards
($) |
| Michael F. Roman | | | 4,720,000* | | 10,000,000 |
| Inge G. Thulin | | $11,000,000 | | $12,000,000 | | 9,000,000* | | 4,687,000 |
| Nicholas C. Gangestad | | $3,123,680 | | $3,677,700 | | 4,673,500 | | 3,640,000 |
| Frank R. Little | | $2,050,290 | | $2,913,400 | |
| Michael F. Roman | | $2,163,150 | | $2,455,580 | |
| Hak Cheol Shin | | $2,106,720 | | $2,393,150 | |
| Ashish K. Khandpur | | | 2,268,290 | | 3,496,080 |
| Julie L. Bushman | | | 2,913,400 | | 2,330,720 |
| Joaquin Delgado | | | 2,268,290 | | 1,165,360 |
| Michael G. Vale | | | 2,268,290 | | 2,268,290 |
| * | Excludes the target grant value of special grants made in 2018 in connection with the changes in Mr. Roman’s and Mr. Thulin’s roles and responsibilities. If such values had been included, the performance-adjusted target grant value of Mr. Roman’s and Mr. Thulin’s 2018 annual awards would have been $7,220,000 and $9,750,000, respectively. |
Consistent with market practices at companies in the Peer Groups, during 2017,2019, the Committee chose to deliver one-half of the initial estimatedperformance-adjusted target grant value of the annual long-term incentive compensation awards provided to 3M’s Named Executive Officers (other than Mr. Thulin) in the form of stock options and the remaining one-half in the form of performance shares. Mr. Thulin’s awards were delivered approximately 33 percent in the form of stock options and 67 percent in the form of performance shares given the anticipated forfeiture of one half of such performance shares upon his anticipated retirement pursuant to the terms of the original grant agreements.
2017 Stock Options2019 stock options
Stock options granted to the Named Executive Officers in 20172019 as part of their long-term incentive compensation have the following features:
| ●• | an exercise price equal to the closing price of a share of 3M common stock on the NYSE for the date of grant; |
| | |
| ●• | a ratable three-year vesting schedule; and |
| | |
| ●• | a maximum term of 10 years. |
2017 Performance Share Awards2019 performance share awards
Performance shares awarded in 20172019 will result in the issuance of actual shares of 3M common stock to 3M’s Named Executive Officers if the Company achieves certain financial goals over the years 2017, 2018,2019, 2020, and 2019.2021. The number of shares of 3M common stock that will be issued for each 20172019 performance share is linked to the Company’s performance as measured by the criteria of Earnings Perper Share Growth (20 percent weighting), Relative Organic Volume Growth (40 percent weighting), Return on Invested Capital (20 percent weighting), and Free Cash Flow Conversion (20 percent weighting). These performance criteria were selected because they are aligned with 3M’s operating plan and the financial objectives communicated to stockholdersshareholders, and the Committee believes that they are important
2018 Proxy Statement | | 51 |
drivers of long-term stockholdershareholder value. Attainment of these four independent performance criteria is measured separately for each calendar year during the three-year measurement period, with each year weighted as follows: 20172019 — 50 percent; 20182020 — 30 percent; and 20192021 — 20 percent. However, the formulastargets by which the Company’s performance is measured do not change over the three-year performance period.
TheTable of Contents
Excluding shares issued pursuant to dividend equivalent rights, the actual number of shares of 3M common stock that will be delivered at the end of the three-year performance period ending on December 31, 2019,2021, may be anywhere from 0 percent to 200 percent of the target number of performance shares awarded, depending on the performance of the Company during the performance period. However, an executive may forfeit all or a portion of such shares if he or she does not remain employed by the Company throughout the three-year performance period.
For awards tied to the achievement of performance goals over the years 2017, 2018,2019, 2020, and 2019,2021, the Committee approved the following formulastargets for determining the number of shares of 3M common stock to be delivered for each performance share awarded, with the total number of shares actually delivered being the sum of the number of shares earned as a result of the Company’s achievement of each of the four financial goals.goals, plus the number of shares issued pursuant to dividend equivalent rights granted with respect to the shares earned. In the event that the Company’s performance as measured by any of these performance criteria falls between any of the percentages listed below, the number of shares of 3M common stock earned will be determined by linear interpolation.
EPS
GROWTH | | % OF
PERFORMANCE
SHARES | | RELATIVE
ORGANIC
VOLUME
GROWTH | | % OF
PERFORMANCE
SHARES | | RETURN
ON
INVESTED
CAPITAL | | % OF
PERFORMANCE
SHARES | | FCF
CONVERSION | | % OF
PERFORMANCE
SHARES | | TOTAL % OF
PERFORMANCE
SHARES | |
| | | | | Relative | | |
| | | | % of | | Organic | | % of | | Return on | | % of | | | % of | | Total % of |
| EPS | | | Performance | | Volume | | Performance | | Invested | | Performance | | FCF | | Performance | | Performance |
| Growth | | | Shares | | Growth | | Shares | | Capital | | Shares | | Conversion | | Shares | | Shares |
| below 4.0% | | | 0 | % | | below -1.0% | | | 0 | % | | below 18.0% | | | 0 | % | | below 95.0% | | | 0 | % | | | 0 | % | | 0% | | | below -1.0% | | 0% | | | below 20.0% | | 0% | | | below 95.0% | | 0% | | | 0% | |
| 4.0% | | | 4 | % | | -1.0% | | | 8 | % | | 18.0% | | | 4 | % | | 95.0% | | | 4 | % | | | 20 | % | | 4% | | | -1.0% | | 8% | | | 20.0% | | 4% | | | 95.0% | | 4% | | | 20% | |
| 8.0% | | | 20 | % | | 0.5% | | | 40 | % | | 20.0% | | | 20 | % | | 100.0% | | | 20 | % | | | 100 | % | | 20% | | | 0.5% | | 40% | | | 22.0% | | 20% | | | 100.0% | | 20% | | | 100% | |
| 12.0% or | | | 40 | % | | 2.0% or | | | 80 | % | | 23.0% or | | | 40 | % | | 105.0% or | | | 40 | % | | | 200 | % | |
| higher | | | | | | higher | | | | | | higher | | | | | | higher | | | | | | | | | |
| 12.0% or higher | | | 40% | | | 2.0% or higher | | 80% | | | 25.0% or higher | | 40% | | | 105.0% or higher | | 40% | | | 200% | |
The above formulastargets are not a prediction of how 3M will perform during the years 20172019 through 20192021 or any other period in the future. The sole purpose of these formulas, which were approved by the Committee in February 2017,2019, is to establish a method for determining the number of shares of 3M common stock to be delivered for the performance share awards described above. 3M is not providing any guidance, nor updating any prior guidance, of its future performance with the disclosure of these formulas, and you are cautioned not to rely on these formulas as a prediction of 3M’s future performance.
Long-Term IncentivesLong-term incentives — All Outstanding Performance Share Awardsall outstanding performance share awards
The Company’s annual award cycle and three-year performance periods result in an overlap of awards. For example, the performance goals for 20172019 performance share awards relate to the years 2017, 2018,2019, 2020, and 2019.2021. Similarly, the performance goals for 20162018 performance share awards relate to the years 2016, 2017,2018, 2019, and 2018,2020, and so on, as shown below. Performance against the goals established for each award are measured separately for each calendar year during the measurement period, with each year weighted as shown below in parenthesis. The Committee believes this structure reduces motivation to maximize performance in any one period by providing the highest levelhighest-level rewards only by building sustainable long-term results.
| AWARD | | 2015 | | 2016 | | 2017 | | 2018 | | 2019 | |
| 2015 PSA | | Year 1 (50%) | | Year 2 (30%) | | Year 3 (20%) | | | | | |
| 2016 PSA | | | | Year 1 (50%) | | Year 2 (30%) | | Year 3 (20%) | | | |
| 2017 PSA | | | | | | Year 1 (50%) | | Year 2 (30%) | | Year 3 (20%) | |
| Award | | 2017 | | 2018 | | | 2019 | | | 2020 | | 2021 |
| 2017 PSA | | Year 1 (50%) | | Year 2 (30%) | | | Year 3 (20%) | | | | | |
| 2018 PSA | | | | Year 1 (50%) | | | Year 2 (30%) | | | Year 3 (20%) | | |
| 2019 PSA | | | | | | | Year 1 (50%) | | | Year 2 (30%) | | Year 3 (20%) |
| | | | | | | | | | | | | |
Status of Outstanding Performance Share Awardsoutstanding performance share awards
The Committee periodically reviews the Company’s performance against the goals established for each performance share award throughout the duration of its applicable measurement period. The table below summarizes the status of the different performance share awards held by the Named Executive Officers as of December 31, 2017.
AWARD AND
MEASUREMENT | | PERFORMANCE
MEASURES AND | | PERFORMANCE LEVELS | | % OF SHARES ACCRUED
PER PERFORMANCE
SHARE AT SPECIFIED
PERFORMANCE LEVELS | | ACTUAL
PERFORMANCE
LEVEL | | SHARES ACCRUED
PER PERFORMANCE
SHARE BASED
ON ACTUAL |
| PERIOD | | WEIGHTING | | THRESHOLD | | TARGET | | MAXIMUM | | THRESHOLD | | TARGET | | MAXIMUM | | ACHIEVED* | | PERFORMANCE** |
| 2017 PSA | | Earnings per | | | 4.0 | % | | | 8.0 | % | | | 12.0 | % | | | 4 | % | | | 20 | % | | | 40 | % | | 12.4% (2017) | | 0.200 (2017) |
| | | Share Growth | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2017-2019 | | Relative Organic | | | -1.0 | % | | | 0.5 | % | | | 2.0 | % | | | 8 | % | | | 40 | % | | | 80 | % | | 2.0% (2017) | | 0.400 (2017) |
| Measurement | | Volume Growth | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | Return on | | | 18.0 | % | | | 20.0 | % | | | 23.0 | % | | | 4 | % | | | 20 | % | | | 40 | % | | 25.2% (2017) | | 0.200 (2017) |
| | | Invested Capital | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Free Cash Flow | | | 95.0 | % | | | 100.0 | % | | | 105.0 | % | | | 4 | % | | | 20 | % | | | 40 | % | | 97.3% (2017) | | 0.057 (2017) |
| | | Conversion | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2017 PSA Total (as of December 31, 2017) | | 0.857 shares |
| 2016 PSA | | Earnings per | | | 7.0 | % | | | 9.0 | % | | | 12.0 | % | | | 4 | % | | | 20 | % | | | 40 | % | | 12.4% (2017) | | 0.120 (2017) |
| | | Share Growth | | | | | | | | | | | | | | | | | | | | | | | | | | 7.7% (2016) | | 0.048 (2016) |
| 2016-2018 | | Relative Organic | | | -1.0 | % | | | 0.5 | % | | | 2.0 | % | | | 8 | % | | | 40 | % | | | 80 | % | | 2.0% (2017) | | 0.240 (2017) |
| Measurement | | Volume Growth | | | | | | | | | | | | | | | | | | | | | | | | | | -2.1% (2016) | | 0.000 (2016) |
| Period | | Return on | | | 18.0 | % | | | 20.0 | % | | | 23.0 | % | | | 4 | % | | | 20 | % | | | 40 | % | | 25.2% (2017) | | 0.120 (2017) |
| | | Invested Capital | | | | | | | | | | | | | | | | | | | | | | | | | | 22.6% (2016) | | 0.187 (2016) |
| | | Free Cash Flow | | | 95.0 | % | | | 100.0 | % | | | 105.0 | % | | | 4 | % | | | 20 | % | | | 40 | % | | 97.3% (2017) | | 0.034 (2017) |
| | | Conversion | | | | | | | | | | | | | | | | | | | | | | | | | | 103.8% (2016) | | 0.176 (2016) |
| 2016 PSA Total (as of December 31, 2017) | | 0.925 shares |
| 2015 PSA | | Earnings per | | | 7.0 | % | | | 9.0 | % | | | 12.0 | % | | | 4 | % | | | 20 | % | | | 40 | % | | 12.4% (2017) | | 0.080 (2017) |
| | | Share Growth | | | | | | | | | | | | | | | | | | | | | | | | | | 7.7% (2016) | | 0.029 (2016) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1.2% (2015) | | 0.000 (2015) |
| 2015-2017 | | Relative Organic | | | -1.0 | % | | | 0.5 | % | | | 2.0 | % | | | 8 | % | | | 40 | % | | | 80 | % | | 2.0% (2017) | | 0.160 (2017) |
| Measurement | | Volume Growth | | | | | | | | | | | | | | | | | | | | | | | | | | -2.1% (2016) | | 0.000 (2016) |
| Period | | | | | | | | | | | | | | | | | | | | | | | | | | | | -0.9% (2015) | | 0.051 (2015) |
| | | Return on | | | 18.0 | % | | | 20.0 | % | | | 23.0 | % | | | 4 | % | | | 20 | % | | | 40 | % | | 25.2% (2017) | | 0.080 (2017) |
| | | Invested Capital | | | | | | | | | | | | | | | | | | | | | | | | | | 22.6% (2016) | | 0.112 (2016) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | 25.0% (2015) | | 0.200 (2015) |
| | | Free Cash Flow | | | 95.0 | % | | | 100.0 | % | | | 105.0 | % | | | 4 | % | | | 20 | % | | | 40 | % | | 97.3% (2017) | | 0.022 (2017) |
| | | Conversion | | | | | | | | | | | | | | | | | | | | | | | | | | 103.8% (2016) | | 0.106 (2016) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | 102.6% (2015) | | 0.152 (2015) |
| 2015 PSA Total (as of December 31, 2017) | | 0.992 shares |
* The reported level of performance achieved for Relative Organic Volume Growth has been determined, in part, using Worldwide IPI for each relevant period, as reported by Global Insights on January 15, 2018. The final performance level achieved may vary based on changes in reported Worldwide IPI for the relevant period.
** The number of shares of 3M common stock accrued with respect to each performance share subject to a performance share award is determined based on the Company’s performance against the specified goals established for each performance measure. In the event that the Company’s performance for any given performance measure falls between any two performance levels, the number of shares of 3M common stock accrued is determined by linear interpolation.2019.
Table of Contents
Award and
Measurement
Period | | Performance
Measures and
Weighting | | Performance Levels | |
% of Shares Accrued
per Performance
Share at Specified
Performance Levels | | Actual
Performance
Level
Achieved*,** | | Shares Accrued
per Performance
Share Based
on Actual
Performance*** |
| | | Threshold | | Target | | Maximum | | Threshold | | Target | | Maximum | | |
| 2019 PSA | | Earnings per | | 4.0% | | 8.0% | | 12.0% | | 4% | | 20% | | 40% | | -6.9% (2019) | | 0.000 (2019) |
| | | Share Growth | | | | | | | | | | | | | | | | |
| 2019-2021 | | Relative Organic | | -1.0% | | 0.5% | | 2.0% | | 8% | | 40% | | 80% | | -2.9% (2019) | | 0.000 (2019) |
| Measurement | | Volume Growth | | | | | | | | | | | | | | | | |
| Period | | Return on | | 20.0% | | 22.0% | | 25.0% | | 4% | | 20% | | 40% | | 22.9% (2019) | | 0.130 (2019) |
| | | Invested Capital | | | | | | | | | | | | | | | | |
| | | Free Cash Flow | | 95.0% | | 100.0% | | 105.0% | | 4% | | 20% | | 40% | | 106.0% (2019) | | 0.200 (2019) |
| | | Conversion | | | | | | | | | | | | | | | | |
| | | 2019 PSA Total (as of December 31, 2019) | | 0.330 shares |
| 2018 PSA | | Earnings per | | 4.0% | | 8.0% | | 12.0% | | 4% | | 20% | | 40% | | -6.9% (2019) | | 0.000 (2019) |
| | | Share Growth | | | | | | | | | | | | | | 8.6% (2018) | | 0.115 (2018) |
| 2018-2020 | | Relative Organic | | -1.0% | | 0.5% | | 2.0% | | 8% | | 40% | | 80% | | -2.9% (2019) | | 0.000 (2019) |
| Measurement | | Volume Growth | | | | | | | | | | | | | | -1.0% (2018) | | 0.040 (2018) |
| Period | | Return on | | 18.0% | | 20.0% | | 23.0% | | 4% | | 20% | | 40% | | 22.9% (2019) | | 0.118 (2019) |
| | | Invested Capital | | | | | | | | | | | | | | 24.6% (2018) | | 0.200 (2018) |
| | | Free Cash Flow | | 95.0% | | 100.0% | | 105.0% | | 4% | | 20% | | 40% | | 106.0% (2019) | | 0.120 (2019) |
| | | Conversion | | | | | | | | | | | | | | 92.8% (2018) | | 0.000 (2018) |
| | | 2018 PSA Total (as of December 31, 2019) | | 0.593 shares |
| 2017 PSA | | Earnings per | | 4.0% | | 8.0% | | 12.0% | | 4% | | 20% | | 40% | | -6.9% (2019) | | 0.000 (2019) |
| | | Share Growth | | | | | | | | | | | | | | 8.6% (2018) | | 0.069 (2018) |
| | | | | | | | | | | | | | | | | 12.4% (2017) | | 0.200 (2017) |
| 2017-2019 | | Relative Organic | | -1.0% | | 0.5% | | 2.0% | | 8% | | 40% | | 80% | | -2.9% (2019) | | 0.000 (2019) |
| Measurement | | Volume Growth | | | | | | | | | | | | | | -1.0% (2018) | | 0.024 (2018) |
| Period | | | | | | | | | | | | | | | | 1.7% (2017) | | 0.360 (2017) |
| | | Return on | | 18.0% | | 20.0% | | 23.0% | | 4% | | 20% | | 40% | | 22.9% (2019) | | 0.079 (2019) |
| | | Invested Capital | | | | | | | | | | | | | | 24.6% (2018) | | 0.120 (2018) |
| | | | | | | | | | | | | | | | | 25.2% (2017) | | 0.200 (2017) |
| | | Free Cash Flow | | 95.0% | | 100% | | 105.0% | | 4% | | 20% | | 40% | | 106.0% (2019) | | 0.080 (2019) |
| | | Conversion | | | | | | | | | | | | | | 92.8% (2018) | | 0.000 (2018) |
| | | | | | | | | | | | | | | | | 97.3% (2017) | | 0.057 (2017) |
| | | 2017 PSA Total (as of December 31, 2019) | | 1.189 shares |
| * | The reported level of performance achieved for Relative Organic Volume Growth has been determined, in part, using Worldwide IPI for each relevant period, as reported by Global Insights on January 15, 2020. The final performance level achieved may vary based on changes in reported Worldwide IPI for the relevant period. |
| ** | For purposes of calculating Earnings per Share Growth for any given fiscal year, the baseline earnings per share figure is set equal to the final adjusted earnings per share figure used to calculate the Earnings per Share Growth attainment for the preceding year. As a result, any increase in earnings per share attributable to adjustments in one fiscal year necessarily will make it more difficult for the Company to achieve its Earnings per Share Growth target in the following year. |
| *** | The number of shares of 3M common stock accrued with respect to each performance share subject to a performance share award is determined based on the Company’s performance, as adjusted for certain special items, against the specified goals established for each performance measure taking into account the weighting for the applicable performance year and measure. In the event that the Company’s performance for any given performance measure falls between any two performance levels, the number of shares of 3M common stock accrued is determined by linear interpolation. See Appendix A to this Proxy Statement | for details concerning the adjustments made to certain metrics under the AIP and the outstanding performance share awards. |
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Performance Share Accruals Basedshare accruals based on 2017 Performance2019 performance
The table below shows the number of shares of 3M common stock that were accrued (excluding dividend equivalents) for the outstanding performance share awards held by each Named Executive Officer based on the Company’s performance during 2017.2019.
| NAME | | PERFORMANCE
SHARE AWARD | | PERFORMANCE
SHARES
AWARDED | | SHARES ACCRUED
PER PERFORMANCE
SHARE BASED ON
2017 PERFORMANCE | | TOTAL SHARES
ACCRUED
BASED ON 2017
PERFORMANCE* | | MARKET VALUE
OF SHARES
ACCRUED
BASED ON 2017
PERFORMANCE** | |
| Name | | | Performance
Share Award | | Target
Number of
Performance
Shares | | Shares Accrued Per
Target Performance
Share Based on
2019 Performance | | Total Shares
Accrued
Based on 2019
Performance* | | Market Value of
Shares Accrued
Based on 2019
Performance**
($) |
| Michael F. Roman | | | 2019 PSA | | 24,098 | | 0.330 | | 7,952 | | 1,402,952 |
| | | | 2018 PSA | | 16,596 | | 0.238 | | 3,948 | | 696,427 |
| | | | 2017 PSA | | 6,467 | | 0.159 | | 1,026 | | 181,032 |
| | | | | | | | | | Total | | 2,280,411 |
| Inge G. Thulin | | 2017 PSA | | 31,603 | | 0.857 | | 27,083 | | $6,374,505 | | 2019 PSA | | 7,531*** | | 0.330 | | 2,485 | | 438,386 |
| | | 2016 PSA | | 34,464 | | 0.514 | | 17,721 | | $4,171,003 | | 2018 PSA | | 16,804 | | 0.238 | | 3,997 | | 705,101 |
| | | 2015 PSA | | 34,507 | | 0.343 | | 11,830 | | $2,784,434 | | 2017 PSA | | 31,603 | | 0.159 | | 5,013 | | 884,455 |
| | | | | | | | | Total | | $13,329,942 | | | | | | | | Total | | 2,027,942 |
| Nicholas C. Gangestad | | 2017 PSA | | 9,686 | | 0.857 | | 8,301 | | $1,953,783 | | 2019 PSA | | 8,772 | | 0.330 | | 2,895 | | 510,694 |
| | | 2016 PSA | | 9,788 | | 0.514 | | 5,032 | | $1,184,453 | | 2018 PSA | | 10,101 | | 0.238 | | 2,403 | | 423,900 |
| | | 2015 PSA | | 9,255 | | 0.343 | | 3,174 | | $747,142 | | 2017 PSA | | 9,686 | | 0.159 | | 1,537 | | 271,128 |
| | | | | | | | | Total | | $3,885,378 | | | | | | | | Total | | 1,205,722 |
| Frank R. Little | | 2017 PSA | | 7,673 | | 0.857 | | 6,575 | | $1,547,535 | |
| Ashish K. Khandpur | | | 2019 PSA | | 8,425 | | 0.330 | | 2,780 | | 490,433 |
| | | 2016 PSA | | 6,424 | | 0.514 | | 3,303 | | $777,398 | | 2018 PSA | | 4,903 | | 0.238 | | 1,166 | | 205,655 |
| | | 2015 PSA | | 5,834 | | 0.343 | | 2,000 | | $470,796 | | 2017 PSA | | 3,689 | | 0.159 | | 586 | | 103,387 |
| | | | | | | | | Total | | $2,795,730 | | | | | | | | Total | | 799,475 |
| Michael F. Roman | | 2017 PSA | | 6,467 | | 0.857 | | 5,541 | | $1,304,270 | |
| Julie L. Bushman | | | 2019 PSA | | 5,617 | | 0.330 | | 1,853 | | 326,956 |
| | | 2016 PSA | | 6,778 | | 0.514 | | 3,485 | | $820,161 | | 2018 PSA | | 6,297 | | 0.238 | | 1,498 | | 264,273 |
| | | 2015 PSA | | 5,994 | | 0.343 | | 2,055 | | $483,706 | | 2017 PSA | | 4,867 | | 0.159 | | 772 | | 136,264 |
| | | | | | | | | Total | | $2,608,137 | | | | | | | | Total | | 727,493 |
| Hak Cheol Shin | | 2017 PSA | | 6,303 | | 0.857 | | 5,401 | | $1,271,190 | |
| Joaquin Delgado | | | 2019 PSA | | 1,405 | | 0.330 | | 463 | | 81,739 |
| | | 2016 PSA | | 6,601 | | 0.514 | | 3,394 | | $798,780 | | 2018 PSA | | 4,903 | | 0.238 | | 1,166 | | 205,655 |
| | | 2015 PSA | | 5,994 | | 0.343 | | 2,055 | | $483,706 | | 2017 PSA | | 5,974 | | 0.159 | | 948 | | 167,182 |
| | | | | | | | | Total | | $2,553,675 | | | | | | | | Total | | 454,576 |
| Michael G. Vale | | | 2019 PSA | | 5,467 | | 0.330 | | 1,804 | | 318,223 |
| | | | 2018 PSA | | 4,903 | | 0.238 | | 1,166 | | 205,655 |
| | | | 2017 PSA | | 6,138 | | 0.159 | | 974 | | 171,799 |
| | | | | | | | | | Total | | 695,677 |
* | * | The amounts in this column reflect the number of shares accrued (excluding dividend equivalents) based on, among other things, Worldwide IPI for the 2019 calendar year, as reported by Global Insights on January 15, 2020. The final number of shares accrued may vary in the event of changes in Worldwide IPI reported by Global Insights. Due to rounding, the numbers shown in this column may not equal the result obtained by multiplying the Target Number of Performance Shares by the Shares Accrued Per Target Performance Share Based on 2019 Performance. See Appendix A to this Proxy Statement for a reconciliation of the adjusted earnings per share figures used to calculate the amounts shown above to the earnings per share figures determined in accordance with GAAP. |
| ** | Represents the closing price of a share of 3M common stock on the NYSE for December 31, 2019 ($176.42), multiplied by the total number of shares accrued (before rounding and excluding dividend equivalents) based on the Company’s 2019 performance. |
| *** | In accordance with the terms of the award, the target number of performance shares subject to Mr. Thulin’s 2019 performance share award was reduced based on his June 1, 2019, retirement. Prior to this reduction, the target number of performance shares subject to Mr. Thulin’s 2019 performance share award was 15,061. |
Table of shares accrued based on, among other things, Worldwide IPI for the 2017 calendar year, as reported by Global Insights on January 15, 2018. The final number of shares accrued may vary in the event of changes in Worldwide IPI reported by Global Insights. Due to rounding, the numbers shown in this column may not equal the result obtained by multiplying the Performance Shares Awarded by the Shares Accrued Per Performance Share Based on 2017 Performance.Contents
** Represents the closing price of a share of 3M common stock on the NYSE for December 29, 2017 ($235.37), multiplied by the actual number of shares accrued (before rounding) based on the Company’s 2017 performance.
Although shares of 3M common stock are accrued annually for each outstanding performance share award, an executive may forfeit all or a portion of the shares otherwise issuable pursuant to his or her award if he or she does not remain employed by the Company throughout the entire three-year performance period.
Special Retention Grants
Given the size and complexity of 3M’s operations and the inherent risks and challenges associated with replacing top performers, the Committee believes that retaining key leaders who possess deep knowledge of the business is essential to the organization’s future success. After consulting with its independent compensation consultant and considering the strong performance of Mr. Gangestad and Mr. Little, as well as their existing compensation packages and other incentives, the Committee approved a special restricted stock unit award for Mr. Gangestad and Mr. Little with a target grant value of $1,500,000 and $1,200,000, respectively. Each of the restricted stock unit awards will vest in two equal annual installments on each of December 1, 2020, and December 1, 2022, provided that Mr. Gangestad and Mr. Little remain in employment with 3M through each such date.
For additional information concerning the manner in which the compensation of the Named Executive Officers is determined and the role of the Compensation Committee and its advisors, see Section II of this Compensation Discussion and Analysis beginning on page 42.57.
SECTION IV:Ways in Which We Address Risk and Governance |
Section IV: Ways in which we address risk and governance
Stock Ownership Guidelinesownership guidelines
The Company maintains robust stock ownership guidelines that apply to all Section 16 officers of the Company and are designed to increase an executive’s equity stake in 3M and more closely align his or her financial interests with those of 3M’s stockholders.shareholders. The following table below shows the stock ownership guideline for each Named Executive Officer (other than Mr. Thulin and Dr. Delgado) and their compliance status as of December 31, 2017:2019. As former employees, Mr. Thulin and Dr. Delgado are no longer subject to the Company’s stock ownership guidelines.
NAME | MULTIPLE OF MEASUREMENT DATE
BASE SALARY REQUIRED | | COMPLIANCE STATUS
AS OF DECEMBER 31, 2017* | | | | Percentage of Named Executive
Officers in compliance
with the Company’s stock
ownership guidelines as of
December 31, 2019: 100% |
| | Multiple of | | | |
| | Measurement Date | | Compliance Status | |
| Name | | Base Salary Required | | as of December 31, 2017:100%
2019* | |
Inge G. ThulinMichael F. Roman | | 6x | | In compliance | |
| Nicholas C. Gangestad | | 3x | | In compliance | |
Frank R. LittleAshish K. Khandpur | | 3x | | In compliance | |
| Julie L. Bushman | | 3x | | In compliance | |
Michael F. RomanG. Vale | 3x | | In compliance | |
Hak Cheol Shin | 3x | | In compliance | |
* In accordance with the terms of the stock ownership guidelines, the number of shares required to be beneficially owned by each Named Executive Officer in order to maintain compliance was most recently recalculated as of December 31, 2016, using the closing price of a share of 3M common stock on the NYSE for December 30, 2016. Although each of the Named Executive Officers has until December 31, 2019, to acquire beneficial ownership of any additional shares required as a result of the recalculation, each individual beneficially owned a sufficient number of shares on December 31, 2017, to comply with the new ownership levels required.
| * | In accordance with the terms of the stock ownership guidelines, the number of shares required to be beneficially owned by each Named Executive Officer in order to maintain compliance was most recently recalculated as of December 31, 2019, using the closing price of a share of 3M common stock on the NYSE for December 31, 2019. Although each such Named Executive Officer (other than Mr. Roman) has until December 31, 2022, to acquire beneficial ownership of any additional shares required as a result of the recalculation, each such individual beneficially owned a sufficient number of shares on December 31, 2019, to comply with the new ownership levels required. |
| ** | As a result of Mr. Roman’s appointment to the position of Chief Executive Officer and the resulting increase in his required level of ownership, effective July 1, 2018, from a multiple of three times his annual base salary to a multiple of six times his annual base salary, Mr. Roman has until June 30, 2023, to acquire beneficial ownership of any additional shares required as a result of the December 31, 2019, recalculation. Mr. Roman beneficially owned a sufficient number of shares on December 31, 2019, to comply with the new ownership level required. |
The stock ownership guidelines provide that the number of shares required to be beneficially owned by each covered executive will be calculated using such executive’s annual base salary at the time of his or her initial appointment to a Section 16 position and again at the time of a position change from one multiple level to another multiple level, and the fair market value of 3M common stock at that time. The guidelines also provide that the number of shares required to be beneficially owned by each executive will be recalculated every three years using his or her annual base salary and the fair market value of 3M common stock at the recalculation date. Pursuant to the terms of the guidelines, the next periodic recalculation date is scheduled to occur on December 31, 2019.30, 2022.
Each covered executive is expected to attain beneficial ownership of the number of shares of 3M stock determined by the guidelines within five years of his or her initial appointment to a position covered by the guidelines or a position change from one multiple level to another multiple level. The guidelines also provide that each covered executive whose required level of ownership increases as a result of a periodic recalculation will have three years from the recalculation date (or the balance of the five-year period since the date of their initial appointment or latest position change, if longer) to acquire beneficial ownership of any additional shares required as a result of the recalculation. However, if a covered executive is not making adequate progress to meet the required level of ownership within the applicable time period, the guidelines provide that he or she will be required to hold and not sell a sufficient number of the after-tax 3M shares received upon the next payout of performance shares to be on track to satisfy the required ownership level.
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For purposes of these guidelines, shares owned directly by a covered executive or by members of the covered executive’s immediate family, shares owned indirectly through a covered executive’s account in the Company’s 401(k) plan or another deferred compensation plan, outstanding shares of restricted stock owned by a covered executive, and shares represented by outstanding restricted stock units granted to a covered executive are all considered to be beneficially owned by the covered executive and are counted in determining attainment of the required beneficial ownership level.
For more information concerning the 3M stock ownership of the Named Executive Officers, see the section entitled “Security Ownershipownership of Management”management” beginning on page 7592 of this Proxy Statement.
2018 Proxy Statement | | 55 |
Prohibition of Hedginghedging and Pledgingpledging
The Company’s stock trading policies prohibitprohibits the Company’s directors and executive officers from (1) purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of the Company’s common stock, including prepaid variable forward contracts, equity swaps, collars, and exchange funds; (2) engaging in short sales related to the Company’s common stock; (3) placing standing orders; (4) maintaining margin accounts; and (5) pledging 3M securities as collateral for a loan. All transactions in 3M securities by directors and executive officers must be pre-cleared with the Company’s Deputy General Counsel.
Policy on Reimbursement of Incentive Payments (“Clawback”)Clawback policy
The Company’s Board of Directors has adopted a policy requiring theunder which it is authorized to require reimbursement of excess incentivecertain cash and equity compensation payments madeprovided to an executive in the event thatif (1) 3M is required to make a material restatement of its financial statements.statements, whether or not the result of misconduct by the executive or any other individual, (2) the executive commits an act of misconduct that causes, or might reasonably be expected to cause, significant financial or reputational harm to the Company, or (3) the executive fails to identify, escalate, monitor or manage, in a timely manner and as reasonably expected, risks material to the Company, which cause, or might reasonably be expected to cause, significant financial or reputational harm to the Company. The policy also authorizes the Company to require reimbursement of any profits the executive realizes on the sale of Company securities during the 12-month period following the issuance by the Company of a financial report that, due to the misconduct of the executive, is materially noncompliant with Federal securities laws. This policy applies to all senior executives of the Company, including all of the Named Executive Officers. This
The Board of Directors continues to monitor regulatory developments relating to recoupment of incentive-based compensation and intends to further amend this policy, does not requireif necessary, to comply with any misconduct on the part of the covered executive whose excess incentive compensation payment is being reimbursed. As long as the Company is required to make a material restatement of its financial statements that causes an incentive compensation payout to be higher than it should have been, the Company may seek to recover the over payment from all affected executives irrespective of whether their conduct contributed to the needfinal regulations issued for the restatement. The Company established this policy prior topurpose of implementing the passagerequirements of the Dodd-Frank Act, which establishes new requirements for such policies. Upon issuance by the Securities and Exchange Commission of final implementing regulations for the Dodd-Frank Act’s requirements, the Company will make any changes to its existing policy as may be required to comply with those regulations.Act.
Assessment of Risk Relatedrisk related to Compensation Programscompensation programs
Following completion of a recent compensation risk assessment, the Company concluded that none of its compensation policies and practices is reasonably likely to have a material adverse effect on the Company. In connection with this assessment, the Company completed an inventory of its executive and non-executive compensation programs globally, with particular emphasis on incentive compensation plans or programs. The scope of the fiscal 20172019 risk assessment generally was consistent with that of pastconducted in recent years, except that we continued to respond to external market events by givingincluding heightened attention toon plan design, and whether the design, oversight, and controls in place have potential to create not only financial risk, but reputational risk as well. Based on this assessment, the Company evaluated the primary components of its compensation plans and practices to identify whether those components, either alone or in combination, properly balanced compensation opportunities and risk.
The Company believes that our overall cash versus equity pay mix, balance of shorter-term versus longer-term performance focus, balance of revenue versus profit focused performance measures, stock ownership guidelines, and “clawback” policy all work together to provide our employees and executives with incentives to deliver outstanding performance to build long-term stockholdershareholder value, while taking only necessary and prudent risks. In this regard, the Company’s strong ethics and its corporate compliance systems, which are overseen by the Audit Committee, further mitigate against excessive or inappropriate risk taking. In addition, our employee sales plans are designed under global guidelines, where oversight of plan terms, administration, and operation is stronger and governance roles are segregated.
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The Compensation Committee, with assistance from its independent compensation consultant, George B. Paulin of FW Cook, reviewed a risk assessment that Mr. Paulin conducted for the Committee on the Company’s executive compensation policies and practices. Based on its consideration of these assessments, the Committee concurred with the Company’s determination that none of its compensation policies and practices is reasonably likely to have a material adverse effect on the Company.
Compensation Committee Reportreport
In accordance with the Securities and Exchange Commission’s disclosure requirements for executive compensation, the Compensation Committee of the Board of Directors of 3M Company (the “Committee”) has reviewed and discussed with 3M Managementmanagement the Compensation Discussion and Analysis. Based on this review and these discussions with 3M Management,management, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the 20182020 Proxy Statement of 3M Company and 3M Company’s Annual Report on Form 10-K for the year ended December 31, 2017.2019.
Submitted by the Compensation Committee
Michael L. Eskew, Chair
Vance D. Coffman
Herbert L. Henkel, Chair
Amy E. Hood
Muhtar Kent
Edward M. Liddy
Patricia A. Woertz
Compensation Committee Interlocksinterlocks and Insider Participationinsider participation
The members of the Compensation Committee are named in the section titled “Compensation Committee” on page 2839 of this Proxy Statement. No members of the Compensation Committee were officers or employees of 3M or any of its subsidiaries during the year, were formerly 3M officers, or had any relationship otherwise requiring disclosure.
20182020 Proxy Statement | | 5773 |
Table of Contents
Executive Compensation Tablescompensation tables
2017 Summary Compensation Table2019 summary compensation table
The following table shows the compensation earned or received during 2017, 2016,2019, 2018, and 20152017 by each of 3M’s Named Executive Officersnamed executive officers (as determined pursuant to the Securities and Exchange Commission’s disclosure requirements for executive compensation in Item 402 of Regulation S-K).
NAME AND PRINCIPAL
POSITION | YEAR | | SALARY ($) | | 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
($)(5) | | TOTAL
($) |
Inge G. Thulin
Chairman of the Board,
President and Chief Executive Officer | 2017 | | | 1,526,595 | | | 6,000,146 | | 6,002,785 | | | 4,121,830 | | | | 2,175,108 | | | | 667,821 | | | 20,494,285 |
| 2016 | | | 1,483,929 | | | 5,500,110 | | 5,502,854 | | | 2,303,678 | | | | 1,319,993 | | | | 560,110 | | | 16,670,674 |
| 2015 | | | 1,448,153 | | | 5,500,071 | | 5,497,855 | | | 2,330,134 | | | | 3,941,164 | | | | 723,685 | | | 19,441,062 |
Nicholas C. Gangestad
Senior Vice President
and Chief Financial Officer | 2017 | | | 778,103 | | | 3,339,178 | | 1,839,705 | | | 1,110,975 | | | | 2,110,908 | | | | 58,396 | | | 9,237,265 |
| 2016 | | | 681,551 | | | 1,562,067 | | 1,562,767 | | | 667,599 | | | | 1,303,839 | | | | 55,958 | | | 5,833,781 |
| 2015 | | | 601,743 | | | 1,475,154 | | 1,474,443 | | | 571,980 | | | | 939,858 | | | | 61,885 | | | 5,125,063 |
Frank R. Little(6)
Executive Vice President,Safety and Graphics Business Group | 2017 | | | 690,639 | | | 2,657,000 | | 1,457,385 | | | 1,077,371 | | | | 851,463 | | | | 108,866 | | | 6,842,724 |
Michael F. Roman(6)
Chief Operating Officer and Executive Vice President | 2017 | | | 839,575 | | | 1,227,825 | | 1,228,374 | | | 1,090,797 | | | | 2,347,859 | | | | 59,800 | | | 6,794,230 |
| 2016 | | | 747,022 | | | 1,081,701 | | 1,082,225 | | | 602,433 | | | | 1,444,650 | | | | 56,774 | | | 5,014,805 |
Hak Cheol Shin
Vice Chair and Executive Vice President
| 2017 | | | 838,751 | | | 1,196,688 | | 1,197,153 | | | 1,121,844 | | | | 1,907,479 | | | | 146,484 | | | 6,408,399 |
| 2016 | | | 790,201 | | | 1,053,454 | | 1,053,983 | | | 605,262 | | | | 1,295,944 | | | | 57,215 | | | 4,856,059 |
| 2015 | | | 773,322 | | | 955,384 | | 955,109 | | | 591,975 | | | | 1,050,239 | | | | 163,996 | | | 4,490,025 |
(1) The amounts in the Stock Awards column reflect the aggregate grant date fair value of such awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures. Assumptions made in the calculation of these amounts are included in Note 16 to the Company’s audited financial statements for the fiscal year ended December 31, 2017, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 8, 2018. The amounts included in this column for the performance share awards made during 2017 are calculated based on the probable satisfaction of the performance conditions for such awards. If the highest level of performance is achieved for the 2017 performance share awards, the maximum value of these awards at the grant date would be as follows: Mr. Thulin — $12,000,291; Mr. Gangestad — $3,667,968; Mr. Little — $2,913,592; Mr. Roman — $2,455,649; and Mr. Shin — $2,393,375.
(2) The amounts in the Option Awards column reflect the aggregate grant date fair value of such awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures. Assumptions made in the calculation of these amounts are included in Note 16 to the Company’s audited financial statements for the fiscal year ended December 31, 2017, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 8, 2018.
(3) The amounts in the Non-Equity Incentive Plan Compensation column reflect the annual incentive compensation earned by each individual under the Company’s Executive Annual Incentive Plan.
(4) The amounts in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column reflect the actuarial increase in the present value of each individual’s pension benefits under all defined benefit pension plans of the Company, determined using the same interest rate and mortality assumptions as those used for financial statement reporting purposes. See Note 12 to the Company’s audited financial statements for the fiscal year ended December 31, 2017, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 8, 2018. There were no above-market earnings on deferred compensation under the Company’s nonqualified deferred compensation programs.
(5) See the All Other Compensation table below for details of the amounts reported for 2017.
(6) No amounts are reported for Mr. Little for the years 2015 and 2016, or for Mr. Roman for the year 2015, since they first became named executive officers after those years.
Name and
Principal Position | | Year | | Salary
($) | | 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
($)(5) | | Total
($) |
Michael F. Roman(6)
Chairman of the Board, President and Chief Executive Officer | | 2019 | | 1,249,568 | | 5,000,094 | | 4,999,946 | | 1,256,671 | | 5,642,262 | | 173,025 | | 18,321,566 |
| | 2018 | | 1,049,976 | | 3,610,286 | | 3,610,217 | | 1,431,503 | | 3,020,986 | | 141,771 | | 12,864,739 |
| | 2017 | | 839,575 | | 1,227,825 | | 1,228,374 | | 1,090,797 | | 2,347,859 | | 70,788 | | 6,805,218 |
Inge G. Thulin(7)
Former Executive Chairman of the Board | | 2019 | | 416,667 | | 3,125,007 | | 1,562,023 | | 382,259 | | 2,689,641 | | 31,476 | | 8,207,073 |
| | 2018 | | 1,269,200 | | 3,750,032 | | 6,000,564 | | 1,877,798 | | — | | 632,492 | | 13,530,086 |
| | 2017 | | 1,526,595 | | 6,000,146 | | 6,002,785 | | 4,121,830 | | 2,175,108 | | 708,729 | | 20,535,193 |
Nicholas C. Gangestad
Senior Vice President and Chief Financial Officer | | 2019 | | 862,953 | | 1,820,102 | | 1,820,002 | | 531,579 | | 2,488,003 | | 60,357 | | 7,582,996 |
| | 2018 | | 830,995 | | 2,336,765 | | 2,336,984 | | 787,783 | | 1,384,479 | | 62,458 | | 7,739,464 |
| | 2017 | | 778,103 | | 3,339,178 | | 1,839,705 | | 1,110,975 | | 2,110,908 | | 68,372 | | 9,247,241 |
Ashish K. Khandpur(8)
Executive Vice President, Transportation and Electronics Business Group | | 2019 | | 683,422 | | 1,748,103 | | 1,748,032 | | 325,583 | | 1,342,856 | | 46,535 | | 5,894,531 |
Julie L. Bushman(8)
Executive Vice President, International Operations | | 2019 | | 800,502 | | 1,165,471 | | 1,165,366 | | 507,681 | | 1,982,778 | | 29,170 | | 5,650,968 |
| | 2018 | | 792,795 | | 1,456,748 | | 1,456,856 | | 649,048 | | 945,379 | | 38,525 | | 5,339,351 |
Joaquin Delgado
Former Executive Vice President, Consumer Business Group | | 2019 | | 368,892 | | 582,839 | | 582,700 | | 256,137 | | 1,155,625 | | 1,788,819 | | 4,735,012 |
| | 2018 | | 694,090 | | 1,134,260 | | 1,134,284 | | 532,836 | | 700,842 | | 101,075 | | 4,297,387 |
| | 2017 | | 680,383 | | 1,134,224 | | 1,134,687 | | 561,067 | | 1,174,715 | | 99,466 | | 4,784,542 |
Michael G. Vale
Executive Vice President, Safety and Industrial Business Group | | 2019 | | 737,093 | | 1,134,348 | | 1,134,151 | | 396,967 | | 1,619,621 | | 60,282 | | 5,082,462 |
| | 2018 | | 707,186 | | 1,134,260 | | 1,134,284 | | 533,871 | | 127,703 | | 65,850 | | 3,703,154 |
| | 2017 | | 693,221 | | 1,165,361 | | 1,165,908 | | 629,703 | | 980,555 | | 61,498 | | 4,696,246 |
58(1) | | 3MThe amounts in the Stock Awards column reflect the aggregate grant date fair value of such awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures. Assumptions made in the calculation of these amounts are included in Note 18 to the Company’s audited financial statements for the fiscal year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020. The amounts included in this column for the performance share awards made during 2019 are calculated based on the probable satisfaction of the performance conditions for such awards. If the highest level of performance is achieved for these performance share awards, the maximum value of these awards at the grant date would be as follows: Mr. Roman — $10,000,188; Mr. Thulin — $6,250,014; Mr. Gangestad — $3,640,204; Mr. Khandpur — $3,496,206; Ms. Bushman — $2,330,942; Dr. Delgado — $1,165,678; and Mr. Vale — $2,268,696. |
| (2) | The amounts in the Option Awards column reflect the aggregate grant date fair value of such awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures. Assumptions made in the calculation of these amounts are included in Note 18 to the Company’s audited financial statements for the fiscal year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020. |
| (3) | The amounts in the Non-Equity Incentive Plan Compensation column reflect the annual incentive compensation earned by each individual during the year specified pursuant to the Company’s Executive Annual Incentive Plan. |
| (4) | Except with respect to Mr. Thulin, the amounts in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column reflect the actuarial increase in the present value (if any) of each individual’s pension benefits under all defined benefit pension plans of the Company, determined using the same interest rate and mortality assumptions as those used for financial statement reporting purposes. See Note 13 to the Company’s audited financial statements for the fiscal year ended December 31, |
Table of Contents
| 2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020. Mr. Thulin commenced his pension benefits and as such, the December 31, 2019, value of his benefit under the Nonqualified Pension Plan was set equal to the gross amount of the payment he received in 2019 and the present value of his benefit under the Employee Retirement Income Plan was determined based on his final benefit amount and payment form selected. There were no above-market earnings on deferred compensation under the Company’s nonqualified deferred compensation programs. |
| (5) | See the All Other Compensation table below for details of the amounts reported for 2019. |
| (6) | Mr. Roman was appointed Chief Executive Officer, effective July 1, 2018. Prior to that, Mr. Roman served as the Company’s Executive Vice President and Chief Operating Officer from 2017 to his appointment as Chief Executive Officer. |
| (7) | Mr. Thulin served as the Company’s Executive Chairman from July 1, 2018, until his retirement on June 1, 2019. Prior to that, Mr. Thulin served as 3M’s Chairman of the Board, President and Chief Executive Officer from 2012 to his appointment as Executive Chairman in 2018. |
| (8) | No amounts are reported for Mr. Khandpur for the years 2017 and 2018, or for Ms. Bushman for the year 2017, since they first became Named Executive Officers after those years. |
2017 All Other Compensation Table2019 all other compensation table
| NAME | | 401(K)
COMPANY
CONTRIBUTIONS
($)(1) | | VIP
EXCESS
COMPANY
CONTRIBUTIONS
($)(2) | | EXECUTIVE
LIFE
INSURANCE
($)(3) | | FINANCIAL
PLANNING
($)(4) | | PERSONAL
AIRCRAFT
USE
($)(5) | | SECURITY
SYSTEMS/
SERVICES
($)(6) | | PERSONAL
AUTO
USE
($)(7) | | OTHER
($)(8) | | TOTAL
($) | |
| Name | | | 401(k)
Company
Contributions
($)(1) | | VIP
Excess
Company
Contributions
($)(2) | | Executive
Life
Insurance
($)(3) | | Financial
Planning
($)(4) | | Personal
Aircraft
Use
($)(5) | | Security
Systems/
Services
($)(6) | | Other
($)(7) | | Total
($) |
| Michael F. Roman | | | 4,500 | | 52,462 | | 23,760 | | 15,132 | | 76,557 | | 614 | | — | | 173,025 |
| Inge G. Thulin | | | 5,304 | | 80,877 | | | 286,115 | | | 13,500 | | | 258,926 | | | 682 | | | | 22,417 | | | | 0 | | | 667,821 | | 4,800 | | 13,176 | | — | | 13,500 | | — | | — | | — | | 31,476 |
| Nicholas C. Gangestad | | 5,423 | | 27,105 | | 13,868 | | 12,000 | | 0 | | 0 | | 0 | | 0 | | 58,396 | | 5,394 | | 25,983 | | 15,480 | | 13,500 | | — | | — | | — | | 60,357 |
| Frank R. Little | | 7,448 | | 30,625 | | 57,293 | | 13,500 | | 0 | | 0 | | 0 | | 0 | | 108,866 | |
| Michael F. Roman | | 5,207 | | 27,238 | | 15,178 | | 12,000 | | 0 | | 0 | | 0 | | 177 | | 59,800 | |
| Hak Cheol Shin | | 5,120 | | 27,370 | | 100,494 | | 13,500 | | 0 | | 0 | | 0 | | 0 | | 146,484 | |
| Ashish K. Khandpur | | | 6,246 | | 16,457 | | 11,832 | | 12,000 | | — | | — | | — | | 46,535 |
| Julie L. Bushman | | | 6,300 | | — | | 8,194 | | 14,676 | | — | | — | | — | | 29,170 |
| Joaquin Delgado | | | 5,934 | | 7,676 | | 11,709 | | 13,500 | | — | | — | | 1,750,000 | | 1,788,819 |
| Michael G. Vale | | | 7,846 | | 26,175 | | 12,761 | | 13,500 | | — | | — | | — | | 60,282 |
(1) The amounts shown reflect 3M matching and additional automatic contributions under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan. All eligible employees under this plan may receive 3M matching contributions on their pre-tax or Roth 401(k) contributions to the plan on up to five percent of their eligible pay. Eligible employees hired on or after January 1, 2009, also receive additional automatic 3M retirement income contributions equal to three percent of their eligible pay.
(2) The amounts shown reflect 3M matching contributions under the VIP Excess Plan, a nonqualified defined contribution plan. Eligibility for this plan and its matching contributions is limited to employees whose compensation exceeds a limit established by Federal income tax laws for tax-qualified defined contribution plans. The plan permits eligible employees to save additional amounts from their current cash compensation beyond the contribution limits established by Federal tax laws, and to receive Company matching contributions similar to the matching contributions provided under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan.
(3) The amounts shown reflect the amount of premiums paid by the Company on behalf of each individual with respect to their respective universal life or term life insurance policies obtained for them under the Executive Life Insurance Plan.
(4) These amounts reflect fees for personal financial planning and tax return preparation services paid by the Company on behalf of each individual.
(5) This amount reflects the aggregate incremental cost to the Company for Mr. Thulin’s personal use of corporate aircraft during 2017. This aggregate incremental cost was calculated by combining the variable operating costs of such travel, including the cost of fuel, landing fees, parking fees, trip preparation fees, en route communication charges, en route navigation charges, on-board catering, and crew travel expenses. The Compensation Committee requires Mr. Thulin to use the corporate aircraft for all business and personal travel.
(6) This amount reflects the expenses incurred by 3M from January 1, 2017, through March 31, 2017, for home security equipment and monitoring services at Mr. Thulin’s personal residence. Mr. Thulin declined such services for the remainder of the year.
(7) This amount reflects the aggregate incremental cost to the Company for Mr. Thulin’s personal use of a Company-provided automobile and local ground transportation. These costs include lease payments for the vehicle, fuel, insurance premiums, repairs, and maintenance.
(8) This amount reflects the aggregate incremental cost to the Company for meals provided to Mr. Roman’s spouse while accompanying the executive on a business trip at the Company’s request.
| (1) | The amounts shown reflect 3M matching and additional automatic contributions under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan. All eligible employees under this plan may receive 3M matching contributions on their pre-tax or Roth 401(k) contributions to the plan on up to five percent of their eligible pay. Eligible employees hired on or after January 1, 2009, also receive additional automatic 3M retirement income contributions equal to three percent of their eligible pay. |
| (2) | The amounts shown reflect 3M matching contributions under the VIP Excess Plan, a nonqualified defined contribution plan. Eligibility for this plan and its matching contributions is limited to employees whose compensation exceeds a limit established by Federal income tax laws for tax-qualified defined contribution plans. The plan permits eligible employees to save additional amounts from their current cash compensation beyond the contribution limits established by Federal tax laws, and to receive Company matching contributions similar to the matching contributions provided under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan. |
| (3) | The amounts shown reflect the amount of premiums paid by the Company on behalf of each individual with respect to their respective universal life or term life insurance policies obtained for them under the Executive Life Insurance Plan. |
| (4) | These amounts reflect fees for personal financial planning and tax return preparation services paid by the Company on behalf of each individual. |
| (5) | This amount reflects the aggregate incremental cost to the Company for Mr. Roman’s personal use of corporate aircraft during 2019. This aggregate incremental cost was calculated by combining the variable operating costs of such travel, including the cost of fuel, landing fees, parking fees, trip preparation fees, en route communication charges, en route navigation charges, on-board catering, and crew travel expenses. The Compensation Committee required Mr. Roman to use the corporate aircraft for all business and personal travel. |
| (6) | This amount reflects the expenses incurred by 3M during 2019 for home security equipment and monitoring services at the personal residence of Mr. Roman. |
| (7) | The amount shown reflects the payment made to Dr. Delgado under the terms of a separation agreement. For more information concerning the arrangement with Dr. Delgado, see the section entitled “Separation pay” on page 61 of this Proxy Statement. |
Grants of Plan-Based Awardsplan-based awards
The following table reflects the various equity and non-equity plan awards granted to the Named Executive Officers during 2017.2019. With the exception of the annual incentive compensation earned by such Named Executive Officers under the Executive Annual Incentive Plan, all of the awards referred to in this table were granted under the 2016 Long-Term Incentive Plan.
20182020 Proxy Statement | | 5975 |
2017 GrantsTable of Plan-Based Awards TableContents
2019 GRANTS OF PLAN-BASED AWARDS TABLE
| | | | | | | | | | | | | | | | | ALL | | ALL | | | | |
| | | | | | | | | | | | | | | | | OTHER | | OTHER | | | | GRANT |
| | | | | | | ESTIMATED FUTURE | | | | | | | | STOCK | | OPTION | | | | DATE FAIR |
| | | | | | | PAYOUTS UNDER | | | | | | | | AWARDS: | | AWARDS: | | EXERCISE | | VALUE OF |
| | | | | | | NON-EQUITY | | ESTIMATED FUTURE PAYOUTS | | NUMBER | | NUMBER OF | | OR BASE | | STOCK |
| | | | | | | INCENTIVE PLAN | | UNDER EQUITY INCENTIVE | | OF SHARES | | SECURITIES | | PRICE OF | | AND |
| | | | | | | AWARDS(2) | | PLAN AWARDS(3) | | OF STOCK | | UNDERLYING | | OPTION | | OPTION |
| | | TYPE OF | | GRANT | | TARGET | | MAXIMUM | | THRESHOLD | | TARGET | | MAXIMUM | | OR UNITS | | OPTIONS | | AWARDS | | AWARDS |
| NAME | | GRANT(1) | | DATE | | ($) | | ($) | | (#) | | (#) | | (#) | | (#) | | (#)(4) | | ($/SH)(5) | | ($)(6) |
Inge G.
Thulin | | 17PS | | | 03/01/2017 | | | | | | | | | 6,321 | | | 31,603 | | | 63,206 | | | | | | | | | | | | 6,000,146 | |
| Option | | | 02/07/2017 | | | | | | | | | | | | | | | | | | | | | 255,329 | | | 175.76 | | | 6,002,785 | |
| | | AIP | | | n/a | | | 2,442,711 | | | 14,052,500 | | | | | | | | | | | | | | | | | | | | | | |
Nicholas C.
Gangestad | | 17PS | | | 03/01/2017 | | | | | | | | | 1,937 | | | 9,686 | | | 19,372 | | | | | | | | | | | | 1,838,984 | |
| Option | | | 02/07/2017 | | | | | | | | | | | | | | | | | | | | | 78,252 | | | 175.76 | | | 1,839,705 | |
| | | AIP | | | n/a | | | 778,102 | | | 14,052,500 | | | | | | | | | | | | | | | | | | | | | | |
| | | RSU | | | 12/01/2017 | | | | | | | | | | | | | | | | | | 6,221(7) | | | | | | | | | 1,500,194 | |
Frank R.
Little | | 17PS | | | 03/01/2017 | | | | | | | | | 1,535 | | | 7,673 | | | 15,346 | | | | | | | | | | | | 1,456,796 | |
| Option | | | 02/07/2017 | | | | | | | | | | | | | | | | | | | | | 61,990 | | | 175.76 | | | 1,457,385 | |
| | | AIP | | | n/a | | | 587,139 | | | 14,052,500 | | | | | | | | | | | | | | | | | | | | | | |
| | | RSU | | | 12/01/2017 | | | | | | | | | | | | | | | | | | 4,977(7) | | | | | | | | | 1,200,204 | |
Michael F.
Roman | | 17PS | | | 03/01/2017 | | | | | | | | | 1,293 | | | 6,467 | | | 12,934 | | | | | | | | | | | | 1,227,825 | |
| Option | | | 02/07/2017 | | | | | | | | | | | | | | | | | | | | | 52,249 | | | 175.76 | | | 1,228,374 | |
| | | AIP | | | n/a | | | 881,193 | | | 14,052,500 | | | | | | | | | | | | | | | | | | | | | | |
Hak Cheol
Shin | | 17PS | | | 03/01/2017 | | | | | | | | | 1,261 | | | 6,303 | | | 12,606 | | | | | | | | | | | | 1,196,688 | |
| Option | | | 02/07/2017 | | | | | | | | | | | | | | | | | | | | | 50,921 | | | 175.76 | | | 1,197,153 | |
| | | AIP | | | n/a | | | 778,619 | | | 14,052,500 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Estimated Future
Payouts Under
Non-Equity
Incentive Plan
Awards(2) | | Estimated Future
Payouts Under
Equity
Incentive Plan
Awards(3) | | All
Other
Stock
Awards:
Number
of Shares
of Stock | | All
Other
Option
Awards:
Number of
Securities
Underlying | | Exercise
or Base
Price of
Option | | Grant
Date Fair
Value of
Stock and
Option |
| Name | | Type of
Grant(1) | | Grant
Date | | Target
($) | | Maximum
($) | | Threshold
(#) | | Target
(#) | | Maximum
(#) | | or Units
(#) | | Options
(#)(4) | | Awards
($/Sh)(5) | | Awards
($)(6) |
| Michael F. Roman | | 19PS | | 03/01/19 | | | | | | 4,820 | | 24,098 | | 48,196 | | | | | | | | 5,000,094 |
| | Option | | 02/05/19 | | | | | | | | | | | | | | 146,240 | | 201.12 | | 4,999,946 |
| | AIP | | n/a | | 2,040,051 | | 13,277,243 | | | | | | | | | | | | | | |
| Inge G. Thulin | | 19PS | | 03/01/19 | | | | | | 3,012 | | 15,061 | | 30,122 | | | | | | | | 3,125,007 |
| | Option | | 02/05/19 | | | | | | | | | | | | | | 45,686 | | 201.12 | | 1,562,023 |
| | AIP | | n/a | | 1,500,000 | | 13,277,243 | | | | | | | | | | | | | | |
| Nicholas C. Gangestad | | 19PS | | 03/01/19 | | | | | | 1,754 | | 8,772 | | 17,544 | | | | | | | | 1,820,102 |
| | Option | | 02/05/19 | | | | | | | | | | | | | | 53,232 | | 201.12 | | 1,820,002 |
| | AIP | | n/a | | 862,953 | | 13,277,243 | | | | | | | | | | | | | | |
| Ashish K. Khandpur | | 19PS | | 03/01/19 | | | | | | 1,685 | | 8,425 | | 16,850 | | | | | | | | 1,748,103 |
| | Option | | 02/05/19 | | | | | | | | | | | | | | 51,127 | | 201.12 | | 1,748,032 |
| | AIP | | n/a | | 581,003 | | 13,277,243 | | | | | | | | | | | | | | |
| Julie L. Bushman | | 19PS | | 03/01/19 | | | | | | 1,123 | | 5,617 | | 11,234 | | | | | | | | 1,165,471 |
| | Option | | 02/05/19 | | | | | | | | | | | | | | 34,085 | | 201.12 | | 1,165,366 |
| | AIP | | n/a | | 680,538 | | 13,277,243 | | | | | | | | | | | | | | |
| Joaquin Delgado | | 19PS | | 03/01/19 | | | | | | 562 | | 2,809 | | 5,618 | | | | | | | | 582,839 |
| | Option | | 02/05/19 | | | | | | | | | | | | | | 17,043 | | 201.12 | | 582,700 |
| | AIP | | n/a | | 593,007 | | 13,277,243 | | | | | | | | | | | | | | |
| Michael G. Vale | | 19PS | | 03/01/19 | | | | | | 1,093 | | 5,467 | | 10,934 | | | | | | | | 1,134,348 |
| | Option | | 02/05/19 | | | | | | | | | | | | | | 33,172 | | 201.12 | | 1,134,151 |
| | AIP | | n/a | | 626,632 | | 13,277,243 | | | | | | | | | | | | | | |
(1) Abbreviations for the Type of Grant: 17PS = 2017 performance shares; Option = stock options; RSU = restricted stock unit; AIP = annual incentive pay.
(2) The amounts shown as the Estimated Future Payouts Under Non-Equity Incentive Plan Awards reflect the target and maximum amounts that may be earned by each individual during 2017 under the Executive Annual Incentive Plan. This plan establishes a maximum amount of annual incentive compensation that may be earned by each covered executive during a plan year (established for purposes of complying with Section 162(m) of the Internal Revenue Code), which for each of the Named Executive Officers was one-quarter of one percent of the Company’s Adjusted Net Income for 2017, and then permits the Compensation Committee to pay each covered executive less than this maximum amount based on such factors as it deems relevant. Since the Executive Annual Incentive Plan was first adopted in 2007, the Compensation Committee has rarely used this discretion to pay a covered executive (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the Company’s broad-based Annual Incentive Plan. (For additional information, see “Annual Incentive” beginning on page 44 of this Proxy Statement).
(3) The amounts shown as the Estimated Future Payouts Under Equity Incentive Plan Awards with respect to 2017 performance shares reflect the threshold, target, and maximum number of shares of 3M common stock that may be earned by each individual as a result of the 2017 performance shares granted to each individual during 2017 under the 2016 Long-Term Incentive Plan. The actual number of shares of 3M common stock to be delivered as a result of these performance shares will be determined by the performance of the Company during the three-year performance period of 2017, 2018, and 2019, as measured against four performance criteria selected by the Compensation Committee (Relative Organic Volume Growth, Return on Invested Capital, Earnings Per Share Growth and Free Cash Flow Conversion). For more information on these performance criteria and the formulas for determining the number of shares of 3M common stock payable as a result of these performance shares, please refer to the “Long-Term Incentives — 2017 Annual Grants” beginning on page 51 of this Proxy Statement.
(4) The amounts shown as the All Other Option Awards reflect the number of shares of 3M common stock subject to nonqualified stock options granted to each individual during 2017 under the 2016 Long-Term Incentive Plan. The options granted on February 7, 2017, were part of the Company’s annual grant of stock options to the approximately 6,000 employees participating in the plan, and they vest in installments of one-third on each of the first three anniversaries of the grant date.
(5) The exercise price for all stock options granted under the Company’s 2016 Long-Term Incentive Plan is set at the closing price at which 3M common stock traded on the NYSE on the option grant date.
(6) The amounts in the Grant Date Fair Value of Stock and Option Awards column were determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures, and, in the case of performance share awards, are based upon the probable outcome of the applicable performance conditions at the time of grant. Assumptions made in the calculation of these amounts are included in Note 16 to the Company’s audited financial statements for the fiscal year ended December 31, 2017, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 8, 2018.
(7) The amount shown reflects the number of shares subject to a restricted stock unit award that may be earned by the holder. The restricted stock unit award will vest in two equal annual installments on each of December 1, 2020, and December 1, 2022, provided that the holder remains in employment with 3M through such date. For more information on these awards, see “Special Retention Grants” on page 54 of this Proxy Statement.
60(1) | |Abbreviations: 19PS = 2019 performance shares; Option = stock options; AIP = annual incentive pay. |
| (2) | The amounts shown as the Estimated Future Payouts Under Non-Equity Incentive Plan Awards reflect the target and maximum amounts that may be earned by each individual during 2019 under the Executive Annual Incentive Plan. This plan establishes a maximum amount of annual incentive compensation that may be earned by each covered executive during a plan year (initially established with the intent of complying with performance-based compensation exception of Section 162(m) of the Internal Revenue Code and similar state laws), which for each of the Named Executive Officers was one-quarter of one percent of the Company’s Adjusted Net Income for 2019, and then permits the Compensation Committee to pay each covered executive less than this maximum amount based on such factors as it deems relevant. Since the Executive Annual Incentive Plan was first adopted in 2007, the Compensation Committee has rarely used this discretion to pay a covered executive (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the Company’s broad-based Annual Incentive Plan. (For additional information, see “Annual Incentive” beginning on page 59 of this Proxy Statement). |
| (3) | The amounts shown as the Estimated Future Payouts Under Equity Incentive Plan Awards with respect to 2019 performance shares reflect the threshold, target, and maximum number of shares of 3M common stock (disregarding dividend equivalents) that may be earned by each individual as a result of the 2019 performance shares granted under the 2016 Long-Term Incentive Plan. The actual number of shares of 3M common stock to be delivered as a result of these performance shares will be determined by the performance of the Company during the three-year performance period of 2019, 2020, and 2021, as measured against four performance criteria selected by the Compensation Committee (Relative Organic Volume Growth, Return on Invested Capital, Earnings per Share Growth and Free Cash Flow Conversion). For more information on these performance criteria and the formulas for determining the number of shares of 3M common stock payable as a result of these performance shares, please refer to the “Long-term incentives — 2019 annual grants” beginning on page 67 of this Proxy Statement. |
| (4) | The amounts shown as the All Other Option Awards reflect the number of shares of 3M common stock subject to nonqualified stock options granted to each individual during 2019 under the 2016 Long-Term Incentive Plan. The options granted on February 5, 2019, were part of the Company’s annual equity grants made to approximately 6,000 employees, and they vest in installments of one-third on each of the first three anniversaries of the grant date. |
Table of Contents
| (5) | The exercise price for all stock options granted under the Company’s 2016 Long-Term Incentive Plan is set at the closing price at which 3M common stock traded on the NYSE on the option grant date. |
| (6) | The amounts in the Grant Date Fair Value of Stock and Option Awards column were determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures, and, in the case of performance share awards, are based upon the probable outcome of the applicable performance conditions at the time of grant. Assumptions made in the calculation of these amounts are included in Note 18 to the Company’s audited financial statements for the fiscal year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020. |
2017 Outstanding Equity Awards2019 outstanding equity awards at Fiscal Year-End Tablefiscal year-end table
| | | OPTION AWARDS | | STOCK AWARDS |
| NAME | | NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS (#)
EXERCISABLE | | NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS (#)
UNEXERCISABLE | | OPTION
EXERCISE
PRICE
($) | | OPTION
EXPIRATION
DATE | | NUMBER
OF
SHARES OR
UNITS OF
STOCK
THAT HAVE
NOT
VESTED (#) | | MARKET
VALUE
OF SHARES
OR UNITS OF
STOCK THAT
HAVE NOT
VESTED
($)(1) | | EQUITY
INCENTIVE
PLAN
AWARDS:
NUMBER OF
UNEARNED
SHARES, UNITS
OR OTHER
RIGHTS THAT
HAVE NOT
VESTED (#) | | EQUITY
INCENTIVE PLAN
AWARDS:
MARKET OR
PAYOUT VALUE
OF UNEARNED
SHARES, UNITS
OR OTHER
RIGHTS THAT
HAVE NOT
VESTED
($)(1) |
| Inge G. Thulin | | | | | | | | | | | | | | 68,928(7) | | 16,223,583 |
| | | | | | | | | | | | | | | 63,206(8) | | 14,876,796 |
| | | 59,584 | | 0 | | 54.11 | | 02/08/2019 | | | | | | | | |
| | | 50,166 | | 0 | | 78.72 | | 02/07/2020 | | | | | | | | |
| | | 43,560 | | 0 | | 89.47 | | 02/08/2021 | | | | | | | | |
| | | 204,804 | | 0 | | 87.89 | | 02/07/2022 | | | | | | | | |
| | | 204,950 | | 0 | | 101.49 | | 02/03/2023 | | | | | | | | |
| | | 206,168 | | 0 | | 126.72 | | 02/02/2024 | | | | | | | | |
| | | 152,909 | | 76,455(2) | | 165.94 | | 02/03/2025 | | | | | | | | |
| | | 81,705 | | 163,411(3) | | 147.87 | | 02/02/2026 | | | | | | | | |
| | | — | | 255,329(4) | | 175.76 | | 02/06/2027 | | | | | | | | |
| Nicholas C. | | | | | | | | | | | | | | 19,576(7) | | 4,607,603 |
| Gangestad | | | | | | | | | | | | | | 19,372(8) | | 4,559,588 |
| | | 3,362 | | 0 | | 78.72 | | 02/07/2020 | | | | | | | | |
| | | 3,092 | | 0 | | 89.47 | | 02/08/2021 | | | | | | | | |
| | | 6,219 | | 0 | | 87.89 | | 02/07/2022 | | | | | | | | |
| | | 6,505 | | 0 | | 101.49 | | 02/03/2023 | | | | | | | | |
| | | 9,592 | | 0 | | 126.72 | | 02/02/2024 | | | | | | | | |
| | | 41,007 | | 20,505(2) | | 165.94 | | 02/03/2025 | | | | | | | | |
| | | 23,203 | | 46,408(3) | | 147.87 | | 02/02/2026 | | | | | | | | |
| | | | | 78,252(4) | | 175.76 | | 02/06/2027 | | | | | | | | |
| | | | | | | | | | | 6,221(5) | | 1,464,237 | | | | |
| Frank R. Little | | | | | | | | | | | | | | 12,848(7) | | 3,024,034 |
| | | | | | | | | | | | | | | 15,346(8) | | 3,611,988 |
| | | 2,146 | | 0 | | 89.47 | | 02/08/2021 | | | | | | | | |
| | | 8,332 | | 0 | | 87.89 | | 02/07/2022 | | | | | | | | |
| | | 9,795 | | 0 | | 101.49 | | 02/03/2023 | | | | | | | | |
| | | 30,690 | | 0 | | 126.72 | | 02/02/2024 | | | | | | | | |
| | | 25,853 | | 12,927(2) | | 165.94 | | 02/03/2025 | | | | | | | | |
| | | 15,229 | | 30,460(3) | | 147.87 | | 02/02/2026 | | | | | | | | |
| | | — | | 61,990(4) | | 175.76 | | 02/06/2027 | | | | | | | | |
| | | | | | | | | | | 4,977(5) | | 1,171,436 | | | | |
| | | Option Awards | | Stock Awards |
| Name | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | Option
Exercise
Price
($) | | Option
Expiration
Date | | Number
of Shares
or Units
of Stock
That
Have
Not
Vested
(#) | | Market
Value
of Shares
or Units of
Stock That
Have Not
Vested
($)(1) | | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested (#) | | Equity
Incentive
Plan
Awards:
Market or
Payout
Value
of Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested
($)(1) |
| Michael F. Roman | | | | | | | | | | | | | | 10,202(7) | | 1,799,837 |
| | | | | | | | | | | | | | | 6,394(7) | | 1,128,029 |
| | | | | | | | | | | | | | | 24,098(8) | | 4,251,369 |
| | | 8,906 | | | | 78.72 | | 02/07/20 | | | | | | | | |
| | | 10,067 | | | | 89.47 | | 02/08/21 | | | | | | | | |
| | | 9,747 | | | | 87.89 | | 02/07/22 | | | | | | | | |
| | | 10,610 | | | | 101.49 | | 02/03/23 | | | | | | | | |
| | | 25,867 | | | | 126.72 | | 02/02/24 | | | | | | | | |
| | | 39,846 | | | | 165.94 | | 02/03/25 | | | | | | | | |
| | | 48,206 | | | | 147.87 | | 02/02/26 | | | | | | | | |
| | | 34,832 | | 17,417(2) | | 175.76 | | 02/06/27 | | | | | | | | |
| | | 18,916 | | 37,834(3) | | 233.63 | | 02/04/28 | | | | | | | | |
| | | 12,094 | | 24,190(4) | | 195.52 | | 07/01/28 | | | | | | | | |
| | | | | 146,240(5) | | 201.12 | | 02/04/29 | | | | | | | | |
| Inge G. Thulin | | | | | | | | | | | | | | 12,968(7) | | 2,287,815 |
| | | | | | | | | | | | | | | 3,836(7) | | 676,747 |
| | | | | | | | | | | | | | | 7,531(8) | | 1,328,619 |
| | | 204,950 | | | | 101.49 | | 02/03/23 | | | | | | | | |
| | | 206,168 | | | | 126.72 | | 02/02/24 | | | | | | | | |
| | | 229,364 | | | | 165.94 | | 02/03/25 | | | | | | | | |
| | | 245,116 | | | | 147.87 | | 02/02/26 | | | | | | | | |
| | | 170,219 | | 85,110(2) | | 175.76 | | 02/06/27 | | | | | | | | |
| | | 48,092 | | 96,187(3) | | 233.63 | | 02/04/28 | | | | | | | | |
| | | — | | 45,686(5) | | 201.12 | | 02/04/29 | | | | | | | | |
20182020 Proxy Statement | | 6177 |
Table of Contents
| | | Option Awards | | Stock Awards |
| Name | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | Option
Exercise
Price
($) | | Option
Expiration
Date | | Number
of Shares
or Units
of Stock
That
Have
Not
Vested
(#) | | Market
Value
of Shares
or Units of
Stock That
Have Not
Vested
($)(1) | | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested (#) | | Equity
Incentive
Plan
Awards:
Market or
Payout
Value
of Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested
($)(1) |
| Nicholas C. Gangestad | | | | | | | | | | | | | | 10,101(7) | | 1,782,018 |
| | | | | | | | | | | | | | | 8,772(8) | | 1,547,556 |
| | | 3,092 | | | | 89.47 | | 02/08/21 | | | | | | | | |
| | | 6,219 | | | | 87.89 | | 02/07/22 | | | | | | | | |
| | | 6,505 | | | | 101.49 | | 02/03/23 | | | | | | | | |
| | | 9,592 | | | | 126.72 | | 02/02/24 | | | | | | | | |
| | | 61,512 | | | | 165.94 | | 02/03/25 | | | | | | | | |
| | | 69,611 | | | | 147.87 | | 02/02/26 | | | | | | | | |
| | | 52,167 | | 26,085(2) | | 175.76 | | 02/06/27 | | | | | | | | |
| | | 18,730 | | 37,461(3) | | 233.63 | | 02/04/28 | | | | | | | | |
| | | | | 53,232(5) | | 201.12 | | 02/04/29 | | | | | | | | |
| | | | | | | | | | | 6,221(6) | | 1,097,509 | | | | |
| Ashish K. Khandpur | | | | | | | | | | | | | | 4,903(7) | | 864,987 |
| | | | | | | | | | | | | | | 8,425(8) | | 1,486,339 |
| | | 3,605 | | | | 89.47 | | 02/08/21 | | | | | | | | |
| | | 5,760 | | | | 87.89 | | 02/07/22 | | | | | | | | |
| | | 6,505 | | | | 101.49 | | 02/03/23 | | | | | | | | |
| | | 7,838 | | | | 126.72 | | 02/02/24 | | | | | | | | |
| | | 25,445 | | | | 165.94 | | 02/03/25 | | | | | | | | |
| | | 29,392 | | | | 147.87 | | 02/02/26 | | | | | | | | |
| | | 19,868 | | 9,935(2) | | 175.76 | | 02/06/27 | | | | | | | | |
| | | 9,090 | | 18,183(3) | | 233.63 | | 02/04/28 | | | | | | | | |
| | | | | 51,127(5) | | 201.12 | | 02/04/29 | | | | | | | | |
| Julie L. Bushman | | | | | | | | | | | | | | 6,297(7) | | 1,110,917 |
| | | | | | | | | | | | | | | 5,617(8) | | 990,951 |
| | | 9,000 | | | | 89.47 | | 02/08/21 | | | | | | | | |
| | | 30,875 | | | | 87.89 | | 02/07/22 | | | | | | | | |
| | | 24,650 | | | | 101.49 | | 02/03/23 | | | | | | | | |
| | | 40,535 | | | | 126.72 | | 02/02/24 | | | | | | | | |
| | | 37,514 | | | | 165.94 | | 02/03/25 | | | | | | | | |
| | | 41,181 | | | | 147.87 | | 02/02/26 | | | | | | | | |
| | | 26,211 | | 13,107(2) | | 175.76 | | 02/06/27 | | | | | | | | |
| | | 11,676 | | 23,353(3) | | 233.63 | | 02/04/28 | | | | | | | | |
| | | | | 34,085(5) | | 201.12 | | 02/04/29 | | | | | | | | |
| | | OPTION AWARDS | | STOCK AWARDS |
| NAME | | NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS (#)
EXERCISABLE | | NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS (#)
UNEXERCISABLE | | OPTION
EXERCISE
PRICE
($) | | OPTION
EXPIRATION
DATE | | NUMBER
OF
SHARES OR
UNITS OF
STOCK
THAT HAVE
NOT
VESTED (#) | | MARKET
VALUE
OF SHARES
OR UNITS OF
STOCK THAT
HAVE NOT
VESTED
($)(1) | | EQUITY
INCENTIVE
PLAN
AWARDS:
NUMBER OF
UNEARNED
SHARES, UNITS
OR OTHER
RIGHTS THAT
HAVE NOT
VESTED (#) | | EQUITY
INCENTIVE PLAN
AWARDS:
MARKET OR
PAYOUT VALUE
OF UNEARNED
SHARES, UNITS
OR OTHER
RIGHTS THAT
HAVE NOT
VESTED
($)(1) |
| Michael F. Roman | | | | | | | | | | | | | | 13,556(7) | | 3,190,676 |
| | | | | | | | | | | | | | | 12,934(8) | | 3,044,276 |
| | | 6,604 | | 0 | | 77.18 | | 05/13/2018 | | | | | | | | |
| | | 4,944 | | 0 | | 54.11 | | 02/08/2019 | | | | | | | | |
| | | 8,906 | | 0 | | 78.72 | | 02/07/2020 | | | | | | | | |
| | | 10,067 | | 0 | | 89.47 | | 02/08/2021 | | | | | | | | |
| | | 9,747 | | 0 | | 87.89 | | 02/07/2022 | | | | | | | | |
| | | 10,610 | | 0 | | 101.49 | | 02/03/2023 | | | | | | | | |
| | | 25,867 | | 0 | | 126.72 | | 02/02/2024 | | | | | | | | |
| | | 26,563 | | 13,283(2) | | 165.94 | | 02/03/2025 | | | | | | | | |
| | | 16,068 | | 32,138(3) | | 147.87 | | 02/02/2026 | | | | | | | | |
| | | — | | 52,249(4) | | 175.76 | | 02/06/2027 | | | | | | | | |
| | | | | | | | | | | 12,646(6) | | 2,976,489 | | | | |
| Hak Cheol Shin | | | | | | | | | | | | | | 13,202(7) | | 3,107,355 |
| | | | | | | | | | | | | | | 12,606(8) | | 2,967,074 |
| | | 58,772 | | 0 | | 54.11 | | 02/08/2019 | | | | | | | | |
| | | 57,587 | | 0 | | 78.72 | | 02/07/2020 | | | | | | | | |
| | | 49,595 | | 0 | | 89.47 | | 02/08/2021 | | | | | | | | |
| | | 46,314 | | 0 | | 87.89 | | 02/07/2022 | | | | | | | | |
| | | 38,450 | | 0 | | 101.49 | | 02/03/2023 | | | | | | | | |
| | | 32,428 | | 0 | | 126.72 | | 02/02/2024 | | | | | | | | |
| | | 26,563 | | 13,283(2) | | 165.94 | | 02/03/2025 | | | | | | | | |
| | | 15,649 | | 31,299(3) | | 147.87 | | 02/02/2026 | | | | | | | | |
| | | — | | 50,921(4) | | 175.76 | | 02/06/2027 | | | | | | | | |
| | | | | | | | | | | 12,646(6) | | 2,976,489 | | | | |
Table of Contents
| | | Option Awards | | Stock Awards |
| Name | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | Option
Exercise
Price
($) | | Option
Expiration
Date | | Number
of Shares
or Units
of Stock
That
Have
Not
Vested
(#) | | Market
Value
of Shares
or Units of
Stock That
Have Not
Vested
($)(1) | | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested (#) | | Equity
Incentive
Plan
Awards:
Market or
Payout
Value
of Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested
($)(1) |
| Joaquin Delgado | | | | | | | | | | | | | | 4,903(7) | | 864,987 |
| | | | | | | | | | | | | | | 1,405(8) | | 247,870 |
| | | 36,126 | | | | 87.89 | | 02/07/22 | | | | | | | | |
| | | 35,490 | | | | 101.49 | | 02/03/23 | | | | | | | | |
| | | 32,428 | | | | 126.72 | | 02/02/24 | | | | | | | | |
| | | 48,489 | | | | 165.94 | | 02/03/25 | | | | | | | | |
| | | 57,136 | | | | 147.87 | | 02/02/26 | | | | | | | | |
| | | 32,175 | | 16,089(2) | | 175.76 | | 02/06/27 | | | | | | | | |
| | | 9,090 | | 18,183(3) | | 233.63 | | 02/04/28 | | | | | | | | |
| | | | | 17,043(5) | | 201.12 | | 02/04/29 | | | | | | | | |
| Michael G. Vale | | | | | | | | | | | | | | 4,903(7) | | 864,987 |
| | | | | | | | | | | | | | | 5,467(8) | | 964,488 |
| | | 7,812 | | | | 89.47 | | 02/08/21 | | | | | | | | |
| | | 30,875 | | | | 87.89 | | 02/07/22 | | | | | | | | |
| | | 43,705 | | | | 101.49 | | 02/03/23 | | | | | | | | |
| | | 31,559 | | | | 126.72 | | 02/02/24 | | | | | | | | |
| | | 49,804 | | | | 165.94 | | 02/03/25 | | | | | | | | |
| | | 58,684 | | | | 147.87 | | 02/02/26 | | | | | | | | |
| | | 33,061 | | 16,531(2) | | 175.76 | | 02/06/27 | | | | | | | | |
| | | 9,090 | | 18,183(3) | | 233.63 | | 02/04/28 | | | | | | | | |
| | | | | 33,172(5) | | 201.12 | | 02/04/29 | | | | | | | | |
FOOTNOTES TO 20172019 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
(1) The market value of performance shares or RSUs that have not vested was determined by multiplying the closing price of a share of 3M common stock on the NYSE for December 29, 2017 ($235.37), by the number of performance shares or RSUs shown, respectively.
(2) These stock options vested in full on February 3, 2018.
(3) These stock options vested or will vest in installments of one-half on February 2, 2018, and February 2, 2019.
(4) These stock options vested or will vest in installments of one-third on each of February 6, 2018, February 6, 2019, and February 6, 2020.
(5) These restricted stock units will vest in installments of one-half on December 1, 2020, and December 1, 2022, provided that the holder remains in employment with 3M through such date.
(6) These restricted stock units will vest in full on December 1, 2019, provided that the holder remains in employment with 3M through such date.
(7) The shares of 3M common stock to be delivered as a result of the Company’s performance over the three-year performance period ending December 31, 2018, will not vest until December 31, 2018. Under the terms of the awards, these shares of 3M common stock will be delivered no later than March 15, 2019, unless deferred by the executive. In accordance with the Securities and Exchange Commission’s regulations, the number of shares and payout value for these performance shares reflect the maximum payout under the formula for this grant since the Company’s performance during the first two years of the three-year performance period exceeded the target levels for this grant.
(8) The shares of 3M common stock to be delivered as a result of the Company’s performance over the three-year performance period ending December 31, 2019, will not vest until December 31, 2019. Under the terms of the 2016 Long-Term Incentive Plan and the applicable award agreement, these shares of 3M common stock will be delivered no later than March 15, 2020, unless deferred by the executive. In accordance with the Securities and Exchange Commission’s regulations, the number of shares and payout value for these performance shares reflect the maximum payout under the formula for this grant since the Company’s performance during the first year of the three-year performance period exceeded the target levels for this grant.
| (1) | The market value of performance shares or RSUs that have not vested was determined by multiplying the closing price of a share of 3M common stock on the NYSE for December 31, 2019 ($176.42), by the number of performance shares or RSUs shown, respectively. |
| (2) | These stock options vested in full on February 7, 2020. |
| (3) | These stock options vested or will vest in installments of one-half on February 6, 2020, and February 6, 2021. |
| (4) | These stock options will vest in installments of one-half on July 1, 2020, and July 1, 2021. |
| (5) | These stock options vested or will vest in installments of one-third on each of February 5, 2020, February 5, 2021, and February 5, 2022. |
| (6) | These restricted stock units will vest in installments of one-half on December 1, 2020, and December 1, 2022, provided that the holder remains in employment with 3M through such date. |
| (7) | The shares of 3M common stock to be delivered as a result of the Company’s performance over the three-year performance period ending December 31, 2020, will not vest until December 31, 2020. Under the terms of the awards, these shares of 3M common stock will be delivered no later than March 15, 2021, unless deferred by the executive. In accordance with the Securities and Exchange Commission’s regulations, the number of shares and payout value for these performance shares reflect the target payout under the formula for this grant since the Company’s performance during the first two years of the three-year performance period exceeded the threshold levels for this grant. |
| (8) | The shares of 3M common stock to be delivered as a result of the Company’s performance over the three-year performance period ending December 31, 2021, will not vest until December 31, 2021. Under the terms of the awards, these shares of 3M common stock will be delivered no later than March 15, 2022, unless deferred by the executive. In accordance with the Securities and Exchange Commission’s regulations, the number of shares and payout value for these performance shares reflect the target payout under the formula for this grant since the Company’s performance during the first year of the three-year performance period has exceeded the threshold levels for this grant. |
622020 Proxy Statement | | 3M79 |
Table of Contents2017 Option Exercises
2019 option exercises and Stock Vested Tablestock vested table
| | | OPTION EXERCISES AND STOCK VESTED | |
| | | | |
| | | OPTION AWARDS | | STOCK AWARDS | |
| | | | | | |
| NAME | | NUMBER OF SHARES
ACQUIRED ON
EXERCISE (#) | | VALUE REALIZED
ON EXERCISE
($)(1) | | NUMBER OF SHARES
ACQUIRED ON
VESTING (#) | | VALUE REALIZED
ON VESTING
($)(2) | |
| Inge G. Thulin | | | 50,792 | (3) | | | 5,092,761 | | | | 34,218 | (6) | | | 8,053,817 | | |
| Nicholas C. Gangestad | | | 6,892 | (4) | | | 1,020,352 | | | | 9,178 | (7) | | | 2,160,263 | | |
| Frank R. Little | | | — | | | | — | | | | 9,518 | (8) | | | 2,124,495 | | |
| Michael F. Roman | | | — | | | | — | | | | 5,944 | (9) | | | 1,398,999 | | |
| Hak Cheol Shin | | | 47,528 | (5) | | | 4,737,330 | | | | 5,944 | (10) | | | 1,398,999 | | |
| | | Option Exercises and Stock Vested |
| | | Option Awards | | Stock Awards |
| Name | | Number of
Shares
Acquired on
Exercise (#) | | Value
Realized
on Exercise
($)(1) | | Number of
Shares
Acquired on
Vesting (#) | | Value
Realized
on Vesting
($)(2) |
| Michael F. Roman | | 4,944(3) | | 719,550 | | 21,052(10) | | 3,629,898 |
| Inge G. Thulin | | 298,530(4) | | 26,270,916 | | 41,081(11) | | 7,247,510 |
| Nicholas C. Gangestad | | 1,681(5) | | 205,819 | | 12,591(12) | | 2,221,304 |
| Ashish K. Khandpur | | 3,362(6) | | 320,995 | | 4,795(13) | | 845,934 |
| Julie L. Bushman | | 13,172(7) | | 1,592,596 | | 18,972(14) | | 3,262,944 |
| Joaquin Delgado | | 63,560(8) | | 6,241,164 | | 7,766(15) | | 1,370,078 |
| Michael G. Vale | | 8,906(9) | | 1,073,838 | | 20,625(16) | | 3,554,566 |
FOOTNOTES TO 20172019 OPTION EXERCISES AND STOCK VESTED TABLE
(1) The amounts shown as Value Realized on Exercise were determined by multiplying the number of shares acquired on exercise by the difference between the closing price of a share of 3M common stock on the NYSE for the exercise date and the per share exercise price of the options.
(2) The amounts shown as Value Realized on Vesting were determined by multiplying the number of shares acquired on vesting by the closing price of a share of 3M common stock on the NYSE for the vesting date.
(3) | (1) | The amounts shown as Value Realized on Exercise were determined by multiplying the number of shares acquired on exercise by the difference between the closing price of a share of 3M common stock on the NYSE for the exercise date and the per share exercise price of the options. |
| |
| (2) | The amounts shown as Value Realized on Vesting were determined by multiplying the number of shares acquired on vesting by the closing price of a share of 3M common stock on the NYSE for the vesting date. |
| |
| (3) | The stock options exercised by Mr. Roman were granted on February 9, 2009, and had an exercise price of $54.11 per share. |
| |
| (4) | The stock options exercised by Mr. Thulin were granted on February 9, 2010, February 8, 2011 and February 7, 2012, and had an exercise price between $78.72 and $89.47 per share. |
| |
| (5) | The stock options exercised by Mr. Gangestad were granted on February 9, 2010, and had an exercise price of $78.72 per share. |
| |
| (6) | The stock options exercised by Mr. Khandpur were granted on February 9, 2010, and had an exercise price of $78.72 per share. |
| |
| (7) | The stock options exercised by Ms. Bushman were granted on February 9, 2010, and had an exercise price of $78.72 per share. |
| |
| (8) | The stock options exercised by Dr. Delgado were granted on February 9, 2010, and February 8, 2011, and had an exercise price between $78.72 and $89.47 per share. |
| |
| (9) | The stock options exercised by Mr. Vale were granted on February 9, 2010, and had an exercise price of $78.72 per share. |
| |
| (10) | Reflects the number of shares earned by Mr. Roman upon the vesting of restricted stock units and performance shares granted to him under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. Of this total number of shares, 12,646 were attributable to restricted stock units granted on December 1, 2014, and 8,406 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. Mr. Roman previously elected to defer receipt of all of the shares issuable pursuant to his 2017 performance shares until following his termination of employment. |
| |
| (11) | Reflects the number of shares earned by Mr. Thulin upon the vesting of performance shares granted to him under the 2016 Long-Term Incentive Plan. All 41,081 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. Mr. Thulin previously elected to defer receipt of all of these shares until following his termination of employment. |
| |
| (12) | Reflects the number of shares earned by Mr. Gangestad upon the vesting of performance shares granted to him under the 2016 Long-Term Incentive Plan. All 12,591 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. |
| |
| (13) | Reflects the number of shares earned by Mr. Khandpur upon the vesting of performance shares granted to him under the 2016 Long-Term Incentive Plan. All 4,795 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. Mr. Khandpur previously elected to defer receipt of all of these shares until following his termination of employment. |
| |
| (14) | Reflects the number of shares earned by Ms. Bushman upon the vesting of restricted stock units and performance shares granted to her under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. Of this total number of shares, 12,646 were attributable to restricted stock units granted on December 1, 2014, and 6,326 of these shares were attributable to her 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. |
| |
| (15) | Reflects the number of shares earned by Dr. Delgado upon the vesting of performance shares granted to him under the 2016 Long-Term Incentive Plan. All 7,766 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. |
| |
| (16) | Reflects the number of shares earned by Mr. Vale upon the vesting of restricted stock units and performance shares granted to him under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. Of this total number of shares, 12,646 |
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were attributable to restricted stock units granted on May 13, 2008,December 1, 2014, and had an exercise price of $77.18 per share.
(4) The stock options exercised by Mr. Gangestad were granted on May 13, 2008, and February 9, 2009, and had exercise prices between $54.11 and $77.18 per share.
(5) The stock options exercised by Mr. Shin were granted on May 13, 2008, and had an exercise price of $77.18 per share.
(6) Reflects the number of shares earned by Mr. Thulin upon the vesting of performance shares granted to him under the 2008 Long-Term Incentive Plan. All 34,2187,979 of these shares were attributable to his 20152017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2017.2019. Mr. ThulinVale previously elected to defer receipt of all of thesethe shares issuable pursuant to his 2017 performance shares until following his termination of employment.
(7) Reflects the number of shares earned by Mr. Gangestad upon the vesting of performance shares granted to him under the 2008 Long-Term Incentive Plan. All 9,178 of these shares were attributable to his 2015 performance shares for which the three-year performance period was completed on December 31, 2017. Mr. Gangestad previously elected to defer receipt of 25 percent of these shares until following his termination of employment.
(8) These shares were acquired by Mr. Little upon the vesting of restricted stock units and performance shares granted to him under the 2008 Long-Term Incentive Plan. Of this total number of shares, 3,733 were attributable to restricted stock units granted on June 1, 2012, and 5,785 were attributable to his 2015 performance shares for which the three-year performance period was completed on December 31, 2017.
(9) Reflects the number of shares earned by Mr. Roman upon the vesting of performance shares granted to him under the 2008 Long-Term Incentive Plan. All 5,944 of these shares were attributable to his 2015 performance shares for which the three-year performance period was completed on December 31, 2017. Mr. Roman previously elected to defer receipt of all of these shares until following his termination of employment.
(10) Reflects the number of shares earned by Mr. Shin upon the vesting of performance shares granted to him under the 2008 Long-Term Incentive Plan. All 5,944 of these shares were attributable to his 2015 performance shares for which the three-year performance period was completed on December 31, 2017.
Pension Benefitsbenefits
The following table shows the present value of the accumulated benefits payable to each of the Named Executive Officers, as well as the number of years of service credited to each individual, under each of the Company’s defined benefit pension plans determined using the same interest rate and mortality assumptions as those used for financial statement reporting purposes. See Note 1213 to the Company’s audited financial statements for the fiscal year ended December 31, 2017,2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 8, 2018.6, 2020.
2019 PENSION BENEFITS TABLE
| Name | | Plan Name | | Number
of Years
Credited
Service
(#) | | Present
Value of
Accumulated
Benefits
($) | | Payments
During
Last Fiscal
Year
($) |
| Michael F. Roman | | Employee Retirement Income Plan | | 31 | | 1,839,130 | | — |
| | | Nonqualified Pension Plan | | 31 | | 14,282,279 | | — |
| Inge G. Thulin | | Employee Retirement Income Plan | | 40 | | 2,019,001* | | 71,293 |
| | | Nonqualified Pension Plan | | 40 | | — | | 28,680,254 |
| Nicholas C. Gangestad | | Employee Retirement Income Plan | | 35 | | 1,683,480 | | — |
| | | Nonqualified Pension Plan | | 35 | | 8,390,844 | | — |
| Ashish K. Khandpur | | Employee Retirement Income Plan | | 25 | | 1,095,946 | | — |
| | | Nonqualified Pension Plan | | 25 | | 3,427,582 | | — |
| Julie L. Bushman | | Employee Retirement Income Plan | | 36 | | 1,942,755 | | — |
| | | Nonqualified Pension Plan | | 36 | | 8,231,838 | | — |
| Joaquin Delgado | | Employee Retirement Income Plan | | 32 | | 1,710,547** | | 51,145 |
| | | Nonqualified Pension Plan | | 32 | | 6,676,594 | | — |
| Michael G. Vale | | Employee Retirement Income Plan | | 27 | | 1,234,502 | | — |
| | | Nonqualified Pension Plan | | 27 | | 4,683,307 | | — |
2018 Proxy Statement | * | 63Mr. Thulin commenced payment of his benefits under the specified plan during 2019. As a result, the amounts shown were determined based on his final benefit amount (after adjustment to reflect the pension benefits he earned during his employment in Sweden before his transfer to the United States) and the payment form selected. |
Table** | Dr. Delgado commenced payment of Contents | his benefits under the specified plan during 2019. As a result, the amounts shown were determined based on his final benefit amount and the payment form selected. |
2017 Pension Benefits Table
| NAME | | PLAN NAME | | NUMBER
OF YEARS
CREDITED
SERVICE (#) | | PRESENT
VALUE OF
ACCUMULATED
BENEFITS
($) | | PAYMENTS
DURING
LAST FISCAL
YEAR
($) |
| Inge G. Thulin | | Employee Retirement Income Plan | | 38 | | | 2,040,129 | * | | 0 |
| | | Nonqualified Pension Plan | | 38 | | | 26,357,843 | | | 0 |
| Nicholas C. Gangestad | | Employee Retirement Income Plan | | 32 | | | 1,338,956 | | | 0 |
| | | Nonqualified Pension Plan | | 32 | | | 4,862,886 | | | 0 |
| Frank R. Little | | Employee Retirement Income Plan | | 15 | | | 758,811 | | | 0 |
| | | Nonqualified Pension Plan | | 15 | | | 2,317,812 | | | 0 |
| Michael F. Roman | | Employee Retirement Income Plan | | 29 | | | 1,486,146 | | | 0 |
| | | Nonqualified Pension Plan | | 29 | | | 5,972,015 | | | 0 |
| Hak Cheol Shin | | Employee Retirement Income Plan | | 33 | | | 1,836,599 | | | 0 |
| | | Nonqualified Pension Plan | | 33 | | | 9,829,655 | | | 0 |
* A portion of Mr. Thulin’s benefits will actually be paid by a pension plan maintained by the Company’s subsidiary in Sweden (based on the years he was employed in Sweden before transferring to the United States), and the amount paid by this plan in Sweden will reduce the amount paid by the Employee Retirement Income Plan.
The Employee Retirement Income Plan (“ERIP”) is a tax-qualified defined benefit pension plan maintained by 3M for its eligible employees in the United States. Effective January 1, 2001, the Company amended the ERIP to include a pension equity formula for (1) employees hired or rehired on or after January 1, 2001, and (2) employees who voluntarily elected the pension equity formula during the one-time choice election period in 2001. The ERIP was closed to new participants effective January 1, 2009, meaning that employees hired or rehired on or after January 1, 2009, do not participate in the plan. Of the Named Executive Officers, Mr. Roman, Mr. Thulin, Mr. Gangestad, Mr. Roman,Khandpur, Ms. Bushman and Mr. ShinDr. Delgado participate under the non-pension equity formula of the ERIP (the Portfolio I Plan), while Mr. LittleVale participates under the pension equity formula of the ERIP (the Portfolio II Plan). Retirement benefits under the ERIP are based on an employee’s years of service and average annual earnings during the employee’s four highest-paid consecutive years of service. As applied to the Named Executive Officers, earnings for purposes of the ERIP include base salary and target annual incentive compensation. All benefits earned under the ERIP by the Named Executive Officers will be payable in the form of life annuities, unless an individual elects at the time their employment ends to receive the entire amount of his or her earned pension benefits in the form of a single lump-sum cash payment.
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Under the Portfolio I Plan, employees earn annual benefits payable at retirement generally equal to 1.15 percent of their high-four average annual earnings multiplied by their years of service plus 0.35 percent of their high-four average annual earnings in excess of a Social Security breakpoint multiplied by their years of service (up to a maximum of 35 years). The Social Security breakpoint is an average of the Social Security taxable wage bases for each of the 35 years ending with the year each employee qualifies for receiving unreduced Social Security retirement benefits. Under the Portfolio I Plan, an employee may retire with an unreduced pension at age 60 (61 or 62 for employees born after 1942 and 1959, respectively). If the employee’s age and service at the time of retirement total at least 90 (91 or 92 for employees born after 1942 and 1959, respectively) the employee also would receive a Social Security bridge payment until age 62. Mr. Thulin is eligible to retire withcurrently receives unreduced earlyretirement benefits, and Dr. Delgado currently receives reduced retirement benefits. As of March 13, 2018,2020, each of Mr. Roman, Mr. Gangestad, and Mr. ShinMs. Bushman is eligible to retire with reduced early retirement benefits, with the reduction being equal to 5 percent of the pension otherwise payable for each year that hesuch executive retires prior to age 61.61 (age 62 for Mr. Gangestad and Ms. Bushman).
Under the Portfolio II Plan, employees earn pension credits (from 3 percent to 12 percent) for each year of employment based on their age and accumulated years of service under the plan. Once their employment ends, these accumulated pension credits are multiplied by their high-four average annual earnings and added to an amount determined by multiplying one-half of these accumulated pension credits by their high-four average annual earnings in excess of a Social Security integration level (70 percent of the Social Security taxable wage base in the year employment ends). The sum of these two amounts is then converted into an annuity payable over the lifetime of the employee using fixed conversion factors. The Portfolio II Plan does not provide any subsidies for early retirement.
As a tax-qualified plan, the ERIP is subject to a variety of limits that apply to both the amount of any employee’s earnings that may be considered when determining the benefits earned under the plan as well as the maximum amount of benefits that any employee may earn. The Nonqualified Pension Plan is designed to provide additional benefits to employees, including the Named Executive Officers, affected by these limits. The amount
of benefits earned under this Nonqualified Pension Plan generally equals the amount of benefits an employee was not able to earn under the ERIP as a result of the limits imposed by Federal tax laws. The benefits earned under this Nonqualified Pension Plan are generally paid in the form of a single lump-sum cash payment following the termination of their employment (subject to any applicable delay under Federal tax laws). Current employees were given a one-time opportunity during 2008 to elect to receive their benefits earned under this Nonqualified Pension Plan in the form of a life annuity following their retirement, and Mr. Shinnone of the Named Executive Officers elected to receive histheir benefits in the form of a life annuity.
Nonqualified Deferred Compensationdeferred compensation
The following table reflects the participation during 20172019 by the Named Executive Officers in three nonqualified deferred compensation plans offered by the Company. The Deferred Compensation Excess Plan allows eligible employees to defer for a number of years or until retirement from the Company the receipt of a portion of their base salary and annual incentive compensation. The Performance Awards Deferred Compensation Plan allows eligible employees to defer for a number of years or until retirement from the Company the payout of their performance share or performance unit awards under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. The VIP Excess Plan allows eligible employees to defer until retirement from the Company the receipt of a portion of their base salary and annual incentive compensation. All three plans generally allow the eligible employees to elect to receive payment of their account balances in the form of either a single lump sum payment or in up to ten annual installments. With the exception of deferrals of performance shares under the Performance Awards Deferred Compensation Plan, earnings are credited to the amounts deferred under all three plans based on the returns paid on the investment funds available to participants in 3M’s qualified 401(k) plan or a fixed rate of return based on corporate bond yields (as selected by each participant). Earnings are credited to the deferrals of performance shares under the Performance Awards Deferred Compensation Plan based on the return on shares of 3M common stock, including reinvested dividends.
2018 Proxy Statement | 82 | 653M Company |
2017 Nonqualified Deferred Compensation Table of Contents
| NAME | EXECUTIVE
CONTRIBUTIONS IN
LAST FY
($)(1) | | REGISTRANT
CONTRIBUTIONS IN
LAST FY
($)(2) | | AGGREGATE
EARNINGS IN
LAST FY
($)(3) | | AGGREGATE
WITHDRAWALS/
DISTRIBUTIONS
($) | | AGGREGATE
BALANCE AT LAST
FYE
($)(4) |
| Inge G. Thulin | | | | | | | | | |
| VIP Excess Plan | 365,027 | | 80,877 | | 97,107 | | 0 | | 2,576,248 |
| Deferred Compensation Excess Plan | 1,727,758 | | 0 | | 142,994 | | 0 | | 4,030,876 |
| Performance Awards DeferredCompensation Plan | 8,013,633 | | 0 | | 8,643,433 | | 0 | | 32,903,599 |
| Nicholas C. Gangestad | | | | | | | | | |
| VIP Excess Plan | 126,570 | | 27,105 | | 72,545 | | 0 | | 541,297 |
| Deferred Compensation Excess Plan | 0 | | 0 | | 0 | | 0 | | 0 |
| Performance Awards DeferredCompensation Plan | 0 | | 0 | | 717,472 | | 0 | | 2,772,347 |
| Frank R. Little | | | | | | | | | |
| VIP Excess Plan | 108,911 | | 30,625 | | 66,396 | | 0 | | 1,101,859 |
| Deferred Compensation Excess Plan | 578,012 | | 0 | | 69,714 | | 0 | | 1,935,241 |
| Performance Awards DeferredCompensation Plan | 0 | | 0 | | 26,854 | | 0 | | 658,359 |
| Michael F. Roman | | | | | | | | | |
| VIP Excess Plan | 126,201 | | 27,238 | | 22,209 | | 0 | | 625,477 |
| Deferred Compensation Excess Plan | 0 | | 0 | | 8,821 | | 0 | | 216,254 |
| Performance Awards DeferredCompensation Plan | 1,142,316 | | 0 | | 423,486 | | 0 | | 1,565,802 |
| Hak Cheol Shin | | | | | | | | | |
| VIP Excess Plan | 126,401 | | 27,370 | | 190,606 | | 0 | | 1,915,804 |
| Deferred Compensation Excess Plan | 0 | | 0 | | 0 | | 0 | | 0 |
| Performance Awards DeferredCompensation Plan | 0 | | 0 | | 0 | | 0 | | 0 |
FOOTNOTES TO 20172019 NONQUALIFIED DEFERRED COMPENSATION TABLE
| Name | | Executive
Contributions
in Last FY
($)(1) | | Registrant
Contributions
in Last FY
($)(2) | | Aggregate
Earnings in
Last FY
($)(3) | | | Aggregate
Withdrawals/
Distributions
($) | | Aggregate
Balance at Last
FYE
($)(4) |
| Michael F. Roman | | | | | | | | | | | |
| VIP Excess Plan | | 251,645 | | 56,395 | | | 41,029 | | | — | | 1,235,898 |
| Deferred Compensation Excess Plan | | — | | — | | | 8,458 | | | — | | 231,049 |
Performance Awards Deferred
Compensation Plan | | 1,484,748 | | — | | | (241,480 | ) | | — | | 3,672,315 |
| Inge G. Thulin | | | | | | | | | | | | |
| VIP Excess Plan | | 210,447 | | 46,825 | | | 133,424 | | | — | | 3,692,807 |
| Deferred Compensation Excess Plan | | 938,899 | | — | | | 326,793 | | | — | | 9,083,916 |
Performance Awards Deferred
Compensation Plan | | 7,569,122 | | — | | | (2,144,679 | ) | | — | | 39,257,779 |
| Nicholas C. Gangestad | | | | | | | | | | | | |
| VIP Excess Plan | | 146,074 | | 31,747 | | | 173,732 | | | — | | 1,058,950 |
| Deferred Compensation Excess Plan | | — | | — | | | — | | | — | | — |
Performance Awards Deferred
Compensation Plan | | 1,072,070 | | — | | | (216,321 | ) | | — | | 3,594,778 |
| Ashish K. Khandpur | | | | | | | | | | | | |
| VIP Excess Plan | | 131,636 | | 27,647 | | | 130,840 | | | — | | 735,378 |
| Deferred Compensation Excess Plan | | — | | — | | | — | | | — | | — |
Performance Awards Deferred
Compensation Plan | | 900,125 | | — | | | (114,202 | ) | | — | | 1,502,658 |
| Julie L. Bushman | | | | | | | | | | | | |
| VIP Excess Plan | | 35,773 | | 10,256 | | | 36,698 | | | — | | 249,702 |
| Deferred Compensation Excess Plan | | — | | — | | | — | | | — | | — |
Performance Awards Deferred
Compensation Plan | | — | | — | | | — | | | — | | — |
| Joaquin Delgado | | | | | | | | | | | | |
| VIP Excess Plan | | 53,176 | | 10,305 | | | 257,599 | | | — | | 1,468,136 |
| Deferred Compensation Excess Plan | | — | | — | | | 35,594 | | | — | | 193,048 |
Performance Awards Deferred
Compensation Plan | | — | | — | | | — | | | — | | — |
| Michael G. Vale | | | | | | | | | | | | |
| VIP Excess Plan | | 108,096 | | 30,283 | | | 109,741 | | | — | | 1,295,387 |
| Deferred Compensation Excess Plan | | — | | — | | | 2,157 | | | — | | 23,205 |
Performance Awards Deferred
Compensation Plan | | 1,807,439 | | — | | | (296,693 | ) | | — | | 4,531,829 |
FOOTNOTES TO 2019 NONQUALIFIED DEFERRED COMPENSATION TABLE
| (1) | With the exception of the amounts contributed by Mr. Roman, Mr. Thulin, Mr. Gangestad, Mr. Khandpur, and Mr. Vale from the payout of their performance share awards for the 2016-2018 performance period and by Mr. Khandpur from the payout of his annual incentive earned in 2018, all amounts contributed by these individuals during 2019 have been included in the Summary Compensation Table as Salary, Stock Awards, or Non-Equity Incentive Plan Compensation earned in 2017, 2018, or 2019. The Summary Compensation Table does not reflect any portion of the contributions from the payout of Mr. Roman’s, Mr. Thulin’s, Mr. Gangestad’s, Mr. Khandpur’s and Mr. Vale’s performance share awards for the 2016-2018 performance period because those awards were granted in 2016 and does not reflect any portion of the contributions from Mr. Khandpur’s 2018 annual incentive payment because those amounts were earned prior to the first year he became a Named Executive Officer. |
| |
| (2) | The amounts shown reflect 3M matching contributions under the VIP Excess Plan, a nonqualified defined contribution plan. Eligibility for this plan and its matching contributions is limited to employees whose compensation exceeds a limit established by Federal income tax laws for tax-qualified defined contribution plans. The plan permits eligible employees to save additional amounts from their current cash compensation beyond the contribution limits established by Federal tax laws, and to receive |
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Company matching contributions similar to the matching contributions provided under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan. With the exception of the amounts contributed by3M matching contributions to Mr. Thulin and Mr. Roman from the payout of their performance share awards for the 2014-2016 performance period and by Mr. Little from the payoutKhandpur’s VIP Excess Plan account in respect of his 2018 annual incentive earned during 2016,payment (paid in 2019), all amounts contributed by these individuals during 2017 have been included in the Summary Compensation Table as Salary, Stock Awards, or Non-Equity Incentive Plan Compensation earned in 2015, 2016, or 2017. The Summary Compensation Table does not reflect any portion of the contributions from the payout of Mr. Thulin’s and Mr. Roman’s performance share awards for the 2014-2016 performance period because those awards were granted in 2014.
(2) All amounts contributed by the Company on behalf of these individuals during 20172019 are included in the “All Other Compensation” column of the Summary Compensation Table.
(3) None of these amounts are included in the The Summary Compensation Table as compensation earned in 2017, since nonedoes not reflect any portion of the Company’s nonqualified deferred compensation plans provide above-market or preferential earnings.
(4) Includes3M matching contributions made to Mr. Khandpur’s VIP Excess Plan account in respect of his 2018 annual incentive payment because those amounts were earned prior to the following amounts that were reported as compensation in the Summary Compensation Table for prior years: Mr. Thulin — $16,175,883; Mr. Gangestad — $508,185; Mr. Little — $0; Mr. Roman — $398,994; and Mr. Shin — $669,347.first year he became a Named Executive Officer.
66(3) | | 3MNone of these amounts are included in the Summary Compensation Table as compensation earned in 2019, since none of the Company’s nonqualified deferred compensation plans provide above-market or preferential earnings. |
Table of Contents(4) | Includes the following amounts that were reported as compensation for 2017 and 2018 in the Summary Compensation Table: Mr. Roman — $501,252; Mr. Thulin — $5,554,184; Mr. Gangestad — $384,096; Mr. Khandpur — $0; Ms. Bushman — $107,497; Dr. Delgado — $1,144,068; and Mr. Vale — $280,955. |
Potential Payments Upon Terminationpayments upon termination or Changechange in Controlcontrol
As reflected in the Compensation Discussion and Analysis portion of this Proxy Statement, 3M has no employment agreements with any of the Named Executive Officers nor does it have any severance or change in control plans or arrangements that would provide severance benefits to any of the Named Executive Officers solely in the event of the termination of their employment or a change in control of the Company. We also do not have any agreements that would provide automatic “single-trigger” accelerated vesting of equity compensation or excise tax gross-up payments to any of our Named Executive Officers in the event of a change in control of the Company. However,
Effective February 3, 2020, 3M adopted a new severance plan to provide separation benefits to eligible U.S. employees (including the Named Executive Officers) who incur a qualifying termination. In addition, certain of the Company’s executive compensation and benefit plans provide all participants (including the Named Executive Officers) with certain rights or the right to receive payments in the event of the termination of their employment or upon a change in control of the Company. The terms applicable to these potential rights or payments in various situations are described below. Payments or benefits under other plans and arrangements that are generally provided on a non-discriminatory basis to all similarly situated employees of the Company upon the termination of their employment are not described, including (a) accrued base salary; (b) annual incentive earned with respect to completed performance periods; (c) retiree welfare benefits provided to substantially all of the Company’s U.S. employees, including retiree medical benefits; (d) distribution of vested account balances under the Company’s qualified 401(k) plan; (e) accrued pension benefits under the Company’s defined benefit pension plans payable following an employee’s retirement or other termination of employment (the amounts of these benefits earned by the Named Executive Officers are reported in the 20172019 Pension Benefits Table); (f) life insurance benefits generally available to all salaried employees; and (g) distribution of account balances under the Company’s nonqualified deferred compensation plans (the account balances of the Named Executive Officers are reported in the 20172019 Nonqualified Deferred Compensation Table).
Rights and Payments Upon Retirementpayments upon retirement
Following retirement (as described below), the Named Executive Officers are entitled to receive:
| ●• | continued vesting of stock options previously granted under the Company’s stock plans, and the opportunity to exercise vested stock options previously granted under such plans during the remainder of the original term (up to 10 years) of such options; |
| | |
| • | an annual incentive plan payment for the year of retirement, prorated based on the number of days worked prior to the date of separation; |
| | ● |
| • | for those Named Executive Officers initially appointed to a 3M executive position before January 1, 2006, or after December 31, 2017, payment for all previously granted performance shares upon completion of the respective three-year performance period (prorated to reflect the portion of the year worked only with respect to the performance shares granted in the year of retirement) and based on actual performance; and |
| | | |
| ●• | for those Named Executive Officers initially appointed to a 3M executive position on or after January 1, 2006, and on or before December 31, 2017, payment for all previously granted performance shares upon completion of the respective three-year performance period (prorated to reflect the portion of the three-year performance period that occurred prior to the date of the Named Executive Officer’s retirement) and based on actual performance. |
For this purpose, the term “Retirement” means a termination of employment with the Company after attaining age 55 with at least 10 years of service (age 55 with at least five years of service for awards granted before January 1, 2016).
Rights and Payments Upon Termination Due to Disability
In the event of the termination of their employment due to disability, the Named Executive Officers are entitled to receive:
| | ● | continued vesting of stock options previously granted under the Company’s stock plans, and the opportunity to exercise vested stock options previously granted under such plans during the remainder of the original term (up to 10 years) of such options; |
| | |
| ● | immediate vesting of all restricted stock units previously granted under the Company’s stock plans; and |
| | |
| ● | payment for all previously granted performance shares upon completion of the respective three-year performance period, based on actual performance. |
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Rights and Payments Upon Termination Duepayments upon termination due to Deathdeath
In the event of the termination of their employment due to death, the Named Executive Officers are entitled to receive:
| ●• | immediate vesting of all unvested stock options and restricted stock units previously granted under the Company’s stock plans, and the opportunity for the Named Executive Officer’s estate or beneficiaries to exercise all vested stock options during the two-year period following the date of death (but not beyond the original expiration date of any such stock option); |
2018 Proxy Statement | | 67 |
| | ● |
| • | payment to the Named Executive Officer’s estate or beneficiaries, no later than March 15 of the year following the year in which the Named Executive Officer died, for all previously granted performance shares (in the same amount as paid for the performance shares granted to other Named Executive Officers if the date of death occurs after the end of the three-year performance period for such shares, and at the lesser of the target value or such other amount as determined by the Committee in its discretion if the date of death occurs before the end of the three-year performance period for such shares); and |
| | | |
| ●• | payment to the Named Executive Officer’s beneficiaries of the proceeds from the life insurance policies provided for such Named Executive Officer pursuant to the Company’s Executive Life Insurance Plan. |
Rights and Payments Upon Termination for Any Other Reasonpayments upon termination due to disability
In the event of the termination of their employment due to disability, the Named Executive Officers are entitled to receive:
| • | continued vesting of stock options previously granted under the Company’s stock plans, and the opportunity to exercise vested stock options previously granted under such plans during the remainder of the original term (up to 10 years) of such options; |
| |
| • | immediate vesting of all restricted stock units previously granted under the Company’s stock plans; and |
| |
| • | payment for all previously granted performance shares upon completion of the respective three-year performance period, based on actual performance. |
Rights and payments upon a qualifying termination under the severance plan
Effective February 3, 2020, the Company adopted the 3M Executive Severance Plan (which we refer to as the “Severance Plan”) for any reasoncertain U.S. executives, including our Named Executive Officers, to provide separation benefits in the event an eligible employee’s employment is terminated by 3M other than for Misconduct or an eligible employee resigns for Good Reason. An eligible employee who becomes entitled to benefits under the Severance Plan receives the following:
| • | continued payment of his or her annual base salary for a number of months (24 months for the Chief Executive Officer, and 18 months for all other Named Executive Officers); |
| |
| • | continued payment of annual incentive payments that would have been paid if the participant remained employed through the end of the severance payment period, calculated based on actual results for the relevant year, using the participant’s final performance rating as of the end of the applicable year (or if none, a performance rating of “fully meets expectations” or equivalent), and prorated based on the number of days in the year preceding the end of the severance period (if the severance payment period ends prior to the end of a year); |
| |
| • | an opportunity to exercise all vested stock options and stock appreciation rights following the participant’s termination and prior to the expiration date of such award; |
| |
| • | accelerated vesting and payment of a prorated portion of the participant’s outstanding “annual” restricted stock units, with proration based on the number of full years of the participant’s completed service over the number of years required to vest under the original vesting schedule; |
| |
| • | outstanding performance share awards will not be forfeited solely as a result of the participant’s termination, and the target number of shares under each award will be prorated based on the number of months the participant worked during the applicable performance period; |
| |
| • | full vesting of the participant’s VIP company contribution account; and |
| |
| • | outplacement services in accordance with 3M’s policy. |
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Any severance payments under the Severance Plan will be reduced on a dollar-for-dollar basis (but not below $0) by any payments the participant may receive under his or her non-competition agreement with 3M. In addition, severance payments will cease in the event the participant becomes reemployed by 3M.
The Severance Plan does not provide severance benefits to employees who terminate pursuant to a mandatory retirement death,policy adopted by the Board. Employees who terminate in connection with a spinoff, divestiture or disability (and other thansimilar transaction involving the employee’s business unit may be eligible to participate at the discretion of the Company. To be eligible to receive benefits under the Severance Plan, an employee must execute and not revoke a general release of claims in favor of the Company in form approved by the Company.
In addition, in the event a Named Executive Officer’s payments under the Severance Plan would be subject to an excise tax on “parachute payments” in connection with a change in control as described further below):of the Company due to the application of Section 280G of the Internal Revenue Code, the Named Executive Officer will not be entitled to a “gross-up.” Instead, the Named Executive Officer’s “parachute payments” may be reduced if such reduction would provide the Named Executive Officer with a greater post-tax benefit than he or she would receive if the excise taxes were to apply.
| ● | the Named Executive Officers will have the opportunity to exercise vested stock options granted under the Company’s stock plans within the first 90 days following the termination date (but not beyond the original expiration date of any such stock option), at which time any remaining vested stock options are forfeited; and |
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| ● | all unvested stock options, restricted stock units, and performance shares granted to the Named Executive Officers are forfeited immediately. |
For purposes of the Severance Plan, the terms “Misconduct” and “Good Reason” mean the following:
“Misconduct” means (i) the employee’s willful failure to substantially perform his or her duties (other than a failure resulting from his or her disability); (ii) the employee’s willful failure to carry out, or comply with any lawful and reasonable directive of the Board or his or her immediate supervisor; (iii) the occurrence of any act or omission by the employee that could reasonably be expected to result in (or has resulted in) his or her conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or indictable offense or crime involving moral turpitude; (iv) the employee’s commission of an act of fraud, embezzlement, misappropriation, misconduct, or breach of fiduciary duty against the Company or any of its subsidiaries or affiliates or any of their officers, directors, employees, customers, suppliers, insurers or agents; (v) the employee’s material breach of any material provision of any written agreement with the Company or any subsidiary; (vi) any action (or inaction) by the employee that 3M reasonably determines constitutes gross negligence or misconduct in the performance of his or her duties and responsibilities; or (vii) any other intentional misconduct by the Named Executive Officer that significantly affects the business or affairs of the Company or any subsidiary in an adverse manner.
“Good Reason” means, with respect to a voluntary termination occurring within 18 months following a change in control of the Company, (i) a material diminution in the employee’s position, authority, duties or responsibilities as in effect immediately prior to the change in control, (ii) a material diminution in the employee’s base salary or annual planned cash compensation, or (iii) a material change in the geographic location at which the employee is required to perform services for his or her employer. If the voluntary termination does not occur within 18 months following a change in control, “Good Reason” means (i) a material diminution in the employee’s base salary or annual planned cash compensation, other than an across-the-board reduction that applies to all comparable positions, or (ii) a change in excess of 100 miles in the primary work location at which the employee is required to perform services for his or her employer. For terminations that do not occur within 18 months following a change in control, the employee will be required to provide written notice to the Company of the grounds for a Good Reason termination within 30 days of the initial existence of such grounds, and the Company has 30 days from the date of such notice to cure such circumstances. An employee must terminate employment for Good Reason within 60 days after the first occurrence of the applicable grounds.
Rights and Payments Uponpayments upon a Qualifying Terminationqualifying termination in Connectionconnection with a Changechange in Controlcontrol
If the Company terminates a Named Executive Officer’s employment for reasons other than Misconduct (or for awards granted prior to May 10, 2016, reasons other than Cause) or if a Named Executive Officer resigns for Good Reason, in any such case within 18 months following a “change in control event” of the Company (as defined for purposes of Section 409A of the Internal Revenue Code), then in addition to any benefits provided under the Severance Plan described above, all of the Named Executive Officer’s outstanding unvested stock options and restricted stock units granted under the Company’s stock plans will be immediately vested and all of such Named Executive Officer’s outstanding performance shares will be prorated and settled in accordance with the terms of the plan.
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For purposes of our outstanding long-term incentive awards, the terms “Misconduct”, “Cause”,“Misconduct,” “Cause,” and “Good Reason” mean the following:
“Misconduct” means (i) the Named Executive Officer’s willful failure to substantially perform his or her duties (other than a failure resulting from his or her disability); (ii) the Named Executive Officer’s willful failure to carry out, or comply with any lawful and reasonable directive of the Board or his or her immediate supervisor; (iii) the occurrence of any act or omission by the Named Executive Officer that could reasonably be expected to result in (or has resulted in) his or her conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or indictable offense or crime involving moral turpitude; (iv) the Named Executive Officer’s commission of an act of fraud, embezzlement, misappropriation, misconduct, or breach of fiduciary duty against the Company or any of its subsidiaries or affiliates or any of their officers, directors, employees, customers, suppliers, insurers or agents; (v) the Named Executive Officer’s material breach of any material provision of any written agreement with the Company or any subsidiary; or (vi) any other intentional misconduct by the Named Executive Officer that significantly affects the business or affairs of the Company or any subsidiary in an adverse manner.
“Cause” means a material violation of any policy of the Company, or embezzlement or theft of property belonging to the Company.
“Good Reason” means (i) a material diminution in the Named Executive Officer’s position, authority, duties, or responsibilities as in effect immediately prior to the change in control; (ii) a material diminution in the Named Executive Officer’s base salary or annual planned cash compensation; or (iii) a material change in the geographic location at which the Named Executive Officer is required to perform services for the Company.
Rights and payments upon termination for any other reason
In the event of the termination of their employment for any reason that does not qualify for Severance Plan benefits other than retirement, death, or disability (and other than in connection with a change in control, as described further below):
| • | the Named Executive Officers will have the opportunity to exercise vested stock options granted under the Company’s stock plans within the first 90 days following the termination date (but not beyond the original expiration date of any such stock option), at which time any remaining vested stock options are forfeited; and |
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| • | all unvested stock options, restricted stock units, and performance shares granted to the Named Executive Officers are forfeited immediately. |
The amounts payable to or on behalf of each of the Named Executive Officers in each of the above situations (other than amounts relating to payments or benefits generally provided on a non-discriminatory basis to all similarly situated employees) is reflected in the following table below, assuming that each individual’s employment had terminated and/or a change in control of the Company had occurred on December 31, 2017.2019. As of December 31, 2017, Mr. Thulin, Mr. Little,2019, Mr. Roman, Mr. Gangestad, and Mr. ShinMs. Bushman were eligible to retire (as that term is defined for purposes of 3M’s stock plans). Mr. Thulin retired from employment with the Company effective as of June 1, 2019, and Dr. Delgado’s employment with the Company ended on July 1, 2019. The amounts shown below do not reflect payments and benefits available under the Severance Plan, as it was not in effect on December 31, 2019.
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2017 Potential Payments Upon Termination or Change in Control Table of Contents
| NAME | TERMINATION OF EMPLOYMENT DUE TO… | | OUTSTANDING
PERFORMANCE
SHARE
AWARDS ($)(1) | | UNVESTED
RSUS
($)(2) | | UNVESTED
OPTIONS
($)(3) | | LIFE
INSURANCE
PROCEEDS
($)(4) | | TOTAL
($) |
| Inge G. Thulin | Retirement | | 0 | | 0 | | 0 | | 0 | | 0 |
| | Death | | 15,550,190 | | 0 | | 34,826,895 | | 10,391,214 | | 60,768,299 |
| | Disability | | 0 | | 0 | | 0 | | 0 | | 0 |
| | Other reason | | 0 | | 0 | | 0 | | 0 | | 0 |
| | Qualifying Termination in Connection witha Change in Control | | 10,966,368 | | 0 | | 34,826,895 | | 0 | | 45,793,263 |
| Nicholas C. Gangestad | Retirement | | 0 | | 0 | | 0 | | 0 | | 0 |
| | Death | | 4,583,595 | | 1,464,237 | | 10,148,964 | | 3,000,000 | | 19,196,796 |
| | Disability | | 0 | | 1,464,237 | | 0 | | 0 | | 1,464,237 |
| | Other reason | | 0 | | 0 | | 0 | | 0 | | 0 |
| | Qualifying Termination in Connection witha Change in Control | | 3,210,070 | | 1,464,237 | | 10,148,964 | | 0 | | 14,823,271 |
| Frank R. Little | Retirement | | 0 | | 0 | | 0 | | 0 | | 0 |
| | Death | | 3,318,011 | | 1,171,436 | | 7,257,996 | | 2,184,334 | | 13,931,777 |
| | Disability | | 0 | | 1,171,436 | | 0 | | 0 | | 1,171,436 |
| | Other reason | | 0 | | 0 | | 0 | | 0 | | 0 |
| | Qualifying Termination in Connection witha Change in Control | | 2,283,775 | | 1,171,436 | | 7,257,996 | | 0 | | 10,713,207 |
| Michael F. Roman | Retirement | | 0 | | 0 | | 0 | | 0 | | 0 |
| | Death | | 3,117,476 | | 2,976,489 | | 6,848,877 | | 3,000,000 | | 15,942,842 |
| | Disability | | 0 | | 2,976,489 | | 0 | | 0 | | 2,976,489 |
| | Other reason | | 0 | | 0 | | 0 | | 0 | | 0 |
| | Qualifying Termination in Connection witha Change in Control | | 2,190,588 | | 2,976,489 | | 6,848,877 | | 0 | | 12,015,954 |
| Hak Cheol Shin | Retirement | | 0 | | 0 | | 0 | | 0 | | 0 |
| | Death | | 3,037,214 | | 2,976,489 | | 6,696,302 | | 3,697,668 | | 16,407,673 |
| | Disability | | 0 | | 2,976,489 | | 0 | | 0 | | 2,976,489 |
| | Other reason | | 0 | | 0 | | 0 | | 0 | | 0 |
| | Qualifying Termination in Connection witha Change in Control | | 2,134,039 | | 2,976,489 | | 6,696,302 | | 0 | | 11,806,830 |
FOOTNOTES TO 20172019 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
(1) The amounts in this column reflect the value of performance share awards under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan for which the three-year performance period has not been completed (adjusted to reflect the closing price of a share of 3M common stock on the NYSE for December 29, 2017 ($235.37)), and which would be paid upon the occurrence of the respective triggering events in accordance with the provisions of the plan.
| Name | | Termination of
Employment Due to… | | Cash
Severance
($) | | Outstanding
Performance
Share Awards
($)(1) | | Unvested
RSUs
($)(2) | | Unvested
Options
($)(3) | | Life
Insurance
Proceeds
($)(4) | | Total
($) |
| Michael F. Roman | | Retirement | | — | | — | | — | | — | | — | | — |
| | | Death | | — | | 7,179,235 | | — | | 11,495 | | 3,000,000 | | 10,190,730 |
| | | Disability | | — | | — | | — | | — | | — | | — |
| | | Qualifying Termination in connection with a Change in Control | | — | | 3,566,845 | | — | | 11,495 | | — | | 3,578,340 |
| | | Other Reason | | — | | — | | — | | — | | — | | — |
| Inge G. Thulin | | Retirement | | — | | — | | — | | — | | — | | — |
| Nicholas C. Gangestad | | Retirement | | — | | — | | — | | — | | — | | — |
| | | Death | | — | | 3,329,574 | | 1,097,509 | | 17,216 | | 3,000,000 | | 7,444,299 |
| | | Disability | | — | | — | | 1,097,509 | | — | | — | | 1,097,509 |
| | | Qualifying Termination in connection with a Change in Control | | — | | 1,818,367 | | 1,097,509 | | 17,216 | | — | | 2,933,092 |
| | | Other Reason | | — | | — | | — | | — | | — | | — |
| Ashish K. Khandpur | | Retirement | | — | | — | | — | | — | | — | | — |
| | | Death | | — | | 2,351,326 | | — | | 6,557 | | 2,614,000 | | 4,971,883 |
| | | Disability | | — | | — | | — | | — | | — | | — |
| | | Qualifying Termination in connection with a Change in Control | | — | | 1,131,850 | | — | | 6,557 | | — | | 1,138,407 |
| | | Other Reason | | — | | — | | — | | — | | — | | — |
| Julie L. Bushman | | Retirement | | — | | — | | — | | — | | — | | — |
| | | Death | | — | | 2,101,868 | | — | | 8,651 | | 2,900,846 | | 5,011,365 |
| | | Disability | | — | | — | | — | | — | | — | | — |
| | | Qualifying Termination in connection with a Change in Control | | — | | 1,142,458 | | — | | 8,651 | | — | | 1,151,109 |
| | | Other Reason | | — | | — | | — | | — | | — | | — |
| Joaquin Delgado | | Other Reason(5) | | 1,750,000 | | — | | — | | — | | — | | 1,750,000 |
| Michael G. Vale | | Retirement | | — | | — | | — | | — | | — | | — |
| | | Death | | — | | 1,829,475 | | — | | 10,910 | | 2,760,000 | | 4,600,385 |
| | | Disability | | — | | — | | — | | — | | — | | — |
| | | Qualifying Termination in connection with a Change in Control | | — | | 954,942 | | — | | 10,910 | | — | | 965,852 |
| | | Other Reason | | — | | — | | — | | — | | — | | — |
(2) The amounts in this column reflect the value of the shares underlying the unvested 3M restricted stock units that would vest upon the occurrence of the respective triggering events in accordance with the terms of the awards. Share values are based on the closing price of a share of 3M common stock on the NYSE for December 29, 2017 ($235.37).FOOTNOTES TO 2019 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
(3) The amounts in this column reflect the spread value on December 31, 2017, of unvested, in-the-money 3M stock options that will vest upon the occurrence of the respective triggering events in accordance with the existing contractual terms of the stock options. Spread values are based on the closing price of a share of 3M common stock on the NYSE for December 29, 2017 ($235.37).
(4) The amounts in this column reflect the life insurance proceeds that would be payable to each individual’s beneficiary or beneficiaries pursuant to the policies obtained for them under the Executive Life Insurance Plan. Under such plan, individuals first appointed to an executive position on or before August 31, 2003, receive additional life insurance coverage that is provided through a whole life insurance policy or a universal life insurance policy and individuals first appointed on or after September 1, 2003, receive additional group term life insurance coverage.
| (1) | The amounts in this column reflect the value of performance share awards under the 2016 Long-Term Incentive Plan for which the three-year performance period has not been completed (adjusted to reflect the closing price of a share of 3M common stock on the NYSE for December 31, 2019 ($176.42)), and which would be paid upon the occurrence of the respective triggering events in accordance with the terms of the awards. |
| |
| (2) | The amounts in this column reflect the value of the shares underlying the unvested 3M restricted stock units that would vest upon the occurrence of the respective triggering events in accordance with the terms of the awards. Share values are based on the closing price of a share of 3M common stock on the NYSE for December 31, 2019 ($176.42). |
| |
| (3) | The amounts in this column reflect the intrinsic value on December 31, 2019, of unvested, in-the-money 3M stock options that will vest upon the occurrence of the respective triggering events in accordance with the existing contractual terms of the stock options. Intrinsic values are based on the closing price of a share of 3M common stock on the NYSE for December 31, 2019 ($176.42). |
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| (4) | The amounts in this column reflect the life insurance proceeds that would be payable to each individual’s beneficiary or beneficiaries pursuant to the policies obtained for them under the Executive Life Insurance Plan. Under such plan, individuals first appointed to an executive position on or before August 31, 2003, receive additional life insurance coverage that is provided through a universal life insurance policy and individuals first appointed on or after September 1, 2003, receive additional group term life insurance coverage. |
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| (5) | The amount shown reflects the payment made to Dr. Delgado under the terms of a separation agreement. For more information concerning the arrangement with Dr. Delgado, see the section entitled “Separation pay” on page 61 of this Proxy Statement. |
Pay Ratioratio
Presented below is the ratio of annual total compensation of our CEO to the annual total compensation of our median employee (excluding our CEO). for 2019. The ratio presented below isreflects a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the Securities Exchange Act of 1934.
In identifying ourdetermining the ratio below, we began by using the same median employee (a full-time production employee in the Midwestern United States) identified for purposes of calculating the ratio included in our 2018 and 2019 proxy statement because there have not been changes in our employee population or employee compensation arrangements that we calculatedbelieve would significantly impact the pay ratio disclosure. The median employee initially was identified based on target annual total cash compensation offor each employee as of December 31, 2017. For these purposes, annual total cash compensation included base salary or hourly wages, cash incentives, commissions, and comparable cash elements of compensation in non-U.S. jurisdictions and was calculated using internal human resources records. All amounts were annualized for permanent employees who did not work for the entire year, such as new hires, employees on paid or unpaid leave of absence and employees called for active military duty. We did not apply any cost-of-living adjustments as part of the calculation.
We selected theThe median employee was selected from among 90,823 full-time, part-time, temporary, and seasonal workers who were employed as of December 31, 2017. As permitted by Item 402(u) of Regulation S-K, we excluded 1,575 employees (including 966 non-U.S. employees) who joined the Company during 2017 as part of our acquisition of Scott Safety when making this determination. Except for the employees excluded on the basis of the Scott Safety acquisition completed in 2017, we did not exclude any other employees (whether pursuant to thede minimisexemption for foreign employees or any other permitted exclusion).
As determined in accordance with Item 402 of Regulation S-K, the 20172019 annual total compensation was $20,494,285$18,321,566 for our CEO and $63,338$57,494 for our median employee. Among other things, these amounts include base salary, overtime, incentive payments, stock-based compensation (based on the grant date fair value of awards granted during 2017)2019), changes in pension values and retirement plan contributions. As calculated in this manner, the ratio of our CEO’s total compensation to our median employee’s total compensation for fiscal year 20172019 is 324319 to 1.
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STOCKHOLDER PROPOSALS
Proposal No. 4: Stockholder Proposal on Special Shareholder Meetings | | |
PROPOSAL
4 | Shareholder Proposal on Setting Target Amounts for CEO Compensation • Shareholder proposal on setting target amounts for CEO compensation, if properly presented at the meeting. • See the Board’s opposition statement. |
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3M has received a stockholder proposal from James McRitichie, 9295 Yorkship Court, Elk Grove, CA 95758, the owner of 84 shares of 3M common stock (the “Proponent”). The Proponent has requested that the Company include the following proposal and supporting statement(in italics)in its proxy statement for the Annual Meeting of Stockholders. The proposal may be voted on at the Annual Meeting only if properly presented by the Proponent or the Proponent’s qualified representative. For the reasons set forth following the Proponent’s statement, your Board of Directors recommends that you vote “AGAINST” this proposal.
RESOLVED:
The shareholders of 3M Company (MMM) (‘Company’) hereby request that the Board of Directors take the steps necessary to amend our bylaws and each appropriate governing document to give holders with an aggregate of 15% of our outstanding common stock the power to call a special shareowner meeting. This proposal does not impact our board’s current power to call a special meeting.
SUPPORTING STATEMENT:
Delaware law allows 10% of company shares to call a special meeting. A shareholder right to call a special meeting is a way to bring an important matter to the attention of both management and shareholders outside the annual meeting cycle. This is important because there could be 15-months between annual meetings.
A shareholder right to act by written consent and to call a special meeting are two complimentary ways to bring an important matter to the attention of both management and shareholders outside the annual meeting cycle. Both are associated with increased governance quality and shareholder value. Our Company offers no right of shareholders to act by written consent.
Currently, 64% of S&P 500 companies have adopted company bylaws, articles of incorporation, or charter provisions to allow shareholders to call a special meeting. Even more than half of all S&P 1500 companies allow shareholders this right.
This topic won more than 44% support at our Company in 2016. According to Proxy Insight, 266 funds voted for, while 79 voted against. Unfortunately, large funds like Vanguard, State Street and BlackRock were among those voting against. We hope they and others will reconsider their position this year.
This proposal topic won majority votes last year at Salesforce.com, NETGEAR, CVS Health and United Rentals. It may be possible to adopt this proposal by simply incorporating this text into our governing documents:
“Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board or the President, and shall be called by the Chairman of the Board or President or Secretary upon the order in writing of a majority of or by resolution of the Board of Directors, or at the request in writing of stockholders owning 15% net long of the entire capital stock of the Corporation issued and outstanding and entitled to vote.”
We urge the Board to join the mainstream of major U.S. companies and establish a right for shareholders owning 15% of our outstanding common stock to call a special meeting.
Please vote for: Special Shareowner Meetings – Proposal 4
2018 Proxy Statement | | 71 |
Board’s Statement Opposing the Proposal
After careful consideration, and for the reasons set forth below, the Board believes that the proposal to ask our Board to take the steps necessary to give holders with an aggregate of 15 percent of our outstanding common stock the right to call a special stockholder meeting, subject to the conditions specified in the proposal, is not in the best interests of 3M or its stockholders for the following reasons:
1. | Our stockholders already have a meaningful right to call a special meeting. The Company’s Bylaws already permit the holders of 25 percent of 3M’s outstanding stock to call a special stockholder meeting upon written request to the Board. In light of our strong corporate governance practices and the many stockholder protections already in place, the Board believes that giving stockholders owning 25 percent of the Company’s outstanding stock the ability to call special stockholder meetings strikes the appropriate balance between giving stockholders the ability to call special meetings to vote on important matters that arise between Annual Meetings and protecting the resources of the Company and interests of all stockholders. The Board has an established protocol for stockholders to communicate with our independent Lead Director, the chairs of the Board committees, and other independent directors. In addition, management engages in regular, ongoing outreach to listen to and solicit input from our stockholders. Lowering the threshold to 15 percent could force the Company to expend a great deal of time and money on a special meeting, as described below, even if up to 85 percent of the Company’s stockholders do not want a special meeting. |
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2. | Given the size of the Company and the number of its stockholders, convening a meeting of stockholders is a significant undertaking that requires a substantial commitment of time and financial resources. The Company must pay to prepare, print, and distribute legal disclosure documents to stockholders, solicit proxies, and tabulate votes. The Board and management must also divert time from the business to prepare for and conduct the meeting. Because of these burdens and costs to a company, special stockholder meetings should be extraordinary events that occur only when a substantial percentage of the stockholders agree there are extremely pressing matters that must be addressed before the next Annual Meeting. The current provision of the Bylaws allows for stockholders to call a special meeting when such an extraordinary event arises, without enabling a small minority of stockholders to call meetings more frequently than necessary. We believe that if less than 25 percent of the stockholders want a special meeting, this demonstrates that the need for a special meeting is not so great as to warrant disrupting the conduct of 3M’s business and imposing unnecessary costs on the Company and its stockholders. Therefore, we believe it is unnecessary and would be damaging to the Company and its stockholders to lower the current threshold and give holders of only 15 percent of our outstanding stock the ability to call an unlimited number of special meetings for any purpose at any time. |
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3. | Special meetings could also be misused by special interest stockholder groups. The proposal with its low 15 percent ownership requirement could subject the Company to disruption from special interest stockholder groups with an agenda not in the best interests of the Company or the majority of stockholders. Currently, special meetings of stockholders may be called by (i) a majority of the Board of Directors or the Chairman of the Board, or (ii) the holders of 25 percent of 3M’s outstanding stock upon written request to the Board. Each director has a fiduciary duty to represent all stockholders when determining whether a matter is so pressing that it must be addressed at a special meeting. By way of contrast, stockholders do not have any fiduciary obligations to the Company or other stockholders. Stockholders can be self-interested in ways that directors, bound by the duties of care and loyalty, cannot be. The proposal would permit a small group of stockholders who have a special interest to use the extraordinary measure of a special meeting to serve their narrow self-interest. For example, would-be acquirers who seek to take over the Company for an inadequate price could use special meetings to avoid negotiating with the Board, which has the responsibility to protect the interests of all stockholders. In fact, if this proposal were implemented, a small group of stockholders would have the ability to call a special meeting at their sole discretion, at any time, with no duty to act other than in their own interests. |
RECOMMENDATION OF THE BOARD
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|
 | The Board of Directors unanimously recommends a vote “AGAINST” this proposal. Proxies solicited by the Board of Directors will be voted “AGAINST” this proposal unless a stockholder indicates otherwise in voting the proxy.
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Proposal No. 5: Stockholder Proposal on Setting Target Amounts for CEO Compensation
3M has received a stockholder proposal from the United Steelworkers, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, 60 Boulevard of the Allies, Pittsburgh, PA 15222, the owner of 68 shares of 3M common stock (the “Proponent”). The Proponent has requested that the Company include the following proposal and supporting statement ((in italics)italics) in its proxy statement for the Annual Meeting of Stockholders.Shareholders. The proposal may be voted on at the Annual Meeting only if properly presented by the Proponent or the Proponent’s qualified representative. For the reasons set forth following the Proponent’s statement, your Board of Directors recommends that you vote “AGAINST” this proposal.
RESOLVED: Shareholders of 3M Corporation (the “Company’’) request that the Compensation Committee of the Board of Directors take into consideration the pay grades and/or salary ranges of all classifications of Company employees when setting target amounts for CEO compensation. The Compensation Committee should describe in the Company’s proxy statements for annual shareholder meetings how it complies with this requested policy. Compliance with this policy is excused if it will result in the violation of any existing contractual obligation or the terms of any existing compensation plan.
SUPPORTING STATEMENT
Like at many companies, our Company’s Compensation Committee uses peer group benchmarks of what other companies pay their CEOs to set its target CEO compensation. These target pay amounts are then subject to performance adjustments. To ensure that our Company’s CEO compensation is reasonable relative to our Company’s overall employee pay philosophy and structure, we believe that the Compensation Committee should also consider the pay grades and/or salary ranges of Company employees when setting CEO compensation target amounts.
This proposal does not require the Compensation Committee to use other employee pay data in a specific way to set CEO compensation targets. Under this proposal, the Compensation Committee will have discretion to determine how other employee pay should impact CEO compensation targets. The Compensation Committee also will retain authority to use peer group benchmarks and/or any other metric to set CEO compensation target amounts.
Over time, using peer group benchmarks to set CEO compensation can lead to pay inflation. Although many companies target CEO compensation at the median of their peer group, certain companies have targeted their CEO’s pay above median. In addition, peer groups can be cherry-picked to include larger or more successful companies where CEO compensation is higher. (Charles Elson and Craig Ferrere, “Executive Superstars, Peer Groups and Overcompensation,” Journal of Corporation Law, Spring 2013).
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HighThe current system of using peer group benchmarks, without taking into account the pay disparities between CEOs and other senior executives may undermine collaboration and teamwork.grades or salary ranges of all company employees, when determining CEO compensation has had the effect of CEO pay far outpacing that of average employees. In 2018, the average S&P 500 CEO made 287 times that of their median employee. For our Company, the CEO/median employee ratio calculated in 2018 was 302 to 1. According to Institutional Shareholder Services, an excessivethe 2006 report The State of Working America the ratio of CEO pay disparity between theto average worker pay has risen from 35 to 1 in 1979, to 71 to 1 in 1989, to 248 to 1 in 1998. The current system of determining CEO and the next highest-paid named executive officer is a problematic pay practice that may result in a recommendation to its clients that they vote against advisory votes on executive compensation. (Institutional Shareholder Services, United States Proxy Voting Manual, February 23, 2016, p. 147).
In our view,compensation without taking into account the pay of non-executiveaverage company employees should also be considered. High CEO compensation can impacthas led to glaring inequality between the moraleworkers who make our company what it is and productivity of employeesthe man or woman who are not senior executives. According to a Glassdoor study of employee opinions, “Higher CEO compensation is statistically linked to lower CEO approval ratings on average” (Glassdoor, What Makes a Great CEO?, August 2016, availablesits athttps://www.glassdoor.com/research/studies/what-makes-a-great-ceo/). the top.
For those reasons, we urge you to vote in favor of this proposal.
2018 Proxy Statement | | 73 |
Board’s Statement Opposingstatement opposing the Proposalproposal
After careful consideration, and for the reasons set forth below, the Board believes that it is not in the best interests of 3M or its stockholdersshareholders to approve the proposed resolution, for the following reasons:resolution.
| 1. | The Company already maintains global compensation principles that are intended to ensure that its compensation practices are fair and reasonable as applied to both executive and non-executive employees. These principles align with the Company’s vision and strategies, balance both individual and enterprise-wide performance and seek to provide competitive wages and benefits with consistent positioning in the median range of the most-relevant markets that are most relevant to all employees based on roles, responsibilities, skills, and performance. To monitor and ensuresupport the effectiveness of this program, the Company also regularlyperiodically compares its pay components to those of other premier companies, and adjusts them as necessary to stay competitive and attract, retain, and motivate a highly qualified, diverse workforce at all levels throughout the organization, not just for its executives. |
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| 2. | The Board of Directors believes that the overwhelming majority of our stockholdersshareholders support the Company’s current executive compensation program. As described in more detail in the Compensation Discussion and Analysis portion of this Proxy Statement, the current program emphasizes a strong pay-for-performance philosophy and seeks to align the compensation of the Company’s Chief Executive Officer and other executive officers with the interests of long-term 3M stockholders.shareholders. In 2017,2019, approximately 9695 percent of the votes cast on the Company’s say-on-pay proposal approved the compensation of the named executive officers as disclosed in last year’s Proxy Statement. |
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| 3. | The actions requested byCompensation Committee already reviews and considers the proposal are ambiguous and implementation would imposeratio of annual total compensation of our Chief Executive Officer to the annual total compensation of our median employee (excluding our Chief Executive Officer), as reported in the proxy statement, which the Company believes provides a significant time, cost and resource burden on the Company. As the Proponent acknowledges, the proposal “does not requiresimilar perspective to the Compensation Committee at no incremental cost to use other employee pay data in a specific way to set CEO compensation targets.” The proposal instead indicates only that the Compensation Committee should “take into consideration the pay grades and/or salary ranges of all classifications of Company employees when setting target amounts for CEO compensation.” Left unanswered are questions about how to put such information in context so that it is not misleading. For example, it is unclear whether or how adjustments should be made for part-time, temporary and seasonal employees, differences in currencies, differences in cost-of-living or variations in compensation structures for employees who receive sales incentives, overtime compensation or other significant benefits (e.g., health benefits, retirement benefits, housing allowances) in lieu of base salary.Company. 3M has operations and different compensation programs in more thanabout 70 countries around the world. Compliance with the proposal would require substantial coordination with local employees in foreign countries to collect and transmit the necessary data on “all classifications” of the Company’s more than 90,000approximately 96,000 employees worldwide, all of which would need to be carefully analyzed and summarized. The Company believes that the time, cost, and resource burden associated with implementing the proposal is not warranted by any incremental benefit that the resulting information may be able to offer. |
RECOMMENDATION OF THE BOARD
RECOMMENDATION OF THE BOARD
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| |
 | The Board of Directors unanimously recommends a vote “AGAINST” “AGAINST” this proposal. Proxies solicited by the Board of Directors will be voted “AGAINST” “AGAINST” this proposal unless a stockholdershareholder indicates otherwise in voting the proxy. |
742020 Proxy Statement | | 3M91 |
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| Stock ownership information |
STOCK OWNERSHIP
INFORMATION
Security Ownershipownership of Managementmanagement
The following table includes all 3M stock basedstock-based holdings, as of February 28, 2018,29, 2020, of the directors and the Named Executive Officers set forth in the Summary Compensation Table, and the directors and executive officers as a group.
Common Stock and Total Stock-Based HoldingsCOMMON STOCK AND TOTAL STOCK-BASED HOLDINGS
| NAME AND PRINCIPAL POSITION | | STOCK(1) | | RESTRICTED
STOCK
UNITS(2) | | DEFERRED
STOCK(3) | | TOTAL(4) | | PERCENT OF
CLASS |
| Sondra L. Barbour, Director | | — | | — | | 3,345 | | 3,345 | | (5) |
| Thomas “Tony” K. Brown, Director | | — | | — | | 4,659 | | 4,659 | | (5) |
| Vance D. Coffman, Director | | 6,591 | | — | | 41,611 | | 48,202 | | (5) |
| David B. Dillon, Director | | — | | — | | 2,303 | | 2,303 | | (5) |
| Michael L. Eskew, Director | | — | | — | | 36,813 | | 36,813 | | (5) |
| Herbert L. Henkel, Director | | — | | — | | 31,841 | | 31,841 | | (5) |
| Amy E. Hood, Director | | 24 | | — | | 308 | | 332 | | (5) |
| Muhtar Kent, Director | | — | | — | | 9,580 | | 9,580 | | (5) |
| Edward M. Liddy, Director | | — | | — | | 52,636 | | 52,636 | | (5) |
| Gregory R. Page, Director | | 1,000 | | — | | 2,537 | | 3,537 | | (5) |
| Patricia A. Woertz, Director | | 1,738 | | — | | — | | 1,738 | | (5) |
| Inge G. Thulin, Director, | | 1,243,705 | | — | | 173,001 | | 1,416,706 | | (5) |
| Chairman of the Board, President and Chief Executive Officer | | | | | | | | | | |
| Nicholas C. Gangestad, | | 173,457 | | 6,221 | | 14,005 | | 193,683 | | (5) |
| Senior Vice President and Chief Financial Officer | | | | | | | | | | |
| Frank R. Little | | 148,432 | | 8,710 | | — | | 157,142 | | (5) |
| Executive Vice President | | | | �� | | | | | | |
| Michael F. Roman, | | 167,443 | | 12,646 | | 12,421 | | 192,510 | | (5) |
| Chief Operating Officer and Executive Vice President | | | | | | | | | | |
| Hak Cheol Shin, | | 378,591 | | 12,646 | | — | | 391,237 | | (5) |
| Vice Chair and Executive Vice President | | | | | | | | | | |
| All Directors and Executive Officers as a Group (28 persons) | | 3,779,838 | | 78,393 | | 430,035 | | 4,288,266 | | (5) |
| Name and principal position | | Stock(1) | | | Restricted
Stock
Units(2) | | | Deferred
Stock(3) | | | Total(4) | | | Percent
of Class | |
| Thomas “Tony” K. Brown, Director | | | — | | | | — | | | | 6,753 | | | | 6,753 | | | (5) | |
| Pamela J. Craig, Director | | | — | | | | — | | | | 1,002 | | | | 1,002 | | | (5) | |
| David B. Dillon, Director | | | 1,200 | | | | — | | | | 4,255 | | | | 5,455 | | | (5) | |
| Michael L. Eskew, Director | | | — | | | | — | | | | 42,659 | | | | 42,659 | | | (5) | |
| Herbert L. Henkel, Director | | | — | | | | — | | | | 36,988 | | | | 36,988 | | | (5) | |
| Amy E. Hood, Director | | | 24 | | | | — | | | | 2,139 | | | | 2,163 | | | (5) | |
| Muhtar Kent, Director | | | — | | | | — | | | | 13,458 | | | | 13,458 | | | (5) | |
| Edward M. Liddy, Director | | | — | | | | — | | | | 58,999 | | | | 58,999 | | | (5) | |
| Dambisa F. Moyo, Director | | | 1,430 | | | | — | | | | 104 | | | | 1,534 | | | (5) | |
| Gregory R. Page, Director | | | 4,000 | | | | — | | | | 5,159 | | | | 9,159 | | | (5) | |
| Patricia A. Woertz, Director | | | 2,580 | | | | — | | | | 1,002 | | | | 3,582 | | | (5) | |
| Michael F. Roman, Chairman of the Board, President and Chief Executive Officer | | | 313,845 | | | | — | | | | 29,221 | | | | 343,066 | | | (5) | |
| Inge G. Thulin, Former Executive Chairman of the Board | | | 1,344,758 | | | | — | | | | 201,328 | | | | 1,546,086 | | | (5) | |
| Nicholas C. Gangestad, Senior Vice President and Chief Financial Officer | | | 307,927 | | | | 6,221 | | | | 20,564 | | | | 334,712 | | | (5) | |
| Ashish K. Khandpur, Executive Vice President, Transportation and Electronics Business Group | | | 147,408 | | | | — | | | | 13,250 | | | | 160,658 | | | (5) | |
| Julie L. Bushman, Executive Vice President, International Operations | | | 296,714 | | | | — | | | | — | | | | 296,714 | | | (5) | |
| Joaquin Delgado, Former Executive Vice President, Consumer Business Group | | | 272,269 | | | | — | | | | — | | | | 272,269 | | | (5) | |
| Michael G. Vale, Executive Vice President, Safety and Industrial Business Group | | | 320,435 | | | | — | | | | 33,690 | | | | 354,125 | | | (5) | |
| All Directors and Executive Officers as a Group (25 persons) | | | 2,139,990 | | | | 11,666 | | | | 304,103 | | | | 2,455,759 | | | (5) | |
FOOTNOTES TO COMMON STOCK AND TOTAL STOCK-BASED HOLDINGS TABLE
(1) This column lists beneficial ownership of 3M common stock as calculated under Securities and Exchange Commission rules. Unless otherwise noted, voting power and investment power in the shares are exercisable solely by the named person, and none of the shares are pledged as security by the named person. In accordance with Securities and Exchange Commission rules, this column also includes shares that may be acquired pursuant to stock options that are or will be exercisable within 60 days of February 28, 2018, as follows: Mr. Thulin 1,187,531, Mr. Gangestad 161,091, Mr. Little 140,865, Mr. Roman 159,540, and Mr. Shin 312,491.
(2) This column reflects restricted stock units that generally vest over a three- to five-year period, assuming continued employment until each vesting date (or until the individual retires from the Company, in some cases). The executive officers do not have voting power with respect to the shares listed in this column.
(3) This column reflects shares earned by the directors as a result of their service on the Board of Directors, the payout of which has been deferred until following the termination of their membership on the Board of Directors. This column also includes shares of the Company’s common stock which the executive officers are entitled to receive following their retirement from the Company as a result of their election to defer the payout of their performance share awards granted under the Company’s long-term incentive plan. Neither the directors nor the executive officers have voting power with respect to the shares listed in this column.
(4) This column shows the individual’s total 3M stock-based holdings, including the securities shown in the “Stock” column (as described in note 1), in the “Restricted Stock Units” column (as described in note 2), and in the “Deferred Stock” column (as described in note 3).
(5) Each director and executive officer individually, and All Directors and Executive Officers as a Group, beneficially owned less than one percent of the outstanding common stock of the Company.
| (1) | This column lists beneficial ownership of 3M common stock as calculated under Securities and Exchange Commission rules. Unless otherwise noted, voting power and investment power in the shares are exercisable solely by the named person, and none of the shares are pledged as security by the named person. In accordance with Securities and Exchange Commission rules, this column also includes shares that may be acquired pursuant to stock options that are or will be exercisable within 60 days of February 29, 2020, as follows: Mr. Roman — 295,265 shares, Mr. Thulin — 1,252,340 shares, Mr. Gangestad — 289,986 shares, Mr. Khandpur — 143,571 shares, Ms. Bushman — 257,786 shares, Mr. Delgado — 248,092 shares and Mr. Vale — 301,269 shares. This column includes the following shares over which the named person shares voting and/or investment power: Mr. Khandpur — 1,573 shares held by a family member. |
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| (2) | This column reflects restricted stock units that generally vest over a three- to five-year period, assuming continued employment until each vesting date (or until the individual retires from the Company, in some cases). The executive officers do not have voting power with respect to the shares listed in this column. |
| (3) | This column reflects shares earned by the directors as a result of their service on the Board of Directors, the payout of which has been deferred until following the termination of their membership on the Board of Directors. This column also includes shares of the Company’s common stock which the executive officers are entitled to receive following their retirement from the Company as a result of their election to defer all or a portion of the payout of their performance share awards granted under the Company’s long-term incentive plan. Neither the directors nor the executive officers have voting power with respect to the shares listed in this column. |
| (4) | This column shows the individual’s total 3M stock-based holdings, including the securities shown in the “Stock” column (as described in note 1), in the “Restricted Stock Units” column (as described in note 2), and in the “Deferred Stock” column (as described in note 3). |
| (5) | Each director and executive officer individually, and All Directors and Executive Officers as a Group, beneficially owned less than one percent of the outstanding common stock of the Company. |
Security Ownershipownership of Certain Beneficial Ownerscertain beneficial owners
The following table sets forth information regarding beneficial owners of more than 5 percent of the outstanding shares of 3M common stock.
| NAME/ADDRESS | | COMMON STOCK
BENEFICIALLY
OWNED | | PERCENT OF
CLASS |
The Vanguard Group(1)
100 Vanguard Blvd.
Malvern, PA 19355 | | 48,885,164 | | 8.20 |
State Street Corporation(2)
State Street Financial Center
One Lincoln Street
Boston, MA 02111 | | 45,135,766 | | 7.58 |
BlackRock, Inc.(3)
55 East 52nd Street
New York, NY 10055 | | 38,828,584 | | 6.50 |
(1) In a Schedule 13G/A filed with the Securities and Exchange Commission on February 13, 2018, The Vanguard Group reported that, as of December 31, 2017, it had sole voting power with respect to 849,465 shares, shared voting power with respect to 136,832 shares, sole dispositive power with respect to 47,920,113 shares, and shared dispositive power with respect to 965,051 shares. It also reported that Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 663,642 shares or .11 percent of 3M common stock outstanding as a result of its serving as investment manager of collective trust accounts. It further reported that Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 483,141 shares or .08 percent of 3M common stock outstanding as a result of its serving as investment manager of Australian investment offerings. Vanguard provides investment management services to the Company’s defined contribution plans in the U.S. through co-mingled mutual fund vehicles. The 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan use these investments in their defined contribution investment choices. Fees paid for investment management of these funds are incorporated into the fund NAV on a daily basis and fully disclosed as an expense ratio for the funds. As a result, these fees are paid by participants in the Company’s defined contribution plans and are not paid by the Company. The total amount of the fees will fluctuate based on the plan participant allocation decisions. The fees paid are reviewed by the fiduciaries of the retirement plans and are determined to be reasonable for the services provided.
(2) In a Schedule 13G filed with the Securities and Exchange Commission on February 13, 2018, State Street Corporation reported that, as of December 31, 2017, it had shared voting power with respect to 45,135,766 shares of 3M common stock and shared dispositive power with respect to 45,135,766 shares of 3M common stock. Of these shares, 13,562,056 shares were held as trustee or investment manager for certain 3M savings plans, including the Company’s Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan, which are 401(k) retirement savings plans. State Street Bank and Trust Company provides custody, investment management, and corporate finance services to the Company and a number of employee benefit plans sponsored by the Company and its affiliates. The 3M Voluntary Investment Plan and Employee Stock Ownership Plan, the 3M Savings Plan and 3M Retiree Welfare Benefit Plan utilize State Street Global Advisors, an affiliate of State Street Bank and Trust Company, as an investment manager. State Street Bank and Trust Company also provides custody services for the Company’s defined contribution plans in the U.S. Further, State Street Bank and Trust Company is a participant of 3M Company’s $3.75 billion revolving credit agreement dated March 9, 2016. In total, the Company and the various employee benefit plans paid fees of $2.1 million to State Street Bank and Trust Company and its affiliates in 2017. In addition, the Trustee will charge the funds an annual administration fee and transaction fees which are incorporated into the funds’ NAV. The fees paid are reviewed by the Company (with respect to the credit agreement) and the fiduciaries of the employee benefit plans and are determined to be reasonable for the services provided.
(3) In a Schedule 13G/A filed with the Securities and Exchange Commission on February 8, 2018, BlackRock, Inc. reported that, as of December 31, 2017, it had sole voting power with respect to 33,477,521 shares and sole dispositive power with respect to 38,828,584 shares, of which 30,570 shares were held as investment manager for the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan. BlackRock, Inc. and its affiliates provide investment management services to several employee benefit plans sponsored by the Company and its Canadian affiliate. The 3M Voluntary Investment Plan and Employee Stock Ownership Plan, the 3M Savings Plan and the 3M Canada Company Master Trust utilize these investment management services. In total, the various employee benefit plans paid fees of $2.1 million in 2017 to BlackRock, Inc. and its affiliates, a majority of which was paid by the participants in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan. In addition, the Trustee will charge the funds held by the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan an annual administration fee which is incorporated into the funds’ NAV. The fees paid are reviewed by the fiduciaries of the employee benefit plans and are determined to be reasonable for the services provided.
| Name/address | | Common Stock
Beneficially
Owned | | Percent
of Class | |
The Vanguard Group(1)
100 Vanguard Blvd.
Malvern, PA 19355 | | | 50,504,075 | | | 8.78 | |
State Street Corporation(2)
State Street Financial Center
One Lincoln Street
Boston, MA 02111 | | | 42,320,337 | | | 7.36 | |
BlackRock, Inc.(3)
55 East 52nd Street
New York, NY 10055 | | | 41,713,628 | | | 7.30 | |
76(1) | |In a Schedule 13G/A filed with the Securities and Exchange Commission on February 12, 2020, The Vanguard Group reported that, as of December 31, 2019, it had sole voting power with respect to 869,956 shares, shared voting power with respect to 153,602 shares, sole dispositive power with respect to 49,524,158 shares, and shared dispositive power with respect to 979,917 shares. It also reported that Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 674,130 shares or 0.11 percent of 3M common stock outstanding as a result of its serving as investment manager of collective trust accounts. It further reported that Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 491,319 shares or 0.08 percent of 3M common stock outstanding as a result of its serving as investment manager of Australian investment offerings. Vanguard provides investment management services to the Company’s defined contribution plans in the U.S. through a co-mingled mutual fund vehicle. The 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan use this investment in their defined contribution investment choices. Fees paid for investment management of the fund are incorporated into the fund NAV on a daily basis and fully disclosed as an expense ratio for the fund. As a result, these fees are paid by participants in the Company’s defined contribution plans and are not paid by the Company. The total amount of the fees will fluctuate based on the plan participant allocation decisions. The fees paid are reviewed by the fiduciaries of the retirement plans and are determined to be reasonable for the services provided. |
| (2) | In a Schedule 13G filed with the Securities and Exchange Commission on February 13, 2020, State Street Corporation reported that, as of December 31, 2019, it had shared voting power with respect to 34,053,004 shares of 3M common stock and shared dispositive power with respect to 42,314,931 shares of 3M common stock. Of these shares, 11,668,839 shares were held as trustee or investment manager for certain 3M savings plans, including the Company’s Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan, which are 401(k) retirement savings plans. State Street Bank and Trust Company provides custody, investment management, and corporate finance services to the Company and a number of employee benefit plans sponsored by the Company and its affiliates. The 3M Voluntary Investment Plan and Employee Stock Ownership Plan, the 3M Savings Plan, and the 3M Retiree Welfare Benefit Plan utilize State Street Global Advisors, an affiliate of State Street Bank and Trust Company, as an investment manager. State Street Bank and Trust Company also provides custody services for the Company’s defined contribution plans in the U.S. Further, State Street Bank and Trust Company is a participant of 3M Company’s $3 billion five-year credit agreement dated November 15, 2019. In total, the Company and the various employee benefit plans paid fees of $1.6 million in 2019 to State Street Bank and Trust Company and its affiliates, a majority of which was paid by the participants in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan. In addition, the Trustee will charge the funds held by the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan an annual administration fee and transaction fees which are incorporated into the funds’ NAV. The fees paid are reviewed by the Company (with respect to the credit agreement) and the fiduciaries of the employee benefit plans and are determined to be reasonable for the services provided. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a)Table of the Securities Exchange Act of 1934 requires our directors and executive officers, and any person owning more than 10 percent of the outstanding shares of 3M common stock, to file with the Securities and Exchange Commission reports regarding their ownership and changes in their ownership of our stock. As a practical matter, 3M assists its directors and executive officers by monitoring transactions and completing and filing Section 16 reports on their behalf. 3M believes that during 2017, its directors and executive officers timely filed all required Section 16(a) reports. In making this statement, 3M has relied upon examination of copies of Forms 3, 4, and 5 and the written representations of its directors and executive officers.Contents
| (3) | In a Schedule 13G/A filed with the Securities and Exchange Commission on February 5, 2020, BlackRock, Inc. reported that, as of December 31, 2019, it had sole voting power with respect to 35,673,569 shares and sole dispositive power with respect to 41,713,628 shares, of which 30,795 shares were held as investment manager for the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan. BlackRock, Inc. and its affiliates provide investment management services to several employee benefit plans sponsored by the Company and its Canadian affiliate. The 3M Voluntary Investment Plan and Employee Stock Ownership Plan, the 3M Savings Plan and the 3M Canada Company Master Trust utilize these investment management services. In total, the various employee benefit plans paid fees of $2.7 million in 2019 to BlackRock, Inc. and its affiliates, a majority of which was paid by the participants in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan. In addition, the Trustee will charge the funds held by the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan an annual administration fee and transaction fees which are incorporated into the funds’ NAV. The fees paid are reviewed by the fiduciaries of the employee benefit plans and are determined to be reasonable for the services provided. |
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OTHER
INFORMATION
Proxy Statementstatement
The Board of Directors (the “Board”) of 3M Company, a Delaware corporation (“3M” or the “Company”) is soliciting proxies for the Company’s Annual Meeting of Stockholders.Shareholders. You are receiving a Proxy Statement because you own shares of 3M common stock that entitle you to vote at the meeting. By use of a proxy you can vote, whether or not you attend the meeting. The Proxy Statement describes the matters we would like you to vote on and provides information on those matters so you can make an informed decision.
The information included in this Proxy Statement relates to proposals to be voted on at the meeting (if properly presented), the voting process, 3M’s Board and Board committees, the compensation of directors and certain executive officers, and other required information.
Purpose of the Annual Meeting
The purpose of the Annual Meeting is to elect the directors identified in this Proxy Statement and to conduct the business described in the Notice of Annual Meeting.
Annual Meeting Admission
How do I attend the 20182020 Annual Meeting? What do I need to bring?
Only stockholdersshareholders who held shares of 3M common stock as of the close of business on March 13, 2018,17, 2020, the record date, are invited to attend the Annual Meeting. To attend the meeting, you will need to pre-register and bring an admission ticket and a valid government issued photo identification. You will need to RSVP and print an admission ticket in advance by visitingwww.proxyvote.comand following the instructions there. You will need the 16-digit control number to accesswww.proxyvote.com.www.proxyvote.com. You can find your control number on:
| ●• | your proxy card included in this Proxy Statement if it was mailed to you; |
| | |
| ●• | your Notice of Internet Availability of Proxy Materials if you received proxy materials via electronic delivery; or |
| | |
| ●• | your voting instruction card if you hold your shares in street name through a broker or other nominee. |
If you are not a record date stockholder,shareholder, you may be admitted to the meeting only if you have a valid legal proxy from a record date stockholdershareholder who has pre-registered and obtained an admission ticket. You must present that proxy and admission ticket, as well as a valid government issued photo identification, at the entrance to the meeting.
On the day of the meeting, an admission ticket, along with a valid government issued photo identification such as a driver’s license or passport, must be presented in order to be admitted to the Annual Meeting. Please note that seating is limited, and admission is on a first-come, first-served basis.
For questions about admission to the Annual Meeting, please contact us at 1-800-3M HELPS (1-800-364-3577).
If you do not provide photo identification or comply with the other procedures outlined here, you will not be admitted to the Annual Meeting.
Use of cameras, recording devices, computers and other electronic devices, such as smartphones and tablets, will not be permitted at the meeting. For security reasons, you will be required to pass through metal detection screening before being granted access to the meeting. No large bags or packages are allowed at the meeting.
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How do I listen to the live webcast?
If you are unable to attend the Annual Meeting, you can listen to the live webcast of the business portion of the meeting by visitinghttp://investors.3M.com, orwww.3M.comunder Investor Relations — Annual Meeting Live Webcast.
Could emerging developments regarding the coronavirus affect our ability to hold an in-person Annual Meeting?
We are actively monitoring the coronavirus (COVID-19) situation. In the event it is not possible or advisable to hold our Annual Meeting in person, we will publicly announce, as soon as practicable before the meeting, a determination to hold the meeting solely by means of remote communication online. In that event, you or your proxyholder could participate, vote and examine the list of shareholders of record by accessing a designated website using your 16-digit control number. Please monitor our investor relations website athttps://investors.3m.comfor updated information.
Information Aboutabout the Notice of Internet Availability of Proxy Materials
Why did I receive a Notice of Internet Availability of the proxy materialsProxy Materials and not the printed proxy materials?
The Securities and Exchange Commission allows companies to furnish their proxy materials to stockholdersshareholders over the Internet. As a result, we are mailing to many of our stockholdersshareholders a Notice of Internet Availability of Proxy Materials instead of a paper copy of the proxy materials. In addition, we are providing the notice and proxy materials by e-mail to some of our stockholdersshareholders who previously consented to electronic delivery of proxy materials. Those stockholdersshareholders should have received an e-mail containing a link to the website where the proxy materials are available, as well as a link to the proxy voting website. All stockholdersshareholders receiving the Notice of Internet Availability of Proxy Materials will have the ability to access the proxy materials over the Internet and to request to receive a paper copy of the proxy materials by mail. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the notice. In addition, the notice contains instructions on how you may request to receive proxy materials in printed form by mail or to access them electronically in connection with future distributions of proxy materials. Distributing proxy materials electronically conserves natural resources and reduces the costs of printing and distributing our proxy materials.
Why did I receive a printed copy of the proxy materials and not the Notice of Internet Availability of Proxy Materials?
We are providing some of our stockholders,shareholders, including stockholdersshareholders who have previously requested to receive paper copies of the proxy materials, with paper copies of the proxy materials instead of the Notice of Internet Availability of Proxy Materials.
How do I view the proxy materials online?
Go towww.proxyvote.comand follow the instructions to view the materials. You will need to provide the control number printed in the box marked by the arrow located on your Notice of Internet Availability of Proxy Materials (see example below — the information in the box is an example only — your number will be different and is unique to you).
  | 1234 5678 9012 3456 |
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What if I prefer to receive a paper copy of the proxy materials?
You can easily request a paper copy of the proxy materials (including the Notice of Annual Meeting, Proxy Statement, and 20172019 Annual Report) at no cost by using one of the three methods below. You will need to provide the control number printed in the box marked by the arrow located on your Notice of Internet Availability of Proxy Materials (see example above — the information in the box is an example only — your number will be different and is unique to you).
  | ● | ByINTERNET Internet
Logon atwww.proxyvote.com; |
 | | |
 | ● | ByTELEPHONE Telephone,
Call toll-free at 1-800-579-1639; or |
 | | |
 | ● | By sending anE-MAIL E-mail
Send tosendmaterial@proxyvote.com (simply provide in the subject line the control number printed in the box marked by the arrow from your Notice of Internet Availability of Proxy Materials; no other information is necessary). |
Can I request to receive my Notice of Internet Availability of Proxy Materials by e-mail rather than by mail?
You may request to receive proxy materials for future meetings by e-mail viawww.proxyvote.comorwww.investordelivery.comand follow the electronic delivery enrollment instructions. If you choose to access future proxy materials electronically, you will receive an e-mail with instructions containing a link to the website where those materials are available and a link to the proxy voting website. Your election to access proxy materials by e-mail will remain in effect until you terminate it.
Please note that you MAY NOT USE your Notice of Internet Availability of Proxy Materials to vote your shares; it is NOT a form for voting. If you return the Notice of Internet Availability of Proxy Materials in an attempt to vote your shares, that vote will not count. |
| For more information about the Notice of Internet Availability of Proxy Materials, please visit:www.sec.gov/spotlight/proxymatters/e-proxy.shtml |
2018 Proxy Statement | | 79 |
Stockholders EntitledShareholders entitled to Votevote
Each share of our common stock outstanding as of the close of business on March 13, 2018,17, 2020, the record date, is entitled to one vote at the Annual Meeting on each matter properly brought before the meeting. As of that date, there were 594,707,931575,260,717 shares of common stock issued and outstanding.
Most 3M stockholdersshareholders hold their shares through a broker, bank, trustee, or other nominee (which for simplicity we refer to as a “broker or other nominee”) rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially:
STOCKHOLDER OF RECORDShareholderof Record | | If your shares are registered directly in your name with 3M’s transfer agent, EQ Shareowner Services, you are considered the stockholdershareholder of record of those shares and the Notice of Internet Availability of Proxy Materials, or if you requested paper delivery, a copy of these proxy materials are being sent directly to you by 3M. As the stockholdershareholder of record, you have the right to grant your voting proxy directly to 3M or to vote in person at the meeting. You may also vote on the Internet or by telephone, as described in the Notice of Internet Availability of Proxy Materials and below under the heading “Voting Methods.methods.” |
BENEFICIAL OWNER2020 Proxy Statement | 97 |
Table of Contents
| BeneficialOwner | | If your shares are held by a broker or other nominee, you are considered the beneficial owner of shares held in street name and these proxy materials are being forwarded to you by your broker or other nominee who is considered the stockholdershareholder of record of those shares. As the beneficial owner, you have the right to direct your broker or other nominee on how to vote and are also invited to attend the meeting. However, since you are not the stockholdershareholder of record, you may not vote these shares in person at the meeting, unless you obtain a legal proxy from the broker or other nominee. Your broker or other nominee is obligated to provide you with a voting instruction card for you to use. You may also vote on the Internet or by telephone, as described in the Notice of Internet Availability of Proxy Materials and below under the heading “Voting Methods.methods.” If you fail to provide voting instructions to your broker or other nominee, it will have discretion to vote your shares with respect to Proposal 2, but not with respect to Proposals 1, 3, 4, or 5,4, as described below under “Voting Requirementsrequirements to Elect Directorselect directors and Approve Eachapprove each of the Proposals Describedproposals described in this Proxy Statement.proxy statement.” |
PLAN ACCOUNTSPlanAccounts | | If your shares are held in your account in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan, you are considered the beneficial owner of these shares and the trustee of the plans is considered the stockholdershareholder of record. Participants in 3M’s Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan may direct the trustee on how to vote the shares allocated to their account via the Internet, by telephone, or by signing and submitting the proxy card as described in the Notice of Internet Availability of Proxy Materials and below under the heading “Voting Methods.methods.” Participants in 3M’s Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan may also direct the trustee how to vote a proportionate number of allocated shares of common stock for which it has not received direction by following the same voting instructions. If you fail to direct the trustee how to vote your shares by following these instructions, the trustee will vote your shares as described in the proxy card. |
Proposals you are Askedasked to Votevote on and the Board’s Voting Recommendationsvoting recommendations
The following proposals are included in this Proxy Statement and are scheduled to be voted on at the meeting. 3M’s Board recommends that you vote your shares as indicated below.
PROPOSALS:Proposals: | | THE BOARD’SThe Board’s Voting
VOTING
RECOMMENDATIONS:Recommendations: | | RATIONALE FOR
SUPPORT:Rationale for Support: | | FOR FURTHERFor Further
DETAILS:Details: |
| 1. | | Elect the twelveeleven directors identified in this Proxy Statement, each for a term of one year. | | “FOR” “FOR” each nominee to the Board | | Our nominees are distinguished leaders who bring a mix of skills and qualifications to the Board and can represent the Interestsinterests of all stockholders.shareholders. | | Page 6 |
PROPOSALS: | | THE BOARD’S
VOTING
RECOMMENDATIONS: | | RATIONALE FOR
SUPPORT: | | FOR FURTHER
DETAILS:13 |
| 2. | | Ratify the appointment of PricewaterhouseCoopers LLP as 3M’s independent registered public accounting firm for 2018.2020. | | “FOR” “FOR” | | Based on its assessment of the qualifications and performance of PricewaterhouseCoopers LLP (“PwC”), the Audit Committee believes that it is in the best interests of the Company and its stockholdersshareholders to retain PwC. | | Page 3446 |
| 3. | | Approve, on an advisory basis, the compensation of our named executive officers. | | “FOR” “FOR” | | Our executive compensation program appropriately aligns our executives’ compensation with the performance of the Company and its business units as well as their individual performance. | | Page 3750 |
| 4. | Stockholder proposal on special shareholder meetings, if properly presented at the meeting. | | “AGAINST” | | See the Board’s opposition statement. | | Page 71 |
5. | StockholderShareholder proposal on setting target amounts for CEO compensation, if properly presented at the meeting. | | “AGAINST” “AGAINST” | | See the Board’s opposition statement. | | Page 7390 |
Other than the proposals described in this Proxy Statement, the Board is not aware of any other matters to be presented for a vote at the Annual Meeting. If you grant a proxy by telephone, Internet, or by signing and returning your proxy card, any of the persons appointed by the Board as proxy holders — Michael F. Roman, Nicholas C. Gangestad, Gregg M. Larson, and Inge G. ThulinIvan K. Fong — will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If any of our nominees is unavailable as a candidate for director, the above-named proxy holders will vote your proxy for another candidate or candidates as may be nominated by the Board of Directors.
Table of Contents
Voting Requirementsrequirements to Elect Directorselect directors and Approve Eachapprove each of the Proposals Describedproposals described in This Proxy Statementthis proxy statement
QUORUMQuorum | | The presence of the holders of a majority of the outstanding shares of common stock entitled to vote at the Annual Meeting, present in person or represented by proxy, is necessary to constitute a quorum. Abstentions and “broker non-votes” are counted as present for purposes of determining a quorum. As discussed below, a “broker non-vote” occurs when a broker or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the broker or other nominee does not have discretionary voting power for that proposal and has not received instructions from the beneficial owner. |
BROKER VOTINGBrokerVoting | | Under NYSE rules, brokers have discretionary authority to vote their clients’ shares in “routine” matters (including Proposal 2, the ratification of PwC as our independent registered public accounting firm) so long as the beneficial owner of those shares did not provide voting instructions to the broker at least ten days before the stockholdershareholder meeting. Director elections, stockholdershareholder proposals, and the say-on-pay proposal, are not considered “routine” matters for these purposes. As a result, if you do not provide your broker with instructions as to how to vote your shares, your broker will be prohibited from voting on Proposals 1, 3, 4, and 5,4, resulting in a “broker non-vote” with respect to those proposals. If you are a beneficial owner (other than as a participant in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan), your broker or other nominee is permitted to vote your shares on the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2018,2020, even if it does not receive voting instructions from you. |
2018 Proxy Statement | | 81 |
ELECTION OFDIRECTORSDirectors | | In accordance with 3M’s Bylaws, each director is elected by the vote of the majority of votes cast (which means the number of votes cast “for” a director’s election exceeds the number of votes cast “against” that director’s election, with “abstentions” and “broker non-votes” not counted as a vote cast either “for” or “against” that director’s election) with respect to that director’s election at this meeting for the election of directors at which a quorum is present. |
| | | The Nominating and Governance Committee has established procedures under which any incumbent director who is not elected shall offer to tender his or her resignation to the Board. In the event an incumbent director fails to receive a majority of the votes cast in the election, the Nominating and Governance Committee, or such other committee designated by the Board of Directors, shall make a recommendation to the Board of Directors as to whether to accept or reject the resignation of such incumbent director, or whether other action should be taken. The Board of Directors shall act on the resignation, taking into account the Committee’s recommendation, and publicly disclose (by issuing a press release and filing appropriate disclosure with the Securities and Exchange Commission) its decision regarding the resignation and, if such resignation is rejected, the rationale behind the decision within ninety (90) days following certification of the election results. The Nominating and Governance Committee in making its recommendation and the Board of Directors in making its decision each may consider any factors and other information that they consider appropriate and relevant. |
| | | An incumbent director who fails to receive a majority of the votes cast in the election and who tenders his or her resignation pursuant to the procedures described above shall remain active and engaged in Board activities while the Nominating and Governance Committee and the Board decide whether to accept or reject such resignation, or whether other action should be taken. However, it is expected that such incumbent director shall not participate in any proceedings by the Nominating and Governance Committee or the Board regarding whether to accept or reject such director’s resignation, or whether to take other action with respect to such director. |
| | | If the Board of Directors accepts a director’s resignation, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board of Directors may fill the resulting vacancy pursuant to the Bylaws. |
ALL OTHERPROPOSALSAll OtherProposals | | The affirmative “FOR” vote of a majority of those shares present in person or represented by proxy at the meeting and entitled to vote on the matter is required to approve Proposals 2, 3, 4, and 5.4. In tabulating the voting result for any particular proposal “broker non-votes” (if applicable) are not counted as votes “FOR” or “AGAINST” the proposal. An abstention will, however, be counted as entitled to vote on a proposal and will, therefore, have the effect of a vote “AGAINST.” |
Table of Contents
Voting Methodsmethods
If you hold shares directly as the stockholdershareholder of record, you may vote by granting a proxy or by voting in person at the Annual Meeting by requesting a ballot. If you hold shares beneficially in street name, you may vote by submitting voting instructions to your broker or other nominee or in person at the Annual Meeting by requesting a legal proxy from your broker or other nominee. If you own shares beneficially as a participant in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan, you may vote by submitting voting instructions to the trustee. In most instances, you will be able to do this over the Internet, by telephone, or by mail. Even if you plan to attend the Annual Meeting, we recommend that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the Annual Meeting.
Please refer to the summary instructions below and those included on your Notice of Internet Availability of Proxy Materials or proxy card or, for shares held in street name, the voting instruction card provided by your broker or other nominee.
The Internet and telephone voting procedures are designed to authenticate stockholdersshareholders by use of a control number and to allow you to confirm that your instructions have been properly recorded. If you vote by telephone or on the Internet, you do not need to return your proxy card. Telephone and Internet voting for stockholdersshareholders of record will be available 24 hours a day, up until 11:10:59 p.m., EasternCentral Daylight Time, on May 7, 2018.11, 2020. Participants in 3M’s Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan may instruct the trustee how to vote their shares via the Internet, by telephone, or by signing and returning the proxy card by 11:10:59 p.m., EasternCentral Daylight Time, on May 6, 2018.10, 2020.
VOTE BY INTERNET  
www.proxyvote.com | | If you have Internet access, you may submit your proxy from any location in the world 24 hours a day, 7 days a week. Have your proxy card or the Notice of Internet Availability of Proxy Materials in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. |
VOTE BY TELEPHONE  
1-800-690-6903 | | If you live in the United States, you may use any touch-tone telephone to vote your proxy toll-free 24 hours a day, 7 days a week. Have your proxy card or the Notice of Internet Availability of Proxy Materials in hand when you call and follow the instructions. |
VOTE BY MAIL
Sign and mail your proxy card
| | You may vote by signing and submitting your proxy card to the Company. If you provide specific voting instructions in your proxy card, your shares will be voted as you instruct. If you sign your proxy card, but do not provide voting instructions, your shares will be voted as the Board recommends. Mark, sign, and date your proxy card and return it in the postage-paid envelope provided so that it is received by May 7, 2018 (or by May 6, 2018 for participants in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan), to 3M Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. For shares held in street name, you may direct your broker or other nominee on how to vote your shares by following the instructions set forth in the voting instruction card that your broker or other nominee has provided. |
VOTE IN PERSON
May 8, 2018 -
8:30 a.m., Eastern Daylight Time
Conrad Indianapolis
50 West Washington Street
Indianapolis, Indiana 46204
| | If you are a stockholder of record, you may grant your proxy to 3M or vote in person at the Annual Meeting by requesting a ballot at the meeting. If you are a street name holder, you may vote in person at the Annual Meeting only if you obtain a legal proxy from your broker or other nominee. |
ALL SHARES THAT HAVE BEEN PROPERLY VOTED AND NOT REVOKED WILL BE VOTED AT THE ANNUAL MEETING.
Changing your Vote
You may change your proxy voting instructions at any time prior to the vote at the Annual Meeting. You may enter a new vote by using the Internet or the telephone or by mailing a new proxy card or new voting instruction card bearing a later date (which will automatically revoke your earlier voting instructions), so long as the new vote is received before the deadlines described above under the heading “Voting Methods.” You may also change your vote by granting a new proxy or by voting in person at the Annual Meeting.
2018 Proxy Statement | | 83 |
Counting the Vote
In the election of directors, you may vote “FOR” or “AGAINST” one or more of the nominees or you may “ABSTAIN.” Abstentions will have no effect on the outcome of the election of directors. For Proposals 2, 3, 4, and 5, you may vote “FOR,” “AGAINST,” or “ABSTAIN,” but please note that abstentions will have the same effect as a vote “AGAINST.” If you sign your proxy card or broker voting instruction card but provide no voting instructions, your shares will be voted in accordance with the recommendations of the Board. Shares held in your account in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan will be voted by the trustee as described in “Stockholders Entitled to Vote” beginning on page 80.
Representatives of Broadridge Financial Solutions, Inc. will tabulate the votes and act as the inspectors of election.
Confidentiality
The Company’s Board of Directors has a policy that all stockholder proxies, ballots, and tabulations that identify stockholders are to be maintained in confidence. No such document will be available for examination, and the identity and vote of any stockholder will not be disclosed, except as necessary to meet legal requirements and allow the inspectors of election to certify the results of the stockholder vote. The policy also provides that inspectors of election for stockholder votes must be independent and cannot be employees of the Company. Occasionally, stockholders provide written comments on their proxy card that may be forwarded to 3M management.
Results of the Vote
We will issue a press release announcing the preliminary voting results for items of business properly presented at the meeting and will disclose the results for those items in a Current Report on Form 8-K filed with the Securities and Exchange Commission within four business days of the Annual Meeting date. The press release with voting results will also be available on our website atwww.3M.com/profile/pressbox/index.jhtml.
Delivery of Documents to Stockholders Sharing an Address
Securities and Exchange Commission rules allow us to deliver a single copy of an annual report and proxy statement to any household not participating in electronic proxy material delivery at which two or more stockholders reside, if we believe the stockholders are members of the same family (a practice called “householding”). We believe that householding benefits both you and the Company by eliminating duplicate mailings to stockholders living at the same address and by reducing our printing and mailing costs. Each stockholder will continue to receive a separate proxy card or voting instruction card.
Your household may have received a single set of proxy materials this year. If you prefer to receive your own copy now or in future years, please request a duplicate set by calling 1-800-579-1639, by going towww.proxyvote.com, by e-mailingsendmaterial@proxyvote.com, or by writing to 3M Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Alternatively, if your household received multiple sets of proxy materials this year, and members of your household who are entitled to receive proxy materials would all prefer to receive only a single set of proxy materials, you may submit such a request as specified in the preceding sentence.
If a broker or other nominee holds your shares, you may continue to receive some duplicate mailings. Certain brokers will eliminate duplicate account mailings by allowing stockholders to consent to such elimination, or through implied consent if a stockholder does not request continuation of duplicate mailings. Since not all brokers and nominees may offer stockholders the opportunity this year to eliminate duplicate mailings, you may need to contact your broker or other nominee directly to discontinue duplicate mailings to your household.
List of Stockholders
A list of the stockholders of record entitled to vote at the Annual Meeting will be available for inspection at the Annual Meeting for any purpose germane to the meeting. The list also will be available for ten days prior to the meeting between the hours of 7:45 a.m. and 4:30 p.m., Eastern Daylight Time, at our offices at Aearo Technologies, 7911 Zionsville Road, Indianapolis, Indiana 46268, by contacting the Secretary of the Company.
Cost of Proxy Solicitation
3M will pay for the cost of preparing, assembling, printing, mailing, and distributing these proxy materials. You will need to obtain your own Internet access if you choose to access the proxy materials and/or vote over the Internet. In addition to mailing these proxy materials, the solicitation of proxies or votes may be made in person, by telephone, or by electronic communication by our directors, officers, and employees, who will not receive any additional compensation for these solicitation activities. We have hired Georgeson Shareholder Communications, Inc. to assist us in the distribution of proxy materials and the solicitation of votes. We will pay Georgeson Shareholder Communications, Inc. a fee of $20,000 plus expenses for these services. We will also reimburse brokerage houses and other custodians, nominees, and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to beneficial owners of stock.
Transfer Agent
Our transfer agent is EQ Shareowner Services. All communications concerning stockholders of record accounts, including address changes, name changes, common stock transfer requirements, and similar issues can be handled by contacting EQ Shareowner Services at 1-800-401-1952 (U.S.), 651-450-4064 (outside the U.S.),www.shareowneronline.com, or in writing, P.O. Box 64854, St. Paul, MN 55164-0854.
Requirements for Submission of Stockholder Proposals for Next Year’s Annual Meeting
In order for a stockholder proposal to be considered for inclusion in 3M’s Proxy Statement for next year’s Annual Meeting, our Corporate Secretary must receive the proposal by November 21, 2018. Such proposals must be sent via registered, certified, or express mail (or other means that allows the stockholder to determine when the proposal was received by the Company) to: Gregg M. Larson, Vice President, Deputy General Counsel and Secretary, 3M Company, 3M Center, Building 220-13E-26A, St. Paul, MN 55144-1000. Such proposals must comply with the Securities and Exchange Commission’s regulations regarding the inclusion of stockholder proposals in Company sponsored proxy materials, such as the stockholder continuing to own a minimum number of shares until the Annual Meeting and appearing in person or through an authorized representative at the meeting to present the proposal.
Alternatively, stockholders intending to present a proposal at next year’s Annual Meeting without having it included in the Company’s Proxy Statement must comply with the requirements set forth in the Company’s Bylaws, a copy of which is available atwww.3M.com under Investor Relations — Governance. Our Bylaws require, among other things, that our Corporate Secretary receive written notice from the stockholder no earlier than the close of business on November 21, 2018, and no later than the close of business on December 21, 2018. The notice must contain the information required by our Bylaws.
Proposals received by the Corporate Secretary after the dates mentioned will not be included in the Proxy Statement or acted upon at next year’s Annual Meeting.
By Order of the Board of Directors.
Gregg M. Larson
Vice President, Deputy General Counsel and Secretary
2018 Proxy Statement | | 85 |
APPENDIX A - SUPPLEMENTAL CONSOLIDATED STATEMENT OF INCOME INFORMATION
Reconciliation of GAAP to Non-GAAP Financial Measures
(Millions, except per-share amounts)
(Unaudited)
In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (GAAP), the Company also discusses non-GAAP measures that exclude special items. Operating income, net income attributable to 3M (hereafter referred to as “net income”), and diluted earnings per share attributable to 3M common stockholders (hereafter referred to as “diluted earnings per share”) are all measures for which 3M provides the reported GAAP measure and an adjusted measure (excluding special items). Special items are not in accordance with, nor are they a substitute for, GAAP measures. Special items represent significant charges or credits that are important to an understandingof the Company’s ongoing operations. The Company uses these non-GAAP measures to evaluate and manage the Company’s operations. The Company believes that discussion of results excluding special items is meaningful to investors as it provides a useful analysis of ongoing operating trends. The determination of special items may not be comparable to similarly titled measures used by other companies.
The reconciliations provided below reconciles the non-GAAP financial measures with the most directly comparable GAAP financial measures for the twelve months ended December 31, there were no special items in 2016:
| ADJUSTED EARNINGS PER SHARE (NON-GAAP MEASURE) | | 2017 | | | | 2016 | | |
| (Dollars in millions, except per share amounts) | | REPORTED
GAAP
MEASURE | | ADJUSTMENT
FOR U.S. TAX
REFORM
LEGISLATION
(a) | | ADJUSTED
NON-GAAP
MEASURE | | REPORTED
GAAP
MEASURE | |
| Net income attributable to 3M | | | $4,858 | | | | $762 | | | | $5,620 | | | | $5,050 | | |
| Earnings per diluted share | | | $7.93 | | | | $1.24 | | | | $9.17 | | | | $8.16 | | |
| Earnings per diluted share percent change | | | -2.8 | % | | | | | | | 12.4 | % | | | | | |
| | | | | | | | | | | | | | | | | | |
| FREE CASH FLOW (NON-GAAP MEASURE) | | | | | | | 2017 | | | | | | | 2016 | | |
| (millions) | | REPORTED
MEASURE | | ADJUSTMENT
FOR U.S. TAX
REFORM
LEGISLATION
(a) | | ADJUSTED
NON-GAAP
MEASURE | | | REPORTED
MEASURE | | |
| Major GAAP Cash Flow Categories | | | | | | | | | | | | | | | | | |
| Net cash provided by operating activities | | | $6,240 | | | | | | | | | | | | $6,662 | | |
| Net cash provided by (used in) investing activities | | | (3,086 | ) | | | | | | | | | | | (1,403 | ) | |
| Net cash used in financing activities | | | (2,655 | ) | | | | | | | | | | | (4,626 | ) | |
| | | | | | | | | | | | | | | | | | |
| Free Cash Flow (non-GAAP measure) | | | | | | | | | | | | | | | | | |
| Net cash provided by operating activities | | | $6,240 | | | | $600 | | | | $6,840 | | | | $6,662 | | |
| Purchases of property, plant and equipment | | | (1,373 | ) | | | — | | | | (1,373 | ) | | | (1,420 | ) | |
| Free Cash Flow (b) | | | $4,867 | | | | $600 | | | | $5,467 | | | | $5,242 | | |
| Net Income Attributable | | | $4,858 | | | | $762 | | | | $5,620 | | | | $5,050 | | |
| Free Cash Flow Conversion (b) | | | 100.2 | % | | | | | | | 97.3 | % | | | 103.8 | % | |
| RETURN ON INVESTED CAPITAL (NON-GAAP MEASURE) | | | 2017 | | | | 2016 | |
| (millions) | | REPORTED
MEASURE | | ADJUSTMENT
FOR U.S. TAX
REFORM
LEGISLATION
(a) | | ADJUSTED
NON-GAAP
MEASURE | | REPORTED
MEASURE | |
| Net income including non-controlling interest | | | $4,869 | | | | $762 | | | | $5,631 | | | | $5,058 | | |
| Interest expense (after-tax) | | | 208 | | | | — | | | | 208 | | | | 143 | | |
| Adjusted net income (Return) | | | $5,077 | | | | $762 | | | | $5,839 | | | | $5,201 | | |
| Average shareholders’ equity (including non-controlling interest)(2) | | | $11,627 | | | | $191 | | | | $11,818 | | | | $11,316 | | |
| Average short-term and long-term debt(3) | | | 12,156 | | | | (150 | ) | | | 12,006 | | | | 11,725 | | |
| Average invested capital | | | $23,783 | | | | $41 | | | | $23,824 | | | | $23,041 | | |
| Return on Invested Capital(c) | | | 21.3% | | | | | | | | 24.5% | | | | 22.6% | | |
| (1) Effective income tax rate used for interest expense | | | 35.5% | | | | | | | | 35.5% | | | | 28.3% | | |
| (2) Calculation of average equity (includes non-controlling interest) | | | | | | | | | | | | | | | | | |
| Ending total equity as of: | | | | | | | | | | | | | | | | | |
| March 31 | | | $11,040 | | | | $— | | | | $11,040 | | | | $11,495 | | |
| June 30 | | | 11,644 | | | | — | | | | 11,644 | | | | 11,658 | | |
| September 30 | | | 12,202 | | | | — | | | | 12,202 | | | | 11,769 | | |
| December 31 | | | 11,622 | | | | 762 | | | | 12,384 | | | | 10,343 | | |
| Average total equity | | | $11,627 | | | | $191 | | | | $11,818 | | | | $11,316 | | |
| (3) Calculation of average debt | | | | | | | | | | | | | | | | | |
| Ending short-term and long-term debt as of: | | | | | | | | | | | | | | | | | |
| March 31 | | | $11,711 | | | | $— | | | | $11,711 | | | | $11,139 | | |
| June 30 | | | 11,301 | | | | — | | | | 11,301 | | | | 11,749 | | |
| September 30 | | | 11,663 | | | | — | | | | 11,663 | | | | 12,361 | | |
| December 31 | | | 13,949 | | | | (600 | ) | | | 13,349 | | | | 11,650 | | |
| Average short-term and long-term debt | | | $12,156 | | | | $(150 | ) | | | $12,006 | | | | $11,725 | | |
(a) During the fourth quarter of 2017, 3M recorded a net tax expense of $762 million related to the enactment of the Tax Cuts and Jobs Act (the “U.S. Tax Reform Legislation”). The expense is primarily related to the U.S. Tax Reform Legislation’s transition tax on previously unremitted earnings of non-U.S. subsidiaries and is net of remeasurement of 3M’s deferred tax assets and liabilities considering the U.S. Tax Reform Legislation’s newly enacted tax rates and certain other impacts. This provisional amount is subject to adjustment during the measurement period of up to one year following the December 2017 enactment of the U.S. Tax Reform Legislation, as provided by recent SEC guidance. In addition to reporting financial results in accordance with GAAP, the Company also provides non-GAAP measures that adjust for the net impact of enactment of the U.S. Tax ReformLegislation. This item represents a significant charge that impacted the Company’s financial results. Income, earnings per share, and the effective tax rate are all measures for which 3M provides the reported GAAP measure and an adjusted measure. The adjusted measures are not in accordance with, nor are they a substitute for, GAAP measures. Because of the U.S. Tax Reform Legislation, the Company made a $600 million pension contribution to its U.S. defined benefit pension plan. This contribution did not impact 2017 net income, but it did impact Free Cash Flow Conversion and ROIC. The Company considers these non-GAAP measures in evaluating and managing the Company’s operations. The Company believes that discussion of results adjusted for this item is meaningful to investors as it provides a useful analysis of ongoing underlying operating trends.
(b) Free cash flow and free cash flow conversion are not defined under GAAP. Therefore, they should not be considered a substitute for income or cash flow data prepared in accordance with GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The Company defines free cash flow conversion as free cash flow divided by net income attributable to 3M. The Company believes free cash flow and free cash flow conversion is meaningful to investors as they are useful measures of performance and the Company uses these measures as an indication of the strength of the Company and its ability to generate cash. In 2017, net cash provided by operating activities was impacted by 3M’s enactment of the U.S. Tax Reform Legislation, along with a U.S. pension contribution of $600 million that 3M made following the signing of tax reform. On a combined basis, these items benefited free cash flow conversion by three percentage points. Refer to the proceeding “Cash Flows from Operating Activities” section for discussion of additional items that impacted operating cash flow. Refer to the proceeding “Cash Flows from Investing Activities” section for discussion on capital spending for property, plant and equipment.
(c) Return on Invested Capital (ROIC) is not defined under U.S. generally accepted accounting principles. Therefore, ROIC should not be considered a substitute for other measures prepared in accordance with GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines ROIC as adjusted net income (net income including non-controlling interest plus after-tax interest expense) divided by average invested capital (equity plus debt). The Company believes ROIC is meaningful to investors as it focuses on shareholder value creation.
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CONRAD INDIANAPOLIS
| Location |
| |
| 50 West Washington Street
Indianapolis, Indiana 46204 |
ADMISSION TICKET AND PHOTO ID REQUIRED FOR THE ANNUAL MEETING
Please note that you will need an admission ticket and a valid photo ID to attend the Annual Meeting. For more details, please read “Annual Meeting Admission” on page 78 of the Proxy Statement.
This Proxy Statement was printed on
recycled paper with soy based inks in
a facility that uses 100% renewable
wind energy.
3M CENTER
BLDG. 220-9E-02
ST. PAUL, MN 55144-1000
 | SCAN TO
VIEW MATERIALS & VOTE |  |
VOTE BY INTERNET -www.proxyvote.com or scan the QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Daylight Time on May 7, 2018*. Have your proxy card in hand when you access the Web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Daylight Time on May 7, 2018*. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Sign and mail your proxy card
You may vote by signing and submitting your proxy card to the Company. If you provide specific voting instructions in your proxy card, your shares will be voted as you instruct. If you sign your proxy card, but do not provide voting instructions, your shares will be voted as the Board recommends. Mark, sign, and date your proxy card and return it in the postage-paid envelope we have provided or return it to 3M Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717, so that it is received by May 7, 2018*.ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred11, 2020 (or by 3M Company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
*Up until 11:59 p.m. Eastern Daylight Time on May 6, 2018,10, 2020 for participants in 3M’sthe 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan.Plan), to 3M Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. For shares held in street name, you may direct your broker or other nominee on how to vote your shares by following the instructions set forth in the voting instruction card that your broker or other nominee has provided.
| VOTE IN PERSON
May 12, 2020 8:30 a.m., CDT TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:Archer Hotel 3121 Palm Way Austin, TX 78758 | If you are a shareholder of record, you may grant your proxy to 3M or vote in person at the Annual Meeting by requesting a ballot at the meeting. If you are a street name holder, you may vote in person at the Annual Meeting only if you obtain a legal proxy from your broker or other nominee. | E36088-P02442-Z71771 | KEEP THIS PORTION FOR YOUR RECORDS |
ALL SHARES THAT HAVE BEEN PROPERLY VOTED AND NOT REVOKED WILL BE VOTED AT THE
ANNUAL MEETING. | | DETACH AND RETURN THIS PORTION ONLY | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
Table of Contents Changing your vote You may change your proxy voting instructions at any time prior to the vote at the Annual Meeting. You may enter a new vote by using the Internet or the telephone or by mailing a new proxy card or new voting instruction card bearing a later date (which will automatically revoke your earlier voting instructions), so long as the new vote is received before the deadlines described above under the heading “Voting methods.” You may also change your vote by granting a new proxy or by voting in person at the Annual Meeting. Counting the vote In the election of directors, you may vote “FOR” or “AGAINST” one or more of the nominees or you may “ABSTAIN.” Abstentions will have no effect on the outcome of the election of directors. For Proposals 2, 3, and 4, you may vote “FOR,” “AGAINST,” or “ABSTAIN,” but please note that abstentions will have the same effect as a vote “AGAINST.” If you sign your proxy card or broker voting instruction card but provide no voting instructions, your shares will be voted in accordance with the recommendations of the Board. Shares held in your account in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan will be voted by the trustee as described in “Shareholders entitled to vote” beginning on page 97. Representatives of Broadridge Financial Solutions, Inc. will tabulate the votes and act as the inspectors of election. Confidentiality The Company’s Board of Directors has a policy that all shareholder proxies, ballots, and tabulations that identify shareholders are to be maintained in confidence. No such document will be available for examination, and the identity and vote of any shareholder will not be disclosed, except as necessary to meet legal requirements and allow the inspectors of election to certify the results of the shareholder vote. The policy also provides that inspectors of election for shareholder votes must be independent and cannot be employees of the Company. Occasionally, shareholders provide written comments on their proxy card that may be forwarded to 3M management. Results of the vote We will issue a press release announcing the preliminary voting results for items of business properly presented at the meeting and will disclose the results for those items in a Current Report on Form 8-K filed with the Securities and Exchange Commission within four business days of the Annual Meeting date. The press release with voting results will also be available on our website atwww.3M.com/profile/pressbox/index.jhtml. Delivery of documents to shareholders sharing an address Securities and Exchange Commission rules allow us to deliver a single copy of an annual report and proxy statement to any household not participating in electronic proxy material delivery at which two or more shareholders reside, if we believe the shareholders are members of the same family (a practice called “householding”). We believe that householding benefits both you and the Company by eliminating duplicate mailings to shareholders living at the same address and by reducing our printing and mailing costs. Each shareholder will continue to receive a separate proxy card or voting instruction card. Your household may have received a single set of proxy materials this year. If you prefer to receive your own copy now or in future years, please request a duplicate set by calling 1-800-579-1639, by going towww.proxyvote.com, by e-mailing sendmaterial@proxyvote.com, or by writing to 3M Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Alternatively, if your household received multiple sets of proxy materials this year, and members of your household who are entitled to receive proxy materials would all prefer to receive only a single set of proxy materials, you may submit such a request as specified in the preceding sentence. If a broker or other nominee holds your shares, you may continue to receive some duplicate mailings. Certain brokers will eliminate duplicate account mailings by allowing shareholders to consent to such elimination, or through implied consent if a shareholder does not request continuation of duplicate mailings. Since not all brokers and nominees may offer shareholders the opportunity this year to eliminate duplicate mailings, you may need to contact your broker or other nominee directly to discontinue duplicate mailings to your household. Table of Contents List of shareholders A list of the shareholders of record entitled to vote at the Annual Meeting will be available for inspection at the Annual Meeting for any purpose germane to the meeting. The list also will be available for ten days prior to the meeting during normal business hours at 3M Center, St. Paul, MN 55144, by contacting the Secretary of the Company. Cost of proxy solicitation 3M will pay for the cost of preparing, assembling, printing, mailing, and distributing these proxy materials. You will need to obtain your own Internet access if you choose to access the proxy materials and/or vote over the Internet. In addition to mailing these proxy materials, the solicitation of proxies or votes may be made in person, by telephone, or by electronic communication by our directors, officers, and employees, who will not receive any additional compensation for these solicitation activities. We have hired Georgeson Shareholder Communications, Inc. to assist us in the distribution of proxy materials and the solicitation of votes. We will pay Georgeson Shareholder Communications, Inc. a fee of $20,000 plus expenses for these services. We will also reimburse brokerage houses and other custodians, nominees, and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to beneficial owners of stock. Transfer agent Our transfer agent is EQ Shareowner Services. All communications concerning shareholders of record accounts, including address changes, name changes, common stock transfer requirements, and similar issues can be handled by contacting EQ Shareowner Services at 1-800-401-1952 (U.S.), 651-450-4064 (outside the U.S.),www.shareowneronline.com, or in writing, P.O. Box 64854, St. Paul, MN 55164-0854. Requirements for submission of shareholder proposals for next year’s Annual Meeting In order for a shareholder proposal to be considered for inclusion in 3M’s Proxy Statement for next year’s Annual Meeting, our Corporate Secretary must receive the proposal by November 25, 2020. Such proposals must be sent via registered, certified, or express mail (or other means that allows the shareholder to determine when the proposal was received by the Company) to: Ivan K. Fong, Senior Vice President, General Counsel and Secretary, 3M Company, 3M Center, Building 220-13E-26A, St. Paul, MN 55144-1000. Such proposals must comply with the Securities and Exchange Commission’s regulations regarding the inclusion of shareholder proposals in Company sponsored proxy materials, such as the shareholder continuing to own a minimum number of shares until the Annual Meeting and appearing in person or through an authorized representative at the meeting to present the proposal. Alternatively, shareholders intending to present a proposal at next year’s Annual Meeting without having it included in the Company’s Proxy Statement must comply with the requirements set forth in the Company’s Bylaws, a copy of which is available atwww.3M.comunder Investor Relations — Governance. Our Bylaws require, among other things, that our Corporate Secretary receive written notice from the shareholder no earlier than the close of business on November 25, 2020, and no later than the close of business on December 25, 2020. The notice must contain the information required by our Bylaws. Proposals received by the Corporate Secretary after the dates mentioned will not be included in the Proxy Statement or acted upon at next year’s Annual Meeting. By Order of the Board of Directors. 
Ivan K. Fong Senior Vice President, General Counsel and Secretary Table of Contents | Appendix A - Supplemental consolidated statement of income information |
Reconciliation of GAAP to non-GAAP financial measures (millions, except per-share amounts) (unaudited) In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (GAAP), the Company also discusses non-GAAP measures that exclude special items. Operating income, net income attributable to 3M (hereafter referred to as “net income”), and diluted earnings per share attributable to 3M common shareholders (hereafter referred to as “diluted earnings per share”) are all measures for which 3M provides the reported GAAP measure and an adjusted measure (excluding special items). Special items are not in accordance with, nor are they a substitute for, GAAP measures. Special items represent significant charges or credits that are important to an understanding of the Company’s ongoing operations. The Company uses these non-GAAP measures to evaluate and manage the Company’s operations. The Company believes that discussion of results excluding special items is meaningful to investors as it provides a useful analysis of ongoing operating trends. The determination of special items may not be comparable to similarly titled measures used by other companies. The reconciliations provided below reconcile the non-GAAP financial measures with the most directly comparable GAAP financial measures for the twelve months ended December 31, 2019, 2018 and 2017: ADJUSTED EARNINGS PER SHARE
(non-GAAP measure) | | | 2019 | (Dollars in millions,
except per share
amounts) | | Reported GAAP
Measure | | Adjustment for
Significant Litigation
Related Charges(a) | | Adjustment for loss
on deconsolidation
of Venezuelan
subsidiary(b) | | Adjustment for
Gas & Flame Sale
Gain(c) | | Adjustment for
Fourth Quarter
Restructuring
Items(d) | | Adjustment for
Acelity and M*Modal
Acquisitions(e) | | Adjusted
Non-GAAP
Measure | | Net Sales | | $ | 32,136 | | | | | | | | | | | | | | | | | | | | | | | $ | 32,136 | | | Operating Income | | | 6,174 | | | | 762 | | | | — | | | | (112) | | | | 134 | | | | 63 | | | | 7,022 | | | Operating Income Margin | | | 19.2% | | | | | | | | | | | | | | | | | | | | | | | | 21.9% | | | Net income attributable to 3M | | $ | 4,570 | | | $ | 590 | | | $ | 162 | | | $ | (128) | | | $ | 117 | | | $ | 108 | | | $ | 5,419 | | | Earnings per diluted share | | $ | 7.81 | | | $ | 1.01 | | | $ | 0.28 | | | $ | (0.21) | | | $ | 0.20 | | | $ | 0.18 | | | $ | 9.27 | | | Earnings per diluted share percent change | | | -12.1% | | | | | | | | | | | | | | | | | | | | | | | | -6.9% | |
| | | 2018 | | 2017 | (Dollars in millions,
except per share
amounts) | | Reported GAAP
Measure | | Adjustment for MN
NRD Resolution(f) | | Adjustment for
Measurement Period
Accounting of
TCJA(g) | | CMD Sale Gain, net
of Restructuring
Items(h) | | Adjusted
Non-GAAP
Measure | | Reported
GAAP
Measure | | | Adjustment
for TCJA(i) | | Adjusted
Non-GAAP
Measure | | Net Sales | | $ | 32,765 | | | | | | | | | | | | | | | $ | 32,765 | | | $ | 31,657 | | | | | | | $ | 31,657 | | | Operating Income | | | 7,207 | | | | 897 | | | | — | | | | (381) | | | | 7,723 | | | | 7,692 | | | | — | | | | 7,692 | | | Operating Income Margin | | | 22.0% | | | | | | | | | | | | | | | | 23.6% | | | | 24.3% | | | | | | | | 24.3% | | | Net income attributable to 3M | | $ | 5,349 | | | $ | 770 | | | $ | 176 | | | $ | (299) | | | $ | 5,996 | | | $ | 4,858 | | | $ | 762 | | | $ | 5,620 | | | Earnings per diluted share | | $ | 8.89 | | | $ | 1.28 | | | $ | 0.29 | | | $ | (0.50) | | | $ | 9.96 | | | $ | 7.93 | | | $ | 1.24 | | | $ | 9.17 | | | Earnings per diluted share percent change | | | 12.1% | | | | | | | | | | | | | | | | 8.6% | | | | -2.8% | | | | | | | | 12.4% | |
Table of Contents FREE CASH FLOW
(non-GAAP measure) | | | 2019 | | | | Reported
Measure | | Adjustment
for Significant
Litigation
Related
Charges(a) | | Adjustment
for loss on
deconsolidation
of Venezuelan
subsidiary(b) | | Adjustment
for Gas &
Flame Sale
Gain(c) | | Adjustment for
Fourth Quarter
Restructuring
Items(d) | | Adjusted
Non-GAAP
Measure | | Major GAAP Cash Flow Categories | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by operating activities | | $ | 7,070 | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by (used in) investing activities | | | (6,444) | | | | | | | | | | | | | | | | | | | | | | | Net cash used in financing activities | | | (1,124) | | | | | | | | | | | | | | | | | | | | | | | FREE CASH FLOW (non-GAAP measure) | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by operating activities | | $ | 7,070 | | | $ | 274 | | | $ | — | | | $ | (17) | | | $ | — | | | $ | 7,327 | | | Purchases of property, plant and equipment | | | (1,699) | | | | | | | | | | | | | | | | | | | | (1,699) | | | Free Cash Flow (j) | | $ | 5,371 | | | $ | 274 | | | $ | — | | | $ | (17) | | | $ | — | | | $ | 5,628 | | | Net Income Attributable | | $ | 4,570 | | | $ | 590 | | | $ | 162 | | | $ | (128) | | | $ | 117 | | | $ | 5,311 | | | Free Cash Flow Conversion (j) | | | 117.5% | | | | | | | | | | | | | | | | | | | | 106.0% | |
| | | 2018 | | 2017 | | | | Reported
Measure | | Adjustment
for MN NRD
Resolution(f) | | Adjustment for
Measurement
Period
Accounting of
TCJA(g) | | CMD Sale
Gain, net of
Restructuring
Items(h) | | Adjusted
Non-GAAP
Measure | | Reported
Measure | | Adjustment
for TCJA(i) | | Adjusted
Non-GAAP
Measure | | Major GAAP Cash Flow Categories | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by operating activities | | $ | 6,439 | | | | | | | | | | | | | | | | | | | $ | 6,240 | | | | | | | | | | | Net cash provided by (used in) investing activities | | | 222 | | | | | | | | | | | | | | | | | | | | (3,086) | | | | | | | | | | | Net cash used in financing activities | | | (6,701) | | | | | | | | | | | | | | | | | | | | (2,655) | | | | | | | | | | FREE CASH FLOW
(non-GAAP measure) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by operating activities | | $ | 6,439 | | | $ | 679 | | | | | | | $ | 24 | | | $ | 7,142 | | | $ | 6,240 | | | $ | 600 | | | $ | 6,840 | | | Purchases of property, plant and equipment | | | (1,577) | | | | | | | | | | | | | | | | (1,577) | | | | (1,373) | | | | | | | | (1,373) | | | Free Cash Flow (j) | | $ | 4,862 | | | $ | 679 | | | $ | — | | | $ | 24 | | | $ | 5,565 | | | $ | 4,867 | | | $ | 600 | | | $ | 5,467 | | | Net Income Attributable | | $ | 5,349 | | | $ | 770 | | | $ | 176 | | | $ | (299) | | | $ | 5,996 | | | $ | 4,858 | | | $ | 762 | | | $ | 5,620 | | | Free Cash Flow Conversion (j) | | | 90.9% | | | | | | | | | | | | | | | | 92.8% | | | | 100.2% | | | | | | | | 97.3% | |
Table of Contents RETURN ON INVESTED CAPITAL
(non-GAAP measure) | | | 2019 | | | | Reported
Measure | | Adjustment
for Significant
Litigation
Related
Charges(a) | | Adjustment
for loss on
deconsolidation
of Venezuelan
subsidiary(b) | | Adjustment
for Gas &
Flame Sale
Gain(c) | | Adjustment for
Fourth Quarter
Restructuring
Items(d) | | Adjustment
for Acelity
and M*Modal
Acquisitions(e) | | Adjusted
Non-GAAP
Measure | | Net income including non-controlling interest | | $ | 4,582 | | | $ | 590 | | | $ | 162 | | | $ | (128 | ) | | $ | 117 | | | $ | 49 | | | $ | 5,372 | | | Interest expense (after-tax) (1) | | | 359 | | | | | | | | | | | | | | | | | | | | | | | | 359 | | | Adjusted net income (Return) | | $ | 4,941 | | | $ | 590 | | | $ | 162 | | | $ | (128 | ) | | $ | 117 | | | $ | 49 | | | $ | 5,731 | | | Average shareholders’ equity (including non-controlling interest) (2) | | $ | 10,198 | | | $ | 327 | | | $ | — | | | $ | (8 | ) | | $ | 29 | | | $ | (3,512 | ) | | $ | 7,034 | | | Average short-term and long-term debt (3) | | | 17,982 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 17,982 | | | Average invested capital | | $ | 28,180 | | | $ | 327 | | | $ | — | | | $ | (8 | ) | | $ | 29 | | | $ | (3,512 | ) | | $ | 25,016 | | | Return on Invested Capital (k) | | | 17.5% | | | | | | | | | | | | | | | | | | | | | | | | 22.9% | | | (1) Effective income tax rate used for interest expense | | | 19.8% | | | | | | | | | | | | | | | | | | | | | | | | 19.8% | | | (2) Calculation of average equity (includes non-controlling interest) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending total equity as of: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31 | | $ | 9,757 | | | $ | 424 | | | $ | — | | | $ | — | | | $ | — | | | $ | (947 | ) | | $ | 9,234 | | | June 30 | | | 10,142 | | | | 418 | | | | — | | | | (31 | ) | | | — | | | | (935 | ) | | | 9,594 | | | September 30 | | | 10,764 | | | | 149 | | | | — | | | | (3 | ) | | | — | | | | (4,173 | ) | | | 6,737 | | | December 31 | | | 10,126 | | | | 316 | | | | — | | | | — | | | | 117 | | | | (7,990 | ) | | | 2,569 | | | Average total equity | | $ | 10,198 | | | $ | 327 | | | $ | — | | | $ | (8 | ) | | $ | 29 | | | $ | (3,512 | ) | | $ | 7,034 | | | (3) Calculation of average debt | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending short-term and long-term debt as of: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31 | | $ | 16,370 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 16,370 | | | June 30 | | | 15,806 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 15,806 | | | September 30 | | | 19,439 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 19,439 | | | December 31 | | | 20,313 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 20,313 | | | Average short-term and long-term debt | | $ | 17,982 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 17,982 | |
Table of Contents | | | 2018 | | 2017 | | | | Reported
Measure | | Adjustment
for MN NRD
Resolution(f) | | Adjustment for
Measurement
Period
Accounting of
TCJA(g) | | CMD Sale
Gain, net of
Restructuring
Items(h) | | Adjusted
Non-GAAP
Measure | | Reported
Measure | | Adjustment
for TCJA(i) | | Adjusted
Non-GAAP
Measure | | Net income including non-controlling interest | | $ | 5,363 | | | $ | 770 | | | $ | 176 | | | $ | (263) | | | $ | 6,046 | | | $ | 4,869 | | | $ | 762 | | | $ | 5,631 | | | Interest expense (after-tax) (1) | | | 268 | | | | | | | | | | | | | | | | 268 | | | | 208 | | | | | | | | 208 | | | Adjusted net income (Return) | | $ | 5,631 | | | $ | 770 | | | $ | 176 | | | $ | (263) | | | $ | 6,314 | | | $ | 5,077 | | | $ | 762 | | | $ | 5,839 | | | Average shareholders’ equity (including non-controlling interest) (2) | | $ | 10,407 | | | $ | (136) | | | $ | 207 | | | $ | 236 | | | $ | 10,714 | | | $ | 11,627 | | | $ | 191 | | | $ | 11,818 | | | Average short-term and long-term debt (3) | | | 14,912 | | | | — | | | | — | | | | — | | | | 14,912 | | | | 12,156 | | | | (150) | | | | 12,006 | | | Average invested capital | | $ | 25,318 | | | $ | (136) | | | $ | 207 | | | $ | 236 | | | $ | 25,626 | | | $ | 23,783 | | | | 41 | | | $ | 23,824 | | | Return on Invested Capital (k) | | | 22.2% | | | | | | | | | | | | | | | | 24.6% | | | | 21.3% | | | | | | | | 24.5% | | | (1) Effective income tax rate used for interest expense | | | 23.4% | | | | | | | | | | | | | | | | 20.0% | | | | 35.5% | | | | | | | | 35.5% | | | (2) Calculation of average equity (includes non-controlling interest) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending total equity as of: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31 | | $ | 11,039 | | | $ | (139) | | | $ | 217 | | | $ | — | | | $ | 11,117 | | | $ | 11,040 | | | $ | — | | | $ | 11,040 | | | June 30 | | | 10,428 | | | | (155) | | | | 217 | | | | 377 | | | | 10,867 | | | | 11,644 | | | | — | | | | 11,644 | | | September 30 | | | 10,311 | | | | (155) | | | | 217 | | | | 285 | | | | 10,658 | | | | 12,202 | | | | — | | | | 12,202 | | | December 31 | | | 9,848 | | | | (95) | | | | 176 | | | | 282 | | | | 10,211 | | | | 11,622 | | | | 762 | | | | 12,384 | | | Average total equity | | $ | 10,407 | | | $ | (136) | | | $ | 207 | | | $ | 236 | | | $ | 10,714 | | | $ | 11,627 | | | $ | 191 | | | $ | 11,818 | | | (3) Calculation of average debt | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending short-term and long-term debt as of: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31 | | $ | 15,660 | | | $ | — | | | $ | — | | | $ | — | | | $ | 15,660 | | | $ | 11,711 | | | $ | — | | | $ | 11,711 | | | June 30 | | | 14,519 | | | | — | | | | — | | | | — | | | | 14,519 | | | | 11,301 | | | | — | | | | 11,301 | | | September 30 | | | 14,846 | | | | — | | | | — | | | | — | | | | 14,846 | | | | 11,663 | | | | — | | | | 11,663 | | | December 31 | | | 14,622 | | | | — | | | | — | | | | — | | | | 14,622 | | | | 13,949 | | | | (600) | | | | 13,349 | | | Average short-term and long-term debt | | $ | 14,912 | | | $ | — | | | $ | — | | | $ | — | | | $ | 14,912 | | | $ | 12,156 | | | $ | (150) | | | $ | 12,006 | |
| (a) | In 2019, the Company recorded significant litigation-related charges of $762 million ($590 million after tax) related to PFAS (certain perfluorinated compounds) matters and coal mine dust respirator mask lawsuits of which $214 million ($166 million after tax) occurred in the fourth quarter. | | | | (b) | In the second quarter of 2019, 3M recorded a pre-tax charge of $162 million related to the deconsolidation of the Company’s Venezuelan subsidiary. | | | | (c) | In August 2019, 3M closed on the sale of its gas and flame detection business, a leader in fixed and portable gas and flame detection, to Teledyne Technologies Incorporated. 3M’s gas and flame business was part of the overall October 2017 acquisition of underlying legal entities and associated assets of Scott Safety. This business has annual sales of approximately $120 million. The transaction resulted in a pre-tax gain of $112 million that was reported within the Company’s Safety and Industrial business. | | | | (d) | During the fourth quarter of 2019, in light of a slower than expected 2019 and to realign 3M’s organizational structure and operating model to improve growth and operational efficiency, respectively, management approved and committed to undertake certain restructuring actions. The Company recorded a fourth quarter 2019 pre-tax charge of $134 million. | | | | (e) | In February 2019, 3M completed the acquisition of all of the ownership interests of the technology business of M*Modal for $0.7 billion of cash, net of cash acquired, and assumption of $0.3 billion of M*Modal’s debt. In October 2019, 3M completed the acquisition of all of the ownership interests of Acelity Inc. and its KCI subsidiaries for consideration of $4.5 billion net of cash acquired as shown in the table below, and assumption of $2.3 billion of debt. | | | | (f) | In February 2018, 3M reached an agreement with the State of Minnesota that resolved the previously disclosed Natural Resource Damages (NRD) lawsuit filed by the State against the Company related to certain PFCs present in the environment. Under the terms of the settlement, 3M agreed to provide an $850 million grant to the State for a special “3M Water Quality and Sustainability Fund.” This Fund will enable projects that support water sustainability in the Twin Cities East Metro region, such as continued delivery of water to residents and enhancing groundwater recharge to support sustainable growth. The projects will also result in habitat and recreation improvements, such as fishing piers, trails, and open space preservation. 3M recorded a charge of $897 million ($770 million after-tax), inclusive of legal fees and other related obligations, in the first quarter of 2018 associated with the resolution of this matter. |
Table of Contents | (g) | During the first quarter of 2018, 3M recorded a tax expense of $217 million related to a measurement period adjustment to the provisional amounts recorded in December 2017 from the enactment of the Tax Cuts and Jobs Act (TCJA). In the fourth quarter 2018, 3M finalized the tax impact related to TCJA with a reversal of previously recorded tax expense in the amount of $41 million. | | | | (h) | In June 2018, 3M completed the sale of substantially all of its Communication Markets Division and reflected a pre-tax gain of $494 million as a result of this divestiture. Additionally, in December 2018, completed the sale of the remaining telecommunications system integration services portion of the business based in Germany and reflected a pre-tax gain of $15 million as a result of this divestiture. Both divestitures were reported within the Company’s Electronics and Energy business. During the second quarter and fourth quarter of 2018, management approved and committed to undertake certain restructuring actions related to addressing corporate functional costs following the Communication Markets Division divestiture. These actions resulted in a second quarter 2018 pre-tax charge of $105 million and a fourth quarter 2018 pre-tax charge of $22 million, net of adjustments for reductions in cost estimates. | | | | (i) | During the fourth quarter of 2017, 3M recorded a net tax expense of $762 million related to the enactment of the Tax Cuts and Jobs Act (the “TCJA”). The expense is primarily related to the TCJA’s transition tax on previously unremitted earnings of non-U.S. subsidiaries and was net of remeasurement of 3M’s deferred tax assets and liabilities considering the TCJA’s newly enacted tax rates and certain other impacts. This provisional amount was subject to adjustment during the measurement period of up to one year following the December 2017 enactment of the TCJA, as provided by recent SEC guidance. In addition to reporting financial results in accordance with GAAP, the Company also provides non-GAAP measures that adjust for the net impact of enactment of the TCJA. This item represents a significant charge that impacted the Company’s financial results. Income, earnings per share, and the effective tax rate are all measures for which 3M provides the reported GAAP measure and an adjusted measure. The adjusted measures are not in accordance with, nor are they a substitute for, GAAP measures. Because of the TCJA, the Company made a $600 million pension contribution to its U.S. defined benefit pension plan. This contribution did not impact 2017 net income, but it did impact Free Cash Flow Conversion and ROIC. The Company considers these non-GAAP measures in evaluating and managing the Company’s operations. The Company believes that discussion of results adjusted for this item is meaningful to investors as it provides a useful analysis of ongoing underlying operating trends. | | | | (j) | Free cash flow and free cash flow conversion are not defined under GAAP. Therefore, they should not be considered a substitute for income or cash flow data prepared in accordance with GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The Company defines free cash flow conversion as free cash flow divided by net income attributable to 3M. The Company believes free cash flow and free cash flow conversion is meaningful to investors as they are useful measures of performance and the Company uses these measures as an indication of the strength of the Company and its ability to generate cash. In 2017, net cash provided by operating activities was impacted by 3M’s enactment of the TCJA, along with a U.S. pension contribution of $600 million that 3M made following the signing of tax reform. On a combined basis, these items benefited free cash flow conversion by three percentage points. Refer to the proceeding “Cash Flows from Operating Activities” section for discussion of additional items that impacted operating cash flow. Refer to the proceeding “Cash Flows from Investing Activities” section for discussion on capital spending for property, plant and equipment. | | | | (k) | Return on Invested Capital (ROIC) is not defined under U.S. generally accepted accounting principles. Therefore, ROIC should not be considered a substitute for other measures prepared in accordance with GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines ROIC as adjusted net income (net income including non-controlling interest plus after-tax interest expense) divided by average invested capital (equity plus debt). The Company believes ROIC is meaningful to investors as it focuses on shareholder value creation. |
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| ADMISSION TICKET AND PHOTO ID REQUIRED FOR THE ANNUAL MEETING | Please note that you must pre-register and bring an admission ticket and a valid photo ID to attend the Annual Meeting. For more details, please read “Annual Meeting Admission” on page 95 of the Proxy Statement. |
Table of Contents  | | | | | This Proxy Statement was printed on recycled paper with soy based inks in a facility that uses 100% renewable wind energy. | |
Table of Contents 
3M CENTER
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VOTE BY INTERNET -www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 10:59 p.m. Central Daylight Time on May 11, 2020*. Have your proxy card in hand when you access the Web site and follow the instructions to obtain your records and to create an electronic voting instruction form. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 10:59 p.m. Central Daylight Time on May 11, 2020*. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to 3M Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717, so that it is received by May 11, 2020*. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by 3M Company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. *Up until 10:59 p.m. Central Daylight Time on May 10, 2020, for participants in 3M’s Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E96940-P32436-Z76245 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | 3M COMPANY | | | | The Board of Directors recommends you vote FOR proposals 1, 2 and 3: | | | | | | | | | | | | | | | The Board of Directors recommends you vote FOR proposals 1, 2 and 3: | | | | | | | | | | | | | | | Vote on Directors | | | | | | | | | | | | | | | 1. | To elect twelve members to the Board of Directors, each for a term of one year. | | | | | | | | | | For | | Against | | Abstain | | Nominees: | | | | | | | | | | | | | | | | | 1a. | Sondra L. Barbour | | o | | o | | o | | | | | | | | | | | 1b. | Thomas “Tony” K. Brown | | o | | o | | o | | | | | | | | | | | 1c. | David B. Dillon | | o | | o | | o | | | | | | | | | | | 1d. | Michael L. Eskew | | o | | o | | o | | | | | | | | | | | 1e. | Herbert L. Henkel | | o | | o | | o | | | | | | | | | | | 1f. | Amy E. Hood | | o | | o | | o | | | | | | | | | | | 1g. | Muhtar Kent | | o | | o | | o | | | | | | | | | | | 1h. | Edward M. Liddy | | o | | o | | o | | | | | | | | | For address changes and/or comments, please check this box and write them on the back where indicated. | | | | | | o | | | | | | | | |
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. |
| 1. | To elect eleven members to the Board of Directors, each for a term of one year. | | | |
| | | | | | For | | Against | | Abstain | | | | | | | | | | | | | 1i. | Gregory R. Page | | | | o | | o | | o | | | | | | | | | | | | | 1j. | Michael F. Roman | | | | o | | o | | o | | | | | | | | | | | | | 1k. | Inge G. Thulin | | | | o | | o | | o | | | | | | | | | | | | | Nominees: | | For | | Against | | Abstain | | | | | | | | | | | | 1a. | Thomas “Tony” K. Brown | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1b. | Pamela J. Craig | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1c. | David B. Dillon | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1d. | Michael L. Eskew | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1e. | Herbert L. Henkel | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1f. | Amy E. Hood | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1g. | Muhtar Kent | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1h. | Dambisa F. Moyo | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | For address changes and/or comments, please check this box and write them on the back where indicated. | | | | | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1l. | Patricia A. Woertz | | | | o | | o | | o |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | | | | | | 1i. | Gregory R. Page | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1j. | Michael F. Roman | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1k. | Patricia A. Woertz | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 2. | To ratify the appointment of PricewaterhouseCoopers LLP as 3M’s independent registered public accounting firm. | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 2. | To ratify the appointment of PricewaterhouseCoopers LLP as 3M’s independent registered public accounting firm. | | o | | o | | o | | | | | | | | | | | 3. | Advisory approval of executive compensation. | | o | | o | | o | | | | | | | | | | | The Board of Directors recommends you vote AGAINST proposals 4 and 5: | | For | | Against | | Abstain | | | | | | | | | | | 4. | Stockholder proposal on special shareholder meetings. | | o | | o | | o | | | | | | | | | | 5. | Stockholder proposal on setting target amounts for CEO compensation. | | o | | o | | o | | | | | | | | | | | NOTE:Such other business as may properly come before the meeting or any adjournment or postponement thereof. | | | | | | |
| 3. | Advisory approval of executive compensation. | | ☐ | | ☐ | | ☐ | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | | Date | | Signature (Joint Owners) | | Date | |
| The Board of Directors recommends you vote AGAINST proposal 4: | | For | | Against | | Abstain | | | | | | | | | | 4. | Shareholder proposal on setting target amounts for CEO compensation. | | ☐ | | ☐ | | ☐ | | | | | | | | |
NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS
Tuesday, May 8, 2018, 8:30 a.m. Eastern Daylight Time
Conrad Indianapolis
50 West Washington Street
Indianapolis, Indiana 46204NOTE:
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available atwww.proxyvote.com.
If you plan to attend Such other business as may properly come before the meeting or any adjournment or postponement thereof.
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in person, please register and print an admission ticket in advance atwww.proxyvote.com, following the instructions set forth in the Proxy Statement.full corporate or partnership name by authorized officer. |
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| Signature (Joint Owners) | Date |
