UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
☑ | Filed by the Registrant | ☐ | Filed by a Party other than the Registrant |
CHECK THE APPROPRIATE BOX: | ||
☐ | Preliminary Proxy Statement | |
☐ | Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
☑ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material Under Rule 14a-12 |
International Paper Company
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX): | |||
☑ | No fee required. | ||
☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | ||
1) Title of each class of securities to which transaction applies: | |||
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☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. | ||
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NOTICE OF | |||
April | |
Dear Shareowner: | |
We invite you to join us for our
As a leading producer of renewable fiber-based products, our customers, investors and employees depend on us to be leaders in environmental stewardship and strengthen our people and communities. We recognize the broader role we can play in advancing sustainable outcomes–both environmental and social. Earlier this year, we announced our Vision 2030 goals which demonstrate our commitment to building a better future for people, the planet and our company. These goals are ambitious and consistent with our vision, values and customer expectations. We also I’m proud of the progress we made in
Sincerely, Mark S. Sutton | Mark S. Sutton Pursuing our vision to be among the most SUCCESSFUL, SUSTAINABLE and RESPONSIBLE companies in the world |
www.internationalpaper.com | 3 |
Notice of Annual Meeting of Shareowners |
To the Owners of Common Stock of International Paper Company:
Date and Time | |
Place | |
Your vote is important | |
Vote on the Internet | |
If you choose to vote via the Internet, follow the instructions for accessing the website on the Notice of Internet Availability or proxy card provided to you. You will need to have the 16-digit control number printed on the Notice of Internet Availability or proxy card. | |
Vote by telephone | |
If you choose to vote by telephone, you may do so toll-free by following the instructions on the Notice of Internet Availability or proxy card provided to you. You will need to have the 16-digit control number printed on the Notice of Internet Availability or proxy card. | |
Vote by mail | |
If you choose to vote by mail, simply mark, sign and date your proxy card and return it in the postage-paid envelope that was included with the proxy card. |
Items of Business | |
Board Recommendation | |
Item 1 | FOR |
Item 2 | FOR |
Item 3 | FOR |
Item 4 | AGAINST |
Consider any other business properly brought before the meeting.
Record Date
March 14, 2019.12, 2020. Holders of record of International Paper common stock, par value $1.00 per share, at the close of business on that date, are entitled to vote at the meeting.
By order of the Board of Directors,
Sharon R. Ryan
Senior Vice President, General Counsel
and Corporate Secretary
April 3, 20191, 2020
Important Notice Regarding the Availability of Proxy Materials for the Shareowner Meeting to Be Held on May 13, 2019:11, 2020:
The following materials are available for viewing and printing atmaterials.proxyvote.com/460146:
● | The Notice of Annual Meeting of Shareowners to be held on May |
● | International Paper’s |
● | International Paper’s |
A Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) or the proxy statement, proxy card and annual report are first being sent to shareowners on or about April 3, 2019.1, 2020.
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Proxy Summary |
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider, and you should read the entire proxy statement before voting.
Meeting Agenda and Voting Recommendations
ITEM 1 | |
Company Proposal to Elect 11 Directors There are no other nominees competing for seats on the Board. Under our Amended and Restated Certificate of Incorporation and By-Laws, directors in non-contested elections are elected by an affirmativemajority of votes cast. You may vote “for” or “against” a nominee, or you may “abstain” from voting with respect to a nominee. “Abstentions” and broker non-votes will have no effect on the results. | Our Board of Directors unanimously recommends that you vote FOReach of the nominees. | |
Director Nominees
All nominees are currently directors of International Paper. The following table lists the names, primary occupations, and ages of the nominees as of the date of the Annual Meeting, the year each first became a director of International Paper, and the Board committees on which they will serve as of the date of the Annual Meeting.serve.
Director Since | Board Committees | Director Since | Board Committees | |||||||||||||||||||||||||
Name | Primary Occupation | Age | A&F | GOV | MDCC | PP&E | Primary Occupation | Age | A&F | GOV | MDCC | PP&E | ||||||||||||||||
William J. Burns | President, The Carnegie Endowment for International Peace | 62 | 2015 | President, The Carnegie Endowment for International Peace | 63 | 2015 | ||||||||||||||||||||||
Christopher M. Connor | Retired Chairman and Chief Executive Officer, The Sherwin-Williams Company | 63 | 2017 | Retired Chairman and Chief Executive Officer, The Sherwin-Williams Company | 64 | 2017 | ||||||||||||||||||||||
Ahmet C. Dorduncu | Chief Executive Officer, Akkök Group | 65 | 2011 | Chief Executive Officer, Akkök Group | 66 | 2011 | ||||||||||||||||||||||
Ilene S. Gordon | Retired Chairman, President and Chief Executive Officer, Ingredion Incorporated | 65 | 2012 | Retired Chairman, President and Chief Executive Officer, Ingredion Incorporated | 66 | 2012 | ||||||||||||||||||||||
Anders GustafssonNEW | Chief Executive Officer, Zebra Technologies Corporation | 58 | 2019 | |||||||||||||||||||||||||
Anders Gustafsson | Chief Executive Officer, Zebra Technologies Corporation | 59 | 2019 | |||||||||||||||||||||||||
Jacqueline C. Hinman | Retired Chairman, President and Chief Executive Officer, CH2M HILL Companies, Ltd. | 57 | 2017 | Retired Chairman, President and Chief Executive Officer, CH2M HILL Companies, Ltd. | 58 | 2017 | ||||||||||||||||||||||
Clinton A. Lewis, Jr. | Executive Vice President and Group President, International Operations, Commercial Development, Genetics and PHARMAQ, Zoetis Inc. | 52 | 2017 | Former Executive Vice President and Group President, Int’l Operations, Commercial Development, Global Genetics and PHARMAQ, Zoetis Inc. | 53 | 2017 | ||||||||||||||||||||||
Kathryn D. Sullivan | Senior Fellow, Potomac Institute for Policy Studies and Ambassador-at-Large, Smithsonian National Air & Space Museum | 67 | 2017 | Senior Fellow, Potomac Institute for Policy Studies and Ambassador-at-Large, Smithsonian National Air & Space Museum | 68 | 2017 | ||||||||||||||||||||||
Mark S. Sutton | Chairman and Chief Executive Officer, International Paper Company | 57 | 2014 | Chairman and Chief Executive Officer, International Paper Company | 58 | 2014 | ||||||||||||||||||||||
J. Steven Whisler | Retired Chairman and Chief Executive Officer, Phelps Dodge Corporation | 64 | 2007 | Retired Chairman and Chief Executive Officer, Phelps Dodge Corporation | 65 | 2007 | ||||||||||||||||||||||
Ray G.Young | Executive Vice President and Chief Financial Officer, Archer-Daniels-Midland Company | 57 | 2014 | Executive Vice President and Chief Financial Officer, Archer-Daniels-Midland Company | 58 | 2014 |
A&F Audit and Finance | GOV Governance | MDCC Management Development and Compensation | PP&E Public Policy and Environment | Member | Committee Chair | |||||||
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Board Snapshot | ||
Average Tenure Is | Diversity of Experience and Background | |
Corporate Governance Highlights
We believe sound corporate governance is critical to achieving business success and serves the best interests of our shareowners. Highlights of our commitment to sound governance practices include:
Shareholder Rights | ✓Annual elections and majority voting for directors, with a director resignation policy ✓Shareholder right to call special meetings ✓Shareholder right to act by written consent ✓Shareholder right to proxy access | |
Board Independence | ✓10 of 11 director nominees are independent ✓Robust independent Presiding Director role ✓Executive sessions without management present at every in-person Board meeting ✓Focus on Board composition and refreshment | |
Other Governance Practices | ✓Robust engagement with our shareowners ✓Strong anti-hedging and anti-pledging stock trading provisions ✓Annual Board, committee and individual director ✓Strong stock ownership and retention requirements |
Global Citizenship Governance
We believe global citizenship is a key element of our corporate governance, promoted by our Board of Directors, CEO and Senior Lead Team. Our Board of Directors upholds our Company mission and ensures effective organizational planning, focusing on strategy and risk management while monitoring strategic initiatives. The Public Policy and Environment Committee of the Board has overall responsibility for Global Citizenship at International Paper. It reviews and assesses public policy, legal, health and safety, technology, environmental and sustainability issues. The Company’s Governance Committee also has oversight of certain public policy and sustainability matters. For additional information on Global Citizenship Governance at International Paper, please read our Global Citizenship report, prepared in accordance with the Global Reporting Initiative (GRI) Standards, available atwww.internationalpaper.com/ |
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ITEM 2 | |
Company Proposal to Ratify Deloitte & Touche LLP as the Company’s Independent Registered Public Accounting Firm for Our Audit and Finance Committee has selected Deloitte & Touche LLP (“Deloitte & Touche”) to serve as the Company’s independent registered public accounting firm for | Our Board of Directors unanimously recommends that you vote FORthe ratification of Deloitte & Touche as the Company’s independent registered public accounting firm for | |
ITEM 3 | |
Company Proposal to Vote on a Non-Binding Resolution to Approve the Compensation of Our Named Executive Officers Our Board of Directors is seeking your approval of the compensation of our Named Executive Officers (“NEOs”), as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including in the Compensation Discussion & Analysis, related compensation tables and narrative disclosure. This annual vote is non-binding. To approve this proposal, the affirmative vote of amajority of a quorum at the annual meeting is required. You may vote “for” or “against” this non-binding proposal, or you may “abstain” from voting. “Abstentions” and broker non-votes will have the same effect as votes against this proposal. | Our Board of Directors unanimously recommends that you vote FORthe approval of the compensation of our NEOs as disclosed pursuant to Item 402 of Regulation S-K under the Exchange Act. | |
20182019 Financial Performance Highlights
Strong Returns Creating Long-Term Value | Returned | Strengthened Balance Sheet and Invested Strategically | ||||
Driven bysolid commercial and operational performance | Paid down$ |
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Pay for Performance | |||
We reward achievement of specific goals that improve our financial performance and drive strategic initiatives to ensure sustainable long-term profitability. | |||
Pay at Risk | |||
We believe a significant portion of an executive’s compensation should be specifically tied to performance—both Company performance and individual performance. |
✓ | Strong pay-for-performance |
✓ | Robust compensation governance practices, informed by ongoing shareowner engagement |
✓ | Long-Term Incentive (“LTI”) plan based solely on three-year Company Performance—no individual modifier |
✓ | CEO’s performance achievement in Short-Term Incentive (“STI”) plan based solely on Company performance |
✓ | Implemented |
✓ | |
✓ | |
✓ | Our |
ITEM 4 | |
Shareowner Proposal The shareowner proposal to reduce the special shareowner meeting ownership threshold to 10 percent will be approved if amajority of a quorum at the annual meeting is voted “for” the proposal. You may vote “for” or “against” the shareowner proposal, or you may “abstain” from voting. “Abstentions” and broker non-votes will have the same effect as votes against this shareowner proposal. | Our Board of Directors unanimously recommends that you vote AGAINST this proposal. | |
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Table of Contents |
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PROXY STATEMENT20192020 Annual Meeting of Shareowners
This proxy statement is furnished in connection with the solicitation of proxies by International Paper Company on behalf of the Board of Directors for the The At the ●Item 1:Elect the 11 nominees named in this proxy statement as directors for a one-year term. The Board recommends a voteFOReach of the nominees. ●Item 2:Ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for ●Item 3:Vote on a non-binding resolution to approve the compensation of our named executive officers, as disclosed under the heading “Compensation Discussion & Analysis.” The Board recommends a voteFORthis proposal. ●Item 4:Vote on a shareowner proposal to reduce the special shareowner meeting ownership threshold to 10 percent, if properly presented at the meeting. The Board recommends a voteAGAINSTthis proposal. Information about these items may be found beginning on page 16 of this proxy statement. Shareowners of record of International Paper common stock at the close of business on March There were A list of shareowners as of the record date will be available for inspection and review upon request of any shareowner to the Corporate Secretary at the address on page 14 of this proxy statement. We will also make the list available at the annual meeting and on the Internet through the virtual web conference at the beginning of the annual meeting. | Your vote is important | ||
Vote on the Internet | |||
If you choose to vote via the Internet, follow the instructions for accessing the website on the Notice of Internet Availability or proxy card provided to you. You will need to have the 16-digit control number printed on the Notice of Internet Availability or your proxy card. | |||
Vote by telephone | |||
If you choose to vote by telephone, you may do so toll-free by following the instructions on the Notice of Internet Availability or proxy card provided to you. You will need to have the 16-digit control number printed on the Notice of Internet Availability or proxy card. | |||
Vote by mail | |||
If you choose to vote by mail, simply mark, sign and date your proxy card and return it in the postage-paid envelope that was included with the proxy card. | |||
Important Notice Regarding the Availability of Proxy Materials for the Shareowner Meeting to Be Held on May The following materials are available for viewing and printing atmaterials.proxyvote.com/460146: ●The Notice of Annual Meeting of Shareowners to be held on May ●International Paper’s ●International Paper’s A Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) or the proxy statement, proxy card and annual report are first being sent to shareowners on or about April |
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Information About Annual Meeting
Voting Procedures and Annual Meeting Attendance
Why am I receiving these proxy materials?
We have made these materials available to you or delivered paper copies to you by mail because you are an International Paper shareowner of record as of March 14, 2019,12, 2020, and International Paper’s Board of Directors is soliciting your proxy to vote your shares at the 20192020 annual meeting of shareowners. This proxy statement includes information that we are required to provide to you under U.S. Securities and Exchange Commission (“SEC”) rules and is designed to assist you in voting your shares.
What is a proxy?
A proxy is your legal designation of another person to vote the stock you own. The person you designate is called a proxy. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. By submitting your proxy (either by voting electronically on the Internet or by telephone or by signing and returning a proxy card), you authorize three International Paper executive officers (Mark S. Sutton, Chairman and Chief Executive Officer; Timothy S. Nicholls, Senior Vice President and Chief Financial Officer; and Sharon R. Ryan, Senior Vice President, General Counsel and Corporate Secretary) to represent you and vote your shares at the meeting in accordance with your instructions. They also may vote your shares to adjourn the meeting and will be authorized to vote your shares at any postponements or adjournments of the meeting.
What is included in the proxy materials?
The proxy materials for our 20192020 annual meeting of shareowners include the Notice of Annual Meeting of Shareowners (the “Annual Meeting Notice”), this proxy statement (the “Proxy Statement”) and International Paper’s Annual Performance Summary (the “Annual Report”). If you receive a paper copy of the proxy materials, a proxy card or voting instruction form and pre-paid return envelope are also included. The Annual Meeting Notice (which is included in the Proxy Statement), Proxy Statement and Annual Report are being made available for viewing and printing atmaterials.proxyvote.com/460146and are being mailed, along with the accompanying proxy card or voting instruction form, to applicable shareowners beginning on or about April 3, 2019.1, 2020.
Why did I receive a Notice of the Internet Availability of Proxy Materials instead of a full set of proxy materials?
This year, weWe are furnishing proxy materials to our shareowners primarily through notice-and-access delivery pursuant to SEC rules. As a result, beginning April 3, 2019,1, 2020, we are mailing to many of our shareowners a Notice of the Internet Availability of Proxy Materials (the “Notice of Internet Availability”) containing instructions on how to access the proxy materials on the Internet. Shareowners who have affirmatively requested electronic delivery of our proxy materials will receive instructions via email regarding how to access these materials electronically. Shareowners who have previously requested to receive a paper copy of the materials will receive a full paper set of the proxy materials by mail. Using the notice-and-access method of proxy delivery expedites receipt of proxy materials by our shareowners and reduces the cost of producing and mailing the full set of proxy materials. If you receive a Notice of Internet Availability by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice of Internet Availability instructs you on how to access the proxy materials and vote on the Internet. If you would like to receive paper copies of our proxy materials in the mail, you may follow the instructions in the Notice of Internet Availability for making this request.
Information About Annual Meeting
How many votes must be present to hold the annual meeting?
Holders of International Paper common stock, present in person, by attendance through the virtual annual meeting or represented by proxy, representing one-third of the number of votes entitled to be cast upon any proposal to be considered at the meeting (at least113,830,365 131,143,555 votes) are required to hold the 20192020 annual meeting. If you properly vote on any proposal, your shares will be included in the number of shares to establish a quorum for the annual meeting. Shares held of record and represented by proxy cards marked ““abstain,” or returned without voting instructions, will be counted as present for the purpose of determining whether the quorum for the annual meeting is satisfied. In addition, if you hold shares through a bank or brokerage account, your shares will also be counted as present for the purpose of determining whether the quorum for the annual meeting is satisfied, even if you do not provide voting instructions to your bank or brokerage firm and result in a broker non-vote.
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Information About Annual Meeting
We urge you to vote by proxy even if you plan to attend the meeting.meeting in person or via the Internet. That will help us know as soon as possible that we have enough votes to hold the meeting. Returning your proxy card will not affect your right to revoke your proxy or to attend the 20192020 annual meeting and vote in person.meeting.
How do I vote my shares?
You may vote at the annual meeting by proxy as noted below, or may vote by attending the annual meeting via the Internet atwww.virtualshareholdermeeting.com/IP2020or (if you physically attend the annual meeting) in person. For shareowners who attend the annual meeting remotely and desire to vote their shares at the annual meeting, see below under “How Do I Attend the Annual Meeting?” for additional details.
If you are aholder of record(that is, if your shares are registered in your own name with our transfer agent), you have several options. You may vote in advance of the meeting on the Internet atmaterials.proxyvote.com/460146, by telephone or by attending the meeting and voting in person. In addition, you may vote by mail using a written proxy card. You may request a written proxy card by following the instructions included on the Notice of Internet Availability that you received. You may also attend the meeting (whether remotely or in person) and vote at the meeting in the manner set forth herein.
If you hold your shares instreet name(that is, if you hold your shares through a broker, bank or other holder of record), you have the right to direct your bank or broker how to vote your shares. If you do not give instructions to your bank or brokerage firm, it will nevertheless be entitled to vote your shares with respect to “routine” items, but it will not be permitted to vote your shares with respect to “non-routine” items. In the case of a non-routine item, your shares will be considered “broker non-votes” on that proposal. If you want to vote in person at the annual meeting, you must obtain and bring a power of attorney or proxy from your broker, bank or other holder of record authorizing you to vote. If you want to vote remotely at the annual meeting, you must use your 16-digit control number printed on the Notice of Internet Availability or proxy card.
If I hold shares in the International Paper Company Savings Plan, how do I vote my shares?
If you hold shares in the International Paper Company Savings Plan, you may instruct the trustee, State Street Bank and Trust Company, to vote your shares in the Company Stock Fund by returning the proxy/voting instruction card that you received in the mail or by providing voting instructions on the Internet or by telephone as directed on the Notice of Internet Availability or proxy/voting instruction card that you received. If you do not return the proxy/voting instruction card or provide voting instructions, or if your instructions are unclear or incomplete, the trustee will vote your shares at its discretion.
How do I attend the annual meeting?
All shareowners as of the record date, March 14, 2019,12, 2020, or their duly authorized proxy holders, are welcome to attend the annual meeting. As the result of public health and safety concerns arising from the outbreak of the coronavirus (COVID-19), this year’s annual meeting will be a “hybrid” meeting of shareowners, meaning that you may attend the annual meeting either via the Internet atwww.virtualshareholdermeeting.com/IP2020by following the instructions set forth below or in person in Memphis, Tennessee. While we intend to host a physical meeting, we encourage shareowners to consider whether it is advisable to attend by virtual means rather than in person in light of COVID-19 and public health concerns. In the event we determine it is necessary or appropriate to take additional steps regarding how we conduct our annual meeting or impose additional procedures or limitations on those attending the annual meeting in person in light of these COVID-19 concerns, we would plan to announce such details on our website on our website,www.internationalpaper.com, under the“Performance”tab at the top of the page followed by the“Investors”link (in addition to any filings with the SEC we may elect to make).
If you decide to attend the annual meeting online, you will be able to submit your questions during the meeting and vote your shares by visitingwww.virtualshareholdermeeting.com/IP2020. If you attend the annual meeting via the Internet (whether you are a holder of record or hold your shares in street name), you will be able to vote electronically and submit questions during the annual meeting only if you use your 16-digit control number printed on the Notice of Internet Availability or proxy card.
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Information About Annual Meeting
If you are voting by mail, by telephone or via the Internet, prior to the meeting, but still wish to attend the meeting (whether remotely or in person), follow the instructions on the Notice of Internet Availability or proxy card or via the Internet (www.proxyvote.commaterials.proxyvote.com/460146) to tell us that you plan to attend.Shareowners attending in person must bring proof of ownership and valid photo identification in order to be admitted to the meeting. Shareowners attending virtually must have the 16-digit control number printed on the Notice of Internet Availability or proxy card to vote electronically and ask questions during the annual meeting.
If you hold your shares in street name and you decide to attend in person, you must bring to the annual meeting a copy of your bank or brokerage statement evidencing your ownership of International Paper common stock as of the record date.
What happens if the annual meeting is postponed or adjourned?
Your proxy will still be valid and may be voted at the postponed or adjourned meeting. You will still be able to change or revoke your proxy until it is voted.
Information About Annual Meeting
Can I change or revoke my proxy?
Yes, you may change your vote or revoke your proxy at any time at or before the annual meeting. If you are a holder of record, you may change your vote or revoke your proxy through any of the following means:
● | by casting a new vote by telephone or on the Internet prior to the annual meeting, or by properly completing and signing another proxy card with a later date and returning the proxy card prior to the annual meeting; |
● | giving written revocation to our Corporate Secretary prior to the annual meeting either by mail to the address on page 14 of this proxy statement, or at the meeting; or |
● | voting virtually or in person at the annual meeting. |
You must obtain a ballot and vote at the annual meeting to revoke your proxy.
If you hold your shares in street name, you may change your voting instructions by contacting your broker, bank or other holder of record prior to the annual meeting or by voting virtually or in person at the annual meeting pursuant to a power of attorney or proxy from your bank or broker.
What if I do not indicate my vote for one or more of the matters on my proxy card?
If you are a holder of record and you return a signed proxy card without indicating your vote, your shares will be voted as follows:
● | forthe Company’s proposal to elect the 11 nominees named in this proxy statement to the Company’s Board of Directors in Item 1; |
● | forthe Company’s proposal to ratify the appointment of the Company’s independent registered public accounting firm for |
● | forthe Company’s proposal to approve the compensation of our named executive officers in Item 3; and |
● | againstthe shareowner proposal |
If you are a holder of record and you do not return a proxy card or vote at the annual meeting, your shares will not be voted and will not count toward the quorum requirement to hold the annual meeting.
If your shares are held in street name and you do not give your bank or broker instructions on how to vote, your shares will still be counted toward the quorum requirement for the annual meeting. The failure to instruct your bank or broker how to vote will have one of three effects on the proposals for consideration at the annual meeting, depending upon the type of proposal. For all voting items, other than Item 2 to ratify our independent registered public accounting firm for 2019,2020, absent instructions from you, the bank or broker may not vote your shares at all and your shares will be considered broker non-votes. For Item 2, however, the broker may vote your shares at its discretion. For Item 1, a broker non-vote will have no effect on the outcome of the proposal. For Items 3 and 4, a broker non-vote will have the same effect as a vote against the proposal.
If you hold shares in the International Paper Company Savings Plan and you do not provide voting instructions, the trustee will vote your shares at its discretion.
Will my vote be confidential?
Yes. Your vote is confidential and will not be disclosed to our directors or employees, unless in accordance with law.
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Information About Annual Meeting
Will our directors attend the annual meeting?
Yes. The Company’sCorporate Governance Guidelinesstate that directors are expected to attend our annual meeting. In light of the fact that we will be holding a hybrid annual meeting this year as the result of public health and safety concerns arising from the outbreak of the coronavirus (COVID-19), we expect that some or all of our directors may be in attendance at the meeting via the Internet.
Who will be soliciting proxies on our behalf?
The Company pays the cost of preparing proxy materials and soliciting your vote. Proxies may be solicited on our behalf by our directors, officers or employees by telephone, electronic or facsimile transmission or in person, without compensation. We have hired Alliance Advisors, LLC to solicit proxies for an estimated fee of approximately $25,000, plus expenses.
Information About Annual Meeting
What is householding?
We have adopted “householding,” a procedure by which shareowners of record who have the same address and last name and do not participate in electronic delivery will receive only one copy of the Notice of Internet Availability or the proxy materials unless one or more of these shareowners notifies us that they wish to continue receiving individual copies. This procedure saves us printing and mailing costs. Shareowners will continue to receive separate proxy cards.
We will deliver promptly, upon written or oral request, a separate copy of the Notice of Internet Availability or the proxy materials to a shareowner at a shared address to which a single copy of the documents was delivered. To request separate copies of the Notice of Internet Availability or the proxy materials, either now or in the future, please send your written request to Investor Relations, International Paper, 6400 Poplar Avenue, Memphis, TN 38197, or call (866) 540-7095. You may also submit your request on our website,www.internationalpaper.com, under the“Performance”tab at the top of the page followed by the“Contact Us”link and then the“Financial Requests”link.
How do I change future proxy delivery options?
If you hold your shares in street name and wish to receive separate copies of future Notices of Internet Availability or sets of proxy materials or if you currently receive multiple copies of the Notice of Internet Availability or multiple sets of proxy materials, and would like to receive a single copy or set, please send your written request to:
Broadridge Financial Solutions, Inc.
Householding Dept.
51 Mercedes Way
Edgewood, NY 11717
or call 1-866-540-7095
How do I communicate with the Board?
YouShareowners or other interested parties may communicate with our entire Board, the Chairman, the independent directors as a group, the Presiding Director, or any one of the directors by writing to Ms. Sharon R. Ryan, Senior Vice President, General Counsel, and Corporate Secretary, at the address set forth below. Ms. Ryan will forward all communications relating to International Paper’s interests, other than business solicitations, advertisements, job inquiries or similar communications, directly to the appropriate director(s).
In addition, as described in detail under “Board Oversight of the Company - Code of Conduct,” our Global Ethics and Compliance office has aHelpLinethat is available 24 hours a day, seven days a week, to receive calls, emails, and letters to report a concern or complaint, anonymous or otherwise.
Direct all Board correspondence to:
Corporate Secretary
International Paper
6400 Poplar Avenue
Memphis, TN 38197
Allegations of impropriety relating to our accounting, internal controls or other financial or audit matters are immediately forwarded to the chair of our Audit and Finance Committee. Such matters are investigated and responded to in accordance with the procedures established by our Audit and Finance Committee.
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Information About Annual Meeting
What is the deadline for consideration of Rule 14a-8 shareowner proposals for the 20202021 Annual Meeting of Shareowners?
A shareowner who wishes to submit a shareowner proposal to be included in theour proxy statement for the 20202021 Annual Meeting of Shareowners must send the proposal to the Corporate Secretary at the address above. We must receive the proposal in writing on or before December 5, 2019,2, 2020, and the proposal must comply with SEC rules, including Rule 14a-8.
DoesCan I nominate a director in connection with the Board consider director nominees recommended by shareowners?2021 Annual Meeting of Shareowners?
Yes. The Governance Committee ofIf you would like to make any director nomination that will not be included in our proxy statement for the Board will review shareowner recommendations of possible nominees. Shareowner recommendations should2021 annual meeting, you must submit such nomination in accordance with the advance notice provisions set forth in our By-Laws. Any such nomination must be submitted in writing to thereceived by our Corporate Secretary at the address above and should include a statement regarding the qualifications and experience of the proposed nominee. Our By-Laws require that we receive such nominations no earlier than January 14, 2020,11, 2021, and no later February 10, 2021 (assuming we do not change the date of our 2021 annual meeting by more than February 13,30 days before or 70 days after the anniversary date of our 2020 annual meeting), and must otherwise include the information required by our By-Laws in connection with any such nomination must include(including with respect to both the informationshareholder proponent and the nominee) and otherwise comply with our By-Laws. In the event any director nomination is made in accordance with our By-Laws as set forth above, our Governance Committee will consider any such nominees as potential nominees for election to our Board at our 2021 annual meeting.
In addition, you have the ability to include a director nominee in the By-LawsCompany’s proxy statement for its 2021 annual meeting under certain conditions as noted below under “Can shareowners include their director nominees in the Company’s proxy statement?” Moreover, you may recommend a director candidate for consideration by our Governance Committee as provided below under “Information About Corporate Governance - Director Qualifications and SEC rules.Experience - Recommendations for Director Candidates.”
Can shareowners include their director nominees in the Company’s proxy statement?
Yes. In 2016, the Company proactively amended its By-Laws to allow “proxy access” as many of our shareowners consider proxy access a fundamental right. The proxy access By-Law permits a shareowner, or a group of up to 20 shareowners, owning 3 percent or more of the Company’s outstanding common stock continuously for three years, to nominate and include in the Company’s proxy materials director nominees constituting up to two individuals or 20 percent of the Board (whichever is greater); provided that shareowners and nominees meet the additional requirements set forth in the By-Laws. If a shareowner(s) wishes to include a director nominee(s) in the Company’s proxy materials, we must receive the notice to nominate the director(s) using the Company’s proxy materials no earlier than November 5, 2019,2, 2020, and no later than December 5, 2019.2, 2020. The notice must contain the information required by our By-Laws, and the shareowner(s) and nominee(s) must comply with the additional requirements in our By-Laws.
Can I raise other business at the 20202021 Annual Shareowner Meeting?
Yes. Our By-Laws requireIf you would like to raise any business (other than director nominations) that we receive writtenis not the subject of a proposal submitted for inclusion in our proxy statement for the 2021 annual meeting pursuant to Rule 14a-8 under the Exchange Act, you must raise such business in accordance with the advance notice ofprovisions set forth in our By-Laws. Any such othernotice with respect to such business must be received by our Corporate Secretary no earlier than January 14, 2020,11, 2021, and no later February 10, 2021 (assuming we do not change the date of our 2021 annual meeting by more than February 13,30 days before or 70 days after the anniversary date of our 2020 annual meeting), and any such notice must otherwise include the information set forthrequired by our By-Laws in connection with the By-Lawsproposal of any such business and SEC rules.must otherwise comply with our By-Laws.
Our By-Laws are available at www.internationalpaper.com, under the“Company”tab at the top of the page followed by the“Leadership”link and then the“Governance”Governance Documents”link. A paper copy is available at no cost by written request to the Corporate Secretary.
www.internationalpaper.com | 15 |
Matters to be Acted upon at the |
Company Proposals
ITEM 1 | |
The Board of Directors currently consists of 11 members. Each of the 11 current directors has been nominated by the Board for re-election by shareowners at the annual meeting. Information about these nominees may be found in the “Board of Directors” section of this proxy statement. All 11 nominees, if elected, will hold office until the earlier of:
(i) | our |
(ii) | death, resignation or retirement. |
We do not know of any reason why any nominee would be unable to, or for good cause would not, serve as a director if elected. If, prior to the election, a nominee is unable or unwilling to serve, the shares represented by all valid proxies will be voted for the election of such other person as the Board may nominate, or the Board may reduce its size.
Majority vote for directors:Each director must receive a majority of votes cast “for” his or her election.
If a director does not receive a majority of votes cast “for” his or her election, he or she must submit a letter of resignation, and the Board, through its Governance Committee (excluding the nomineesnominee in question), will decide whether to accept the resignation at its next regularly scheduled meeting. If the resignation is not accepted, the Board will disclose the explanation of its decision via a Form 8-K.
Our Board of Directors unanimously recommends that you voteFOReach of the following nominees: |
✓ | William J. Burns | ✓ | ✓ | ✓ | J. Steven Whisler | ||
✓ | Christopher M. Connor | ✓ | Anders Gustafsson | ✓ | Kathryn D. Sullivan | ✓ | Ray G. Young |
✓ | Ahmet C. Dorduncu | ✓ | Jacqueline C. Hinman | ✓ | Mark S. Sutton |
16 |
Matters to be Acted upon at the 20192020 Annual Meeting
ITEM 2 | |
Our Audit and Finance Committee has selected Deloitte & Touche to serve as the Company’s independent registered public accounting firm for 2019.2020. We are asking shareowners to ratify the selection of Deloitte & Touche. To ratify the selection of our independent registered public accounting firm, the affirmative vote of amajority of a quorum at the annual meetingis required. You may vote ““for”for” or ““against”against” the ratification of the selection of our independent registered public accounting firm, or you may ““abstain”abstain” from voting. ““Abstentions”Abstentions” will have the same effect as votes against this proposal because they are considered votes present for purposes of a quorum on the vote.
We do not expect there to be any broker non-votes associated with this proposal, as the ratification of our independent registered public accounting firm is a routine matter. As a result, if your shares are held in street name and you do not give your bank or broker instructions on how to vote, your shares will be voted by the broker in its discretion.
Although ratification is not required by our By-Laws or otherwise, the Board is submitting the selection of Deloitte & Touche to our shareowners for ratification because we value our shareowners’ views on the Company’s independent registered public accounting firm. Our Audit and Finance Committee will consider the outcome of this vote in its decision to appoint an independent registered public accounting firm, but is not bound by the shareowners’ vote. Even if the selection of Deloitte & Touche is ratified, the Audit and Finance Committee may change the appointment at any time during the year if it determines that a change would be in the best interests of the Company and its shareowners.
Our Board of Directors unanimously recommends that you vote FORthe ratification of Deloitte & Touche as the Company’s independent registered public accounting firm for |
www.internationalpaper.com | 17 |
Matters to be Acted upon at the 20192020 Annual Meeting
ITEM 3 | |
Our Board of Directors is seeking your approval of the compensation of our NEOs as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K under the Exchange Act, including in the Compensation Discussion & Analysis, related compensation tables and narrative disclosure. This vote is being provided as required pursuant to Section 14A of the Exchange Act and is non-binding. To approve this proposal, commonly referred to as a “Say on Pay” proposal, the affirmative vote of amajority of a quorum at the annual meetingis required.
You may vote ““for”for” or ““against”against” this non-binding proposal, or you may ““abstain”abstain” from voting. ““Abstentions”Abstentions” will have the same effect as votes against this proposal because they are considered votes present for purposes of a quorum on the vote.
If you hold your shares in street name, your failure to indicate voting instructions to your bank or broker will cause your shares to be considered broker non-votes not entitled to vote with respect to Item 3. Broker non-votes will have the same effect as votes against this proposal.proposal because they are considered votes present for purposes of a quorom on the vote.
Our Board seeks your approval of the compensation of our NEOs, who are listed in the Summary Compensation Table of this proxy statement. Information describing the compensation of our NEOs is provided in the Compensation Discussion & Analysis section, the accompanying tables and narrative contained in this proxy statement.
Our Board asks shareowners to approve the following non-binding advisory resolution:
“Resolved, that the compensation paid to the Company’s Named Executive Officers, as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K under the Exchange Act, including in the Compensation Discussion & Analysis, the related compensation tables and narrative disclosure, is hereby approved.”
Our Board of Directors unanimously recommends that you vote FORthe approval of the compensation of our Named Executive Officers as disclosed pursuant to Item 402 of Regulation S-K under the Exchange Act. |
18 |
Matters to be Acted upon at the 20192020 Annual Meeting
ITEM 4 | |
“Proposal 4 – Make Shareholder Right to Call Special Shareholder Meeting ImprovementMore Accessible
Resolved, Shareowners ask our board to take the steps necessary (unilaterally if possible) to amend our bylaws and each appropriate governing document to give holders in the aggregate of 10% of our outstanding common stock the power to call a special shareowner meeting (or closest percentagemeeting. Shareholders, in addition to 10% according to state law). This proposal does not impact our board’s current powerdirectors, will thus have a right to call a special meeting.
Special meetings allowA special meeting allows shareowners to vote on important matters, such as electing new directors that can arise between annual meetings. For instance Anders Gustafsson, who joined the Board in 2019, was rejected by 30-times as many shares as each of 6 other International Paper directors.
This proposal topic won more than 70%-support at Edwards Lifesciences and SunEdisonSunEdison. This proposal topic, sponsored by William Steiner, also won 78% support at a Sprint annual meeting with 1.7 Billion yes-votes. Nuance Communications (NUAN) shareholders gave 94%-support in 2013. The 70% support would have been higher if all2018 to a rule 14a-8 proposal calling for 10% of shareholders had access to independent proxy voting advice.
Scores of Fortune 500 companies allow a more practical percentage of shares to call a special meeting comparedmeeting.
The current stock ownership threshold of 20% can mean that more than 40% of shareholders must be contacted during a short window of time to the higher requirement of International Paper. IP shareholders do not have the full right tosimply call a special meeting. Plus many shareholders, who are convinced that a special meeting should be called, can make a small paperwork error that will disqualify them from counting toward the 20% ownership threshold that is available under state law.needed for a special meeting.
StockholderPlus our shareholder rights are limited by the restricted International Paper version of the shareholder right to act by written consent. It could be called a self-destructive version of written consent. For instance 20% of shareholders must first deliver burdensome paperwork to simply ask that a record date be set and meanwhile they must give up their direct contact information.
Thus management has a fish-in-a-barrel chance to try to convince a critical mass of the 20% of shares that they should revoke their written consents. At the same time the depleted ranks of initial written consent shareholders still have the burden of getting the support of 51% of shares in a limited amount of time.
Stockholders proposals such as this have had an importanta significant role in improving the governance rules of our company. For instance, International Paper adopted a version of shareholder proxy access after thea shareholder proposal was received in 2016.
International Paper shareholders gave 45%-support to this proposal topic in 2018. The 45%-support would have been higher if all shareholders had access to independent proxy voting advice.
Any claim that a shareholder right to call a special meeting can be costly –- may be moot. When shareholders have a good reason to call a special meeting –- our boarddirectors should be able to take positive responding action to make a special meeting unnecessary. This proposal deserves added attention sincedue to the pricelackluster performance of our stock fell from $55 to $45which was at $46 way back in the year leading up to the due date for this proposal.2007.
Please vote yes:
Make Shareholder Right to Call Special Shareholder Meeting ImprovementMore Accessible – Proposal 4”
www.internationalpaper.com | 19 |
Matters to be Acted upon at the 20192020 Annual Meeting
The Board has again carefully considered this proposal and continues to believe that its adoption would not be in the best interests of the Company or our shareowners in light of our corporate governance practices and the current right of shareholders to call a special meeting.
Our Existing Special Meeting Right Reflects the Input of Our Shareowners, Who Have Repeatedly Rejected a Special Meeting Right with a 10% Ownership Threshold.We amended our By-Laws in May 2010 to permit shareowners owning 20% of the Company’s outstanding stock to call a special shareowner meeting upon written request to the Board. The Board proposed this amendment after a review of best practices in corporate governance and shareowner interest in the matter, including a shareowner proposal requesting that our By-Laws be changed to allow 10% of the shareowners the right to call special meetings. This amendment was overwhelmingly approved by an affirmative vote of 99% of our shareowners. Moreover, at our 2018 and 2019 annual meetings of shareowners, our shareowners again defeated proposals nearly identical to the current proposal, which sought to give holders of 10% of our stock the power to call a special meeting of shareowners. It is also worth noting there was a year-over-year decline in voting for these unsuccessful proposals the past two years.
We actively conduct shareowner engagement for feedback and have been responsive to shareowner concerns. Although we recognize that the Company’s largest investors do not have uniform views on the appropriate ownership threshold to call a special meeting, in our engagement and numerous communications with our investors, our special meeting By-Law has never been raised as an issue of concern. Our largest five investors have indicated in their voting guidelines that they continue to support similar levels of ownership for special meeting bylaws as permitted in our By-Law. The views of our investors, as reflected during our engagement and otherwise, informed the Board’s decision to continue to oppose this proposal.
A 20% Ownership Threshold Provides a Procedural Safeguard Against Abuse, Corporate Waste and is Consistent with Overwhelming Market Practice.The Company’s existing shareowner right to call a special meeting also remains consistent with best practices, and we continue to believe it strikes the right balance between giving shareowners a meaningful right to call a special meeting and protecting against the risk that a small group of shareowners, including shareowners with special interests, require the Company to expend significant money and time on a special meeting to promote agenda items relevant to particular constituencies as opposed to our shareowners generally. Convening a meeting of shareowners imposes significant costs. The Company must prepare required disclosures, print and distribute materials, solicit proxies and tabulate votes. The Board and management must devote time to preparing for and conducting the meeting, distracting them from managing the business and enhancing returns for all shareowners. Because special meetings require a considerable diversion of resources, they should be limited to circumstances where a substantial number of shareowners believe a matter is sufficiently urgent or extraordinary that it must be addressed between annual meetings. Reducing the Company’s threshold to 10% could require the Company to incur such costs more often and for a special meeting that up to 90% of our shareowners may not support. The Company’s current 20% ownership threshold allows for a reasonable number of shareowners to call a special meeting and thereby impose these costs on all shareowners. Failure to aggregate sufficient share ownership to reach the 20% ownership threshold is a strong indicator that a sufficient interest among the majority of shareowners does not exist to call a special meeting. Lowering this threshold risks giving a small group of shareowners a disproportionate amount of influence over the Company’s affairs. Approximately 80% of S&P 500 companies have either no right for shareowners to call a special meeting or at least a 20% threshold.
20 |
| 2020 Proxy Statement |
Matters to be Acted upon at the 2020 Annual Meeting
● |
| |
● | In addition to providing shareowners with rights to call special meetings, we also provide shareowners with a meaningful ability to act by written consent and recently adopted proxy access, giving shareowners multiple avenues to hold our Board accountable. | |
● | Our Board continually focuses on its composition and evaluates the skills and qualifications of existing directors and the diversity of their background and experience with the desire for board refreshment, resulting in an average tenure for our director nominees of fewer than | |
● | The Board and Governance Committee also contemplate multiple dynamics that promote and advance diversity among the members of our Board.
|
The Company’s existing governance practices and structure and the right that shareowners already have to call special meetings both enhance shareowner rights and protect against the risk that a small minority of shareowners could detrimentally impact a majority of our shareowners. Therefore, we continue to believe the adoption of this proposal is unnecessary and not in the best interests of the Company or its shareowners.
For these reasons, we recommend that you voteagainstthis proposal.
Our Board of Directors unanimously recommends that you vote AGAINSTthis proposal. |
www.internationalpaper.com | 21 |
Board of Directors |
Directors Standing for Election – Term Expiring in 20202021
The following 11 individuals are nominated for election at the 20192020 annual meeting. Each of these nominees is standing for election to serve a term that will expire in 2020.2021. In addition to biographical information and committee memberships as of the date of the annual meeting for each director nominee, we describe the specific experience, qualifications, attributes or skills that led our Board to conclude such person should serve as a director in light of the Company’s business.
William J. Burns |
Independent Age: Director since:2015 | Committees ●Governance ●Public Policy and Environment Key Skills & Experience | |
Biography
President of the Carnegie Endowment for International Peace, the oldest international affairs think tank in the United States, since February 2015. He served in the U.S. Department of State as Deputy Secretary of State from July 2011 to November 2014, as Under Secretary for Political Affairs from 2008 to July 2011, and as Ambassador to Russia from 2005 to 2008, among many other posts during his 33 years in the Foreign Service.
Board Qualifications
Ambassador Burns’s service as Deputy Secretary of State in the U.S. State Department, Under Secretary for Political Affairs and Ambassador to Russia, as well as numerous other posts during his 33 years in the Foreign Service, brings a unique and valuable perspective to the Board. His extensive public policy experience, both domestic and international, is valuable particularly in considering a broad range of strategic and tactical business matters. His current position as president of the Carnegie Endowment for International Peace, the oldest international affairs think tank, further strengthens his international management and public policy expertise.
2020 Proxy Statement |
Board of Directors
Christopher M. Connor |
Independent Age: Director since:2017 | Committees ●Management Development and Compensation ●Audit and Finance Key Skills & Experience | |
Biography
Retired as executive chairman of The Sherwin-Williams Company, a global manufacturer of paint, architectural coatings, industrial finishes and associated supplies, in December 2016. Mr. Connor joined The Sherwin-Williams Company in 1983 and served as its chairman and chief executive officer from 2000 to December 2015. Mr. Connor is chairmanserves on the board of directors of the Rock & Roll Hall of Fame in Cleveland, Ohio, and serves on the boards of directors of Eaton Corporation PLC and Yum! Brands, Inc.
Board Qualifications
Having served as CEO and executive chairman of The Sherwin-Williams Company, Mr. Connor brings significant senior management experience and strong financial expertise to the Board. He understands the various issues facing a large, global manufacturing company, including operational, financial and strategic issues. His technical background and long tenure with The Sherwin-Williams Company bring industrial expertise, which further strengthens our Board.
Ahmet C. Dorduncu |
Independent Age: Director since:2011 | Committees ●Audit and Finance ●Public Policy and Environment Key Skills & Experience | |
Biography
Chief executive officer of Akkök Group, a financial and industrial conglomerate located in Turkey, since January 2013. Mr. Dorduncu served as chief executive officer of Sabanci Holding, another financial and industrial conglomerate located in Turkey, from 2005 to 2010. He also served from 2006 to 2010 as chairman of the board of Olmuksa, then an industrial packaging business joint venture between Sabanci Holding and International Paper. Sabanci Holding is the parent company of the Sabanci Group, a leading Turkish financial and industrial company.
Board Qualifications
As CEO of Akkök Group and retired chairman and CEO of Sabanci Holding, two leading financial and industrial conglomerates, Mr. Dorduncu brings vast experience in international operations for a non-U.S. manufacturing company. His keen financial literacy also adds to the strength of our Board.operations. His knowledge of regions of key importance to the Company brings even greater perspective to our Board.
www.internationalpaper.com |
Board of Directors
Ilene S. Gordon |
Independent Presiding Director Age: Director since:2012 | Committees ●Governance (Chair) ●Management Development and Compensation Key Skills & Experience | |
Biography
Retired executive chairman of Ingredion Incorporated (formerly Corn Products International, Inc.), a publicly traded global ingredient solutions company, from January 1, 2018 until July 31, 2018. Ms. Gordon served as chairman, president and chief executive officer of Ingredion from May 2009 through December 2017. Ms. Gordon is also a memberserves on the board of trustees of The Conference Board. She previously served on the board of trustees of MIT (known as the Corporation) and is an emeritus member of the Conference Board.board of directors of the Economic Club of Chicago. Ms. Gordon previously served as president and chief executive officer of Rio Tinto’s Alcan Packaging, a multinational company engaged in the production of flexible and specialty packaging, from 2007 until 2009, and in various senior executive roles at Alcan Packaging and its affiliate and predecessor companies from 1999 until 2007. Prior to 1999, Ms. Gordon was employed for 17 years with Tenneco Inc., a conglomerate, in a variety of management positions, including vice president and general manager, leading its folding carton business. Ms. Gordon serves on the board of directors of Lockheed Martin Corporation, a publicly traded global security and aerospace company.
Board Qualifications
As the former chairman, CEO and president of Ingredion Incorporated, Ms. Gordon brings senior management expertise and leadership capabilities, as well as broad understanding of the operational, financial and strategic issues facing public companies. Her previous experience at Rio Tinto’s Alcan Packaging includes manufacturing, supply chain and marketing. She has experience with operations overseas, including South America, Asia Pacific and Europe. Ms.Europe.Ms. Gordon also brings strong financial expertise to our Board.
Anders Gustafsson |
Independent Age: Director since:2019 | Committees ●Audit and Finance ●Public Policy and Environment Key Skills & Experience | |
Biography
Chief executive officer of Zebra Technologies Corporation, a global leader in innovating at the edge of the enterprise, designing and marketing specialty printers, mobile computing, data capture, radio frequency identification products and real-time locating systems, since September 2007. Mr. Gustafsson served as chief executive officer of Spirent Communications plc, a publicly traded telecommunications company, from 2004 to 2007. Prior to Spirent, Mr. Gustafsson was a senior executive vice president, global business operations for Tellabs, Inc. Mr. Gustafsson serves as a trustee of the Shedd Aquarium. Mr. Gustafsson also serves on the boards of Zebra Technologies and Dycom Industries, a leading provider of specialty contracting services throughout the U.S. and Canada.Canada, but has resigned from the Dycom Industries board effective May 2020.
Board Qualifications
As CEO of Zebra Technologies Corporation, former CEO of Spirent Communications plc and a former senior executive at several different communications networking companies, Mr. Gustafsson brings significant international business experience and strong financial expertise to the Board. He will provide a unique and valuable technology perspective, and his current and prior service on other public company boards further broadens his range of knowledge and allows him to draw on various perspectives and viewpoints.
2020 Proxy Statement |
Board of Directors
Jacqueline C. Hinman |
Independent Age: Director since:2017 | Committees ●Audit and Finance ●Management Development and Compensation Key Skills & Experience | |
Biography
Served as chairman, president and chief executive officer of CH2M HILL Companies, Ltd., a Fortune 500 engineering and consulting firm focused on delivering infrastructure, energy, environmental and industrial solutions for clients and communities around the world, until December 2017, when the firm was acquired by Jacobs Engineering. Prior to becoming chairman in September 2014 and president and chief executive officer in January 2014, Ms. Hinman served as president of CH2M’s International Division from 2011 until 2014, and she served on CH2M’s board of directors from 2008 through 2017. She recently served on the Executive Committee of the Business Roundtable, chairing its Infrastructure Committee, and was a member of the Business Council. Ms. Hinman also serves on the board of directors of Dow Chemical Company, (as of April 2019)a multinational chemical corporation, and AECOM, a premier infrastructure firm. Ms. Hinman previously served on the board of directors of Catalyst, a leading nonprofit organization accelerating progress for women through workplace inclusion.
Board Qualifications
Having served as chairman, president, and chief executive officer of CH2M HILL Companies, Ms. Hinman brings senior management and leadership capabilities to the Board, as well as particular understanding of global manufacturing companies. Because of her experience in a global engineering consulting business, she has unique knowledge of environmental and sustainability issues globally. Ms. Hinman, in her previous roles at CH2M HILL, also brings international operations and strategic planning expertise to our Board.
Clinton A. Lewis, Jr. |
Independent Age: Director since:2017 | Committees ●Governance ●Public Policy and Environment Key Skills & Experience | |
BiographyExecutiveFormer executive vice president and president of international operations, commercial development, global genetics and PHARMAQ at Zoetis Inc., a NYSE-listed global leader in the discovery, development, manufacture and commercialization of animal health medicines and vaccines that was spun off by Pfizer in 2013. Prior to being named to his currentthat role, in May 2015, Mr. Lewis served as president of U.S. operations at Zoetis from October 2012February 2013 to May 2015 and at Pfizer Animal Health from 2007 to October 2012.February 2013. He joined Pfizer in 1988, and held positions of increasing responsibility across various commercial operations dedicated to human health prior to joining the animal health organization. He formerly served as chairman of the board for the Animal Health Institute (AHI), an industry trade association in the U.S., and as treasurer for the International Federation for Animal Health (IFAH), the industry trade association in Europe.
Board Qualifications
As the former executive vice president and president of international operations, commercial development, global genetics and PHARMAQ at Zoetis, Inc., Mr. Lewis brings critical business insight to a large, diversified company with global operations. He brings experience in international operations for a U.S. multinational company manufacturing globally. Mr. Lewis’s knowledge and strategic planning expertise, as well as knowledge of regions of key importance to the Company, bring even greater perspective to our Board.
www.internationalpaper.com |
Board of Directors
Kathryn D. Sullivan |
Independent Age: Director since:2017 | Committees ●Public Policy and Environment (Chair) ●Governance Key Skills & Experience | |
Biography
Ambassador-at-Large at the Smithsonian National Air and Space Museum, where she served as The Charles A. Lindbergh Fellow of Aerospace History from March 2017 through August 2017. Dr. Sullivan is also a Senior Fellow at the Potomac Institute for Policy Studies. Dr. Sullivan served in several roles in the U.S. Department of Commerce and the National Oceanic and Atmospheric Administration (NOAA) between May 2011 and January 2017, including as Under Secretary of Commerce for Oceans & Atmosphere and NOAA Administrator from March 2014 until January 2017. She served as a Director for Ohio State University’s Battelle Center for Mathematics and Science Education Policy from 2006 through 2011. Between 1996 and 2005, Dr. Sullivan served as President and CEO of the Center of Science and Industry (COSI). Between 1978 and 1993, Dr. Sullivan was a Mission Specialist for NASA. She is a veteran of three Shuttle missions with over 500 hours in space and she is the first American woman to walk in space. Dr. Sullivan served on the boards of directors of several public companies between 1997 and 2011. She is a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the board of directors of Accenture Federal Services.Services and serves on the advisory board of Terra Alpha Investments, LLC.
Board Qualifications
Dr. Sullivan’s service at NOAA brings a valuable perspective on current issues in sustainability, which is a critical issue to the Company. As a former NASA space shuttle astronaut, she also brings a strong technical background, leadership capabilities, and strategic planning experience. Dr. Sullivan’s service on other public company boards gives her experience and oversight of natural resource conservation and production as well as a broad range of strategic and tactical business matters. She also brings finance and budgeting experience having served as president and chief executive officer of COSI, as well as her service on a public company’s audit and finance committee.
Mark S. Sutton |
Chairman & CEO Age: Director since:2014 | Key Skills & Experience | |
Biography
Chairman (since January 1, 2015) and Chief Executive Officer (since November 1, 2014). Mr. Sutton previously served as President & Chief Operating Officer from June 1, 2014 to October 31, 2014, Senior Vice President – Industrial Packaging from November 2011 to May 31, 2014, Senior Vice President – Printing and Communications Papers of the Americas from 2010 until 2011, Senior Vice President – Supply Chain from 2008 to 2009, Vice President – Supply Chain from 2007 until 2008, and Vice President – Strategic Planning from 2005 until 2007. Mr. Sutton joined International Paper in 1984. Mr. Sutton serves on the board of directors for The Kroger Company. He is a member of The Business Council, serves on the American Forest & Paper Association board of directors, the Business Roundtable board of directors, and the international advisory board of the Moscow School of Management – Skolkovo. He was appointed chairman of the U.S. Russian Business Council. He also serves on the board of directors of Memphis Tomorrow and the board of governors for New Memphis Institute.
Board Qualifications
Mr. Sutton has been with International Paper his entire 30 plus-year career and served in various senior leadership roles, including President and Chief Operating Officer and Senior Vice President – Industrial Packaging, the Company’s largest business. He has also served as the senior leader of Printing and Communications Papers, supply chain, corporate strategic planning, as well as leading packaging operations in Europe, Middle East and Africa. As a result, he brings deep experience and institutional knowledge to the Board and management in his roles as Chairman and CEO.
2020 Proxy Statement |
Board of Directors
J. Steven Whisler |
Independent Age: Director since:2007 | Committees ●Governance ●Management Development and Compensation Key Skills & Experience | |
Biography
Retired as chairman and chief executive officer of Phelps Dodge Corporation, an international mining company, upon its merger with Freeport-McMoRan Inc. in March 2007. Mr. Whisler served as chairman and chief executive officer of Phelps Dodge Corporation from May 2000 until March 2007, and served on the board of Phelps Dodge Corporation from 1995 through March 2007. Mr. Whisler is a director of CSX Corporation and the Brunswick Corporation. He is also a director of the C.M. Russell Museum.
Board Qualifications
Mr. Whisler served as chairman and CEO of Phelps Dodge Corporation, a large, publicly traded, manufacturing company with international operations, prior to its acquisition in March 2007. He also served as general counsel of Phelps Dodge and, as a result, has a deep understanding of the governance, compliance and regulatory issues facing public companies. His service on other public company boards further augments his range of knowledge and allows him to draw on various perspectives and viewpoints.
Ray G.Young |
Independent Age: Director since:2014 | Committees ●Audit and Finance (Chair) ●Management Development and Compensation Key Skills & Experience | |
Biography
Executive vice president and chief financial officer of Archer-Daniels-Midland Company (“ADM”), with responsibility for strategic oversight of ADM’s business in Asia.. ADM is a publicly traded company and one of the largest agricultural processers and food ingredientshuman and animal nutrition companies in the world, and Mr. Young has been its chief financial officer since December 2010. Prior to joining ADM, he was employed on four continents at General Motors Company (“GM”), a publicly traded company and producer of vehicles throughout the world, from 1986 to 2010. At GM and its affiliates, he served in various senior executive roles, including as its president of the Mercosur Region from 2004 to 2007, its chief financial officer from 2008 to 2009 and its vice president, International Operations, based in China, in 2010. He currently serves on the boards of the U.S. China Business Council and the American Cancer Society Illinois Division. He also serves as board member of Wilmar International, a Singapore-listed global agricultural processor and food ingredients company.
Board Qualifications
As executive vice president and chief financial officer of ADM, a large, publicly traded company, Mr. Young brings strong financial expertise and strategic acumen to the Board. In addition to his experience at ADM, he also served in various executive roles at General Motors Company for over 20 years, and as a result, has a deep knowledge of global manufacturing operations.
www.internationalpaper.com |
Information About Corporate Governance |
Director Qualifications and Experience
Director Qualification Criteria
Our Board has adoptedDirector Qualification Criteria and Independence Standards, which it uses to evaluate incumbent directors being considered for re-election at each annual meeting, as well as to evaluate new director candidates. The Governance Committee of our Board is responsible for evaluating each director candidate, and for recommending qualified director nominees for election to the Board. We seek candidates with ample experience and a proven record of professional success, leadership and the highest level of personal and professional ethics, integrity and values. The Governance Committee also considers whether each candidate demonstrates the following:
● | Commitment to the Company’s mission and purpose, and loyalty to the interests of the Company and its shareowners; |
● | Ability to exercise objectivity and independence in making informed business decisions; |
● | Willingness and commitment to devote the extensive time necessary to fulfill his/her duties; |
● | Ability to communicate effectively and collaboratively with other Board members to contribute effectively to the diversity of perspectives that enhances Board and Committee deliberations and |
● | Skills, knowledge and expertise relevant to the Company’s business. |
Recommendations for Director Candidates
Shareowners may submit recommendations for director candidates to the Governance Committee by writing to the Corporate Secretary. The candidates should meet the director qualifications criteria described above. The Governance Committee applies the same criteria in evaluating candidates recommended by shareowners as those from other sources. If a shareowner would like to otherwise nominate a director candidate, the shareowner must follow the procedures set forth in our By-Laws, including the deadline to make such nominations. See “Communicating with the Board” above and “Adoption of Proxy Access” below.
Diversity of Our Directors
Our Board and the Governance Committee have assembled a Board comprised of experienced directors who are currently, or have recently been, leaders of major companies and institutions, are independent thinkers and have a diverse range of expertise and skills that they bring to the boardroom. The Board, through its Governance Committee, seeks to have a group of directors with a mix of backgrounds, experiences and tenure that will enhance the quality of its deliberations and decisions, and provide a blend of institutional knowledge and fresh perspective. The criteria considered by the Board and the Governance Committee include a person’s skills, current and previous occupations, other board memberships and professional experiences in the context of the current needs of the Board. The Governance Committee Charter specifically directs the Committee to seek qualified candidates with diverse backgrounds including, but not limited to, such factors as race, gender, and ethnicity. While the Company does not have a formal policy on Board diversity, the Governance Committee actively considers diversity in the recruitment and nomination of directors. The current composition of our Board reflects those efforts and the importance of diversity to the Board. The satisfaction of all director qualification and other criteria qualifications and objectives is
Information About Corporate Governance
implemented and assessed through ongoing consideration of directors and nominees by the Governance Committee and the Board, as
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well as through the Board’s annual self-evaluation process. Our Board believes that its membership should include individuals with a diverse background in the broadest sense, and is particularly interested in maintaining a mix of skills and experience that includes the following:
Our Director Qualification Criteria and Independence Standards may be found at www.internationalpaper.com under the “Company” tab at the top of the page followed by the “Leadership” link and then under the “Governance Documents” link.
Board Composition – Results of Succession Planning & Board Refreshment Efforts
11 Highly qualified directors with a diverse mix of qualifications, skills and experience | 5 Of the 5 new directors – |
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Board Leadership and Corporate Governance Practices
Board Leadership Structure
Our Board believes that the Company and its shareowners are best served by having the flexibility to determine the right leadership structure for the Company at any given point in time, taking into consideration the current business environment and shareholder landscape. We currently combine the role of Chairman and CEO and believe this is the most effective leadership structure for the Company at this time. When Mr. Sutton was appointed as CEO in 2014, the Board evaluated whether continuing to combine the role of Chairman and CEO was in the best interests of the Company and the shareowners. The Board concluded that maintaining the combined position of Chairman and CEO iswas appropriate to further strengthen the Company’s governance structure by promoting unified leadership and direction for the Company, fostering accountability and allowing for a single, clear focus for management to execute the Company’s strategy and business plans.
Information About Corporate Governance
As a counterbalance, we have an independent Presiding Director, Ilene S. Gordon, whose role and responsibilities provide strong independent leadership in the boardroom. The authority and duties of our independent Presiding Director are set forth in theCorporate Governance Guidelinesand provided below.
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Role of the Presiding Director
The Presiding Director is elected each year by the independent directors for a term of not less than one year. Effective January 1, 2018, the independent directors elected Ilene S. Gordon as Presiding Director, rotating that position. J. Steven Whisler had previously served as Presiding Director. The Presiding Director has authority to call meetings of independent directors. She may consult and directly communicate with certain shareowners if requested. The other duties of the Presiding Director include:
● | Determining a schedule and agenda for regular executive sessions in which independent directors meet without management present, and presiding over these sessions; |
● | Presiding over meetings of the Board in the event the Chairman is not present; |
● | Serving as liaison between the Chairman and independent directors; |
● | Approving agendas of the Board and meeting schedules to assure there is ample discussion time; |
● | Approving information sent to the Board; and |
● | Organizing the process for evaluating the performance of the Chairman and CEO not less than annually in consultation with the Management Development and Compensation Committee. |
The Board considers its own leadership structure as part of the Company’s succession planning process. The Board will continue to evaluate this structure going forward in light of factors and considerations prevailing at the time to determine whether a combined CEO and Chairman role is in the best interests of the Company and its shareowners.
Succession Planning and Talent Management
Our Board is actively engaged and involved in succession planning and talent management. Our Board oversees and annually reviews leadership development and assessment initiatives, as well as short- and long-term succession plans for our senior management. In addition, our Board regularly reviews our talent strategy to ensure that it supports our business strategy.
Commitment to Sound Corporate Governance Principles
We believe good corporate governance is critical to achieving business success and serves the best interests of our shareowners. We value the perspectives of our shareholders and other stakeholders, including our employees and the communities in which we operate, and take steps to address their concerns where warranted. We seek to foster employee well-being and performance through a people development process that includes engagement, health and wellness programs, training and business/region-specific people councils. We know that a highly engaged culture leads to better safety and business success. Our annual employee engagement survey allows us to measure important factors that affect engagement — how employees feel about their work environment, the people they work with and the company’s vision.
Our Board has adopted ourCorporate Governance Guidelinesthat reflect its commitment to sound governance practices. In addition, each of our Board committees has its own charter to assure that our Board fully discharges its responsibilities to our shareowners. Our Board regularly reviews itsCorporate Governance Guidelinesand committee charters at least annually and makes changes from time to time to reflect developments in the law and the corporate governance area. Our Amended and Restated Certificate of Incorporation permits the size of our Board to range from nine to 18 members. Currently, the size of our Board is 11 members. Our Board maintains four standing committees, as well as an Executive Committee, which is comprised of the Presiding Director and the chairs of each of the standing committees.
Shareowner Engagement
We believe that thoughtful shareowner engagement is important, and we have a long history of such engagement. We have an active shareowner engagement program, which allows us to better understand our shareowners’ priorities, perspectives and concerns, and enables the company to effectively address issues that matter most to our shareowners.
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Adoption of Proxy Access
In 2016, our Board of Directors adopted a proxy access By-Law that permits stockholders owning 3 percent or more of our common stock for at least three years to nominate the greater of two directors or up to 20 percent of the Board, and include these nominees in our proxy materials. The number of shareowners who may aggregate their shares to meet the ownership threshold is limited to 20. Nominations are subject to the eligibility, procedural and disclosure requirements set forth in the By-Laws.
Information About Corporate Governance
Our Board believes that a shareowner-focused governance model is the right fit for International Paper. The below table highlights our sound corporate governance practices:
Shareholder | ✓Annual elections and majority voting for directors, with a director resignation policy ✓Shareholder right to call special meetings ✓Shareholder right to act by written consent ✓Shareholder right to proxy access | |
Board Independence | ✓10 of 11 director nominees are independent ✓Robust independent Presiding Director role ✓Executive sessions without management present at every in-person Board meeting ✓Focus on Board composition and refreshment | |
Other Governance Practices | ✓Robust engagement with our shareowners ✓Strong anti-hedging and anti-pledging stock trading provisions ✓Annual Board, committee and individual director ✓Strong stock ownership and retention requirements |
OurCorporate Governance Guidelinesand our Board committee charters are available atwww.internationalpaper.comunder the “Company” tab at the top of the page followed by the “Leadership” link and then under the “Governance Documents” link. A paper copy is available at no cost by written request to the Corporate Secretary at the address on page 14 of this proxy statement.
In each of the areas discussed below, we have embraced sound principles, policies and procedures to ensure that our Board and our management goals are aligned with our shareowners’ interests.
Board of Directors’ Policies and Practices
Annual Board, Committee and Individual Director Self Assessment
● | The Board is committed to a robust and constructive evaluation process and recognizes this process promotes continuous improvement and overall Board effectiveness. |
● | Our Board conducts an annual self assessment of its own and its committees’ performances, in accordance with a procedure established by the Governance Committee. |
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● | Effectiveness of Board and |
● | Board and |
● | Effectiveness of each individual director’s performance and contributions to the functioning of the Board; |
● | Board culture and dynamics, including the effectiveness of discussion and debate at meetings; and |
● | Board and management dynamics, including the quality of management presentations and information provided to the Board. |
● | Separately, an assessment of individual Board members is conducted by the Governance Committee and the Chairman of the Board prior to their nomination for election by shareowners, in accordance with theDirector Qualification Criteria and Independence Standards discussed above. |
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Board, Committee and Annual Meeting Attendance
● | The Board met nine times during |
● | Each director attended 75 percent or more of the aggregate number of meetings of the Board and committees on which he or she |
● | As expected by ourCorporate Governance Guidelines, all those who were directors at the time of the |
Information About Corporate Governance
Executive Sessions of Non-Management and Independent Directors
● | After each regularly scheduled face-to-face meeting and, if needed, after telephonic meetings, non-management and independent directors of our Board meet in executive session, without management present, chaired by the Presiding |
● | If any non-management directors are not independent, then the Presiding Director will also chair an executive session of independent directors at least once annually. |
● | In |
● | Independent directors may engage, at the Company’s expense, independent legal, financial, accounting and other advisors as they may deem appropriate, without obtaining management’s approval. |
Orientation and Continuing Education
● | Our new directors participate in a director orientation that includes written materials and presentations by Company employees who are subject-matter experts, as well as meetings with senior management, our independent registered public accounting firm and both the Company’s and the Management Development and Compensation Committee’s compensation consultants. |
● | New directors visit several of our facilities and meet with employees. |
● | Continuing education occurs at Board and committee meetings, with specific topics of interest covered by management or outside experts. |
● | Directors are also offered the opportunity to attend director education programs provided by third parties. |
● | From time to time, directors attend meetings of Company officers, and, at each Board meeting, they meet informally and formally with senior leaders of the Company. |
Mandatory Retirement Policies
● | Our Board has a mandatory retirement policy for non-employee directors, under which a non-employee director is required to retire from our Board effective December 31 of the year in which he or she attains the age of 72. |
● | In addition, we have a mandatory retirement policy for |
Resignation Policies
● | We have two policies relating to director resignation. The first applies when a director has a substantial change in his or her principal occupation, and the second applies in relation to a director who does not receive a majority of shares voted in favor of his or her election. We describe each policy below. |
● | First, if a director’s principal occupation changes substantially, he or she is required to tender his or her resignation for consideration by the Governance Committee. The Governance Committee then recommends to the Board whether or not to accept the resignation using the Company’sDirector Qualification Criteria and Independence Standards. |
● | Second, our Amended and Restated Certificate of Incorporation provides for majority voting of directors in non-contested elections. Pursuant to our By-Laws, any director nominee in a non-contested election who fails to receive the requisite majority of votes cast |
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Board Oversight of the Company
Risk Oversight
The Board is responsible for assuring appropriate alignment of its leadership structure and oversight of management with the interests of shareowners and the communities in which the Company operates. The Board exercises oversight of the Company’s enterprise risk management (ERM) program, which includes strategic, operational and financial matters, as well as compliance, legal and legalcyber risks. Pursuant to delegated authority as permitted by the Company’s By-Laws,Corporate Governance Guidelines,, and committee charters, the Board’s four standing committees oversee certain risks. The Audit and Finance Committee coordinates the risk oversight role exercised by various committees and management, and it receives updates on the risk management processes twice per year. Our Board and its committees receive regular reports from senior managers on areas of material risk, including operational, financial, strategic, competitive, reputational, legal and regulatory risks, and how those risks are managed. The Company’sCorporate Governance Guidelinesprovide the foundation upon which the Board oversees a working system of principled goal-setting and effective decision-making, with the objective of establishing a vital, agile, and ethical corporate entity that provides value to the shareowners who invest in the Company and to the communities in which it operates.
As an example, the Chief Information Security Officer (CISO) provides reports on the analysis of emerging IT risks as well as plans and strategies to mitigate those risks to senior management on a regular basis. These risks are also aggregated into the Company’s Enterprise Risk Management program. The CISO presents to the Audit & Finance Committee and to the full Board of Directors, as part of the Board’s risk oversight responsibility.
Code of Conduct
Our Board has adopted aCode of Conduct (the “Code”)that applies to our directors, officers and all employees to ensure we conduct business in a legal and ethical manner. The Code is available atwww.internationalpaper.com, under the“Company”tab at the top of the page, then under“Ethics.”A paper copy is available at no cost by written request to the Corporate Secretary.
Our Global Ethics and Compliance office is located at our global headquarters in Memphis, Tennessee. If an employee, customer, vendor or shareowner has a concern about ethics or business practices of the Company or any of its employees or representatives, he or she may contact the Global Ethics and Compliance office in person, via mail, e-mail, facsimile or telephone. TheCodedescribesThe Code describes multiple channels by which employees may report a concern, such as through their managers, a human resources professional, legal counsel or our internal audit department.
Our HelpLine is also available 24 hours a day, seven days a week, to receive calls from anyone wishing to report a concern or complaint, whether anonymous or otherwise.
Our HelpLine contact information can be found atwww.internationalpaper.com, under the“Company”tab at the top of the page, then under“Ethics”and“HelpLine.”
All HelpLine reports are immediately forwarded to the Global Ethics and Compliance office for further action and for a response to the person reporting, unless he or she has chosen to remain anonymous. A report made through any of our other reporting channels that involves an impropriety relating to our accounting, internal controls or other financial or audit matters is also forwarded immediately to the Global Ethics and Compliance office. That office has responsibility for investigating all such matters, and will report certain of those matters, unfiltered, to the chair of our Audit and Finance Committee in accordance with the procedures established by the Audit and Finance Committee to ensure compliance with the Sarbanes-Oxley Act of 2002.
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Director Independence Standards
It is the policy of our Board that a majority of its members be independent from the Company, its management and its independent registered public accounting firm. Based on the Governance Committee’s review of our current directors, our Board has determined that each of our current non-employee directors and each of our former non-employee directors who servedis independent as a director during 2018 is independent: David J. Bronczek;follows: William J. Burns; Christopher M. Connor; Ahmet C. Dorduncu; Ilene S. Gordon; Anders Gustafsson; Jacqueline C. Hinman; Jay L. Johnson; Clinton A. Lewis, Jr.; Kathryn D. Sullivan; John L. Townsend; J. Steven Whisler; and Ray G. Young. We have one employee-director, our Chairman, Mr. Sutton, who is not independent. Each standing committee of the Board is comprised entirely of independent directors.
Further, the Governance Committee has concluded and recommended to our Board, and our Board has determined, that each of our current non-employee directors and each of our former non-employees who served as a director during 2018 meets the independence requirements for service on our Audit and Finance Committee, the Management Development and Compensation Committee and the Governance Committee.
Director Independence Determination Process and Standards
Annually, our Board determines the independence of directors based on a review conducted by the Governance Committee and the General Counsel. The Governance Committee and the Board evaluate and determine each director’s independence under theNYSE Listed Company Manual’sindependence standards and the Company’sDirector Qualification Criteria and Independence Standards, which are consistent with, but more rigorous than, the NYSE standards.standards, as well as independence standards applicable to service on particular committees of the Board, as provided under SEC rules and theNYSE Listed Company Manual.
Under SEC rules, the Governance Committee is required to analyze and describe any transactions, relationships or arrangements not specifically disclosed as a related party transaction in this proxy statement that were considered in determining our directors’ independence. To facilitate this process, the Governance Committee reviews directors’ responses to our annual Directors’ and Officers’ Questionnaire, which requires disclosure of each director’s and his or her immediate family’s relationships to the Company, as well as any potential conflicts of interest.
In this context, the Governance Committee considered the relationships described below. Based on its analysis of the relationships and our independence standards, the Governance Committee concluded and recommended to our Board that none of these relationships impaired the independence of any current non-employee director, or any former non-employee director who served as a director in 2018, including:
● | Non-profit and charitable organization affiliations of our directors. None of our directors serve as an executive officer of any organization to which we make charitable contributions. |
● | Service by several of our directors as an executive officer at a company with whom we may do business. The Governance Committee determined that the commercial relationships involving routine, arms-length purchases and sales transactions between International Paper and these companies were not material under our independence standards. These standards provide that payments to or payments from the Company to a company for which a director serves as an executive officer, for property or services that are less than the greater of $750,000 or 1.75 percent of such other company’s consolidated gross revenue, are not considered a material relationship that would impair the director’s independence. We provide additional details about these relationships in the following table. |
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Transactions Considered in Analysis of Director Independence
Director | Name of Employer | Business Relationship (including affiliated companies) | Dollar Amount of Routine Sales Transactions (approximate) | Amount exceeds | ||||
Ray G.Young | Archer-Daniels-Midland Company | Routine sales to ADM | $ | No | ||||
Routine purchases from ADM | $ | No |
As described above, in order to fulfill its responsibilities, the Board has delegated certain authority to its committees. The Board has four standing committees and one ad hoc Executive Committee: (i) Audit and Finance; (ii) Governance; (iii) Management Development and Compensation; and (iv) Public Policy and Environment. The Executive Committee meets only if Board action is required and a quorum of the full Board cannot be convened on a timely basis.
Each committee has its own charter, and each charter is reviewed annually by each committee to assure ongoing compliance with applicable law and sound governance practices. The Governance Committee assesses the Executive Committee Charter. Committee charters are available atwww.internationalpaper.comunder the“Company”tab at the top of the page followed by the“Leadership”link and then under the“Board Committees”link. A paper copy is available at no cost by written request to the Corporate Secretary.
Committee Assignments
Independent Board members are assigned to one or more committees. The Governance Committee recommends any changes in assignments to the entire Board. Committee chairs are rotated periodically, usually every three to five years.
Governance Committee |
Current Members Ilene S. Gordon (Chair) William J. Burns Clinton A. Lewis, Jr. Kathryn D. Sullivan J. Steven Whisler All Members are Independent | Meetings Meeting agendas are developed by the Governance Committee chair in consultation with committee members and senior leaders, who regularly attend the meetings. Responsibilities The Governance Committee is responsible for assuring the Company abides by sound corporate governance principles, including compliance with the Company’s Certificate of Incorporation, By-Laws, andCorporate Governance Guidelines, and reviewing conflicts of interest, including related person transactions under ourRelated Person Transactions Policy and Procedures. The committee also serves as the Board’s nominating committee, responsible for identifying and recommending individuals qualified to become Board members and for evaluating directors being considered for re-election. The committee is also responsible for assuring that shareowner communications, including shareowner proposals, are addressed appropriately by the Board or Company management. The committee also recommends non-employee director compensation, and assists the Board in its annual self assessment. |
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The Company’s Independent Registered Public Accounting Firm
The Audit and Finance Committee is responsible for the appointment, compensation, retention and oversight of the independent external audit firm retained to audit the Company’s financial statements. The committee has evaluated the qualifications, performance and independence of Deloitte & Touche, including discussions regarding PCAOB inspection results, peer reviews and any other internal inspection results and trends in their internal system of quality controls, and appointed Deloitte & Touche as the Company’s independent external auditor for the fiscal year 2019. Deloitte & Touche has served as International Paper’s independent external auditor continuously since 2002. In order to assure continuing auditor independence, the Audit and Finance Committee periodically considers whether there should be a rotation of the independent external audit firm. The members of the Audit and Finance Committee and the Board believe the continued retention of Deloitte & Touche to serve as the Company’s independent external auditor is in the best interests of International Paper and its shareowners.
Deloitte & Touche’s reports on the consolidated financial statements for each of the three fiscal years in the period ended December 31, 2018, which were included in the Company’s 2018 Annual Report on Form 10-K, did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. Representatives of Deloitte & Touche will be present at the 2019 annual meeting to answer questions, and they also will have the opportunity to make a statement if they desire to do so.
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Independent Auditor Fees
The Audit and Finance Committee engaged Deloitte & Touche to perform an annual integrated audit of the Company’s financial statements, which includes an audit of the Company’s internal controls over financial reporting, for the years ended December 31, 2017, and December 31, 2018. The total fees and expenses paid to Deloitte & Touche are as follows:
2017 | 2018 | |||
($, in thousands) | ($, in thousands) | |||
Audit Fees | 16,368 | 16,027 | ||
Audit-Related Fees | 1,730 | 3,667 | ||
Tax Fees | 3,632 | 5,536 | ||
All Other Fees | 172 | 79 | ||
Total Fees | 21,902 | 25,309 |
Services Provided by the Independent Auditors
All services rendered by Deloitte & Touche are permissible under applicable laws and regulations, and are pre-approved by the Audit and Finance Committee. For a complete copy of International Paper’s “Guidelines of International Paper Company Audit and Finance Committee for Pre-Approval of Independent Auditor Services,” please write to the Corporate Secretary, or visit us on our website,www.internationalpaper.com, under the“Company”tab, then the“Governance”link.
Pursuant to rules adopted by the SEC, the fees paid to Deloitte & Touche for services provided are presented in the table above under the following categories:
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The Audit and Finance Committee assists the Board of Directors in its oversight of the Company’s financial reporting process and implementation and maintenance of effective controls to prevent, deter and detect fraud by management. The Audit and Finance Committee’s responsibilities are more fully described in its charter, which is accessible on the Company’s website atwww.internationalpaper.comunder the “Company” tab at the top of the page and then under the “Leadership” link and the “Board Committees” section. Paper copies of the Audit and Finance Committee charter may be obtained, without cost, by written request to Ms. Sharon R. Ryan, Corporate Secretary, International Paper Company, 6400 Poplar Avenue, Memphis, TN 38197.
In fulfilling its oversight responsibilities, the Audit and Finance Committee has reviewed and discussed the Company’s annual audited and quarterly consolidated financial statements for the 2018 fiscal year with management and Deloitte & Touche LLP (“Deloitte & Touche”), the Company’s independent registered public accounting firm, including discussions related to significant accounting policies and critical accounting estimates and their related disclosures. The Audit and Finance Committee has discussed with Deloitte & Touche the matters required to be discussed by Auditing Standard No. 1301, “Communications with Audit Committees,” issued by the Public Company Accounting Oversight Board (United States). The Audit and Finance Committee has received the written disclosures and the letter from Deloitte & Touche required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with Deloitte & Touche its independence from the Company and its management. The Audit and Finance Committee has also considered whether the provision of non-audit services by Deloitte & Touche is compatible with maintaining the firm’s independence.
The Board has determined that the following members of the Audit and Finance Committee are audit committee financial experts as defined in Item 407(d)(5)(ii) of Regulation S-K: Christopher M. Connor, Anders Gustafsson (joined committee effective March 1, 2019), Jacqueline C. Hinman and Ray G. Young. The Board has determined each member of the Audit and Finance Committee meets the independence and financial literacy requirements for audit committee members set forth under the listing standards of the NYSE and our independence standards.
Based on the review and discussions referred to above, the Audit and Finance Committee recommended to the Company’s Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
The Audit and Finance Committee has approved and selected, and the Board of Directors has ratified, Deloitte & Touche as the Company’s independent registered public accounting firm for 2019.
Audit and Finance Committee
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Current Members Ray G. Young (Chair) Christopher M. Connor Ahmet C. Dorduncu Anders Gustafsson Jacqueline C. Hinman All Members are Independent | Meetings Meeting agendas are developed by the Audit and Finance Committee chair in consultation with committee members and senior management, who regularly attend the meetings. At each meeting, the committee holds executive sessions without members of management, and it also meets privately with representatives from our independent registered public accounting firm, and separately with each of the Chief Financial Officer, General Counsel, Vice President of Internal Audit, and Controller. Responsibilities The Audit and Finance Committee assists our Board in monitoring the integrity of our financial statements and financial reporting procedures, reviewing the independent registered public accounting firm’s qualifications and independence, overseeing the performance of our internal audit function and independent registered public accounting firm, coordinating our compliance with legal and regulatory requirements relating to the use and development of our financial resources, and monitoring the risk of financial fraud involving management and ensuring that controls are in place to prevent, deter and detect fraud by management. In overseeing the performance of our internal audit function and independent registered public accounting firm, the Audit and Finance Committee discusses the scope, significant risks and plans for the independent audit as well as the annual internal audit workplan. Throughout the year, at the Audit and Finance Committee meetings and in private sessions, the Audit and Finance Committee discusses issues encountered or any changes in planned audit scopes. These meetings may include key members of the audit teams, subject matter experts, and key members of the management team. |
The Company’s Independent Registered Public Accounting Firm
The Audit and Finance Committee is responsible for the appointment, compensation, retention and oversight of the independent external audit firm retained to audit the Company’s financial statements. The committee has evaluated the qualifications, performance and independence of Deloitte & Touche, including discussions regarding PCAOB inspection results, peer reviews and any other internal inspection results and trends in their internal system of quality controls, and appointed Deloitte & Touche as the Company’s independent external auditor for the fiscal year 2020. Deloitte & Touche has served as International Paper’s independent external auditor continuously since 2002. In order to assure continuing auditor independence, the Audit and Finance Committee periodically considers whether there should be a rotation of the independent external audit firm. The members of the Audit and Finance Committee and the Board believe the continued retention of Deloitte & Touche to serve as the Company’s independent external auditor is in the best interests of International Paper and its shareowners. In making this determination, the Audit and Finance Committee and Board have taken into account Deloitte & Touche’s significant institutional knowledge of our business, operations, accounting policies and financial systems, and internal controls framework, as well as Deloitte’s global capabilities, technical expertise, depth of resources, quality, efficiency of services, quality of communications with the Audit and Finance Committee and management, and independence. In addition, in accordance with applicable rules on partner rotation, Deloitte & Touche rotates its lead audit engagement partner not less than every five years. The Audit and Finance Committee is involved in considering the selection of Deloitte & Touche’s primary engagement partner when there is a rotation.
Deloitte & Touche’s reports on the consolidated financial statements for each of the three fiscal years in the period ended December 31, 2019, which were included in the Company’s 2019 Annual Report on Form 10-K, did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. Representatives of Deloitte & Touche will be present at the 2020 annual meeting to answer questions, and they also will have the opportunity to make a statement if they desire to do so.
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Independent Auditor Fees
The Audit and Finance Committee engaged Deloitte & Touche to perform an annual integrated audit of the Company’s financial statements, which includes an audit of the Company’s internal controls over financial reporting, for the years ended December 31, 2018, and December 31, 2019. The total fees and expenses paid to Deloitte & Touche are as follows:
2018 | 2019 | |||
($, in thousands) | ($, in thousands) | |||
Audit Fees | 15,773 | 16,103 | ||
Audit-Related Fees | 3,667 | 1,071 | ||
Tax Fees | 5,536 | 2,492 | ||
All Other Fees | 79 | 414 | ||
Total Fees | 25,055 | 20,080 |
Services Provided by the Independent Auditors
All services rendered by Deloitte & Touche are permissible under applicable laws and regulations, and are pre-approved by the Audit and Finance Committee. For a complete copy of International Paper’s “Guidelines of International Paper Company Audit and Finance Committee for Pre-Approval of Independent Auditor Services,” please write to the Corporate Secretary, or visit us on our website,www.internationalpaper.com, under the“Company”tab, followed by the“Leadership”link, and then the“Governance Documents”link.
Pursuant to rules adopted by the SEC, the fees paid to Deloitte & Touche for services provided are presented in the table above under the following categories:
1. | Audit Fees– These are fees for professional services performed by Deloitte & Touche for the audit and review of our annual financial statements, the review of our financial statements included in our quarterly Form 10-Q reports and those services that are normally provided by an independent auditor in connection with statutory and regulatory filings or engagements for the fiscal year, such as comfort letters, consents and other services related to SEC matters. Audit fees in both years include amounts related to the audit of the effectiveness of internal controls over financial reporting. |
2. | Audit-Related Fees– These are fees for assurance and related services performed by Deloitte & Touche that are reasonably related to the performance of the audit or review of our financial statements. This includes employee benefit and compensation plan audits, accounting consultations on divestitures and acquisitions, attestations by Deloitte & Touche that are not required by statute or regulation, consulting on financial accounting and reporting standards, and consultations on internal controls and quality assurance audit procedures related to new or changed systems or work processes. |
3. | Tax Fees– These are fees for professional services performed by Deloitte & Touche with respect to tax compliance, tax advice and tax planning. This includes consultations on preparation of original and amended tax returns for the Company and its consolidated subsidiaries, refund claims, payment planning, and tax audit assistance. Deloitte & Touche has not provided any services related to tax shelter transactions, nor has Deloitte & Touche provided any services under contingent fee arrangements. |
4. | All Other Fees– These are fees for other permissible work performed by Deloitte & Touche that do not meet the above category descriptions. The services relate to various consultations that are permissible under applicable laws and regulations, which are primarily related to engagements to provide advice, observations, and recommendations regarding operations, infrastructure and distribution to be considered by the Company. |
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Audit and Finance Committee Report | |||
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The Audit and Finance Committee assists the Board of Directors in its oversight of the Company’s financial reporting process and implementation and maintenance of effective controls to prevent, deter and detect fraud by management. The Audit and Finance Committee’s responsibilities are more fully described in its charter, which is accessible on the Company’s website atwww.internationalpaper.comunder the “Company” tab at the top of the page and then under the “Leadership” link and the “Board Committees” section. Paper copies of the Audit and Finance Committee charter may be obtained, without cost, by written request to Ms. Sharon R. Ryan, Corporate Secretary, International Paper Company, 6400 Poplar Avenue, Memphis, TN 38197.
In fulfilling its oversight responsibilities, the Audit and Finance Committee has reviewed and discussed the Company’s annual audited and quarterly consolidated financial statements for the 2019 fiscal year with management and Deloitte & Touche LLP (“Deloitte & Touche”), the Company’s independent registered public accounting firm, including discussions related to significant accounting policies and critical accounting estimates and their related disclosures. In addition, the Audit and Finance Committee has reviewed, and discussed with management and Deloitte & Touche, management’s assessment of the effectiveness of the Company’s internal control over financial reporting, and the evaluation by Deloitte & Touche of the Company’s internal control over financial reporting. The Audit and Finance Committee has discussed with Deloitte & Touche the matters required to be discussed by Auditing Standard No. 1301, “Communications with Audit Committees,” issued by the Public Company Accounting Oversight Board (United States). The Audit and Finance Committee has received the written disclosures and the letter from Deloitte & Touche required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with Deloitte & Touche its independence from the Company and its management. The Audit and Finance Committee has also considered whether the provision of non-audit services by Deloitte & Touche is compatible with maintaining the firm’s independence.
The Board has determined that the following members of the Audit and Finance Committee are audit committee financial experts as defined in Item 407(d)(5)(ii) of Regulation S-K: Christopher M. Connor, Anders Gustafsson, Jacqueline C. Hinman and Ray G. Young. The Board has determined that each member of the Audit and Finance Committee meets the independence and financial literacy requirements for audit committee members set forth under the listing standards of the NYSE and our independence standards, as well as applicable independence requirements under SEC rules.
Based on the review and discussions referred to above, the Audit and Finance Committee recommended to the Company’s Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
The Audit and Finance Committee has approved and selected, and the Board of Directors has ratified, Deloitte & Touche as the Company’s independent registered public accounting firm for 2020.
Audit and Finance Committee
Ray G. Young, Chair | Christopher M. Connor | Ahmet C. Dorduncu |
Anders Gustafsson | Jacqueline C. Hinman |
38 | 2020 Proxy Statement |
Each element of director compensation discussed below is recommended by the Governance Committee and approved by our Board. Mr. Sutton does not receive compensation for his service as a director.
Stock Ownership Requirements
Our director stock ownership policy requires our directors to hold equity of the Company valued at two times the total annual Board retainer, which, through April 30, 2020, is equivalent to 4.9 times the annual cash retainer (and requires ownership of Company stock equivalent to $550,000). We believe this helps align the interests of our directors with the interests of our shareowners. New directors have four years from the date of their election to meet the ownership requirement. As of December 31, 2019, all directors who were required to meet the ownership levels held the requisite amount of equity.
Elements of Our DirectorManagement Development and Compensation ProgramCommittee
Current Members All Members are
| Meetings Responsibilities The committee is also responsible for discussing with Company management the required disclosure under Item 407(e)(5) of Regulation S-K, including the Compensation Discussion & Analysis that is prepared as part of this proxy statement, and for recommending that it be included in our proxy statement. The committee is responsible for ensuring we have in place policies and programs for the development of senior leaders and succession planning. The committee acts as the oversight committee with respect to our retirement and benefit plans for senior officers and must approve significant changes to the retirement and benefit plans for our
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Role of Independent Consultant. The Management Development and Compensation Committee engaged FW Cook, commencing in mid-2011, to serve as its independent, external compensation consultant. The committee has sole authority for retaining or terminating FW Cook, as well as approving the terms of engagement, including fees. FW Cook works exclusively for the committee and provides no services to the Company, other than services provided in the firm’s capacity as the committee’s consultant. FW Cook is expected to achieve the following objectives:
● | Attend meetings of the Management Development and Compensation Committee as requested; |
● | Acquire adequate knowledge and understanding of our compensation |
● | Provide advice on the direction and design of our |
● | Provide insight into the general direction of executive compensation within Fortune 500 companies; and |
● | Facilitate open communication between our |
40 | 2020 Proxy Statement |
Information About Corporate Governance
Assessment and Management of Compensation-Related Risk.The Management Development and Compensation Committee is committed to completing an annual risk assessment to evaluate the Company’s compensation plans and practices. In 2019, at the committee’s request, FW Cook conducted a risk assessment with the objective of identifying any compensation plans and practices that may encourage employees to take unnecessary or excessive risks that could threaten the Company. No such plans or practices were identified. The results of this 2019 evaluation indicated, and the committee thus concluded, that there are no significant compensation-related risk areas at the Company and that our compensation plans and practices do not encourage unnecessary or excessive risk-taking and do not create risks that are reasonably likely to have a material adverse effect on the Company. Also, based on this evaluation, the committee concluded that the Company’s executive compensation program appropriately aligns compensation with long-term shareowner value creation and avoids short-term rewards for decisions that could pose long-term risks to the Company. These conclusions were based on the following factors:
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● | Our performance is measured against absolute and relative metrics to | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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● | The committee maintains strict controls over the Compensation Committee Interlocks and Insider Participation The members of the Management Development and Compensation Committee during 2019 were Mr. Christopher M. Connor, Chair, Mr. David J. Bronczek (retired February 28, 2019), Ms. Ilene S. Gordon, Jacqueline C. Hinman (beginning May 1, 2019), J. Steven Whisler and Mr. Ray G. Young. No member of the Management Development and Compensation Committee was, during the fiscal year, an officer or employee of the Company or was formerly an officer of the Company. Please refer to the discussion below related to “Transactions with Related Persons,” for additional information requiring disclosure by us under Item 404 of Regulation S-K under the Exchange Act for members of the Company’s Management Development and Compensation Committee. In addition, no executive officer of the Company served as a member of the compensation committee (or its equivalent) of another entity, or as a director of another entity, one of whose executive officers served on our Management Development and Compensation Committee. No executive officer of the Company served as a member of the compensation committee (or its equivalent) of another entity, one of whose executive officers served as one of our directors. Transactions with Related Persons Transactions Covered.Our Board has adopted a written policy and procedures for review and approval or ratification of transactions involving the Company and “related persons” (directors, director nominees and executive officers and their immediate family members or shareowners owning 5 percent or greater of our outstanding common stock and their immediate family members). The policy covers any related person transaction in which (i) the amount involved exceeded $120,000, and (ii) a related person had or will have a direct or indirect material interest. The policy also provides that any transaction in which the Company participates with another company that employs a related person, or is controlled by a related person, or in which a related person has an ownership interest or financial interest material to such related person, shall be considered a related person transaction for purposes of the policy. The policy also sets forth certain clarifications and exceptions with respect to the applicability of the policy to certain types of transactions.
Information About Corporate Governance Related Person Transaction Review Procedures.In accordance with the procedures set forth below, related person transactions are approved in advance by the Governance Committee whenever possible, or must be ratified by the Governance Committee as promptly as possible thereafter. We disclose in our proxy statement any transactions that are required to be disclosed in accordance with Item 404(a) of Regulation S-K. Prior to entering into a related person transaction (as defined in our policy), a related person must provide the details of the transaction to the General Counsel, including the relationship of the person to the Company, the dollar amount involved, and whether the related person or his or her family member has or will have a direct or indirect interest in the transaction. The General Counsel evaluates the transaction to determine if the Company or the related person has a direct or indirect material interest in the transaction. If so, then the General Counsel notifies the CEO and submits the facts of the transaction to the Governance Committee for its review. The Governance Committee may approve a transaction only if these review procedures have been followed, and the Governance Committee determines that the transaction is not detrimental to the Company and does not violate the Company’sConflict of Interest Policy. Related Person Transactions.Since January 1, 2019, the Company has not been a participant in any transaction, and is not a participant in any currently proposed transaction, in which any related person had or will have a direct or indirect material interest that would require disclosure under Item 404(a) of Regulation S-K. Our Related Person Transaction procedures are available at www.internationalpaper.com under the “Company” tab at the top of the page followed by the “Leadership” link and then under the “Governance Documents” link. A paper copy is available at no cost by written request to the Corporate Secretary.
Each element of director compensation discussed below is recommended by the Governance Committee and approved by our Board. Mr. Sutton does not receive compensation for his service as a director. Stock Ownership Requirements Our director stock ownership policy requires our directors to hold equity of the Company valued at two times the total annual Board retainer, which, through April 30, 2020, is equivalent to 4.9 times the annual cash retainer (and requires ownership of Company stock equivalent to $550,000). We believe this helps align the interests of our directors with the interests of our shareowners. New directors have four years from the date of their election to meet the ownership requirement. As of December 31, 2019, all directors who were required to meet the ownership levels held the requisite amount of equity.
Role of Independent Consultant. The Management Development and Compensation Committee engaged FW Cook, commencing in mid-2011, to serve as its independent, external compensation consultant. The committee has sole authority for retaining or terminating FW Cook, as well as approving the terms of engagement, including fees. FW Cook works exclusively for the committee and provides no services to the Company, other than services provided in the firm’s capacity as the committee’s consultant. FW Cook is expected to achieve the following objectives:
Information About Corporate Governance Assessment and Management of Compensation-Related Risk.The Management Development and Compensation Committee is committed to completing an annual risk assessment to evaluate the Company’s compensation plans and practices. In 2019, at the committee’s request, FW Cook conducted a risk assessment with the objective of identifying any compensation plans and practices that may encourage employees to take unnecessary or excessive risks that could threaten the Company. No such plans or practices were identified. The results of this 2019 evaluation indicated, and the committee thus concluded, that there are no significant compensation-related risk areas at the Company and that our compensation plans and practices do not encourage unnecessary or excessive risk-taking and do not create risks that are reasonably likely to have a material adverse effect on the Company. Also, based on this evaluation, the committee concluded that the Company’s executive compensation program appropriately aligns compensation with long-term shareowner value creation and avoids short-term rewards for decisions that could pose long-term risks to the Company. These conclusions were based on the following factors:
Compensation Committee Interlocks and Insider Participation The members of the Management Development and Compensation Committee during 2019 were Mr. Christopher M. Connor, Chair, Mr. David J. Bronczek (retired February 28, 2019), Ms. Ilene S. Gordon, Jacqueline C. Hinman (beginning May 1, 2019), J. Steven Whisler and Mr. Ray G. Young. No member of the Management Development and Compensation Committee was, during the fiscal year, an officer or employee of the Company or was formerly an officer of the Company. Please refer to the discussion below related to “Transactions with Related Persons,” for additional information requiring disclosure by us under Item 404 of Regulation S-K under the Exchange Act for members of the Company’s Management Development and Compensation Committee. In addition, no executive officer of the Company served as a member of the compensation committee (or its equivalent) of another entity, or as a director of another entity, one of whose executive officers served on our Management Development and Compensation Committee. No executive officer of the Company served as a member of the compensation committee (or its equivalent) of another entity, one of whose executive officers served as one of our directors. Transactions with Related Persons Transactions Covered.Our Board has adopted a written policy and procedures for review and approval or ratification of transactions involving the Company and “related persons” (directors, director nominees and executive officers and their immediate family members or shareowners owning 5 percent or greater of our outstanding common stock and their immediate family members). The policy covers any related person transaction in which (i) the amount involved exceeded $120,000, and (ii) a related person had or will have a direct or indirect material interest. The policy also provides that any transaction in which the Company participates with another company that employs a related person, or is controlled by a related person, or in which a related person has an ownership interest or financial interest material to such related person, shall be considered a related person transaction for purposes of the policy. The policy also sets forth certain clarifications and exceptions with respect to the applicability of the policy to certain types of transactions.
Information About Corporate Governance Related Person Transaction Review Procedures.In accordance with the procedures set forth below, related person transactions are approved in advance by the Governance Committee whenever possible, or must be ratified by the Governance Committee as promptly as possible thereafter. We disclose in our proxy statement any transactions that are required to be disclosed in accordance with Item 404(a) of Regulation S-K. Prior to entering into a related person transaction (as defined in our policy), a related person must provide the details of the transaction to the General Counsel, including the relationship of the person to the Company, the dollar amount involved, and whether the related person or his or her family member has or will have a direct or indirect interest in the transaction. The General Counsel evaluates the transaction to determine if the Company or the related person has a direct or indirect material interest in the transaction. If so, then the General Counsel notifies the CEO and submits the facts of the transaction to the Governance Committee for its review. The Governance Committee may approve a transaction only if these review procedures have been followed, and the Governance Committee determines that the transaction is not detrimental to the Company and does not violate the Company’sConflict of Interest Policy. Related Person Transactions.Since January 1, 2019, the Company has not been a participant in any transaction, and is not a participant in any currently proposed transaction, in which any related person had or will have a direct or indirect material interest that would require disclosure under Item 404(a) of Regulation S-K. Our Related Person Transaction procedures are available at www.internationalpaper.com under the “Company” tab at the top of the page followed by the “Leadership” link and then under the “Governance Documents” link. A paper copy is available at no cost by written request to the Corporate Secretary.
Compensation Philosophy Our compensation program for non-employee directors is guided by the following principles. We believe our director compensation program should:
Each element of director compensation discussed below is recommended by the Governance Committee and approved by our Board. Mr. Sutton does not receive compensation for his service as a director. Stock Ownership Requirements Our director stock ownership policy requires our directors to hold equity of the Company valued at two times the total annual Board retainer, which, through April 30, 2020, is equivalent to 4.9 times the annual cash retainer (and requires ownership of Company stock equivalent to $550,000). We believe this helps align the interests of our directors with the interests of our shareowners. New directors have four years from the date of their election to meet the ownership requirement. As of December 31, 2019, all directors who were required to meet the ownership levels held the requisite amount of equity. Elements of Our Director Compensation Program For the May 2019 to April 2020 service year, compensation for our non-employee directors consists of:
On at least a biennial basis, we evaluate the reasonableness and appropriateness of the total compensation paid to our directors in comparison to peer companies who comprise our CCG. We target our director compensation at the median of our CCG. Annual Compensation The annual retainer fees for the May 2019 to April 2020 service year are shown in the table below. A director’s annual compensation paid as board fees is $275,000, of which $112,000 (41 percent) is payable in cash and $163,000 (59 percent) is payable in equity. A director may elect to convert all or 50 percent of his or her cash retainer fee (plus any committee fees and Presiding Director fees, as discussed below) into shares of restricted stock. In order to encourage director stock ownership, a director who makes this election receives a 20 percent premium of this converted cash award in additional shares of restricted stock. Ten of the 11 non-employee directors who served during 2019 elected to receive stock in lieu of all or 50 percent of the cash award and received the applicable premium. Restrictions on shares awarded to our directors under our current compensation plan lapse one year from the date of grant, and then the shares are freely transferable, subject to our director stock ownership requirement and securities regulations.
Director Compensation Directors may also elect to defer receipt of their equity retainer fee. Directors who make this election receive restricted stock units (“RSUs”) in lieu of restricted stock. In the event this election is made, these RSUs are not transferable until a director’s retirement from the Board, death or disability. The cash value of RSUs is paid in January following retirement, death or disability. Five of the 11 non-employee directors who served during 2019 elected to defer payment of all or a portion of their equity compensation until retirement, death or disability. Elections with regard to form of payment and deferrals are made in December preceding each service year. We use the closing market price of the Company’s common stock on the day preceding our annual meeting in May to award the equivalent number of shares for the $163,000 equity retainer and restricted stock elected by our directors in lieu of their cash retainer fee. RSUs are settled in cash based on the closing price of the Company’s common stock as of December 31 of the year of the director’s retirement. Directors earn dividends on their shares of stock and RSUs, which they may elect to receive either as cash or in the form of additional shares of restricted stock or RSUs. Dividends are paid to the director at the time the underlying award is vested or settled. In addition, as referenced above, each committee chair receives a fee for his or her service in such role. For 2019, Messrs. Bronczek, Connor, Whisler, Young and Mses. Gordon and Sullivan each received a committee chair fee. Members of our Audit and Finance Committee also receive an additional fee for their services on this committee. For 2019, Messrs. Connor, Dorduncu, Gustafsson and Young, and Ms. Hinman each received an Audit and Finance Committee member fee. As Presiding Director, Ms. Gordon also received a Presiding Director fee for 2019.
Insurance and Indemnification Contracts We provide life insurance in the amount of $10,500 to each of our non-employee directors, and travel accident insurance in the amount of $500,000 that covers a director if he or she dies or suffers certain injuries while traveling on Company business. We provide liability insurance for our directors, officers and certain other employees at an annual cost of approximately $3 million. The primary underwriters of coverage, which was renewed in 2019 and extends to July 1, 2020, are XL Specialty Insurance Company and ACE American Insurance Company. Our By-Laws provide for standard indemnification of our directors and officers in accordance with New York law. We also have contractual arrangements with our directors that indemnify them in certain circumstances for costs and liabilities incurred in actions brought against them while acting as our directors.
Director Compensation Our Analysis We believe our director compensation program appropriately compensates our directors for their time and commitment to the Company and is consistent with our compensation philosophy as shown in the following table.
Non-Employee Director Compensation Table The following table provides information on 2019 compensation for non-employee directors. This table shows fiscal year 2019 compensation based on the SEC’s compensation disclosure requirements, though we pay our directors on a May to April service year. The amounts in the table below show differences among directors because (i) each director makes an individual election to receive his or her fees in cash and/or equity; (ii) certain directors receive committee chair fees, a Presiding Director fee, and/or Audit and Finance Committee member fees; and (iii) directors may join our Board on different dates, so their compensation is prorated for the year.
Director Compensation The following table shows the aggregate number of unvested shares of restricted stock and RSUs outstanding as of December 31, 2019, for each non-employee director who served as of that date.
Introduction This CD&A describes our compensation program that applies to all of our executive officers, including our CEO and Senior Vice Presidents, whom we refer to as our Senior Leadership Team (“SLT”). It is designed to provide shareowners with an understanding of our compensation philosophy, core design principles and decision-making process. This narrative further explains how our Management Development and Compensation Committee (“MDCC”) oversees and designs the program and reviews the 2019 compensation of our Named Executive Officers (“NEOs”) as shown below:
Overview of Our CD&A
Compensation Discussion & Analysis (“CD&A”) Our MDCC wants to provide some additional context for your consideration, as explained below, when reviewing the Summary Compensation Table (“SCT”). Compensation Committee Highlights on 2017-2019 Executive Pay as Shown in the Summary Compensation Table (pg 74)
Current status of our pension benefit plans (to salaried U.S. participants)
Change in pension value
Compensation Discussion & Analysis (“CD&A”)
Note:
Compensation Discussion & Analysis (“CD&A”) International Paper delivered
The following section briefly highlights the MDCC’s key compensation decisions for Key Highlights for
Compensation Discussion & Analysis (“CD&A”)
Compensation Discussion & Analysis (“CD&A”)
The chart above demonstrates our commitment to
Compensation Discussion & Analysis (“CD&A”) Responsiveness to Shareowners – “Say-on-Pay” Consideration
Compensation Governance Practices
Compensation Discussion & Analysis (“CD&A”)
Executive Compensation Philosophy Our executive compensation program continues to be designed to attract, retain and motivate our SLT to deliver Company performance that builds long-term shareowner value. To achieve our objectives, our program is designed around two guiding principles:
Pay for Performance – CCG Analysis The MDCC reviews our CEO’s pay in relation to the Company’s performance to ensure alignment. We conduct this review against our Compensation Comparator Group (“CCG”) because it is one of two groups against which we target pay and is the Historical CEO Pay-for-Performance Alignment The following table demonstrates the close correlation between our CEO’s realizable pay and the Company’s performance over the past five three-year performance periods as compared to our CCG.
Compensation Discussion & Analysis (“CD&A”) Current CEO Pay-for-Performance Alignment Each point on the graph below represents a CCG CEO’s three-yearrealizablecompensation (the cash compensation actually paid plus the economic value of equity-based grants) relative to his or her company’s three-year performance in TSR over the period Compared to our CCG, our
Compensation Discussion & Analysis (“CD&A”)
The MDCC, in conjunction with its consultants, uses two sources of market data to assure our pay remains
International Paper vs. CCG Revenue1 IP’s Targeted TDC = CCG Median (50thpercentile)
Compensation Discussion & Analysis (“CD&A”)
Compensation Discussion & Analysis (“CD&A”)
The primary elements of our executive compensation program are base salary, short-term (annual) incentive compensation under our Management Incentive Plan (“MIP”), long-term incentive compensation under our Performance Share Plan (“PSP”), other ad hoc equity awards and benefits. Total Direct Compensation (“TDC”) is the combination of fixed and variable compensation. Other compensation elements, such as our limited executive benefits, are not part of TDC, but the MDCC also reviews these elements. Elements of Executive Compensation Base salary is the only fixed element of TDC. The MDCC considers base salary merit increases annually based on individual performance, while taking into account whether market-based adjustments are necessary. Annual merit increases for most employees across the globe, including the NEOs, are effective March 1. The following table shows the annual base salary in effect during
Variable Compensation: Overview and How We Assess Performance We do not have guaranteed bonuses. Variable compensation is pay at risk and is tied directly to performance. Company performance is based on the achievement of specific financial goals described below. Individual performance is rewarded upon achievement of specific pre-established objectives or priorities.
Other equity awards, including awards of stock and service-based restricted stock/units, may be granted from time to time under limited circumstances to address specific recruitment, retention or other recognition efforts. All SLT compensation, including any such equity awards, must be approved by the MDCC.
Compensation Discussion & Analysis (“CD&A”) How and Why We Chose Our Performance Metrics Our incentive compensation plan design is based upon achievement of pre-established performance objectives that we believe will drive improved financial performance of the Company. Each year the MDCC assesses the appropriateness of the performance metrics, and periodically makes adjustments based on the financial objectives most critical to the Company’s success. We explain below why the MDCC chose the performance metrics we used for our 2019 Short-Term Incentive Plan Metrics
2019-2021 Long-Term Incentive Plan Metrics
Compensation Discussion & Analysis (“CD&A”) The footnotes below explain the details of our performance metric calculations for purposes of our incentive compensation plans:
Compensation Discussion & Analysis (“CD&A”) Why We Use Different Peer Groups In the chart below, we explain why we use different peer groups for compensation benchmarking (as applicable) and for measuring Previously, our 2017 PSP TSR peer group was comprised of 15 companies and two indices that were hand-selected as companies that IP competed against for investment dollars. Beginning with the 2018 PSP grant, the peer group was selected using a more formulaic process and was expanded to 28 companies. The member companies of the below indices were used to form the TSR Peer Group:
The goal was to select closely correlated peers against which to compare our performance.
Bolded companies are also part of our
Compensation Discussion & Analysis (“CD&A”) Management Incentive Plan (“MIP”) Overview The MIP is our annual, cash-based incentive compensation plan designed to motivate employees to achieve our most critical short-term financial goals. In
In the event that our actual year-end result in any one of the metrics above falls below the established threshold performance level (as shown in the chart above), no payment will be earned for that portion of the award. Furthermore, in the event that our actual year-end result in any one of the metrics above falls between the threshold and target performance levels, or between the target and maximum performance levels, the payment earned will be calculated on a straight-line interpolated basis. The MDCC believes our MIP performance targets should motivate management to achieve results that will drive superior investor returns.
The Company’s MIP target award pool is equal to the sum of each MIP-eligible employee’s target award, based on his or her position in the Company. To calculate the actual award pool, the target award pool is multiplied by the Company’s
The MDCC has the discretion to decrease the award pool to zero and has Individual MIP Awards For all MIP-eligible employees, their respective awards are based on Company performance, but then may be modified by their individual performance achievement as determined by their direct manager. The CEO has discretion to recommend an additional award outside the MIP, called a CEO Award, in recognition of exceptional individual performance beyond what is captured in individual objectives. For 2019, none of our SLT members received a CEO Award. As described in Section 5, for
Compensation Discussion & Analysis (“CD&A”) Performance Share Plan (“PSP”) Overview The PSP is our long-term, equity-based incentive compensation plan designed to motivate employees to create long-term shareowner value. PSP awards are granted annually in performance-based restricted stock units The MDCC does not have discretion to increase the performance achievement, but may decrease it in the event the Company experiences negative Adjusted ROIC or negative TSR. In addition, if the Company’s absolute TSR over the three-year performance period is negative, performance achievement for the TSR portion of the PSP award may not exceed 100%.
Company Performance Metrics and Objectives
In the event that our actual three-year performance period ending result in either metric falls below the established threshold performance level (as shown in the chart above), no payment will be earned (vested) for that portion of the award. Furthermore, in the event that our actual three-year performance period ending result in either metric falls between the threshold and target performance levels, or between the target and maximum performance levels, the award earned (vested) will be calculated on a straight-line interpolated basis.
Compensation Discussion & Analysis (“CD&A”) Payout Calculation Based on market data, each PSP participant has a target award based on his or her position. The actual number of shares paid may be higher or lower than the target award, based solely on the Company’s performance achievement. Possible payouts under the
For the
Other types of equity awards, such as grants of stock, restricted stock awards (“RSAs”) or restricted stock units (“RSUs”), are used for purposes of recruitment, retention or recognition. Vesting provisions for these service-based awards vary on a case-by-case basis, but under regular terms and conditions are forfeited if the participant voluntarily terminates employment prior to vesting. During
Compensation Discussion & Analysis (“CD&A”) Members of the SLT participate in the same health, welfare and retirement programs available to most of the Company’s salaried U.S. employees. Additionally, our unfunded, non-qualified plans—the Pension Restoration Plan and the Deferred Compensation Savings Plan (“DCSP”)—are available to eligible salaried U.S.
Change-in-Control The Company has entered into CIC agreements with certain executives, including the SLT, that provide severance and other benefits, including acceleration of equity-award vesting, in the event of a “double trigger,” which requiresbotha CIC of the Companyanda qualifying termination of employment (i.e., involuntary termination without “cause” or departure for “good reason”). We believe these potential benefits align executive and shareowner interests by enabling leaders of the Company to focus on the interests of shareowners and other constituents when considering a potential CIC, without undue concern for their own financial and employment security. No benefits are provided As disclosed in Section 7, we do not offer perquisites to our SLT other than the following: the CEO’s limited personal use of Company aircraft; standard benefits under our Global Mobility Policy which establishes many of the benefits provided to employees who serve or have served as expatriates; benefits granted to grandfathered participants in our Executive Supplemental Life Insurance Program; and tax preparation related to board service, at the Company’s request, with the Company’s Ilim joint venture in
Compensation Discussion & Analysis (“CD&A”)
The compensation benchmarking review used to establish NEO target TDC levels for We do not, nor do we believe it is necessary to, have a policy that dictates a specific ratio of CEO compensation to other NEOs or the SLT. Generally, we base our compensation decisions on principles of internal equity and external market competitiveness. The difference that exists between our CEO’s compensation and our other NEOs is based on the complexity of the CEO’s leadership responsibilities for the global enterprise.
In this section, we describe the The “Target” amount includes:
The “Actual” amount represents what we believe is the appropriate way to illustrate
In comparing the following charts to the Summary Compensation Table, you will see the value shown for the “equity awards” differs. Equity awards granted in
Compensation Discussion & Analysis (“CD&A”)
The chart below compares Mr. Sutton’s Target LTIis based on Actual LTIis based on
Compensation Discussion & Analysis (“CD&A”)
The chart below compares Mr. Nicholls’s Target LTIis based on Actual LTIis based on
Compensation Discussion & Analysis (“CD&A”)
The chart below compares Mr. Ribieras’s 2019 actual compensation paid against targeted compensation amounts. Target LTIis based on 22,638 target shares valued at $53.01 using the 20-day average stock price as of December 31, 2016. Actual LTIis based on 18,436 shares, which includes the original target shares plus reinvested dividends, multiplied by 72.5% performance achievement and valued at $43.56, IP’s closing share price on February 7, 2020.
Compensation Discussion & Analysis (“CD&A”)
2019 Realized Compensation
The chart below compares Target LTIis based on Actual LTIis based on Compensation Discussion & Analysis (“CD&A”)
2019 Realized Compensation
The chart below compares Ms. Ryan’s 2019 actual compensation paid against targeted compensation amounts. Target LTIis based on 33,013 target shares valued at $53.01 using the 20-day average stock price as of December 31, 2016. Actual LTIis based on 26,884 shares, which includes the original target shares plus reinvested dividends, multiplied by 72.5% performance achievement and valued at $43.56, IP’s closing share price on February 7, 2020.
Compensation Discussion & Analysis (“CD&A”)
Insider Trading and Anti-Hedging/Anti-Pledging Policies The Company has adopted comprehensive and detailed policies that regulate trading in Company securities by our insiders, including the SLT and Board members. These policies include information regarding trading “blackout” periods and explain when transactions in Company securities are permitted. The policies also strictly prohibit our SLT and Board members (as well as our corporate Officer Stock Ownership and Retention Requirements All of our officers are expected to own shares of our common stock with a minimum market value based on a multiple of base pay. This policy is intended to align our officers’ interests with those of our shareowners and encourage long-term shareowner value creation by requiring officers to have a significant equity stake in the Company. Our stock ownership requirements are based on position:
The following are counted toward meeting the ownership requirement: freely held shares (whether purchased on the open market or fully earned through Company plan or program); “beneficial” shares held indirectly by a trust or family member; and share equivalents held in the Salaried Savings Plan and Deferred Compensation Savings Plan. However, unvested restricted shares (e.g., PSP awards and RSAs) arenotcounted toward meeting the ownership requirement. Officers are required to retain 50 percent of their net shares paid under any Company long-term incentive plan or program, such as shares paid out under the PSP and vested RSA shares, until their ownership requirements are satisfied. SLT stock ownership is reviewed annually by the MDCC to assure compliance. As of our last annual evaluation, all SLT members were in compliance with our policy. Board Policy on Personal Use of Company Aircraft The Board encourages the CEO to use Company aircraft for business continuity and efficiency purposes, where appropriate. Use of the Company aircraft allows the CEO to be available at all times for business needs, whether on business or personal travel. Pursuant to Board resolutions and his Time Sharing Agreement, Mr. Sutton is authorized to use the Company aircraft for personal travel and is required to reimburse the Company for the incremental cost of personal use of the aircraft above $75,000. The value of such use is imputed income to him, and is not grossed up for taxes. Clawback or Forfeiture of Incentive Awards Both MIP and PSP awards are subject to a clawback provision contained in our plan documents. Under this clawback provision, if the Company’s financial statements are restated as a result of errors, omission, or fraud, the MDCC may, at its discretion, based on the facts and circumstances surrounding the restatement, require some or all participants to return all or a portion of their awards to the Company. In addition,
Compensation Discussion & Analysis (“CD&A”) Non-Competition and Non-Solicitation Agreements The Company maintains Non-Competition and Non-Solicitation Agreements with leaders of the Company, including our SLT, to prohibit such leaders from engaging in certain competitive activities and to protect confidential information and trade secrets from unauthorized use or disclosure. Violation of these agreements may result in clawback or forfeiture of incentive compensation awards. Board Policy on (Non-CIC) Severance Agreements with Senior Officers A supplemental severance payment to the CEO must be approved by the independent directors of the Board. A supplemental severance payment to any other Prohibition on We do not backdate or reprice equity grants. Our incentive compensation plan provides that stock options may not be repriced, directly or indirectly, without the prior consent of the Company’s shareowners. The Company discontinued granting stock options in 2005 and all outstanding stock options expired in 2015. The Company does not have any program, plan or practice to time, and has not timed, equity grants to coordinate with the release of material non-public information. Annual equity grants (including pro rata grants for promotions and employees hired in the prior year) under the PSP are approved at the MDCC’s meeting in December. Having predetermined grant dates minimizes any concern that grant dates could be selectively chosen based upon market price at any given time. Deductibility of Executive Compensation Section 162(m) of the Internal Revenue Code limits the tax deductibility of compensation for certain executive officers that is more than $1 million. Prior to the enactment of the Tax Cuts and Jobs Act in December 2017, Section 162(m) provided an exemption from this deduction limitation for compensation that qualified as “performance-based compensation.” However, the exemption for performance-based compensation was repealed, effective for taxable years beginning after December 31, 2017, subject to transition relief for certain arrangements in place as of November 2, 2017. In designing our executive compensation program and determining the Accounting for Stock-Based Compensation The accounting treatment of stock-based compensation is not determinative of the type, timing, or amount of any particular grant made to our employees.
Compensation Discussion & Analysis (“CD&A”)
The following tables in this Section provide detailed information regarding compensation for our NEOs. The table below shows base salary, stock awards under our PSP and, if applicable, RSA program, cash awards under our MIP, the change in pension value, and all other compensation to our NEOs for the years ended December 31, 2019, 2018
Compensation Discussion & Analysis (“CD&A”)
Compensation Discussion & Analysis (“CD&A”) Other Grants of Plan-Based Awards During The table below shows payout ranges for our NEOs under the
Narrative to the Grants of Plan-Based Awards Table Estimated Possible Payouts under Non-Equity Incentive Plan Awards These columns show the threshold, target and maximum payouts under the The amount shown in the “Threshold” column was the amount that would have been paid under the The amount shown in the “Maximum” column was the possible payout for each NEO based on maximum Company performance achievement of 200 percent. Estimated Future Payouts under Equity Incentive Plan Awards These columns show the threshold, target and maximum payouts under the The amount shown in the “Threshold” column is the number of shares each NEO would receive if the Company achieved only the minimum performance level required in one of the following performance metrics: absolute Adjusted ROIC and relative TSR. The amount shown in the “Maximum” column is the possible number of shares each NEO would receive based on maximum Company performance of 200 percent.
Grant Date Fair Value of Stock Awards The amounts shown in this column reflect the grant date fair value of the awards granted to each NEO under the
Compensation Discussion & Analysis (“CD&A”) at January 1, The amount ultimately paid to PSP participants may or may not be the same amount as the value shown in the table due to two factors: (1) the ultimate number of shares paid to our PSP participants will vary based on the relative performance of the Company to the other companies in our TSR Outstanding Equity Awards at December 31, The following table shows the outstanding equity awards held by our NEOs as of December 31,
Compensation Discussion & Analysis (“CD&A”) The following table shows the value received upon the vesting in
The following table shows the present value of benefits payable to our NEOs under our Retirement Plan, Pension Restoration Plan, or SERP at December 31, All of our NEOs are eligible for a benefit calculated under the Retirement Plan. The NEOs are also eligible for a benefit that is calculated under the Pension Restoration Plan formula. Mr. Sutton, Mr. Nicholls and Ms. Ryan are also eligible for a benefit calculated under the SERP formula. We amended the SERP to comply with IRC Section 409A, effective January 1, 2008. As amended, the portion of the benefit that is earned prior to SERP eligibility is paid under the Pension Restoration Plan, and the portion earned following SERP eligibility is paid from the SERP. Mr.
Compensation Discussion & Analysis (“CD&A”)
Narrative to Pension Benefits Table Retirement Plan of International Paper Company Our Retirement Plan is a funded, tax-qualified plan that covers all U.S. salaried employees hired prior to July 1, 2004. U.S. employees hired on or after July 1, 2004, are eligible for a Company-paid Retirement Savings Account contribution to our Salaried Savings Plan and Deferred Compensation Savings Plan in lieu of participation in the Retirement Plan. All of our NEOs, except Ms. Slater, were hired prior to July 1, 2004, and thus are eligible to participate in the Retirement Plan. Ms. Slater is eligible to participate in the Retirement Plan because she was hired by Weyerhaeuser on or before December 1, 2011, and was participating in Weyerhaeuser’s salaried pension plan on December 1, 2016, the date of the Company’s acquisition of Weyerhaeuser’s pulp business. All similarly situated employees of the acquired business were allowed to participate and begin accruing a benefit under the Retirement Plan as of December 1, 2016. We calculate the benefit under the Retirement Plan at the rate of 1.67% of the participant’s average pensionable earnings received over the highest five consecutive calendar years of the last 10 calendar years, multiplied by his or her years of service, then reduced by a portion of Social Security benefits. We include as pensionable earnings the participant’s base salary plus MIP awards that were not deferred, up to the maximum limit set by the IRS. International Paper Company Pension Restoration Plan for Salaried Employees Our supplemental retirement plan for our salaried employees is an unfunded, non-qualified plan that covers all U.S. salaried employees hired prior to July 1, 2004. This plan augments our Retirement Plan by providing retirement benefits based on compensation that is greater than the limits set by the IRS. We include as eligible compensation under this plan the participant’s base salary plus MIP awards, including amounts deferred. All of our NEOs, except Ms. Slater, were hired prior to July 1, 2004, and thus are eligible to participate in the Pension Restoration Plan. Ms. Slater is eligible to participate in the Pension Restoration Plan because she was hired by Weyerhaeuser on or before December 1, 2011, and participating in Weyerhaeuser’s salaried pension plan on December 1, 2016, the date of the Company’s acquisition of Weyerhaeuser’s pulp business. All similarly situated employees of the acquired business were allowed to participate and begin accruing a benefit under the Pension Restoration Plan as of December 1, 2016. We calculate the benefit under the Pension Restoration Plan in the same manner as the Retirement Plan and then reduce the benefit by the amount payable under the Retirement Plan. The International Paper Company Unfunded Supplemental Retirement Plan for Senior Managers Our SERP is an alternative retirement plan available to certain senior executives, including the NEOs (other than Mr. A participant who has announced retirement at least 12 months in advance has the right to lock in a discount rate used to determine the amount of the lump sum payment based on the average for the month in which they choose to lock in. All NEOs who are eligible for a SERP benefit have locked in the discount rate under this provision.
Compensation Discussion & Analysis (“CD&A”) Policies with Regard to Granting Additional Years of Service Our change-in-control agreements described elsewhere in this proxy statement provide additional years of age and service to be added to the calculation of retirement benefits in the event of a qualifying termination of each NEO’s employment following a change-in-control. The change-in-control agreements for Mr. Sutton, Mr. Nicholls and Ms. Ryan provide three additional years of age and service. The change-in-control agreements for Mr. Ribieras and Ms. Slater
Eligibility for Early Retirement Benefits Normal retirement under our Retirement Plan and Pension Restoration Plan is age 65. Participants, including the NEOs, are eligible for early retirement under the Retirement Plan, the Pension Restoration Plan and the SERP at age 55 with 10 years of service. However, a participant’s accrued benefit is reduced by 4% for each year that the participant retires before reaching age 62. Eligible active employees may receive an unreduced benefit once they reach age 61 and have completed at least 20 years of service. All NEOs are eligible for early retirement; their benefit would be reduced based on age and years of service. Pension Change In February 2014, the MDCC approved changes to the Retirement Plan, the Pension Restoration Plan and the SERP such that credited service and compensation were capped effective December 31, 2018, for salaried employees, including the NEOs. For service after this date, employees affected by the freeze will receive Retirement Savings Account Non-Qualified Deferred Compensation in The following table shows contributions in
Narrative to Non-Qualified Deferred Compensation Table The DCSP allows participants to save for retirement by deferring up to 85% of eligible cash compensation, which includes base salary and MIP awards. Participants may contribute to the DCSP after deferring either the maximum pre-tax amount or total pre-tax and after-tax amount to the 401(k) plan or after reaching the IRS compensation limit for that year. The Company credits matching contributions equal to 70% of the participant’s contributions up to 4% of compensation, plus 50% of contributions up to an additional 4% of compensation. Beginning in 2019, the Company credits Retirement Savings Account Contributions to each NEO’s account. These contributions are equal to a percentage of eligible compensation, based on the NEO’s age at the date the contribution is made. All NEOs received RSA contributions in an amount equal to 6% of their eligible compensation.
Compensation Discussion & Analysis (“CD&A”) For Participant contributions are credited with earnings (or losses) based on the participant’s choice of investment fund equivalents. Investment fund equivalents match the investment returns of the funds available in the 401(k) plan. Investment elections may be changed daily subject to securities laws restrictions. Differences in earnings reported in the “Non-Qualified Deferred Compensation” table above, are based on the individual participant’s investment elections.
Participants are fully vested in their contributions at all times. Amounts contributed by the Company become vested upon completing three years of service, reaching age 65, death, disability, termination of employment as a result of the permanent closing of the participant’s facility, or eligibility for severance under the Salaried Employee Severance Plan. Participant accounts are divided into contribution accounts for amounts deferred prior to January 1, 2005, and contribution accounts for amounts deferred after January 1, 2005. Distributions of amounts contributed on or after January 1, 2005, may only be made in the event of termination of employment, death, disability or through an in-service distribution at a date elected during the initial enrollment period. Participants must elect their distribution form of payment in an initial deferral election, which may only be changed under a subsequent distribution election that meets the requirements under IRC Section 409A. In the event no election has been made, the participant will receive a lump-sum form of payment. In-service withdrawals are limited to unforeseeable emergencies. Post-Employment Termination Benefits Potential Payments Upon Death or Disability The Company provides to our NEOs the following benefits in the event of death or disability, which are also available to all of our U.S. salaried employees. Upon reaching age 65, the disabled individual is covered under our retirement programs, if eligible, as described above. We provide the following disability benefits:
The Company provides the same benefits to the beneficiary of an SLT member (including a NEO) upon death as are available to our U.S. salaried employees, with two additional benefits:
In the event of disability or death, PSP awards are prorated based upon the number of months the participant worked during the performance period, and are paid at the end of the three-year performance period based on actual Company performance. Service-based restricted stock awards also become vested upon death or disability.
Compensation Discussion & Analysis (“CD&A”) Potential Payments Upon Retirement The following table presents the potential payments to our NEOs, assuming that they retired at the end of
Potential Payments Upon Involuntary Termination Without Cause The following table represents all amounts that would be payable to our NEOs in the event of involuntary termination without cause, including earned pension amounts not payable as a result of the termination, assuming that the termination occurred at the end of
Compensation Discussion & Analysis (“CD&A”) Potential Payments Upon Involuntary Termination With Cause An executive officer who is terminated with cause would not be eligible for the severance benefits included in the previous table, other than vacation pay. Further, the executive officer would lose outstanding equity awards under the PSP or other restricted stock grants, and not be eligible for payment of an MIP award.
Potential Payments Upon Qualifying Termination After Change in Control The following table represents amounts that would be payable to our NEOs upon termination of employment without cause (including by the NEO for “good reason”) within two years following a change in control of the Company on December 31,
Compensation Discussion & Analysis (“CD&A”) Narrative to Potential Payments Upon Qualifying Termination After Change in Control Table The Company has entered into change-in-control agreements with certain executives that provide severance and other benefits in the event of a change in control of the Company. Our Board believes that maintaining We believe this program aligns executive and shareowner interests by enabling leaders of the Company to focus on the interests of shareowners and other constituents when considering a potential change in control, without undue concern for their own financial and employment security. As part of its ongoing oversight of this program, the Board modified it in 2010 to eliminate the excise tax gross-up provision, replacing it with a “best net” calculation. Under this “best net” approach, the Company will, prior to making any payments, perform a calculation comparing:
This comparison will determine the higher “net” benefit payable under the agreement.
In 2013, the MDCC and the Board approved and required our officers to sign amended change-in-control agreements. As shown in greater detail in the above table, our change-in-control agreements provide the following benefits to NEOs only if there has been both a change in control of the Company and a qualifying termination of employment,i.e., they are terminated without cause by the new employer or the employee departs for “good reason” within two years of the change in control (“double-trigger” benefits):
Beginning in 2012, for change-in-control agreements with future non-CEO SLT members, the cash severance payment multiple has been reduced to two times (from three times) the sum of base salary plus target MIP, and the additional years of pension credit and the benefit continuation period have been reduced to two years (from three years). Since Mr. Ribieras and Ms. Slater became SLT members after 2012, the multiple in their change-in-control agreements is two times as set forth above.
Compensation Discussion & Analysis (“CD&A”) A “change in control” is defined in our agreements as any of the following events:
The lump sum cash severance benefit shown above is payable only in the event of termination of employment without cause within two years following a change in control. This includes voluntary resignation only in limited situations that meet the definition of “good reason,” listed below. Under no circumstance will an executive receive a cash severance benefit under the agreement if he or she leaves voluntarily other than for “good reason,” which is defined as:
Currently, the following benefits are payable upon a change in control and do not require termination of employment:
We have offered these limited single-trigger benefits for the purpose of:
In light of the difficulty in determining relative performance achievement in our PSP following a change in control of the Company, we provide for payment of PSP awards as described above. Further, in light of the seniority of our covered executives, and their proximity to retirement age, we believe that increasing their pension protection provides appropriate retirement security in their employment following a change in control.
International Paper is one of the world’s leading producers of fiber-based packaging, pulp, and paper, with To determine the pay ratio required by Item 402(u) of Regulation S-K, the Company first identified the median employee using our global employee population as of October 1, Once the median employee was identified, we then determined the median employee’s annual total compensation using the Summary Compensation Table methodology as detailed in Item 402(c)(2)(x) of Regulation S-K, and compared it to the total compensation of Mr. Sutton, our Chairman and CEO, as detailed in the Summary Compensation Table for As noted above, a large segment of our employees is hourly-based, as is our median employee. Our median employee is located in the United States and works in one of our box plants.
Our pension plans were frozen for all salaried employees as of December 31, 2018. Therefore, Mr. Sutton’s actual accrued pension benefit Security Ownership of Certain Beneficial Owners The following table sets forth information concerning beneficial ownership of our common stock by persons known to us to own more than 5 percent of our common stock outstanding as of March
Ownership of Company Stock Security Ownership of Management The following table sets forth the number of shares of our common stock beneficially owned by each of our directors and NEOs, and by all of our directors and executive officers as a group, as of March
Equity Compensation Plan Information The following table provides information as of December 31,
The tables below present reconciliations of
Adjusted EBITDA is a non-GAAP financial measure presented as a supplemental measure of our performance and the most directly comparable GAAP measure The Company believes Adjusted
Free cash flow is a non-GAAP financial measure and the most directly comparable GAAP measure is cash provided by operations. Management believes that free cash flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the business, to maintain a strong balance sheet, pay dividends, repurchase stock, service debt and make investments for future growth. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. By adjusting for certain items that are not indicative of the Company’s ongoing performance, free cash flow also enables investors to perform meaningful comparisons between past and present periods.
Appendix A – Reconciliations of Non-GAAP Measures
The Company considers adjusted return on invested capital (“Adjusted ROIC”), a non-GAAP financial measure, to be a meaningful indicator of our operating performance, and we evaluate this metric because it measures how effectively and efficiently we use the capital invested in our business. The Company defines and calculates Adjusted ROIC using in the numerator Adjusted Operating Earnings Before Net Interest Expense, the most directly comparable GAAP measure to which is Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings. The Company calculates Adjusted Operating Earnings Before Net Interest Expense by excluding net interest expense, the after-tax effect of non-operating pension expense and items considered by management to be unusual (special items) from the earnings reported under GAAP. Management uses this measure to focus on on-going operations and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present operating results. Adjusted ROIC = Adjusted Operating Earnings Before Net Interest Expense / Average Invested Capital
The Company considers Cash Conversion, a non-GAAP financial measure, to be a meaningful indicator of our operating performance, and we evaluate this metric because it measures how effectively and efficiently we generate cash from normal business operations after non-strategic capital spending. The Company defines and calculates
Appendix A – Reconciliations of Non-GAAP Measures Cash Conversion using in the numerator Adjusted EBITDA (as defined above) less Non-Strategic Capital Spending plus/minus changes in Operating Working Capital for Cash Conversion. The Company calculates Non-Strategic Capital Spending by excluding spending from projects intended to improve market position or customer service/satisfaction, but including volume increases and performance or quality improvements from the Invested in Capital Projects amount on the Consolidated Cash Flow Statement reported under GAAP. Operating Working Capital for Cash Conversion is defined and calculated as Trade Accounts and Notes Receivable plus Contract Assets plus Inventories less Trade Accounts Payable as reported on the Consolidated Balance Sheet under GAAP, excluding Corporate Operating Working Capital and other adjustments. Non-Strategic Capital Spending and changes in Operating Capital may be adjusted for any impact of acquisitions, divestitures and/or the effect of changes in tax laws, accounting principles or other laws or provisions affecting reported results. Management uses this measure to focus on on-going operations and believes it is useful to investors because it enables them to perform meaningful comparisons of past and present operating results. Cash Conversion = Adjusted EBITDA – Non-Strategic Capital Spending +/- Changes in Operating Working Capital / Adjusted EBITDA
INTERNATIONAL PAPER COMPANY C/O COMPUTERSHARE P.O. BOX 43004 PROVIDENCE, RI 02940-3004 VOTE BY INTERNET You may use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. EDT May During The Meeting - Go towww.virtualshareholdermeeting.com/IP2020
VOTE BY PHONE - 1-800-690-6903 VOTE BY MAIL If you or your duly appointed virtually or in person proxy holder are planning to attend the annual meeting of shareowners on May
INTERNATIONAL PAPER COMPANY
Important Notice Regarding the Availability of Proxy Materials for the Shareowner Meeting INTERNATIONAL PAPER COMPANY SHAREOWNER PROXY AND CONFIDENTIAL VOTING INSTRUCTION CARD THIS PROXY/VOTING INSTRUCTION CARD IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INTERNATIONAL PAPER COMPANY AND BY THE TRUSTEES OF THE PLANS LISTED BELOW.THIS MAY ONLY BE USED AT THE ANNUAL MEETING OF SHAREOWNERS, TO BE HELD ON MAY As the result of public health and safety concerns arising from the outbreak of the coronavirus (COVID-19), this year’s annual meeting will be a “hybrid” meeting of shareowners, meaning that you may attend the annual meeting either via the Internet or in person. While we intend to host a physical shareowners meeting, we encourage shareowners to consider whether it is advisable to attend by virtual means rather than in person in light of COVID-19 and public health concerns. In the event we determine it is necessary or appropriate to take additional steps regarding how we conduct our annual meeting or impose additional procedures or limitations on those attending the annual meeting in person in light of these COVID-19 concerns, we would plan to announce such details on our company website (in addition to any filings with the SEC we may elect to make). If you are a registered shareowner, by submitting this proxy you are appointing Mark S. Sutton, Tim S. Nicholls and Sharon R. Ryan, jointly or individually, as proxies with power of substitution, to vote all shares you are entitled to vote at the Annual Meeting of Shareowners on May If you are a participant in either the International Paper Salaried Savings Plan or the International Paper Hourly Savings Plan, by signing this proxy/voting instruction card, you are instructing the Trustee to vote the shares of common stock in accordance with your voting instructions. The Company has authorized Broadridge as the agent to tabulate the votes under each of the plans. Any shares held by the Trustee for which it has not received voting instructions by Internet, phone or mail by 11:59 P.M. EDT May The proxies are instructed to vote as indicated on the reverse side. This proxy revokes all prior proxies given by you. Please sign on the reverse side exactly as your name or names appear(s) there. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee, guardian or other fiduciary, please give your full title. If a corporation, please sign in full corporate name by authorized officer. If a partnership or LLC, please sign in firm name by authorized partner or member.
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