Dear Shareholder:
I am pleased to invite you to attend 3M’s Annual Meeting of Shareholders, which will be held on Tuesday, May 12, 2020, at 8:30 a.m., Central Daylight Time at the Archer Hotel, 3121 Palm Way, Austin, Texas. Details regarding admission to the meeting and the business to be conducted are provided
In addition, you will have a chance at the meeting to vote on the matters set forth in the accompanying Notice of Annual Meeting and Proxy Statement. I will report on Company operations and discuss our future plans. There will also be time for your questions and comments. I sincerely hope you will be able to join us at the Annual Meeting. For information on how to attend the Annual Meeting, or listen to the live webcast, please read “Annual Meeting Admission” on page 95 of the accompanying Proxy Statement. There will also be time for your questions and comments. Shareholders who wish to submit questions in advance of the meeting may do so by using their 16-digit control number to access www.proxyvote.com.
We sincerely hope you will join us at our virtual Annual Meeting. For information on how to attend the meeting, please read “Participating in the Virtual Annual Meeting” on page 110 of the accompanying Proxy Statement. Your vote is important. Whether or not you plan to attend the Annual Meeting, please vote as soon as possible. You may vote your proxy on the Internet, by telephone, or if this Proxy Statement was mailed to you, by completing and mailing the enclosed traditional proxy card. Please review the instructions on the proxy card or the electronic proxy material delivery notice regarding each of these voting options. Thank you for your ongoing support of 3M. Sincerely, | | | | | | | | Michael F. Roman Chairman of the Board and Chief Executive Officer | | Michael L. Eskew Lead Independent Director | |
2022 Proxy Statement 3
Table of Contents Notice of 2022 annual meeting of shareholders | Time and Date | 8:30 a.m., | | Central Daylight Time | | Tuesday, May 10, 2022 | | | | Where | Virtual only at | | www.virtualshareholder | | meeting.com/MMM2022 | | | How to vote | Whether or not you plan to attend the Annual Meeting,virtual meeting, please vote your proxy either by using the Internet or telephone as soon as possible. further explained in this Proxy Statement or by filling in, signing, dating, and promptly mailing a proxy card. | | | | By Telephone | In the U.S. or Canada, you | | may vote your shares toll-free | | by calling 1-800-690-6903. | | | | By Internet | You may vote your proxy on the Internet,shares | | online at www.proxyvote.com. | | | | By Mail | You may vote by telephone, or, if this Proxy Statement was mailed to you,mail by completingmarking, dating, and mailing the enclosed traditional proxy card. Please review the instructions on thesigning your proxy card or voting instruction form and returning it in the electronic proxy material delivery notice regarding each of these voting options.Thank you for your ongoing support of 3M.
Sincerely,
March 25, 2020 postage-paid envelope. | |
Michael F. Roman
Chairman of
| | By Online Voting | You may vote online at the Board, President
and Chief Executive Officervirtual annual meeting. | |
2 | 3M CompanyImportant Notice regarding the availability of proxy materials for the Annual Meeting of Shareholders to be held on May 10, 2022. |
The Notice of Annual Meeting, Proxy Statement, and 2021 Annual Report are available at www.proxyvote.com. Enter the 16-digit control number located in the box next to the arrow on the Notice of Internet Availability of Proxy Materials or proxy card to view these materials. THIS PROXY STATEMENT AND PROXY CARD, AND THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS, ARE BEING DISTRIBUTED TO SHAREHOLDERS ON OR ABOUT MARCH 23, 2022. Items of business | | Board Recommendation |
Table of Contents
Notice of 2020 Annual Meeting of Shareholders
Items of business
Record date You are entitled to vote if you were a shareholder of record at the close of business on Tuesday, March 17, 2020. 15, 2022. Adjournments and postponements Any action on the items of business described above may be considered at the Annual Meeting at the time and on the date specified above or at any time and date to which the Annual Meeting may be properly adjourned or postponed. Annual report Our 20192021 Annual Report, which is not part of the proxy soliciting materials, is enclosed if the proxy materials were mailed to you. The Annual Report is accessible on the Internet by visitingwww.proxyvote.com, if you have received the Notice of Internet Availability of Proxy Materials, or previously consented to the electronic delivery of proxy materials. By Orderorder of the Board of Directors,
Ivan K. FongMichael M. Dai
Senior Vice President, Associate General Counsel and Secretary
3M Company 3M Center, St. Paul, Minnesota 55144
Important Notice regardingAttending the availabilityvirtual Annual Meeting
To prioritize the health and well-being of proxy materials forour shareholders due to concerns related to COVID-19, and to leverage technology to enable shareholder participation from any location, the 2022 Annual Meeting of Shareholders towill be held on May 12, 2020. exclusively online. The Notice of Annual Meeting, Proxy Statement, and 2019 Annual Report are available atwww.proxyvote.com. Enter the 16-digit control number located in the box next to the arrow on the Notice of Internet Availability of Proxy Materials or proxy card to view these materials.
THIS PROXY STATEMENT AND PROXY CARD, OR THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS, ARE BEING DISTRIBUTED TO SHAREHOLDERS ON OR ABOUT MARCH 25, 2020.
| Time and Date
8:30 a.m., Central Daylight Time Tuesday, May 12, 2020
| | | | Place
Archer Hotel, 3121 Palm Way Austin, TX 78758
|
How to vote
Whether or not you plan to attend the meeting, please provide your proxy by either using the Internet or telephone as further explained in this Proxy Statement or filling in, signing, dating, and promptly mailing a proxy card.
| By Telephone
In the U.S. or Canada, you can vote your shares toll-free by calling
1-800-690-6903.
| | | | By Internet
You can vote your shares online at
www.proxyvote.com.
| | | | By Mail
You can vote by mail by marking, dating, and signing your proxy card or voting instruction form and returning it in the postage-paid envelope.
|
Attending the meeting
If you wish to attend the Annual Meeting in person, you will need to RSVP and print your admission ticket atwww.proxyvote.com. An admission ticket together with a valid government issued photo identification must be presented in order toTo be admitted to the Annual Meeting. Please referMeeting at www.virtualshareholdermeeting.com/MMM2022, you need to enter the section entitled “Annual Meeting Admission”16-digit control number on your proxy card, voting instruction, or Notice of Internet Availability you previously received. See additional instructions on page 95 of the Proxy Statement for further details.
110. We are actively monitoringhave worked to offer the coronavirus (COVID-19) situation. Insame participation opportunities as were provided at the event it is not possible or advisable to holdin-person portion of our past meetings. At the virtual Annual Meeting, in person,we will publicly announce, as soon as practicable before the meeting, a determination to hold the meeting solely by means of remote communication online. In that event,you or your proxyholder couldmay participate,vote and examine thea list of shareholders of record entitled to vote at the meeting by accessing a designated websitewww.virtualshareholdermeeting.com/MMM2022. If you wish to submit questions in advance of the virtual meeting, you may do so by using your 16-digit control number. Please monitor our investor relationsnumber to access www.proxyvote.com. During the virtual meeting, you may type in your questions on the meeting website athttps://investors.3m.com for updated information. as well. See additional instructions on page 111.
4 3M Company
Table of Contents Table of contents
Table of Contents
2022 Proxy Statement 5
Table of Contents
Special Note About Forward-Looking Statements This proxy statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements involve risks and uncertainties that could cause results to differ materially from those projected. Please refer to the section entitled “Risk Factors” in our Forms 10-K and 10-Q. The information contained herein is as of the date of this proxy statement. We assume no obligation to update any forward-looking statements contained herein as a result of new information or future events or developments, except as required by law. No Incorporation By Reference This proxy statement includes website addresses and references to additional materials found on those websites. These websites and materials are not incorporated by reference herein. 6 3M Company
Table of Contents Proxy highlights |
| | | PROPOSALProposal
1 | | Elect the Eleven11 Directors Identified in this Proxy Statement (page 19) • ● Elect the eleven11 directors identified in this Proxy Statement, each for a term of one year.
• ● Our nominees are distinguished leaders who bring a mix of skills and qualifications to the Board and can represent the interests of all shareholders.
| ● As proven leaders, our nominees are well-positioned to guide 3M’s strategic directions.
“FOR● ” each
nomineeOur recent Board refreshment brings new skills and experience to the Board
Page 13 and enhances its oversight of various areas important to the Company.
| | | | | | | | “FOR” each nominee to the Board | | | | | |
Director nominees
| | | | Director | | | | 3M Committees | Director Nominee and Occupation | | Age | | Since | | Other Current Public Boards | | A | C | N&G | STS | Thomas “Tony” K. Brown Independent Retired Group Vice President, Global Purchasing, Ford Motor Company | | 64 | | 2013 | | • ConAgra Foods, Inc. | | | | | | Pamela J. Craig Independent Retired Chief Financial Officer, Accenture plc | | 63 | | 2019 | | • Merck & Co. • Progressive Corporation | | | | | | David B. Dillon Independent Retired Chairman of the Board and Chief Executive Officer, The Kroger Co. | | 68 | | 2015 | | • Union Pacific Corporation | | | | | | Michael L. Eskew Independent Lead Director Retired Chairman of the Board and Chief Executive Officer, United Parcel Service, Inc. | | 70 | | 2003 | | • The Allstate Corporation • Eli Lilly and Company • International Business Machines Corporation (independent lead director) | | | | | | Herbert L. Henkel Independent Retired Chairman of the Board and Chief Executive Officer, Ingersoll-Rand plc | | 71 | | 2007 | | • Herc Holdings, Inc. (non-executive chair) | | | | | | Amy E. Hood Independent Executive Vice President and Chief Financial Officer, Microsoft Corporation | | 48 | | 2017 | | | | | | | | Muhtar Kent Independent Retired Chairman of the Board and Chief Executive Officer, The Coca-Cola Company | | 67 | | 2013 | | | | | | | | Dambisa F. Moyo Independent Founder and CEO, Mildstorm, LLC | | 51 | | 2018 | | • Chevron Corporation | | | | | | Gregory R. Page Independent Retired Chairman of the Board and Chief Executive Officer, Cargill | | 68 | | 2016 | | • Deere & Company • Eaton Corporation plc • Corteva, Inc. (non-executive chair) | | | | | | Michael F. Roman Chairman of the Board, President and Chief Executive Officer, 3M Company | | 60 | | 2018 | | | | | | | | Patricia A. Woertz Independent Retired Chairman of the Board and Chief Executive Officer, Archer-Daniels-Midland Company | | 67 | | 2016 | | • The Procter & Gamble Company | | | | | |
| | Chair | | A:Audit | | N&G:Nominating and Governance | | | Member | | C:Compensation | | STS:Science, Technology & Sustainability |
TableDiversity of Contents
Corporate governance highlights*
* | The “Corporate governance highlights” above reflect the Board’s current 12 directors and related information for 2019. One of them, Edward M. Liddy, is no longer eligible to stand for re-election as he has reached the mandatory retirement age. |
The Qualificationsskills, experience and Attributes, and Demographic Background information below reflect the eleven Director Nominees for this Annual Meeting.
Table of Contents
DIRECTOR NOMINEES – DIVERSITY OF SKILLS AND EXPERIENCE
perspective The Nominating and Governance Committee identifies, reviews, and recommends nominees to the Board for approval. The Committee seeks individuals with distinguished records of leadership and success and who will make substantial contributions to Board operations and effectively represent the interests of all shareholders. The Committee considers a wide range of factors and experiences, including ensuring an experienced, qualified Board with expertise in the following key areas most relevant to 3M. The numbers indicated in the diagram below represent the number of director nominees who the Committee believes possess each of the skills and experiences. | Leadership
Leadership. Significant leadership experience with understanding of complex global organizations, strategy, risk management, and how to drive change and growth. | | | | Manufacturing
As a vertically integrated Company, manufacturing experience is important to understanding the operations and capital needs of the Company.
| | | | Supply Chain
Directors with expertise in the management of the upstream and downstream relationships with suppliers and customers provide important perspectives on achieving efficient operations.
| | | | Technology
As a diversified technology, science-based Company, directors with technology backgrounds understand 3M’s 51 technology platforms and the importance of investing in new technologies for future growth.
| | | | Finance
Finance. Financial metrics measures our performance. All directors must understand finance and financial reporting processes. All, but one, Audit Committee members qualify as “audit committee financial experts.” | | | | | | | Global
Manufacturing. As a vertically integrated Company, manufacturing experience is important to understanding the operations and capital needs of the Company. | | | Global. Global business experience is critical to 3M’s international growth with 60 percent of sales from outside the U.S. in 2019.2021. | | | | | | | Supply Chain. Directors with expertise in the management of the upstream and downstream relationships with suppliers and customers provide important perspectives on achieving efficient operations. | | | Risk ManagementManagement. Directors with experience in risk management and oversight, including environmental, social, and cybersecurity, play an important role in the Board’s oversight of risks. | | | | Technology. As a diversified technology, science-based Company, directors with technology backgrounds understand 3M’s 51 technology platforms and the importance of investing in new technologies for future growth. | | | | Marketing
Marketing. Organic growth is one of 3M’s financial metrics and directors with marketing expertise provide important perspectives on developing new markets. |
2022 Proxy Statement 7
Table of Contents Proxy highlights | | |
Significant corporateCorporate governance actionsdashboard
Director nominees, board diversity of skills and experience We recently implemented several changes that demonstrate our ongoing commitment to strong corporate governance practices:
8 3M Company
A new board committee
As we continually seek ways to improve corporate governance, our Board announced in November 2019 that it had established a new committee to strengthen oversightTable of the Company’s strategies related to research and development, commercialization, sustainability, environmental stewardship and other related activities. The Science, Technology & Sustainability Committee will help ensure 3M is building on its strong innovation capabilities while maintaining 3M’s high product stewardship standards. As a science-based company that relies on investments and capabilities in R&D, commercialization and sustainability for our success, this new Committee aligns with 3M’s strategic priorities and enables the Board greater focus and engagement on a critical element of our strategy.Contents
2022 Proxy Statement 9
Table of Contents In addition to forming the Science, Technology & Sustainability Committee, the Board has ended the Finance Committee. The responsibilities of the Finance Committee will be undertaken by the Audit Committee and the full Board.
The Qualifications and Attributes, and Demographic Background information below reflect the 11 Director Nominees for this Annual Meeting. Qualifications and Attributes | Brown | Craig | Dillon | Eskew | Fitterling | Hood | Kent | Kereere | Moyo | Page | Roman | | Leadership | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | | Manufacturing | ■ | | | ■ | ■ | | | | | ■ | ■ | | Supply Chain | ■ | | ■ | ■ | ■ | | ■ | ■ | | ■ | ■ | | Technology | | ■ | ■ | ■ | ■ | ■ | | ■ | ■ | | ■ | | Finance | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | | Global | ■ | ■ | | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | | Risk Management | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | | Marketing | | | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | | Demographic Background | | | | | | | | | | | | Tenure (Years) | 9 | 3 | 7 | 19 | 1 | 5 | 9 | <1 | 4 | 6 | 4 | Age (Years) | 66 | 65 | 70 | 72 | 60 | 50 | 69 | 56 | 53 | 70 | 62 | Gender (Male/Female) | M | F | M | M | M | F | M | F | F | M | M | Race/Ethnicity | | | | | | | | | | | | African American/Black | ■ | | | | | | | ■ | ■ | | | Caucasian/White | | ■ | ■ | ■ | ■ | ■ | ■ | | | ■ | ■ |
Corporate governance highlights Diverse board in all aspects Effective lead independent director Evolving board committees High director meeting attendance Regular board refreshment and a mix of tenure | Regular shareholder engagement Committed to sustainability and social responsibility Extensive oversight of environmental, social and enterprise risk management Annual board, committee and individual director self-evaluation | Strong alignment between company performance and executive compensation Comprehensive clawback policy Annual assessment of risk related to compensation Robust stock ownership guidelines for executive officers and directors |
Board refreshment We regularly add directors to infuse new ideas and fresh perspectives into the boardroom. Five out of the 10 independent director nominees standing for this year’s election have joined our Boardboard within the past five years, including four years.women directors. In recruiting directors, we focus on how the experience and skill set of each individual complements those of their fellow directors to create a balanced board with diverse viewpoints and backgrounds, deep expertise, and strong leadership experience. 10 3M Company
Table of Contents Shareholder outreach and engagement Shareholder engagement is fundamental to our commitment to good governance and essential to maintaining our strong corporate governance practices. We engage regularly with our global investors to gain valuable insights into the governance issues about which they care most. We aim to seek a collaborative and mutually beneficial approach to issues of importance to investors that affect our business, and to ensure that our corporate governance practices remain industry-leading from their perspectives. During 2019, members of senior management met with a cross-section of shareholders owning approximately 29 percent of our outstanding shares or approximately 42 percent of our institutional shareholders. The meetings included an overview of the Company and a discussion of the Company’s practices on corporate governance, including board refreshment and diversity, director evaluation, directors’ skills matrix, board leadership structure, as well as on strategic priorities, capital allocation and structure, environmental and social matters, sustainability, and company culture. In general, investors viewed the Company’s governance practices favorably, including the Board chairman transition, the mix of tenure and overall diversity, and the disclosure regarding the Directors’ skill sets and qualifications. The feedback from these meetings was shared with the Board of Directors and helped inform the Board on corporate governance practices and trends.
| | | | | Participants | | | Topics Discussed | | | Feedback | | | | | | | | PROPOSALDuring 2021, members of senior management met with a cross-section of shareholders owning approximately:
or
230% of our outstanding shares
44% of our institutional shareholders Two of our independent directors – our Lead Independent Director and Chair of our Compensation and Talent Committee – participated in our November 2021 engagement. | | | Board/Corporate Governance ● Culture, composition/diversity, refreshment/orientation, evaluation ● Risk oversight (cyber, ESG, litigation/regulatory); STS Committee ● Executive compensation; any contemplated changes ● Board interactions with management and broader organization Supply Chain ● Current challenges; strategy; lessons learned Environmental, social, sustainability ● Carbon/water stewardship goals; plastics reduction; investments and pathway to achieve goals ● PFAS management ● Opportunities to help customers with sustainability ● Diversity and inclusion | | | Investors provided valuable comments and perspectives on the Company’s governance practices, including the Board’s culture and overall diversity, director refreshment, evolving Board committee composition, the Board’s risk oversight, the Company’s actions in managing supply chain challenges and investing in environmental stewardship, social justice and sustainability. The feedback from these meetings was shared with the Board of Directors and helped inform the Board on corporate governance practices and trends. |
3M’s sustainability highlights At 3M, we are people committed to helping other people. We seek to observe, understand, and solve. Every day we help tackle problems, big and small, in pursuit of our Promise to improve lives. Our goals and environmental, social, and governance (ESG) metrics reflect a heightened commitment to thinking holistically about how our operations and products can unlock the power of people, ideas, and science to reimagine what’s possible, inspiring progress to transform aspirations into action. We are acting now to bend the curve on carbon emissions and water use. In February of 2021, 3M committed to investing $1 billion to accelerate new environmental goals over the next 20 years and committing to achieve carbon neutrality. By applying science and technological expertise, 3M expects to further reduce carbon emissions, aiming for a 50% reduction by 2030, an 80% reduction by 2040, and 100% carbon neutrality in its operations by 2050. At the same time, we are increasing our water efficiency goal to 25% and announcing a new commitment to improve water quality. Shortly following in April of 2021, 3M committed to reducing use of new plastic made from petroleum by 125 million pounds by 2025. We believe a sustainable future is one in which ecosystems and communities thrive and opportunities are equitable and accessible for all. To advance the social justice and impact agenda, 3M created a 3M Equity & Community organization to support our goals and commitments to progress equity in our workplaces, business practices, and communities globally. This holistic and cross-functional organization connects our teams and strategies across the areas of diversity and inclusion in our workforce; 3Mgives dedicated to building community partnerships and supporting volunteerism with a focus on closing the opportunity gap for underrepresented groups in STEM (science, technology, engineering, and math) and skilled trades, and administering our $50 million social justice fund; and Social Justice Strategy & Initiatives dedicated to leading workstreams across the enterprise to address policies and practices advancing equitable societal solutions, including supplier diversity, product development, and policy advocacy. 2022 Proxy Statement 11
Table of Contents We apply our expertise to create bold ambitions to shape a sustainable future in three priority areas: Science for Circular, Science for Climate, and Science for Community. Science for Circular At 3M, we see the circular economy as an opportunity to inspire leadership, innovation, and disruptive change across all industries, meeting the needs of current and future consumptive demands. In 2021, we announced our commitment to reduce dependence on virgin fossil-based plastic by 125 million pounds by 2025. We will use recycled content and bio-based plastics, and ultimately work to decrease our overall virgin, fossil-based plastic use. Working towards preserving the world’s freshwater resources to achieve a net positive water impact, 3M joined the Water Resilience Coalition leadership committee. 3M is also taking steps to reduce water use and improve water quality through installation of technologies at key manufacturing sites worldwide. This includes a commitment to install state-of-the art water purification technology at its largest water-using facilities by the end of 2023 and fully operational by 2024. To drive impact for the greater good, we continue to advance our goal of 100% of products entering 3M’s new product commercialization process to include descriptions of their sustainability impact. | | Science for Climate We are accelerating our ambitions through bigger long-term and intermediary goals and actions. In 2021, 3M was recognized with the Market Trailblazer Award from RE100, a global initiative bringing together the world’s most influential businesses committed to 100% renewable power. The award celebrates RE100 companies who are committed to driving change in the markets they serve, communicating transparently about the barriers they face, and collaborating with companies, utilities, and governments to drive change. Expanding our access to opportunities to invest in climate technology companies, 3M joined more than 20 other global companies in investing in TPG Rise Climate Fund, a multi-billion dollar climate impact investing fund who deploys mission-driven capital at scale. Through select 3M product platforms, we helped our customers avoid emitting nearly 75 million metric tons of CO2 in the last five years alone. Examples include helping customers in electronics, automotive, and construction industries improve their energy efficiency and reduce waste through the use of 3M materials and solutions. | | Science for Community We are cultivating a connected community by listening, understanding, and acting, bringing forward community voices and perspectives to advise 3M on plans for directing a $50 million investment to address racial opportunity gaps. In 2021, 3M launched the Community Coalition – a group of diverse leaders located near 3M headquarters in St. Paul, Minnesota, including representatives from local government, nonprofits, and the education sector. This group identified five areas for strategic investments and volunteerism, including STEM equity, access to health care, transportation safety, education, and housing. To drive greater equity in our communities, 3M’s four business groups will leverage the power of each group’s people, products, philanthropy, and partnerships to elevate health care equity, increase access to homeownership, support urban safety and mobility, and promote trade skills. Each equity commitment is aligned to the United Nations Sustainable Development Goals. In our communities, business practices, and workplaces, 3M is working to create five million STEM and skilled trades learning experiences. |
12 3M Company
Table of Contents | | | | | | | Proposal 2 | | Ratification of the Appointment of Independent Registered Public Accounting Firm for 2020 2022 (page 51) | | | | | •● Ratify the appointment of PricewaterhouseCoopers LLP as 3M’s independent registered public accounting firm for 2020.
2022. •● Based on its assessment of the qualifications and performance of PricewaterhouseCoopers LLP (“PwC”), the Audit Committee believes that it is in the best interests of the Company and its shareholders to retain PwC.
| | | “FOR” | | |
Executive compensation | | | | | | | Proposal 3 | | “FOR” Advisory Approval of Executive
Page 46Compensation (page 55)
| | | |
Executive compensation
| | | PROPOSAL
3
| Advisory Approval of Executive Compensation
•● Approve, on an advisory basis, the compensation of our Named Executive Officers.
•● Our executive compensation program appropriately aligns our executives’ compensation with the performance of the Company and its business units as well as their individual performance.
| “FOR”
Page 50
| | | “FOR” | | |
Powered by purpose, we are unlocking the power of people, ideas and science to re-imagine what’s possible and create what’s next In 2018, following the appointment of Mike Roman to the CEO role and under his leadership, the executive team embarked on a five-year transformation strategy that focused on four key priorities: 2020 | | | | | | | Portfolio management | | Transforming 3M operating model | | Growth through innovation | | People and culture |
Stronger, realigned business groups, operating rigor and cost efficiencies created a more customer-driven and streamlined organization that delivered outstanding results in 2021, demonstrating the strength of the new 3M growth, productivity, and sustainability model. Our fiscal 2021 performance exceeded our original full-year organic growth and earnings expectations. We accomplished this by investing in growth, productivity, and sustainability while managing through a challenging global supply chain environment. The executive team kept a relentless focus on serving customers, ensured continuity of raw material supply, managed shifting manufacturing production plans, navigated logistics constraints and delivered strong full-year organic sales growth of 8.8 percent, with all business segments posting high-single digit growth. We achieved operating margins of 20.8 percent and delivered a 14.4 percent increase in adjusted earnings per share.* We continued to focus on working capital improvement, generating adjusted free cash flow of $6 billion*, while reduced net debt by $1 billion that strengthened our financial flexibility. As part of our long-term growth strategy, we continued to create sustainable long-term growth by working to optimize our portfolio through organic growth acceleration, acquisitions, and divestitures throughout 2021. Our capital management strategy is geared to support strategic investments in high growth, high return portfolios that utilize our fundamental strengths and align with global trends in automotive, home improvements, safety, health care and electronic sectors. In 2021, for example, our automotive electrification platform grew 30 percent organically and our biopharma filtration business grew 26 percent. * | See Appendix A to this Proxy Statement for a reconciliation of adjusted earnings per share and adjusted free cash flow to our results for the most directly comparable financial measures as determined in accordance with generally accepted accounting principles in the United States (referred to as “GAAP”). |
Table of Contents Table of Contents
Selected 2019 financial performance and business highlights
3M’s 2019 financial performance was achieved through disciplined execution, impacted by weakness in certain end markets (China, automotive, and electronics) and channel inventory adjustments. The table below reflects the Company’s performance against the key metrics underlying the Company’s performance share awards, both as determined in accordance with GAAP and as adjusted to better reflect the Compensation Committee’s view of the Company’s 2019 operating performance.
| | Results Determined in Accordance with GAAP (to the Extent Applicable) | | Results as Adjusted to Better Reflect the Compensation Committee’s view of the Company’s 2019 Operating Performance | Earnings Per Share Growth | | -12.1% | | -6.9%* | Organic Local Currency Sales Growth | | -1.5% | | -1.5% | Return on Invested Capital | | 17.5%* | | 22.9%* | Free Cash Flow Conversion | | 117.5%* | | 106.0%* |
Earnings Per Share Growth | | Organic Sales Growth | | Return on Invested Capital | | Free Cash Flow Conversion | Results determined in accordance with GAAP (to the extent applicable) | | | 8.1% | | 8.8% | | 19.5%* | | 99%* | Results as adjusted to better reflect the Compensation and Talent Committee’s view of the Company’s 2021 operating performance | 14.4%* | | 8.8% | | 19.5%* | | 101%* |
* | See Appendix A to this Proxy Statement for a reconciliation of earnings per share, operating margin performance, free cash flow and free cash flow conversion to our results for the most directly comparable financial measures as reported under generally accepted accounting principles in the United States,GAAP, and the calculation of return on invested capital. See “Adjustments for certain special items” on page 60 below for additional information concerning the Committee’s general approach to adjustments. |
We are living in a changing world, and we are leading the change As 3M continues to deliver strong financial performance results and remains dedicated to our customers, we are also focused on managing litigation facing the Company, supply chain disruptions, and the evolving impacts from the COVID-19 pandemic, all of which have led to significant market volatility. We are taking actions to strengthen our supply chain and, guided by 3M values and science, continue to lead in the end markets we serve. We are contributing to the global pandemic efforts from all angles, and for all stakeholders, with 2.3 billion respirators distributed in 2021, for a total of 4.3 billion since the onset of the pandemic, while engaging with governments on how to prepare for future emergencies. As part of our commitment to lead in environmental stewardship as a manufacturer and leverage the power of technology, we deploy capital to make our factories and communities stronger and more sustainable. In February 2021, we announced plans to invest $1 billion over 20 years to accelerate our progress toward carbon neutrality, reduce water use, improve water quality, and reduce plastics. Work is already under way. In Cordova, Illinois, we are on track to complete a new water filtration system by the end of this year. In Cottage Grove, Minnesota, we recently closed our incinerator and are now partnering with a leading disposal company to more efficiently manage our waste stream. And in February 2022, we announced a $165 million investment to further improve water quality and reduce water use at that site. We also have implemented a requirement that every new product helps improve sustainability for our customers. Over the last five years, 3M innovations have helped our customers avoid nearly 75 million tons of emissions. Starting in 2022, our annual incentive program will include an ESG modifier to hold the executive team accountable for making progress toward our ESG goals. Additionally, the Compensation and Talent Committee reviewed and updated the performance metrics utilized in our annual and long-term incentive programs to improve alignment with our strategic priorities, as we continue to grow our businesses, strengthen our operational performance and find new ways to apply science to improve lives – delivering for our customers, shareholders and all stakeholders who have placed their trust in us. Executive compensation tied to long-term stock price and Company performance To align corporate performance and executive compensation, 91 percent of our CEO’s and 78-82 percent of our other NEOs’ target direct compensation is at-risk, with its realizable value tied to our long-term stock price performance, achievement of pre-set rigorous performance targets, or both. Consistent with our strong 2021 corporate financial performance results, our CEO received an annual incentive program payout at 133.8 percent of target. The Company’s performance exceeded sales and economic profit growth targets, all of which were set at or above 2020 results. No individual performance modifier was applied when determining Mr. Roman’s payout. The payout for other NEOs ranged between 105.3 and 194.8 percent of target, reflective of the applicable corporate or business unit financial results and individual performance. In alignment with shareholder long-term returns, performance shares for the 2019-2021 period paid below target at 88.4 percent. Considering our stock price performance over the same performance period, the shares earned and associated dividend equivalents had an aggregate value at the end of the performance period equal to 75.7 percent of the initial target grant value. Our CEO’s realized compensation for the last three years, including fiscal 2021, was significantly below the total compensation reported in the Summary Compensation Table. This result is consistent with the pay-for-performance nature of our executive compensation program, where approximately 50 percent of the target grant value of Mr. Roman’s annual long-term incentive awards is delivered in the form of stock options that deliver value only if the Company’s stock price increases and the remainder is provided in the form of performance share awards where the payout is tied to the attainment of rigorous, pre-established performance goals for key financial metrics that are believed to drive long-term shareholder value. Based on the closing trading price for a share of the Company’s financial performance and consistent with our pay-for-performance philosophy, common stock on
Table of Contents the 2019 annual incentive payments that our Named Executive Officers received and their performance share accruals based on 2019 performance were below targeted levels. For additional information, see “Impact of company performance on incentive compensation and real pay delivery,” “2019 annual incentive” and “Performance share accruals based on 2019 performance” beginning on pages 53, 66 and 70, respectively. The stock,NYSE for March 1, 2022, all stock options and other long-term incentive compensation awards heldgranted to Mr. Roman in the past three years (as well as all stock options granted to Mr. Roman after February 4, 2014) were underwater. In addition, the total value of performance shares earned by our Named Executive Officers throughout 2019 also decreased in valueMr. Roman during the year withsame three-year period is less than the declineaggregate target grant date values reported in the market value of our shares.Summary Compensation Table. Recent business accomplishments NoteworthyBelow are a few noteworthy accomplishments from January 1, 2019,2021, through March 1, 2020, include the following:
2022. •Performance | Realigned | ● Delivered 2021 organic sales growth of 8.8 percent, strong 8.1 percent increase in earnings per share, robust free cash flow of $5.9 billion with free cash flow conversion of 99 percent, despite significant raw materials and logistics cost inflation and global supply chain challenges* ● Focused on serving customers in uncertain environment * See Appendix A to this Proxy Statement for a reconciliation of free cash flow conversion to our organizational structureresults for the most directly comparable financial measures as reported under generally accepted accounting principles in the United States. | | ● Strengthened the balance sheet providing financial flexibility, reduced net debt by $1.2 billion, while returning $5.6 billion to shareholders in 2021 via dividends and streamlinedgross share repurchases ● Continued to help the world respond to COVID-19, including distributing 2.3 billion respirators in 2021 ● Over 100 consecutive years of paying dividends to shareholders and 64 consecutive years of annual increases | Portfolio management | | ● Prioritized investments in growth, productivity and sustainability ● Accelerated investments in large, fast-growing end-markets that align with key global trends such as automotive, home improvement, safety, health care and electronics ● Enhanced shareholder value through active portfolio management, including the announced divestiture of our globalfood safety business and the sale of our floor products business in Western Europe | | ● Introduced new sustainability goals, including investing $1 billion over the next 20 years to accelerate air and water stewardship; announced new plastic reduction goals; and deployed capital to make factories and communities more sustainable and stronger ● Advanced our digital capabilities, including through new investments and ongoing deployments of our Enterprise Resource Planning (ERP) system | Transforming 3M operating model | | ● Advanced our business group-led operating model, around four new business groups toincluding streamlining of organization and further alignaligning to customers and go-to-market models for improved growth, operating agility, and accountability;accountability | | ● Focused on transformation including accelerating our digital strategy to better serve customers and improve efficiency of operations and executed on and exceeded net cost savings for the Company’s restructuring efforts announced in December 2020 | •Growth through innovation | Completed | ● Invested $3.6 billion in the acquisitioncombination of M*Modalresearch and development and capital expenditures to strengthenposition 3M for the future ● 3M innovation helped customers avoid emitting nearly 75 million metric tons of carbon dioxide (CO2) in the last five years alone, the equivalent of taking 16 million cars off the road | | ● Introduced 166 new products across our Health Information Systems portfolio and complement organic growth; | • | Completed the acquisition of Acelity, Inc. to bolster our Medical Solutionsfour market-leading business and support our growth strategy to offer comprehensive advanced and surgical wound care solutions; | • | Strengthened our portfolio going forward by completing the divestitures of our gas and flame detection business and advanced ballistics-protection business; and announced the divestiture of substantially all of the drug delivery business; | • | groups ●Awarded a total of 3,6163,211 patents from patent offices around the world in 2019,2021, including 700621 patents granted to 3M by the United States Patent and Trademark Office, which brings to more than 121,000 the129,000 total number of patents awarded to 3M insince its corporate history;inception | •People and culture | Established a | ● Implemented new Board committeeemployee work models rooted in flexibility and trust ● Advanced diversity, equity, and inclusion within 3M and our communities with new investments and initiatives; introduced annual diversity, equity, and inclusion report to provide oversightstrengthen accountability and transparency | | ● Continued to focus on employee health and safety in the midst of the Company’s strategies related to research and development, commercialization, sustainability, environmental stewardship, and other related activities, which will help ensure that the Company is building on its strong innovation capabilities while maintaining the Company’s high product stewardship standards; | • | Over 100 consecutive years of paying dividends to shareholders and 62 consecutive years of annual increases; | • | Reported an all-time high free cash flow of $5.4 billion for 2019, up 10 percent over 2018; | • | Returned $4.7 billion to shareholders via dividends and gross share repurchases; and | • | COVID-19 ●Recognized by FORTUNE®FORTUNE® magazine as one of the “World’s Most Admired Companies,Companies” ● Honored by Ethisphere® Institute as one of “The World’s Most Ethical Companies®” which 3M management believes is a recognition of our ability to create a foundation of trust with all of our stakeholders.for the 8th consecutive year |
Table of Contents Elements of target 2019 total direct compensation for 2021 The illustrationtable below shows how the 2021 target Total Direct Compensation of the Named Executive Officers (excluding our former Executive Chairman)identified on page 56 (“NEOs”) was apportioned among base salary, annual incentives, performance share awards, and stock options, and restricted stock units (“RSUs”), summarizes the rationale for 2019.
Abbreviations: AIP = Annual incentive pay; PSAs = Performance share awards.providing each such element, and lists the performance metrics and weightings used for annual and long-term incentives granted in 2021.
* | | | | 2021 Pay Elements(1) | | | | 2021 Performance Metrics | | | | | CEO | Other NEOs | | Why It Is Provided | | and Weightings(2) | | | | | | | | ●Compensate executives for their normal day-to-day responsibilities | | | | | | | | ●Motivate executives to stay focused on day-to-day operations by aligning a significant portion of Total Cash Compensation with the near term financial performance of the Company and its business units | | ● Local Currency Sales (of 3M or a business unit, as applicable) vs. Plan (50%) ● Economic Profit (of 3M or a business unit, as applicable) vs. Plan (20%) ●Economic Profit of 3M vs. Prior Year (30%) | | | Performance Shares | | ● Motivate executives to focus on continuously improving performance in key financial metrics believed to drive long-term shareholder value ●Retain executive talent | | ●Earnings per Share Growth (20%) | | | | | | | ●Relative Organic Volume Growth (40%) ●Return on Invested Capital (20%) ●Free Cash Flow Conversion (20%) | | | Stock Options(3) | | ●Motivate executives to build long-term shareholder value | | ●Vesting is based on continued service, while value of the options is based on stock price appreciation (100%) | | | | | | ● Retain executive talent | | | | Restricted Stock Units(3) | | ●Motivate executives to build long-term shareholder value ● Retain executive talent | | ●Vesting is based on continued service, while value of the RSUs is based on total shareholder return (100%) | | | | | | |
(1) | Percentages shown reflect the apportionment of the components of target total direct compensation that are expected to be recurring. Such amounts do not reflect special items such as hiring bonuses, one-time make-whole and inducement awards granted in connection with the commencement of employment, or retention awards. Numbers domay not add to 100 percent due to rounding. | **(2) | AmountsIn determining the level of achievement of the performance goals established under the Annual Incentive Plan (“AIP”) and the performance share awards for any given period, the costs, sales and impact on assets and liabilities from acquisitions are excluded in the year that the acquisition is completed. The Compensation and Talent Committee also makes other adjustments from time to time for special items that it believes are unrelated to the operational performance of the Company for the relevant measurement period (e.g., changes in tax laws or accounting principles, asset write-downs, the impact of restructurings, divestitures, or asset sales, unusual tax transactions, litigation or claim judgments and settlements, and other special items described in management’s discussion and analysis of financial conditions and results of operations appearing in the Company’s annual/quarterly report to shareholders for the applicable period). These adjustments can have either a positive or negative impact on award payouts. | (3) | Beginning with the annual grants made in 2021, each of the Company’s executives (other than our CEO) was offered the opportunity to indicate a preference to receive 25 percent of the target grant value of their annual long-term incentive awards in the form of RSUs or stock options. For executives who indicated a preference to receive RSUs, 50 percent of the target grant value of their annual long-term incentive awards was delivered in the form of performance shares, 25 percent of the target grant value was delivered in the form of stock options, and the remaining 25 percent was delivered in the form of RSUs. For all other executives (including our CEO), 50 percent of the target grant value of their annual long-term incentive awards was delivered in the form of performance shares and the remaining 50 percent was delivered in the form of stock options. The percentages shown reflect the average apportionment for all Named Executive Officers other than Mr. Roman and Mr. Thulin. Including Mr. Thulin, the average apportionment for the other Named Executive Officers would be as follows: base salary — 18 percent; AIP — 18 percent;of stock options — 29 percent; performance shares — 35 percent; and performance-based pay — 82 percent.RSUs based on the elections for 2021 made by the NEOs (other than our CEO, who was not offered an opportunity to make an election). |
Compensation policies and practices
Our compensation program is designed to provide appropriate performance incentives and avoid compensation practices that do not promote the interestsTable of our shareholders.
Contents | We doProxy highlights | | | | We do not | | | | | | |
Say-on-pay results | Maintain3M has a history of strong alignment between corporate performancesay-on-pay results. In 2021, approximately 91 percent of the votes cast on our say-on-pay proposal approved the compensation of our named executive officers as disclosed in last year’s Proxy Statement. Although the vote was non-binding, the Compensation and Talent Committee believes this level of approval indicates that shareholders strongly support our executive officers’ compensation by having a majorityprograms and policies. The Compensation and Talent Committee will consider the results of Total Direct Compensation consist of performance-based compensation. Conduct an annual assessment for the purpose of identifying and mitigating significant economic and reputational risks in the design of our incentive compensation programs.Have a comprehensive clawback policy that covers both cash and equity compensation and includes provisions addressing reputational and financial riskthis year’s say-on-pay proposal, as well as risk management failures.Use an independent compensation consultant retained by, and reporting directly to, the Compensation Committee.Limit the number and amount of executive perquisites.Prohibitfeedback from our executive officers from hedging or pledging 3M common stock.Maintain robust stock ownership guidelines applicable to all of our executive officers.Conduct competitive benchmarking to alignshareholders, when making future executive compensation with the market. decisions.For information concerning our investor outreach efforts, see “Shareholder outreach and engagement” on page 11. | | | xHave employment or change3-year average votes cast in control agreements with anyfavor of our executive officers. xProvide tax gross-ups on executive perquisites.
xHave agreements that would provide automatic “single-trigger” accelerated vesting of equity compensation or excise tax gross-up payments to any of our executive officers upon a change in control.
xPay dividends or dividend equivalents on unearned equity awards.
xReprice stock options without the approval of 3M shareholders, except for “anti-dilution” adjustments (such as adjustments in connection with a stock split, spinoff, etc.)
say-on-pay proposal |
2020 Proxy Statement 11
Table of Contents
NoteworthyRecent noteworthy compensation program actions since January 1, 2019
Since January 1, 2019, 3Mthe filing of last year’s Proxy Statement, the Compensation and the CompensationTalent Committee took the noteworthy actions described below as part of the Company’s executive compensation program. •● | Approved participationEffective for the 2022 annual incentive compensation program offered to eligible employees, updated the metrics and weightings with the intent of all executive officers insharpening focus on performance against the broad-based Annual Incentive Plan (as opposed to the Executive Annual Incentive Plan), effective foroperating plan, years beginningprioritizing operating cash flow conversion as a key driver of operating value, and enhancing focus on or after January 1, 2020. | • | Recalculated the number of shares required to be beneficially owned by our executive officers in order to maintain compliance with our stock ownership guidelines, effective December 31, 2019. | • | Approved a new severance plan for certain U.S. executives (including the Named Executive Officers) to provide separation paymentsinventory and benefits upon a qualifying termination of employment. Among other things, the new plan is intended to help support talent recruitment and retention objectives and provide a consistent approach to executive departures.receivables performance. For more information, concerningsee “2022 changes to our incentive compensation program—2022 annual incentive compensation program” on page 72. | ● | Added a new environmental, social and governance (ESG) modifier to the new severance plan,formula used to calculate the annual incentive compensation earned by the Company’s senior executives, including our Named Executive Officers. Beginning in 2022, amounts earned by the Company’s senior executives will be increased 10 percent of target, decreased 10 percent of target, or left unchanged based on the Compensation and Talent Committee’s assessment of 3M’s performance against a set of objective ESG metrics. For more information, see “New severance plan”“2022 changes to our incentive compensation program—2022 annual incentive compensation program” on page 72. | ● | Effective for grants made to executives in 2022, updated the metrics, weightings, and “Rightscertain other aspects of the Company’s performance share awards. The changes generally are intended to strengthen the link to value creation for 3M in the current environment and payments upon a qualifying termination underbetter align the severance plan” beginningmacro benchmark used as the basis of the relative metric with 3M’s business portfolio. For more information, see “2022 changes to our incentive compensation program—2022 performance share awards” on pages 61 and 85page 73. | ● | Beginning with the annual grants made in 2022, increased (from 25 percent to 50 percent) the portion of this Proxy Statement, respectively.the target grant value that the Company’s executives (other than its CEO) may ask to receive in the form of restricted stock units rather than stock options. | | |
| | | | | | | Proposal 4 | | Shareholder Proposal (page 102) ● Shareholder proposal, if properly presented at the meeting. ● See the Board’s opposition statement. | | | “AGAINST” | | |
Table of Contents | | | | | | | PROPOSALProposal
45
| | Shareholder Proposal on Setting Target Amounts for CEO Compensation
(page 105) •● Shareholder proposal, on setting target amounts for CEO compensation, if properly presented at the meeting.
•● See the Board’s opposition statement.
| “AGAINST”
Page 90
| | | “AGAINST” | | |
12 3M Company
Table of Contents Corporate governance at 3M | | | PROPOSALProposal
1 | | Elect the Eleven11 Directors Identified in this Proxy Statement •● Elect the eleven11 directors identified in this Proxy Statement, each for a term of one year.
•● Our nominees are distinguished leaders who bring a mix of skills and qualifications to the Board and can represent the interests of all shareholders.
|
2022 Proxy Statement 19
Table of Contents Corporate governance at 3M | | | | |
At the 20202022 Annual Meeting, eleven11 directors are to be elected to hold office until the 20212023 Annual Meeting of Shareholders and until their successors have been elected and qualified. All nominees are presently 3M directors who were elected by shareholders at the 20192021 Annual Meeting.Meeting, except for Ms. Suzan Kereere, who joined the board on February 10, 2022 and is standing for election for the first time. A director search firm assisted with the identification of Ms. Kereere for recommendation by the Nominating and Governance Committee for her election to the Board. We expect each nominee for election as a director to be able to serve if elected. If any nominee is not able to serve, proxies will be voted in favor of the remainder of those nominated and may be voted for substitute nominees, unless the Board chooses to reduce the number of directors serving on the Board. Each nominee elected as a director will continue in office until his or her successor has been elected and qualified, or until his or her earlier death, resignation, or retirement. Edward M. LiddyHerbert L. Henkel is no longer eligible to stand for re-election as he has reached the mandatory retirement age. Patricia A. Woertz is not seeking re-election and will retire from her service on the 3M Board on May 10, 2022, when her term expires. We thank both Mr. LiddyHenkel and Ms. Woertz for histheir many contributions to the Board and to the Company. The Nominating and Governance Committee reviewed the Board Membership Criteria (described on page 19)27) and the specific experience, qualifications, attributes, and skills of each nominee, including membership(s) on the boards of directors of other public companies. The following pages contain biographical and other information about the nominees. Following each nominee’s biographical information, we have provided information concerning the particular experience, qualifications, attributes, and skills that are deemed most critical to 3M’s long-term success and led the Nominating and Governance Committee and the Board to determine that each nominee should serve as a director. In addition, the majority of our directors serve or have served on boards and board committees (including as committee chairs) of other public companies, which the Board believes provides them with additional board leadership and governance experience, exposure to best practices, and substantial knowledge and skills that further enhance the functioning of our Board. 20 3M Company
Table of Contents | Corporate governance at 3M |
Table of Contents
Nominees for director
Age6466 Director since2013 Other current directorships •● ConAgra Foods, Inc.,
3M Board committee(s) •● Audit
•● Nominating &and Governance
Directorships within the past five years •● Tower International, Inc.
(non-executive chair)
| | Thomas “Tony” K. BrownIndependent Retired Group Vice President, Global Purchasing, Ford Motor Company Professional Highlights Mr. Brown is theRetired Group Vice President, Global Purchasing, Ford MotorCompany, a global automotive industry leader. Mr. Brown served in various leadership capacities in global purchasing since joining Ford in 1999. In 2008, he became Ford’s Group Vice President, Global Purchasing, with responsibility for approximately $90 billion of production and non-production procurement for Ford operations worldwide. He retired from Ford on August 1, 2013. From 1997 to 1999 he served in leadership positions at United Technologies Corporation, including its Vice President, Supply Management. From 1991 to 1997 he served as Executive Director, Purchasing and Transportation at QMS Inc. From 1976 to 1991 he served in various managerial roles at Digital Equipment Corporation. Nominee Qualifications Mr. Brown’s bachelor’s degree in business administration from American International College in Springfield, Massachusetts, his leadership roles, including his experience serving as a director of the public companies listed, and his knowledge of and extensive experiences in global purchasing, management, and supply chain at Ford Motor Company and other companies, qualify him to serve as a director of 3M. |
Age6365 Director since2019 Other current directorships •● Merck & Co., Inc.
•● Progressive (Insurance) Corporation
● Corning Inc. 3M Board committee(s) •● Audit
•● Finance (until 11/12/2019)
• Science, Technology & Sustainability (from 11/12/2019)Compensation and Talent (Chair)
Directorships within the past five years •● Akamai Technologies, Inc.
• VMware, Inc.
•● Wal-Mart Stores, Inc.
| | Pamela J. CraigIndependent Retired Chief Financial Officer, Accenture plc Professional Highlights Ms. Craig is theRetired Chief Financial Officer, Accenture plc., a global management consulting, technology services and outsourcing company.company. She served as Accenture’s CFO from 2006 through 2013, following her many other leadership roles in line management, consulting and operations at Accenture during her 34 years with the company. She has a long track record of active involvement in charitable organizations, focused on education and on the advancement of women in business, including The Committee of 200, The Women’s Forum of New York and Junior Achievement of New Jersey, and the C200 Foundation. She chairs the Board of Comprehensive Development, Inc., a non-profit that provides academic and social service support to at-risk New York City high school students. Jersey. Nominee Qualifications Ms. Craig’s bachelor’s degree from Smith College and M.B.A. degree from New York University Stern School, her decades of executive leadership roles and experiences at Accenture, including serving as its CFO, and her finance, management, business operations and services, global business, and technology expertise, her skills in financial, audit, compensation and governance matters, and her experiences as a director at the other public companies listed, qualify her to serve as a director of 3M. |
2022 Proxy Statement 21
Table of Contents 14Corporate governance at 3M | 3M Company |
Table of Contents
Age6870 Director since2015 Other current directorships •● Union Pacific Corporation
3M Board committee(s) •● Audit (Chair)
•● Nominating &and Governance
Directorships within the past five years •● DirecTV
| | David B. DillonIndependent Retired Chairman of the Board and Chief Executive Officer, The Kroger Co. Professional Highlights Mr. Dillon is theRetired Chairman of the Board and Chief Executive Officer, The Kroger Co., a large retailer that operates retail food and drug stores, multi-department stores, jewelry stores, and convenience storesfood production facilities throughout the U.S.Mr. Dillon retired on December 31, 2014 as Chairman of the Board of Kroger, where he was Chairman since 2004 and was the Chief Executive Officer from 2003 through 2013. Mr. Dillon served as President of Kroger from 1995 to 2003 and was elected Executive Vice President in 1990. Mr. Dillon served as Director of theThe Kroger Co. from 1995 through 2014. Mr. Dillon began his retailing career at Dillon Companies, Inc. (later a subsidiary of The Kroger Co.) in 1976 and advanced through various management positions, including its President from 1986-1995. Nominee Qualifications Mr. Dillon’s bachelor’s degree in business from the University of Kansas and his law degree from Southern Methodist University, his leadership roles and experiences at The Kroger Co., including serving as Chairman of the Board and Chief Executive Officer, his knowledge of and extensive experiences in leading one of the world’s largest retailers, his experiences in Kroger’s successful $13 billion merger with Fred Meyer, Inc., his leadership in sustainability, his skills in financial and audit matters, and his experiences as a director at the public companies listed, qualify him to serve as a director of 3M. |
Age7072 Director since2003 Other current directorships •● The Allstate Corporation
•● Eli Lilly and Company
•● International Business Machines Corporation (lead independent director)
3M Board committee(s) •● Compensation (until 11/12/2019)and Talent
• Nominating & Governance
| | Michael L. EskewIndependent Retired Chairman of the Board and Chief Executive Officer, United Parcel Service, Inc. Professional Highlights Mr. Eskew is theRetired Chairman of the Board and Chief Executive Officer, United Parcel Service, Inc. (“UPS”), a provider of specialized transportation and logistics services. Mr. Eskew was appointed Executive Vice President in 1999 and Vice Chairman in 2000 before becoming Chairman and Chief Executive Officer of UPS in January 2002. He retired as Chairman of the Board and Chief Executive Officer at the end of 2007 but remained as a director of UPS until December 31, 2014. Nominee Qualifications Mr. Eskew’s bachelor’s degree in industrial engineering from Purdue University, his leadership roles and experiences at UPS, including serving as Chairman of the Board and Chief Executive Officer, his knowledge of and extensive experiences in global logistics, his skills in financial and audit matters, and his experiences as a director at the public companies listed, qualify him to serve as a director of 3M. Mr. Eskew is our Lead Independent Director. |
22 3M Company
Table of Contents | Corporate governance at 3M |
Table of Contents
Age7160 Director since20072021 Other current directorships •● Herc Holdings,Dow Inc.
(non-executive chair)
3M Board committee(s) •● Compensation (Chair)and Talent
• Nominating & Governance
(until 11/12/2019)
• Science, Technology & Sustainability (from 11/12/2019)
Directorships within the past five years
• The Allstate Corporation
• C. R. Bard, Inc.
• Visteon Corporation
| | Herbert L. HenkelJames R. Fitterling Independent
Retired Chairman of the Board and Chief Executive Officer, Ingersoll-Rand plc
Dow Inc. Professional Highlights Mr. HenkelFitterling is theRetired Chairman of the Board and Chief Executive Officer, Ingersoll-Rand plc, a manufacturer of industrial products and components.Mr. Henkel retired as Ingersoll-Rand’s Chief Executive Officer, a position he held since October 1999, on February 4, 2010, and retired as Chairman of the Board on June 3, 2010. Mr. Henkel served as President and Chief Operating Officer of Ingersoll-Rand from April 1999 to October 1999. Mr. Henkel served in various leadership roles at Textron, Inc., including its President and Chief Operating Officer from 1998-1999. Nominee Qualifications
Mr. Henkel’s bachelor’s and master’s degrees in engineering from Polytechnic University of New York and M.B.A. from the Lubin School at Pace University, his leadership roles and experiences at Textron, Inc. and Ingersoll-Rand, including serving as Chairman of the Board and Chief Executive Officer of Ingersoll-Rand,Dow Inc., one of the world’s leading global materials science companies. Mr. Fitterling was named CEO-elect of Dow in March 2018 prior to becoming CEO in July 2018, and he was elected Chairman in April 2020. Before that, he served as President and Chief Operating Officer of Dow and also previously served as Chief Operating Officer for the Materials Science division of DowDuPont. In his knowledge37-year career with the company, Mr. Fitterling has spent 10 years in Asia, and has held leadership positions with P&L responsibility in many of the company’s operations. A strong advocate for inclusion and diversity, Mr. Fitterling was named # 1 LGBT + Executive in 2018 on the “OUTstanding in Business” list published by Financial Times. Mr. Fitterling serves as the Vice Chair of the Board of Directors of the National Association of Manufacturers and Chair of the Board of Directors for the American Chemistry Council.
Nominee Qualifications Mr. Fitterling’s bachelor’s degree in mechanical engineering from the University of Missouri – Columbia, his extensive leadership roles and experiences in engineering, manufacturing, management, salesat Dow, including serving as its Chairman and marketing in a varietyCEO, his many years of industries,international business experiences, his skills in financialdeep understanding and audit matters,appreciation of materials science and innovation, and his experiences as a director at the public companies listed,strong track record of advancing environmental, social and governance goals, qualify him to serve as a director of 3M. |
Age4850 Director since2017 Other current directorships •● None
3M Board committee(s) •● Compensation and Talent
• Finance (until 11/12/2019)
•● Science, Technology & Sustainability (from 11/12/2019)
| | Amy E. HoodIndependent Executive Vice President and Chief Financial Officer, Microsoft Corporation Professional Highlights Ms. Hood isExecutive Vice President and Chief Financial Officer of Microsoft Corporation, a worldwide provider of software, services and solutions. As chief financial officer, Ms. Hood is responsible for leading Microsoft’s worldwide finance organization, including acquisitions, treasury activities, tax planning, accounting and reporting, and internal audit and investor relations. Prior to this role, Ms. Hood was chief financial officerChief Financial Officer of Microsoft’s Business Division, responsible for the company’s productivity applications and services including Microsoft Office 365, Office, SharePoint, Exchange, Dynamics ERP and Dynamics CRM. During her time in the Business Division, Ms. Hood helped lead the transition to the company’s Office 365 service, and she was deeply involved in the strategy development and overall execution of the company’s successful acquisitions of Skype and Yammer. Ms. Hood joined Microsoft in 2002 and previously held positions in the Server and Tools Business as well as the corporate finance organization. Prior to 2002, she worked at Goldman Sachs & Co. in various investment banking and capital markets groups roles. Nominee Qualifications Ms. Hood’s bachelor’s degree in economics from Duke University and M.B.A. from Harvard University, her extensive leadership roles and experiences at Microsoft Corporation, especially in strategic business development, finance, and digitization, qualify her to serve as a director of 3M. |
2022 Proxy Statement 23
Table of Contents 16Corporate governance at 3M | 3M Company |
Table of Contents
Age6769 Director since2013 Other current directorships •● NoneNuBank
3M Board committee(s) •● CompensationNominating and Governance (Chair)
•● Finance (Chair, until 11/12/2019)
• NominatingScience, Technology & Governance (Chair, from 11/12/2019)Sustainability
Directorships within the past five years •● The Coca-Cola Company
| | Muhtar KentIndependent Retired Chairman of the Board and Chief Executive Officer, The Coca-Cola Company Professional Highlights Mr. Kent is theRetired Chairman of the Board and Chief Executive Officer of The Coca-Cola Company, the world’s largest beverage company. Mr. Kent held the position of Chairman of the Board of The Coca-Cola Company from April 23, 2009, until his retirement on April 30, 2019. He held the position of Chief Executive Officer from July 1, 2008 until May 2017. From December 2006 through June 2008, Mr. Kent served as President and Chief Operating Officer of The Coca-Cola Company. From January 2006 through December 2006, Mr. Kent served as President of Coca-Cola International and was elected Executive Vice President of The Coca-Cola Company in February 2006. From May 2005 through January 2006, he was President and Chief Operating Officer of The Coca-Cola Company’s North Asia, Eurasia and Middle East Group, an organization serving a broad and diverse region that included China, Japan, and Russia. Nominee Qualifications Mr. Kent’s bachelor’sBachelor of scienceScience degree in economics from the University of Hull, England, and master’sMaster of scienceScience degree in administrative sciences from City University London, his extensive leadership roles and experiences at The Coca-Cola Company across multiple geographies, and his extensive international experience at The Coca-Cola Company qualify him to serve as a director of 3M. |
Age 56 Director since 2022 Other current directorships ● None 3M Board committee(s) ● Compensation and Talent | | Suzan Kereere Independent Head of Global Business Solutions, Fiserv, Inc. Professional Highlights Ms. Kereere is the Head of Global Business Solutions, Fiserv, Inc., a global fintech and payments company with solutions for banking, global commerce, merchant acquiring, billing and payments, and point-of-sale. Most recently, she served as Chief Growth Officer at Fiserv, leading enterprise strategy and business development initiatives. Prior to Fiserv, she held executive leadership roles in global merchant sales and acquiring at VISA from 2016 to 2021 and in merchant services, network business, customer services, business and corporate travel, including serving as head of U.S. National Merchant Business and head of Global Network Business at American Express where she worked from 1988 to 2016. She has led businesses in Europe, Australia, Asia and North America. Nominee Qualifications Ms. Kereere’s bachelor’s degree in Economics from Tufts University and M.B.A. degree from Columbia University Business School, her decades of experience and expertise in leading payments and technology platform business at Fortune 100 companies across global business lines and regional high growth start-ups, her accomplishments in digital transformation, sales optimization, front-line customer engagement and inclusive growth, and her track record of championing for equity in the corporate space and bringing analytics to the race and inclusion discussion, qualify her to serve as a director of 3M. |
24 3M Company
Table of Contents | Corporate governance at 3M | | |
Age5153 Director since2018 Other current directorships •● Chevron Corporation
3M Board committee(s) •● Audit
• Finance (until 11/12/2019)
•● Nominating &and Governance (from 11/12/2019)
Directorships within the past five years •● Barclays PLC
•● Barrick Gold Corporation
•● SABMiller PLC
•● Seagate Technology Public Limited Company
| | Dambisa F. MoyoIndependent Founder and CEO, Mildstorm LLC
Co-Principal, Versaca Investments Professional Highlights Dr. Moyo has been Co-Principal of Versaca Investments, a family office focused on growth investment globally since she co-founded it in 2021. She served as theChief Executive Officer of Mildstorm LLCsince she founded it in 2015. from 2015 to 2021. She is a global economist and commentator, analyzing the macroeconomy and international affairs. From 2001 to 2008, she worked at Goldman Sachs in various roles, including as an economist. Prior to that she worked at the World Bank in Washington, D.C. during 1993-1995. A New York Times bestsellers’ author, Dr. Moyo’s writing regularly appears in economic and finance-related publications. Nominee Qualifications Dr. Moyo’s Ph.D in economics from the University of Oxford, her M.B.A. in finance from the American University, and her M.P.A. from Harvard’s Kennedy School of Government, her leadership roles and experience in the banking and financial services industry, her extensive knowledge of macroeconomics, geopolitics and global markets, and her experience as a director at the public companies listed, qualify her to serve as a director of 3M. |
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Age6870 Director since2016 Other current directorships •● Deere & Company
•● Eaton Corporation plc
•● Corteva Inc.Agriscience (non-executive chair)
3M Board committee(s) •● AuditCompensation and Talent
• Nominating & Governance (until 11/12/2019)
•● Science, Technology & Sustainability (Chair, from 11/12/2019)(Chair)
Directorships within the past five years •● Cargill
•● Carlson Companies
| | Gregory R. PageIndependent Retired Chairman of the Board and Chief Executive Officer, Cargill Professional Highlights Mr. Page is theRetired Chairman of the Board and Chief Executive Officer, Cargill, an international marketer, processor and distributor of agricultural, food, financial and industrial products and services. Mr. Page was named Corporate Vice President & Sector President, Financial Markets and Red Meat Group of Cargill in 1998, Corporate Executive Vice President, Financial Markets and Red Meat Group in 1999, President and Chief Operating Officer in 2000, and became Chairman of the Board and Chief Executive Officer in 2007. He served as Executive Chairman of the Board of Cargill from December 2013 until his retirement from Cargill in September 2015, and Executive Director of Cargill from September 2015 to September 2016. Mr. Page is a director and past non-executive Chair of the Board of Big Brothers Big Sisters of America. He is past President and board member of the Northern Star Council of the Boy Scouts of America. Nominee Qualifications Mr. Page’s bachelor’s degree in economics from the University of North Dakota, his leadership roles and experiences while serving as Chairman of the Board and Chief Executive Officer at Cargill, his expertise and knowledge of financial and audit matters and corporate governance, and his experiences as a director at the public companies listed, qualify him to serve as a director of 3M. |
2022 Proxy Statement 25
Table of Contents Corporate governance at 3M | | | |
Age6062 Director since2018 Other current directorships •● NoneAbbott Laboratories
3M Board committee(s) •● None
| | Michael F. Roman Chairman of the Board President and Chief Executive Officer, 3M Company Professional Highlights Mr. Roman is theChairman of the Board President and Chief Executive Officer of 3M Company since May 2019. Mr. Roman previously served as Chief Executive Officer from July 1, 2018 to May 14, 2019; Chief Operating Officer and Executive Vice President from July 1, 2017 to June 30, 2018 with direct responsibilities for 3M’s five business groups and the Company’s international operations. Mr. Roman previously served as Executive Vice President, Industrial Business Group, of 3M Company from June 2014 to July 2017. Mr. Roman served as the Company’s Senior Vice President, Business Development, from May 2013 to June 2014. Prior to that, he was Vice President and General Manager of Industrial Adhesives and Tapes Division from September 2011 to May 2013. Mr. Roman also has lived in and led 3M businesses around the world, including the United States, Europe and Asia. Nominee Qualifications Mr. Roman’s bachelor’s and master’s degrees in electrical engineering from the University of Minnesota and the University of Southern California, his distinguished 3M career over 30 years with leadership roles across multiple geographies and businesses, his experience in managing 3M’s fivefour business groups and international operations, his knowledge and skills in key areas such as manufacturing, supply chain, technology, finance, and risk management, and his accomplishments in sales growth, operational efficiency and value creation across a wide range of global businesses, qualify him to serve as a director of 3M. |
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Age67
Director since2016
Other current directorships
• The Procter & Gamble Company
3M Board committee(s)
• Compensation
• Finance (until 11/12/2019)
• Science, Technology & Sustainability (from 11/12/2019)
Directorships within the past five years
• Royal Dutch Shell plc
• Archer-Daniels-Midland Company
| Patricia A. WoertzIndependent
Retired ChairmanRecommendation of the Board and Chief Executive Officer, Archer-Daniels-Midland Companyboard
Professional Highlights
Ms. Woertz is theRetired Chairman of the Board and Chief Executive Officer, Archer-Daniels-Midland Company (“ADM”), an agricultural processor and food ingredient provider. Ms. Woertz joined ADM as Chief Executive Officer and President in April 2006, and was named Chairman of the Board in February 2007. She served as Chief Executive Officer until December 2014, and Chairman of the Board until December 2015. Before joining ADM, Ms. Woertz held positions of increasing importance at Chevron Corporation and its predecessor companies. Ms. Woertz served on the President’s Export Council from 2010-2015 and chaired the U.S. section of the U.S.-Brazil CEO Forum 2013-2015.
Nominee Qualifications
Ms. Woertz’s bachelor’s degree from Pennsylvania State University in accounting, her experiences as a Certified Public Accountant at Ernst & Young, her experiences in finance, auditing, strategic planning, and marketing at Gulf Oil Corporation, her experiences in the financial aspects of the mergers between Gulf Oil and Chevron and Texaco and Chevron, her leadership roles and experiences at ChevronTexaco Corporation as Executive Vice President, Global Downstream from 2001-2006, her extensive experience serving as Chairman and Chief Executive Officer at Archer-Daniels-Midland, her expertise and knowledge of financial and audit matters and corporate governance, and her experiences as a director at the public companies listed, qualify her to serve as a director of 3M.
|
RECOMMENDATION OF THE BOARD
| | The Board of Directors unanimously recommends a vote“FOR”the election of these nominees as directors. Proxies solicited by the Board of Directors will be voted “FOR” these nominees unless a shareholder indicates otherwise in voting the proxy. | | | | | |
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Board Membership Criteriamembership criteria 3M’s Corporate Governance Guidelines contain Board Membership Criteria that include a list of key skills and characteristics deemed critical to serve 3M’s long-term business strategy and expected to be represented on 3M’s Board. The Nominating and Governance Committee periodically reviews with the Board the appropriate skills and characteristics required of Board members given the current Board composition. It is the intent of the Board that the Board, itself, will be a high-performance organization creating competitive advantage for the Company. To perform as such, the Board will be composed of individuals who have distinguished records of leadership and success in their arena of activity and who will make substantial contributions to Board operations and effectively represent the interests of all shareholders. The Committee’s and the Board’s assessment of Board candidates includes, but is not limited to, consideration of: •● | Roles in and contributions valuable to the business community; | •● | Personal qualities of leadership, character, judgment, and whether the candidate possesses and maintains throughout service on the Board a reputation in the community at large of integrity, trust, respect, competence, and adherence to the highest ethical standards; | •● | Relevant knowledge and diversity of background and experience in business, manufacturing, technology, finance and accounting, marketing, international business, government, and other areas; and | •● | Whether the candidate is free of conflicts and has the time required for preparation, participation, and attendance at all meetings. |
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In addition to these minimum requirements, the Committee will also evaluate whether the nominee’s skills are complementary to the existing Board members’ skills, the Board’s needs for particular expertise in certain areas, and will assess the nominee’s impact on Board dynamics, effectiveness, and diversity of experience and perspectives. Director nominees – Diversitydiversity of skills and experience The diagram below summarizes the director nominees’ key skills and experiences in the areas that are most relevant to 3M and shows the number of director nominees who possess each of the skills and experiences: | Leadership
| Leadership. Significant leadership experience with understanding of complex global organizations, strategy, risk management, and how to drive change and growth. | | | Manufacturing
As a vertically integrated Company, manufacturing experience is important to understanding the operations and capital needs of the Company. | | | Supply Chain
Directors with expertise in the management of the upstream and downstream relationships with suppliers and customers provide important perspectives on achieving efficient operations.
| | | Technology
As a diversified technology, science-based Company, directors with technology backgrounds understand 3M’s 51 technology platforms and the importance of investing in new technologies for future growth.
| | | Finance
Finance. Financial metrics measures our performance. All directors must understand finance and financial reporting processes. All, but one, Audit Committee members qualify as “audit committee financial experts.” | | | Global
| | | | | | | | Manufacturing. As a vertically integrated Company, manufacturing experience is important to understanding the operations and capital needs of the Company. | | | | Global. Global business experience is critical to 3M’s international growth with 60 percent of sales from outside the U.S. in 2019. | 2021. | | | | | | | | | | Supply Chain. Directors with expertise in the management of the upstream and downstream relationships with suppliers and customers provide important perspectives on achieving efficient operations. | | | | Risk ManagementManagement. Directors with experience in risk management and oversight, including environmental, social, and cybersecurity, play an important role in the Board’s oversight of risks. | | | Marketing
| | | | | | | | Technology. As a diversified technology, science-based Company, directors with technology backgrounds understand 3M’s 51 technology platforms and the importance of investing in new technologies for future growth. | | | | Marketing. Organic growth is one of 3M’s financial metrics and directors with marketing expertise provide important perspectives on developing new markets. | |
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Diversity For 3M, diversity, in its myriad manifestations, is fundamental to innovation, performance, and relevancy. The Board of Directors regards diversity as an important factor in selecting board nominees to serve on the Board. Although the Board has no formal diversity policy, whenWhen selecting nominees, it actively considers diversity in recruitment and nomination of directors, such as gender, race, ethnicity, sexual orientation, and national origin. The current composition of our Board reflects those ongoing efforts and the continued importance of diversity to the Board. Board self-evaluation process The Board conducts a multi-step annual self-evaluation to determine whether it, its committees and its directors are functioning effectively, consider opportunities for continual enhancement, and as part of its annual director nomination process. 201 | 3M Company | | | | ● Chairman/Lead Director/Nominating and Governance (N&G) Committee Chair meet around the time of the November Board meeting to evaluate the performance and skills of each director ● Information is shared and discussed with the N&G Committee and considered in the nomination process at the February meeting | 2 | | | | | ● N&G Chair meets individually with each director around the time of the February meeting to discuss: ► Effectiveness of Board and committees ► Opportunities for improvement ► Director’s self-evaluation ► Director’s evaluation of other Board members ► Other topics selected by director ● N&G Chair shares comments and feedback with the Board and N&G Committee | 3 | | | | | ● Following the February meeting, each director completes a questionnaire on the functioning of the Board and committees ● Results are discussed at the April Board and committee meetings | 4 | | | | | ● As a result of this process: ► The Board and its committees identify potential areas for improvement, as well as existing practices which have contributed to high effectiveness ► Items requiring follow-up are monitored on a going-forward basis by the full Board, committees and/or committee chairs, as applicable ► The N&G Committee considers the performance and contributions of each director as part of its annual nomination process to ensure our directors continue to possess the necessary skills and experience to effectively oversee the Comp any; on occasion, the N&G Committee has not re-nominated a director |
While this formal self-evaluation is conducted on an annual basis, directors share perspectives, feedback, and suggestions year-round. The Board and each committee conducted an evaluation of its performance in 2021. Director nomination process In addition to its annual assessment and nomination of incumbent directors, the Nominating and Governance Committee oversees the process for selecting new director candidates. 28 3M Company
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Identification, evaluation, and selection of nominees Director nomination process The Nominating and Governance Committee identifies and evaluates individuals who the Committee believes are qualified to become Board members in accordance with the Board Membership Criteria set forth above, and reviews qualified director nominees with the Board. The Committee and the Chairman of the Board interview candidates that meet the Board Membership Criteria, and the Committee selects nominees that best suit the Board’s current needs and recommends them to the Board. The Board reviews such recommendations and determines submissions for election at the next shareholder meeting of the Company in which directors will be elected or filling any vacancies on the Board.
The Committee also focuses on overall Board-level succession planning at the director level, periodically reviews the appropriate size and composition of the Board and anticipates future vacancies and needs of the Board. In the event the Committee recommends an increase in the size of the Board or a vacancy occurs, the Committee considers qualified nominees from several sources, including current Board members and nominees recommended by shareholders and other persons. The Committee may from time to time retain a director search firm to help the Committee identify qualified director nominees for consideration by the Committee. In 2019,2021, the Committee retained Russell Reynolds to help identify future Board candidates. Shareholder nominations The Nominating and Governance Committee has a policy to consider properly submitted shareholder recommendations for candidates for membership on the Board of Directors. Shareholders proposing individuals for consideration by the Committee must include at least the following information about the proposed nominee: the proposed nominee’s name, age, business or residence address, principal occupation or employment, and whether such person has given written consent to being named in the Proxy Statement as a nominee and to serving as a director if elected. Shareholders should send the required information about the proposed nominee to: | Corporate Secretary 3M Company 3M Center Building 220-9E-02 St. Paul, MN 55144-1000 |
For an individual proposed by a shareholder to be considered by the Committee for recommendation as a Board nominee for the 2023 Annual Meeting, the Corporate Secretary must receive the proposal by November 23, 2022. Such proposals must be sent via registered, certified, or express mail (or other means that allows the shareholder to determine when the proposal was received by the Company). The Corporate Secretary will refer properly submitted shareholder proposed nominations to the Chair of the Nominating and Governance Committee for consideration at a future Committee meeting. Individuals proposed by shareholders in accordance with these procedures will receive the same consideration received by individuals identified to the Committee through other means. 2022 Proxy Statement 29
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Shareholder nominations – advance notice bylaw In addition, 3M’s Bylaws permit shareholders to nominate directors at an annual meeting of shareholders or at a special meeting at which directors are to be elected in accordance with the notice of meeting. Shareholders intending to nominate a person for election as a director must comply with the requirements set forth in the Company’s Bylaws. With respect to nominations to be acted upon at our 2023 Annual Meeting, our Bylaws would require, among other things, that the Corporate Secretary receive written notice from the record shareholder no earlier than November 23, 2022, and no later than December 23, 2022. The notice must contain the information required by the Bylaws, a copy of which is available on our website at www.3M.com, under Investor Relations — Governance. Nominations received after December 23, 2022, will not be acted upon at the 2023 Annual Meeting. Shareholder nominations – universal proxy rules In addition to satisfying the foregoing advance notice requirements under 3M’s Bylaws, to comply with the universal proxy rules (once effective) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-9 under the Exchange Act no later than March 11, 2023, which is 60 days prior to the anniversary date of the 2022 Annual Meeting. Proxy access nominations Further, pursuant to the proxy access Bylaw adopted by the Board in November 2015, a shareholder, or a group of up to 20 shareholders, continuously owning for three years at least three percent of our outstanding common shares may nominate and include in our proxy materials up to the greater of two directors and 20 percent of the number of directors currently serving, if the shareholder(s) and nominee(s) satisfy the Bylaw requirements. For eligible shareholders to include in our proxy materials nominees for the 2023 Annual Meeting, proxy access nomination notices must be received by the Company no earlier than November 23, 2022, and no later than December 23, 2022. The notice must contain the information required by the Bylaws. Director orientation and continuing education Our orientation programs familiarize new directors with 3M’s businesses, strategic plans, and policies, and help prepare them for their role on their assigned committees. Continuing education programs assist directors in maintaining skills and knowledge necessary for the performance of their duties. These programs may be part of regular Board and Committee meetings or provided by academic or other qualified third parties. The programs have also included visits to the Company’s laboratories and manufacturing facilities. Director independence The Board has adopted a formal set of Director Independence Guidelines with respect to the determination of director independence, which either conform to or are more exacting than the independence requirements of the New York Stock Exchange (“NYSE”) listing standards, and the full text of which is available on our website atwww.3M.com, under Investor Relations — Governance. In accordance with these Guidelines, a director or nominee for director must be determined to have no material relationship with the Company other than as a director. The Guidelines specify the criteria by which the independence of our directors will be determined, including strict guidelines for directors and their immediate family members with respect to past employment or affiliation with the Company or its independent registered public accounting firm. The Guidelines also prohibit Audit and Compensation and Talent Committee members from having any direct or indirect financial relationship with the Company, and restrict both commercial and not-for-profit relationships of all directors with the Company. Directors may not be given personal loans or extensions of credit by the Company, and all directors are required to deal at arm’s length with the Company and its subsidiaries, and to disclose any circumstance that might be perceived as a conflict of interest. In accordance with these Guidelines, the Board undertook its annual review of director independence. During this review, the Board considered transactions and relationships between each director, or any member of his or her immediate family and the Company and its subsidiaries and affiliates in each of the most recent three completed fiscal years. The Board also considered whether there were any transactions or relationships between the Company and a director or any members of a director’s immediate family (or any entity of which a director or an immediate family member is an executive officer, general partner, or significant equity holder). The Board considered that in the ordinary course of business, transactions may occur between the Company and its subsidiaries and companies at which some of our directors are or have been officers. In particular, the Board considered the annual amount of sales to 3M for each of the most recent three completed fiscal years by each of the companies where directors serve or have served as an executive officer, as well as purchases by those companies from 3M. The Board determined that the amount of 30 3M Company
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sales and purchases in each fiscal year was below one percent of the annual revenues of each of those companies, the threshold set forth in the Director Independence Guidelines. The Board also considered charitable contributions to not-for-profit organizations with which our directors or immediate family members are affiliated, none of which approached the threshold set forth in our Director Independence Guidelines. Table of Contents
As a result of this review, the Board affirmatively determined that the following directors are independent under these Guidelines: Thomas “Tony” K. Brown, Pamela J. Craig, David B. Dillon, Michael L. Eskew, James R. Fitterling, Herbert L. Henkel, Amy E. Hood, Muhtar Kent, Edward M. Liddy,Suzan Kereere, Dambisa F. Moyo, Gregory R. Page, and Patricia A. Woertz. The Board has also determined that members of the Audit Committee and Compensation and Talent Committee received no compensation from the Company other than for service as a director. Michael F. Roman, Chairman of the Board President and Chief Executive Officer, is considered to not be independent because of his employment by the Company. Nominees proposed by shareholders
The Nominating and Governance Committee has a policy to consider properly submitted shareholder recommendations for candidates for membership on the Board of Directors. Shareholders proposing individuals for consideration by the Committee must include at least the following information about the proposed nominee: the proposed nominee’s name, age, business or residence address, principal occupation or employment, and whether such person has given written consent to being named in the Proxy Statement as a nominee and to serving as a director if elected. Shareholders should send the required information about the proposed nominee to:
| Corporate Secretary
3M Company
3M Center
Building 220-13E-26A
St. Paul, MN 55144-1000 |
For an individual proposed by a shareholder to be considered by the Committee for recommendation as a Board nominee for the 2021 Annual Meeting, the Corporate Secretary must receive the proposal by November 25, 2020. Such proposals must be sent via registered, certified, or express mail (or other means that allows the shareholder to determine when the proposal was received by the Company). The Corporate Secretary will refer properly submitted shareholder proposed nominations to the Chair of the Nominating and Governance Committee for consideration at a future Committee meeting. Individuals proposed by shareholders in accordance with these procedures will receive the same consideration received by individuals identified to the Committee through other means.
Shareholder nominations – Advance notice bylaw
In addition, 3M’s Bylaws permit shareholders to nominate directors at an annual meeting of shareholders or at a special meeting at which directors are to be elected in accordance with the notice of meeting. Shareholders intending to nominate a person for election as a director must comply with the requirements set forth in the Company’s Bylaws. With respect to nominations to be acted upon at our 2021 Annual Meeting, our Bylaws would require, among other things, that the Corporate Secretary receive written notice from the record shareholder no earlier than November 25, 2020, and no later than December 25, 2020. The notice must contain the information required by the Bylaws, a copy of which is available on our website atwww.3M.com, under Investor Relations — Governance. Nominations received after December 25, 2020, will not be acted upon at the 2021 Annual Meeting.
Proxy access nominations
Further, pursuant to the proxy access Bylaw adopted by the Board in November 2015, a shareholder, or a group of up to 20 shareholders, continuously owning for three years at least three percent of our outstanding common shares may nominate and include in our proxy materials up to the greater of two directors and 20 percent of the number of directors currently serving, if the shareholder(s) and nominee(s) satisfy the Bylaw requirements. For eligible shareholders to include in our proxy materials nominees for the 2021 Annual Meeting, proxy access nomination notices must be received by the Company no earlier than November 25, 2020, and no later than December 25, 2020. The notice must contain the information required by the Bylaws.
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Corporate governance overviewpractices and policies The Company believes that good corporate governance practices serve the long-term interests of shareholders, strengthen the Board and management, and further enhance the public trust 3M has earned from more than a century of operating with uncompromising integrity and doing business the right way. The following sections provide an overview of 3M’s corporate governance practices, which are published on the Company’s website, including the Corporate Governance Guidelines, the Board’s leadership structureour shareholder outreach and the responsibilities of the independent Lead Director, communication with directors, director independence, the director nomination process, the Board’s role in risk oversight,engagement practices, the Codes of Conduct for directors and employees, public policy engagement, and the Company’s commitment to the environment and sustainability.other important governance-related policies. Corporate governance highlights*highlights
* | The Corporate governance highlights above reflect the Board’s current 12 directors | Board compositions and related information for 2019. independence | | | Board and board committee practices | | | Shareholder rights | | One of them, Edward M. Liddy, is no longer eligible to stand for re-election as he has reached the mandatory retirement age. |
● Diverse board in all aspects Board Independence | Substantial majority of our directors – eleven of our twelve directors are● 92% independent of the Company and management – and all are highly qualified. | | | •board
● 100% independent board committees ● Lead Independent directors regularly meet inDirector with robust authority ● Regular executive sessions without management.for independent directors •
Independent directors have complete● Full access to management and employees.employees
•
Regularly refresh Board; added five new independent directors in past four years; average director tenure is 7 years.
| | Board Committee Independence and Expertise | Only independent directors serve on the Board’s committees with independent committee chairs empowered to establish committee agendas. | | | •● Annual board, committee and individual director self-evaluation process
Committee executive sessions – at each regularly scheduled meeting, members of all committees meet in executive session.● Comprehensive onboarding and continuing education program
•
Financial expertise – all members of the● Strong Audit Committee meet the NYSE listing standards for financial expertise
● Regular board refreshment and foura mix of the five members are “audit committee financial experts” under SEC rules. |
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Shareholder Rights | The Board has taken numerous actions –tenure, including those proposed by shareholders – to promote effective corporate governancemandatory director retirement age ● Active consideration of diversity in director nomination process ● Regular shareholder outreach and accountability to shareholders. | engagement | | •
●Annual election of all directors.directors •
●Majority voting for directors in uncontested elections. Incumbent director not receiving majority votes tenders resignation, subject to the Board recommendation for action.elections ● Market-standard proxy access right •
Proxy access – a shareholder, or a group of up to 20 shareholders, continuously owning for three years at least three percent of our outstanding common shares may nominate and include in our proxy materials up to the greater of two directors and 20 percent of the number of directors currently serving, if the shareholder(s) and nominee(s) satisfy the Bylaw requirements.
•
Established policies and criteria for director nominations, including candidates recommended by shareholders.
•
●No supermajority voting provisions in Bylaws or Certificate of Incorporation.requirements •
Shareholders holding 25 percent of the outstanding shares have the● Shareholder right to call a special meeting.meetings
● No poison pill •
No shareholders’ rights plan (also known as a “poison pill”).
•
Established protocol● Processes for director nomination by shareholders and other interested parties to communicatecommunicating with the independent Lead Director, the chairs of all committees of the Board any of the other independent directors or all of the independent directors as a group or the full Board.
| | | Board oversight areas | | | Executive compensation governance | | | | Shareholder Outreach | ● Long-term strategic plans and Engagement | We maintain a vigorous shareholder engagement program. | capital allocation ● Enterprise risk management, including cybersecurity ● Environmental stewardship and sustainability ● Diversity and inclusion, equity in workplaces, communities and business practices ● Human capital management ● CEO and management succession planning ● Political activities and contributions | | •
Shareholder engagement is fundamental to our commitment to good governance and essential to maintaining our strong corporate governance practices. We engage regularly with our global investors to gain valuable insights into the governance issues about which they care most. We aim to seek a collaborative and mutually beneficial approach to issues of importance to investors that affect our business, and to ensure that our corporate governance practices remain industry-leading from their perspectives.
•
During 2019, members of senior management met with a cross-section of shareholders owning approximately 29 percent of our outstanding shares or approximately 42 percent of our institutional shareholders. The meetings included an overview of the Company and a discussion of the Company’s practices on corporate governance, including board refreshment and diversity, director evaluation, directors’ skills matrix, board leadership structure, as well as on strategic priorities, capital allocation and structure, environmental and social matters, sustainability, and company culture. In general, investors viewed the Company’s governance practices favorably, including the Board chairman transition, the mix of tenure and overall diversity, and the disclosure regarding the Directors’ skill sets and qualifications. The feedback from these meetings was shared with the Board of Directors and helped inform the Board on corporate governance practices and trends.
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Risk Oversight | The Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, both as a whole Board and through its committees. | | | •
At least annually, the Board reviews enterprise risks facing the Company and certain of its businesses. Other important categories of risk are assigned to designated Board committees (which are comprised solely of independent directors) that report back to the full Board. The Board has delegated to the Audit Committee through its charter the primary responsibility for the oversight of risks facing the Company, including cybersecurity. The Audit Committee’s charter provides that the Audit Committee shall “discuss policies and procedures with respect to risk assessment and risk management, the Company’s major risk exposures and the steps management has taken to monitor and mitigate such exposures.” The newly established Science, Technology & Sustainability Committee, in providing oversight of the company’s strategies on research and development, commercialization, sustainability, and environmental and product stewardships, reviews the company’s policies and programs on environmental, health and safety, including for compliance with all applicable laws and regulations. The Committee also assists the Board in identifying and analyzing significant emerging science and technology, disruptive innovations, materials vulnerability, and geopolitical issues that may impact the company’s overall strategy, global business continuity and financial results.
| | Board Approved Long-Term Strategic Plans and Capital Allocation Strategies | Each year management presents to the Board, and the Board discusses and approves, detailed long-term strategic plans for the Company. | | | •
Each year management presents to the Board, and the Board discusses and approves, detailed long-term strategic plans for the Company. In addition to the overall strategic plan for the Company and the business groups, the discussions in 2019 also focused on breakout sessions with the directors on strategic corporate-wide themes of portfolio management, transformation and ERP ecosystem, innovation and acceleration, and people and culture.
•
The Board also approves the long-term capital structure of the Company to ensure that there is sufficient capital to invest for future growth.
•
The Company is committed to investing in organic growth, most notably through capital expenditures and research and development. The Company has invested over $16.7 billion in capital expenditures and research and development to support and fund organic growth over the past five years. 3M has opened six customer technical centers around the world, and a new, state-of-the-art research and development laboratory in the United States.
•
The capital allocation plans have flexibility to respond quickly to strategic acquisition opportunities that can strengthen the Company’s portfolio. Over the past five years, 3M has invested approximately $9.9 billion in, and assumed about $3.3 billion of debt related to, strategic acquisitions to build upon and strengthen its business portfolio for continued future growth.
•
The Company has a long history of returning cash to shareholders, having paid approximately $14.55 billion in dividends over the past five years.
•
Finally, share repurchases represent the last component of 3M’s capital allocation plans. Over the past five years, 3M has returned approximately $17.3 billion to shareholders via share repurchases.
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Director Orientation and Continuing Education | Our orientation programs familiarize new directors with the company and their role, and our continuing education programs assist directors in maintaining skills and knowledge necessary to perform their duties. | | | •
Our director orientation programs familiarize new directors with 3M’s businesses, strategic plans, and policies, and help prepare them for their role on their assigned committees.
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Continuing education programs assist directors in maintaining skills and knowledge necessary for the performance of their duties. These programs may be part of regular Board and Committee meetings or provided by academic or other qualified third parties.
| | Board, Committee, and Director Evaluations | The Nominating and Governance Committee conducts an annual evaluation of the performance of the Board, each of its committees, and individual directors. | | | •
The results of the annual evaluations of the board and its committees are shared with the Board and help identify areas in which the Board and its committees could improve performance.
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Before the November Board meeting, the Chairman/CEO, Lead Director, and Chair of the Nominating and Governance Committee meet to discuss the performance and contributions of each director.
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As part of the nomination process, the Nominating and Governance Committee considers the performance and contributions of each individual director and evaluates each of the directors to ensure our directors continue to possess the necessary skills and experience to effectively oversee the Company. On occasion, the Nominating and Governance Committee has not renominated a director based on this individual director evaluation process.
| | Compliance | Creating a foundation of trust with all our stakeholders is important and is reflected by our recent recognition by FORTUNE®magazine as one of the “World’s Most Admired Companies.” | | | •
Code of Business Conduct and Ethics for directors.
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Code of Conduct for all employees, including our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer.
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Chief Compliance Officer, who has direct reporting obligations to the Audit Committee, provides regular updates to the Audit Committee on compliance with the Company’s Code of Conduct, and at least annually, on the implementation and effectiveness of the Company’s compliance and ethics program.
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Disclosure committee as part of the Company’s disclosure controls and procedures for financial reporting.
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Disclosure of public policy engagement on our Investor Relations website, under Governance — Governance Documents — “Political Activities and Issue Advocacy,” including disclosure of political contributions and membership in key trade associations where membership dues allocated for lobbying purposes exceed $25,000.
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Commitment to Sustainability | 3M has a long-standing commitment to sustainability. | | | •
3M’s Strategic Sustainability Framework provides a guiding structure and focus for our ongoing environmental and social commitments and actions. Our 2025 Sustainability Goals are aligned with our Strategic Sustainability Framework and organized to help advance our efforts under each pillar: Science for Circular, Science for Climate and Science for Community.
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Our Sustainability Value Commitment, implemented in December 2018, requires that all new products entering our new product commercialization process demonstrate how they drive impact for the greater good.
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Through membership in the RE100, we are committed to transitioning our global operations to 100 percent renewable electricity by 2050, and have increased our interim target for energy sourced from renewables to 50 percent by 2025, having achieved the prior goal of 25 percent.
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In December 2019, we increased our commitment to improving lives around the world with an additional 2025 Sustainability Goal. Through expansion of 3M Impact, a skills-based employee volunteer program, 3M committed to 300,000 work hours of service across the globe by 2025.
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Sustainability at 3M is guided by our Innovation Steering Committee and overseen by the newly established Science, Technology & Sustainability Committee of our Company’s Board of Directors.
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Our sustainability progress is reported publicly in our annual Sustainability Report, and more information on current initiatives can be found atwww.3M.com/Sustainability.
| | Executive Compensation | Annual advisory approval of executive compensation with approximately 95 percent of the votes cast in favor of the Company’s executive compensation program in 2019. | | | •
Strong pay-for-performance philosophy.
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Incentive compensation subject to● Comprehensive clawback policy that includes provisions addressing reputational and financial risk as well as risk management failures.
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●Robust stock ownership guidelines for executive officers and stock retention policy for directors.directors •
Prohibition of● No hedging or pledging 3M stock by directorsexecutive officers and executive officers.directors
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●No employment or change in control agreements with any senior executives, including the CEO. •
Long-term incentive compensation linked to financial objectives of earnings per share growth, relative organic volume growth, return on invested capital, and free cash flow conversion.CEO
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Corporate governance guidelines The Board has adopted Corporate Governance Guidelines which provide a framework for the effective governance of the Company. The guidelines address matters such as the respective roles and responsibilities of the Board and management, the Board’s leadership structure, the responsibilities of the independent Lead Director, director independence, the Board Membership Criteria, Board committees, and Board and management evaluation. The Board’s Nominating and Governance Committee is responsible for overseeing and reviewing the Guidelines at least annually and recommending any proposed changes to the Board for approval. Some key governance guidelines, not otherwise addressed in our Proxy Statement, are set forth below. The Corporate Governance Guidelines, the Certificate of Incorporation and Bylaws, the charters of the Board committees, the Director Independence Guidelines, and the Codes of Conduct provide the framework for the governance of the Company and are available on our website atwww.3M.com, under Investor Relations — Governance. Board’s role in the company’s long-term strategy
Each year management presents to the Board, and the Board discusses and approves, detailed long-term strategic plans for the Company. In addition to the overall strategic plan for the Company and the business groups, the discussions also focused on breakout sessions with the directors on strategic corporate-wide themes of portfolio management, innovation, commercial transformation, manufacturing and supply chain transformation, and people and culture.
Our Company’s long-term strategy is outlined in the 3M Value Model.
3M VALUE MODEL
The 3M Value Model is what differentiates our company in the marketplace. It’s how we create extraordinary value for customers, and premium returns for shareholders. The model is built around four elements: our vision, our strengths, our priorities, and our values.
28Mandatory Retirement Age | ● | The retirement age of a nonemployee director is 74. A director elected to the Board prior to their 74th birthday may continue to serve until the annual shareholder meeting coincident with or following their 74th birthday. Absent special circumstances, directors will not be nominated for election after their 74th birthday. | Outside Board Policy | ● | Independent directors who also serve as CEOs of publicly-traded companies or in equivalent positions should not serve on more than two boards of public companies in addition to the 3M CompanyBoard, and other independent directors should not serve on more than four other boards of public companies in addition to the 3M Board. Independent directors must advise the Chairman/CEO before accepting an invitation to serve on another for-profit board. | Access to Employees and Outside Advisors | ● | Board members have complete access to all members of 3M management and its employees, as well as outside advisors. |
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Our vision
Our vision drives everything we do:3M Technology Advancing Every Company, 3M Products Enhancing Every Home, 3M Innovation Improving Every Life. It is aspirational and authentic to 3M, and is an important part of the purpose that drives us as an enterprise.
Our strengths
Our strengths help us continually innovate to create differentiated value for customers at above-market growth rates. They also enable us to take advantages of the changes in customers, technology and commercial channels.
In our Customer Inspired Innovation approach, we combine close engagement with customers, deep domain expertise in markets and the science behind our technology platforms to develop unique insights into the critical needs of our customers.
We then leverage our fundamental strengths. In technology, we leverage our deep intellectual property and broad range of technology platforms. In manufacturing, we leverage our unique capabilities in process engineering. Our global capabilities enable us to take that technology and manufacturing strength and deliver through our go-to-market models to serve customers around the world. And finally, our brand adds value in each of our businesses.
We do this while maintaining a focus on our customers – the end users of our solutions. Most of our sales are specified or designed into customer applications. While the channel to our end user may change over time, our global commerce strategy is to connect directly with end users while leveraging the go-to-market model that will deliver where, when and how the end user wants.
Our priorities
We have four priorities that are positioning us for long-term growth and value creation: Portfolio, Transformation, Innovation, and People & Culture. The first three are levers that have been proven to create extraordinary value over time. They form the foundation of our priorities moving forward. They depend on our efforts to advance people and culture. Our focus on advancing people and culture supports the entire value model.
New phase of our transformation journey
On our journey of transformation – one of our strategic priorities – we have taken concrete actions to streamline and improve our operations, including the implementation of a new enterprise resource planning (ERP) system and the April 2019 move from five to four business groups. Enabled by the success of these initiatives, we are now entering a new phase of our transformation journey by implementing, at the beginning of 2020, a new global operating model to further align our four business groups – Safety and Industrial, Transportation and Electronics, Health Care, and Consumer – with the company’s customers and go-to-market models. In this new model, 3M’s business groups now have full responsibility for all facets of strategy, portfolio optimization and resource prioritization across their entire global operations. We continue to transform how we operate and build a more streamlined and customer-driven organization for the future. This latest phase of our transformation journey is designed to improve growth and operational efficiency, and will enable us to create even more value for our customers and shareholders.
Our values
Our values bind us together as one 3M – across business groups and geographies. They include our leadership behaviors – how we want our leaders to act to drive performance, develop others, and continue to win in the marketplace. Then our Code of Conduct; great companies are built on trust from customers, shareholders, employees, communities. We’ve earned that trust and our reputation for integrity over many decades. No one at 3M is free to compromise it. We also have four values that will be a priority moving forward. We are working to make 3M the most inclusive enterprise we can be. This will help us become even more diverse and enable us to become an even more creative and innovative company. We have long been a leader in sustainability and we will continue to advance this across the company. Finally, we will do even more to encourage and challenge every 3M employee to be their best.
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Board’s role in risk oversight
The Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, both as a whole Board and through its committees. At least annually, the Board reviews enterprise risks facing the Company and certain of its businesses. Other important categories of risk are assigned to designated Board committees (which are comprised solely of independent directors) that report back to the full Board. The Board has delegated to the Audit Committee through its charter the primary responsibility for the oversight of risks facing the Company, including cybersecurity. The Audit Committee’s charter provides that the Audit Committee shall “discuss policies and procedures with respect to risk assessment and risk management, the Company’s major risk exposures and the steps management has taken to monitor and mitigate such exposures.”
The Vice President and General Auditor, Corporate Auditing (the “Auditor”), whose appointment and performance is reviewed and evaluated by the Audit Committee and who has direct reporting obligations to the Committee, is responsible for leading the formal risk assessment and management process within the Company. The Auditor, through consultation with the Company’s senior management, periodically assesses the major risks facing the Company and works with those executives responsible for managing each specific risk. The Auditor periodically reviews with the Audit Committee the major risks facing the Company and the steps management has taken to monitor and mitigate those risks. The Auditor’s risk management report, which is provided in advance of the meeting, is reviewed with the entire Board by either the chair of the Audit Committee or the Auditor. The executive responsible for managing a particular risk may also report to the full Board on how the risk is being managed and mitigated. With the establishment of the new Science, Technology & Sustainability Committee and the sunsetting of the Finance Committee in November 2019, the Audit Committee has assumed from the Finance Committee the oversight responsibilities over risks associated with the Company’s capital structure, credit ratings and cost of capital, long-term benefit obligations, and use of or investment in financial products, such as derivatives to manage risk related to foreign currencies, commodities, and interest rates.
The Board has delegated to other committees the oversight of risks within their areas of responsibility and expertise. For example, the Compensation Committee oversees risks associated with the Company’s compensation practices, including by performing an annual review of the Company’s risk assessment of its compensation policies and practices for its employees. The Nominating and Governance Committee oversees risks associated with the Company’s overall governance and its succession planning process to ensure that the Company has a slate of future, qualified candidates for key management positions. The Science, Technology & Sustainability Committee oversees risks associated with the Company’s environmental and product stewardship efforts, including environmental, health and safety (EHS) legal and regulatory compliance, as well as significant emerging science and technology, disruptive innovations, materials vulnerability, and geopolitical issues that my impact the company’s overall strategy, global business continuity and financial results.
The Board believes that its oversight of risks, primarily through delegation to the Audit Committee, but also through delegation to other committees to oversee specific risks within their areas of responsibility and expertise, and the sharing of information with the full Board, is appropriate for a diversified technology and manufacturing company like 3M. The chair of each committee that oversees risk provides a summary of the matters discussed with the committee to the full Board following each committee meeting. The minutes of each committee meeting are also provided to all Board members. The Board also believes its oversight of risk is enhanced by its current leadership structure (further discussed below) because the CEO, who is ultimately responsible for the Company’s management of risk, also chairs regular Board meetings. Given his in-depth knowledge and understanding of the Company, the CEO is best able to bring key business issues and risks to the Board’s attention.
Management succession planning
The Board plans the succession to the position of Chairman, CEO and other senior management positions. To assist the Board, the Chairman, CEO and Senior Vice President of Human Resources annually assess senior managers and their succession potential for the position of Chairman/CEO and other senior management positions. As a result of a thorough and thoughtful succession planning process, in February 2019, Inge G. Thulin, Executive Chairman of the Board, announced his intention not to stand for reelection at the 2019 Annual Shareholder Meeting. The Board nominated Michael F. Roman, CEO and a Board member, to serve as Chairman of the Board, effective May 14, 2019, following his election as a director by shareholders at the 2019 Annual Shareholder Meeting.
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Communication with directors The Board of Directors has adopted the following process for shareholders and other interested parties to send communications to members of the Board. Shareholders and other interested parties may communicate with the Lead Independent Director, the chairs of the Audit, Compensation and Talent, Nominating and Governance, and Science, Technology & Sustainability Committees of the Board, or with any of our other independent directors, or all of them as a group, by sending a letter to the following address: Corporate Secretary, 3M Company, 3M Center, Building 220-13E-26A,220-9E-02, St. Paul, MN 55144-1000. The Corporate Secretary reviews communications to the independent directors and forwards those communications to the independent directors as discussed below. Communications involving substantive accounting or auditing matters will be immediately forwarded to the Chair of the Audit Committee and the Company’s Chief Compliance Officer consistent with time frames established by the Audit Committee for the receipt of communications dealing with these matters. Communications that pertain to non-financial matters will be forwarded promptly. Items that are unrelated to the duties and responsibilities of the Board will not be forwarded, such as: business solicitation or advertisements; product-related inquiries; mass mailings; resumes or other job-related inquiries; and unsolicited commercial emails.e-mails. Compliance
3M’s codes of conduct More than a century of operating with uncompromising integrity has earned 3M trust from our customers, credibility with our communities, and dedication from our employees. All of our employees, including our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, are required to abide by 3M’s Code of Conduct to ensure that our business is conducted in a consistently legal and ethical manner. The Code forms the foundation of a comprehensive process that includes compliance with corporate policies and procedures and a Company-wide focus on uncompromising integrity in every aspect of our operations. Our Code of Conduct covers many topics, including antitrust and competition law, conflicts of interest, financial reporting, protection of confidential information, and compliance with all laws and regulations applicable to the conduct of our business. Employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of the Code of Conduct. The Audit Committee has adopted procedures to receive, retain, and treat complaints received regarding accounting, internal accounting controls, or auditing matters, and to allow for the confidential and anonymous 32 3M Company
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submission by employees or others of concerns regarding questionable accounting or auditing matters. Information on how to submit any such communications can be found on 3M’s Investor Relations website, under Governance — Governance Documents — Employee Business Conduct Policies — “Report a concern or ask a question.” Our Chief Compliance Officer, who has direct reporting obligations to the Audit Committee, periodically reports to the Audit Committee on compliance with the Company’s Code of Conduct, including the effectiveness of the Company’s compliance program. The Board also has adopted a Code of Business Conduct and Ethics for Directors of the Company. This Code incorporates long-standing principles of conduct the Company and the Board follow to ensure the Company’s business and the activities of the Board are conducted with integrity and adherence to the highest ethical standards, and in compliance with the law. The Company’s Code of Conduct for employees and the Code of Business Conduct and Ethics for Directors are available on our website atwww.3M.comunder Investor Relations — Governance — Governance Documents. Public policy engagement The Company believes that transparency with respect to the consideration, processes, and oversight of our engagement with lawmakers is important to our shareholders, and continuously makes efforts to give our shareholders useful information about our public policy engagement. Since 2007, the Company has voluntarily published a detailed explanation of the Company’s political activities which is available on our website atwww.3M.comunder Investor Relations — Governance — Governance Documents — “Political“Lobbying and Political Activities and Issue Advocacy.Governance.” There, the Company sets out in detailexplains its principles and governance procedures and provides detailed information about 3M’s lobbying, political activities, and engagement with industry associations. We discuss our positions on important public policy issues, the factors we consider when making political contributions,evaluating contribution proposals, and the processes we use for legal, financial, executive, and Board oversight of our political activities and contributions. We also provide links to the reports the 3M Political Action Committee files monthly with the Table of Contents
Federal Election Commission and the Company’s quarterly Lobbying Disclosure reports, as well as a detailed list of our contributions to state candidates and political parties, and contributions to “527” political organizations. The Company also discloses on its website the trade associations the Company joined where $25,000 or more of the dues are allocated for lobbying purposes by the trade association. Certain tax-exempt organizations, organized under U.S. Internal Revenue Code §501(c)(4) and known as “social welfare” organizations, may engage in lobbying activities related to their primary purpose. If the portion of any of our dues or other contribution in excess of $25,000 are allocated to lobbying activities, we will disclose the association and amount so allocated. The Company believes that these disclosures on our website, which exceed the disclosures required by law, offer transparency respecting the Company’s public policy engagement and political activities. Commitment to sustainability
At 3M, we are inspired and motivated by Our Vision of advancing every company, enhancing every home and improving every life. In collaboration with our employees, customers, partners, government and communities, we apply our expertise and technology to help solve shared global challenges. Sustainability is at the heart of our company. It anchors our purpose-driven innovation in products, manufacturing processes and new technologies—and we’re always trying to do more. It is our ambition to meet the increasing expectations of our customers, employees, investors, and stakeholders—and grow our business—by continuing to make bold sustainability commitments and taking stronger actions.
3M has a long-standing commitment to sustainability, from our groundbreaking Pollution Prevention Pays program that began in 1975 to our increasingly ambitious set of 2025 Sustainability Goals, which are designed to improve the footprint of our own operations, help our customers meet their own sustainability goals and drive action on global environmental and social issues. We report on these efforts annually in our Sustainability Report. As a global corporation, contributing to society through diverse markets, we believe that we have a significant responsibility to advance the United Nations Sustainable Development Goals across the world. We are also a participant of the United Nations Global Compact, a policy initiative for businesses to demonstrate their commitment to ten principles in the areas of human rights, labor, environment, and anti-corruption. We align our Sustainability Report to the guidelines of the Sustainability Accounting Standards Board (SASB), and the Task Force for Climate-Related Financial Disclosures (TCFD) recommendations for helping businesses disclose climate-related financial information. Together with our ambition of improving every life and our strong set of 3M values, these commitments drive and inform our formalized approach to sustainability—the 3M Strategic Sustainability Framework. Announced by CEO Mike Roman on Investor Day in November 2018, the Framework directs our efforts to areas where we can make the greatest impact: Science for Circular, Science for Climate, and Science for Community.
To advance Science for Circular, we design solutions that do more with less material to advance a global circular economy. To help accomplish this, in December 2018, at the United Nations Climate Conference (COP24), CTO John Banovetz announced 3M’s Sustainability Value Commitment—requiring all new products entering 3M’s new product commercialization process to demonstrate how they drive impact for the greater good. This commitment builds on 3M’s history of creating more sustainable products and collaborating with our customers to help them reach their own sustainability goals. Additional initiatives to drive circularity include moving more than 30 percent of our manufacturing sites to zero waste to landfill status, membership in the Ellen MacArthur Foundation CE100 and establishing Circular Economy Working Groups to increase use of renewable and recycled materials. We’ve also announced significant product innovations, like 3M’s iconic yellow and green Scotch-Brite®Heavy Duty scrub sponge with scrubbing fibers made from 100 percent recycled content and 3M™ Thinsulate™ 100% Recycled Featherless Insulation that mimics the warmth and performance of down through tiny fibers made from post-consumer recycled plastic.
To advance Science for Climate, we are innovating to decarbonize industry, accelerating global climate solutions and improving 3M’s environmental footprint. We believe that climate change is one of the greatest challenges we face as a society and now is the time to lead and take action—for our climate, and our communities. Since 2002, we’ve achieved a 63.7 percent reduction in Scope 1 and Scope 2 location-based greenhouse gas emissions and have helped our customers avoid emitting over 41 million metric tons CO2 through use of select 3M product platforms in the last three years alone. In 2019, we developed methodologies around Scope 3 Categories 9-12, providing a holistic map of relevant categories for 3M and identifying new opportunities to reduce emissions. We also advanced efforts to better understand our climate risks and are incorporating this analysis into business strategies and actions. In February 2019, CEO Mike Roman committed to moving our entire global operations to 100 percent renewable electricity and increased our interim target to 50 percent by 2025, having already achieved the prior goal of 25 percent. On March 1, 2019, 3M flipped the switch to 100 percent renewable sources of energy at our global headquarters in St. Paul, Minnesota. From a product perspective, our portfolio of window films retain heat in the winter and cool air in the summer, resulting in
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reduced energy use and cost savings. Our innovative 3M™ Smog-reducing Granules and 3M™ Cool Roofing Granules are helping resident and commercial property owners address poor air quality and the urban heat island effect by turning pollution in contact with roofs into water-soluble ions that wash away and reflect sunlight.
To advance Science for Community, we aim to create a more positive world through science, and inspire people to join us. This begins with 3M’s culture, which is rooted in a community of scientists who are driven to create positive impact. We deliver through a variety of products, solutions and services across 3M’s 51 technology platforms and core business groups—Safety and Industrial, Transportation and Electronics, Health Care and Consumer. Examples include the Fluency Direct™ speech recognition system from M*Modal, which increases physician productivity while capturing a more complete, informative patient narrative; School Zone Safety programs that engage key stakeholders in improving the routes children take to school; and personal safety equipment, such as the 3M 8210 (N95) and 3M 8511 (N95) respirators, which can save lives when disaster strikes. To give our employees the space and freedom to innovate these solutions, we have a program that encourages them to spend 15 percent of their working time on projects of their own choosing. In addition to maintaining and expanding its diverse and inclusive work environment, 3M strives to help employees grow in their career. In December 2019, 3M unveiled a new 2025 Sustainability Goal and committed to providing 300,000 work hours of service across the globe through the expansion of 3M Impact, our skills-based employee volunteer program. This program joins existing philanthropic and social programs that support the workforce of the future—both in Science, Technology, Engineering and Math (STEM) disciplines, as well as the skilled trades. It is this unique innovation culture, ambition for improving every life and dedicated scientific community that allows 3M to advance the greater good.
Our continued work across the Strategic Sustainability Framework helps advance 3M’s progress toward our 2025 Sustainability Goals, which is reported on in our annual Sustainability Report. Sustainability at 3M is also guided by our Innovation Steering Committee which includes our CEO, CTO and General Counsel. The Committee provides leadership, oversight and strategy to encourage and ensure sustainability opportunities are recognized, and strong policies and procedures are in place. In November 2019, the 3M Board of Directors established a new board-level committee to provide general oversight of the significant scientific and technological aspects of 3M Company’s businesses and the Company’s sustainability and stewardship activities: The Science, Technology & Sustainability Committee. The Committee will review the company’s sustainability policies and programs, identifying and analyzing significant sustainability, materials vulnerability and geopolitical issues that may impact our overall business strategy, global business continuity and financial results.
To learn more, please visitwww.3M.com/Sustainability.
Related person transaction policy and procedures The Board of Directors has adopted a written Related Person Transaction Policy and Procedures which is administered by the Nominating and Governance Committee. This Policy applies to any transaction or series of transactions in which the Company or a subsidiary is a participant, the amount involved exceeds $120,000, and a Related Person (as that term is defined in the Policy) has a direct or indirect material interest and which is required to be disclosed under Item 404(a) of Regulation S-K. Transactions that fall within this definition are referred to the Committee for approval ratification, or other action. Based on its consideration of all of the relevant facts and circumstances, the Committee decides whether or not to approve a transaction and approves only those transactions that are in the best interests of the Company.Company and its shareholders. In the course of its review and approval or ratification of a transaction, the Committee considers: •● | The nature of the Related Person’s interest in the transaction; | •● | The material terms of the transaction, including whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances; | •● | The significance of the transaction to the Related Person; | •● | The significance of the transaction to the Company; | •● | Whether the related person is involved in the negotiation of the terms of the transaction or receives any special benefit as a result of the transaction; | ● | Whether the transaction would impair the judgment of a director or executive officer to act in the best interest of the Company;Company and its shareholders; and | •● | Any other matters the Committee deems appropriate. |
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Any Committee member who is a Related Person with respect to a transaction under review may not participate in the deliberations or vote respecting such approval, or ratification, except that such a director may be counted in determining the presence of a quorum at a meeting at which the Committee considers the transaction. There were no Related Person Transactions that were referred to the Committee in 2019.2021. 2022 Proxy Statement 33
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Policy on adoption of a rights plan In 2002 and 2003, a 3M shareholder submitted a shareholder proposal to 3M regarding the approval process for adopting a shareholders’ rights plan (also known as a “poison pill”). 3M does not have a rights plan and is not currently considering adopting one. The Board continues to believe, however, that there may be circumstances under which adoption of a rights plan would give the Board the negotiating power and leverage necessary to obtain the best result for 3M shareholders in the context of a takeover effort. Following consideration of the favorable vote the shareholder proposal received and in light of this belief, the Board adopted and has reaffirmed a statement of policy on this topic. The Board’s policy is that it will only adopt a rights plan if either: (1) shareholders have approved adoption of the rights plan; or (2) the Board (including a majority of the independent members of the Board), in its exercise of its fiduciary responsibilities, makes a determination that, under the circumstances existing at the time, it is in the best interests of 3M’s shareholders to adopt a rights plan without the delay in adoption resulting from seeking shareholder approval. The Board has directed the Nominating and Governance Committee to review this policy statement on an annual basis and to report to the Board on any recommendations it may have concerning the policy. The terms of the policy, as in effect, are included in 3M’s published Corporate Governance Guidelines and itsin addition to this Proxy Statement. Key areas of Board oversight Board’s role in strategy Each year management presents to the Board, and the Board discusses and approves, detailed long-term strategic plans for the Company. In addition to the Company’s overall strategic plan, financial strategic plan, enterprise strategic plans and priorities including Enterprise Operations and environmental, social and governance (ESG), the discussions also focused on breakout sessions with the directors on strategic plans and priorities for each of the four business groups. Our Company’s long-term strategy is guided by our Purpose, Promise, and Principles in the pursuit of creating unique and differentiated value for customers, shareholders, and our stakeholders. Leading with purpose As a company we are guided by our Purpose, Promise, and Principles in the pursuit of creating unique and differentiated value for customers, shareholders, and our stakeholders. Our Purpose Why 3M exists | | Unlock the power of people, ideas, and science to reimagine what’s possible | | | | | | | | | | | | | | Our Promise What 3M delivers to our employees, customers, and shareholders every day | | Improve lives by helping solve the world’s greatest challenges | | | | | | | | | | | | | | Our Principles | | Science-based performance | | Unparalleled expertise, extraordinary outcomes | | Makers of what’s next | | Strength in collaboration | | Change for good | | | | | | | | | | | | | | Our beliefs that enable us to uniquely deliver on our promise, now and in the future | | We believe that science improves lives. We apply our scientific expertise to create high-performance products and solutions with rigor and precision. | | We integrate the best of 3M globally—our technologies, capabilities, and solutions—to solve the seemingly impossible and help people, businesses and communities achieve extraordinary outcomes. | | We innovate in ways big and small, continuously transforming what we deliver and how we work to drive next-generation ideas forward. | | We bring our outside-in perspective, insight, and solutions in everything we do, working together to develop solutions with companies, institutions, and individuals. | | We believe in an equitable and inclusive world, so we think, work and act to drive meaningful change that endures. Together, we commit to creating a more sustainable world for future generations. | | | | | | | | | | | | | |
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All of these bind us together as one 3M, unified in our ambitions and empowered to act to drive growth, development, reputation, and impact with every action. These collective ideals correspond to expectations from our customers, investors, and our employees, and they work in concert with our foundational strengths and priorities for long-term growth: Our Strengths Our strengths are the foundation of 3M. They are deep competitive advantages that we leverage across the enterprise, and make 3M greater than the sum of our parts. All 3M businesses are connected and bolstered by our strengths: unique technologies, advanced manufacturing, global capabilities and leading brands. We apply and combine our 51 technology platforms – from adhesives and abrasives, to microreplication and nonwoven materials. We leverage our manufacturing capabilities: one-third of our technology platforms and one-quarter of our patents relate to process engineering. 3M’s global reach allows us to serve markets around the world, where we have operations in 70 countries and sales in nearly all countries. Finally, our brand adds value in each of our businesses. We do this while maintaining close engagement with our customers and end-markets, to gain insights that guide our innovation. Our Priorities 3M constantly builds on our foundation through four priorities – Portfolio, Transformation, Innovation, and People & Culture – which position us for long-term success. The ongoing review and reshaping of our portfolio – including prioritization within 3M, and acquisitions and divestitures – is key to maximizing value. We are transforming 3M with new business processes, service models and digitalization capabilities. Innovation remains at the center of our model, and is constantly fueled by investments in research and development and capital. Developing our people and enhancing our culture is foundational to each priority, and our ability to grow, evolve and succeed. 2022 Proxy Statement 35
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Board’s role in risk oversight Board of directors | ● | Oversees the Company’s risk profile and management’s processes for assessing and managing risk, both as a whole Board and through its committees | ● | Provides general oversight of 3M’s overall environmental, social and governance (ESG) and human resources strategies, goals and results | ● | Reviews enterprise risks at least annually (including environmental, health and safety (EHS) compliance, human capital management, ESG, cybersecurity and information security risks) | ● | Assigns other important categories of risk and specific ESG elements to designated Board committees and receives reports from them | | |
Audit committee ● Has the primary responsibility for the oversight of risks facing the Company, including cybersecurity ● �� Has the oversight responsibilities over risks associated with the Company’s capital structure, credit ratings and cost of capital, long-term benefit obligations, and use of or investment in financial products, such as derivatives to manage risk related to foreign currencies, commodities, and interest rates The Audit Committee’s charter provides that the Audit Committee shall “discuss policies and procedures with respect to risk assessment and risk management, the Company’s major risk exposures and the steps management has taken to monitor and mitigate such exposures.” The role of the auditor The Senior Vice President and General Auditor, Corporate Auditing (the “Auditor”), whose appointment and performance is reviewed and evaluated by the Audit Committee and who has direct reporting obligations to the Committee, is responsible for leading the formal risk assessment and management process within the Company. The Auditor, through consultation with the Company’s senior management, periodically assesses the major risks facing the Company and works with those executives responsible for managing each specific risk. The Auditor periodically reviews with the Audit Committee the major risks facing the Company and the steps management has taken to monitor and mitigate those risks. The Auditor’s risk management report, which is provided in advance of the meeting, is reviewed with the entire Board by either the chair of the Audit Committee or the Auditor. | | Compensation and talent committee ● Oversees risks associated with the Company’s compensation practices, including by performing an annual review of the Company’s risk assessment of its compensation policies and practices for its employees, including talent sourcing, diversity and retention strategies; talent development; internal pay equity, and equal employment opportunities Nominating and governance committee ● Oversees risks associated with the Company’s overall governance (e.g., Board diversity, public policy, social responsibility, political activities and contributions) and its succession planning process to ensure that the Company has a slate of future, qualified candidates for key management positions Science, technology & sustainability committee ● Oversees risks associated with the Company’s environmental and product stewardship efforts, including EHS legal and regulatory compliance, as well as significant emerging science and technology, disruptive innovations, materials vulnerability, and geopolitical issues that may impact the company’s overall strategy, global business continuity and financial results |
Management | ● | Provides consultation to the Auditor when he or she assesses the major risks facing the Company | ● | Manages and mitigates risks (e.g., the formation of a holistic Equity & Community organization to advance social justice and equity in our workplaces, business practices and communities globally) | ● | Reports, as needed, to the full Board on how a particular risk is being managed and mitigated |
The Board believes that its oversight of risks, primarily through delegation to the Audit Committee, but also through delegation to other committees to oversee specific risks within their areas of responsibility and expertise, and the sharing of information with the full Board, is appropriate for a diversified technology and manufacturing company like 3M. The chair of each committee that oversees risk provides a summary of the matters discussed with the committee to the full Board following each committee meeting. The minutes of each committee meeting are also provided to all Board members. The Board also believes its oversight of risk is enhanced by its current leadership structure (further discussed 36 3M Company
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below) because the CEO, who is ultimately responsible for the Company’s management of risk, also chairs regular Board meetings. Given his in-depth knowledge and understanding of the Company, the CEO is best able to bring key business issues and risks to the Board’s attention. Board’s role in management succession planning and human capital management The Board plans the succession to the position of Chairman, CEO and other senior management positions. To assist the Board, the Chairman/CEO and Chief Human Resources Officer annually assess senior managers and their succession potential for the position of Chairman/CEO and other senior management positions. The Board also reviews the Company’s strategies and plans to recruit, retain, develop, protect and fairly compensate its global workforce, with focuses on health and safety, development, diversity, equity and inclusion, and compensation and benefits. Human capital management At 3M, we believe the ability to recruit, retain, develop, protect, and fairly compensate our global workforce of 95,000 enables our success. Health and Safety - We are committed to the safety, health, and well-being of our employees. We continuously evaluate opportunities to raise safety and health standards, visiting sites to identify and manage environmental health and safety risks; evaluating compliance with regulatory requirements and 3M policy; and maintaining a global security operation for the protection of facilities and people on 3M sites. We also promote a culture of health and well-being through disease prevention programs, on-site clinical services, employee assistance programs, and comprehensive health care benefits. Development - Developing employees contributes to growing 3M’s business. We maintain talent and succession planning processes, including regular review by the Company’s chief executive officer (CEO) and reporting up through the Board of Directors. We have a suite of high-potential leadership development programs which brings a consistent approach to leadership development. We also have development programs for managers and supervisors and provide learning opportunities for all employees, in addition to regular coaching and support from their supervisor. With the Company’s global online employee learning platform, employees are able to access unique, just-in-time development resources in 12 languages to support their career aspirations and advance their skills. Diversity, Equity and Inclusion - A diverse, global workforce and inclusive culture that provides fair and equitable opportunities helps 3M remain competitive, advance its innovation culture, and serve customers. We focus on attracting and advancing top talent and have publicly committed to advancing global diversity in management across all dimensions, with additional specific goals to continue advancing pay equity and to increase the Company’s diversity with underrepresented groups. We support these values with an internal CEO Inclusion Council, a forum led by senior management to advance diversity, equity and inclusion initiatives. We also plan to invest $50 million over a five-year period through 2025 to address racial opportunity gaps through workforce development initiatives in the communities in which our employees live and our business operates. Compensation and Benefits - We have a trust-based approach to work that empowers employees to work where and when they can best achieve their goals, which supports attraction and retention of talent around the globe. In addition to a professional and flexible work environment that promotes innovation, well-being, and rewards performance, 3M’s total compensation for employees includes a variety of components that support sustainable employment and the ability to build a strong financial future, including competitive market-based pay and comprehensive benefits. In addition to earning a base salary, eligible employees are compensated for their contributions to the Company’s goals with both short-term cash incentives and long-term equity-based incentives. Through its global pay philosophy, principles and consistent implementation, 3M is committed to providing fair and equitable pay for employees. Eligible full-time employees in the United States also have access to medical, dental, and vision plans; savings and retirement plans; a 3M employee stock purchase plan; and other resources. Some of these benefits can also be available to regular part-time employees who work at least 20 hours a week. Programs and benefits differ internationally for a variety of reasons, such as local legal requirements, market practices, and negotiations with works councils, trade unions, and other employee representative bodies. Commitment to sustainability We are guided by the principles of sound science and corporate responsibility. We believe in an equitable and inclusive world, so we think, work, and act to drive meaningful change that endures. Together, we commit to creating a more sustainable world for future generations. In collaboration with our employees, customers, partners, government, and communities, we apply our expertise and technology to help solve shared global challenges. We recognize and consistently seek opportunities to do more. It is our ambition to meet the increasing expectations of our customers, employees, investors, and stakeholders—and grow our business—by continuing to make bold sustainability commitments and taking stronger actions. 2022 Proxy Statement 37
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For more than 45 years, 3M has been recognized as a leader among global corporations in sustainability actions and measures, with programs dating back as early as 1975. Since then and to this day, our goals and ambitions continue to grow and gain momentum as we recognize how much still needs to be done to make the world more sustainable for future generations. Our sustainability strategy is a systemic approach, seeking to drive innovation and holistic impact against shared global needs. We set impactful and measurable goals that demonstrate our environmental, social, and governance (ESG) commitments and progress. As a global science, technology, and manufacturing company, we believe 3M is uniquely positioned to bring our full capabilities to advance meaningful impact, not only in our workplaces but also in our communities. As we advance our initiatives with determination, we know systemic change requires resources and long-term dedication. We report on these efforts annually in our Global Impact Report. As a global corporation contributing to society through diverse markets, we believe that we have a significant responsibility to advance the United Nations Sustainable Development Goals across the world. We are also a participant of the United Nations Global Compact, a policy initiative for businesses to demonstrate their commitment to ten principles in the areas of human rights, labor, environment, and anti-corruption. We align our Global Impact Report to the guidelines of the Sustainability Accounting Standards Board (SASB) and the Task Force for Climate-Related Financial Disclosures (TCFD) recommendations for helping businesses disclose climate-related financial information. Together with our ambition of improving lives and our strong set of 3M values, these commitments drive and inform our formalized approach to sustainability—the 3M Strategic Sustainability Framework. Our commitment to sustainability encompasses stewardship of water discharges, air emissions and physical waste to minimize our manufacturing processes’ environmental impact, including active management of PFAS (per- and polyfluoroalkyl substances). In these efforts, 3M is committed to working with communities, elected officials, regulators, and scientists to continue to be a good neighbor. Our robust governance framework includes oversight by our Board of Directors, which receives regular sustainability updates and reviews related risks as part of 3M’s enterprise risk management. The Science, Technology & Sustainability Committee of the Board of Directors has primary oversight responsibility of 3M’s sustainability and stewardship activities, including, among others, environmental and product stewardship efforts, environmental, health & safety, and legal and regulatory compliance. The company’s Environmental Responsibility and Sustainability Committee, comprising 3M top executive management, provides leadership, oversight and strategy for sustainability and develops and monitors adherence with related policies and procedures. 3M is a pay-for-performance company. Beginning in 2022, a new ESG modifier has been added to the formula used to calculate the annual incentive compensation earned by the Company’s senior executives. Amounts earned by them will be increased 10 percent of target, decreased 10 percent of target, or left unchanged based on the Compensation and Talent Committee’s assessment of 3M’s performance against a set of objective ESG metrics. For more information, see “2022 changes to our incentive compensation program—2022 annual incentive compensation program” on page 69. Board of Directors | | ● Receives regular sustainability updates at Board meetings ● Reviews sustainability-related risks as part of 3M’s enterprise risk program | Science, Technology& SustainabilityCommittee of the Boardof Directors | | ● Provides primary oversight of 3M’s sustainability and stewardship activities ● Reviews 3M’s sustainability policies and program to identify and analyze significant sustainability, materials vulnerability and geopolitical issues that may impact 3M’s overall business strategy, global business continuity and financial results | EnvironmentalResponsibility andSustainability Committee | | ● Provides leadership, oversight, and strategy to encourage and ensure sustainability opportunities are recognized ● Develops and monitors adherence with strong sustainability-related policies and procedures ● Includes 3M’s CEO, CFO, CTO & EVP Environmental Responsibility, Group President Enterprise Operations, EVP & Chief HR Officer, EVP & Chief Legal Affairs Officer, SVP & Chief Strategy Officer, and EVP Country Governance & Services | Chief SustainabilityOfficer | | ● Leads 3M’s sustainability activities ● Reports to the Environmental Responsibility and Sustainability Committee and other internal and external groups | Sustainability leaders inbusiness groups, areas,and enterprise-wide | | ● Drives Strategic Sustainability Framework priorities and initiatives consistent with the scope of their role ● Leads customer relationships to solve shared global challenges |
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Through engagement with our Board of Directors, executive leadership team and business groups, our work across 3M’s Strategic Sustainability Framework is advancing progress towards our sustainability commitments and ESG metrics. To learn more, please visit www.3M.com/ESG. Our priority areas Science for Circular Design solutions that domore with less material,advancing a globalcircular economy. | | A circular economy does more with less, keeps products and materials in use, designs out waste and pollution, and regenerates natural systems. At the core is an opportunity to develop technologies and business models that are restorative and regenerative by design. At 3M, we see circular economy as an opportunity to inspire leadership, innovation and disruptive change, all driving impact for a more sustainable future. Goals Reduce global water use by an additional 10%, indexed to sales by 2022, 20% by 2025, and 25% by 2030.1,2 For 3M’s global manufacturing operations, enhance the quality of water returned to the environment from industrial processes by 2030. Our initial focus is on implementing state of-the-art water purification technology at the largest water use locations globally and having them operational in 2024.2 Engage 100% of water-stressed/scarce communities where 3M manufactures, on community-wide approaches to water management by 2025. Drive supply chain sustainability through targeted raw material traceability and supplier performance assurance by 2025. Drive supply chain sustainability through targeted raw material traceability and supplier performance assurance by 2025. Reduce manufacturing waste by an additional 10%, indexed to sales by 2025. Achieve zero landfill status at more than 30% of manufacturing sites by 2025. Require every new product that enters 3M’s new product commercialization process to have a Sustainability Value Commitment, demonstrating how it drives impact for the greater good. | | | | Science for Climate Innovate to decarbonizeindustry, accelerate global climate changesolutions and improveour environmentalfootprint. | | At 3M, we support the global consensus set forth in the 2015 Paris Agreement and we are acting on the 2018 findings of the Special Report on Global Warming of 1.5°C by the Intergovernmental Panel on Climate Change into our goals, operations and actions. The global climate crisis impacts businesses, our communities and our families. We believe that by working together, we can drive necessary system change. We recognize the work to be done and are inspired by the opportunity to chart our collective path forward. Goals Improve energy efficiency, indexed to net sales, by 30% by 2025. Increase renewable energy to 50% of total electricity use by 2025 and to 100% by 2050. Reduce Scope 1 and 2 market-based GHG emissions at least 50% by 2030, 80% by 2040 and achieve carbon neutrality in our operations by 2050.2,3 Help our customers reduce their GHGs by 250 million tons of CO2 equivalent emissions through the use of 3M products by 2025. |
| | (1) | Expanded commitment from 10% between 2015 and 2025. | (2) | 2019 will be the baseline measure year for these new commitments. | (3) | Expanded 3M’s 2025 goal to stay below 50% of our 2002 baseline, meaning 3M’s 2030 Scope 1 and 2 emissions will now be reduced more than 85% from 2002 levels. | | |
2022 Proxy Statement 39
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Science for Community Create a more positive world through science and inspire people to join us. | | 3M recognizes the crucial role of science in improving lives, protecting health and safety, and helping solve global challenges. We know we need new technologies, creative scientists, and evidence-based policies and decisions to drive impactful change. We recognize the importance of well-trained science, technology, engineering, and mathematics (STEM) graduates and the critical need for equitable access to STEM education and careers which drives us to advance diversity, equity, inclusion and social justice within our company and community. We believe in the power of science, sharing our expertise, and investing in the bright minds of tomorrow. Together we will lead and design a sustainable future for all. Goals Invest cash and products for education, community, and environmental programs by 2025. Double the pipeline of global diverse talent in management to build a diverse workforce by 2030, an adjustment from the previous goal year of 2025 as we reassess our progress to date. See 3M’s 2021 Diversity, Equity & Inclusion Report for more details. 100% participation in employee development program to advance individual and organizational capabilities by 2025. Provide 300,000 work hours of skills-based volunteerism by 3M employees to improve lives and help solve society’s toughest challenges by 2025. Provide training to five million people globally on worker and patient safety by 2025. |
Board structure and processes Board’s leadership structure Following his electionOur Corporate Governance Guidelines allow the independent directors flexibility to directorship atsplit or combine the Company’s Annual MeetingChairman and CEO responsibilities. The independent directors annually review our leadership structure to determine the structure that is in the best interest of Shareholders on May 14, 2019, CEO Michael Roman was nominated3M and elected to serve as Chairman of the Board.
its shareholders. The Board’s current leadership structure is characterized by: •● | A combined Chairman of the Board and CEO; | • | | ● | A strong, independent, and highly experienced Lead Independent Director with well-defined responsibilities that support the Board’s oversight responsibilities; | • | | ● | A robust committee structure consisting entirely of independent directors with oversight of various types of risks; and | • | | ● | An engaged and independent Board. | | |
The Board of Directors believes that this leadership structure provides independent board leadership and engagement while deriving the benefits of having our CEO also serve as Chairman of the Board. As the individual with primary responsibility for managing the Company’s day-to-day operations and with in-depth knowledge and understanding of the Company, the CEO is best positioned to chair regular Board meetings as the directors discuss key business and strategic issues. Coupled with an independentthe Lead Independent Director, this combined structure provides independent oversight while avoiding unnecessary confusion regarding the Board’s oversight responsibilities and the day-to-day management of business operations. The Board believes that adopting a rigid policy on whether to separate or combine the positions of Chairman of the Board and CEO would inhibit the Board’s ability to provide for a leadership structure that would best serve shareholders. As a result, the Board has rejected adopting a policy permanently separating or combining the positions of Chairman and CEO in its Corporate Governance Guidelines, which are reviewed at least annually and available on our website atwww.3M.com, under Investor Relations — Governance. Instead, the Board adopted an approach that allows it, in representing the shareholders’ best interests, to decide who should serve as Chairman or CEO, or both, under present or anticipated future circumstances. Table of Contents
The Board believes that combining the roles of CEO and Chairman contributes to an efficient and effective Board. The Board believes that to drive change and continuous improvement within the Company, tempered by respect for 3M’s traditions and values, the CEO must have maximum authority. The CEO is primarily responsible for effectively leading 40 3M Company
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significant change, improving operational efficiency, driving growth, managing the Company’s day-to-day business, managing the various risks facing the Company, and reinforcing the expectation for all employees of continuing to build on 3M’s century-old tradition of uncompromising integrity and doing business the right way. The Board also believes that the Company’s corporate governance measures ensure that strong, independent directors continue to effectively oversee the Company’s management and key issues related to executive compensation, CEO evaluation and succession planning, strategy, risk, and integrity. The Corporate Governance Guidelines provide, in part, that: •● | Independent directors comprise a substantial majority of the Board; | •● | Directors are elected annually by a majority vote in uncontested director elections; | •● | Only independent directors serve on the Audit, Compensation and Talent, Nominating and Governance, and Science, Technology & Sustainability Committees; | •● | The committee chairs establish their respective agendas; | •● | The Board and committees may retain their own advisors; | •● | The independent directors have complete access to management and employees; | •● | The independent directors meet in executive session without the CEO or other employees during each regular Board meeting; and | •● | The Board and each committee regularly conduct a self-evaluation to determine whether it and its committees function effectively. |
The Board has also designated one of its members to serve as Lead Director, with responsibilities (described in the next section) that are similar to those typically performed by an independent chairman. Independent lead director The Board has designated one of its members to serve as a Lead Director, with responsibilities that are similar to those typically performed by an independent chairman (“chairman.
Lead Director”). Michael L. Eskew was appointedIndependent Director Since 2012, our Lead Independent Director by the independent directors effective November 12, 2012, succeeding Dr. Vance Coffman who had served as Lead Director since 2006.has been Michael Eskew, is a highly experienced director,director. He currently servingserves on the boards of The Allstate Corporation, Eli Lilly and Company, and International Business Machines Corporation, and is the former Chairman and CEO of United Parcel Service, Inc. His responsibilities include, but are not limited to, the following: •● | Presides at all meetings of the Board at which the Chairman is conflicted or not present, including executive sessions of the independent directors; | • | | ● | Acts as a key liaison between the Chairman/CEO and the independent directors; | • | | ● | Approves the meeting agendas for the Board, and approves the meeting schedules to assure that there is sufficient time for preparation and discussion of all agenda items; | • | | ● | Has the authority to approve the materials to be delivered to the directors in advance of each Board meeting and provides feedback regarding the quality, quantity, and timeliness of those materials (this duty not only gives the Lead Director approval authority with respect to materials to be delivered to the directors in advance of each Board meeting but also provides a feedback mechanism so that the materials may be improved for future meetings); | • | | ● | Has the authority to call meetings of the independent directors; | • | | ● | Communicates Board member feedback to the Chairman/CEO (except that the chair of the Compensation and Talent Committee leads the discussion of the Chairman/CEO’s performance and communicates the Board’s evaluation of that performance to the Chairman/CEO); | • | | ● | If requested by major shareholders, ensures that he is available, when appropriate, for consultation and direct communication; and | • | | ● | Performs such other duties as requested by the independent directors. |
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Executive sessions As an agenda item for every regularly scheduled Board and committee meeting, independent directors regularly meet in executive session, without the Chairman/CEO or other members of management present, to consider such matters as they deem appropriate. The Lead Independent Director presides over the Board’s executive sessions. 2022 Proxy Statement 41
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Board committees Board, committees, and director evaluations
The Board conducts an annual self-evaluation to determine whether it and its committees are functioning effectively and consider opportunities for continual enhancement. The Chair of the Nominating and Governance Committee solicits and receives comments from all directors and shares those comments with the Committee and the Board. Based on the comments and further discussion and reflection, the Board makes an assessment reviewing areas in which the Board believes improvements could be made to increase the effectiveness of the Board and its committees as well as identifying existing practices which have contributed to high effectiveness and accordingly should be continued. Self-evaluation items requiring follow-up and/or the development and execution of implementation and action plans are monitored on a going-forward basis by the full Board, as well as by individual committees and the chairs thereof, as applicable. While this formal self-evaluation is conducted on an annual basis, directors share perspectives, feedback, and suggestions year-round. The Board and each committee conducted an evaluation of its performance in 2019.
Before the November Board meeting, the Chairman/CEO, Lead Director, and chair of the Nominating and Governance Committee meet to discuss the performance and contributions of each director. As part of the nomination process, the Nominating and Governance Committee considers the performance and contributions of each director and evaluates each of the directors to ensure our directors continue to possess the necessary skills and experience to effectively oversee the Company. On occasion, the Nominating and Governance Committee has not renominated a director based on this individual director evaluation process.
Board and committee information The Board currently has twelve directors and the following fourstanding committees: Audit, Compensation and Talent, Nominating and Governance, and Science, Technology & Sustainability. The Board had a Finance Committee until November 12, 2019, whencurrent members of our committees, the Science, Technology & Sustainability Committee was established. The membership and the functionprincipal functions of each committee both before and after the Novembernumber of meetings held in 2021 are shown below. Each member is independent under our Director Independence Standards, as well as applicable Securities Exchange Commission (“SEC”) rules and NYSE listing standards. Each committee structural update,has adopted, and annually reviews, a charter setting forth its roles and responsibilities. Those charters are described below.available at www.3M.com > Investor Relations > Governance > Governance Documents > Committee Charters. During 2019, the Board of Directors held five regularly scheduled meetings and three telephonic meetings. Overall attendance at Board and committee meetings was 96 percent. During 2019, all of our directors attended at least 75 percent of all Board and Committee meetings on which they served.
The Company has a long-standing policy that directors are expected to attend the Annual Meeting of Shareholders unless extenuating circumstances prevent them from attending. All directors who were members of the Board as of May 2019 attended last year’s Annual Meeting of Shareholders. Sondra Barbour was not present at the meeting as she did not seek re-election and ended her service on the Board on May 14, 2019, when her term expired.
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BOARD COMMITTEE COMPOSITION (JANUARY 1 – NOVEMBER 12, 2019)
Name of Non-employee Director | | Audit | | Compensation | | Finance | | Nominating
and
Governance | Sondra L. Barbour
(retired from the Board, effective May 14, 2019) | | | | | | | | | Thomas “Tony” K. Brown | | | | | | | | | Pamela J. Craig
(elected to the Board, effective May 14, 2019) | | | | | | | | | David B. Dillon | | | | | | | | | Michael L. Eskew | | | | | | | | | Herbert L. Henkel | | | | | | | | | Amy E. Hood | | | | | | | | | Muhtar Kent | | | | | | | | | Edward M. Liddy | | | | | | | | | Dambisa F. Moyo | | | | | | | | | Gregory R. Page | | | | | | | | | Patricia A. Woertz | | | | | | | | |
= Committee Member; = Chair
BOARD COMMITTEE COMPOSITION (SINCE NOVEMBER 12, 2019)
composition Name of Non-employee Director | | Audit | | Compensation and Talent | | Nominating and Governance | | Science, Technology
Technology & Sustainability | Thomas “Tony” K. Brown | | | | | | | | | Pamela J. Craig | | | | | | | | | | | David B. Dillon | | | | | | | | | Michael L. Eskew | | | | | | | | | James R. Fitterling | | | | | | | | | Herbert L. HenkelHenkel* | | | | | | | | | Amy E. Hood | | | | | | | | | Muhtar Kent | | | | | | | | | Edward M. Liddy*Suzan Kereere | | | | | | | | | Dambisa F. Moyo | | | | | | | | | Gregory R. Page | | | | | | | | | Patricia A. Woertz* | | | | | | | | |
= Committee member = Chair * | Until Mr. Henkel and Ms. Woertz’s retirement in May 2022. | | |
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Audit CommitteeMeetings in 2021: 10 | | | | | | | | Patricia A. Woertz | | | | | | | David B. Dillon | | |
= Committee Member; = Chair
* | Mr. Liddy has reached the mandatory retirement age and will retire from the Board on May 12, 2020. |
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Members
Sondra L. Barbour
(until 5/14/2019) Thomas “Tony” K. Brown
| | Pamela J. Craig
(from 5/14/2019)
David B. Dillon (chair)
| | Dambisa F. Moyo
Gregory R. PageMeetings in 201910
| (chair) | | | | | | | The Board of Directors has determined that all Audit Committee members are “independent” and “financially literate” under the NYSE listing standards and that members of the Audit Committee received no compensation from the Company other than for service as a director. The Board has also determined that the following Audit Committee members — David B. Dillon (chair), Sondra L. Barbour, Pamela J. Craig, and Dambisa F. Moyo and Gregory R. Page — have “accounting or related financial management expertise” under the NYSE listing standards and are “audit committee financial experts” as that term is defined by applicable Securities and Exchange Commission regulations.regulations. The Audit Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities.
Audit Committee Charter
www.3M.com> Investor Relations > Governance > Governance Documents > Committee Charters
| Introduction The Audit Committee assists the Board in its oversight of the integrity of the Company’s financial statements, compliance with legal and regulatory requirements, the qualifications, independence, and performance of the Company’s independent registered public accounting firm (the “Independent Accounting Firm”), the performance of the Company’s internal auditing department, the Company’s financial risk assessment and management, and furnishes a report for inclusion in the Company’s Proxy Statement. Roles and Responsibilities | •● Reviews the Company’s annual audited and quarterly consolidated financial statements and internal controls over financial reporting;
•● Reviews the Company’s financial reporting process and internal controls over financial reporting, including any major issues regarding accounting principles and financial statement presentation, and critical accounting policies to be used in the consolidated financial statements;
•● Reviews and discusses with management and the Independent Accounting Firm the Company’s report on internal controls over financial reporting and the Independent Accounting Firm’s audit of internal controls over financial reporting;
•● Reviews earnings press releases prior to issuance;
•● Appoints, oversees, and approves compensation of the Independent Accounting Firm;
•● Reviews with the Independent Accounting Firm the scope of the annual audit, including fees and staffing, and approves all audit and permissible non-audit services provided by the Independent Accounting Firm;
•● Reviews findings and recommendations of the Independent Accounting Firm and management’s response to the recommendations of the Independent Accounting Firm;
•● Discusses policies with respect to risk assessment and risk management, the Company’s major risk exposures, and the steps management has taken to monitor and mitigate such exposures;
•● Periodically reviews the Company’s capital allocation and capital structure strategies, insurance coverage, funding for pension and other post-retirement benefit plans, and global tax planning;
•● Periodically reviews the Company’s global Treasury activities, including risks associated with cash investments, counterparties, and use of derivatives and other financial instruments for risk management purposes;
| | •● Periodically reviews and approves the Company’s use of swaps exemption pursuant to Dodd-Frank derivatives clearing policy;
•● Periodically obtains reports from senior management, including the Chief Information Officer, regarding the progress on the phased implementation of the global enterprise resource planning system, information technology networks and systems, and the adequacy and effectiveness of the Company’s information security policies and internal controls regarding information security;
•● Periodically obtains reports from the Company’s senior internal auditing executive, who has direct reporting obligations to the Committee, on the annual audit plan, scope of work, and the results of internal audits and management’s response thereto;
•● Periodically obtains reports from the Company’s Chief Compliance Officer, who has direct reporting obligations to the Committee, on compliance with the Company’s Code of Conduct, and at least annually, on the implementation and effectiveness of the Company’s compliance and ethics program;
•● Reviews with the Company’sCompany���s General Counsel legal matters that may have a material impact on the consolidated financial statements and any material reports or inquiries received from regulators or government agencies regarding compliance; and
•● Establishes procedures for (i) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and (ii) the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters and periodically review with the Chief Compliance Officer and the Company’s senior internal auditing executive these procedures and any significant complaints received.
| | | | | | | | | |
= Financially literate = Financial expert
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38 | 3M CompanyCompensation and Talent CommitteeMeetings in 2021: 10 |
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COMPENSATION COMMITTEE
Members
Pamela J. Craig (chair) | | Michael L. Eskew
(until 11/12/2019)
| | James R. Fitterling | | Herbert L. Henkel (chair) Henkel* | | Amy E. Hood
Muhtar Kent
Edward M. Liddy
| | Suzan Kereere | | Gregory R. Page | | Patricia A. WoertzMeetings in 20195 Woertz* | | | | | | | | | | | | | | | | The Board of Directors has determined that all Compensation and Talent Committee members are “independent” under the NYSE listing standards, including the listing standards applicable to compensation committee members. The Board has also determined that each Compensation and Talent Committee member qualifies as a “Non-Employee Director” under Rule 16b-3 of the Securities Exchange Act of 1934, and that each member qualifies as an “outside director” under Section 162(m) of the Internal Revenue Code.1934. The Compensation Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities.
Compensation Committee Charter
www.3M.com> Investor Relations > Governance > Governance Documents > Committee Charters
| Introduction The Compensation and Talent Committee reviews the Company’s compensation practices and policies, annually reviews and approves (subject to ratification by the independent directors of the Board) the compensation for the CEO, annually reviews and approves the compensation for the other senior executives, evaluates CEO performance, reviews and discusses with management of the Company the Compensation Discussion and Analysis prepared in accordance with the Securities and Exchange Commission’s disclosure rules for executive compensation, and furnishes a report for inclusion in the Company’s Proxy Statement. Roles and Responsibilities | | •● Reviews disclosures in the Company’s Proxy Statement regarding advisory votes on executive compensation and the frequency of such votes;
•● Approves the adoption, amendment, and termination of incentive compensation and deferred compensation programs for employees of the Company;
•● Approves the adoption, amendment, or termination of equity compensation programs or, if shareholder approval would be required, recommends such actions to the Board;
•● Approves, subject to ratification by the independent directors of the Board, employment agreements and severance arrangements for the CEO, as appropriate;
•● Approves employment agreements and severance arrangements for the senior executives of the Company (other than the CEO), as appropriate;
•● Oversees the administration of the Company’s stock and long-term incentive compensation programs, and determines the employees who receive awards and the size of their awards under such programs;
•● Approves the adoption and amendment of Company guidelines covering ownership of Company common stock by executives, and annually reviews compliance with these guidelines;
| | •● Reviews and makes recommendations to the Board of Directors concerning any amendment to a retirement benefit plan that would require Board approval;
•● Annually reviews a risk assessment of the Company’s compensation policies and practices for its employees;
•● Periodically reviews and discusses with the Company’s management matters relating to internal pay equity;
•● Reviews shareholder proposals relating to executive compensation matters and makes recommendations to the Board regarding responses;
•● Effective February 8, 2022: Periodically reviews human resource issuesand discusses with management matters relating to the Company’s policiestalent sourcing, diversity, and practices with respect to workforce diversityretention strategies; talent development; internal pay equity; and equal employment opportunities;
● Effective February 8, 2022: Periodically reviews with the Chairman/CEO their assessment of the Company’s senior executives and succession plans relating to their positions; and •● Has the authority to retain compensation consultants, counsel, or other advisors as it deems appropriate, including the authority to approve such advisors’ fees and retention terms.
| | The Committee may delegate its authority to subcommittees of one or more Committee members or to senior executives of the Company as it deems appropriate, subject to compliance with applicable laws, rules, regulations, and plan requirements. The Committee has delegated authority to the Company’s Chief Executive Officer and to its SeniorExecutive Vice President and Chief Human Resources Officer, to grant certain stock-based awards to eligible, non-executive employees, subject to certain limits. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
* | Until Mr. Henkel and Ms. Woertz’s retirement in May 2022. | | |
Table of Contents | Corporate governance at 3M |
2020 Proxy Statement | 39Nominating and Governance Committee Meetings in 2021: 5 |
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FINANCE COMMITTEE (until 11/12/2019)*
Members
Sondra L. Barbour
(until 5/14/2019)
Pamela J. Craig
(from 5/14/2019)
Amy E. Hood
Muhtar Kent (chair)
Dambisa F. Moyo
Patricia A. Woertz
Meetings in 20194
The Board of Directors has determined that all Finance Committee members are “independent” under the NYSE listing standards.
The Finance Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities.
Finance Committee Charter
www.3M.com> Investor Relations > Governance > Governance Documents > Committee Charters
| Introduction
The Finance Committee assists the Board with its oversight of the Company’s financial structure, including its overall capital structure, sources and uses of funds and related cash and financing plans, the Company’s financial condition and capital strategy, and financial risk management.
Roles and Responsibilities
• Reviews and recommends for approval by the Board the dividend policy and the declaration of dividends or other forms of distributions on the Company’s stock, such as stock splits in the form of a stock dividend;
• Reviews and recommends for approval by the Board the authorization for repurchase of the Company’s stock and periodically reviews repurchase activities;
• Reviews and recommends for approval by the Board the Company’s authorization limit for cumulative short- and long-term borrowings;
• Reviews and recommends for approval by the Board the registration and issuance of the Company’s debt or equity securities, except in the case of the issuance of debt or equity securities in connection with a merger or acquisition transaction which is presented to the Board;
• Periodically reviews the Company’s capital allocation and capital structure strategies and related metrics from a credit rating agency and investor perspective;
• Reviews and recommends for approval by the Board an annual capital expenditure budget and revisions to that budget;
• Reviews and recommends for approval by the Board capital expenditures in excess of $75,000,000;
• Periodically reviews the Company’s global treasury and tax planning activities;
• Reviews and evaluates risks associated with the Company’s policies and activities related to cash investments, counterparty risks, and use of derivatives as part of hedging programs to manage risk related to foreign currencies, commodity prices, and interest rates;
• Periodically reviews and approves the Company’s decision to enter into derivative swaps, including swaps exempt from an otherwise applicable clearing or trading mandate, and other governance matters related to derivatives trading;
• Periodically reviews the Company’s insurance coverage;
• Periodically reviews the funding, asset performance, and strategies for the Company’s pension and other postretirement benefit plans; and
• Periodically reviews the Company’s funding and liquidity strategies for achievement of financing objectives.
|
* | The responsibilities of the Finance Committee have been assumed by the Audit Committee and the full Board since November 12, 2019. |
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NOMINATING AND GOVERNANCE COMMITTEE
Members
Muhtar Kent (chair) | | Thomas “Tony” K. Brown
| | David B. Dillon
Michael L. Eskew
(chair until 11/12/2019)
Herbert L. Henkel
(until 11/12/2019)
Muhtar Kent (chair from
11/12/2019)
Edward M. Liddy
| | Dambisa F. Moyo
(from 11/12/2019)
Gregory R. Page
(until 11/12/2019)Meetings in 20194
| | | | | | | | The Board of Directors has determined that all Nominating and Governance Committee members are “independent” under the NYSE listing standards. The Nominating and Governance Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities.
Nominating and Governance Committee Charter
www.3M.com> Investor Relations > Governance > Governance Documents > Committee Charters
| Introduction The Nominating and Governance Committee establishes the Board Membership Criteria, assists the Board by identifying individuals qualified to become Board members, recommends to the Board matters of corporate governance, facilitates the annual review of the performance of the Board and its committees, and periodically reviews CEO and management succession plans. Roles and Responsibilities | | •● Selects and recommends director candidates to the Board of Directors, in light of the Board Membership Criteria adopted by the Board, either to be submitted for election at the Annual Meeting or to fill any vacancies on the Board, including consideration of any shareholder nominees for director (submitted in accordance with the Company’s Bylaws);
•● Reviews and makes recommendations to the Board of Directors concerning the composition and size of the Board and its committees, the Board Membership Criteria, frequency of meetings, and changes in compensation for non-employee directors;
•● Reviews the Company’s Corporate Governance Guidelines at least annually, and recommends any proposed changes to the Board for approval;
•● Develops and recommends to the Board standards to be applied in making determinations on the types of relationships that constitute material relationships between the Company and a director for purposes of determining director independence;
| | •● Reviews and approves or ratifies any transaction between the Company and any related person, which is required to be disclosed under the rules of the Securities and Exchange Commission;
•● Develops and recommends to the Board for its approval an annual self-assessment process of the Board and its committees and oversees the process;
•● Reviews periodically with the Chairman/CEO succession plans relating to positions held by elected corporate officers, and makes recommendations to the Board with respect to the selection of individuals to occupy these positions;
•● Periodically reviews the corporate contribution program (3Mgives) and the contribution activities of the 3M Foundation, which is funded by the Company; and
•● Periodically reviews the Company’s positions and engagement on important public policy, social responsibility and corporate governance issues affecting its business, including political contributions by 3M and its Political Action Committee, and shareholder engagement.
| | | | | | | | | | | | | | | | | | |
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2020 Proxy StatementScience, Technology & Sustainability CommitteeMeetings in 2021: 9 | | 41 | | | | | |
| | | | | | | Gregory R. Page (chair) | | Herbert L. Henkel* | | Amy E. Hood | | Muhtar Kent | |
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SCIENCE, TECHNOLOGY & SUSTAINABILITY COMMITTEE (from 11/12/2019)
Members
Pamela J. Craig
Herbert L. Henkel
Amy E. Hood
Gregory R. Page (chair)
Patricia A. Woertz
Meetings in 20190
The Board of Directors has determined that all Science, Technology & Sustainability Committee members are “independent” under the NYSE listing standards. The Science, Technology & Sustainability Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities.
Science, Technology & Sustainability Committee Charter
www.3M.com> Investor Relations > Governance > Governance Documents > Committee Charters
| Introduction The responsibility of the Science, Technology & Sustainability Committee (the “Committee”) of the 3M Board of Directors is to oversee the twin demands of developing products to meet the ever-changing needs of our customers while ensuring that those products cause no harm to people or to our planet. The Committee is responsible for providing the general oversight of the significant scientific and technological aspects of 3M’s businesses and the Company’s sustainability and stewardship activities. Roles and Responsibilities | | | | •● Monitors and reviews the overall strategy, direction and effectiveness of the Company’s research and development activities;
•● Reviews management’s strategy and allocation of resources for research and development activities, including product line extensions and new product platforms;
•● Reviews the Company’s policies and programs on sustainability; environmental and product stewardship; and environmental, health and safety, including for compliance with all applicable laws and regulations;
| | •● Assists the Board in identifying and analyzing significant emerging science and technology, disruptive innovations, sustainability, materials vulnerability, and geopolitical issues that may impact the Company’s overall business strategy, global business continuity and financial results; and
•● Annually reviews the Company’s Sustainability Report.
| | | | | | | | | |
| | * | Until Mr. Henkel’s retirement in May 2022. |
Meeting attendance During 2021, the Board of Directors held five regularly scheduled meetings and four special meetings. Overall attendance at Board and committee meetings was 98 percent. During 2021, all of our directors attended at least 75 percent of all Board and Committee meetings on which they served. The Company has a long-standing policy that directors are expected to attend the Annual Meeting of Shareholders unless extenuating circumstances prevent them from attending. All 12 directors who were members of the Board as of May 2021 attended last year’s Annual Meeting of Shareholders.
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Director compensation and stock ownership guidelines Director compensation philosophyPhilosophy and elementsProcess
The Nominating and Governance Committee periodically receives reports on the status of Board compensation in relation to other large U.S. companies and is responsible for recommendingreviewing and making recommendations to the Board changes inregarding all matters pertaining to the compensation forof our non-employee directors. The Board reviews the recommendations of the Committee and determines the form and amount of director compensation. In developing its recommendations, the Nominating and Governance Committee is guided by the following goals: • Compensation should fairly pay directors for work required in a company of 3M’s size and scope;
• A significant portion of the total compensation should be paid in common stock to align directors’ interests with the long-term interests of shareholders; and
• The structure of the compensation should be simple and transparent.
● | Compensation should fairly pay directors for work required in a company of 3M’s size and complexity; | ● | A significant portion of the total compensation should be paid in common stock (or common stock equivalents) to align directors’ interests with the long-term interests of shareholders; and | ● | The structure of the compensation should be simple and transparent. |
The Nominating and Governance Committee works with an independent compensation consultant to support its objectives of maintaining a reasonable and appropriate program. For 2019,2021, Frederic W. Cook & Co., Inc. (“FW Cook”) provided the Committee with expert advice on the compensation of non-employee directors, in addition to analyzing market data on director compensation at the same peer group of 17 companies approved by the Compensation and Talent Committee for evaluating Named Executive Officer compensation. Neither the Company nor the Nominating and Governance Committee has any arrangement with any other compensation consultant who has a role in determining or recommending the amount or form of director compensation. Table of Contents
Our director program is comprised of a mix of cash and equity that is intended to approximate the peer-group median mix. Our directors’ overall target total direct compensation is consistent with 3M’s size and market-capitalization value relative to its peers. In addition, our hold-until-termination requirement on the annual stock retainer is rigorous relative to the holding requirement of our peers. For more information on the peer group, please see the section entitled “Executive compensation peer group” beginning on page 6267.
Directors who are employees of this Proxy Statement. Non-employee directors’ compensation includes the following compensation elements: Company do not receive payment for their Board service. Annual Compensation —In May 2019, the Nominating and Governance Committee considered a board compensation study prepared by FW Cook. After reviewing that study, the Committee recommended no changes in the compensation for non-employee directors. As a result, the 2019Elements of annual compensation for non-employee directors was $305,000. Approximately 44 percent
Our non-employee directors receive annual compensation, as summarized below, that is intended to approximate the peer-group median mix (cash vs. equity) and overall target total direct compensation that is consistent with 3M’s size and market-capitalization value relative to its peers. To better align the interests of our directors with those of our shareholders, the annual stock retainer is subject to a rigorous hold-until-termination requirement. For more information on the peer group, please see the section entitled “Executive compensation peer group” beginning on page 67 of this Proxy Statement. | | | In May 2021, based on the recommendation of the Nominating and Governance Committee after its consideration of a director compensation study prepared by FW Cook, the Board approved a $15,000 increase to the annual stock retainer provided to each non-employee director and a $5,000 increase in the fee paid to each of the Lead Director and the chair of the Science, Technology and Sustainability Committee. | | |
| Abbreviations: AC = Audit Committee; STSC = Science, Technology & Sustainability Committee | | | * | Unless a director elects otherwise (see “Alternative Times and Forms of Payment” below), the annual cash retainer, annual Lead Director fee and annual Committee Chair fee are paid in cash on a quarterly basis, and the annual stock retainer is paid shortly after the Annual Meeting in deferred stock units (“DSUs”). All such cash fees are prorated based on the number of days of relevant service during the calendar quarter in which the fees are earned, and directors joining the Board after the Annual Meeting receive a prorated annual stock retainer. |
DSUs. Each DSU represents the annual compensation (or $135,000) is payable in cash in four quarterly installments and approximately 56 percent of the annual compensation (or $170,000) is payable in 3M common stock equivalents (“Deferred Stock Units”) granted after the Annual Meeting (referred to as the “annual stock retainer”). In addition, the Lead Director receives an annual fee of $35,000, the chair of the Audit Committee receives an annual fee of $25,000, and the chairs of the Compensation, Finance (before it was ended), Nominating and Governance, and Science, Technology & Sustainability Committees each receive an annual fee of $20,000. The Lead Director and committee chair fees are payable in cash in four quarterly installments. There are no meeting fees. In lieu of receiving the Deferred Stock Units, a director may electright to receive 3M common shares on a current basis, but such shares must be retained until the director leaves the Board. Similarly, in lieu of cash fees, a director may elect to receive 3M common shares or Deferred Stock Units. Non-employee directors also may elect to defer all or part of their annual compensation until they cease to be members of the Board. Deferred Stock —For each director who receives all or a portion of the annual fees in deferred stock, the Company credits his or her account with a number of Deferred Stock Units equal to the number of shares (including fractional shares) of 3M common stock that otherwise could have been purchased with such fees, as determined using the closing sales price for aone share of 3M common stock onat a future date. For fees paid in DSUs, the NYSE for the last trading day immediately preceding the earliest date such amount otherwise could have been be paid to the director if taken on a current basis. For each ordinary cash dividend paid on the shares of the Company’s common stock, the Company also credits the directors’ accounts with an additional number of Deferred Stock Units on the dividend payment date. The number of additional Deferred Stock Units credited to each directors’ account is calculated by dividing the aggregate dividends that otherwise would have been paid on the shares underlying the aggregate number of Deferred Stock Unitsunits credited to the director’s recordkeeping account onis determined by dividing the relevant dividend record datetarget value of the fees to be paid by the closing sales price for a share of 3M common stock on the NYSE for the last trading day
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immediately preceding the applicableearliest date such amount otherwise could have been paid to the director if taken on a current basis. The Company also credits the director’s account with an additional number of DSUs for each ordinary cash dividend payment date. The Deferred Stock Units are fully vested upon grant but do not have voting rights.paid on the shares of the Company’s common stock. Appropriate adjustments to the number of Deferred Stock UnitsDSUs credited to each director’s account will be made for stock splits, stock dividends, mergers, consolidations, payments of dividends other than in cash, and similar circumstances affecting 3M common stock. TheUnless deferred (see “Alternative Times and Forms of Payment” below), the shares of 3M common stock underlying the Deferred Stock UnitsDSUs will be distributed in a single lump sum during the month of January in the first year after the director leaves the Board, unless the non-employee director elects an alternative distribution schedule prior to the beginningBoard. Alternative Times and Forms of Payment. In lieu of receiving all or a portion of the yearannual stock retainer in whichDSUs, a director may elect to receive shares of 3M common stock on a current basis, but the net after-tax portion of such shares must be retained by the director until he or she leaves the Board. Similarly, in lieu of cash fees, are earned. Non-employee directorsa director may opt to receive 3M common shares, DSUs or deferred cash. Directors also may elect to receive distribution of the sharestheir deferred cash or settlement of 3M common stock underlying his or her Deferred Stock Units for a year in a single lump sum during the month of January in the first or second year following the year in which they leave the Board or in a series of three, five, or ten annual installments beginning on the first business day of January in the first year following their termination of Board service. All Other Compensation —The column below showing “All Other Compensation” includes the incremental cost of complimentary products and matching gifts. The non-employee directors are eligible to participate in the Company’s matching gift program on the same termsDSUs as 3M employees. Under this program, the 3M Foundation will match up to a total of $5,000 a year in contributions by the director to eligible educational institutions and, effective January 1, 2020, up to a total of $1,000 a year in contributions by the director to eligible charitable organizations.
follows: 2020 Proxy Statement● | 43a single lump sum during the month of January in the first or second year following the year in which they leave the Board; or |
● | in a series of three, five, or ten annual installments beginning during the month of January in the first year after they leave the Board. | | |
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20192021 director compensation table
The total 2019 compensation oftable below shows the amounts earned by our non-employee directors is shown(other than Ms. Kereere) in 2021. As Ms. Kereere joined the following table:Board on February 10, 2022, she did not earn any director compensation during 2021. Non-Employee Directors | | Fees Earned or Paid in Cash ($)(3) | | Stock Awards ($)(4) | | All Other Compensation ($)(5) | | Total ($) | Thomas “Tony” K. Brown | | 135,000 | | 185,000 | | 487 | | 320,487 | Pamela J. Craig | | 135,000 | | 185,000 | | 5,626 | | 325,626 | David B. Dillon(1) | | 160,000 | | 185,000 | | 6,933 | | 351,933 | Michael L. Eskew(1) | | 173,187 | | 185,000 | | 313 | | 358,500 | James R. Fitterling(2) | | 131,875 | | 229,712 | | 21 | | 361,608 | Herbert L. Henkel(1), (2) | | 142,253 | | 185,000 | | 737 | | 327,990 | Amy E. Hood | | 135,000 | | 185,000 | | 894 | | 320,894 | Muhtar Kent(1) | | 155,000 | | 185,000 | | 917 | | 340,917 | Dambisa F. Moyo | | 135,000 | | 185,000 | | 882 | | 320,882 | Gregory R. Page(1) | | 158,187 | | 185,000 | | 881 | | 344,068 | Patricia A. Woertz(1), (2) | | 157,748 | | 185,000 | | 701 | | 343,449 |
Non-Employee Directors | | Fees Earned or Paid in Cash ($)(1) | | Stock Awards ($)(2) | | All Other Compensation ($)(3) | | Total ($) | Sondra L. Barbour(retired from the Board, effective May 14, 2019)** | | 49,697 | | — | | — | | 49,697 | Thomas “Tony” K. Brown | | 135,000 | | 170,000 | | 5,389 | | 310,389 | Pamela J. Craig (elected to the Board, effective May 14, 2019)** | | 85,303 | | 170,000 | | 5,262 | | 260,565 | David B. Dillon* | | 160,000 | | 170,000 | | 5,757 | | 335,757 | Michael L. Eskew* | | 187,283 | | 170,000 | | 270 | | 357,553 | Herbert L. Henkel* | | 155,000 | | 170,000 | | 588 | | 325,588 | Amy E. Hood | | 135,000 | | 170,000 | | 834 | | 305,834 | Muhtar Kent* | | 155,000 | | 170,000 | | 752 | | 325,752 | Edward M. Liddy* | | 135,000 | | 170,000 | | — | | 305,000 | Dambisa F. Moyo | | 135,000 | | 170,000 | | 767 | | 305,767 | Gregory R. Page* | | 137,717 | | 170,000 | | 398 | | 308,115 | Patricia A. Woertz | | 135,000 | | 170,000 | | 411 | | 305,411 |
FOOTNOTES TO 2021 DIRECTOR COMPENSATION TABLE *(1) | Lead Director or Committee Chair during all or a portion of 2019.2021. | **(2) | Director compensation prorated according to effective date of election, appointment, or retirement.retirement: Mr. Fitterling was appointed to the Board, effective February 5, 2021; Ms. Woertz succeeded Mr. Henkel as Chair of the Compensation and Talent Committee, effective as of May 12, 2021. | | |
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(1)(3) | This column represents the amount of all fees earned or paid in cash for services as a director.director, including the annual cash retainer, annual lead director and committee chair fees. With respect to each of Mr. Fitterling and Ms. Woertz, the amount shown also includes $10,000 for their services on a special committee. The table below shows the amount of cash compensation earned during 2021 that each director elected to receive in 3M common shares or DSUs and the number of shares or DSUs received, excluding adjustments for dividend equivalents. For more information concerning all 3M stock-based holdings of the directors, see “Security ownership of management” beginning on page 108. | | |
| Non-Employee Directors | | Cash Fees Paid in Common Shares or DSUs at Director’s Election | | 3M Common Shares or DSUs Received | | Thomas “Tony” K. Brown | | — | | — | | Pamela J. Craig | | — | | — | | David B. Dillon | | — | | — | | Michael L. Eskew | | 173,187 | | 932 | | James R. Fitterling | | — | | — | | Herbert L. Henkel | | 142,253 | | 762 | | Amy E. Hood | | — | | — | | Muhtar Kent | | — | | — | | Dambisa F. Moyo | | — | | — | | Gregory R. Page | | — | | — | | Patricia A. Woertz | | 157,748 | | 847 |
| | (2)(4) | This column represents the grant date fair value of the stock awards made in 2019,2021, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation. In addition to the amount shown for the annual stock retainer each director received shortly following his or her election to the Board at the 2021 Annual Meeting, the amount shown for Mr. Fitterling includes $44,712 attributable to the prorated annual stock retainer he received for his service to the Board from the date of his appointment through the date of the 2021 Annual Meeting. | | | | The Company does not grant stock options to non-employee directors. Since all stock awards vest on the grant date, there are no unvested stock awards outstanding at year end. | | | (3)(5) | This column includes the incremental cost of complimentary products and matching gifts. Non-employee directors are eligible to participate in the Company’s matching gift program on the same terms as 3M employees. Under this program, the 3M Foundation will match up to a total of $5,000 a year in contributions made by the director to eligible educational institutions and effective January 1, 2020, up to a total of $1,000 a year in contributions by the director to eligible charitable organizations. | | |
Reasonableness of non-employee director compensation As described above, our philosophy on director compensation is to pay directors fairly for work required in a company of our size and complexity, make a significant portion of the total compensation equity based to align directors’ interests with thosethe long-term interests of our shareholders, and structure compensation in a simple and transparent manner. We believe that the application of this philosophy has resulted in a non-employee director compensation program that reflects best-in-class design with the following provisions: •● | Retainer-only compensation delivered in a combination of cash compensationand stock-based awards with no fees for attending meetings that are an expected part of board service. | • | | ● | Additional retainers for special roles having greater responsibilities, such as Lead Director and committee chairs, to recognize the incremental additional time and effort required. | • | | ● | Equity delivered in the form of current or deferred full-value shares, where annual grants are based on a competitive fixed-value formula and immediate vesting helps avoid director entrenchment. | • | | ● | A requirement to retain thethat directors hold until termination from Board service all annual stock retainer portion of annual compensation issuedretainers earned on or after October 1, 2007, until termination from Board service, which includes net after-tax shares attributable to current payments and pre-tax shares attributable to deferrals. | • | | ● | Flexible voluntary deferral provisions and noprovisions. | | | ● | No material benefits or perquisites. | • | | ● | Our 2016 Long-Term Incentive Plan, most recently approved by shareholders at the 20162021 Annual Meeting, includes a $600,000 annual compensation limit on all forms of compensation for non-employee directors. | | |
Table of Contents 44Corporate governance at 3M | |
Stock retention requirement The Board requires each director to hold the net after-tax shares (or, if deferred, a number of DSUs equal to the number of pre-tax shares underlying the DSUs) attributable to all annual stock retainers earned on or after October 1, 2007, until the director leaves the Board. Information regarding accumulated stock and DSUs is set forth under “Security ownership of management” beginning on page 108. | | | Shares or DSUs issued to 3M’s directors as part of their annual stock retainer are subject to rigorous hold-until-termination requirements. |
Prohibition of hedging, pledging, and other actions The Company’s stock trading policies prohibit the Company’s directors and executive officers from (1) purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of the Company’s common stock, including prepaid variable forward contracts, equity swaps, collars, and exchange funds; (2) engaging in short sales related to the Company’s common stock; (3) placing standing orders; (4) maintaining margin accounts; and (5) pledging 3M securities as collateral for a loan. All transactions in 3M securities by directors and executive officers must be pre-cleared with the Company’s Legal Affairs department. | | ● No hedging ● No short sales ● No standing orders ● No margin accounts ● No pledging |
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Stock ownership guidelines
The Board requires that each director retain the stock retainer portion (currently valued at $170,000) of the annual compensation issued on or after October 1, 2007, until the director leaves the Board. Information regarding accumulated stock and deferred stock units is set forth in the section entitled “Security ownership of management” beginning on page 92 of this Proxy Statement.
Hedging and pledging policies
The Company’s stock trading policies prohibit directors and the Company’s executive officers from (i) purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of the Company’s common stock, including prepaid variable forward contracts, equity swaps, collars and exchange funds; (ii) engaging in short sales related to the Company’s common stock; (iii) placing standing orders; (iv) maintaining margin accounts; and (v) pledging 3M securities as collateral for a loan. All transactions in 3M securities by directors and executive officers must be pre-cleared with the Company’s General Counsel.
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| | | PROPOSAL
| | | | | Proposal 2 | | Ratification of the Appointment of Independent Registered Public Accounting Firm for 2020•2022
| | | | ● Ratify the appointment of PricewaterhouseCoopers LLP as 3M’s independent registered public accounting firm for 2020.•2022.
| | | | | | | | ● Based on its assessment of the qualifications and performance of PricewaterhouseCoopers LLP (“PwC”), the Audit Committee believes that it is in the best interests of the Company and its shareholders to retain PwC. | | | Recommendation of the Audit Committee The Audit Committee of the Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2022. Proxies solicited by the Board of Directors will be voted “FOR” ratification unless a shareholder indicates otherwise in voting the proxy. |
The Audit Committee is directly responsible for the appointment, compensation (including approval of all fees), retention, and oversight of the Company’s independent registered public accounting firm (“Independent Accounting Firm”) retained to perform the audit of our financial statements and our internal control over financial reporting. The Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) to serve as 3M’s Independent Accounting Firm for 2020.2022. PwC has been 3M’s Independent Accounting Firm since 1998. Prior to that, 3M’s Independent Accounting Firm was Coopers & Lybrand from 1975 until its merger with Price Waterhouse in 1998. In accordance with SEC rules and PwC policy, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide service to our Company. For lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five years. The process for selection of the Company’s lead audit partner pursuant to this rotation policy involves a meeting between the Chair of the Audit Committee and the candidate for the role, as well as discussion by the full Committee and with management. The Audit Committee annually reviews PwC’s independence and performance in connection with the Audit Committee’s determination of whether to retain PwC or engage another firm as our Independent Accounting Firm. In the course of these reviews, the Audit Committee considers, among other things: •● | PwC’s historical and recent performance on the 3M audit, including input from those 3M employees with substantial contact with PwC throughout the year about PwC’s quality of service provided, and the independence, objectivity, and professional skepticism demonstrated throughout the engagement by PwC and its audit team; | • | | ● | an analysis of PwC’s known legal risks and significant proceedings; | • | | ● | external data relating to audit quality and performance, including recent Public Company Accounting Oversight Board (“PCAOB”) reports on PwC and its peer firms; | • | | ● | PwC’s independence; | • | | ● | the appropriateness of PwC’s fees, on both an absolute basis and as compared to its peer firms; | • | | ● | PwC’s tenure as our independent auditor and its familiarity with our global operations and businesses, accounting policies and practices and internal control over financial reporting; and | • | | ● | PwC’s capability and expertise in handling the breadth and complexity of our global operations, including the Company’s phased implementation of an enterprise resource planning system on a worldwide basis over the next several years. |
Based on this evaluation, the Audit Committee believes that PwC is independent and that it is in the best interests of the Company and our shareholders to retain PwC to serve as our Independent Accounting Firm for 2020.2022.
Table of Contents We are asking our shareholders to ratify the selection of PwC as our Independent Accounting Firm for 2020.2022. Although ratification is not required by our Bylaws or otherwise, the Board is submitting the selection of PwC to our shareholders for ratification as a matter of good corporate governance. If the selection of PwC is not ratified, the Audit Committee will consider whether it is appropriate to select another Independent Accounting Firm. Even if the selection is ratified, the Audit Committee may in its discretion select a different Independent Accounting Firm at any time during the year if it determines that such a change would be in the best interests of the Company and our shareholders. Table of Contents
PwC representatives are expected to attend the Annual Meeting where they will be available to respond to appropriate questions and, if they desire, to make a statement. RECOMMENDATION OF THE AUDIT COMMITTEE
| | The Audit Committee of the Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2020. Proxies solicited by the Board of Directors will be voted “FOR” ratification unless a shareholder indicates otherwise in voting the proxy. |
Audit Committee report The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. The management of the Company is responsible for (i) the preparation of complete and accurate annual and quarterly consolidated financial statements (“financial statements”) in accordance with generally accepted accounting principles in the United States, (ii) maintaining appropriate accounting and financial reporting principles and policies and internal controls designed to assure compliance with accounting standards and laws and regulations, and (iii) an assessment of the effectiveness of internal control over financial reporting. The Independent Accounting Firm is responsible for planning and conducting in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”) an audit of the Company’s annual consolidated financial statements and a review of the Company’s quarterly financial statements and expressing opinions on the Company’s financial statements and internal control over financial reporting based on the integrated audits. In this context, the Audit Committee has met and held discussions with management and the Independent Accounting Firm regarding the fair and complete presentation of the Company’s results and the assessment of the Company’s internal control over financial reporting. The Audit Committee has discussed significant accounting policies applied by the Company in its financial statements, as well as alternative treatments. Management has represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States, and the Audit Committee has reviewed and discussed the consolidated audited financial statements with management and the Independent Accounting Firm. The Audit Committee has discussed with the Independent Accounting Firm matters required to be discussed pursuant to the applicable requirements of the PCAOB and the Securities and Exchange Commission with Audit Committees. In addition, the Audit Committee has reviewed and discussed with the Independent Accounting Firm the auditor’s independence from the Company and its management. As part of that review, the Audit Committee has received the written disclosures and the letters required by applicable requirements of the PCAOB regarding the Independent Accounting Firm’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed the Independent Accounting Firm’s independence from the Company. The Audit Committee also has considered whether the Independent Accounting Firm’s provision of non-audit services to the Company is compatible with the auditor’s independence. The Audit Committee has concluded that the Independent Accounting Firm is independent from the Company and its management. The Audit Committee has discussed with the Company’s Internal Audit Department and Independent Accounting Firm the overall scope of and plans for their respective audits. The Audit Committee meets with the Internal Auditor, Chief Compliance Officer, the General Counsel, and representatives of the Independent Accounting Firm in regular and executive sessions, to discuss the results of their examinations, the evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting and compliance programs. In reliance on the reviews and discussions referred to above, the Audit Committee has recommended to the Board of Directors, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019,2021, for filing with the SEC. Submitted by the Audit Committee David B. Dillon,, Chair Thomas “Tony” K. Brown Pamela J. Craig Dambisa F. Moyo
Gregory R. Page 2020 Proxy Statement52 | 473M Company |
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Audit Committee policy on pre-approval of audit and permissible non-audit services of the independent accounting firm The Audit Committee is responsible for appointing and overseeing the work of the Independent Accounting Firm. The Audit Committee has established a policy requiring its pre-approval of all audit and permissible non-audit services provided by the Independent Accounting Firm. The policy identifies the guiding principles that must be considered by the Audit Committee in approving services to ensure that the Independent Accounting Firm’s independence is not impaired; describes the Audit, Audit-Related, Tax and All Other services that may be provided and the non-audit services that may not be performed; and sets forth the pre-approval requirements for all permitted services. The policy provides for the pre-approval of specific types of Audit, Audit-Related, Tax and Other services and a limited fee estimate range for such services on an annual basis. The policy also requires specific pre-approval of all permitted services not already included in the annual pre-approval. The Independent Accounting Firm is required to report periodically to the Audit Committee regarding the extent of services provided in accordance with their pre-approval and the fees for the services performed to date. The Audit Committee’s policy delegates to its Chair the authority to address requests for pre-approval of services in certain limited circumstances between Audit Committee meetings. The chair, in his discretion, must either seek immediate approval by e-mail from the other Audit Committee members, or report any pre-approval decisions to the Audit Committee for its approval at its next scheduled meeting. The Audit Committee may not delegate to management the Audit Committee’s responsibility to pre-approve permitted services of the Independent Accounting Firm. All Audit, Audit-Related, Tax and All Other services described below were approved by the Audit Committee before services were rendered. Fees of the independent accounting firm The following table represents fees billed for professional services rendered by PricewaterhouseCoopers LLP (“PwC”) for the audit of the Company’s consolidated financial statements for the years ended December 31, 20182020 and 2019,2021, and fees billed for other services rendered by PwC during those periods. AUDIT AND NON-AUDIT FEES ($ IN MILLIONS)
| | 2018 | | | 2019 | | Audit Fee: | | $ 18.6 | | | $ 18.8 | | Audit-Related Fee: | | 1.3 | | | 1.3 | | Tax Fee: | | 0.7 | | | 0.7 | | All Other Fee: | | 0.2 | | | 0.1 | | Total | | $ 20.8 | | | $ 20.9 | | | | | | | | |
Audit and non-audit fees ($ in millions) | | | | | | | | | | | | | | | | 2020 | | | 2021 | | Audit Fees | | | $19.1 | | | | $21.9 | | Audit-Related Fees | | | 0.4 | | | | 0.5 | | Tax Fees | | | 0.5 | | | | 0.5 | | All Other Fees | | | 0.0 | | | | 0.0 | | Total | | | $20.0 | | | | $22.9 | |
In the above table, in accordance with SEC rules, “Audit” fees consisted of audit work and review services, as well as work generally only the independent registered public accounting firm can reasonably be expected to provide, such as statutory audits, comfort letters, consents, and review of documents filed with the Securities and Exchange Commission. In 2021, these fees also included services related to the carve-out audit of the Food Safety Division. “Audit-related” fees consisted principally of carve out audit procedures, procedures related to the adoption of new accounting standards in future years, internal control and system audit procedures for periods prior to the rollout of the ERP system, agreed-upon procedures, employee benefit plan audits, carve out audit procedures not related to documents filed with the Securities and Exchange Commission, and other attestation services. “Tax” fees consisted principally of tax compliance services in foreign jurisdictions, assistance with transfer pricing documentation, and advice on foreign and domestic tax related matters. “All Other” fees consistedconsist of general industry and accounting training, information security vendor assessments, licenses for accounting research software, and other permissible services that do not fall into the three categories listed above.
Table of Contents 48Audit Committee matters | 3M Company |
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Audit Committee restrictions on hiring employees of the independent accounting firm The Audit Committee has adopted restrictions on the hiring by the Company of any PwC partner, director, manager, staff, reviewing actuary, reviewing tax professional, and any other persons having responsibility for providing audit assurance on any aspect of PwC’s certification of the Company’s financial statements. Audit assurance includes all work that results in the expression of an opinion on financial statements, including audits of statutory accounts. 2020 Proxy Statement54 | 493M Company |
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Executive compensation | | | | PROPOSAL
| Proposal 3 | | AdvisoryApproval of Executive Compensation •
| | | ● Approve, on an advisory basis, the compensation of our Named Executive Officers. •
| | | ● Our executive compensation program appropriately aligns our executives’ compensation with the performance of the Company and its business units as well as their individual performance. | | | Recommendation of the Board The Board of Directors unanimously recommends a vote “FOR” this proposal for the reasons discussed below. Proxies solicited by the Board of Directors will be voted “FOR” this proposal unless a shareholder indicates otherwise in voting the proxy. |
Section 14A of the Securities Exchange Act provides our shareholders with the opportunity to approve, on an advisory basis, the compensation of our named executive officersthe Named Executive Officers as described in this Proxy Statement. This is the tenthtwelfth year that the Company is asking shareholders to vote on this type of proposal, known as a “say-on-pay” proposal. We believe that our executive compensation program is consistent with our core compensation principles and is structured to assure that those principles are implemented. At the Annual Meeting of Shareholders held on May 14, 2019,11, 2021, approximately 9591 percent of the votes cast on this issue voted to approve the compensation of the Company’s named executive officers as disclosed in last year’s Proxy Statement. Although the vote was non-binding, the Compensation and Talent Committee believes this level of approval percentage indicates that our shareholders strongly support our core compensation principles and our executive compensation program. Thus, the Company is submitting to shareholders the following resolution for their consideration and approval: “RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the Company’s Named Executive Officers as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission (including in the Compensation Discussion and Analysis, the accompanying compensation tables and related narrative).” We encourage you to read the entire Compensation Discussion and Analysis portion of this Proxy Statement to learn more about our executive compensation program and the impact that our financial performance has on the annual and long-term incentive compensation earned by our leadership team. While the Board of Directors and the Compensation and Talent Committee intend to carefully consider the results of the voting on this proposal when making future decisions regarding executive compensation, the vote is not binding on the Company or the Board and is advisory in nature. The Company currently holds advisory votes on the compensation of named executive officers annually. Accordingly, the next such advisory vote is expected to occur at the 20212023 Annual Meeting.
Table of Contents RECOMMENDATION OF THE BOARDExecutive compensation
| | The Board of Directors unanimously recommends a vote “FOR” this proposal for the reasons discussed above.
Proxies solicited by the Board of Directors will be voted “FOR” this proposal unless a shareholder indicates otherwise in voting the proxy.
|
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Compensation Discussiondiscussion and Analysisanalysis This Compensation Discussion and Analysis describes 3M’s executive compensation program, explains how 3M’s Compensation and Talent Committee oversees and implements this program, and reviews the 20192021 compensation for the current and former executive officers identified below. Throughout this Compensation Discussion and Analysis and elsewhere in this Proxy Statement, we refer to this group of individuals as the “Named Executive Officers.Officers” or “NEOs.” The titles shown below reflect the position of each Named Executive Officer as of March 1, 2022. Name | | Title(1) | Michael F. Roman | | Chairman of the Board President and Chief Executive Officer | | Monish Patolawala Executive Vice President, Chief Financial and Transformation Officer | Inge G. Thulin(2) | | Former Executive Chairman of the Board |
| | | Nicholas C. Gangestad | | Senior Vice President and Chief Financial Officer | Ashish K. Khandpur | | Executive Vice Group President, Transportation and Electronics Business Group | Julie L. Bushman(3) | | Executive ViceMojdeh Poul Group President, International Operations | Joaquin Delgado(4) | | Former Executive Vice President, Consumer Health Care Business Group | Michael G. Vale | | Executive Vice Group President, Safety and Industrial Business Group |
(1) | Reflects the title of each Named Executive Officer as of March 1, 2020. | | | (2) | Mr. Thulin retired from employment with the Company, effective June 1, 2019. | | | (3) | Ms. Bushman has announced her intentionSee Appendix B to retire and is expected to separate from employment with the Company, effective April 1, 2020. | | | (4) | Dr. Delgado separated from employment with the Company on July 1, 2019. |
To enable quicker navigation of the information provided, this Compensation Discussion and Analysis is organized into four distinct sections:
Section I: Executive Summary | | 51 | Section II: How We Determine Compensation | | 57 | Section III: How We Paid our Named Executive Officers in 2019 | | 65 | Section IV: Ways in Which We Address Risk and Governance | | 71 |
ForProxy Statement for the meaning of certain capitalized terms used throughout this Compensation Discussion and Analysis, see “MeaningAnalysis.
Table of certain terms” on page 64 of this Proxy Statement.Contents Section I: Executive summaryoverview Powered by purpose, we are unlocking the power of people, ideas and science to re-imagine what’s possible and create what’s next Selected 2019 financial performanceIn 2018, following the appointment of Mike Roman to the CEO role and under his leadership, the executive team embarked on a five-year transformation strategy that focused on four key priorities:
| | | | | | | | | | | | | | Portfolio management | | Transforming 3M operating model | | Growth through innovation | | People and culture | | | | | | | |
Stronger, realigned business highlights 3M’s 2019 financial performance was achieved through disciplined execution, impacted by weaknessgroups, operating rigor and cost efficiencies created a more customer-driven and streamlined organization that delivered outstanding results in certain end markets (China, automotive and electronics) and channel inventory adjustments. The table below reflects2021, demonstrating the Company’s performance against the key metrics underlying the Company’s performance share awards, both as determined in accordance with GAAP and as adjusted to better reflect the Committee’s viewstrength of the Company’s 2019new 3M growth, productivity, and sustainability model.
Our fiscal 2021 performance exceeded our original full-year organic growth and earnings expectations. We accomplished this by investing in growth, productivity, and sustainability while managing through a challenging global supply chain environment. The executive team kept a relentless focus on serving customers, ensured continuity of raw material supply, managed shifting manufacturing production plans, navigated logistics constraints and delivered strong full-year organic sales growth of 8.8 percent, with all business segments posting high-single digit growth. We achieved operating performance.margins of 20.8 percent and delivered a 14.4 percent increase in adjusted earnings per share.* We continued to focus on working capital improvement, generating adjusted free cash flow of $6 billion*, while reducing net debt by $1 billion to strengthen our financial flexibility. As part of our long-term growth strategy, we continued to create sustainable long-term growth by working to optimize our portfolio through organic growth acceleration, acquisitions, and divestitures throughout 2021. Our capital management strategy is geared to support strategic investments in high growth, high return portfolios that utilize our fundamental strengths and align with global trends in automotive, home improvements, safety, health care and electronic sectors. In 2021, for example, our automotive electrification platform grew 30 percent organically and our biopharma filtration business grew 26 percent. | | Results Determined in Accordance with GAAP (to the Extent Applicable) | | Results as Adjusted to Better Reflect the Committee’s View of the Company’s 2019 Operating Performance | Earnings Per Share Growth | | -12.1% | | -6.9%* | Organic Local Currency Sales Growth | | -1.5% | | -1.5% | Return on Invested Capital | | 17.5%* | | 22.9%* | Free Cash Flow Conversion | | 117.5%* | | 106.0%* |
| | | | | | | | Earnings Per Share Growth | | Organic Sales Growth | | Return on Invested Capital | | Free Cash Flow Conversion | | | | | | Results determined in accordance with GAAP (to the extent applicable) | | | | | | | | 8.1% | | 8.8% | | 19.5%* | | 99%* | | | | | | | | | | Results as adjusted to better reflect the Committee’s view of the Company’s 2021 operating performance | | | | 14.4%* | | 8.8% | | 19.5%* | | 101%* | | | | | | | | | |
| | * | See Appendix A to this Proxy Statement for a reconciliation of earnings per share, operating margin performance, free cash flow and free cash flow conversion to our results for the most directly comparable financial measures as reported under generally accepted accounting principles in the United States,GAAP, and the calculation of return on invested capital. See “Adjustments for certain special items” on page 60 below for additional information concerning the Committee’s general approach to adjustments. |
We are living in a changing world, and we are leading the change As 3M continues to deliver strong financial performance results and remains dedicated to our customers, we are also focused on managing litigation facing the Company, supply chain disruptions, and the evolving impacts from the COVID-19 pandemic, all of which have led to significant market volatility. We are taking actions to strengthen our supply chain and, guided by 3M values and science, continue to lead in the end markets we serve. We are contributing to the global pandemic efforts from all angles, and for all stakeholders, with 2.3 billion respirators distributed in 2021, for a total of 4.3 billion since the onset of the pandemic, while engaging with governments on how to prepare for future emergencies. As part of our commitment to lead in environmental stewardship as a manufacturer and leverage the power of technology, we deploy capital to make our factories and communities stronger and more sustainable. In February 2021, we announced plans to invest $1 billion over 20 years to accelerate our progress toward carbon neutrality, reduce water use, improve water quality, and reduce plastics. Work is already under way. In Cordova, Illinois, we are on track 20202022 Proxy Statement | 5157 |
Table of Contents to complete a new water filtration system by the end of this year. In Cottage Grove, Minnesota, we recently closed our incinerator and are now partnering with a leading disposal company to more efficiently manage our waste stream. And in February 2022, we announced a $165 million investment to further improve water quality and reduce water use at that site. We also have implemented a requirement that every new product helps improve sustainability for our customers. Over the last five years, 3M innovations have helped our customers avoid nearly 75 million tons of emissions. Starting in 2022, our annual incentive program will include an ESG modifier to hold the executive team accountable for making progress toward our ESG goals. Additionally, the Committee reviewed and updated the performance metrics utilized in our annual and long-term incentive programs to improve alignment with our strategic priorities, as we continue to grow our businesses, strengthen our operational performance and find new ways to apply science to improve lives – delivering for our customers, shareholders and all stakeholders who have placed their trust in us. Table of ContentsExecutive compensation tied to long-term stock price and Company performance
To align corporate performance and executive compensation, 91 percent of our CEO’s and 78-82 percent of our other NEOs’ target direct compensation is at-risk, with its realizable value tied to our long-term stock price performance, achievement of pre-set rigorous performance targets, or both. Consistent with our strong 2021 corporate financial performance results, our CEO received an annual incentive program payout at 133.8 percent of target. The Company’s performance exceeded sales and economic profit growth targets, all of which were set at or above 2020 results. No individual performance modifier was applied when determining Mr. Roman’s payout. The payout for other NEOs ranged between 105.3 and 194.8 percent of target, reflective of the applicable corporate or business unit financial results and individual performance. In alignment with shareholder long-term returns, performance shares for the 2019-2021 period paid below target at 88.4 percent. Considering our stock price performance over the same performance period, the shares earned and associated dividend equivalents had an aggregate value at the end of the performance period equal to 75.7 percent of the initial target grant value. Our CEO’s realized compensation for the last three years, including fiscal 2021, was significantly below the total compensation reported in the Summary Compensation Table. This result is consistent with the pay-for-performance nature of our executive compensation program, where approximately 50 percent of the target grant value of Mr. Roman’s annual long-term incentive awards is delivered in the form of stock options that deliver value only if the Company’s stock price increases and the remainder is provided in the form of performance share awards where the payout is tied to the attainment of rigorous, pre-established performance goals for key financial metrics that are believed to drive long-term shareholder value. Based on the closing trading price for a share of the Company’s financial performance and consistent with our pay-for-performance philosophy,common stock on the 2019 annual incentive payments that our Named Executive Officers received and their performance share accruals based on 2019 performance were below targeted levels. For additional information, see “Impact of company performance on incentive compensation and real pay delivery,” “2019 annual incentive” and “Performance share accruals based on 2019 performance” beginning on pages 53, 66 and 70, respectively. The stock,NYSE for March 1, 2022, all stock options and other long-term incentive compensation awards heldgranted to Mr. Roman in the past three years (as well as all stock options granted to Mr. Roman after February 4, 2014) were underwater. In addition, the total value of performance shares earned by our Named Executive Officers throughout 2019 also decreased in valueMr. Roman during the year withsame three-year period is less than the declineaggregate target grant date values reported in the market valueSummary Compensation Table.
Table of our shares.Contents Recent business accomplishments NoteworthyBelow are a few noteworthy accomplishments from January 1, 2019,2021, through March 1, 2020, include the following:2022.
| | | | | Performance | ● Delivered 2021 organic sales growth of 8.8 percent, strong 8.1 percent increase in earnings per share, robust free cash flow of $5.9 billion with free cash flow conversion of 99 percent, despite significant raw materials and logistics cost inflation and global supply chain challenges* ● Focused on serving customers in uncertain environment *See Appendix A to this Proxy Statement for a reconciliation of free cash flow conversion to our results for the most directly comparable financial measures as reported under GAAP. | | ● Strengthened the balance sheet providing financial flexibility, reduced net debt by $1.2 billion, while returning $5.6 billion to shareholders in 2021 via dividends and gross share repurchases ● Continued to help the world respond to COVID-19, including distributing 2.3 billion respirators in 2021 ● Over 100 consecutive years of paying dividends to shareholders and 64 consecutive years of annual increases | •Portfolio management | Realigned | ● Prioritized investments in growth, productivity and sustainability ● Accelerated investments in large, fast-growing end-markets that align with key global trends such as automotive, home improvement, safety, health care and electronics ● Enhanced shareholder value through active portfolio management, including the announced divestiture of our organizational structurefood safety business and streamlinedthe sale of our globalfloor products business in Western Europe | | ● Introduced new sustainability goals, including investing $1 billion over the next 20 years to accelerate air and water stewardship; announced new plastic reduction goals; and deployed capital to make factories and communities more sustainable and stronger ● Advanced our digital capabilities, including through new investments and ongoing deployments of our Enterprise Resource Planning (ERP) system | Transforming3M operatingmodel | | ● Advanced our business group-led operating model, around four new business groups toincluding streamlining of organization and further alignaligning to customers and go-to-market models for improved growth, operating agility, and accountability;accountability | | ● Focused on transformation including accelerating our digital strategy to better serve customers and improve efficiency of operations and executed on and exceeded net cost savings for the Company’s restructuring efforts announced in December 2020 | Growththroughinnovation | | • | Completed● Invested $3.6 billion in the acquisitioncombination of M*Modalresearch and development and capital expenditures to strengthen our Health Information Systems portfolio and complement organic growth;position 3M for the future ● 3M innovation helped customers avoid emitting nearly 75 million metric tons of carbon dioxide (CO2) in the last five years alone, the equivalent of taking 16 million cars off the road | | | • | Completed the acquisition of Acelity, Inc. to bolster● Introduced 166 new products across our Medical Solutionsfour market-leading business and support our growth strategy to offer comprehensive advanced and surgical wound care solutions; | | | • | Strengthened our portfolio going forward by completing the divestitures of our gas and flame detection business and advanced ballistics-protection business; and announced the divestiture of substantially all of the drug delivery business; | | | • | groups ● Awarded a total of 3,6163,211 patents from patent offices around the world in 2019,2021, including 700621 patents granted to 3M by the United States Patent and Trademark Office, which brings to more than 121,000 the129,000 total number of patents awarded to 3M insince its corporate history;inception | People andculture | | • | Established a● Implemented new Board committeeemployee work models rooted in flexibility and trust ● Advanced diversity, equity, and inclusion within 3M and our communities with new investments and initiatives; introduced annual diversity, equity, and inclusion report to provide oversight of the Company’s strategies related to researchstrengthen accountability and development, commercialization, sustainability, environmental stewardship, and other related activities, which will help ensure that the Company is building on its strong innovation capabilities while maintaining the Company’s high product stewardship standards;transparency | | | • | Over 100 consecutive years● Continued to focus on employee health and safety in the midst of paying dividends to shareholders and 62 consecutive years of annual increases; | | | • | Reported an all-time high free cash flow of $5.4 billion for 2019, up 10 percent over 2018; | | | • | Returned $4.7 billion to shareholders via dividends and gross share repurchases; and | | | • | COVID-19 ● Recognized by FORTUNE®FORTUNE® magazine as one of the “World’s Most Admired Companies,” which 3M management believes is a recognitionCompanies” ● Honored by Ethisphere® Institute as one of our ability to create a foundation of trust with all of our stakeholders. |
Factors creating alignment between pay and performance
3M’s executive compensation program is designed to maintain a strong alignment between corporate performance and executive compensation by tying incentive compensation to the achievement of performance metrics that we believe increase the Company’s long-term value. For 2019, highlights of the program include:
• | A large portion of each executive’s target Total Direct Compensation (cash plus long-term incentives) is performance-based, varying from 90 percent for Chief Executive Officer Michael Roman to a range of 72-86 percent“The World’s Most Ethical Companies®” for the other Named Executive Officers; and8th consecutive year |
Table of Contents Elements of target total direct compensation for 2021 The table below shows how the 2021 target Total Direct Compensation of the Named Executive Officers was apportioned among base salary, annual incentives, performance share awards, stock options, and restricted stock units (“RSUs”), summarizes the rationale for providing and key characteristics of each such element, and lists the performance metrics and weightings used for annual and long-term incentives granted in 2021. | | | | 2021 Pay Elements(1) | | | | | | 2021 Performance Metrics and | | | | | CEO | Other NEOs | | Why It Is Provided | | Key Characteristics | | Weightings(2) | | | | | | | | ●Compensate executives for their normal day-to-day responsibilities | | ● Only component of compensation that is considered to be fixed rather than variable in nature | | | | | | | | ●Motivate executives to stay focused on day-to-day operations by aligning a significant portion of Total Cash Compensation with the near-term financial performance of the Company and its business units | | ● Performance metrics and goals established by the Committee, which is comprised entirely of independent directors ● Payouts based on performance against three business objectives over a 12-month period, subject to an individual performance multiplier ● Payouts adjusted or left unchanged based on individual performance against preestablished goals and objectives, which can be both quantitative and qualitative ● Payouts cannot exceed 200% of an executive’s weighted-average target annual incentive compensation opportunities providedamount | | ● Local Currency Sales (of 3M or a business unit, as applicable) vs. Plan (50%) ● Economic Profit (of 3M or a business unit, as applicable) vs. Plan (20%) ● Economic Profit of 3M vs. Prior Year (30%) | | | Performance Shares | | ● Motivate executives to focus on continuously improving performance in key financial metrics believed to drive long-term shareholder value ● Retain executive talent | | ● Performance metrics and goals established by the Committee, which is comprised entirely of independent directors ● Payouts based on performance against preestablished goals over three years ● Maximum payout equal to 200% of the target number of performance shares | | ● Earnings per Share Growth (20%) ● Relative Organic Volume Growth (40%) ● Return on Invested Capital (20%) ● Free Cash Flow Conversion (20%) | | | |
| | | Stock Options(3) | | ● Motivate executives to build long-term shareholder value ● Retain executive talent | | ● Provide value only if stock price increases ● Exercise price equal to the Named Executive Officers utilize multiple performance-based metrics focused primarily on revenue and earnings performance, increase in 3M’sgrant date closing trading price for a share of 3M common stock ● Ratable three-year vesting schedule ● Maximum term of 10 years | | ●Vesting is based on continued service, while value of the options is based on stock price efficient useappreciation (100%) | | | |
| | | Restricted Stock Units(3) | | ● Motivate executives to build long-term shareholder value ● Retain executive talent | | ● Three-year “cliff” vesting schedule ● Cash-settled dividend equivalent rights that are payable only if the underlying shares are earned | | ●Vesting is based on continued service, while value of capital, and free cash flow conversion.the RSUs is based on total shareholder return (100%) | | | | | |
Table of Contents 52(1) | 3MPercentages shown reflect the apportionment of the components of target total direct compensation that are expected to be recurring. Such amounts do not reflect special items such as hiring bonuses, one-time make-whole and inducement awards granted in connection with the commencement of employment, or retention awards. Numbers may not add to 100 percent due to rounding. | (2) | In determining the level of achievement of the performance goals established under the AIP and the performance share awards for any given period, the costs, sales and impact on assets and liabilities from acquisitions are excluded in the year that the acquisition is completed. The Committee also makes other adjustments from time to time for special items that it believes are unrelated to the operational performance of the Company for the relevant measurement period (e.g., changes in tax laws or accounting principles, asset write-downs, the impact of restructurings, divestitures, or asset sales, unusual tax transactions, litigation or claim judgments and settlements, and other special items described in management’s discussion and analysis of financial conditions and results of operations appearing in the Company’s annual/quarterly report to shareholders for the applicable period). These adjustments can have either a positive or negative impact on award payouts. | (3) | Beginning with the annual grants made in 2021, each of the Company’s executives (other than our CEO) was offered the opportunity to indicate a preference to receive 25 percent of the target grant value of their annual long-term incentive awards in the form of RSUs or stock options. For executives who indicated a preference to receive RSUs, 50 percent of the target grant value of their annual long-term incentive awards was delivered in the form of performance shares, 25 percent of the target grant value was delivered in the form of stock options, and the remaining 25 percent was delivered in the form of RSUs. For all other executives (including our CEO), 50 percent of the target grant value of their annual long-term incentive awards was delivered in the form of performance shares and the remaining 50 percent was delivered in the form of stock options. The percentages shown reflect the apportionment of stock options and RSUs based on the elections for 2021 made by the NEOs (other than our CEO, who was not offered an opportunity to make an election). |
Table of ContentsPaying for Performance
Impact of company performance on incentive compensation and real pay delivery
One objective of our incentive compensation program is to align our Named Executive Officers’ real pay delivery with performance. The Company’s performance directly impacted incentive compensation pay outcomes for our Named Executive Officers as follows:discussed below. 20192021 annual incentive compensation
| | | For the Named Executive Officers paidwhose 2021 annual incentive compensation payout was calculated based on the basis of the Company’s overall performance, the 2019 annual incentive compensation payout (before any adjustment for individual performance) was 62133.8 percent of the target amount. The payouts reflect the Committee’s view of our performance against the goals established for 2019,2021, as shown below. | | All 2021 performance targets for the AIP were set at or above 2020 results. In establishing these targets, the Committee considered 3M’s internal business plans, external market conditions, uncertainty related to the COVID-19 pandemic, and other items. The targets were intended to be challenging and provide a similar level of rigor as those established for past years in order to provide a consistent incentive compensation opportunity. | • | Local currency sales achieved 96 percent | |
Dollar Amounts in Millions (1) | See Appendix A for the calculation of 2020 and 2021 Economic Profit. Economic Profit metric measured versus 3M’s prior year results is calculated using total Company average invested capital (equity plus debt, as reported in its Consolidated Balance Sheet), while the Economic Profit metric measured versus plan which resulted in an 80 percent payout for this metric (40 percentis calculated using only accounts receivable and inventories of target after adjusting for weighting);the relevant business unit as capital. |
| | •2022 Proxy Statement | 3M economic profit achieved 84 percent of plan, which was below the threshold required to receive a payment based on this metric; and61 |
Table of Contents Executive compensation | | • | 3M’s 2019 economic profit represented 86 percent of its 2018 results, which resulted in a 72 percent payout for this metric (22 percent of target after adjusting for weighting). |
No individual performance multiplier was applied when determining Mr. Roman’s payout. As a result, his 2021 annual incentive compensation payout equaled 133.8% of his target amount. The achievement levels described above reflect certain adjustments that the Committee believed were appropriate to better reflect the Company’s performance against its 2019 operating plan. See Appendix A to this Proxy Statement for a reconciliation of local currency sales to our results for the most directly comparable financial measure as reported under GAAP, andFor more information concerning the calculation of 2018the 2021 annual incentive payout for each Named Executive Officer, including the threshold, target, and 2019 economic profit.maximum goals and attainments used to calculate the annual incentive payouts of the Named Executive Officers who are paid, in part, based on the performance of a business group, see “2021 AIP attainments and payouts” on page 74.
Performance share award payouts and accruals (long-term (long-term incentive compensation) The three-year performance period for the 2017 Performance Share Awards2019 performance share awards issued to the Named Executive Officers ended on December 31, 2019.2021. Based on the financial results achieved during 20172019 – 20192021 and excluding dividend equivalents, the Named Executive Officers received 1.189 shares88.4 percent of 3M common stock for eachthe target performance shareshares subject to their 2017 Performance Share Awards.2019 performance share awards. After considering the change in the market value of 3M’s common stock over the three-year performance period and the additional shares delivered pursuant to the dividend equivalent rights granted as part of the 2017 Performance Share Awards,2019 performance share awards, the value of the total number of 3M shares delivered to the Named Executive Officers in settlement of these awards (determined using the closing price of a share of 3M common stock on the NYSE for December 31, 2019)2021) equaled 12075.7 percent of the initial target grant value ofapproved by the target number of performance shares subject to such awards (determined using the closing price of a share of 3M common stock on the NYSE for March 1, 2017, the grant date for the 2017 performance share awards). Committee. When evaluating the payouts for these awards against the Company’s performance, it is important to keep in mind the weightings applied to each year (2017(2019 – 50 percent; 20182020 – 30 percent; and 20192021 – 20 percent) and each metric (Relative Organic Volume Growth – 40 percent; Return on Invested Capital – 20 percent; Earnings per Share Growth – 20 percent; and Free Cash Flow Conversion – 20 percent). As illustrated in the charts below, the above target payout of these2019 performance share awards was driven primarily byreflects the Company’s strong 2017 Relative Organic Volume Growth, Return on Invested Capital, and Earnings per Share Growth, which was partially offset by the Company’s below target performance on certain metrics for 2018 and 2019. Table of Contents
The attainment levels described above reflect certain adjustments that the Committee believed were appropriate to better reflect the Company’s performancemixed results achieved during the performance period. See Appendix A to this Proxy Statement for a reconciliation of earnings per share, operating margin performance, free cash flow
2019-2021 Performance Targets and free cash flow conversion to our results for the most directly comparable financial measures as reported under GAAP, and the calculation of return on invested capital.Results | | | | | Performance Levels | | Payout Level (% of Target) | | Performance Year and Weighting | | Actual Result* | | Actual Payout (% of Target) | Earnings Per Share Growth | | | Threshold** | | 4% | | 4% | | Year 1 – 50% | | –6.9% | | 0% | Target | | 8% | | 20% | | Year 2 – 30% | | –5.7% | | 0% | Maximum | | 12% | | 40% | | Year 3 – 20% | | 14.4% | | 8% | Relative Organic Volume Growth | | | Threshold** | | –1% | | 8% | | Year 1 – 50% | | –2.8% | | 0% | Target | | 0.5% | | 40% | | Year 2 – 30% | | 2.9% | | 24% | Maximum | | 2% | | 80% | | Year 3 – 20% | | 0.2% | | 6.7% | Return on Invested Capital | | | Threshold** | | 20% | | 4% | | Year 1 – 50% | | 22.9% | | 13% | Target | | 22% | | 20% | | Year 2 – 30% | | 17.1% | | 0% | Maximum | | 25% | | 40% | | Year 3 – 20% | | 19.5% | | 0% | Free Cash Flow Conversion | | | Threshold** | | 95% | | 4% | | Year 1 – 50% | | 106% | | 20% | Target | | 100% | | 20% | | Year 2 – 30% | | 132% | | 12% | Maximum | | 105% | | 40% | | Year 3 – 20% | | 101% | | 4.7% | Total | | | | | | | | | | | | | 88.4% |
* | Results reflect certain adjustments that the Committee believed were appropriate to better reflect the Company’s performance during the performance period. See Appendix A to this Proxy Statement for a reconciliation of earnings per share, operating margin performance, free cash flow, and free cash flow conversion to our results for the most directly comparable financial measures as reported under GAAP, and the calculation of return on invested capital. | ** | No payout is provided for below threshold performance. |
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The Company’s 20192021 performance will have a more pronouncedalso impact on the payouts forof the 2018 Performance Share Awards2020 performance share awards and 2019 Performance Share Awards,2021 performance share awards, where the weighting of 20192021 performance is 30 percent and 50 percent, respectively. To illustrate this point, the tablecharts below showsshow the numberpercent of shares of 3M common stock accrued per target performance shareshares accrued each year during the relevant performance period based on the Company’s performance for the performance share awards that were outstanding at December 31, 2019.performance.
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Percent of target performance shares accrued by year (excluding dividend equivalents) | | The final payout percentage for each performance share award equals the sum of the payout percentages for each year during the performance period based on the Company’s performance against the financial goals established by the Committee at the beginning of the performance period. |
For additionalmore information concerning the overall status of the performance share awards that were outstanding aton December 31, 2019,2021, and the impact that the Company’s 20192021 performance had on such awards, see “Status of outstanding performance share awards” and “Performance share accruals based on 20192021 performance” beginning on pages 6877 and 70,78, respectively. Stock and long-term incentive compensation
Impact of changes in stock price The performance of 3M’s stock has a material impact on the amount of compensation actually realized by our Named Executive Officers. Our stock ownership guidelines require covered executives, including the Named Executive Officers, to own amounts of Company stock having a value exceeding a specified multiple of their base salary. If the market price of 3M’s stock declines, so does the value of the stock they own. Similarly, stock options and otherall long-term incentive awards held byincentives awarded to our Named Executive Officers are equity-based and therefore increase or decrease in value alongconsistent with increases and decreases3M’s total shareholder return or, in the case of stock options, the value of 3M’s common stock. The stock and stock options and other long-term incentive compensation awards held by our Named Executive Officers throughout 2019 decreased2021 modestly increased in value during the year as the closing price for a share of the Company’s common stock on the NYSE decreasedincreased from $190.54$174.79 on December 31, 2018,2020, to $176.42$177.63 on December 31, 2019.2021, although the stock options granted in 2018 and 2019 remain underwater. Likewise, the value of the performance shares and restricted stock units held by our Named Executive Officers throughout the year modestly increased consistent with the one-year total shareholder return for the Company’s stock. Total shareholder return The graphs below illustrate 3M’s stock performance relative to the stock performance of the S&P 500 and the peer companies included in the Company’s executive compensation peer group, (excluding DuPont de Nemours, Inc., formerly DowDuPont Inc., which was excluded due to its spinoff of two independent public companies during 2019 – Dow Inc. and Corteva, Inc.), as described under “Competitive pay”“Use of market data” beginning on page 6166. For 3M, the combination of this Proxy Statement.ongoing litigation uncertainty, together with the COVID-19 pandemic and its related impacts on end-market volatility, global supply chain, raw materials, and logistics disruptions has impacted the Company’s 1-, 3-, and 5-year total shareholder return performance, as reflected in the charts below. In response, we continue to focus on serving customers and end-markets, taking actions to strengthen our global supply chain, while also proactively managing ongoing litigation. We continue to help the world respond to COVID-19 with 2.3 billion respirators distributed in 2021, for a total of 4.3 billion since the onset of the pandemic, while engaging with governments on how to prepare for future emergencies. Annualized total shareholder return performance
TSR = Share Price Appreciation + Dividend Yield (annualized) Note: 5-year period = Five years ending 12/31/19;21; 3-year period = Three years ending 12/31/19;21; 1-year period = One year ending 12/31/19 21 Source: Bloomberg. Bloomberg 20202022 Proxy Statement | 5563 |
Table of Contents Say-on-pay results Table3M has a history of Contents
2019 say on pay
strong say-on-pay results. In 2019,2021, approximately 9591 percent of the votes cast on our say-on-pay proposal approved the compensation of our named executive officers as disclosed in last year’s Proxy Statement. Although the vote was non-binding, the Committee believes this level of approval indicates that shareholders strongly support our executive compensation programs and policies. The Committee will consider the results of this year’s say-on-pay proposal, as well as feedback from our shareholders, when making future executive compensation decisions. For information concerning our investor outreach efforts, please refer to the section entitledsee “Shareholder Outreachoutreach and Engagement”engagement” on page 2411. 3-year average votes cast in favor of this Proxy Statement. say-on-pay proposal
NoteworthyRecent noteworthy compensation program actions since January 1, 2019
Since January 1, 2019, 3M andthe filing of last year’s Proxy Statement, the Committee took the noteworthy actions described below as part of the Company’s executive compensation program. •● | Approved participationEffective for the 2022 annual incentive compensation program offered to eligible employees, updated the metrics and weightings with the intent of all executive officers insharpening focus on performance against the broad-based Annual Incentive Plan (as opposed to the Executive Annual Incentive Plan), effective foroperating plan, years beginningprioritizing operating cash flow conversion as a key driver of operating value, and enhancing focus on or after January 1, 2020. | • | Recalculated the number of shares required to be beneficially owned by our executive officers in order to maintain compliance with our stock ownership guidelines, effective December 31, 2019. | • | Approved a new severance plan for certain U.S. executives (including the Named Executive Officers) to provide separation paymentsinventory and benefits upon a qualifying termination of employment. Among other things, the new plan is intended to help support talent recruitment and retention objectives and provide a consistent approach to executive departures.receivables performance. For more information, concerningsee “2022 changes to our incentive compensation program—2022 annual incentive compensation program” on page 72. | | | ● | Added a new environmental, social and governance (ESG) modifier to the new severance plan,formula used to calculate the annual incentive compensation earned by the Company’s senior executives, including our Named Executive Officers. Beginning in 2022, amounts earned by the Company’s senior executives will be increased 10 percent of target, decreased 10 percent of target, or left unchanged based on the Committee’s assessment of 3M’s performance against a set of objective ESG metrics. For more information, see “New severance plan”“2022 changes to our incentive compensation program—2022 annual incentive compensation program” on page 72. | | | ● | Effective for grants made to executives in 2022, updated the metrics, weightings, and “Rightscertain other aspects of the Company’s performance share awards. The changes generally are intended to strengthen the link to value creation for 3M in the current environment and payments upon a qualifying termination underbetter align the severance plan” beginningmacro benchmark used as the basis of the relative metric with 3M’s business portfolio. For more information, see “2022 changes to our incentive compensation program—2022 performance share awards” on pages 61 and 85page 73. | | | ● | Beginning with the annual grants made in 2022, increased (from 25 percent to 50 percent) the portion of this Proxy Statement, respectively.the target grant value that the Company’s executives (other than its CEO) may ask to receive in the form of restricted stock units rather than stock options. |
64 3M Company
Table of Contents Compensation policies and practices Our compensation program is designed to provide appropriate performance incentives and avoid compensation practices that do not promote the interests of our shareholders.
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Section II: How we determine executive compensation Principles The Company maintains global compensation principles that are intended to ensure that its compensation practices are fair and reasonable as applied to both executive and non-executive employees. These principles align with the Company’s vision and strategies, balance both individual and enterprise-wideenterprise performance, and seek to provide competitive wages and benefits with consistent positioning in the median range of the most-relevant markets to employees based on roles, responsibilities, skills, and performance. 3M also believes that the With respect to 3M’s executive compensation of its executives should be closely tied to the performance of the Company, so that their interests are aligned with the interests of long-term 3M shareholders. Consistent with this philosophy,program, we use the following core principles, provide a framework for the Company’s executive compensation program: which are intended to support our pay-for-performance philosophy: •● | Total Direct Compensation should be competitive to attract the best talent to 3M, motivate executives to perform at their highest levels, reward individual contributions that improve the Company’s ability to deliver outstanding performance, and retain those executives with the leadership abilities and skills necessary for building long-term shareholder value; | • | | ● | The portion of Total Direct Compensation that is performance-basedat-risk and is, therefore, at riskperformance-based should increase with the level of an individual’s responsibility; | • | | ● | The program should balance incentives for delivering outstanding long-term, sustainable performance against the potential to encourage inappropriate risk-taking; | • | | ● | The metrics and targets for earning performance-based incentives should be consistent with, and aligned to, increasing shareholder value over the long term; and | •● | A significant portion of each executive’s personal net worth should be tied to the value of 3M common stock as further motivation to build long-term shareholder value and mitigate the risk of inappropriate risk-taking. |
To monitor and support the effectiveness of this program, the Committee periodically reviews the compensation principles used for setting target annual total cash compensationTotal Cash Compensation for the Company’s global workforce and approves the methodology for determining annual long-term incentive target grant values for employees eligible to receive such awards. The Company also periodically compares its pay components to those of other premier companies and adjusts them as necessary to stay competitive and attract, retain, and motivate a highly qualified, diverse workforce at all levels throughout the organization, not just for its executives. 2022 Proxy Statement 65
Table of Contents Roles and responsibilities The Company believes that a collaborative process best ensures that compensation decisions reflect the principles of our executive compensation program. Set forth below is a summary of the roles and responsibilities of the key participants that were involved in making decisions relating to the compensation that our Named Executive Officers earned in 2019. 2021. Responsible Party | | Primary Roles and Responsibilities Relating to Compensation Decisions | Compensation and Talent Committee (Composed solely of independent, non- employee directors and reports to the Board) | | •● Reviews the design of, and risks associated with, the Company’s compensation policies and practices;
•● Approves the compensation of our Chief Executive Officer, and Executive Chairman (including performance metrics and goals for performance-based long-term and short-term incentive compensation), subject to ratification by the independent members of the Board of Directors;
● Approves the compensation of our other Named Executive Officers; •● Approves the performance metrics and goals for performance-based long-term and short- term incentive compensation arrangements;
● Approves annual performance goals and objectives for our Chief Executive Officer and Executive Chairman; Officer; •● Acting through the Committee’s Chairman, conductsConducts an annual evaluation of our Chief Executive Officer’s and Executive Chairman’s performance and reviews such evaluation with the independent members of the Board of Directors;
and • Approves the compensation of our other Named Executive Officers (including performance metrics and goals for performance-based long-term and short-term incentive compensation); and
•● Approves all changes to the composition of the executive compensation peer group.
| | | | Independent Non- employee Members of the Board of Directors | | •● Considers the Committee’s annual evaluation of our Chief Executive Officer’s and Executive Chairman’s performance; and
•● Considers the Committee’s actions regarding the compensation of our Chief Executive Officer and, Executive Chairman and, if deemed appropriate, ratifies such actions.
| | | |
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Responsible Party | | Primary Roles and Responsibilities Relating to Compensation Decisions | Independent Consultant to the Compensation and Talent Committee*
(Frederic W. Cook & Co., Inc.) (FW Cook) | | •● Provides the Committee with advice regarding the design of all elements of the Company’s executive compensation program;
•● Reviews and provides an assessment of the material economic and reputational risks associated with the Company’s incentive compensation programs;
•● Reviews and provides an independent assessment of materials provided to the Committee by management of the Company;
•● Provides advice and recommendations to the Committee regarding the composition of the compensation peer groups;
•● Provides expert knowledge of regulatory developments, marketplace trends, and best practices relating to executive compensation and competitive pay levels;
•● Makes recommendations regarding the compensation of the Named Executive Officers (including our Chief Executive Officer and Executive Chairman)Officer); and
•● Regularly attends and actively participates in meetings of the Committee, including executive sessions.
| | | | Chief Executive Officer
(Assisted (Assisted by our SeniorExecutive Vice President and Chief Human Resources Officer and other Company employees) | | •● Approves annual performance goals and objectives for the Named Executive Officers (other than himself and our Executive Chairman)himself);
•● Conducts an annual performance evaluation for each of the Named Executive Officers (other than himself and our Executive Chairman)himself) and presents the results to the Committee; and
•● Makes recommendations to the Committee with respect to the compensation of the Named Executive Officers (other than himself and our Executive Chairman)himself) based on the final assessment of their performance.
| | | |
* | During 2019,2021, the Committee was assisted by its independent compensation consultant, George B. Paulin of FW Cook. Other than the support that it provided to the Committee, FW Cook provided no other services to the Company or 3M management, with the exception ofexcept for independent advisory support to the Nominating and Governance Committee on the compensation of 3M’s non-employee directors so that valuation methodologies and peer groups are consistent with those used for executives and other employees. During the year, the Committee considered an evaluation of the independence of Mr. Paulin and his firmFW Cook based on the relevant regulations of the Securities and Exchange Commission and the NYSE listing standards. The Committee concluded that the services performed by Mr. Paulin and his firmFW Cook did not raise any noteworthy conflicts of interest. |
Use of market data ElementsWe compete for executive talent in a global market. To ensure that we are providing Total Direct Compensation that is competitive, the Committee annually considers the available pay data of two peer groups: an executive compensation peer group and a survey peer group.
66 3M Company
Table of Contents Executive compensation peer group For 2021, the executive compensation peer group consisted of the companies identified below (which remained the same as in the previous year, except for the removal of Raytheon Technologies (successor to United Technologies Corporation) and the addition of Parker-Hannifin Corporation, Abbott Laboratories, and The Boeing Company), as recommended by the Committee’s independent compensation consultant and approved by the Committee. The companies in this executive compensation peer group were selected because (1) their performance was monitored regularly by the same market analysts who monitor the performance of 3M (investment peers) and they are considered major business-segment competitors used internally for performance comparisons, or (2) they met certain criteria based on similarity of their business, market capitalization (based on an eight-quarter rolling average), annual revenues, and/or Midwest corporate headquarters, and compete with 3M for capital or talent. (Dollars in millions) Latest Four Quarters Revenues(1) | Johnson & Johnson | $93,775 | The Procter & Gamble Company | $78,346 | General Electric Company | $74,196 | The Boeing Company | $62,286 | Caterpillar Inc. | $50,971 | Deere & Company | $44,413 | Abbott Laboratories | $43,075 | 3M Company | $35,355 | Honeywell International Inc. | $34,392 | Medtronic plc | $31,798 | Danaher Corporation | $29,453 | Johnson Controls International plc | $24,189 | Eaton Corporation plc | $19,628 | Kimberly-Clark Corporation | $19,440 | Emerson Electric Co. | $18,548 | DuPont de Nemours, Inc. | $16,653 | Parker-Hannifin Corporation | $15,293 | TE Connectivity Ltd. | $15,219 | Illinois Tool Works Inc. | $14,455 | Corning Incorporated | $14,082 | 75th Percentile | $47,692 | Mean | $36,853 | Median | $29,453 | 25th Percentile | $17,601 | 3M Percentile Rank | 62% |
Trailing Eight-Quarter Average Market Capitalization(1) | Johnson & Johnson | $418,938 | The Procter & Gamble Company | $344,988 | Abbott Laboratories | $202,975 | Danaher Corporation | $179,530 | Medtronic plc | $149,397 | Honeywell International Inc. | $136,234 | The Boeing Company | $121,659 | Caterpillar Inc. | $101,403 | 3M Company | $ 99,794 | General Electric Company | $ 96,117 | Deere & Company | $ 93,746 | Illinois Tool Works Inc. | $ 66,479 | Eaton Corporation plc | $ 53,497 | Emerson Electric Co. | $ 50,386 | Kimberly-Clark Corporation | $ 46,635 | Johnson Controls International plc | $ 41,628 | DuPont de Nemours, Inc. | $ 41,438 | TE Connectivity Ltd. | $ 41,343 | Parker-Hannifin Corporation | $ 34,988 | Corning Incorporated | $ 29,666 | 75th Percentile | $142,815 | Mean | $118,476 | Median | $ 93,746 | 25th Percentile | $ 44,132 | 3M Percentile Rank | 59% |
(1) | All data shown was obtained from Standard & Poor’s Capital IQ. Revenues are stated in millions for the latest four quarters disclosed as of February 28, 2022. Market capitalizations are stated in millions as of February 28, 2022. |
The Committee, with assistance from its independent compensation consultant, periodically reviews the composition of the executive compensation peer group to determine whether any changes are appropriate. Following its review in August 2021, the Committee determined that no changes were needed at that time. The Company receives market surveys with pay data and information on the executive compensation practices at the companies in 3M’s executive compensation peer group from Aon plc and FW Cook. Survey peer group For 2021, there were approximately 300 comparator companies in the survey peer group. Although the number and identity of the companies varies from year to year and from survey to survey, each of the companies included in the survey peer group had annual revenue exceeding $10 billion. All companies in the survey peer group also participate in one or more executive compensation surveys obtained from three consulting firms: Aon plc, FW Cook, and Willis Towers 2022 Proxy Statement 67
Table of Contents Watson plc. Pay data for the survey peer group is statistically regressed (based on annual revenues) to recognize the different sizes of the comparator companies as compared to the size of 3M. The pay data for the survey peer group is then used to assess the reasonableness of the executive compensation peer group data received, helping to ensure that the Company’s compensation objectives are being met. The Committee does not review the identity of the companies in the survey peer group. How the Committee establishes target 2019compensation levels The Committee considers pay data from the executive compensation peer group as one of several reference points it uses to inform its decisions about overall compensation opportunities and specific compensation elements. The Committee does not benchmark specific compensation elements or total compensation to any specific percentile relative to the Peer Groups or the broader United States market. The Committee instead applies informed judgment in establishing targeted pay levels for the Named Executive Officers, considering pay data from the executive compensation peer group and other factors, such as: ● | the breadth and complexity of the executive’s duties and responsibilities; | | | ● | the quality of the executive’s leadership; | | | ● | the financial and operational performance of the business activities for which the executive is responsible; | | | ● | the executive’s ability to successfully achieve assigned goals related to company culture; | | | ● | the annual performance evaluation that Mr. Roman, assisted by 3M’s Executive Vice President and Chief Human Resources Officer, and other Company employees, completes for each Named Executive Officer (other than himself) and the annual performance evaluation that the Committee completes for Mr. Roman; | | | ● | the executive’s ability to successfully achieve assigned goals related to environmental, social, and governance matters, including sustainability goals; | | | ● | the executive’s performance rating for the prior year; | | | ● | experience and time in their current position (or other positions with comparable duties and responsibilities); and | | | ● | internal pay equity. |
The Committee also uses information on the executive compensation practices at companies in the executive compensation peer group when considering design changes to the Company’s executive compensation program. Overall, the Company believes that use of this information from the Peer Groups enables the Committee to create better alignment between executive pay and performance and to help ensure that 3M can attract and retain high-performing executive leaders. 68 3M Company
Table of Contents Section III: Overview of compensation program design Target total direct compensation mix for 2021 The illustrationillustrations below and the discussion that follows show how the 2021 target Total Direct Compensation of theour CEO and other Named Executive Officers (excluding our former Executive Chairman) was apportioned among base salary, annual incentives, performance share awards, restricted stock units, and stock options for 2019, and how these elements relateoptions. To provide a better representation of the intended mix of annual compensation provided to the strategic business goalsNamed Executive Officers, the percentages shown below do not take into consideration non-recurring special items such as one-time make-whole and inducement awards granted in connection with the commencement of the Company.employment or retention awards.
Abbreviations: AIP = Annualannual incentive pay; PSAs = Performanceperformance share awards. awards; RSUs = restricted stock units. * | Numbers do not add to 100 percent due to rounding. | ** | Amounts shown reflect the average apportionment for all Named Executive Officers other than Mr. Roman and Mr. Thulin. Including Mr. Thulin, the average apportionment for the other Named Executive Officers would be as follows: base salary — 18 percent; AIP — 18 percent; stock options — 29 percent; performance shares — 35 percent; and performance-based pay — 82 percent.Roman. Numbers may not add to 100 percent due to rounding. |
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BASE SALARY
Percentage of Target 2019 Total Direct Compensation: | | CEO – 10% | | Other NEOs – 19% | |
3M pays each of its executives a base salary in cash on a monthly basis. The amount of this base salary is reviewed at least annually and does not vary with the performance of the Company. Base salaries are designed to compensate the executives for their normal day-to-day responsibilities, and it is the only component of their compensation that is considered to be fixed rather than variable in nature.
ANNUAL INCENTIVE
Percentage of Target 2019 Total Direct Compensation: | | Performance Metrics and Weighting: | CEO – 15%
Other NEOs – 17% | | • 50% Local Currency Sales (of 3M or a business unit, as applicable) vs. Plan | | • 20% Economic Profit (of 3M or a business unit, as applicable) vs. Plan | | • 30% Economic Profit of 3M vs. Prior Year |
Annual incentive 3M provides its executives with an opportunity to earn annual incentive compensation through plans that areunder the 3M Annual Incentive Plan, which we refer to as the “AIP.” Participation in the AIP is intended to align a significant portion of theirparticipants’ Total Cash Compensation with the near-term financial performance of the Company and its business units. Each executive is assigned a target amount of annual incentive compensation as part of his or her target Total Cash Compensation, but the actual amount of annual incentive compensation actually paid under the AIP depends on the financial performance of 3M and its relevant business units as well as eachand the executive’s individual performance.performance, in each case, measured against preestablished goals and objectives. 3M’sBasic calculation. The amount a participant earns under the AIP offers eligible employees an opportunity to earn short-termis calculated by multiplying his or her weighted-average target annual incentive compensation based on threeopportunity for the plan year by a business performance metrics, which were weighted for 2019 as indicated above. All 2019factor and an individual performance targets for our Corporate AIP plan were set at or above 2018 results.multiplier.
| Calculated amount that takes into account any mid-year changes in the participant’s target annual incentive compensation opportunity | | Corporate and business unit results adjust AIP pay based on performance against preestablished goals | | Payouts adjusted or left unchanged based on individual performance against preestablished goals and objectives, which can be both quantitative and qualitative | | Final payment amount may range from 0 percent to 200 percent of an individual’s total weighted-average target AIP payout |
Business performance factor. The business performance factor is determined based on the performance of 3M and, in some cases, the business unit for which each Named Executive Officer had responsibility throughout the year against three metrics, as indicated in the table below. | | | The 2021 performancetarget for each metric andbusiness unit shown was setat or above 2020 results. |
The actual amount paid to an eligible employee for a particular year may range from 0 percent to 200 percent
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Table of the employee’s target amount for that year, depending on theContents Performance Metric | | | Business Unit Local Currency Sales vs. Plan | | Economic Profit (of 3M or a business unit, as applicable) vs. Plan | | Total 3M Economic Profit vs. Prior Year | Weighting | | | | | | | | Business Unit Used to Calculate Business Performance Factor* | Mr. Roman | | 3M Worldwide | | 3M Worldwide | | 3M Worldwide | Mr. Patolawala | | 3M Worldwide | | 3M Worldwide | | 3M Worldwide | Mr. Khandpur | | TEBG | | TEBG | | 3M Worldwide | Ms. Poul | | HCBG | | HCBG | | 3M Worldwide | Mr. Vale | | SIBG | | SIBG | | 3M Worldwide |
| | * | Abbreviations: TEBG = Transportation and Electronics Business Group; HCBG = Health Care Business Group; SIBG = Safety and Industrial Business Group. |
Individual performance of the Company and its business units compared to the performance goals approved by the Compensation Committee. multiplier. The amount of annual incentive compensation paid to an eligible employee also may be increased, (up to 30 percent), reduceddecreased, or eliminated entirely basedleft unchanged depending on the employee’s individualhis or her performance during that year. Individual performance takes into account both quantitative (financial results, for example) and qualitative (market and economic circumstances, for example) factors. In no event, however, may the total amount paid to an eligible employee exceed 200 percent of the employee’s target amount for the year. In determining the amount of annual incentive compensation paid to a Named Executive Officer, the Named Executive Officer’s individual performance is considered based upon the annual performance evaluation that Mr. Roman, assisted by 3M’s Senior Vice President, Human Resources, and other Company employees, completed for each Named Executive Officer (other than himself and Mr. Thulin) and the annual performance evaluation that the Compensation Committee (acting through its Chairman) completed for each of Mr. Roman and Mr. Thulin. These performance evaluations are done according to 3M’s overall performance assessment and management processes, which involve setting annual financial and non-financial goals and objectives for each individual and then assessing the individual’s overall performance against these goals and objectives at the end of the year. While the annual incentive compensation earned by eligible 3M employees generally is determined under the AIP, the annual incentive compensation earned during 2019 by the senior executives whose compensation is decided by the Committee (including all of the Named Executive Officers) was determined under the Executive Plan approved by 3M’s shareholders at the 2007 Annual Meeting. A total of 20 senior executives participated in this Executive Plan during 2019. The Company utilized the Executive Plan in 2019 to provide performance-based compensation that, at the time action was taken to designate the plan participants for 2019, was intended to be exempt from the $1 million annual deduction limit of state tax laws that are similar to Section 162(m) of the Internal Revenue Code, as in effect prior to the Tax Cuts and Jobs Act of 2017. Given the number of states that have eliminated the performance-based compensation exception to the annual deduction limit since the enactment of the Tax Cuts and Jobs Act of 2017, the Committee decided to include the Company’s senior executives in the broad-based AIP beginning in 2020.
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Assuming the Company meets the Adjusted Net Income goal, the Executive Plan provides the Committee with discretion to determine the amount of annual incentive compensation paid to 3M’s Named Executive Officers and its other senior executives. The Executive Plan establishes a maximum amount of annual incentive compensation that may be earned by each covered executive for a year (a percentage of the Company’s Adjusted Net Income for such year) and then the Committee utilizes this discretion to pay each covered executive less than this maximum amount based on such factors as it deems relevant. Since the Executive Plan was first adopted in 2007, the Committee has rarely used this discretion to pay a covered executive (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the broad-based AIP (includingWhen determining the individual performance multiplier).
LONG-TERM INCENTIVES
Percentage of Target 2019 Total Direct Compensation: | | Performance Metrics and Weighting: | CEO – 38% Stock Options | | • 20% Earnings per Share Growth | 38% Performance Shares | | • 40% Relative Organic Volume Growth | Other NEOs – 32% Stock Options | | • 20% Return on Invested Capital | 32% Performance Shares | | • 20% Free Cash Flow Conversion |
3M provides long-term incentive compensationmultipliers to its executives through an incentive plan approved bybe used for the Company’s shareholders. This is a typical omnibus-type plan that authorizes the Committee to grant stock options, restricted stock, restricted stock units, stock appreciation rights, performance shares, and other stock awards to employees of the Company and its subsidiaries. The Company provides its executives with this long-term incentive compensation based on 3M common stock in order to effectively motivate such executives to build long-term shareholder value.
In determining the performance-adjusted target grant value of the stock options and performance shares provided to our Named Executive Officers, the Compensation Committee considers the individual performance of ourthe Named Executive Officers using the performance evaluations described under “Annual Incentive”“How the Committee establishes target compensation levels” on page 59.68.
Long-term incentives OurIn order to improve alignment with the Company’s practices for non-executive employees and mitigate potential retention challenges associated with pay delivery, the Committee elected to begin offering each of the Company’s executives (other than its Chief Executive Officer) an opportunity to indicate a preference to receive 25 percent of the target grant value of their annual long-term incentive awards in the form of restricted stock units or stock options. For executives who indicated a preference to receive restricted stock units, 50 percent of the target grant value of their annual long-term incentive awards was delivered in the form of performance shares, 25 percent of the target grant value was delivered in the form of stock options and the remaining 25 percent was delivered in the form of restricted stock units. For all other executives (including the Company’s Chief Executive Officer), 50 percent of the target grant value of their annual long-term incentive awards was delivered in the form of performance shares and the remaining 50 percent was delivered in the form of stock options. The terms of the 2021 performance share awards, 2021 stock options, and 2021 restricted stock units are described in detail below.
In limited circumstances, our Named Executive Officers also may receive specialother equity awards on an ad hoc basis as new hires or for recognition and retention, promotions, or other purposes. For additional information about a special restricted stock unit award granted to Mr. Patolawala in October 2021 in connection with a significant expansion of his duties and responsibilities and as a further incentive for Mr. Patolawala to remain with the Company, see “Section V: 2021 compensation decisions and performance highlights—Monish Patolawala—Compensation Decisions” on page 80. 2021 performance share awards Performance shares awarded in 2021 will result in the issuance of actual shares of 3M common stock to 3M’s Named Executive Officers if the Company achieves certain financial goals over the years 2021, 2022, and 2023. The number of shares of 3M common stock that will be issued for each 2021 performance share is linked to the Company’s performance as measured by the criteria of Earnings per Share Growth (20 percent weighting), Relative Organic Volume Growth (40 percent weighting), Return on Invested Capital (20 percent weighting), and Free Cash Flow Conversion (20 percent weighting). These performance criteria were selected because they are aligned with 3M’s operating plan and the financial objectives communicated to shareholders, and the Committee believes that they are important drivers of long-term shareholder value. Attainment of these four independent performance criteria is measured separately for each calendar year during the three-year measurement period, with each year weighted as follows: 2021 — 50 percent; 2022 — 30 percent; and 2023 — 20 percent. However, the targets by which the Company’s performance is measured do not change over the three-year performance period. The actual number of shares of 3M common stock that will be delivered at the end of the three-year performance period ending on December 31, 2023, may be anywhere from 0 percent to 200 percent of the target number of performance shares awarded, depending on the performance of the Company during the performance period. However, an executive may forfeit all or a portion of such shares if he or she does not remain employed by the Company throughout the three-year performance period. 70 3M Company
Table of Contents AdjustmentsFor awards tied to the achievement of performance goals over the years 2021, 2022, and 2023, the Committee approved the targets shown below for certain special items
In determining the levelnumber of shares of 3M common stock to be delivered for each target performance share awarded, with the total number of shares actually delivered being the sum of the number of shares earned as a result of the Company’s achievement of each of the four financial goals. If the Company’s performance goals established underas measured by any of these performance criteria falls between any of the AIPpercentages listed below, the number of shares of 3M common stock earned will be determined by linear interpolation.
2021 Performance Share Award Targets | | | | | Performance Levels | Payout Level (% of Target) | Earnings Per Share Growth | | | Threshold* | | 4 | % | 4 | % | | | Target | | 8 | % | 20 | % | | | Maximum | | 12 | % | 40 | % | Relative Organic Volume Growth | | | Threshold* | | –1 | % | 8 | % | | | Target | | 0.5 | % | 40 | % | | | Maximum | | 2 | % | 80 | % | Return on Invested Capital** | | | Threshold* | | 16 | % | 4 | % | | | Target | | 18 | % | 20 | % | | | Maximum | | 21 | % | 40 | % | Free Cash Flow Conversion | | | Threshold* | | 95 | % | 4 | % | | | Target | | 100 | % | 20 | % | | | Maximum | | 105 | % | 40 | % |
| | * | No payout is provided for below threshold performance. | | | ** | After considering the Company’s long-term strategic plan and the Company’s historical Return on Invested Capital results, the Committee decided to set the threshold, target, and maximum goals as shown. While these goals reflect a reduction to the corresponding goals established for the 2020 performance share awards, the Committee determined that this was appropriate given the Company’s strategic decision to focus on strengthening its balance sheet, which the Committee believes is consistent with, and aligned to, the Company’s strategic priorities and its objective of increasing shareholder value over the long term. The targets are intended to be challenging and provide a similar level of rigor as those established for past years in order to provide a consistent incentive compensation opportunity. |
The above targets are not a prediction of how 3M will perform during the years 2021 through 2023 or any other period in the future. The sole purpose of these formulas, which were approved by the Committee in February 2021, is to establish a method for determining the number of shares of 3M common stock to be delivered for the performance share awards fordescribed above. 3M is not providing any given period,guidance, nor updating any prior guidance, of its future performance with the costs, salesdisclosure of these formulas, and impactyou are cautioned not to rely on assets and liabilities from acquisitions are excluded in the year that the acquisition is completed. The Committee also makes other adjustments from time to time for special items that it believes are unrelatedthese formulas as a prediction of 3M’s future performance. 2021 stock options Stock options granted to the operational performanceNamed Executive Officers in 2021 as part of their annual long-term incentive compensation have the Companyfollowing features: ● | an exercise price equal to the closing price of a share of 3M common stock on the NYSE for the date of grant; | | | ● | a ratable three-year vesting schedule; and | | | ● | a maximum term of 10 years. |
2021 restricted stock units Restricted stock unit awards granted to the relevant measurement period (e.g., changesNamed Executive Officers in tax laws or accounting principles, asset write-downs,2021 as part of their annual long-term incentive compensation have the impact of restructurings, divestitures or asset sales in which net gains or losses exceed certain thresholds, unusual tax transactions, litigation or claim judgments and settlements, and other special items described in management’s discussion and analysis of financial conditions and results of operations appearing in the Company’s annual/quarterly report to shareholders for the applicable period). These adjustments can have either a positive or negative impact on award payouts.following features: ● | a three-year “cliff” vesting schedule; and | | | ● | cash-settled dividend equivalent rights that are payable only if the underlying shares are earned. |
See Appendix A to this Proxy Statement for additional details concerning the adjustments made to certain metrics under the AIP and the outstanding performance share awards.
Benefits and perquisites The Company’s Named Executive Officers participate in the same health care, disability, life insurance, pension, and 401(k) benefit plans available to most of the Company’s U.S. employees. They also are eligible to receive certain additional benefits and perquisites that are provided for the executives’ convenience (financial(relocation assistance for moves required by 3M, financial planning assistance, and meals when attending to 3M business, for example), financial security (nonqualified deferred compensation plans and premiums for additional group term life insurance coverage, for example), personal security (home 2022 Proxy Statement 71
Table of Contents security equipment/monitoring, for example) or personal health (on-site exercise facilities and physical exams, for example) of the executives.. Our Named Executive Officers and other employees also may receive Company tickets for sporting or other events. The Company believes that the benefits and perquisites offered generally are similar to those of our peers and assist in attracting and retaining executives. In some cases, there is no incremental cost to the Company associated with providing these additional benefits and perquisites (physical exams and certain tickets to events, for example) or the executives pay all or a substantial portion of the incremental costs incurred by the Company (on-site exercise facilities, for example). Table of Contents
These additional benefits and perquisites generally are provided on a consistent basis only to a limited group of our most senior U.S. employees (including all of the Named Executive Officers), although enhanced personal security equipment and monitoring is provided only to our Chief Executive Officer and the type of additional life insurance coverage provided varies based on the date the employee was first appointed to an executive position. Individuals first appointed to an executive position on or before August 31, 2003, receive additional life insurance coverage that is provided through a universal life insurance policy. Individuals first appointed on or after September 1, 2003, including our Chief Executive Officer, receive group term life insurance coverage. Officer. The Company also operates aircraft that are used by our senior officers and other employees to conduct company business. For personal security reasons, the Board of Directors requires our Chief Executive Officer to use the Company’s aircraft for all air travel, both business and personal. Our Chief Executive Officer’s spouse and other guests also may accompany him on flights. The incremental cost to the Company of providing these additional benefits to the Named Executive Officers is reflected in the All Other Compensation Table. No tax gross-upsgross ups are provided on any of these additional benefits and perquisites.perquisites other than taxable relocation benefits. 2022 changes to our incentive compensation program New severance plan
The Committee believes that the Company’s incentive compensation program should incorporate shareholder feedback where appropriate and be tied to key metrics and outcomes that are consistent with, and aligned to, the Company’s strategic priorities and its objective of increasing shareholder value over the long term. In the first half of 2019, the Committee’sconsultation with its independent compensation consultant FW Cook, conducted an analysisand following discussions with management of the benefits and perquisitesCompany, the Committee approved significant changes to the incentive compensation programs offered to the Company’s executives in 2022, as described below. 2022 annual incentive compensation program 2021 Design | | 2022 Design | | Rationale for Changes | Metrics and Weightings | | | Abbreviations: BU = Business Unit | | ● New metrics are intended to sharpen focus on performance against the operating plan, prioritize operating cash flow conversion as a key driver of operating value, and enhance focus on inventory and receivables performance as key contributors to cash ● Adjusted weightings place a stronger emphasis on items within the control of the business units and improve alignment with market practices | | | | | | Environmental, Social and Governance (“ESG”) Modifier | | | ● No ESG modifier | | ● Amounts earned by senior executives may be increased by 10 percent of target, decreased by 10 percent of target, or left unchanged based on the Committee’s determination of 3M’s performance against a set of objective ESG metrics, including metrics related to the Company’s carbon and water commitments, operational improvements in the area of environment, health, and safety; progress on key social measures, and on-time completion of required ethics and compliance training | | ● Improve alignment with key enterprise strategies and developing market practices |
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Table of Contents 2022 performance share awards 2021 Design | | 2022 Design | | Rationale for Changes | Metrics and Weightings | | | Abbreviations: FCF = Free Cash Flow EPS = Earnings per Share Rel. Org. Volume Growth = Relative Organic Volume Growth Rel. OSG = Relative Organic Sales Growth ROIC = Return on Invested Capital | | ● Transition from FCF Conversion to FCF Growth is intended to strengthen the link to shareholder returns by measuring cash flow improvement ● Change from Relative Organic Volume Growth to Relative Organic Sales Growth is intended to enhance alignment with the Company’s operating plan and external guidance ● Elimination of ROIC allows greater weighting to be placed on other metrics believed to have a stronger link to value creation for 3M in the current environment | Benchmark for Relative Metric | | | ● Worldwide Industrial Production Index, as published by IHS Markit prior to the date on which the Committee certifies the performance results | | ● Weighted blend of the Worldwide Industrial Production Index and the Worldwide Gross Domestic Product for the relevant period, in each case, as most recently published by IHS Markit no later than 30 days following completion of the relevant year | | ● Improve alignment of the macro benchmark with 3M’s business portfolio | | | | | |
Except as described above, the design of the 2022 performance share awards provided to approximately 100 of the Company’s most senior employees, including all of the Named Executive Officers, was materially consistent with the design of the 2021 performance share awards. 2022 Proxy Statement 73
Table of Contents Section IV: Incentive compensation attainments and awards 2021 AIP attainments and payouts During 2021, the Committee provided the Named Executive Officers with the opportunity to earn short-term incentive compensation under the AIP. Each Named Executive Officer’s target annual incentive for the year equaled the difference between his or her target Total Cash Compensation and annual base salary (weighted to reflect mid-year adjustments, if appropriate). Business performance factor. For purposes of measuring business performance against the targets established for 2021 and converting that performance into a business performance factor determined in accordance with the terms of the AIP, each Named Executive Officer was assigned to an appropriate business unit for each metric (the entire Company, in some cases). The metrics, relevant business unit, goals, and attainments used to calculate the business performance factor for each Named Executive Officer are shown below. Business performance factor calculation for Mr. Roman and Mr. Patolawala Dollar amounts in millions Business performance factor calculation for Mr. Khandpur Dollar amounts in millions 74 3M Company
Table of Contents Business performance factor calculation for Ms. Poul Dollar amounts in millions Business performance factor calculation for Mr. Vale Dollar amounts in millions | | (1) | The Economic Profit metric measured versus 3M’s prior year results is calculated using total Company average invested capital (equity plus debt, as reported in its Consolidated Balance Sheet), while the Economic Profit metric measured versus plan is calculated using only accounts receivable and inventories of the relevant business unit as capital. See Appendix A for the calculation of 2020 and 2021 Economic Profit. |
Individual performance multiplier. The amount of annual incentive compensation paid to an eligible employee may be increased, decreased, or left unchanged depending on his or her individual performance during the year. The Committee determined the individual performance multiplier for each Named Executive Officer, as shown in the table under “Final 2021 AIP payouts” below, based upon the annual performance evaluation completed for each Named Executive Officer. For a listing of selected 2021 performance highlights of each Named Executive Officer, see “Section V: 2021 compensation decisions and performance highlights” beginning on page 79. 2022 Proxy Statement 75
Table of Contents Final 2021 AIP payouts. At its meeting in February 2022, the Committee approved (and with respect to Mr. Roman, the independent members of the Board of Directors ratified) a payment under the AIP to each Named Executive Officer, as shown below. Named Executive Officer | | Target 2021 Annual Incentive* ($) | | Business Performance Factor | | Individual Performance Multiplier | | Approved 2021 AIP Payout** ($) | Michael F. Roman | | 2,340,638 | | 133.8% | | 100% | | 3,131,774 | Monish Patolawala | | 943,410 | | 133.8% | | 120% | | 1,514,739 | Ashish K. Khandpur | | 625,517 | | 150.1% | | 100% | | 938,589 | Mojdeh Poul | | 631,054 | | 162.3% | | 120% | | 1,229,041 | Michael G. Vale | | 656,171 | | 105.3% | | 100% | | 690,948 |
| | * | Amounts shown reflect mid-year adjustments to target Total Cash Compensation. | | | ** | Due to rounding, the numbers shown in this column may not equal the result obtained by multiplying the Target 2021 Annual Incentive by the Business Performance Factor by the Individual Performance Multiplier. |
2021 long-term incentive awards After considering the most recent long-term incentive compensation data available from companies in the Peer Groups and after taking into account its evaluation of their individual performance during 2020, the Committee approved (and in the case of Mr. Roman, the independent members of the Board of Directors ratified) the performance-adjusted target grant values shown below for the Named Executive Officers’ 2021 long-term incentive compensation awards. For ease of comparison, the table below also shows the performance-adjusted target compensation values of the Named Executive Officers’ 2020 long-term incentive compensation awards. Name | | Performance-Adjusted Target Grant Value of 2020 Annual Awards ($) | | | Performance-Adjusted Target Grant Value of 2021 Annual Awards ($) | | Michael F. Roman | | | 10,000,000 | | | | 10,500,000 | | Monish Patolawala (joined 3M effective July 1, 2020) | | | 1,625,000 | * | | | 4,290,000 | ** | Ashish K. Khandpur | | | 2,268,290 | | | | 2,081,000 | | Mojdeh Poul | | | 2,330,720 | | | | 2,081,000 | | Michael G. Vale | | | 2,268,290 | | | | 2,705,300 | |
| | * | The amount shown was prorated based on the portion of the year worked and excludes the target grant value of special one-time make-whole and inducement awards granted in connection with his commencement of employment. | | | ** | In October 2021, the Board approved a significant expansion of Mr. Patolawala’s duties and responsibilities to include business transformation. The target grant value of Mr. Patolawala’s 2021 annual awards shown here excludes the value of a special restricted stock unit award granted to him in connection with the expansion of his duties and responsibilities and as a further incentive for Mr. Patolawala to remain with the Company. For additional information, see “Section V: 2021 compensation decisions and performance highlights—Monish Patolawala—Compensation Decisions” on page 80. |
Consistent with market practices at companies in the Peer Groups, during 2021, the Committee chose to deliver one-half of the performance-adjusted target grant value of the 2021 annual long-term incentive compensation awards provided to 3M’s Named Executive Officers in the form of performance shares. The remaining portion of the performance-adjusted target grant value was delivered in the form of stock options or, for the Named Executive Officers other than 3M’s Chief Executive Officer, a combination of stock options and restricted stock units. For additional information, see “Section III: Overview of compensation program design—Long-term incentives” on page 70. 763M Company
Table of Contents Status of outstanding performance share awards The Company’s annual award cycle and three-year performance periods result in an overlap of awards. For example, the performance goals for 2021 performance share awards relate to the years 2021, 2022, and 2023. Similarly, the performance goals for 2020 performance share awards relate to the years 2020, 2021, and 2022, and so on, as shown below. Performance against the goals established for each award are measured separately for each calendar year during the measurement period, with each year weighted as shown below in parenthesis. The Committee believes this structure reduces motivation to maximize performance in any one period by providing the highest-level rewards only by building sustainable long-term results. Award | | | 2019 | | | | 2020 | | | | 2021 | | | | 2022 | | | | 2023 | | 2019 PSA | | | Year 1 (50%) | | | | Year 2 (30%) | | | | Year 3 (20%) | | | | | | | | | | 2020 PSA | | | | | | | Year 1 (50%) | | | | Year 2 (30%) | | | | Year 3 (20%) | | | | | | 2021 PSA | | | | | | | | | | | Year 1 (50%) | | | | Year 2 (30%) | | | | Year 3 (20%) | |
The Committee periodically reviews the Company’s performance against the goals established for each performance share award throughout the duration of its measurement period. The tables below summarize the status of the different performance share awards held by the Named Executive Officers as of December 31, 2021. 2021 PSA (2021-2023 measurement period) | | | | | | | | Three-year Performance Period – Actual Performance Level Achieved(1) | | | Performance Levels | | 2021 (Year 1; | | 2022 (Year 2; | | 2023 (Year 3; | Performance Measures and Weighting | | Threshold | | Target | | Maximum | | weighted at 50%) | | weighted at 30%) | | weighted at 20%) | Earnings per Share Growth (20%)(2) | | 4.0% | | 8.0% | | 12.0% | | 14.4% | | | | | Relative Organic Volume Growth (40%)(3) | | -1.0% | | 0.5% | | 2.0% | | 0.2% | | | | | Return on Invested Capital (20%) | | 16.0% | | 18.0% | | 21.0% | | 19.5% | | | | | Free Cash Flow Conversion (20%) | | 95% | | 100% | | 105% | | 101% | | | | | | | | | | | | | | | | | | 2020 PSA (2020-2022 measurement period) | | | | | | | | | Three-year Performance Period – Actual Performance Level Achieved(1) | | | Performance Levels | | 2020 (Year 1; | | 2021 (Year 2; | | 2022 (Year 3; | Performance Measures and Weighting | | Threshold | | Target | | Maximum | | weighted at 50%) | | weighted at 30%) | | weighted at 20%) | Earnings per Share Growth (20%)(2) | | 4.0% | | 8.0% | | 12.0% | | -5.7% | | 14.4% | | | Relative Organic Volume Growth (40%)(3) | | -1.0% | | 0.5% | | 2.0% | | 2.9% | | 0.2% | | | Return on Invested Capital (20%) | | 18.0% | | 20.0% | | 23.0% | | 17.1% | | 19.5% | | | Free Cash Flow Conversion (20%) | | 95% | | 100% | | 105% | | 132% | | 101% | | | | | | | | | | | | | | | | 2019 PSA (2019-2021 measurement period) | | | | | | | | | Three-year Performance Period – Actual Performance Level Achieved(1) | | | Performance Levels | | 2019 (Year 1; | | 2020 (Year 2; | | 2021 (Year 3; | Performance Measures and Weighting | | Threshold | | Target | | Maximum | | weighted at 50%) | | weighted at 30%) | | weighted at 20%) | Earnings per Share Growth (20%)(2) | | 4.0% | | 8.0% | | 12.0% | | -6.9% | | -5.7% | | 14.4% | Relative Organic Volume Growth (40%)(3) | | -1.0% | | 0.5% | | 2.0% | | -2.8% | | 2.9% | | 0.2% | Return on Invested Capital (20%) | | 20.0% | | 22.0% | | 25.0% | | 22.9% | | 17.1% | | 19.5% | Free Cash Flow Conversion (20%) | | 95% | | 100% | | 105% | | 106% | | 132% | | 101% |
| | (1) | Results reflect certain adjustments that the Committee believed were appropriate to better reflect the Company’s performance during the performance period. See Appendix A to this Proxy Statement for a reconciliation of earnings per share, operating margin performance, free cash flow, and free cash flow conversion to our results for the most directly comparable financial measures as reported under GAAP, and the calculation of return on invested capital. |
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Table of Contents | | (2) | For purposes of calculating Earnings per Share Growth for any given fiscal year, the baseline earnings per share figure is set equal to the final adjusted earnings per share figure used to calculate the Earnings per Share Growth attainment for the preceding year. As a result, any increase in earnings per share attributable to adjustments in one fiscal year necessarily will make it more difficult for the Company to achieve its Earnings per Share Growth target in the following year. | | | (3) | The reported level of performance achieved for Relative Organic Volume Growth has been determined, in part, using Worldwide IPI for each relevant period, as reported by IHS Markit on January 18, 2022. The final performance level achieved may vary based on changes in reported Worldwide IPI for the relevant period. |
Performance share accruals based on 2021 performance The table below shows the number of shares of 3M common stock that were accrued (excluding dividend equivalents) for the outstanding performance share awards held by each Named Executive Officer based on the Company’s performance during 2021. Name | | Performance Share Award | | Target Number of Performance Shares | | Fraction of Each Target Performance Share Accrued Based on 2021 Performance | | Total Number of Shares Accrued Based on 2021 Performance(1) | | Market Value of Shares Accrued Based on 2021 Performance(2) ($) | Michael F. Roman | | 2021 PSA | | 29,761 | | 0.636 | | 18,927 | | 3,362,067 | | | 2020 PSA | | 32,676 | | 0.340 | | 11,096 | | 1,970,958 | | | 2019 PSA | | 24,098 | | 0.194 | | 4,685 | | 832,204 | | | | | | | | | Total | | 6,165,229 | Monish Patolawala(3) | | 2021 PSA | | 12,160 | | 0.636 | | 7,734 | | 1,373,748 | | | 2020 PSA | | 11,825 | | 0.340 | | 4,015 | | 713,221 | | | | | | | | | Total | | 2,086,969 | Ashish K. Khandpur | | 2021 PSA | | 5,899 | | 0.636 | | 3,751 | | 666,313 | | | 2020 PSA | | 7,412 | | 0.340 | | 2,516 | | 446,995 | | | 2019 PSA | | 8,425 | | 0.194 | | 1,639 | | 291,099 | | | | | | | | | Total | | 1,404,407 | Mojdeh Poul | | 2021 PSA | | 5,899 | | 0.636 | | 3,751 | | 666,313 | | | 2020 PSA | | 7,616 | | 0.340 | | 2,585 | | 459,260 | | | 2019 PSA | | 5,467 | | 0.194 | | 1,063 | | 188,886 | | | | | | | | | Total | | 1,314,459 | Michael G. Vale | | 2021 PSA | | 7,668 | | 0.636 | | 4,877 | | 866,275 | | | 2020 PSA | | 7,412 | | 0.340 | | 2,516 | | 446,995 | | | 2019 PSA | | 5,467 | | 0.194 | | 1,063 | | 188,886 | | | | | | | | | Total | | 1,502,156 |
| | (1) | The amounts in this column reflect the number of shares accrued (excluding dividend equivalents) based on, among other things, Worldwide IPI for the 2021 calendar year, as reported by IHS Markit on January 18, 2022. The final number of shares accrued may vary in the event of changes in Worldwide IPI reported by IHS Markit. Due to rounding, the numbers shown in this column may not equal the result obtained by multiplying the Target Number of Performance Shares by the Shares Accrued Per Target Performance Share Based on 2021 Performance. | | | (2) | Represents the closing price of a share of 3M common stock on the NYSE for December 31, 2021 ($177.63), multiplied by the total number of shares accrued (before rounding and excluding dividend equivalents) based on the Company’s 2021 performance. | | | (3) | Mr. Patolawala joined the Company and was appointed its Chief Financial Officer effective July 1, 2020. |
Although shares of 3M common stock are accrued annually for each outstanding performance share award, an executive may forfeit all or a portion of the shares otherwise issuable pursuant to his or her award if he or she does not remain employed by the Company throughout the entire three-year performance period. For additional information concerning the manner in which the compensation of the Named Executive Officers is determined and the role of the Compensation and Talent Committee and its advisors, see “Section II: How we determine executive compensation—Roles and responsibilities” on page 66. 78 3M Company
Table of Contents Section V: 2021 compensation decisions and performance highlights Michael F. Roman Chairman of the Board and Chief Executive Officer Selected 2021 performance highlights ● | Building from experience of 2020, continued to provide substantive leadership to 3M in the face of continued global challenges, navigating the ongoing pandemic, rapidly changing demand for N95 respirators, inflation, and supply chain disruptions while still delivering above-market growth performance with organic sales growth of 8.8 percent. | | | ● | Led comprehensive review for value creation and growth across portfolios, including reprioritizing capital and accelerating support for innovation in high growth markets, entering into definitive agreements to separate the Food Safety business and combine it with Neogen Corporation through a Reverse Morris Trust transaction, and successfully completed the operational separation of the Company’s former Drug Delivery Systems business. | | | ● | Executed on and exceeded net cost savings for the Company’s restructuring efforts announced in December 2020 and continued to advance 3M’s operating model for efficiency and growth. | | | ● | Led efficient operation of 3M resulting in adjusted earnings per share growth of 14 percent year-on-year and adjusted free cash flow conversion of 101 percent and strong financial returns.* | | | ● | Set and announced new sustainability goals to achieve carbon neutrality, reduce water use, improve water quality, and reduce use of plastics with accountability to targets established. | | | ● | Deepened 3M’s social justice commitments, delivering on our pledge to invest $50M over five years to address racial opportunity gaps, accelerating diverse supplier spend, and investing in STEM/skilled trades. Demonstrated transparency through the introduction of our first Diversity, Equity and Inclusion report and took action resulting in sustaining 3M’s employee inclusion index score, advancing representation in management globally and in underrepresented groups in the U.S., and sustaining 100 percent pay equity in the U.S. and achieving pay equity in key geographies. | | | ● | Continued the development of 3M’s senior leadership team, including the appointment of a new Group President and Chief Enterprise Operations Officer and a new Executive Vice President and Chief Information & Digital Officer, in addition to several internally promoted appointments. Delivered leadership development and talent pipeline goals and launched new learning content and tracks as part of a multi-year learning ecosystem investment. Introduced a new employee appreciation system (referred to as “Everyday Wins”) that encourages peer and leader appreciation consistently, globally. | | | * | See Appendix A to this Proxy Statement for a reconciliation of adjusted earnings per share growth and adjusted free cash flow conversion to our results for the most directly comparable financial measures as reported under GAAP. |
2021 Compensation decisions In February 2021, the Committee approved, and the independent members of the Board ratified, the following compensation actions with respect to Mr. Roman: ● | a 3.8 percent increase, effective April 1, 2021, to base salary (from $1,299,948 to $1,350,000) and target Total Cash Compensation (from $3,575,000 to $3,712,500); and | | | ● | the issuance of long-term incentive awards with an aggregate performance-adjusted target grant value of $10.5 million, which was split equally between performance shares and stock options. |
The increase to Mr. Roman’s target Total Cash Compensation was intended to progress Mr. Roman’s compensation closer to the market median. In February 2022, the Committee approved, and the independent members of the Board ratified, a 2021 AIP payout for Mr. Roman in the amount of $3,131,774, which represented 133.8 percent of his target. See “Section IV: Incentive compensation attainments and awards — 2021 AIP attainments and payouts” beginning on page 74 for more information. 2022 Proxy Statement 79
Table of Contents Monish Patolawala Executive Vice President, Chief Financial and Transformation Officer Selected 2021 performance highlights ● | Accelerated improvements in operating rigor, ensuring visualization of data to drive to root cause of challenges and problem solving, proactive daily management to minimize surprises and navigation of trade-offs, driving growth and efficiency. | ● | Advanced organic capital allocation to prioritize investments in infrastructure, ESG and higher growth priorities. | ● | Expanded role with new leadership responsibilities for information technology/digital and business development, refreshing our technology transformation roadmap, advancing our enterprise resource planning (ERP) solution, and unlocking value in our portfolio as we entered into definitive agreements to separate the Food Safety business and combine it with Neogen Corporation through a Reverse Morris Trust transaction. | ● | Maintained capital allocation discipline and strong capital structure with continued proactive focus and discipline for free cash flow conversion, improved working capital efficiency along with the management of indirect taxes, cash tax optimization and others. | ● | Drove speed and agility through structural changes, and applied lean practices to eliminate waste in key process cycle times. | ● | Further advanced 3M’s view on end-market strengths and how 3M can win in these important areas. | ● | Built financial literacy acumen through educational podcast series on financial topics, and engagement across the organization in Town Halls and other communication forums, connecting priorities and actions to financial outcomes for our stakeholders. |
Compensation decisions In February 2021, the Committee approved the following compensation actions with respect to Mr. Patolawala in recognition of his exceptional performance in 2020: ● | a two percent increase, effective April 1, 2021, to base salary (from $885,000 to $902,700) and target Total Cash Compensation (from $1,770,000 to $1,805,400); and | ● | the issuance of long-term incentive awards with an aggregate performance-adjusted target grant value of $4,290,000, which was split 50 percent performance shares, 25 percent restricted stock units and 25 percent stock options. |
In October 2021, in connection with a significant expansion of Mr. Patolawala’s duties and responsibilities to include the Company’s business transformation efforts, the Committee approved a 20 percent increase, effective October 20, 2021, to base salary (from to $902,700 to $1,083,240) and target Total Cash Compensation (from $1,805,400 to $2,166,480) to better align that portion of his compensation with the breadth of the duties and responsibilities that accompany his expanded role. Given the significant expansion of Mr. Patolawala’s duties and responsibilities, the vital importance of achieving success with the Company’s ongoing global business transformation efforts, and the strong desire to retain a proven top performing business leader with business transformation experience through a critical, transformative period for 3M, the Committee also approved, effective November 1, 2021, a special restricted stock unit award for Mr. Patolawala with a target grant value of $2,500,000. The special restricted stock unit award will vest in a single installment on the third anniversary of the grant date; provided, that Mr. Patolawala remains in employment with 3M through such date. In February 2022, the Committee approved a 2021 AIP payout for Mr. Patolawala in the amount of $1,514,739, which represented 160.6 percent of his target. See “Section IV: Incentive compensation attainments and awards — 2021 AIP attainments and payouts” beginning on page 74 for more information.
Table of Contents Ashish K. Khandpur Group President, Transportation and Electronics Business Group Selected 2021 performance highlights ● | Despite headwinds in auto unit builds and electronics supply chain disruptions, led Transportation and Electronics Business Group to grow above the Business Composite Index (BCI) (a synthetic market growth rate based on 3M’s end-market exposure) and win market share. | ● | Accelerated investment and innovations in growth platforms of 3M’s Transportation and Electronics Business Group (including auto electrification, semiconductors, and data center/5G) that led to significant total sales in 2021 and built relevance and scale for future market growth. | ● | Made strong progress on global days inventory outstanding (DIO) to accelerate turns and support free cash flow conversion. | ● | Prioritized customer experience improvement and strengthened relationships with key customers. | ● | Supported social justice initiative to advance urban safety and mobility, with a focus on infrastructure improvements and traffic safety where underrepresented and under-resourced populations are disproportionately at risk. | ● | Demonstrated continued focus on advancing diverse, global talent through personal mentoring, employee resource network sponsorship and key leadership appointments. |
Compensation decisions In February 2021, the Committee approved the following compensation actions with respect to Mr. Khandpur: ● | a 5.5 percent increase, effective April 1, 2021, to base salary (from $706,434 to $745,566) and target Total Cash Compensation (from $1,307,000 to $1,379,400); and | ● | the issuance of long-term incentive awards with an aggregate performance-adjusted target grant value of $2,081,000, which was split 50 percent performance shares, 25 percent restricted stock units and 25 percent stock options. |
The increase to Mr. Khandpur’s target Total Cash Compensation was intended to progress Mr. Khandpur’s compensation closer to the market median. In February 2022, the Committee approved a 2021 AIP payout for Mr. Khandpur in the amount of $938,589, which represented 150.1 percent of his target. See “Section IV: Incentive compensation attainments and awards — 2021 AIP attainments and payouts” beginning on page 74 for more information.
Table of Contents Mojdeh Poul Group President, Health Care Business Group Selected 2021 performance highlights ● | Delivered high single-digit, above-market growth and expanded operating margins, through agile actions maximizing business results - despite depressed levels of surgical procedures globally, N95 demand declines, and global supply chain challenges. | ● | Drove impactful changes across 3M’s Health Care portfolio to unlock value, with the announced separation of 3M’s Food Safety business along with the continued integration, growth, and operational efficiencies driven in the Acelity and M*Modal businesses. | ● | Accelerated organic growth through disciplined resource and capital allocation to advance growth portfolios and high impact innovation. Strong 2021 sales growth from new products, including highly successful new product introductions in oral care, biopharma filtration, and food safety, with demand outpacing initial estimates. | ● | Instituted business building steering committee within 3M’s Health Care business, accelerating key programs in biopharma, healthcare information technology, and advanced wound care, along with stepped-up focus on growth investments in China. | ● | Initiated expansion of 3M’s new Digital Science Community capabilities in Ireland beyond healthcare information technology and into digital wound care and food safety connected solutions. | ● | Led social justice initiative to advance health equity, including partnering with a Minnesota coalition of 12 dental organizations and clinics for care access expansion to under-served communities, partnerships with academic institutions, and deploying 3M employee volunteer programs focused on addressing healthcare disparities in underrepresented groups within the communities we serve. | ● | Recognized by Health Technology Report as one of the “Top 25 Women Leaders in Medical Devices of 2021”. |
Compensation decisions In February 2021, the Committee approved the following compensation actions with respect to Ms. Poul: ● | a 5.6 percent increase, effective April 1, 2021, to base salary (from $706,325 to $745,566) and target Total Cash Compensation (from $1,306,800 to $1,379,400); and | ● | the issuance of long-term incentive awards with an aggregate target grant value of $2,081,000, split 50 percent performance shares, 25 percent restricted stock units and 25 percent stock options. |
The adjustments to Ms. Poul’s base salary and target Total Cash Compensation were intended to progress her compensation closer to the market median. At the time of her appointment to the position of Group President, Health Care Business Group, in April 2019, Ms. Poul’s base salary and target Total Cash Compensation were set below the median paid to executives serving in similar positions at companies in the executive compensation peer group. Following completionIn October 2021, the Committee approved a 5.3 percent increase, effective November 1, 2021, to base salary (from $745,566 to $784,806) and target Total Cash Compensation (from $1,379,400 to $1,452,000). The increase was designed to bring Ms. Poul’s target Total Cash Compensation up to the median paid to executives serving in similar positions at companies in the executive compensation peer group. In February 2022, the Committee approved a 2021 AIP payout for Ms. Poul in the amount of $1,229,041, which represented 194.8 percent of her target. See “Section IV: Incentive compensation attainments and awards — 2021 AIP attainments and payouts” beginning on page 74 for more information.
Table of Contents Michael G. Vale Group President, Safety and Industrial Business Group Selected 2021 performance highlights ● | Led efforts of the Safety and Industrial business to achieve volume growth at or above the 2021 Industrial Production Index, both globally and by area. | ● | Navigated with agility, the changing demands on N95 respirator production to ensure supply and respond to changing demands through new variants of COVID impacting requirements across geographies. | ● | Advanced digital transformation within Safety and Industrial Business Group focused on internal analytics, customer experience, connected platforms, and global connectivity. | ● | Delivered on portfolio optimization actions within the business, operations and other structural efficiencies. | ● | Led significant improvements in quality and process control systems. | ● | Continued to optimize and increase impact of marketing through key transformation programs and operating model alignment. | ● | Drove social justice initiative to promote skills trades as a viable career that provides a living wage, focusing on underrepresented students for vocational training for skill trade occupations that 3M and its customers are trying to fill. |
Compensation decisions In February 2021, the Committee approved the following compensation actions with respect to Mr. Vale: ● | a 4.6 percent increase, effective April 1, 2021, to base salary (from to $745,890 to $780,490) and target Total Cash Compensation (from $1,380,000 to $1,444,014); and | ● | the issuance of long-term incentive awards with an aggregate target grant value of $2,703,300, split equally between performance shares and stock options. |
The increase to Mr. Vale’s target Total Cash Compensation was intended to progress Mr. Vale’s compensation closer to the market median. In February 2022, the Committee approved a 2021 AIP payout for Mr. Vale in the amount of $690,948, which represented 105.3 percent of his target. See “Section IV: Incentive compensation attainments and awards — 2021 AIP attainments and payouts” beginning on page 74 for more information.
Table of Contents Section VI: Ways in which we address risk and governance Stock ownership guidelines The Company maintains robust stock ownership guidelines that are intended to align the financial interests of 3M’s Section 16 officers with those of its work, FW Cook informedshareholders. The table below shows the Compensation Committeestock ownership guideline for each Named Executive Officer and their compliance status as of December 31, 2021. Name | | Multiple of Measurement Date Base Salary Required | | Compliance Status as of December 31, 2021(1) | | | | Percentage of Named Executive Officers in compliance with the Company’s stock ownership guidelines as of December 31, 2021: 100% | Michael F. Roman(2) | | 6x | | In compliance | | | | Monish Patolawala(3) | | 3x | | In compliance | | | | Ashish K. Khandpur | | 3x | | In compliance | | | | Mojdeh Poul(4) | | 3x | | In compliance | | | | Michael G. Vale | | 3x | | In compliance | | | |
(1) | In accordance with the terms of the stock ownership guidelines, the number of shares required to be beneficially owned by each Named Executive Officer (other than Mr. Patolawala) in order to maintain compliance was most recently recalculated as of December 31, 2019, using the closing price of a share of 3M common stock on the NYSE for December 31, 2019. Although each such Named Executive Officer has until December 31, 2021 or later to acquire beneficial ownership of any additional shares required as a result of the recalculation, each such individual beneficially owned a sufficient number of shares on December 31, 2021, to comply. | (2) | As a result of Mr. Roman’s appointment to the position of Chief Executive Officer, effective July 1, 2018, his required ownership level increased from a multiple of one times his annual base salary to a multiple of three times his annual base salary. Although Mr. Roman has until June 30, 2023, to acquire beneficial ownership of a sufficient number of shares to comply with the new ownership level required, he beneficially owned a sufficient number of shares on December 31, 2021, to comply. | (3) | At the time Mr. Patolawala joined the Company as its Chief Financial Officer, effective July 1, 2020, he became subject to a stock ownership requirement of three times his annual base salary. Although Mr. Patolawala has until June 30, 2025, to acquire beneficial ownership of a sufficient number of shares to comply with the ownership level required, he beneficially owned a sufficient number of shares on December 31, 2021, to comply. | (4) | As a result of Ms. Poul’s appointment to the position of Group President, Health Care Business Group (then Executive Vice President, Health Care Business Group), effective July 1, 2018, her required ownership level increased from a multiple of one times her annual base salary to a multiple of three times her annual base salary. Although Ms. Poul has until June 30, 2023, to acquire beneficial ownership of a sufficient number of shares to comply with the new ownership level required, she beneficially owned a sufficient number of shares on December 31, 2021, to comply. |
Calculation of Required Ownership. The number of shares required to be beneficially owned in order to comply with the guidelines is determined by dividing the specified multiple of the executive’s annual base salary on the calculation date by the closing trading price of 3M common stock on such date. Calculation Dates. The number of shares required to comply with the guidelines is calculated (or recalculated) on each of the following: ● | the date an executive first becomes subject to the guidelines; | ● | the date an executive’s target ownership multiple increases or decreases due to a change in position; and | ● | every third anniversary of December 31, 2019. |
Grace Period. Each covered executive is expected to attain beneficial ownership of the required number of shares of 3M stock by the later of the fifth anniversary of his or her appointment to the position triggering the calculation date or, if an executive’s required ownership level increases as a result of a triennial recalculation, the third anniversary of the calculation date. Shares Counted. For purposes of determining compliance with the stock ownership guidelines, the following shares are considered to be beneficially owned by the covered executive: ● | shares owned directly by a covered executive or by members of the covered executive’s immediate family; | ● | shares owned indirectly through a covered executive’s account in the Company’s 401(k) plan or another deferred compensation plan; | ● | outstanding shares of restricted stock owned by a covered executive; and | ● | shares underlying outstanding restricted stock units held by a covered executive. |
Stock Holding Requirements. If a covered executive is not making adequate progress to meet the specified level of ownership by the end of the grace period, the guidelines provide that maintenancehe or she must hold a sufficient number of formal severance arrangements for some or allthe after-tax 3M shares received upon the next payout of performance shares to be on track to satisfy the required ownership level.
Table of Contents For more information concerning the 3M stock ownership of the Named Executive Officers, see “Security ownership of management” beginning on page 108. Prohibition of hedging, pledging, and other actions The Company’s stock trading policies prohibit the Company’s directors and executive officers from (1) purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of the Company’s common stock, including prepaid variable forward contracts, equity swaps, collars, and exchange funds; (2) engaging in short sales related to the Company’s common stock; (3) placing standing orders; (4) maintaining margin accounts; and (5) pledging 3M securities as collateral for a loan. All transactions in 3M securities by directors and executive officers must be pre-cleared with the Company’s Legal Affairs department. | | ● No hedging ● No short sales ● No standing orders ● No margin accounts ● No pledging |
Severance benefits The 3M Executive Severance Plan provides separation payments and benefits to certain U.S. executives, including the Named Executive Officers, in the event of a qualifying termination of their executives was a common practice among executive peer group members. Based uponemployment. Among other things, the results of its analysis, FW Cook recommended that the Committee consider implementing a new executive severance plan in orderis intended to support talent recruitment and retention objectives (especially at times when there are uncertainties around restructurings and reductions in force) and to provide a consistent approach to executive departures. With FW Cook’s assistance, the Committee then discussed the pros and cons associated with adoption of a formal severance plan and other related issues over the course of the next nine months, including the benefits that a formal plan would provide the Company, the scope of eligible employees, the various termination scenarios that would be covered, and the compensation and benefits that would be offered. After considering the issues, the Committee recommended that the Board adopt a new 3M Executive Severance Plan to provide separation pay and benefits to certain U.S. employees (including each of the Named Executive Officers) in the event of a qualifying termination of employment. Upon the Committee’s recommendation, the independent members of the Board of Directors unanimously approved the 3M Executive Severance Plan, which became effective on February 3, 2020. Additional detailsinformation concerning the benefits made available under the planSeverance Plan and the circumstances under which benefits will be made available can be found under “Rights and“Potential payments upon a qualifying termination under the severance plan”or change in control” beginning on page 85.96. Clawback policy and other remedial actions Separation pay
In 2019, we entered into an agreement with Dr. DelgadoClawback policy. The Company’s Board of Directors has adopted a policy under which he received $1,750,000 uponit is authorized to require reimbursement of certain amounts provided to an executive, as described below.
Potential clawback triggering events | | Amounts the Board is authorized to recoup | Issuance of noncompliant financial reports. 3M’s issuance of a financial report that, due to the covered executive’s misconduct, is materially noncompliant with Federal securities laws | | All profits realized by the covered executive on the sale of Company securities during the 12-month period following the issuance of the noncompliant financial report | Material restatement – Misconduct. 3M’s filing of a material restatement of the Company’s financial statements with the Securities Exchange Commission that is due to a covered executive’s misconduct or failure of risk management | | All annual and long-term incentive compensation in excess of amounts that would have been provided based on the restated financial results | Material restatement – No misconduct. 3M’s filing of a material restatement of the Company’s financial statements with the Securities Exchange Commission that is not due to a covered executive’s misconduct or failure of risk management | | Annual and long-term incentive compensation paid or provided during the three years prior to the date on which the Company commences steps that lead to the filing of the material restatement in excess of amounts that would have been provided based on amended financial statements | Significant misconduct. An act of misconduct by the covered executive that has or might reasonably be expected to cause significant financial or reputational harm to 3M | | Annual incentive payments and other amounts paid or provided to the covered executive on or after May 7, 2018, that would not have been awarded or earned if the circumstances surrounding the triggering event had been known to the Board of Directors | Significant risk-management failure. Improper or grossly negligent failure of a covered executive, including in a supervisory capacity, to identify, escalate, monitor or manage, in a timely manner and as reasonably expected, risks material to the Company, which has or might reasonably be expected to cause significant financial or reputational harm to 3M | | Annual incentive payments and other amounts paid or provided to the covered executive on or after May 7, 2018, that would not have been awarded or earned if the circumstances surrounding the triggering event had been known to the Board of Directors |
Other remedial actions. Whether or not an executive’s actions trigger a potential clawback, 3M also may take other remedial actions to appropriately address employee conduct that is considered detrimental to the Company’s separation of his employment without cause and his execution of a release of all claims against the Company and its affiliates. In accordance with the terms of the applicable plans and award agreements, Dr. Delgado remained eligible to receive a prorated annual incentive payment for 2019 based upon 3M’s actual performance and continues to vest in his outstanding stock options and performance shares, except that his 2019 performance shares were prorated basedCompany. Depending on the portion of the year worked. Dr. Delgado remains subject to existing non-competition, non-solicitation, and confidentiality obligations. Competitive pay
We compete for executive talent in a global market. In order to ensure that we are providing Total Direct Compensation that is competitive, the Committee annually conducts a rigorous benchmarking process with the help of its independent compensation consultant, FW Cook. During this process, the Committee generally considers available pay data for two peer groups: an executive peer group and a survey peer group.
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Executive peer group
For 2019, the executive peer group consisted of the companies identified below (which remained the same as in the previous year), as recommended by the Committee’s independent compensation consultant and approved by the Committee. The companies in this executive peer group were selected because (1) their performance was monitored regularly by the same market analysts who monitor the performance of 3M (investment peers), and/or (2) they met criteria based on similarity of their business and pay models, market capitalization (based on an eight-quarter rolling average), and annual revenues and compete with 3M for talent or capital.
(Dollars in millions) | | | | Trailing Eight-Quarter | | | Latest Four Quarters Revenues | | | | Average Market Capitalization | | | General Electric Company | | $95,214 | | Johnson & Johnson | | $357,993 | Johnson & Johnson | | $82,059 | | The Procter & Gamble Company | | $258,771 | United Technologies | | $77,046 | | Medtronic plc | | $132,027 | The Procter & Gamble Company | | $69,594 | | Honeywell International, Inc. | | $116,945 | Caterpillar Inc. | | $53,800 | | United Technologies Corporation | | $109,629 | Deere & Company | | $38,880 | | 3M Company | | $106,606 | Honeywell International, Inc. | | $36,709 | | General Electric Company | | $ 91,417 | 3M Company | | $32,136 | | Danaher Corporation | | $ 91,106 | Medtronic plc | | $31,062 | | Caterpillar Inc. | | $ 77,953 | Johnson Controls International plc | | $24,080 | | Deere & Company | | $ 50,140 | Eaton Corporation plc | | $21,390 | | Illinois Tool Works Inc. | | $ 49,275 | Kimberly-Clark Corporation | | $18,450 | | Kimberly-Clark Corporation | | $ 43,137 | Emerson Electric Co. | | $18,376 | | Emerson Electric Co. | | $ 42,392 | Danaher Corporation | | $17,911 | | Eaton Corporation plc | | $ 35,127 | Illinois Tool Works Inc. | | $14,109 | | Johnson Controls International plc | | $ 31,431 | TE Connectivity Ltd. | | $13,269 | | TE Connectivity Ltd. | | $ 29,847 | Corning Incorporated | | $11,503 | | Corning Incorporated | | $ 23,820 | 75th Percentile | | $57,749 | | 75th Percentile | | $111,458 | Mean | | $38,966 | | Mean | | $ 96,313 | Median | | $27,571 | | Median | | $ 64,047 | 25th Percentile | | $18,260 | | 25th Percentile | | $ 40,576 | 3M Percentile Rank | | 55% | | 3M Percentile Rank | | 72% |
All data shown was obtained from Standard & Poor’s Capital IQ. Revenues are stated in millions for the latest four quarters disclosed as of February 28, 2020. Market Capitalizations are stated in millions as of February 28, 2020. Given the significant impact that the spinoffs of two independent public companies (Dow Inc. and Corteva, Inc.) had on the revenues and market capitalization of DuPont de Nemours, Inc. (formerly DowDuPont Inc.), the table above does notcircumstances, such other actions may include, information for such entity.
The Committee, with assistance from its independent compensation consultant, periodically reviews the composition of the executive peer group to determine whether any changes are appropriate. Following its review in August 2019, the Committee determined that no changes were needed at that time.
The Company receives pay data and information on the executive compensation practices at the companies in 3M’s executive peer group from Aon and FW Cook.
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Survey peer group
For 2019, there were approximately 250 comparator companies in the survey peer group. Although the number and identity of the companies varies from year to year and from survey to survey, each of the companies included in the survey peer group had annual revenue exceeding $10 billion. All of the companies in the survey peer group also participate in one or more executive compensation surveys obtained from three consulting firms (Aon, FW Cook, and Willis Towers Watson). Pay data for the survey peer group is statistically regressed to recognize the different sizes of the comparator companies (based on annual revenues) as compared to the size of 3M. The Committee does not review the identity of the companies in the survey peer group.
How the Committee establishes target compensation levels using competitive pay data
The Committee considers the pay data from the Peer Groups as a reference point when establishing the target Total Cash Compensation and the initial target value of long-term incentive compensation to be provided to our executives in any given year before consideration of individual circumstances. For each Named Executive Officer, the Committee’s general approach is to set such amounts at or very near the median for the corresponding items of compensation provided to similarly situated executives in the executive peer group. In situations where the Committee believes that there is insufficient market data for one or more positions, the Committee starts with the median amount for a similar position and adjusts that amount up or down (generally not more than 15 percent) to arrive at a number that it uses as the “median” for that position. The final amounts of target Total Cash Compensation established by the Committee for each executive may vary based on individual circumstances, but generally are set between 80 and 120 percent of the applicable median. When setting the target amounts for any individual executive, the Committee may consider the breadth and complexity ofwithout limitation, reducing the executive’s duties and responsibilities, limiting
Table of Contents the scores assigned to the executive for his or her leadership behaviors (e.g., customer focus, strategic mindset, operational leadership), the financial and operational performanceprogression of the business activities for whichexecutive’s career with 3M, reducing the executive is responsible, experience and time in their current position, internal pay equity, individual performance, and such other factors asexecutive’s base salary or target Total Cash Compensation, reducing the Committee determines to be appropriate. The pay data for the survey peer group is used by the Committee to assess the reasonablenesstarget grant value of the benchmarking results for each executive position benchmarked, helpingexecutive’s future long-term incentive compensation awards, causing the forfeiture of the executive’s outstanding long-term incentive awards, or terminating the executive’s employment with 3M. Assessment of risk related to ensurecompensation programs Following completion of a recent compensation risk assessment, the Company concluded that the Company’snone of its compensation objectives are being met. The Committee also uses informationpolicies and practices is reasonably likely to have a material adverse effect on the Company. In connection with this assessment, the Company completed an inventory of its executive and non-executive compensation practices at companies in the executive peer group when considering design changes toprograms globally, with particular emphasis on incentive compensation plans or programs. The Committee’s independent compensation consultant, FW Cook, conducted a risk assessment of the Company’s executive compensation program. Overall,policies and practices and reviewed the inventory of non-executive compensation programs compiled by management. The scope of the fiscal 2021 risk assessment generally was consistent with that conducted in recent years, through which the Company evaluated the primary components of its compensation plans and practices to identify whether those components, either alone or in combination, properly balanced compensation opportunities and risk.
The Company believes that useits overall cash versus equity pay mix, balance of shorter-term versus longer-term performance focus, balance of revenue- versus profit-focused performance measures, stock ownership guidelines, forfeiture provisions, and “clawback” policy all work together to provide our employees and executives with incentives to deliver outstanding performance to build long-term shareholder value, while taking only necessary and prudent risks. In this information fromregard, the Peer Groups enablesCompany’s strong ethics and its corporate compliance systems, which are overseen by the Audit Committee, further mitigate against excessive or inappropriate risk taking. In addition, the Company’s employee sales plans are designed under global guidelines, where oversight of plan terms, administration, and operation is strong and governance roles are segregated. Based on its consideration of these assessments, the Committee concurred with the Company’s determination that none of its compensation policies and practices is reasonably likely to create better alignment between executive pay and performance and to help ensure that 3M can attract and retain high-performing executive leaders.have a material adverse effect on the Company. Tally sheets The Committee periodically reviews a report comparing the amounts of compensation actually received by the Company’s Named Executive Officers to the amounts reported in its annual proxy statement and summarizing the compensation that would be owed to such individuals in the event of the termination of their employment under variouscertain circumstances. Reviewing this report helps the Committee better understand the Company’s potential obligations to the Named Executive Officers following the termination of their employment. It also helps the Committee better assess the risk of any of the Named Executive Officers leaving the Company prematurely because the Company is not providing sufficient retention incentives. Tax considerations Section 162(m) of the Internal Revenue Code disallows a tax deduction to public companies for compensation paid perin any given year in excess of $1 million to certain current and former executive officers of the Company (although there historically was an exception to this $1 million annual limitation for performance-based compensation ifmeeting certain requirements set forth in Section 162(m) and the applicable regulations were met and for compensation paid to a company’s chief financial officer and former executive officers). As a result, we expect that compensation paid per year to our Named Executive Officers and certain other current and former executive officers in excess of $1 million generally will not be deductible, subject to limited exceptions. Interpretations of and changes in applicable tax laws and regulations as well as other factors beyond the control of the Committee can affect deductibility of compensation, and there can be no assurance that compensation paid to our executive officers will be tax deductible. The Committee has in prior years considered the tax implications (including the potential lack of deductibility under Section 162(m)) when making compensation decisions but reserves the right to make future compensation decisions based on other factors. The Committee also reserves the right to make changes or amendments to existing compensation programs and arrangements, including changes or amendments that may result in the loss of tax deductions, if the Committee believes it is in the best interests of the Company and its shareholders to do so. Table of Contents
Meaning of certain terms
Except as otherwise noted, capitalized terms used in this Compensation Discussion and Analysis have the meaning specified below.
Adjusted Net Income | | means the net income of 3M as reported in its Consolidated Statement of Income, as adjusted to exclude special items. | AIP | | means the broad-based Annual Incentive Plan by which the Company provides annual incentive compensation to approximately 35,000 eligible employees. | Committee | | means the Compensation Committee of the Board of Directors of 3M Company. | Economic Profit | | means the adjusted net income of 3M (net income including non-controlling interest plus after-tax interest expense, as reported in its Consolidated Statement of Income) or a business unit operating income, plus interest income and minus income taxes, adjusted to exclude certain special items and the impact of acquisitions or divestitures in the year each acquisition or divestiture is completed (unless such acquisition or divestiture is included in the operating plan for the business unit), less a charge (10 percent in 2019) for the capital used to generate such operating income. The Economic Profit metric measured versus 3M’s prior year results is calculated using total Company average invested capital (equity plus debt, as reported in its Consolidated Balance Sheet), while the Economic Profit metric measured versus plan is calculated using only accounts receivable and inventories of such business unit as capital. | Earnings per Share (EPS) Growth | | means the percentage increase or decrease in 3M’s diluted earnings per share attributable to 3M common shareholders (as reported in its Consolidated Statement of Income) for a year as compared to the previous year, in each case, as adjusted to exclude certain special items. | Executive Plan | | means the Executive Annual Incentive Plan by which the Company provides annual incentive compensation to the Named Executive Officers as well as certain other executives. | Free Cash Flow Conversion | | means the sum of 3M’s operating cash flows minus capital expenditures, divided by net income, as adjusted to exclude certain special items. | GAAP | | means generally accepted accounting principles in the United States. | Local Currency Sales | | means the net sales of 3M (as reported in its Consolidated Statement of Income) or a business unit, in local currency, adjusted to exclude the impact of acquisitions or divestitures in the year each acquisition or divestiture is completed (unless such acquisition or divestiture is included in the operating plan for the business unit). | Organic Local Currency Sales Growth | | means the percentage amount by which 3M’s net sales (as reported in its Consolidated Statement of Income) for a year increase or decrease as compared to the previous year, in each case, adjusted to neutralize the sales attributable to acquisitions or divestitures for the 12-month period following the date each acquisition or divestiture is completed and to exclude currency effects. | Peer Groups | | means both 3M’s executive peer group and the survey peer group, each as described in the “Competitive pay” section of this Compensation Discussion and Analysis. | Relative Organic Volume Growth | | means the amount by which the percentage increase or decrease in 3M’s net sales (as reported in its Consolidated Statement of Income) for a year as compared to the previous year exceeds the percentage increase or decrease in worldwide real sales growth over the same period, as reflected in the Worldwide Industrial Production Index published by Global Insight. For this purpose, 3M’s net sales are adjusted to neutralize price and currency effects and, during the 12-month period following the date of each acquisition or divestiture, the sales attributable to such acquired or divested business or products. | Return on Invested Capital | | means the operating income of 3M (as reported in its Consolidated Statement of Income), plus interest income and minus income taxes, adjusted to exclude certain special items and the impact of acquisitions in the year each acquisition is completed, divided by the average invested capital (equity plus debt, as reported in its Consolidated Balance Sheet). | Total Cash Compensation | | means the total of an individual’s base salary and annual incentive compensation. | Total Direct Compensation | | means the total of an individual’s Total Cash Compensation plus the compensation value of their annual long-term incentive compensation awards (which is based on their grant date fair value as measured under accounting standards). |
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Section III: How we paid our named executive officers in 2019
2019 base salary and target total cash compensation
The Committee considers changes in the base salaries and target Total Cash Compensation of the Named Executive Officers at least annually. As part of its normal process to progress senior executives to a level of compensation that is commensurate with their responsibilities, the Committee also periodically considers adjustments to the base salaries and target Total Cash Compensation of senior executives whose rate of pay is set below the market median. All adjustments are made only after considering the most recent compensation data available to the Committee for executives with similar responsibilities at companies in the Peer Groups, each individual’s place in the target total cash compensation range for his or her position, and the individual’s job performance.
In February 2019, the Committee approved (and, in the case of Mr. Roman, the independent members of the Board ratified) the increases in the base salaries and target Total Cash Compensation shown below for the Named Executive Officers following completion of their annual performance evaluations. No changes were made to Mr. Thulin’s, Ms. Bushman’s, Dr. Delgado’s or Mr. Vale’s base salary or target Total Cash Compensation at that time. The adjustments to Mr. Roman’s compensation primarily were intended to progress his compensation closer to the market median.
Name | | Previous Base Salary ($) | | New Base Salary Effective 4/1/19 ($) | | % Increase | | Previous Target Total Cash Compensation ($) | | New Target Total Cash Compensation Effective 4/1/19 ($) | | % Increase | Michael F. Roman | | 1,199,952 | | 1,299,948 | | 8% | | 3,120,000 | | 3,380,000 | | 8% | Nicholas C. Gangestad | | 841,495 | | 870,105 | | 3% | | 1,682,989 | | 1,740,211 | | 3% | Ashish K. Khandpur | | 614,386 | | 638,962 | | 4% | | 1,136,700 | | 1,182,168 | | 4% |
As a result of these increases, Mr. Roman’s target Total Cash Compensation represented 90 percent of the median value of the corresponding compensation provided to chief executive officers at companies in the executive peer group, and the target Total Cash Compensation of Mr. Gangestad and Mr. Khandpur represented 102 percent and 94 percent, respectively, of the median value of the corresponding compensation provided to executives with similar responsibilities at companies in the executive peer group.
In March 2019, the Committee approved the adjustments in base salaries and target Total Cash Compensation shown below in connection with Mr. Khandpur’s appointment to Executive Vice President, Transportation and Electronics Business Group, and Mr. Vale’s appointment to Executive Vice President, Safety and Industrial Business Group. The adjustments were intended to better align the target Total Cash Compensation of each executive with the breadth of responsibilities accompanying their expanded roles after the realignment of the Company from five to four business groups.
Name | | Previous Base Salary ($) | | New Base Salary Effective 7/1/19 ($) | | % Increase | | Previous Target Total Cash Compensation ($) | | New Target Total Cash Compensation Effective 7/1/19 ($) | | % Increase | Ashish K. Khandpur | | 638,962 | | 706,434 | | 11% | | 1,182,168 | | 1,307,000 | | 11% | Michael G. Vale | | 710,703 | | 745,890 | | 5% | | 1,314,899 | | 1,380,000 | | 5% |
As a result of these increases, the target Total Cash Compensation of these Named Executive Officers represented 90 percent and 95 percent, respectively, of the median value of the corresponding compensation provided to executives with similar responsibilities at companies in the executive peer group.
2020 Proxy Statement | 65Executive compensation |
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2019 annual incentive
During 2019, the Committee provided the Named Executive Officers with the opportunity to earn short-term incentive compensation under the Executive Plan. Each Named Executive Officer’s target annual incentive for the year was equal to the difference between his or her target Total Cash Compensation and annual base salary. Each of the Named Executive Officers was assigned to an appropriate business unit (the entire Company, in some cases) established under the AIP for the purpose of measuring business performance during 2019 and converting that performance into a payout determined in accordance with the terms of the AIP. While none of the Named Executive Officers were covered by the AIP during 2019, the Committee rarely uses its discretion under the Executive Plan to pay the covered executives (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the AIP (including the individual performance multiplier).
The amounts payable under the AIP for 2019 were based on the following performance results for the Company and, as applicable, the respective business units to which the Named Executive Officers were assigned for all or part of the year:
| | Local Currency Sales (50%) | | Economic Profit (20%) | | Total 3M Economic Profit vs. Prior Year (30%) | | Weighted Average Payout % | (Dollar Amounts in Millions) Business Unit | | Plan | | Actual | | Actual vs. Plan | | Plan | | Actual | | Actual vs. Plan | | Prior Year | | Actual | Actual vs. Prior Year | | Based On Payout Curve | Total Company | | 33,402 | | 32,114 | | 96% | | 5,693 | | 4,808 | | 84% | | 3,752 | | 3,229 | 86% | | 62% | International Operations | | 20,293 | | 19,468 | | 96% | | 3,751 | | 3,208 | | 86% | | 3,752 | | 3,229 | 86% | | 75% | Transportation and Electronics Business Group | | 10,351 | | 9,754 | | 94% | | 2,063 | | 1,573 | | 76% | | 3,752 | | 3,229 | 86% | | 57% | Safety and Industrial Business Group | | 12,653 | | 11,910 | | 94% | | 2,166 | | 1,791 | | 83% | | 3,752 | | 3,229 | 86% | | 57% | Health Care Business Group | | 7,100 | | 6,927 | | 98% | | 1,481 | | 1,421 | | 96% | | 3,752 | | 3,229 | 86% | | 85% | Consumer Business Group | | 5,189 | | 5,512 | | 99% | | 750 | | 721 | | 96% | | 3,752 | | 3,229 | 86% | | 87% |
Since the Company satisfied the Executive Plan’s performance objective by earning Adjusted Net Income of $5.3 billion for 2019, the plan authorized the Committee to approve payments of annual incentive compensation to each Named Executive Officer equal to a maximum of one-quarter of one percent of such Adjusted Net Income ($13 million), subject to the Committee’s negative discretion to pay each covered executive any amount less than this maximum based on such factors as it deems relevant, including the goals set forth under the AIP. At its meeting in February 2020 and consistent with its past practice, the Committee approved (and with respect to Mr. Roman and Mr. Thulin, the independent members of the Board of Directors ratified) a payment to each executive equal to the amount such executive would have received had he or she been participating in the broad-based AIP (including the individual performance multiplier).
Name | | Target 2019 Annual Incentive* ($) | | Actual 2019 Annual Incentive ($) | | Payout as a % of Target | Michael F. Roman | | 2,040,051 | | 1,256,671 | | 62% | Inge G. Thulin | | 620,548 | | 382,259 | | 62% | Nicholas C. Gangestad | | 862,953 | | 531,579 | | 62% | Ashish K. Khandpur | | 581,003 | | 325,583 | | 56% | Julie L. Bushman | | 680,538 | | 507,681 | | 75% | Joaquin Delgado | | 294,066 | | 256,137 | | 87% | Michael G. Vale | | 626,632 | | 396,967 | | 63% |
* | These amounts are prorated to reflect the increases in Total Cash Compensation described above that resulted in corresponding increases (if any) in each individual’s target annual incentive compensation. The amounts shown for Mr. Thulin and Dr. Delgado have been prorated to reflect their separation from the Company, effective as of June 1, 2019, and July 1, 2019, respectively. |
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Long-term incentives — 2019 annual grants
After considering the most recent long-term incentive compensation data available from companies in the Peer Groups and after taking into account its evaluation of their individual performance during 2018 and Mr. Thulin’s anticipated retirement in 2019, the Committee approved (and in the case of Mr. Roman and Mr. Thulin, the independent members of the Board of Directors ratified) the following performance-adjusted target compensation values for the Named Executive Officers’ 2019 long-term incentive compensation awards. For ease of comparison, the table below also shows the performance-adjusted target compensation values of the Named Executive Officers’ 2018 long-term incentive compensation awards.
Name | | Performance- Adjusted Target Grant Value of 2018 Annual Awards ($) | | Performance- Adjusted Target Grant Value of 2019 Annual Awards ($) | Michael F. Roman | | 4,720,000* | | 10,000,000 | Inge G. Thulin | | 9,000,000* | | 4,687,000 | Nicholas C. Gangestad | | 4,673,500 | | 3,640,000 | Ashish K. Khandpur | | 2,268,290 | | 3,496,080 | Julie L. Bushman | | 2,913,400 | | 2,330,720 | Joaquin Delgado | | 2,268,290 | | 1,165,360 | Michael G. Vale | | 2,268,290 | | 2,268,290 |
* | Excludes the target grant value of special grants made in 2018 in connection with the changes in Mr. Roman’s and Mr. Thulin’s roles and responsibilities. If such values had been included, the performance-adjusted target grant value of Mr. Roman’s and Mr. Thulin’s 2018 annual awards would have been $7,220,000 and $9,750,000, respectively. |
Consistent with market practices at companies in the Peer Groups, during 2019, the Committee chose to deliver one-half of the performance-adjusted target grant value of the annual long-term incentive compensation awards provided to 3M’s Named Executive Officers (other than Mr. Thulin) in the form of stock options and the remaining one-half in the form of performance shares. Mr. Thulin’s awards were delivered approximately 33 percent in the form of stock options and 67 percent in the form of performance shares given the anticipated forfeiture of one half of such performance shares upon his anticipated retirement pursuant to the terms of the original grant agreements.
2019 stock options
Stock options granted to the Named Executive Officers in 2019 as part of their long-term incentive compensation have the following features:
• | an exercise price equal to the closing price of a share of 3M common stock on the NYSE for the date of grant; | • | a ratable three-year vesting schedule; and | • | a maximum term of 10 years. |
2019 performance share awards
Performance shares awarded in 2019 will result in the issuance of actual shares of 3M common stock to 3M’s Named Executive Officers if the Company achieves certain financial goals over the years 2019, 2020, and 2021. The number of shares of 3M common stock that will be issued for each 2019 performance share is linked to the Company’s performance as measured by the criteria of Earnings per Share Growth (20 percent weighting), Relative Organic Volume Growth (40 percent weighting), Return on Invested Capital (20 percent weighting), and Free Cash Flow Conversion (20 percent weighting). These performance criteria were selected because they are aligned with 3M’s operating plan and the financial objectives communicated to shareholders, and the Committee believes that they are important drivers of long-term shareholder value. Attainment of these four independent performance criteria is measured separately for each calendar year during the three-year measurement period, with each year weighted as follows: 2019 — 50 percent; 2020 — 30 percent; and 2021 — 20 percent. However, the targets by which the Company’s performance is measured do not change over the three-year performance period.
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Excluding shares issued pursuant to dividend equivalent rights, the actual number of shares of 3M common stock that will be delivered at the end of the three-year performance period ending on December 31, 2021, may be anywhere from 0 percent to 200 percent of the target number of performance shares awarded, depending on the performance of the Company during the performance period. However, an executive may forfeit all or a portion of such shares if he or she does not remain employed by the Company throughout the three-year performance period.
For awards tied to the achievement of performance goals over the years 2019, 2020, and 2021, the Committee approved the following targets for determining the number of shares of 3M common stock to be delivered for each performance share awarded, with the total number of shares actually delivered being the sum of the number of shares earned as a result of the Company’s achievement of each of the four financial goals, plus the number of shares issued pursuant to dividend equivalent rights granted with respect to the shares earned. In the event that the Company’s performance as measured by any of these performance criteria falls between any of the percentages listed below, the number of shares of 3M common stock earned will be determined by linear interpolation.
| | | | | Relative | | | | | | | | | | | | | | | | | | | % of | | Organic | | % of | | Return on | | % of | | | | % of | | Total % of | EPS | | Performance | | Volume | | Performance | | Invested | | Performance | | FCF | | Performance | | Performance | Growth | | Shares | | Growth | | Shares | | Capital | | Shares | | Conversion | | Shares | | Shares | below 4.0% | | 0% | | | below -1.0% | | 0% | | | below 20.0% | | 0% | | | below 95.0% | | 0% | | | 0% | | 4.0% | | 4% | | | -1.0% | | 8% | | | 20.0% | | 4% | | | 95.0% | | 4% | | | 20% | | 8.0% | | 20% | | | 0.5% | | 40% | | | 22.0% | | 20% | | | 100.0% | | 20% | | | 100% | | 12.0% or higher | | 40% | | | 2.0% or higher | | 80% | | | 25.0% or higher | | 40% | | | 105.0% or higher | | 40% | | | 200% | |
The above targets are not a prediction of how 3M will perform during the years 2019 through 2021 or any other period in the future. The sole purpose of these formulas, which were approved by the Committee in February 2019, is to establish a method for determining the number of shares of 3M common stock to be delivered for the performance share awards described above. 3M is not providing any guidance, nor updating any prior guidance, of its future performance with the disclosure of these formulas, and you are cautioned not to rely on these formulas as a prediction of 3M’s future performance.
Long-term incentives — all outstanding performance share awards
The Company’s annual award cycle and three-year performance periods result in an overlap of awards. For example, the performance goals for 2019 performance share awards relate to the years 2019, 2020, and 2021. Similarly, the performance goals for 2018 performance share awards relate to the years 2018, 2019, and 2020, and so on, as shown below. Performance against the goals established for each award are measured separately for each calendar year during the measurement period, with each year weighted as shown below in parenthesis. The Committee believes this structure reduces motivation to maximize performance in any one period by providing the highest-level rewards only by building sustainable long-term results.
Award | | 2017 | | 2018 | | | 2019 | | | 2020 | | 2021 | 2017 PSA | | Year 1 (50%) | | Year 2 (30%) | | | Year 3 (20%) | | | | | | 2018 PSA | | | | Year 1 (50%) | | | Year 2 (30%) | | | Year 3 (20%) | | | 2019 PSA | | | | | | | Year 1 (50%) | | | Year 2 (30%) | | Year 3 (20%) | | | | | | | | | | | | | |
Status of outstanding performance share awards
The Committee periodically reviews the Company’s performance against the goals established for each performance share award throughout the duration of its applicable measurement period. The table below summarizes the status of the different performance share awards held by the Named Executive Officers as of December 31, 2019.
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Award and Measurement Period | | Performance Measures and Weighting | | Performance Levels | | % of Shares Accrued per Performance Share at Specified Performance Levels | | Actual Performance Level Achieved*,** | | Shares Accrued per Performance Share Based on Actual Performance*** | | | Threshold | | Target | | Maximum | | Threshold | | Target | | Maximum | | | 2019 PSA | | Earnings per | | 4.0% | | 8.0% | | 12.0% | | 4% | | 20% | | 40% | | -6.9% (2019) | | 0.000 (2019) | | | Share Growth | | | | | | | | | | | | | | | | | 2019-2021 | | Relative Organic | | -1.0% | | 0.5% | | 2.0% | | 8% | | 40% | | 80% | | -2.9% (2019) | | 0.000 (2019) | Measurement | | Volume Growth | | | | | | | | | | | | | | | | | Period | | Return on | | 20.0% | | 22.0% | | 25.0% | | 4% | | 20% | | 40% | | 22.9% (2019) | | 0.130 (2019) | | | Invested Capital | | | | | | | | | | | | | | | | | | | Free Cash Flow | | 95.0% | | 100.0% | | 105.0% | | 4% | | 20% | | 40% | | 106.0% (2019) | | 0.200 (2019) | | | Conversion | | | | | | | | | | | | | | | | | | | 2019 PSA Total (as of December 31, 2019) | | 0.330 shares | 2018 PSA | | Earnings per | | 4.0% | | 8.0% | | 12.0% | | 4% | | 20% | | 40% | | -6.9% (2019) | | 0.000 (2019) | | | Share Growth | | | | | | | | | | | | | | 8.6% (2018) | | 0.115 (2018) | 2018-2020 | | Relative Organic | | -1.0% | | 0.5% | | 2.0% | | 8% | | 40% | | 80% | | -2.9% (2019) | | 0.000 (2019) | Measurement | | Volume Growth | | | | | | | | | | | | | | -1.0% (2018) | | 0.040 (2018) | Period | | Return on | | 18.0% | | 20.0% | | 23.0% | | 4% | | 20% | | 40% | | 22.9% (2019) | | 0.118 (2019) | | | Invested Capital | | | | | | | | | | | | | | 24.6% (2018) | | 0.200 (2018) | | | Free Cash Flow | | 95.0% | | 100.0% | | 105.0% | | 4% | | 20% | | 40% | | 106.0% (2019) | | 0.120 (2019) | | | Conversion | | | | | | | | | | | | | | 92.8% (2018) | | 0.000 (2018) | | | 2018 PSA Total (as of December 31, 2019) | | 0.593 shares | 2017 PSA | | Earnings per | | 4.0% | | 8.0% | | 12.0% | | 4% | | 20% | | 40% | | -6.9% (2019) | | 0.000 (2019) | | | Share Growth | | | | | | | | | | | | | | 8.6% (2018) | | 0.069 (2018) | | | | | | | | | | | | | | | | | 12.4% (2017) | | 0.200 (2017) | 2017-2019 | | Relative Organic | | -1.0% | | 0.5% | | 2.0% | | 8% | | 40% | | 80% | | -2.9% (2019) | | 0.000 (2019) | Measurement | | Volume Growth | | | | | | | | | | | | | | -1.0% (2018) | | 0.024 (2018) | Period | | | | | | | | | | | | | | | | 1.7% (2017) | | 0.360 (2017) | | | Return on | | 18.0% | | 20.0% | | 23.0% | | 4% | | 20% | | 40% | | 22.9% (2019) | | 0.079 (2019) | | | Invested Capital | | | | | | | | | | | | | | 24.6% (2018) | | 0.120 (2018) | | | | | | | | | | | | | | | | | 25.2% (2017) | | 0.200 (2017) | | | Free Cash Flow | | 95.0% | | 100% | | 105.0% | | 4% | | 20% | | 40% | | 106.0% (2019) | | 0.080 (2019) | | | Conversion | | | | | | | | | | | | | | 92.8% (2018) | | 0.000 (2018) | | | | | | | | | | | | | | | | | 97.3% (2017) | | 0.057 (2017) | | | 2017 PSA Total (as of December 31, 2019) | | 1.189 shares |
* | The reported level of performance achieved for Relative Organic Volume Growth has been determined, in part, using Worldwide IPI for each relevant period, as reported by Global Insights on January 15, 2020. The final performance level achieved may vary based on changes in reported Worldwide IPI for the relevant period. | ** | For purposes of calculating Earnings per Share Growth for any given fiscal year, the baseline earnings per share figure is set equal to the final adjusted earnings per share figure used to calculate the Earnings per Share Growth attainment for the preceding year. As a result, any increase in earnings per share attributable to adjustments in one fiscal year necessarily will make it more difficult for the Company to achieve its Earnings per Share Growth target in the following year. | *** | The number of shares of 3M common stock accrued with respect to each performance share subject to a performance share award is determined based on the Company’s performance, as adjusted for certain special items, against the specified goals established for each performance measure taking into account the weighting for the applicable performance year and measure. In the event that the Company’s performance for any given performance measure falls between any two performance levels, the number of shares of 3M common stock accrued is determined by linear interpolation. See Appendix A to this Proxy Statement for details concerning the adjustments made to certain metrics under the AIP and the outstanding performance share awards. |
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Performance share accruals based on 2019 performance
The table below shows the number of shares of 3M common stock that were accrued (excluding dividend equivalents) for the outstanding performance share awards held by each Named Executive Officer based on the Company’s performance during 2019.
Name | | Performance Share Award | | Target Number of Performance Shares | | Shares Accrued Per Target Performance Share Based on 2019 Performance | | Total Shares Accrued Based on 2019 Performance* | | Market Value of Shares Accrued Based on 2019 Performance** ($) | Michael F. Roman | | 2019 PSA | | 24,098 | | 0.330 | | 7,952 | | 1,402,952 | | | 2018 PSA | | 16,596 | | 0.238 | | 3,948 | | 696,427 | | | 2017 PSA | | 6,467 | | 0.159 | | 1,026 | | 181,032 | | | | | | | | | Total | | 2,280,411 | Inge G. Thulin | | 2019 PSA | | 7,531*** | | 0.330 | | 2,485 | | 438,386 | | | 2018 PSA | | 16,804 | | 0.238 | | 3,997 | | 705,101 | | | 2017 PSA | | 31,603 | | 0.159 | | 5,013 | | 884,455 | | | | | | | | | Total | | 2,027,942 | Nicholas C. Gangestad | | 2019 PSA | | 8,772 | | 0.330 | | 2,895 | | 510,694 | | | 2018 PSA | | 10,101 | | 0.238 | | 2,403 | | 423,900 | | | 2017 PSA | | 9,686 | | 0.159 | | 1,537 | | 271,128 | | | | | | | | | Total | | 1,205,722 | Ashish K. Khandpur | | 2019 PSA | | 8,425 | | 0.330 | | 2,780 | | 490,433 | | | 2018 PSA | | 4,903 | | 0.238 | | 1,166 | | 205,655 | | | 2017 PSA | | 3,689 | | 0.159 | | 586 | | 103,387 | | | | | | | | | Total | | 799,475 | Julie L. Bushman | | 2019 PSA | | 5,617 | | 0.330 | | 1,853 | | 326,956 | | | 2018 PSA | | 6,297 | | 0.238 | | 1,498 | | 264,273 | | | 2017 PSA | | 4,867 | | 0.159 | | 772 | | 136,264 | | | | | | | | | Total | | 727,493 | Joaquin Delgado | | 2019 PSA | | 1,405 | | 0.330 | | 463 | | 81,739 | | | 2018 PSA | | 4,903 | | 0.238 | | 1,166 | | 205,655 | | | 2017 PSA | | 5,974 | | 0.159 | | 948 | | 167,182 | | | | | | | | | Total | | 454,576 | Michael G. Vale | | 2019 PSA | | 5,467 | | 0.330 | | 1,804 | | 318,223 | | | 2018 PSA | | 4,903 | | 0.238 | | 1,166 | | 205,655 | | | 2017 PSA | | 6,138 | | 0.159 | | 974 | | 171,799 | | | | | | | | | Total | | 695,677 |
* | The amounts in this column reflect the number of shares accrued (excluding dividend equivalents) based on, among other things, Worldwide IPI for the 2019 calendar year, as reported by Global Insights on January 15, 2020. The final number of shares accrued may vary in the event of changes in Worldwide IPI reported by Global Insights. Due to rounding, the numbers shown in this column may not equal the result obtained by multiplying the Target Number of Performance Shares by the Shares Accrued Per Target Performance Share Based on 2019 Performance. See Appendix A to this Proxy Statement for a reconciliation of the adjusted earnings per share figures used to calculate the amounts shown above to the earnings per share figures determined in accordance with GAAP. | ** | Represents the closing price of a share of 3M common stock on the NYSE for December 31, 2019 ($176.42), multiplied by the total number of shares accrued (before rounding and excluding dividend equivalents) based on the Company’s 2019 performance. | *** | In accordance with the terms of the award, the target number of performance shares subject to Mr. Thulin’s 2019 performance share award was reduced based on his June 1, 2019, retirement. Prior to this reduction, the target number of performance shares subject to Mr. Thulin’s 2019 performance share award was 15,061. |
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Although shares of 3M common stock are accrued annually for each outstanding performance share award, an executive may forfeit all or a portion of the shares otherwise issuable pursuant to his or her award if he or she does not remain employed by the Company throughout the entire three-year performance period.
For additional information concerning the manner in which the compensation of the Named Executive Officers is determined and the role of the Compensation Committee and its advisors, see Section II of this Compensation Discussion and Analysis beginning on page 57.
Section IV: Ways in which we address risk and governance
Stock ownership guidelines
The Company maintains robust stock ownership guidelines that apply to all Section 16 officers of the Company and are designed to increase an executive’s equity stake in 3M and more closely align his or her financial interests with those of 3M’s shareholders. The table below shows the stock ownership guideline for each Named Executive Officer (other than Mr. Thulin and Dr. Delgado) and their compliance status as of December 31, 2019. As former employees, Mr. Thulin and Dr. Delgado are no longer subject to the Company’s stock ownership guidelines.
| | | | | | Percentage of Named Executive
Officers in compliance
with the Company’s stock
ownership guidelines as of
December 31, 2019:
100%
| | | Multiple of | | | | | | Measurement Date | | Compliance Status | | Name | | Base Salary Required | | as of December 31, 2019* | | Michael F. Roman | | 6x | | In compliance | | Nicholas C. Gangestad | | 3x | | In compliance | | Ashish K. Khandpur | | 3x | | In compliance | | Julie L. Bushman | | 3x | | In compliance | | Michael G. Vale | | 3x | | In compliance | |
* | In accordance with the terms of the stock ownership guidelines, the number of shares required to be beneficially owned by each Named Executive Officer in order to maintain compliance was most recently recalculated as of December 31, 2019, using the closing price of a share of 3M common stock on the NYSE for December 31, 2019. Although each such Named Executive Officer (other than Mr. Roman) has until December 31, 2022, to acquire beneficial ownership of any additional shares required as a result of the recalculation, each such individual beneficially owned a sufficient number of shares on December 31, 2019, to comply with the new ownership levels required. | ** | As a result of Mr. Roman’s appointment to the position of Chief Executive Officer and the resulting increase in his required level of ownership, effective July 1, 2018, from a multiple of three times his annual base salary to a multiple of six times his annual base salary, Mr. Roman has until June 30, 2023, to acquire beneficial ownership of any additional shares required as a result of the December 31, 2019, recalculation. Mr. Roman beneficially owned a sufficient number of shares on December 31, 2019, to comply with the new ownership level required. |
The stock ownership guidelines provide that the number of shares required to be beneficially owned by each covered executive will be calculated using such executive’s annual base salary at the time of his or her initial appointment to a Section 16 position and again at the time of a position change from one multiple level to another multiple level, and the fair market value of 3M common stock at that time. The guidelines also provide that the number of shares required to be beneficially owned by each executive will be recalculated every three years using his or her annual base salary and the fair market value of 3M common stock at the recalculation date. Pursuant to the terms of the guidelines, the next periodic recalculation date is scheduled to occur on December 30, 2022.
Each covered executive is expected to attain beneficial ownership of the number of shares of 3M stock determined by the guidelines within five years of his or her initial appointment to a position covered by the guidelines or a position change from one multiple level to another multiple level. The guidelines also provide that each covered executive whose required level of ownership increases as a result of a periodic recalculation will have three years from the recalculation date (or the balance of the five-year period since the date of their initial appointment or latest position change, if longer) to acquire beneficial ownership of any additional shares required as a result of the recalculation. However, if a covered executive is not making adequate progress to meet the required level of ownership within the applicable time period, the guidelines provide that he or she will be required to hold and not sell a sufficient number of the after-tax 3M shares received upon the next payout of performance shares to be on track to satisfy the required ownership level.
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For purposes of these guidelines, shares owned directly by a covered executive or by members of the covered executive’s immediate family, shares owned indirectly through a covered executive’s account in the Company’s 401(k) plan or another deferred compensation plan, outstanding shares of restricted stock owned by a covered executive, and shares represented by outstanding restricted stock units granted to a covered executive are all considered to be beneficially owned by the covered executive and are counted in determining attainment of the required beneficial ownership level.
For more information concerning the 3M stock ownership of the Named Executive Officers, see the section entitled “Security ownership of management” beginning on page 92 of this Proxy Statement.
Prohibition of hedging and pledging
The Company’s stock trading policies prohibits the Company’s directors and executive officers from (1) purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of the Company’s common stock, including prepaid variable forward contracts, equity swaps, collars, and exchange funds; (2) engaging in short sales related to the Company’s common stock; (3) placing standing orders; (4) maintaining margin accounts; and (5) pledging 3M securities as collateral for a loan. All transactions in 3M securities by directors and executive officers must be pre-cleared with the Company’s General Counsel.
Clawback policy
The Company’s Board of Directors has adopted a policy under which it is authorized to require reimbursement of certain cash and equity compensation provided to an executive if (1) 3M is required to make a material restatement of its financial statements, whether or not the result of misconduct by the executive or any other individual, (2) the executive commits an act of misconduct that causes, or might reasonably be expected to cause, significant financial or reputational harm to the Company, or (3) the executive fails to identify, escalate, monitor or manage, in a timely manner and as reasonably expected, risks material to the Company, which cause, or might reasonably be expected to cause, significant financial or reputational harm to the Company. The policy also authorizes the Company to require reimbursement of any profits the executive realizes on the sale of Company securities during the 12-month period following the issuance by the Company of a financial report that, due to the misconduct of the executive, is materially noncompliant with Federal securities laws. This policy applies to all senior executives of the Company, including all of the Named Executive Officers.
The Board of Directors continues to monitor regulatory developments relating to recoupment of incentive-based compensation and intends to further amend this policy, if necessary, to comply with any final regulations issued for the purpose of implementing the requirements of the Dodd-Frank Act.
Assessment of risk related to compensation programs
Following completion of a recent compensation risk assessment, the Company concluded that none of its compensation policies and practices is reasonably likely to have a material adverse effect on the Company. In connection with this assessment, the Company completed an inventory of its executive and non-executive compensation programs globally, with particular emphasis on incentive compensation plans or programs. The scope of the fiscal 2019 risk assessment generally was consistent with that conducted in recent years, including heightened attention on plan design, and whether the design, oversight, and controls in place have potential to create not only financial risk, but reputational risk as well. Based on this assessment, the Company evaluated the primary components of its compensation plans and practices to identify whether those components, either alone or in combination, properly balanced compensation opportunities and risk.
The Company believes that our overall cash versus equity pay mix, balance of shorter-term versus longer-term performance focus, balance of revenue versus profit focused performance measures, stock ownership guidelines, and “clawback” policy all work together to provide our employees and executives with incentives to deliver outstanding performance to build long-term shareholder value, while taking only necessary and prudent risks. In this regard, the Company’s strong ethics and its corporate compliance systems, which are overseen by the Audit Committee, further mitigate against excessive or inappropriate risk taking. In addition, our employee sales plans are designed under global guidelines, where oversight of plan terms, administration, and operation is stronger and governance roles are segregated.
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The Compensation Committee, with assistance from its independent compensation consultant, George B. Paulin of FW Cook, reviewed a risk assessment that Mr. Paulin conducted for the Committee on the Company’s executive compensation policies and practices. Based on its consideration of these assessments, the Committee concurred with the Company’s determination that none of its compensation policies and practices is reasonably likely to have a material adverse effect on the Company.
Compensation and Talent Committee report In accordance with the Securities and Exchange Commission’s disclosure requirements for executive compensation, the Compensation and Talent Committee of the Board of Directors of 3M Company (the “Committee”) has reviewed and discussed with 3M management the Compensation Discussion and Analysis. Based on this review and these discussions with 3M management, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the 20202022 Proxy Statement of 3M Company and 3M Company’s Annual Report on Form 10-K for the year ended December 31, 2019. 2021. Submitted by the Compensation and Talent Committee Pamela J. Craig James R. Fitterling Herbert L. Henkel, Chair Amy E. Hood
Muhtar Kent
Edward M. Liddy
Gregory R. Page Patricia A. Woertz
Compensation and Talent Committee interlocks and insider participation The members of the Compensation and Talent Committee are named in the section titled “Compensation and Talent Committee” on page 39 of this Proxy Statement.44. No members of the Compensation and Talent Committee were officers or employees of 3M or any of its subsidiaries during the year, were formerly 3M officers, or had any relationship otherwise requiring disclosure. 20202022 Proxy Statement | 7387 |
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Executive compensation tables 20192021 summary compensation table
The following table shows the compensation earned or received during 2019, 2018,2021, 2020, and 20172019 by each of 3M’s named executive officers (as determined pursuant to the Securities and Exchange Commission’s disclosure requirements for executive compensation in Item 402 of Regulation S-K). Name and Principal Position | | Year | | Salary ($) | | Bonus ($)(1) | | Stock Awards ($)(2) | | Option Awards ($)(3) | | Non-Equity Incentive Plan Compensation ($)(4) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | | All Other Compensation ($)(6) | | Total ($) | Michael F. Roman Chairman of the Board and Chief Executive Officer | | 2021 | | 1,337,487 | | — | | 5,250,138 | | 5,250,960 | | 3,131,774 | | 2,978,538 | | 251,687 | | 18,200,584 | | 2020 | | 1,299,948 | | — | | 5,000,082 | | 5,001,553 | | 1,582,901 | | 7,709,350 | | 106,513 | | 20,700,347 | | 2019 | | 1,249,568 | | — | | 5,000,094 | | 4,999,946 | | 1,256,671 | | 5,642,262 | | 173,025 | | 18,321,566 | Monish Patolawala(7)(8) Executive Vice President, Chief Financial and Transformation Officer | | 2021 | | 934,096 | | — | | 5,717,782 | | 1,072,700 | | 1,514,739 | | — | | 177,534 | | 9,416,851 | | 2020 | | 442,500 | | 700,000 | | 5,655,787 | | 812,409 | | 379,580 | | — | | 33,954 | | 8,024,230 | Ashish K. Khandpur Group President, Transportation and Electronics Business Group | | 2021 | | 735,783 | | — | | 1,560,977 | | 520,354 | | 938,589 | | 345,069 | | 65,889 | | 4,166,661 | | 2020 | | 692,848 | | — | | 1,134,184 | | 1,134,504 | | 270,855 | | 2,046,029 | | 46,219 | | 5,324,639 | | 2019 | | 683,422 | | — | | 1,748,103 | | 1,748,032 | | 325,583 | | 1,342,856 | | 46,535 | | 5,894,531 | Mojdeh Poul(8) Group President, Health Care Business Group | | 2021 | | 742,296 | | — | | 1,560,977 | | 520,354 | | 1,229,041 | | — | | 163,903 | | 4,216,571 | | 2020 | | 683,246 | | — | | 1,165,400 | | 1,165,730 | | 305,529 | | — | | 107,452 | | 3,427,357 | Michael G. Vale Group President, Safety and Industrial Business Group | | 2021 | | 771,840 | | — | | 1,352,712 | | 1,352,901 | | 690,948 | | 30,088 | | 76,363 | | 4,274,852 | | 2020 | | 745,890 | | — | | 1,134,184 | | 1,134,504 | | 845,395 | | 1,886,940 | | 78,283 | | 5,825,196 | | 2019 | | 737,093 | | — | | 1,134,348 | | 1,134,151 | | 396,967 | | 1,619,621 | | 60,282 | | 5,082,462 |
Name and Principal Position | | Year | | Salary ($) | | Stock Awards ($)(1) | | Option Awards ($)(2) | | Non-Equity Incentive Plan Compensation ($)(3) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | | All Other Compensation ($)(5) | | Total ($) | Michael F. Roman(6) Chairman of the Board, President and Chief Executive Officer | | 2019 | | 1,249,568 | | 5,000,094 | | 4,999,946 | | 1,256,671 | | 5,642,262 | | 173,025 | | 18,321,566 | | 2018 | | 1,049,976 | | 3,610,286 | | 3,610,217 | | 1,431,503 | | 3,020,986 | | 141,771 | | 12,864,739 | | 2017 | | 839,575 | | 1,227,825 | | 1,228,374 | | 1,090,797 | | 2,347,859 | | 70,788 | | 6,805,218 | Inge G. Thulin(7) Former Executive Chairman of the Board | | 2019 | | 416,667 | | 3,125,007 | | 1,562,023 | | 382,259 | | 2,689,641 | | 31,476 | | 8,207,073 | | 2018 | | 1,269,200 | | 3,750,032 | | 6,000,564 | | 1,877,798 | | — | | 632,492 | | 13,530,086 | | 2017 | | 1,526,595 | | 6,000,146 | | 6,002,785 | | 4,121,830 | | 2,175,108 | | 708,729 | | 20,535,193 | Nicholas C. Gangestad Senior Vice President and Chief Financial Officer | | 2019 | | 862,953 | | 1,820,102 | | 1,820,002 | | 531,579 | | 2,488,003 | | 60,357 | | 7,582,996 | | 2018 | | 830,995 | | 2,336,765 | | 2,336,984 | | 787,783 | | 1,384,479 | | 62,458 | | 7,739,464 | | 2017 | | 778,103 | | 3,339,178 | | 1,839,705 | | 1,110,975 | | 2,110,908 | | 68,372 | | 9,247,241 | Ashish K. Khandpur(8) Executive Vice President, Transportation and Electronics Business Group | | 2019 | | 683,422 | | 1,748,103 | | 1,748,032 | | 325,583 | | 1,342,856 | | 46,535 | | 5,894,531 | Julie L. Bushman(8) Executive Vice President, International Operations | | 2019 | | 800,502 | | 1,165,471 | | 1,165,366 | | 507,681 | | 1,982,778 | | 29,170 | | 5,650,968 | | 2018 | | 792,795 | | 1,456,748 | | 1,456,856 | | 649,048 | | 945,379 | | 38,525 | | 5,339,351 | Joaquin Delgado Former Executive Vice President, Consumer Business Group | | 2019 | | 368,892 | | 582,839 | | 582,700 | | 256,137 | | 1,155,625 | | 1,788,819 | | 4,735,012 | | 2018 | | 694,090 | | 1,134,260 | | 1,134,284 | | 532,836 | | 700,842 | | 101,075 | | 4,297,387 | | 2017 | | 680,383 | | 1,134,224 | | 1,134,687 | | 561,067 | | 1,174,715 | | 99,466 | | 4,784,542 | Michael G. Vale Executive Vice President, Safety and Industrial Business Group | | 2019 | | 737,093 | | 1,134,348 | | 1,134,151 | | 396,967 | | 1,619,621 | | 60,282 | | 5,082,462 | | 2018 | | 707,186 | | 1,134,260 | | 1,134,284 | | 533,871 | | 127,703 | | 65,850 | | 3,703,154 | | 2017 | | 693,221 | | 1,165,361 | | 1,165,908 | | 629,703 | | 980,555 | | 61,498 | | 4,696,246 |
FOOTNOTES TO 2021 SUMMARY COMPENSATION TABLE (1) | The amount in the Bonus column reflects the hiring bonus that Mr. Patolawala negotiated in connection with his commencement of employment with the Company. Although the entire amount of the hiring bonus is shown as 2020 compensation, the actual amount was payable in two installments as follows: $400,000 payable within 30 days of his start date and the remainder payable within 30 days of the first anniversary of his start date, assuming continued employment. | (2) | The amounts in the Stock Awards column reflect the aggregate grant date fair value of such awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures. Assumptions made in the calculation of these amounts are included in Note 18 to the Company’s audited financial statements for the fiscal year ended December 31, 2019,2021, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020.9, 2022. The amounts included in this column for the performance share awards made during 20192021 are calculated based on the probable satisfaction of the performance conditions for such awards. If the highest level of performance is achieved for these performance share awards, the maximum value of these awards at the grant date would be as follows: Mr. Roman — $10,000,188;$10,500,276; Mr. ThulinPatolawala — $6,250,014; Mr. Gangestad — $3,640,204;$4,290,292; Mr. Khandpur — $3,496,206;$2,081,286; Ms. BushmanPoul — $2,330,942; Dr. Delgado — $1,165,678;$2,081, 286; and Mr. Vale — $2,268,696.$2,705,424. |
Table of Contents | | (2)(3) | The amounts in the Option Awards column reflect the aggregate grant date fair value of such awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures. Assumptions made in the calculation of these amounts are included in Note 18 to the Company’s audited financial statements for the fiscal year ended December 31, 2019,2021, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020.9, 2022. | (3)(4) | The amounts in the Non-Equity Incentive Plan Compensation column reflect the annual incentive compensation earned by each individual during the year specified pursuant to the Company’s Executive Annual Incentive Plan. | (4)(5) | Except with respect to Mr. Thulin, theThe amounts in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column reflect the actuarial increase in the present value (if any) of each individual’s pension benefits under all defined benefit pension plans of the Company, determined using the same interest rate and mortality assumptions as those used for financial statement reporting purposes. See Note 13 to the Company’s audited financial statements for the fiscal year ended December 31, |
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| 2019, 2021, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020. Mr. Thulin commenced his pension benefits and as such, the December 31, 2019, value of his benefit under the Nonqualified Pension Plan was set equal to the gross amount of the payment he received in 2019 and the present value of his benefit under the Employee Retirement Income Plan was determined based on his final benefit amount and payment form selected.9, 2022. There were no above-market or preferential earnings on deferred compensation under the Company’s nonqualified deferred compensation programs. | (5)(6) | See the All Other Compensation table below for details of the amounts reported for 2019.2021. | (6)(7) | Mr. RomanPatolawala joined the Company and was appointed Senior Vice President and Chief ExecutiveFinancial Officer, effective July 1, 2018. Prior to that, Mr. Roman served as the Company’s Executive Vice President and Chief Operating Officer from 2017 to his appointment as Chief Executive Officer.2020. | (7) | Mr. Thulin served as the Company’s Executive Chairman from July 1, 2018, until his retirement on June 1, 2019. Prior to that, Mr. Thulin served as 3M’s Chairman of the Board, President and Chief Executive Officer from 2012 to his appointment as Executive Chairman in 2018. | (8) | No amounts are reported for Mr. Khandpur for the years 2017 and 2018,Patolawala or for Ms. BushmanPoul for the year 2017,2019, since they first became Named Executive Officers after those years.that year. |
20192021 all other compensation table
Name | | 401(k) Company Contributions ($)(1) | | VIP Excess Company Contributions ($)(2) | | Executive Life Insurance ($)(3) | | Financial Planning ($)(4) | | Personal Aircraft Use ($)(5) | | Security Systems/ Services ($)(6) | | Other ($) | | Total ($) | Michael F. Roman | | 4,875 | | 95,684 | | 23,760 | | 13,500 | | 112,863 | | 1,005 | | — | | 251,687 | Monish Patolawala | | 23,200 | | 126,798 | | 14,036 | | 13,500 | | — | | — | | — | | 177,534 | Ashish K. Khandpur | | 6,126 | | 35,024 | | 12,739 | | 12,000 | | — | | — | | — | | 65,889 | Mojdeh Poul | | 22,314 | | 115,416 | | 14,173 | | 12,000 | | — | | — | | — | | 163,903 | Mike G. Vale | | 7,971 | | 40,155 | | 14,737 | | 13,500 | | — | | — | | — | | 76,363 |
Name | | 401(k) Company Contributions ($)(1) | | VIP Excess Company Contributions ($)(2) | | Executive Life Insurance ($)(3) | | Financial Planning ($)(4) | | Personal Aircraft Use ($)(5) | | Security Systems/ Services ($)(6) | | Other ($)(7) | | Total ($) | Michael F. Roman | | 4,500 | | 52,462 | | 23,760 | | 15,132 | | 76,557 | | 614 | | — | | 173,025 | Inge G. Thulin | | 4,800 | | 13,176 | | — | | 13,500 | | — | | — | | — | | 31,476 | Nicholas C. Gangestad | | 5,394 | | 25,983 | | 15,480 | | 13,500 | | — | | — | | — | | 60,357 | Ashish K. Khandpur | | 6,246 | | 16,457 | | 11,832 | | 12,000 | | — | | — | | — | | 46,535 | Julie L. Bushman | | 6,300 | | — | | 8,194 | | 14,676 | | — | | — | | — | | 29,170 | Joaquin Delgado | | 5,934 | | 7,676 | | 11,709 | | 13,500 | | — | | — | | 1,750,000 | | 1,788,819 | Michael G. Vale | | 7,846 | | 26,175 | | 12,761 | | 13,500 | | — | | — | | — | | 60,282 |
FOOTNOTES TO 2021 ALL OTHER COMPENSATION TABLE (1) | The amounts shown reflect 3M matching and additional automatic contributions under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan. All eligible employees under this plan may receive 3M matching contributions on their pre-tax or Roth 401(k) contributions to the plan on up to five percent of their eligible pay. Eligible employees hired on or after January 1, 2009, also receive additional automatic 3M retirement income contributions equal to three percent of their eligible pay. | (2) | The amounts shown reflect 3M matching contributions under the VIP Excess Plan, a nonqualified defined contribution plan. Eligibility for this plan and its matchingthe Company contributions is limited to employees whose compensation exceeds a limit established by Federal income tax laws for tax-qualified defined contribution plans. The plan permits eligible employees to save additional amounts from their current cash compensation beyond the contribution limits established by Federal tax laws, and to receive Company matching contributions similar to the matching contributionsthose provided under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan. | (3) | The amounts shown reflect the amount of premiums paid by the Company on behalf of each individual with respect to their respective universal life orfor additional group term life insurance policiescoverage obtained for them under the Executive Life Insurance Plan. | (4) | These amounts reflect fees for personal financial planning and tax return preparation services paid by the Company on behalf of each individual. | (5) | This amount reflects the aggregate incremental cost to the Company for Mr. Roman’s personal use of corporate aircraft during 2019.2021. This aggregate incremental cost was calculated by combining the variable operating costs of such travel, including the cost of fuel, landing fees, parking fees, trip preparation fees, en route communication charges, en route navigation charges, on-board catering, and crew travel expenses. The Compensation and Talent Committee required Mr. Roman to use the corporate aircraft for all business and personal travel. | (6) | This amount reflects the expenses incurred by 3M during 20192021 for home security equipment and monitoring services at the personal residence of Mr. Roman. | (7) | The amount shown reflects the payment made to Dr. Delgado under the terms of a separation agreement. For more information concerning the arrangement with Dr. Delgado, see the section entitled “Separation pay” on page 61 of this Proxy Statement. |
Grants of plan-based awards The following table reflects the various equity and non-equity plan awards granted to the Named Executive Officers during 2019. With the exception of2021. Except for the annual incentive compensation earned by such Named Executive Officers under the Executive Annual Incentive Plan, all of the awards referred to in this table were granted under the 2016 Long-Term Incentive Plan. 20202022 Proxy Statement | 7589 |
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20192021 GRANTS OF PLAN-BASED AWARDS TABLE
| | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) | | Estimated Future Payouts Under Equity Incentive Plan Awards(3) | | All Other Stock Awards: Number of Shares | | All Other Option Awards: Number of Securities | | Exercise or Base Price of | | Grant Date Fair Value of Stock and | Name/ Award Type(1) | | Grant Date | | Approval Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | of Stock or Units (#)(4) | | Underlying Options (#)(5) | | Option Awards ($/Sh)(6) | | Option Awards ($)(7) | Michael F. Roman | | | | | | | | | | | | | | | | | | | | | | | | | PSA | | 03/01/21 | | 02/02/21 | | | | | | | | 5,952 | | 29,761 | | 59,522 | | | | | | | | 5,250,138 | Stock Option | | 02/02/21 | | 02/02/21 | | | | | | | | | | | | | | | | 207,302 | | 175.02 | | 5,250,960 | AIP | | n/a | | n/a | | 14,044 | | 2,340,638 | | 4,681,276 | | | | | | | | | | | | | | | Monish Patolawala | | | | | | | | | | | | | | | | | | | | | | | | | PSA | | 03/01/21 | | 02/01/21 | | | | | | | | 2,432 | | 12,160 | | 24,320 | | | | | | | | 2,145,146 | Stock Option | | 02/02/21 | | 02/01/21 | | | | | | | | | | | | | | | | 42,349 | | 175.02 | | 1,072,700 | RSU | | 02/02/21 | | 02/01/21 | | | | | | | | | | | | | | 6,128 | | | | | | 1,072,523 | Special RSU | | 11/01/21 | | 10/15/21 | | | | | | | | | | | | | | 13,922 | | | | | | 2,500,113 | AIP | | n/a | | n/a | | 5,660 | | 943,410 | | 1,886,820 | | | | | | | | | | | | | | | Ashish K. Khandpur | | | | | | | | | | | | | | | | | | | | | | | | | PSA | | 03/01/21 | | 02/01/21 | | | | | | | | 1,180 | | 5,899 | | 11,798 | | | | | | | | 1,040,643 | Stock Option | | 02/02/21 | | 02/01/21 | | | | | | | | | | | | | | | | 20,543 | | 175.02 | | 520,354 | RSU | | 02/02/21 | | 02/01/21 | | | | | | | | | | | | | | 2,973 | | | | | | 520,334 | AIP | | n/a | | n/a | | 3,753 | | 625,517 | | 1,251,034 | | | | | | | | | | | | | | | Mojdeh Poul | | | | | | | | | | | | | | | | | | | | | | | | | PSA | | 03/01/21 | | 02/01/21 | | | | | | | | 1,180 | | 5,899 | | 11,798 | | | | | | | | 1,040,643 | Stock Option | | 02/02/21 | | 02/01/21 | | | | | | | | | | | | | | | | 20,543 | | 175.02 | | 520,354 | RSU | | 02/02/21 | | 02/01/21 | | | | | | | | | | | | | | 2,973 | | | | | | 520,334 | AIP | | n/a | | n/a | | 3,786 | | 631,054 | | 1,262,108 | | | | | | | | | | | | | | | Michael G. Vale | | | | | | | | | | | | | | | | | | | | | | | | | PSA | | 03/01/21 | | 02/01/21 | | | | | | | | 1,534 | | 7,668 | | 15,336 | | | | | | | | 1,352,712 | Stock Option | | 02/02/21 | | 02/01/21 | | | | | | | | | | | | | | | | 53,411 | | 175.02 | | 1,352,901 | AIP | | n/a | | n/a | | 3,937 | | 656,171 | | 1,312,342 | | | | | | | | | | | | | | |
| | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) | | Estimated Future Payouts Under Equity Incentive Plan Awards(3) | | All Other Stock Awards: Number of Shares of Stock | | All Other Option Awards: Number of Securities Underlying | | Exercise or Base Price of Option | | Grant Date Fair Value of Stock and Option | Name | | Type of Grant(1) | | Grant Date | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | or Units (#) | | Options (#)(4) | | Awards ($/Sh)(5) | | Awards ($)(6) | Michael F. Roman | | 19PS | | 03/01/19 | | | | | | 4,820 | | 24,098 | | 48,196 | | | | | | | | 5,000,094 | | Option | | 02/05/19 | | | | | | | | | | | | | | 146,240 | | 201.12 | | 4,999,946 | | AIP | | n/a | | 2,040,051 | | 13,277,243 | | | | | | | | | | | | | | | Inge G. Thulin | | 19PS | | 03/01/19 | | | | | | 3,012 | | 15,061 | | 30,122 | | | | | | | | 3,125,007 | | Option | | 02/05/19 | | | | | | | | | | | | | | 45,686 | | 201.12 | | 1,562,023 | | AIP | | n/a | | 1,500,000 | | 13,277,243 | | | | | | | | | | | | | | | Nicholas C. Gangestad | | 19PS | | 03/01/19 | | | | | | 1,754 | | 8,772 | | 17,544 | | | | | | | | 1,820,102 | | Option | | 02/05/19 | | | | | | | | | | | | | | 53,232 | | 201.12 | | 1,820,002 | | AIP | | n/a | | 862,953 | | 13,277,243 | | | | | | | | | | | | | | | Ashish K. Khandpur | | 19PS | | 03/01/19 | | | | | | 1,685 | | 8,425 | | 16,850 | | | | | | | | 1,748,103 | | Option | | 02/05/19 | | | | | | | | | | | | | | 51,127 | | 201.12 | | 1,748,032 | | AIP | | n/a | | 581,003 | | 13,277,243 | | | | | | | | | | | | | | | Julie L. Bushman | | 19PS | | 03/01/19 | | | | | | 1,123 | | 5,617 | | 11,234 | | | | | | | | 1,165,471 | | Option | | 02/05/19 | | | | | | | | | | | | | | 34,085 | | 201.12 | | 1,165,366 | | AIP | | n/a | | 680,538 | | 13,277,243 | | | | | | | | | | | | | | | Joaquin Delgado | | 19PS | | 03/01/19 | | | | | | 562 | | 2,809 | | 5,618 | | | | | | | | 582,839 | | Option | | 02/05/19 | | | | | | | | | | | | | | 17,043 | | 201.12 | | 582,700 | | AIP | | n/a | | 593,007 | | 13,277,243 | | | | | | | | | | | | | | | Michael G. Vale | | 19PS | | 03/01/19 | | | | | | 1,093 | | 5,467 | | 10,934 | | | | | | | | 1,134,348 | | Option | | 02/05/19 | | | | | | | | | | | | | | 33,172 | | 201.12 | | 1,134,151 | | AIP | | n/a | | 626,632 | | 13,277,243 | | | | | | | | | | | | | | |
FOOTNOTES TO 2021 GRANTS OF PLAN-BASED AWARDS TABLE (1) | Abbreviations: 19PSPSA = 2019 performance shares; Optionshare award; RSU = restricted stock options;unit award; AIP = annual incentive pay. | (2) | The amounts shown as the Estimated Future Payouts Under Non-Equity Incentive Plan Awards reflect the threshold, target, and maximum amounts that may be earned by each individual during 20192021 under the Executive Annual Incentive Plan. This plan establishes a maximum amount of annual incentive compensation that may be earned by each covered executive during a plan year (initially established with the intent of complying with performance-based compensation exception of Section 162(m) of the Internal Revenue Code and similar state laws), which for each of the Named Executive Officers was one-quarter of one percent of the Company’s Adjusted Net Income for 2019, and then permits the Compensation Committee to pay each covered executive less than this maximum amount based on such factors as it deems relevant. Since the Executive Annual Incentive Plan was first adopted in 2007, the Compensation Committee has rarely used this discretion to pay a covered executive (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the Company’s broad-based Annual Incentive Plan. (For additionalFor more information, see “Annual Incentive” beginning on page 59 of this Proxy Statement).69. | (3) | The amounts shown as the Estimated Future Payouts Under Equity Incentive Plan Awards with respect to 20192021 performance shares reflect the threshold, target, and maximum number of shares of 3M common stock (disregarding dividend equivalents) that may be earned by each individual as a result of the 2019pursuant to their 2021 performance shares granted under the 2016 Long-Term Incentive Plan.share awards. The actual number of shares of 3M common stock to be delivered as a result of these performance shares will be determined by the performance of the Company during the three-year performance period of 2019, 2020,2021, 2022, and 2021,2023, as measured against four performance criteria selected by the Compensation and Talent Committee (Relative Organic Volume Growth, Return on Invested Capital, Earnings per Share Growth and Free Cash Flow Conversion). For more information on thesethe performance criteria and formulas used to determine the formulas for determiningfinal number of shares of 3M common stock payable pursuant to these performance shares, see “2021 performance share awards” beginning on page 70. | (4) | The amounts shown as the All Other Stock Awards reflect the number of shares of 3M common stock payable as a resultsubject to restricted stock unit awards granted to each individual during 2021. The restricted stock unit awards granted on February 2, 2021, were part of these performance shares, please referthe Company’s annual equity grants made to approximately 6,000 employees. All of the “Long-term incentives — 2019 annual grants” beginningrestricted stock units will vest in full on page 67the third anniversary of this Proxy Statement.the grant date. | (4)(5) | The amounts shown as the All Other Option Awards reflect the number of shares of 3M common stock subject to nonqualified stock options granted to each individual during 2019 under the 2016 Long-Term Incentive Plan.2021. The options granted on February 5, 2019,2, 2021, were part of the Company’s annual equity grants made to approximately 6,000 employees, and they vest in installments of one-third on each of the first three anniversaries of the grant date. |
Table of Contents(6)
(5) | The exercise price for all stock options granted underto the Company’s 2016 Long-Term Incentive PlanNamed Executive Officers is set at the closing price at which 3M common stock traded on the NYSE on the option grant date. | (6)(7) | The amounts inshown as the Grant Date Fair Value of Stock and Option Awards column were determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures, and, in the case of performance share awards, are based upon the probable outcome of the applicable performance conditions at the time of grant. Assumptions made in the calculation of these amounts are included in Note 18 to the Company’s audited financial statements for the fiscal year ended December 31, 2019,2021, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020.9, 2022. |
Table of Contents 20192021 outstanding equity awards at fiscal year-end table
| | Option Awards | | Stock Awards | Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | Michael F. Roman | | | | | | | | | | | | | | 10,202(7) | | 1,799,837 | | | | | | | | | | | | | | | 6,394(7) | | 1,128,029 | | | | | | | | | | | | | | | 24,098(8) | | 4,251,369 | | | 8,906 | | | | 78.72 | | 02/07/20 | | | | | | | | | | | 10,067 | | | | 89.47 | | 02/08/21 | | | | | | | | | | | 9,747 | | | | 87.89 | | 02/07/22 | | | | | | | | | | | 10,610 | | | | 101.49 | | 02/03/23 | | | | | | | | | | | 25,867 | | | | 126.72 | | 02/02/24 | | | | | | | | | | | 39,846 | | | | 165.94 | | 02/03/25 | | | | | | | | | | | 48,206 | | | | 147.87 | | 02/02/26 | | | | | | | | | | | 34,832 | | 17,417(2) | | 175.76 | | 02/06/27 | | | | | | | | | | | 18,916 | | 37,834(3) | | 233.63 | | 02/04/28 | | | | | | | | | | | 12,094 | | 24,190(4) | | 195.52 | | 07/01/28 | | | | | | | | | | | | | 146,240(5) | | 201.12 | | 02/04/29 | | | | | | | | | Inge G. Thulin | | | | | | | | | | | | | | 12,968(7) | | 2,287,815 | | | | | | | | | | | | | | | 3,836(7) | | 676,747 | | | | | | | | | | | | | | | 7,531(8) | | 1,328,619 | | | 204,950 | | | | 101.49 | | 02/03/23 | | | | | | | | | | | 206,168 | | | | 126.72 | | 02/02/24 | | | | | | | | | | | 229,364 | | | | 165.94 | | 02/03/25 | | | | | | | | | | | 245,116 | | | | 147.87 | | 02/02/26 | | | | | | | | | | | 170,219 | | 85,110(2) | | 175.76 | | 02/06/27 | | | | | | | | | | | 48,092 | | 96,187(3) | | 233.63 | | 02/04/28 | | | | | | | | | | | — | | 45,686(5) | | 201.12 | | 02/04/29 | | | | | | | | |
| | Option Awards | | Stock Awards | | Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | | Michael F. Roman | | | | | | | | | | | | | | | | 65,352(10) | | | 11,608,476 | | | | | | | | | | | | | | | | | | 59,522(11) | | | 10,572,893 | | | | 10,610 | | | | | 101.49 | | 02/04/23 | | | | | | | | | | | | | | 25,867 | | | | | 126.72 | | 02/03/24 | | | | | | | | | | | | | | 39,846 | | | | | 165.94 | | 02/02/25 | | | | | | | | | | | | | | 48,206 | | | | | 147.87 | | 02/01/26 | | | | | | | | | | | | | | 52,249 | | | | | 175.76 | | 02/06/27 | | | | | | | | | | | | | | 56,750 | | | | | 233.63 | | 02/05/28 | | | | | | | | | | | | | | 36,284 | | | | | 195.52 | | 07/01/28 | | | | | | | | | | | | | | 97,493 | | 48,747(2) | | | 201.12 | | 02/04/29 | | | | | | | | | | | | | | 77,256 | | 154,512(3) | | | 157.24 | | 02/03/30 | | | | | | | | | | | | | | | | 207,302(4) | | | 175.02 | | 02/01/31 | | | | | | | | | | | | Monish Patolawala | | | | | | | | | | | | | | | | 13,048(10) | | | 2,317,716 | | | | | | | | | | | | | | | | | | 10,602(10) | | | 1,883,233 | | | | | | | | | | | | | | | | | | 24,320(11) | | | 4,319,962 | | | | 12,009 | | 24,018(5) | | | 155.43 | | 06/30/30 | | | | | | | | | | | | | | | | 42,349(4) | | | 175.02 | | 02/01/31 | | | | | | | | | | | | | | | | | | | | | | | 12,026(6) | | | 2,136,178 | | | | | | | | | | | | | | | | | | 6,524(7) | | | 1,158,858 | | | | | | | | | | | | | | | | | | 6,128(8) | | | 1,088,517 | | | | | | | | | | | | | | | | | | 13,922(9) | | | 2,472,965 | | | | | | | Ashish K. Khandpur | | | | | | | | | | | | | | | | 14,824(10) | | | 2,633,187 | | | | | | | | | | | | | | | | | | 11,798(11) | | | 2,095,679 | | | | 7,838 | | | | | 126.72 | | 02/03/24 | | | | | | | | | | | | | | 25,445 | | | | | 165.94 | | 02/02/25 | | | | | | | | | | | | | | 29,392 | | | | | 147.87 | | 02/01/26 | | | | | | | | | | | | | | 29,803 | | | | | 175.76 | | 02/06/27 | | | | | | | | | | | | | | 27,273 | | | | | 233.63 | | 02/05/28 | | | | | | | | | | | | | | 34,084 | | 17,043(2) | | | 201.12 | | 02/04/29 | | | | | | | | | | | | | | 17,524 | | 35,048(3) | | | 157.24 | | 02/03/30 | | | | | | | | | | | | | | | | 20,543(4) | | | 175.02 | | 02/01/31 | | | | | | | | | | | | | | | | | | | | | | | 2,973(8) | | | 528,094 | | | | | | |
2020 | | 2022 Proxy Statement | 7791 |
Table of Contents Table of Contents
| | Option Awards | | Stock Awards | Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | Nicholas C. Gangestad | | | | | | | | | | | | | | 10,101(7) | | 1,782,018 | | | | | | | | | | | | | | | 8,772(8) | | 1,547,556 | | | 3,092 | | | | 89.47 | | 02/08/21 | | | | | | | | | | | 6,219 | | | | 87.89 | | 02/07/22 | | | | | | | | | | | 6,505 | | | | 101.49 | | 02/03/23 | | | | | | | | | | | 9,592 | | | | 126.72 | | 02/02/24 | | | | | | | | | | | 61,512 | | | | 165.94 | | 02/03/25 | | | | | | | | | | | 69,611 | | | | 147.87 | | 02/02/26 | | | | | | | | | | | 52,167 | | 26,085(2) | | 175.76 | | 02/06/27 | | | | | | | | | | | 18,730 | | 37,461(3) | | 233.63 | | 02/04/28 | | | | | | | | | | | | | 53,232(5) | | 201.12 | | 02/04/29 | | | | | | | | | | | | | | | | | | | 6,221(6) | | 1,097,509 | | | | | Ashish K. Khandpur | | | | | | | | | | | | | | 4,903(7) | | 864,987 | | | | | | | | | | | | | | | 8,425(8) | | 1,486,339 | | | 3,605 | | | | 89.47 | | 02/08/21 | | | | | | | | | | | 5,760 | | | | 87.89 | | 02/07/22 | | | | | | | | | | | 6,505 | | | | 101.49 | | 02/03/23 | | | | | | | | | | | 7,838 | | | | 126.72 | | 02/02/24 | | | | | | | | | | | 25,445 | | | | 165.94 | | 02/03/25 | | | | | | | | | | | 29,392 | | | | 147.87 | | 02/02/26 | | | | | | | | | | | 19,868 | | 9,935(2) | | 175.76 | | 02/06/27 | | | | | | | | | | | 9,090 | | 18,183(3) | | 233.63 | | 02/04/28 | | | | | | | | | | | | | 51,127(5) | | 201.12 | | 02/04/29 | | | | | | | | | Julie L. Bushman | | | | | | | | | | | | | | 6,297(7) | | 1,110,917 | | | | | | | | | | | | | | | 5,617(8) | | 990,951 | | | 9,000 | | | | 89.47 | | 02/08/21 | | | | | | | | | | | 30,875 | | | | 87.89 | | 02/07/22 | | | | | | | | | | | 24,650 | | | | 101.49 | | 02/03/23 | | | | | | | | | | | 40,535 | | | | 126.72 | | 02/02/24 | | | | | | | | | | | 37,514 | | | | 165.94 | | 02/03/25 | | | | | | | | | | | 41,181 | | | | 147.87 | | 02/02/26 | | | | | | | | | | | 26,211 | | 13,107(2) | | 175.76 | | 02/06/27 | | | | | | | | | | | 11,676 | | 23,353(3) | | 233.63 | | 02/04/28 | | | | | | | | | | | | | 34,085(5) | | 201.12 | | 02/04/29 | | | | | | | | |
Table of Contents
| | Option Awards | | Stock Awards | Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | Joaquin Delgado | | | | | | | | | | | | | | 4,903(7) | | 864,987 | | | | | | | | | | | | | | | 1,405(8) | | 247,870 | | | 36,126 | | | | 87.89 | | 02/07/22 | | | | | | | | | | | 35,490 | | | | 101.49 | | 02/03/23 | | | | | | | | | | | 32,428 | | | | 126.72 | | 02/02/24 | | | | | | | | | | | 48,489 | | | | 165.94 | | 02/03/25 | | | | | | | | | | | 57,136 | | | | 147.87 | | 02/02/26 | | | | | | | | | | | 32,175 | | 16,089(2) | | 175.76 | | 02/06/27 | | | | | | | | | | | 9,090 | | 18,183(3) | | 233.63 | | 02/04/28 | | | | | | | | | | | | | 17,043(5) | | 201.12 | | 02/04/29 | | | | | | | | | Michael G. Vale | | | | | | | | | | | | | | 4,903(7) | | 864,987 | | | | | | | | | | | | | | | 5,467(8) | | 964,488 | | | 7,812 | | | | 89.47 | | 02/08/21 | | | | | | | | | | | 30,875 | | | | 87.89 | | 02/07/22 | | | | | | | | | | | 43,705 | | | | 101.49 | | 02/03/23 | | | | | | | | | | | 31,559 | | | | 126.72 | | 02/02/24 | | | | | | | | | | | 49,804 | | | | 165.94 | | 02/03/25 | | | | | | | | | | | 58,684 | | | | 147.87 | | 02/02/26 | | | | | | | | | | | 33,061 | | 16,531(2) | | 175.76 | | 02/06/27 | | | | | | | | | | | 9,090 | | 18,183(3) | | 233.63 | | 02/04/28 | | | | | | | | | | | | | 33,172(5) | | 201.12 | | 02/04/29 | | | | | | | | |
| | Option Awards | | Stock Awards | | Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | | Mojdeh Poul | | | | | | | | | | | | | | | | 15,232(10) | | | 2,705,660 | | | | | | | | | | | | | | | | | | 11,798(11) | | | 2,095,679 | | | | 1,634 | | | | | 101.49 | | 02/04/23 | | | | | | | | | | | | | | 2,921 | | | | | 126.72 | | 02/03/24 | | | | | | | | | | | | | | 6,194 | | | | | 165.94 | | 02/02/25 | | | | | | | | | | | | | | 7,203 | | | | | 147.87 | | 02/01/26 | | | | | | | | | | | | | | 6,749 | | | | | 175.76 | | 02/06/27 | | | | | | | | | | | | | | 4,899 | | | | | 233.63 | | 02/05/28 | | | | | | | | | | | | | | 22,114 | | 11,058(2) | | | 201.12 | | 02/04/29 | | | | | | | | | | | | | | 18,006 | | 36,013(3) | | | 157.24 | | 02/03/30 | | | | | | | | | | | | | | | | 20,543(4) | | | 175.02 | | 02/01/31 | | | | | | | | | | | | | | | | | | | | | | | 2,875(8) | | | 510,686 | | | | | | | Michael G. Vale | | | | | | | | | | | | | | | | 14,824(10) | | | 2,633,187 | | | | | | | | | | | | | | | | | | 15,336(11) | | | 2,724,134 | | | | | | | | | | | | | | | | | | | | | | | | | 43,705 | | | | | 101.49 | | 02/04/23 | | | | | | | | | | | | | | 31,559 | | | | | 126.72 | | 02/03/24 | | | | | | | | | | | | | | 49,804 | | | | | 165.94 | | 02/02/25 | | | | | | | | | | | | | | 58,684 | | | | | 147.87 | | 02/01/26 | | | | | | | | | | | | | | 49,592 | | | | | 175.76 | | 02/06/27 | | | | | | | | | | | | | | 27,273 | | | | | 233.63 | | 02/05/28 | | | | | | | | | | | | | | 22,114 | | 11,058(2) | | | 201.12 | | 02/04/29 | | | | | | | | | | | | | | 17,524 | | 35,048(3) | | | 157.24 | | 02/03/30 | | | | | | | | | | | | | | | | 53,411(4) | | | 175.02 | | 02/01/31 | | | | | | | | | | | |
FOOTNOTES TO 20192021 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE (1) | The market value of performance shares or RSUs that have not vested was determined by multiplying the closing price of a share of 3M common stock on the NYSE for December 31, 20192021 ($176.42)177.63), by the number of performance shares or RSUs shown, respectively. | (2) | These stock options vested in full on February 7, 2020.5, 2022. | (3) | These stock options vested or will vest in installments of one-half on each of February 6, 2020,4, 2022, and February 6, 2021.4, 2023. | (4) | These stock options will vest in installments of one-half on July 1, 2020, and July 1, 2021. | (5) | These stock options vested or will vest in installments of one-third on each of February 5, 2020,2, 2022, February 5, 2021,2, 2023, and February 5, 2022.2, 2024. | (5) | These stock options will vest in installments of one-half on each of July 1, 2022, and July 1, 2023. | (6) | These restricted stock units will vest in installments of one-half on December 1, 2020, and Decembereach of July 1, 2022, provided thatand July 1, 2023, or immediately in the holder remains inevent of Mr. Patolawala’s termination of employment with 3M through such date.by the Company for reasons other than misconduct or his resignation for good reason. | (7) | These restricted stock units will vest in full on July 1, 2025, or immediately in the event of Mr. Patolawala’s termination of employment by the Company for reasons other than misconduct or his resignation for good reason. | (8) | These restricted stock units will vest in full on February 2, 2024. | (9) | These restricted stock units will vest in full on November 1, 2024. | (10) | The shares of 3M common stock to be delivered as a result of the Company’s performance over the three-year performance period ending December 31, 2020,2022, will not vest until December 31, 2020.2022. Under the terms of the awards, these shares of 3M common stock will be delivered no later than March 15, 2021,2023, unless deferred by the executive. In accordance with the Securities and Exchange Commission’s regulations, the number of shares and payout value for these performance shares reflect the targetmaximum payout under the formula for this grant since the Company’s performance during the first two years of the three-year performance period has exceeded the thresholdtarget levels for this grant. | (8)(11) | The shares of 3M common stock to be delivered as a result of the Company’s performance over the three-year performance period ending December 31, 2021,2023, will not vest until December 31, 2021.2023. Under the terms of the awards, these shares of 3M common stock will be delivered no later than March 15, 2022,2024, unless deferred by the executive. In accordance with the Securities and Exchange Commission’s regulations, the number of shares and payout value for these performance shares reflect the targetmaximum payout under the formula for this grant since the Company’s performance during the first year of the three-year performance period has exceeded the thresholdtarget levels for this grant. |
Table of Contents 20192021 option exercises and stock vested table
| | Option Exercises and Stock Vested | | | Option Awards | | Stock Awards | Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($)(1) | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($)(2) | Michael F. Roman | | 4,944(3) | | 719,550 | | 21,052(10) | | 3,629,898 | Inge G. Thulin | | 298,530(4) | | 26,270,916 | | 41,081(11) | | 7,247,510 | Nicholas C. Gangestad | | 1,681(5) | | 205,819 | | 12,591(12) | | 2,221,304 | Ashish K. Khandpur | | 3,362(6) | | 320,995 | | 4,795(13) | | 845,934 | Julie L. Bushman | | 13,172(7) | | 1,592,596 | | 18,972(14) | | 3,262,944 | Joaquin Delgado | | 63,560(8) | | 6,241,164 | | 7,766(15) | | 1,370,078 | Michael G. Vale | | 8,906(9) | | 1,073,838 | | 20,625(16) | | 3,554,566 |
| | Option Exercises and Stock Vested | | | Option Awards | | Stock Awards | Name | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($)(1) | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting ($)(2) | Michael F. Roman | | 9,747 | (3) | | 1,071,878 | | 23,428 | (7) | | 3,804,864 | Monish Patolawala | | — | | | — | | 6,013 | (8) | | 1,197,128 | Ashish K. Khandpur | | 6,505 | (4) | | 620,390 | | 8,191 | (9) | | 1,330,247 | Mojdeh Poul | | 778 | (5) | | 86,160 | | 5,413 | (10) | | 880,864 | Michael G. Vale | | 30,875 | (6) | | 2,705,910 | | 5,315 | (11) | | 863,219 |
FOOTNOTES TO 20192021 OPTION EXERCISES AND STOCK VESTED TABLE (1) | The amounts shown as Value Realized on Exercise were determined by multiplying the number of shares acquired on exercise by the difference between the closing price of a share of 3M common stock on the NYSE for the exercise date and the per share exercise price of the options. | | | (2) | The amounts shown as Value Realized on Vesting were determined by multiplying the number of shares acquired on vesting by the closing price of a share of 3M common stock on the NYSE for the vesting date. | | | (3) | The stock options exercised by Mr. Roman were granted on February 9, 2009, and had an exercise price of $54.11 per share. | | | (4) | The stock options exercised by Mr. Thulin were granted on February 9, 2010, February 8, 2011 and February 7, 2012, and had an exercise price between $78.72 and $89.47of $87.89 per share. | | | (5)(4) | The stock options exercised by Mr. Gangestad were granted on February 9, 2010, and had an exercise price of $78.72 per share. | | | (6) | The stock options exercised by Mr. Khandpur were granted on February 9, 2010,5, 2013, and had an exercise price of $78.72$101.49 per share. | | | (7)(5) | The stock options exercised by Ms. BushmanPoul were granted on February 9, 2010,7, 2012, and had an exercise price of $78.72$87.89 per share. | | | (8)(6) | The stock options exercised by Dr. Delgado were granted on February 9, 2010, and February 8, 2011, and had an exercise price between $78.72 and $89.47 per share. | | | (9) | The stock options exercised by Mr. Vale were granted on February 9, 2010,7, 2012, and had an exercise price of $78.72$87.89 per share. | | | (10)(7) | Reflects the number of shares earned by Mr. Roman upon the vesting of restricted stock units and performance shares granted to him under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. Of this total number of shares, 12,646 were attributable to restricted stock units granted on December 1, 2014, and 8,406All 23,428 of these shares were attributable to his 20172019 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019.2021. Mr. Roman previously elected to defer receipt of all of the shares issuable pursuant to his 20172019 performance shares until following his termination of employment. | | | (11)(8) | Reflects the number of shares earned by Mr. ThulinPatolawala upon the vesting of performance sharesrestricted stock units granted to him on July 1, 2021, under the 2016 Long-Term Incentive Plan. All 41,081 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. Mr. Thulin previously elected to defer receipt of all of these shares until following his termination of employment. | | | (12)(9) | Reflects the number of shares earned by Mr. Gangestad upon the vesting of performance shares granted to him under the 2016 Long-Term Incentive Plan. All 12,591 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. | | | (13) | Reflects the number of shares earned by Mr. Khandpur upon the vesting of performance shares granted to him under the 2016 Long-Term Incentive Plan. All 4,7958,191 of these shares were attributable to his 20172019 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. Mr. Khandpur previously elected to defer receipt of all of these shares until following his termination of employment.2021. | | | (14)(10) | Reflects the number of shares earned by Ms. BushmanPoul upon the vesting of restricted stock units and performance shares granted to her under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. Of this total number of shares, 12,64698 were attributable to restricted stock units granted on December 1, 2014,February 2, 2021 and 6,326 of these shares5,315 were attributable to her 20172019 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019.2021. Ms. Poul previously elected to defer receipt of all of the shares issuable pursuant to her 2019 performance shares until following her termination of employment. | | | (15)(11) | Reflects the number of shares earned by Dr. DelgadoMr. Vale upon the vesting of performance shares granted to him under the 2016 Long-TermLong- Term Incentive Plan. All 7,7665,315 of these shares were attributable to his 20172019 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019.2021. |
| | (16)2022 Proxy Statement | Reflects the number of shares earned by Mr. Vale upon the vesting of restricted stock units and performance shares granted to him under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. Of this total number of shares, 12,64693 |
Table of Contents 80Executive compensation | 3M Company |
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were attributable to restricted stock units granted on December 1, 2014, and 7,979 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. Mr. Vale previously elected to defer receipt of all of the shares issuable pursuant to his 2017 performance shares until following his termination of employment.
Pension benefits The following table shows the present value of the accumulated benefits payable to each of the Named Executive Officers, as well as the number of years of service credited to each individual, under each of the Company’s defined benefit pension plans determined using the same interest rate and mortality assumptions as those used for financial statement reporting purposes. See Note 13 to the Company’s audited financial statements for the fiscal year ended December 31, 2019,2021, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020.9, 2022. 2021 pension benefits table 2019 PENSION BENEFITS TABLE
Name | | Plan Name | | Number of Years Credited Service (#) | | Present Value of Accumulated Benefits ($) | | Payments During Last Fiscal Year ($) | Michael F. Roman | | Employee Retirement Income Plan | | 31 | | 1,839,130 | | — | | | Nonqualified Pension Plan | | 31 | | 14,282,279 | | — | Inge G. Thulin | | Employee Retirement Income Plan | | 40 | | 2,019,001* | | 71,293 | | | Nonqualified Pension Plan | | 40 | | — | | 28,680,254 | Nicholas C. Gangestad | | Employee Retirement Income Plan | | 35 | | 1,683,480 | | — | | | Nonqualified Pension Plan | | 35 | | 8,390,844 | | — | Ashish K. Khandpur | | Employee Retirement Income Plan | | 25 | | 1,095,946 | | — | | | Nonqualified Pension Plan | | 25 | | 3,427,582 | | — | Julie L. Bushman | | Employee Retirement Income Plan | | 36 | | 1,942,755 | | — | | | Nonqualified Pension Plan | | 36 | | 8,231,838 | | — | Joaquin Delgado | | Employee Retirement Income Plan | | 32 | | 1,710,547** | | 51,145 | | | Nonqualified Pension Plan | | 32 | | 6,676,594 | | — | Michael G. Vale | | Employee Retirement Income Plan | | 27 | | 1,234,502 | | — | | | Nonqualified Pension Plan | | 27 | | 4,683,307 | | — |
* | Mr. Thulin commenced payment of his benefits under the specified plan during 2019. As a result, the amounts shown were determined based on his final benefit amount (after adjustment to reflect the pension benefits he earned during his employment in Sweden before his transfer to the United States) and the payment form selected. | | | ** | Dr. Delgado commenced payment of his benefits under the specified plan during 2019. As a result, the amounts shown were determined based on his final benefit amount and the payment form selected. |
Name | | Plan Name | | Number of Years Credited Service (#) | | Present Value of Accumulated Benefits ($) | | Payments During Last Fiscal Year ($) | Michael F. Roman | | Employee Retirement Income Plan | | 33 | | 2,128,942 | | — | | | Nonqualified Pension Plan | | 33 | | 24,680,355 | | — | Monish Patolawala | | None | | — | | — | | — | Ashish K. Khandpur | | Employee Retirement Income Plan | | 27 | | 1,403,743 | | — | | | Nonqualified Pension Plan | | 27 | | 5,510,883 | | — | Mojdeh Poul | | None | | — | | — | | — | Michael G. Vale | | Employee Retirement Income Plan | | 29 | | 1,541,739 | | — | | | Nonqualified Pension Plan | | 29 | | 6,293,098 | | — |
The Employee Retirement Income Plan (“ERIP”) is a tax-qualified defined benefit pension plan maintained by 3M for its eligible employees in the United States. Effective January 1, 2001, the Company amended the ERIP to include a pension equity formula for (1) employees hired or rehired on or after January 1, 2001, and (2) employees who voluntarily elected the pension equity formula during the one-time choice election period in 2001. The ERIP was closed to new participants effective January 1, 2009, meaning that employees hired or rehired on or after January 1, 2009 (including Mr. Patolawala and Ms. Poul), do not participate in the plan. Of the Named Executive Officers, Mr. Roman Mr. Thulin, Mr. Gangestad,and Mr. Khandpur, Ms. Bushman and Dr. Delgado participate under the non-pension equity formula of the ERIP (the(referred to as the Portfolio I Plan), while Mr. Vale participates under the pension equity formula of the ERIP (the(referred to as the Portfolio II Plan). Retirement benefits under the ERIP are based on an employee’s years of service and average annual earnings during the employee’s four highest-paid consecutive years of service. As applied to the Named Executive Officers, earnings for purposes of the ERIP include base salary and target annual incentive compensation. All benefits earned under the ERIP by the Named Executive Officers will be payable in the form of life annuities, unless an individual elects at the time their employment ends to receive the entire amount of his or her earned pension benefits in the form of a single lump-sum cash payment. Table of Contents
Under the Portfolio I Plan, employees earn annual benefits payable at retirement generally equal to 1.15 percent of their high-four average annual earnings multiplied by their years of service plus 0.35 percent of their high-four average annual earnings in excess of a Social Security breakpoint multiplied by their years of service (up to a maximum of 35 years). The Social Security breakpoint is an average of the Social Security taxable wage bases for each of the 35 years ending with the year each employee qualifies for receivingto receive unreduced Social Security retirement benefits. Under the Portfolio I Plan, an employee may retire with an unreduced pension at age 60 (61 or 62 for employees born after 1942 and 1959, respectively). If the employee’s age and service at the time of retirement total at least 90 (91 or 92 for employees born after 1942 and 1959, respectively) the employee also would receive a Social Security bridge payment until age 62. Mr. Thulin currently receives unreduced retirement benefits, and Dr. Delgado currently receives reduced retirement benefits. As of March 13, 2020, each2022, none of Mr. Roman, Mr. Gangestad, and Ms. Bushman isthe Named Executive Officers were eligible to retire with reduced early retirement benefits,benefits. Mr. Roman is eligible to retire with the reduction being equal to 5 percent of the pension otherwise payable for each year that such executive retires prior to age 61 (age 62 for Mr. Gangestad and Ms. Bushman). unreduced retirement benefits. Under the Portfolio II Plan, employees earn pension credits (from 3 percent to 12 percent) for each year of employment based on their age and accumulated years of service under the plan. Once their employment ends, these accumulated pension credits are multiplied by their high-four average annual earnings and added to an amount determined by multiplying one-half of these accumulated pension credits by their high-four average annual earnings in excess of a Social Security integration level (70 percent of the Social Security taxable wage base in the year employment ends). The sum of these two amounts is then converted into an annuity payable over the lifetime of the employee using fixed conversion factors. The Portfolio II Plan does not provide any subsidies for early retirement. As a tax-qualified plan, the ERIP is subject to a variety of limits that apply to both the amount of any employee’s earnings that may be considered when determining the benefits earned under the plan as well as the maximum amount of benefits that any employee may earn. The Nonqualified Pension Plan is designed to provide additional benefits to employees, including the Named Executive Officers, affected by these limits. The amount of benefits earned under
Table of Contents this Nonqualified Pension Plan generally equals the amount of benefits an employee was not able to earn under the ERIP as a result of the limits imposed by Federal tax laws. The benefits earned under this Nonqualified Pension Plan generally are generally paid in the form of a single lump-sum cash payment following the termination of their employment (subject to any applicable delay under Federal tax laws). Current employees wereEach of the Named Executive Officers (other than Mr. Khandpur) who participates in the Nonqualified Pension Plan was given a one-time opportunity during 2008 to elect to receive their benefits earned under this Nonqualified Pension Plansuch plan in the form of a life annuity following their retirement, and none of the Named Executive Officersthem elected to receive their benefits in the form of a life annuity. Nonqualified deferred compensation The following table reflects the participation during 20192021 by the Named Executive Officers in three nonqualified deferred compensation plans offered by the Company. The Deferred Compensation Excess Plan allows eligible employees to defer for a number of years or until retirement from the Company the receipt of a portion of their base salary and annual incentive compensation. The Performance Awards Deferred Compensation Plan allows eligible employees to defer for a number of years or until retirement from the Company the payout of their performance share awards under the 2016 Long-Term Incentive Plan. The VIP Excess Plan allows eligible employees to defer until retirement from the Company the receipt of a portion of their base salary and annual incentive compensation. All three plans generally allow the eligible employees to elect to receive payment of their account balances in the form of either a single lump sum payment or in up to ten annual installments. With the exception of deferrals of performance shares under the Performance Awards Deferred Compensation Plan, earnings are credited to the amounts deferred under all three plans based on the returns paid on the investment funds available to participants in 3M’s qualified 401(k) plan or a fixed rate of return based on corporate bond yields (as selected by each participant). Earnings are credited to the deferrals of performance shares under the Performance Awards Deferred Compensation Plan based on the return on shares of 3M common stock, including reinvested dividends. Table of Contents2021 nonqualified deferred compensation table
Name | | Executive Contributions in Last FY ($)(1) | | Registrant Contributions in Last FY ($)(2) | | Aggregate Earnings in Last FY ($)(3) | | Aggregate Withdrawals/ Distributions ($) | | Aggregate Balance at Last FYE ($)(4) | Michael F. Roman | | | | | | | | | | | VIP Excess Plan | | 272,539 | | 60,834 | | 21,395 | | | | 1,909,303 | Deferred Compensation Excess Plan | | | | | | 2,855 | | | | 238,779 | Performance Awards Deferred Compensation Plan | | 2,421,957 | | | | 370,593 | | | | 8,043,187 | Monish Patolawala | | | | | | | | | | | VIP Excess Plan | | 55,062 | | 70,040 | | 6,986 | | | | 136,945 | Deferred Compensation Excess Plan | | | | | | | | | | | Performance Awards Deferred Compensation Plan | | | | | | | | | | | Ashish K. Khandpur | | | | | | | | | | | VIP Excess Plan | | 81,164 | | 20,000 | | 167,372 | | | | 1,248,150 | Deferred Compensation Excess Plan | | | | | | | | | | | Performance Awards Deferred Compensation Plan | | 712,772 | | | | 149,785 | | | | 3,243,335 | Mojdeh Poul | | | | | | | | | | | VIP Excess Plan | | 85,283 | | 69,240 | | 93,668 | | | | 934,552 | Deferred Compensation Excess Plan | | | | | | | | | | | Performance Awards Deferred Compensation Plan | | | | | | | | | | | Michael G. Vale | | | | | | | | | | | VIP Excess Plan | | 142,224 | | 44,788 | | 138,058 | | | | 1,789,427 | Deferred Compensation Excess Plan | | 702,079 | | | | 94,018 | | | | 1,185,490 | Performance Awards Deferred Compensation Plan | | 718,122 | | | | 329,040 | | | | 7,100,838 |
2019FOOTNOTES TO 2021 NONQUALIFIED DEFERRED COMPENSATION TABLE
Name | | Executive Contributions in Last FY ($)(1) | | Registrant Contributions in Last FY ($)(2) | | Aggregate Earnings in Last FY ($)(3) | | | Aggregate Withdrawals/ Distributions ($) | | Aggregate Balance at Last FYE ($)(4) | Michael F. Roman | | | | | | | | | | | | VIP Excess Plan | | 251,645 | | 56,395 | | | 41,029 | | | — | | 1,235,898 | Deferred Compensation Excess Plan | | — | | — | | | 8,458 | | | — | | 231,049 | Performance Awards Deferred Compensation Plan | | 1,484,748 | | — | | | (241,480 | ) | | — | | 3,672,315 | Inge G. Thulin | | | | | | | | | | | | | VIP Excess Plan | | 210,447 | | 46,825 | | | 133,424 | | | — | | 3,692,807 | Deferred Compensation Excess Plan | | 938,899 | | — | | | 326,793 | | | — | | 9,083,916 | Performance Awards Deferred Compensation Plan | | 7,569,122 | | — | | | (2,144,679 | ) | | — | | 39,257,779 | Nicholas C. Gangestad | | | | | | | | | | | | | VIP Excess Plan | | 146,074 | | 31,747 | | | 173,732 | | | — | | 1,058,950 | Deferred Compensation Excess Plan | | — | | — | | | — | | | — | | — | Performance Awards Deferred Compensation Plan | | 1,072,070 | | — | | | (216,321 | ) | | — | | 3,594,778 | Ashish K. Khandpur | | | | | | | | | | | | | VIP Excess Plan | | 131,636 | | 27,647 | | | 130,840 | | | — | | 735,378 | Deferred Compensation Excess Plan | | — | | — | | | — | | | — | | — | Performance Awards Deferred Compensation Plan | | 900,125 | | — | | | (114,202 | ) | | — | | 1,502,658 | Julie L. Bushman | | | | | | | | | | | | | VIP Excess Plan | | 35,773 | | 10,256 | | | 36,698 | | | — | | 249,702 | Deferred Compensation Excess Plan | | — | | — | | | — | | | — | | — | Performance Awards Deferred Compensation Plan | | — | | — | | | — | | | — | | — | Joaquin Delgado | | | | | | | | | | | | | VIP Excess Plan | | 53,176 | | 10,305 | | | 257,599 | | | — | | 1,468,136 | Deferred Compensation Excess Plan | | — | | — | | | 35,594 | | | — | | 193,048 | Performance Awards Deferred Compensation Plan | | — | | — | | | — | | | — | | — | Michael G. Vale | | | | | | | | | | | | | VIP Excess Plan | | 108,096 | | 30,283 | | | 109,741 | | | — | | 1,295,387 | Deferred Compensation Excess Plan | | — | | — | | | 2,157 | | | — | | 23,205 | Performance Awards Deferred Compensation Plan | | 1,807,439 | | — | | | (296,693 | ) | | — | | 4,531,829 |
FOOTNOTES TO 2019 NONQUALIFIED DEFERRED COMPENSATION TABLE
(1) | With the exception of the amounts contributed by Mr. Roman, Mr. Thulin, Mr. Gangestad, Mr. Khandpur, and Mr. Vale from the payout of their performance share awards for the 2016-20182018-2020 performance period, and by Mr. Khandpur from the payout of his annual incentive earned in 2018, all amounts contributed by these individuals during 20192021 have been included |
Table of Contents | in the Summary Compensation Table as Salary, Stock Awards, or Non-Equity Incentive Plan Compensation earned in 2017, 2018,2019, 2020, or 2019.2021. The Summary Compensation Table does not reflect any portion of the contributions from the payout of Mr. Roman’s, Mr. Thulin’s, Mr. Gangestad’s, Mr. Khandpur’s, and Mr. Vale’s performance share awards for the 2016-20182018-2020 performance period because those awards were granted in 2016 and does not reflect any portion of the contributions from Mr. Khandpur’s 2018 annual incentive payment because those amounts were earned prior to the first year he became a Named Executive Officer. | | 2018. | (2) | The amounts shown reflect 3M matching contributions under the VIP Excess Plan, a nonqualified defined contribution plan. Eligibility for this plan and its matchingthe Company contributions is limited to employees whose compensation exceeds a limit established by Federal income tax laws for tax-qualified defined contribution plans. The plan permits eligible employees to save additional amounts from their current cash compensation beyond the contribution limits established by Federal tax laws, and to receive Company contributions similar to the Company contributions provided under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan. All amounts contributed by the Company on behalf of these individuals during 2021 are included in the “All Other Compensation” column of the Summary Compensation Table. |
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Company matching contributions similar to the matching contributions provided under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan. With the exception of 3M matching contributions to Mr. Khandpur’s VIP Excess Plan account in respect of his 2018 annual incentive payment (paid in 2019), all amounts contributed by the Company on behalf of these individuals during 2019 are included in the “All Other Compensation” column of the Summary Compensation Table. The Summary Compensation Table does not reflect any portion of the 3M matching contributions made to Mr. Khandpur’s VIP Excess Plan account in respect of his 2018 annual incentive payment because those amounts were earned prior to the first year he became a Named Executive Officer.
(3) | None of these amounts are included in the Summary Compensation Table as compensation earned in 2019,2021, since none of the Company’s nonqualified deferred compensation plans provide above-market or preferential earnings. | | | (4) | Includes the following amounts that were reported as compensation for 20172019 and 20182020 in the Summary Compensation Table: Mr. Roman — $501,252;$480,529; Mr. ThulinPatolawala — $5,554,184; Mr. Gangestad — $384,096;$7,112; Mr. Khandpur — $0;$125,310; Ms. BushmanPoul — $107,497; Dr. Delgado — $1,144,068;$93,035; and Mr. Vale — $280,955.$1,247,864. |
Potential payments upon termination or change in control As reflected in the Compensation Discussion and Analysis portion of this Proxy Statement, 3M has no employment agreements with any of the Named Executive Officers nor does it have any change in control plans or arrangements that would provide benefits to any of the Named Executive Officers solely in the event of a change in control of the Company. We also do not have any agreements that would provide automatic “single-trigger” accelerated vesting of equity compensation or excise tax gross-up payments to any of our Named Executive Officers in the event of a change in control of the Company. Effective February 3, 2020, 3M adopteddoes maintain a new severance plan to providethat provides separation benefits to eligible U.S. employees (including the Named Executive Officers) who incur a qualifying termination. In addition, certain of the Company’s executive compensation and benefit plans provide all participants (including the Named Executive Officers) with certain rights or the right to receive payments in the event of the termination of their employment or upon a change in control of the Company. The terms applicable to these potential rights or payments in various situations are described below. Payments or benefits under other plans and arrangements that generally are generally provided on a non-discriminatory basis to all similarly situated employees of the Company upon the termination of their employment are not described, including (a) accrued base salary; (b) annual incentive earned with respect to completed performance periods; (c) retiree welfare benefits provided to substantially all of the Company’s U.S. employees, including retiree medical benefits; (d) distribution of vested account balances under the Company’s qualified 401(k) plan; (e) accrued pension benefits under the Company’s defined benefit pension plans payable following an employee’s retirement or other termination of employment (the amounts of these benefits earned by the Named Executive Officers are reported in the 2019 Pension Benefits Table); (f) life insurance benefits generally available to all salaried employees; and (g) distribution of account balances under the Company’s nonqualified deferred compensation plans (the account balances of the Named Executive Officers are reported in the 2019 Nonqualified Deferred Compensation Table).including:
● | accrued base salary; | ● | annual incentive earned with respect to completed performance periods; | ● | retiree welfare benefits provided to substantially all of the Company’s U.S. employees, including retiree medical benefits; | ● | distribution of vested account balances under the Company’s qualified 401(k) plan; | ● | accrued pension benefits under the Company’s defined benefit pension plans payable following an employee’s retirement or other termination of employment (the amounts of these benefits earned by the Named Executive Officers are reported in the 2021 Pension Benefits Table); | ● | life insurance benefits generally available to all salaried employees; and | ● | distribution of account balances under the Company’s nonqualified deferred compensation plans (the account balances of the Named Executive Officers are reported in the 2021 Nonqualified Deferred Compensation Table). |
Rights and payments upon retirement Following retirement (as described below), the Named Executive Officers are entitled to receive: •● | continued vesting of stock options previously granted under the Company’s stock plans, and the opportunity to exercise vested stock options previously granted under such plans during the remainder of the original term (up to 10 years) of such options; | | | •● | an annual incentive plan payment for the year of retirement, prorated based on the number of days worked prior to the date of separation; | | | •● | for those Named Executive Officers initially appointed to a 3M executive position before January 1, 2006, or after December 31, 2017, payment for all previously granted performance shares upon completion of the respective three-year performance period (prorated to reflect the portion of the year worked only with respect to the performance shares granted in the year of retirement) and based on actual performance; and | | | •● | for those Named Executive Officers initially appointed to a 3M executive position on or after January 1, 2006, and on or before December 31, 2017, payment for all previously granted performance shares upon completion of the respective three-year performance period (prorated to reflect the portion of the three-year performance period that occurredcompleted prior to the date of the Named Executive Officer’s retirement) and based on actual performance. |
Table of Contents For this purpose, the term “Retirement” means a termination of employment with the Company after attaining age 55 with at least 10 years of service (age 55 with at least five years of service for awardsstock options granted before January 1, 2016). Table of Contents
Rights and payments upon termination due to death In the event of the termination of their employment due to death, the Named Executive Officers are entitled to receive: •● | immediate vesting of all unvested stock options and restricted stock units previously granted under the Company’s stock plans, and the opportunity for the Named Executive Officer’s estate or beneficiaries to exercise all vested stock options during the two-year period following the date of death (but not beyond the original expiration date of any such stock option); | | | •● | payment to the Named Executive Officer’s estate or beneficiaries, no later than March 15 of the year following the year in which the Named Executive Officer died, for all previously granted performance shares (in the same amount as paid for the performance shares granted to other Named Executive Officers if the date of death occurs after the end of the three-year performance period for such shares, and at the lesser of the target value or such other amount as determined by the Committee in its discretion if the date of death occurs before the end of the three-year performance period for such shares); and | | | •● | payment to the Named Executive Officer’s beneficiaries of the proceeds from the life insurance policies provided for such Named Executive Officer pursuant to the Company’s Executive Life Insurance Plan. |
Rights and payments upon termination due to disability In the event of the termination of their employment due to disability, the Named Executive Officers are entitled to receive: •● | continued vesting of stock options previously granted under the Company’s stock plans, and the opportunity to exercise vested stock options previously granted under such plans during the remainder of the original term (up to 10 years) of such options; | | | •● | immediate vesting of all restricted stock units previously granted under the Company’s stock plans; and | | | •● | payment for all previously granted performance shares upon completion of the respective three-year performance period, based on actual performance. |
Rights and payments upon a qualifying termination under the severance plannot in connection with a change in control Effective February 3, 2020, theThe Company adoptedmaintains the 3M Executive Severance Plan (which we refer to as the “Severance Plan”) to provide separation benefits for certain U.S. executives including(including our Named Executive Officers, to provide separation benefitsOfficers) in the event an eligible employee’s employment is terminated by 3M other than for Misconduct or an eligible employee resigns for Good Reason. An eligible employee who becomes entitled to benefits under the Severance Plan receives the following:
•● | continued payment of his or her annual base salary for a number of months (24 months for the Chief Executive Officer, and 18 months for all other Named Executive Officers); | | | •● | continued payment of annual incentive payments that would have been paid if the participant remained employed through the end of the severance payment period, calculated based on actual results for the relevant year, using the participant’s final performance rating as of the end of the applicable year (or if none, a performance rating of “fully meets expectations” or equivalent), and prorated based on the number of days in the year preceding the end of the severance period (if the severance payment period ends prior to the end of a year); | | | •● | an opportunity to exercise all vested stock options and stock appreciation rights following the participant’s termination and prior to the expiration date of such award; | | | •● | accelerated vesting and payment of a prorated portion of the participant’s outstanding “annual” restricted stock units, with proration based on the number of full years of the participant’s completed service over the number of years required to vest under the original vesting schedule; | | | •● | outstanding performance share awards will not be forfeited solely as a result of the participant’s termination, and the target number of shares under each award will be prorated based on the number of months the participant worked during the applicable performance period; | | | •● | full vesting of the participant’s VIP company contribution account; and | | | •● | outplacement services in accordance with 3M’s policy. |
20202022 Proxy Statement | 8597 |
Table of Contents TableIn addition, if Mr. Patolawala voluntarily resigns from employment with the Company for Good Reason or his employment is terminated by the Company other than for Misconduct, he also will be entitled to receive accelerated vesting of Contentscertain make-whole and inducement equity awards granted in connection with his commencement of employment, subject to Mr. Patolawala’s execution of an effective and irrevocable general release of all claims against the Company and its affiliates and without duplication of any benefits to which he may become entitled under the Severance Plan. These additional benefits are not part of the Severance Plan but were negotiated in connection with Mr. Patolawala’s commencement of employment.
Any severance payments under the Severance Plan will be reducedreduce on a dollar-for-dollar basis (but not below $0) by any paymentsamounts the participant may otherwise be eligible to receive under his or her non-competition agreement with 3M. In addition, severance payments will cease in the event the participant becomes reemployed by 3M. The Severance Plan does not provide severance benefits to employees who terminate pursuant to a mandatory retirement policy adopted by the Board. Employees who terminate in connection with a spinoff, divestiture or similar transaction involving the employee’s business unit may be eligible to participate at the discretion of the Company. To be eligible to receive benefits under the Severance Plan, an employee must execute and not revoke a general release of claims in favor of the Company in a form approved by the Company. In addition, in the event a Named Executive Officer’s payments under the Severance Plan would be subject to an excise tax on “parachute payments” in connection with a change in control of the Company due to the application of Section 280G of the Internal Revenue Code, the Named Executive Officer will not be entitled to a “gross-up.” Instead, the Named Executive Officer’s “parachute payments” may be reduced if such reduction would provide the Named Executive Officer with a greater post-tax benefit than he or she would receive if the excise taxes were to apply. For purposes of the Severance Plan and Mr. Patolawala’s special equity benefits, the terms “Misconduct” and “Good Reason” mean the following: “Misconduct” means (i) the employee’s willful failure to substantially perform his or her duties (other than a failure resulting from his or her disability); (ii) the employee’s willful failure to carry out, or comply with any lawful and reasonable directive of the Board or his or her immediate supervisor; (iii) the occurrence of any act or omission by the employee that could reasonably be expected to result in (or has resulted in) his or her conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or indictable offense or crime involving moral turpitude; (iv) the employee’s commission of an act of fraud, embezzlement, misappropriation, misconduct, or breach of fiduciary duty against the Company or any of its subsidiaries or affiliates or any of their officers, directors, employees, customers, suppliers, insurers or agents; (v) for purposes of the Severance Plan only, the employee’s material breach of any material provision of any written agreement with the Company or any subsidiary; (vi) any action (or inaction) by the employee that 3M reasonably determines constitutes gross negligence or misconduct in the performance of his or her duties and responsibilities; or (vii) any other intentional misconduct by the Named Executive Officer that significantly affects the business or affairs of the Company or any subsidiary in an adverse manner. “Good Reason” means, with respect to a voluntary termination occurring within 18 months following a change in control of the Company, (i) a material diminution in the employee’s position, authority, duties or responsibilities as in effect immediately prior to the change in control, (ii) a material diminution in the employee’s base salary or annual planned cash compensation, or (iii) a material change in the geographic location at which the employee is required to perform services for his or her employer. If the voluntary termination does not occur within 18 months following a change in control, “Good Reason” means (i) a material diminution in the employee’s base salary or annual planned cash compensation, other than an across-the-board reduction that applies to all comparable positions, or (ii) a change in excess of 100 miles in the primary work location at which the employee is required to perform services for his or her employer. For terminations that do not occur within 18 months following a change in control, the employee will be required to provide written notice to the Company of the grounds for a Good Reason termination within 30 days of the initial existence of such grounds, and the Company has 30 days from the date of such notice to cure such circumstances. An employee must terminate employment for Good Reason within 60 days after the first occurrence of the applicable grounds. Rights and payments upon a qualifying termination in connection with a change in control If the Company terminates a Named Executive Officer’s employment for reasons other than Misconduct (or for awards granted prior to May 10, 2016, reasons other than Cause) or if a Named Executive Officer resigns for Good Reason, in any such case within 18 months following a “change in control event” of the Company (as defined for purposes of Section 409A of the Internal Revenue Code), then in addition to any benefits provided under the Severance Plan and the special benefits provided to Mr. Patolawala described above, all of the Named Executive Officer’s outstanding unvested
Table of Contents stock options and restricted stock units granted under the Company’s stock plans will be immediately vested and all of such Named Executive Officer’s outstanding performance shares will be prorated and settled in accordance with the terms of the plan. Table of Contents
For purposes of our outstanding long-term incentive awards, the terms “Misconduct,” “Cause,” and “Good Reason” mean the following: “Misconduct” means (i) the Named Executive Officer’s willful failure to substantially perform his or her duties (other than a failure resulting from his or her disability); (ii) the Named Executive Officer’s willful failure to carry out, or comply with any lawful and reasonable directive of the Board or his or her immediate supervisor; (iii) the occurrence of any act or omission by the Named Executive Officer that could reasonably be expected to result in (or has resulted in) his or her conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or indictable offense or crime involving moral turpitude; (iv) the Named Executive Officer’s commission of an act of fraud, embezzlement, misappropriation, misconduct, or breach of fiduciary duty against the Company or any of its subsidiaries or affiliates or any of their officers, directors, employees, customers, suppliers, insurers or agents; (v) the Named Executive Officer’s material breach of any material provision of any written agreement with the Company or any subsidiary; or (vi) any other intentional misconduct by the Named Executive Officer that significantly affects the business or affairs of the Company or any subsidiary in an adverse manner. “Cause” means a material violation of any policy of the Company, or embezzlement or theft of property belonging to the Company. “Good Reason” means (i) a material diminution in the Named Executive Officer’s position, authority, duties, or responsibilities as in effect immediately prior to the change in control; (ii) a material diminution in the Named Executive Officer’s base salary or annual planned cash compensation; or (iii) a material change in the geographic location at which the Named Executive Officer is required to perform services for the Company. Rights and payments upon termination for any other reason In the event of the termination of theira Named Executive Officer’s employment for any reason that does not qualify for Severance Plan benefits other than retirement, death, or disability (and other than in connection with a change in control, asfit into one of the categories described further below): above: •● | the Named Executive Officers will have the opportunity to exercise vested stock options granted under the Company’s stock plans within the first 90 days following the termination date (but not beyond the original expiration date of any such stock option), at which time any remaining vested stock options arewill be forfeited; and | | | •● | all unvested stock options, restricted stock units, and performance shares granted to the Named Executive Officers arewill be forfeited immediately. |
The amounts payable to or on behalf of each of the Named Executive Officers in each of the above situations (other than amounts relating to payments or benefits generally provided on a non-discriminatory basis to all similarly situated employees) is reflected in the table below, assuming that each individual’s employment had terminated and/or a change in control of the Company had occurred on December 31, 2019.2021. As of December 31, 2019,2021, Mr. Roman, Ms. Poul, and Mr. Gangestad, and Ms. BushmanVale were eligible to retire (as that term is defined for purposes of 3M’s stock plans). Mr. Thulin retired from employment with the Company effective as of June 1, 2019, and Dr. Delgado’s employment with the Company ended on July 1, 2019. The amounts shown below do not reflect payments and benefits available under the Severance Plan, as it was not in effect on December 31, 2019. 20202022 Proxy Statement | 8799 |
Table of Contents Table of Contents2021 Potential payments upon termination or change in control table
All amounts in U.S. dollars | | Termination of Employment Due to ... | Name | | Death | | Disability | | Qualifying Termination not in connection with a Change in Control | | Qualifying Termination in connection with a Change in Control | | Retirement/ Other Reason | Michael F. Roman | | | | | | | | | | | Cash Severance | | — | | — | | 7,425,000 | | 7,425,000 | | — | Outstanding PSAs(1) | | 11,560,366 | | — | | — | | 7,099,537 | | — | Unvested RSUs(2) | | — | | — | | — | | — | | — | Unvested Options(3) | | 3,691,558 | | — | | — | | 3,691,558 | | — | Life Insurance Proceeds(4) | | 3,000,000 | | — | | — | | — | | — | Outplacement Services | | — | | — | | 3,500 | | 3,500 | | — | Total | | 18,251,924 | | — | | 7,428,500 | | 18,219,595 | | — | Monish Patolawala | | | | | | | | | | | Cash Severance(5) | | — | | — | | 3,249,720 | | 2,833,206 | | — | Outstanding PSAs(1) | | 4,419,215 | | — | | 2,122,235 | | 2,662,931 | | — | Unvested RSUs(2) | | 7,077,753 | | 7,077,753 | | 3,459,390 | | 7,077,753 | | — | Unvested Options(3) | | 643,730 | | — | | — | | 643,730 | | — | Life Insurance Proceeds(4) | | 3,000,000 | | — | | — | | — | | — | 401(k) Plan Vesting | | — | | — | | 22,629 | | 22,629 | | — | Outplacement Services | | — | | — | | 3,500 | | 3,500 | | — | Total | | 15,140,699 | | 7,077,753 | | 8,857,474 | | 13,243,750 | | — | Ashish K. Khandpur | | | | | | | | | | | Cash Severance | | — | | — | | 2,069,100 | | 2,069,100 | | — | Outstanding PSAs(1) | | 2,467,190 | | — | | 1,482,878 | | 1,544,657 | | — | Unvested RSUs(2) | | 545,694 | | 545,694 | | — | | 545,694 | | — | Unvested Options(3) | | 768,246 | | — | | — | | 768,246 | | — | Life Insurance Proceeds(4) | | 2,758,800 | | — | | — | | — | | — | Outplacement Services | | — | | — | | 3,500 | | 3,500 | | | Total | | 6,539,931 | | 545,694 | | 3,555,478 | | 4,931,197 | | — | Mojdeh Poul | | | | | | | | | | | Cash Severance | | — | | — | | 2,178,000 | | 2,178,000 | | — | Outstanding PSAs(1) | | 2,505,534 | | — | | — | | 1,574,637 | | — | Unvested RSUs(2) | | 527,706 | | 527,706 | | — | | 527,706 | | — | Unvested Options(3) | | 787,922 | | — | | — | | 787,922 | | — | Life Insurance Proceeds(4) | | 2,904,000 | | — | | — | | — | | — | Outplacement Services | | — | | — | | 3,500 | | 3,500 | | — | Total | | 6,725,163 | | 527,706 | | 2,181,500 | | 5,071,766 | | — | Michael G. Vale | | | | | | | | | | | Cash Severance | | — | | — | | 2,166,021 | | 2,166,021 | | — | Outstanding PSAs(1) | | 2,789,272 | | — | | — | | 1,681,219 | | — | Unvested RSUs(2) | | — | | — | | — | | — | | — | Unvested Options(3) | | 854,031 | | — | | — | | 854,031 | | — | Life Insurance Proceeds(4) | | 2,888,028 | | — | | — | | — | | — | Outplacement Services | | — | | — | | 3,500 | | 3,500 | | — | Total | | 6,531,331 | | — | | 2,169,521 | | 4,704,771 | | — |
2019FOOTNOTES TO 2021 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
Name | | Termination of Employment Due to… | | Cash Severance ($) | | Outstanding Performance Share Awards ($)(1) | | Unvested RSUs ($)(2) | | Unvested Options ($)(3) | | Life Insurance Proceeds ($)(4) | | Total ($) | Michael F. Roman | | Retirement | | — | | — | | — | | — | | — | | — | | | Death | | — | | 7,179,235 | | — | | 11,495 | | 3,000,000 | | 10,190,730 | | | Disability | | — | | — | | — | | — | | — | | — | | | Qualifying Termination in connection with a Change in Control | | — | | 3,566,845 | | — | | 11,495 | | — | | 3,578,340 | | | Other Reason | | — | | — | | — | | — | | — | | — | Inge G. Thulin | | Retirement | | — | | — | | — | | — | | — | | — | Nicholas C. Gangestad | | Retirement | | — | | — | | — | | — | | — | | — | | | Death | | — | | 3,329,574 | | 1,097,509 | | 17,216 | | 3,000,000 | | 7,444,299 | | | Disability | | — | | — | | 1,097,509 | | — | | — | | 1,097,509 | | | Qualifying Termination in connection with a Change in Control | | — | | 1,818,367 | | 1,097,509 | | 17,216 | | — | | 2,933,092 | | | Other Reason | | — | | — | | — | | — | | — | | — | Ashish K. Khandpur | | Retirement | | — | | — | | — | | — | | — | | — | | | Death | | — | | 2,351,326 | | — | | 6,557 | | 2,614,000 | | 4,971,883 | | | Disability | | — | | — | | — | | — | | — | | — | | | Qualifying Termination in connection with a Change in Control | | — | | 1,131,850 | | — | | 6,557 | | — | | 1,138,407 | | | Other Reason | | — | | — | | — | | — | | — | | — | Julie L. Bushman | | Retirement | | — | | — | | — | | — | | — | | — | | | Death | | — | | 2,101,868 | | — | | 8,651 | | 2,900,846 | | 5,011,365 | | | Disability | | — | | — | | — | | — | | — | | — | | | Qualifying Termination in connection with a Change in Control | | — | | 1,142,458 | | — | | 8,651 | | — | | 1,151,109 | | | Other Reason | | — | | — | | — | | — | | — | | — | Joaquin Delgado | | Other Reason(5) | | 1,750,000 | | — | | — | | — | | — | | 1,750,000 | Michael G. Vale | | Retirement | | — | | — | | — | | — | | — | | — | | | Death | | — | | 1,829,475 | | — | | 10,910 | | 2,760,000 | | 4,600,385 | | | Disability | | — | | — | | — | | — | | — | | — | | | Qualifying Termination in connection with a Change in Control | | — | | 954,942 | | — | | 10,910 | | — | | 965,852 | | | Other Reason | | — | | — | | — | | — | | — | | — |
FOOTNOTES TO 2019 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
(1) | The amounts in this columnAmounts shown reflect the value of performance share awards (PSAs) under the 2016 Long-Term Incentive Plan for which the three-year performance period has not been completed (adjusted to reflect the closing price of a share of 3M common stock on the NYSE for December 31, 20192021 ($176.42)177.63)), and which would be paid upon the occurrence of the respective triggering events in accordance with the terms of the awards. | | | (2) | The amounts in this columnAmounts shown reflect the value of the shares underlying the unvested 3M restricted stock units that would vest upon the occurrence of the respective triggering events in accordance with the terms of the awards. Share values are based on the closing price of a share of 3M common stock on the NYSE for December 31, 20192021 ($176.42)177.63). |
Table of Contents (3) | The amounts in this columnAmounts shown reflect the intrinsic value on December 31, 2019,2021, of unvested, in-the-money 3M stock options that will vest upon the occurrence of the respective triggering events in accordance with the existing contractual terms of the stock options. Intrinsic values are based on the closing price of a share of 3M common stock on the NYSE for December 31, 20192021 ($176.42)177.63). |
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(4) | The amounts in this columnAmounts shown reflect the group term life insurance proceeds that would be payable to each individual’s beneficiary or beneficiaries pursuant to the policies obtained for them under the Executive Life Insurance Plan. Under such plan, individuals first appointed to an executive position on or before August 31, 2003, receive additional life insurance coverage that is provided through a universal life insurance policy and individuals first appointed on or after September 1, 2003, receive additional group term life insurance coverage. | | | (5) | The amountAmount shown reflects the payment made to Dr. Delgado under “Qualifying Termination in connection with a Change in Control” have been reduced in accordance with the terms of the Severance Plan to provide Mr. Patolawala with a separation agreement. For more information concerninggreater after-tax benefit than he otherwise would have received if the arrangement with Dr. Delgado, seefull amount were paid and he became subject to an excise tax on “excess parachute payments” pursuant to Section 280G of the section entitled “Separation pay” on page 61 of this Proxy Statement.Internal Revenue Code. |
Pay ratio Presented below is the ratio of annual total compensation of our CEO to the annual total compensation of our median employee (excluding our CEO) for 2019.2021. The ratio reflects a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the Securities Exchange Act of 1934. In determining the ratio below, we began by using the sameidentifying our median employee (a full-time production employee in the Midwestern United States) identified for purposes of calculating, we calculated the ratio included in our 2018 and 2019 proxy statement because there have not been changes in our employee population or employee compensation arrangements that we believe would significantly impact the pay ratio disclosure. The median employee initially was identified based on target annual total cash compensation forTotal Cash Compensation of each employee as of December 31, 2017.2021. For these purposes, annual total cash compensationTotal Cash Compensation included base salary or hourly wages, cash incentives, commissions, and comparable cash elements of compensation in non-U.S. jurisdictions and was calculated using internal human resources records. All amounts were annualized for permanent employees who did not work for the entire year, such as new hires, employees on paid or unpaid leave of absence and employees called for active military duty. We did not apply any cost-of-living adjustments as part of the calculation. TheWe selected the median employee was selected from among 90,82395,259 full-time, part-time, temporary, and seasonal workers who were employed as of December 31, 2017. As permitted by Item 402(u) of Regulation S-K, we excluded 1,575 employees (including 966 non-U.S. employees) who joined the Company during 2017 as part of our acquisition of Scott Safety when making this determination. Except for the employees excluded on the basis of the Scott Safety acquisition completed in 2017, we2021. We did not exclude any other employees (whether pursuant to the de minimis exemption for foreign employees or any other permitted exclusion).
when making this determination. As determined in accordance with Item 402 of Regulation S-K, the 20192021 annual total compensation was $18,321,566$18,200,584 for our CEO and $57,494$71,821 for our median employee. Among other things, these amounts include base salary, overtime, incentive payments, stock-based compensation (based on the grant date fair value of awards granted during 2019)2021), changes in pension values and retirement plan contributions. As calculated in this manner, the ratio of our CEO’s total compensation to our median employee’s total compensation for fiscal year 20192021 is 319253 to 1. 20202022 Proxy Statement | 89101 |
Table of Contents Shareholder proposal | | | PROPOSALProposal
4 | | Shareholder Proposal on Setting Target Amounts for CEO Compensation •● Shareholder proposal, on setting target amounts for CEO compensation, if properly presented at the meeting.
•● See the Board’s opposition statement.
| | | | | | | | | | | | | Recommendation of the board The Board of Directors unanimously recommends a vote “AGAINST” this proposal for the reasons discussed below. Proxies solicited by the Board of Directors will be voted “AGAINST” this proposal unless a shareholder indicates otherwise in voting the proxy. | | | | | |
3M has received a shareholder proposal from the United Steelworkers, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, 60 BoulevardJohn Montgomery as trustee of the Allies, Pittsburgh, PA 15222,The John Bishop Montgomery Trust, the owner of 68534 shares of 3M common stock (the “Proponent”). The Company will provide the Proponent’s address promptly upon a shareholder’s oral or written request. The Proponent has requested that the Company include the following proposal and supporting statement (in italics) in its proxy statement for the Annual Meeting of Shareholders. The proponent is responsible for the content of this proposal, and, as a result, the Company is not responsible for any inaccuracies the proposal or statement may contain. The proposal may be voted on at the Annual Meeting only if properly presented by the Proponent or the Proponent’s qualified representative. For the reasons set forth following the Proponent’s statement, your Board of Directors recommends that you vote “AGAINST” this proposal. Item 4 – Report on environmental costs RESOLVEDRESOLVED: Shareholders of 3M Corporation (the “Company’’) request, shareholders ask that the Compensation Committee of the Board of Directors take into considerationcommission and publish a report on (1) the pay grades and/or salary rangeslink between the environmental costs created by 3M’s operations and political influence activities and 3M’s continuing prioritization of all classificationsenterprise risk, and (2) the manner in which such costs and prioritization may affect the market returns available to its diversified shareholders. Supporting Statement: In our Company’s 2021 Sustainability Report, CEO Mike Roman states, “We are committed to being leaders in sustainability.”1 A review of that report reveals our Company employeeshas addressed many environmental concerns. But 3M’s commitment is limited. For example: ● | 3M is active in three trade associations that work against comprehensive U.S. policies to address climate change.2 | ● | 3M does not appear to have committed to meet the Science-Based Targets initiative for a 1.5- degree Celsius world3 and failed to receive an “A” grade in 2020 from CDP, a widely used and respected climate rating.4 | ● | Belgian regulators recently ordered 3M to stop PFAS production after recent blood samples taken from 800 people near 3M’s plant showed elevated levels of PFAS.5 |
It appears our Company only addresses sustainability issues when setting target amounts for CEO compensation.that pursuit optimizes 3M’s financial return. The Compensation Committee should describe in the Company’s proxy statements for annual shareholder meetings how it complies with this requested policy. Compliance with this policy is excused if it will result in the violation of any existing contractual obligation or the terms of any existing compensation plan. SUPPORTING STATEMENTSustainability Report states:
Like at many companies, our Company’s Compensation Committee uses peer group benchmarksOur priority is the comprehensive management of what other companies pay their CEOs to set its target CEO compensation. These target pay amounts are then subject to performance adjustments. To ensure that our Company’s CEO compensation is reasonable relative to our Company’s overall employee pay philosophyenterprise risks through an ethical tone, governance processes, and structure, we believe that the Compensation Committee should also consider the pay grades and/or salary ranges of Company employees when setting CEO compensation target amounts.clear roles, responsibilities, and accountability.
6 This proposalprioritization of risks to the enterprise, rather than risks to the environment, means that 3M only addresses environmental issues that threaten its ability to generate profits. Risks to the global community that do not threaten 3M are not prioritized, so that 3M can continue to profit from conduct that threatens the environment, as it does not require the Compensation Committee to use other employee pay datacreate risk for 3M itself. But a gain in a specific way to set CEO compensation targets. Under this proposal, the Compensation Committee will have discretion to determine how other employee pay should impact CEO compensation targets. The Compensation Committee also will retain authority to use peer group benchmarks and/or any other metric to set CEO compensation target amounts. Over time, using peer group benchmarks to set CEO compensation can lead to pay inflation. Although many companies target CEO compensationCompany profit that comes at the medianexpense of the environment is a bad trade for most 3M shareholders, who are diversified and rely on broad economic growth to achieve their peer group, certain companies have targeted their CEO’s pay above median. In addition, peer groups can be cherry-picked to include larger or more successful companies where CEO compensation is higher. (Charles Elson and Craig Ferrere, “Executive Superstars, Peer Groups and Overcompensation,” Journal of Corporation Law, Spring 2013).financial objectives. A Company strategy
Table of Contents Tablethat increases its own financial returns but threatens global GDP is counter to the interests of Contentsmost 3M shareholders: the potential drag on GDP created by environmental costs will directly reduce diversified portfolio returns over the long term.7
This proposal asks the Board to commission a report that analyzes the trade-offs 3M is making by prioritizing enterprise risk over risks to the environment and the global economy from the perspective of its largely diversified shareholders, whose investment portfolios may be at grave risk from environmental threats. The requested report will help shareholders determine whether current system of using peer group benchmarks, without taking into account the pay grades or salary ranges of all company employees, when determining CEO compensation has had the effect of CEO pay far outpacing that of average employees. In 2018, the average S&P 500 CEO made 287 times that of their median employee. For our Company the CEO/median employee ratio calculated in 2018 was 302 to 1. According to the 2006 report The State of Working America the ratio of CEO pay to average worker pay has risen from 35 to 1 in 1979, to 71 to 1 in 1989, to 248 to 1 in 1998. The current system of determining CEO compensation without taking into account the pay of average company employees has led to glaring inequality between the workers who make our company what it ispolicies serve shareholders’ best interests and the man or woman who sits at the top.whether 3M should prioritize certain environmental issues over financial returns. For those reasons, we urge you toPlease vote in favor of this proposal.for: Report on environmental costs – Proposal 4*
1 | 3M 2021 Sustainability Report at 3. | 2 | https://grist.org/accountability/report-corporations-are-tanking-americas-best-shot-at-fighting-climate-change | 3 | https://sciencebasedtargets.org/companies-taking-action | 4 | https://www.cdp.net/en/responses?per_page=10&queries%5Bname%5D=3m&sort_by=project_year&sort_dir=desc | 5 | https://www.startribune.com/3m-fails-to-overturn-regulators-shutdown-of-pfas-production-in-belgium/600114579/ | 6 | at 95. | 7 | https://www.unepfi.org/fileadmin/documents/universal_ownership_full.pdf; |
Board’s statement opposing the proposal After careful consideration, and for the reasons set forth below, the Board believes that it is not in the best interests of 3M or its shareholders to approve the proposed resolution. Fundamentally, the proposal is based on a premise that is factually unsupported – that enterprise risk management and societal sustainability risks must necessarily be mutually exclusive. The proponent asserts that 3M “only addresses sustainability issues when that pursuit optimizes financial return,” 3M “only addresses environmental issues that threaten its ability to generate profits” and “risks to the global community that do not threaten 3M are not prioritized.” These assertions are unfounded because sustainability-related risk management is an integral part of 3M’s enterprise risk management program. Environmental risks that impact 3M and how 3M impacts the environment are both considerations of our enterprise risk management framework. Such integration has been reported in our public disclosures including the proxy statements, and further, our annual Global Impact Report already publishes 3M’s environmental impacts, environmental stewardship, and environment commitments. Our corporate Promise guides our strategic sustainability framework – For 3M, our corporate Promise – improve lives by helping solve the world’s greatest challenges – culminates in our ambition to help transform businesses and improve lives. Our goals and environmental, social and governance (ESG) metrics reflect a heightened commitment to thinking holistically about how our operations and products can unlock the power of people, ideas, and science to reimagine what’s possible. We are guided by the principles of sound science and corporate responsibility. In collaboration with our employees, customers, partners, government, and communities, we apply our expertise and technology to help solve shared global challenges. We recognize and consistently seek opportunities to do more. For more than 45 years, 3M has been recognized as a leader among global corporations in sustainability actions and measures, with programs dating back as early as 1975. Since then and to this day, our goals and ambitions continue to grow and gain momentum as we recognize how much still needs to be done to make the world more sustainable for future generations. Our sustainability strategy is a systemic approach, seeking to drive innovation and holistic impact against shared global needs. We set impactful and measurable goals that demonstrate our ESG commitments and progress. As a global science, technology, and manufacturing company, we believe 3M is uniquely positioned to bring our full capabilities to advance meaningful impact, not only in our workplaces but also in our communities. As we advance our initiatives with determination, we know systemic change requires resources and long-term dedication. We publish our sustainability and environmental efforts annually in our Global Impact Report – as a global corporation contributing to society through diverse markets, we believe that we have a significant responsibility to advance the United Nations Sustainable Development Goals across the world. We are also a participant of the United Nations Global Compact, a policy initiative for businesses to demonstrate their commitment to ten principles in the areas of human rights, labor, environment, and anti-corruption. We align our Global Impact Report to the guidelines of the Sustainability Accounting Standards Board (SASB) and the Task Force for Climate-Related Financial Disclosures (TCFD) recommendations for helping businesses disclose climate-related financial information. Together with our ambition of improving lives and our strong set of 3M values, these commitments drive and inform our formalized approach to sustainability—the 3M Strategic Sustainability Framework. 1.2022 Proxy Statement | The Company already maintains103 |
Table of Contents We are focusing on three priority areas: ● | Science for Circular: Design solutions that do more with less material, advancing a global compensation principles that are intendedcircular economy | | | In 2021, we announced our commitment to ensure thatreduce dependence on virgin fossil-based plastic by 125 million pounds by 2025. We will use recycled content and bio-based plastics, and ultimately work to decrease our overall virgin, fossil-based plastic use. | | | 3M is also taking steps to reduce water use and improve water quality through installation of technologies at key manufacturing sites worldwide. This includes a commitment to install state-of-the art water purification technology at its compensation practices are fairlargest water-using facilities by the end of 2023 and reasonable as appliedfully operational by 2024. | | | To drive impact for the greater good, we continue to both executiveadvance our goal of 100% of products entering 3M’s new product commercialization process to include descriptions of their sustainability impact. | ● | Science for Climate: Innovate to decarbonize industry, accelerate global climate solutions and non-executive employees. These principles alignimprove our environmental footprint | | | In 2021, 3M was recognized with the Company’s vision and strategies, balance both individual and enterprise-wide performance and seekMarket Trailblazer Award from RE100, a global initiative bringing together the world’s most influential businesses committed to provide competitive wages and benefits with consistent positioning100% renewable power. | | | Through select 3M product platforms, we helped our customers avoid emitting nearly 75 million metric tons of CO2 in the median rangelast five years alone. Examples include helping customers in electronics, automotive, and construction industries improve their energy efficiency and reduce waste through the use of 3M materials and solutions. | ● | Science for Community: Create a more positive world through science and inspire people to join us | | | In 2021, 3M launched the Community Coalition – a group of diverse leaders located near 3M headquarters in St. Paul, Minnesota, including representatives from local government, nonprofits, and the education sector. This group identified five areas for strategic investments and volunteerism, including STEM equity, access to health care, transportation safety, education, and housing. | ● | Our governance framework integrates sustainability-related risk as an integral part of enterprise risk management - Our robust governance framework includes oversight by our Board of Directors, which receives regular sustainability updates and reviews sustainability-related risks as part of 3M’s enterprise risk management. The Science, Technology & Sustainability Committee of the markets that are most relevant to employees based on roles, responsibilities, skills,Board of Directors has primary oversight responsibility of 3M’s sustainability and performance. To monitorstewardship activities, including, among others, environmental and supportproduct stewardship efforts, environmental, health & safety, and legal and regulatory compliance. The company’s Environmental Responsibility and Sustainability Committee, comprising 3M top executive management, provides leadership, oversight and strategy for sustainability and develops and monitors adherence with related policies and procedures. |
As described above, 3M already provides detailed information in our annual Global Impact Report and elsewhere regarding our commitments to environmental stewardship and sustainability and their integral role in enterprise risk management. 3M therefore believes that the additional report requested by this proposal is unnecessary based on the extensive relevant information that is already provided to our stakeholders and the public, our existing policies and procedures, and active Board oversight.
Table of Contents Shareholder proposal | | Proposal 5 | | Shareholder Proposal ● Shareholder proposal, if properly presented at the effectiveness of this program,meeting. ● See the Company also periodically compares its pay components to those of other premier companies, and adjusts them as necessary to stay competitive and attract, retain, and motivate a highly qualified, diverse workforce at all levels throughout the organization, not just for its executives.Board’s opposition statement. | | | 2. | The Board of Directors believes that the overwhelming majority of our shareholders support the Company’s current executive compensation program. As described in more detail in the Compensation Discussion and Analysis portion of this Proxy Statement, the current program emphasizes a strong pay-for-performance philosophy and seeks to align the compensation of the Company’s Chief Executive Officer and other executive officers with the interests of long-term 3M shareholders. In 2019, approximately 95 percent of the votes cast on the Company’s say-on-pay proposal approved the compensation of the named executive officers as disclosed in last year’s Proxy Statement. | | | | 3. | The Compensation Committee already reviews and considers the ratio of annual total compensation of our Chief Executive Officer to the annual total compensation of our median employee (excluding our Chief Executive Officer), as reported in the proxy statement, which the Company believes provides a similar perspective to the Compensation Committee at no incremental cost to the Company. 3M has operations and different compensation programs in about 70 countries around the world. Compliance with the proposal would require substantial coordination with local employees in foreign countries to collect and transmit the necessary data on “all classifications” of the Company’s approximately 96,000 employees worldwide, all of which would need to be carefully analyzed and summarized. The Company believes that the time, cost, and resource burden associated with implementing the proposal is not warranted by any incremental benefit that the resulting information may be able to offer. |
RECOMMENDATION OF THE BOARD
| | | | Recommendation of the board The Board of Directors unanimously recommends a vote “AGAINST” this proposal.proposal for the reasons discussed below. Proxies solicited by the Board of Directors will be voted “AGAINST” this proposal unless a shareholder indicates otherwise in voting the proxy. | | | | | |
3M has received a shareholder proposal from Steven J. Milloy, the owner of 20 shares of 3M common stock (the “Proponent”). The Company will provide the Proponent’s address promptly upon a shareholder’s oral or written request. The Proponent has requested that the Company include the following proposal and supporting statement (in italics) in its proxy statement for the Annual Meeting of Shareholders. The proponent is responsible for the content of this proposal, and, as a result, the Company is not responsible for any inaccuracies the proposal or statement may contain. The proposal may be voted on at the Annual Meeting only if properly presented by the Proponent or the Proponent’s qualified representative. For the reasons set forth following the Proponent’s statement, your Board of Directors recommends that you vote “AGAINST” this proposal. Communist China Audit Resolved: Shareholders request that, beginning in 2022, 3M report to shareholders on the general nature and extent to which corporate operations involve or depend on Communist China, which is a serial human rights violator and a geopolitical threat and adversary to the US. The report should exclude confidential business information but provide shareholders with a basic sense of 3M’s reliance on activities conducted within, and under control of the Communist Chinese government. Supporting Statement: American companies doing business in Communist China is a controversial public policy issue. See, e.g., “Doing business in China is difficult. A clash over human rights is making it harder,” April 2, 2021, https://www.cnn.com/2021/04/02/ business/nike-china-western-business-intl-hnk/index.html. 3M has suppliers who operate in Communist China. Communist China is a well-known serial violator of human and political rights. Communist China may also possibly become a hostile adversary of the US for a variety of reasons, including: 2020— | Communist China intends to displace the US as the lone global superpower by 2049. | — | The US has committed to defending Taiwan, which Communist China may attempt to seize by force. | — | US-China relations are tense over a number of issues including Communist China’s military expansion, egregious human rights violations, actions related to the COVID pandemic, intellectual property theft, elimination of political freedom in Hong Kong, and environmental pollution. |
Communist China has also publicly indicated that it would use its industrial capabilities for strategic purposes against adversaries. 2022 Proxy Statement | 91105 |
Table of Contents Communist China has already taken action against Australia, for example, for COVID-related criticism. At the beginning of the COVID pandemic, 3M admitted it had to secure approval from the Communist Chinese government to export to the US 10 million N95 respirators that 3M manufactured there. Given the controversial, if not dangerous nature of doing business in China, shareholders have the right to know the general nature and extent to which 3M’s business operations are involved with or depend on Communist China. Board’s statement opposing the proposal After careful consideration, and for the reasons set forth below, the Board believes that it is not in the best interests of 3M or its shareholders to approve the proposed resolution. Our business model is to be close to our customers and markets to serve them – 3M has operations in over 70 countries and sales in nearly every country. Over 55,000 3M products are used in homes, businesses, schools, hospitals and other industries around the world. Relative to China, 3M entered in 1984 by registering a wholly-owned subsidiary (without a third party partner) to serve local customers. Out of our global 95,000 employees, close to 6,000 work in China. More than 85% of our revenue in China (from local manufacturing and converting of imported semi-finished materials at its nine plants) is to customers and markets (industrial, electronics, healthcare, consumer, and others) located in China. Our business model is focused on being close to our customers and markets with our capabilities to serve them the best we can. This strategy serves us well and particularly important in uncertain times when collaboration took on new meaning during the global pandemic. We have worked with many companies and customers to collaborate on products to help in the global fight against COVID-19 as we rapidly responded to the impact of the pandemic to supply respirators to frontline healthcare workers and first responders along with other markets and customers around the world. Respect for human rights is deeply engrained in our culture – our commitment to customers is governed by policies and standards that allow us to move forward with integrity, confidence, and the common foundation of 3M’s values. These policies and standards and our actions are reported in more detail in our annual Global Impact Report. The Code of Conduct defines our values and the responsibilities that 3M employees and 3M suppliers must meet. It outlines what 3M believes is the ethical approach to various work situations and summarizes 3M’s compliance principles and raises awareness about how to do business the right way, at all times and at every site. 3M’s Human Rights Policy applies to all 3M employees, contingent workers, anyone doing business with or on our behalf, and others acting on 3M’s behalf. Within our own business, 3M’s approach to managing and respecting human rights is derived from the 3M Code of Conduct, which recognizes the right of 3M workers to have a respectful workplace. 3M continues to implement our human rights program through our global policies, management system, assessments, audits and training. We have a robust governance structure regarding supplier responsibilities that include human rights – The 3M Business Conduct Committee, comprising senior executive management, oversees compliance with the Code of Conduct and regularly updates the Audit Committee of the 3M Board of Directors and 3M’s executive-level Corporate Operations Committee. Additionally, similar committees exist at country, region, and area levels to operationalize and prioritize compliance activities. 3M offers a comprehensive online compliance training program to all employees worldwide in 22 languages, and this program includes awareness training of 3M policies related to human rights. The program’s training modules are assigned to employees based on their roles and areas of responsibility within the company. 3M works with broad, complex supply chains, consisting of over 72,300 suppliers in over 324 subcategories in 113 countries around the world. We set a high bar for our company regarding environmental and social governance, and we expect the same from our suppliers. 3M follows the Organization for Economic Co-operation and Development (OECD) Due Diligence framework for all our responsible sourcing activities. The 3M Supplier Responsibility Code is based on 3M’s corporate values for sustainable and responsible operations and aligns with the 10 Principles of the United Nations Global Compact, of which 3M is a participant. This Code outlines 3M’s basic expectations for suppliers and their sub-contractors in the areas of management systems, labor, environmental, health and safety, and ethics. 3M communicates its human rights and labor expectations to suppliers through its use of contractual provisions and other binding legal obligations, links to 3M’s website and in direct business meetings. The contractual provisions include certifications by suppliers about their labor conditions. 3M expects its suppliers to have similar policies and practices that align with the 3M Supplier Responsibility Code, including due diligence with their suppliers.
Table of Contents 3M has implemented a supplier risk evaluation process to assess existing, prioritized suppliers that could be at risk for non-conformance with our Supplier Responsibility Code, including the human rights elements. 3M’s responsible sourcing team also conducts on-site audits of our suppliers. Suppliers who do not pass this assessment do not qualify to supply 3M. We also expect our suppliers to periodically assess themselves and their suppliers for conformance to our expectations. If the assessment identifies gaps or findings, and if a supplier is not able or willing to resolve them within a reasonable timeframe, alternative actions are determined with a cross-functional business team to evaluate and resolve the situation. We are a company driven by employees who act with uncompromising integrity and develop innovative solutions with a purpose. 2021 is the eighth consecutive year 3M made the list of The World’s Most Ethical Companies®, an honor given by the Ethisphere® Institute. In addition, following evaluations of the 1,000 largest public U.S. companies on issues that matter most to the American public (including upholding human rights across the supply chain, acting ethically and with integrity, and more), Forbes and JUST Capital listed 3M as one of America’s Most Just Companies in 2021. 3M already provides information in our annual Global Impact Report and elsewhere regarding our business model including our operations in China, and our commitments to our own and our suppliers’ ethical business conduct compliance including respect for human rights. 3M therefore believes that the additional report requested by this proposal is unnecessary based on the extensive information that is already provided to our stakeholders and the public, our existing policies and procedures, and the governance framework including active Board oversight.
Table of Contents Stock ownership information Stock ownership information |
Security ownership of management The following table includes all 3M stock-based holdings, as of February 29, 2020,28, 2022, of the directors and the Named Executive Officers set forth in the Summary Compensation Table, and the directors and executive officers as a group. COMMON STOCK AND TOTAL STOCK-BASED HOLDINGS
Name and principal position | | Stock(1) | | | Restricted Stock Units(2) | | | Deferred Stock(3) | | | Total(4) | | | Percent of Class | | Thomas “Tony” K. Brown, Director | | | — | | | | — | | | | 6,753 | | | | 6,753 | | | (5) | | Pamela J. Craig, Director | | | — | | | | — | | | | 1,002 | | | | 1,002 | | | (5) | | David B. Dillon, Director | | | 1,200 | | | | — | | | | 4,255 | | | | 5,455 | | | (5) | | Michael L. Eskew, Director | | | — | | | | — | | | | 42,659 | | | | 42,659 | | | (5) | | Herbert L. Henkel, Director | | | — | | | | — | | | | 36,988 | | | | 36,988 | | | (5) | | Amy E. Hood, Director | | | 24 | | | | — | | | | 2,139 | | | | 2,163 | | | (5) | | Muhtar Kent, Director | | | — | | | | — | | | | 13,458 | | | | 13,458 | | | (5) | | Edward M. Liddy, Director | | | — | | | | — | | | | 58,999 | | | | 58,999 | | | (5) | | Dambisa F. Moyo, Director | | | 1,430 | | | | — | | | | 104 | | | | 1,534 | | | (5) | | Gregory R. Page, Director | | | 4,000 | | | | — | | | | 5,159 | | | | 9,159 | | | (5) | | Patricia A. Woertz, Director | | | 2,580 | | | | — | | | | 1,002 | | | | 3,582 | | | (5) | | Michael F. Roman, Chairman of the Board, President and Chief Executive Officer | | | 313,845 | | | | — | | | | 29,221 | | | | 343,066 | | | (5) | | Inge G. Thulin, Former Executive Chairman of the Board | | | 1,344,758 | | | | — | | | | 201,328 | | | | 1,546,086 | | | (5) | | Nicholas C. Gangestad, Senior Vice President and Chief Financial Officer | | | 307,927 | | | | 6,221 | | | | 20,564 | | | | 334,712 | | | (5) | | Ashish K. Khandpur, Executive Vice President, Transportation and Electronics Business Group | | | 147,408 | | | | — | | | | 13,250 | | | | 160,658 | | | (5) | | Julie L. Bushman, Executive Vice President, International Operations | | | 296,714 | | | | — | | | | — | | | | 296,714 | | | (5) | | Joaquin Delgado, Former Executive Vice President, Consumer Business Group | | | 272,269 | | | | — | | | | — | | | | 272,269 | | | (5) | | Michael G. Vale, Executive Vice President, Safety and Industrial Business Group | | | 320,435 | | | | — | | | | 33,690 | | | | 354,125 | | | (5) | | All Directors and Executive Officers as a Group (25 persons) | | | 2,139,990 | | | | 11,666 | | | | 304,103 | | | | 2,455,759 | | | (5) | |
FOOTNOTES TO COMMON STOCK AND TOTAL STOCK-BASED HOLDINGS TABLE
Common stock and total stock-based holdings | | | | | | | | | | | Name and principal position | | Stock(1) | | Restricted Stock Units(2) | | Deferred Stock(3) | | Total(4) | | Percent of Class | Thomas “Tony” K. Brown, Director | | 1,237 | | — | | 8,144 | | 9,381 | | (5) | Pamela J. Craig, Director | | — | | — | | 3,222 | | 3,222 | | (5) | David B. Dillon, Director | | 1,200 | | — | | 6,705 | | 7,905 | | (5) | Michael L. Eskew, Director | | — | | — | | 49,877 | | 49,877 | | (5) | James R. Fitterling, Director | | 6,300 | | — | | 1,174 | | 7,474 | | (5) | Herbert L. Henkel, Director | | — | | — | | 43,536 | | 43,536 | | (5) | Amy E. Hood, Director | | 24 | | — | | 4,440 | | 4,464 | | (5) | Muhtar Kent, Director | | — | | — | | 17,570 | | 17,570 | | (5) | Suzan Kereere, Director | | — | | — | | 281 | | 281 | | (5) | Dambisa F. Moyo, Director | | 1,302 | | — | | 2,262 | | 3,564 | | (5) | Gregory R. Page, Director | | 4,000 | | — | | 7,674 | | 11,674 | | (5) | Patricia A. Woertz, Director | | 2,580 | | — | | 4,960 | | 7,540 | | (5) | Michael F. Roman, Chairman of the Board and Chief Executive Officer | | 661,388 | | — | | 68,635 | | 730,023 | | (5) | Monish Patolawala, Executive Vice President, Chief Financial and Transformation Officer | | 29,473 | | 47,205 | | — | | 76,678 | | (5) | Ashish K. Khandpur, Group President, Transportation and Electronics Business Group | | 221,202 | | 12,271 | | 18,442 | | 251,915 | | (5) | Mojdeh Poul, Group President, Health Care Business Group | | 108,035 | | 14,962 | | 5,166 | | 128,163 | | (5) | Michael G. Vale, Group President, Safety and Industrial Business Group | | 363,758 | | — | | 40,376 | | 404,134 | | (5) | All Directors and Executive Officers as a Group (25 persons) | | 1,786,100 | | 119,787 | | 296,467 | | 2,202,354 | | (5) |
(1) | This column lists beneficial ownership of 3M common stock as calculated under Securities and Exchange Commission rules. Unless otherwise noted, voting power and investment power in the shares are exercisable solely by the named person, and none of the shares are pledged as security by the named person. In accordance with Securities and Exchange Commission rules, this column also includes shares that may be acquired pursuant to stock options that are or will be exercisable within 60 days of February 29, 2020,28, 2022, as follows: Mr. Roman — 295,265 shares,639,663 shares; Mr. ThulinPatolawala — 1,252,340 shares, Mr. Gangestad — 289,986 shares,26,124 shares; Mr. Khandpur — 143,571 shares,212,772 shares; Ms. Bushman — 257,786 shares, Mr. Delgado — 248,092 sharesPoul —105,631 shares; and Mr. Vale — 301,269346,639 shares. This column includes the following shares over whichthat the named person shares voting and/or investment power: Mr. Khandpur — 1,5731,623 shares held byindirectly with a family member. |
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(2) | This column reflects restricted stock units that generally vest over a three- to five-year period, assuming continued employment until each vesting date (or until the individual retires from the Company, in some cases). The executive officers do not have voting power with respect to the shares listed in this column. | (3) | This column reflects shares earned by the directors as a result of their service on the Board of Directors, the payout of which has been deferred until following the termination of their membership on the Board of Directors. This column also includes shares of the Company’s common stock which the executive officers are entitled to receive following their retirement from the Company as a result of their election to defer all or a portion of the payout of their performance share awards granted under the Company’s long-term incentive plan. Neither the directors nor the executive officers have voting power with respect to the shares listed in this column. |
Table of Contents | Stock ownershipinformation |
| | (4) | This column shows the individual’s total 3M stock-based holdings, including the securities shown in the “Stock” column (as described in note 1), in the “Restricted Stock Units” column (as described in note 2), and in the “Deferred Stock” column (as described in note 3). | (5) | Each director and executive officer individually, and All Directors and Executive Officers as a Group, beneficially owned less than one percent of the outstanding common stock of the Company. |
Security ownership of certain beneficial owners The following table sets forth information regarding beneficial owners of more than 5 percent of the outstanding shares of 3M common stock. Name/address | | Common Stock Beneficially Owned | | Percent of Class | | The Vanguard Group(1) 100 Vanguard Blvd. Malvern, PA 19355 | | | 50,504,075 | | | 8.78 | | State Street Corporation(2) State Street Financial Center One Lincoln Street Boston, MA 02111 | | | 42,320,337 | | | 7.36 | | BlackRock, Inc.(3) 55 East 52nd Street New York, NY 10055 | | | 41,713,628 | | | 7.30 | |
Name/address | | Common Stock Beneficially Owned | | Percent of Class | The Vanguard Group(1) | | 50,240,763 | | 8.72 | 100 Vanguard Blvd. | | | | | Malvern, PA 19355 | | | | | BlackRock, Inc.(2) | | 41,810,186 | | 7.30 | 55 East 52nd Street | | | | | New York, NY 10055 | | | | | State Street Corporation(3) | | 30,984,983 | | 5.38 | State Street Financial Center | | | | | One Lincoln Street | | | | | Boston, MA 02111 | | | | |
(1) | In a Schedule 13G/A filed with the Securities and Exchange Commission on February 12, 2020,9, 2022, The Vanguard Group reported that, as of December 31, 2019,2021, it had sole voting power with respect to 869,956 shares, shared voting power with respect to 153,602897,239 shares, sole dispositive power with respect to 49,524,15847,926,223 shares, and shared dispositive power with respect to 979,9172,314,540 shares. It also reported that Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 674,130 shares or 0.11 percent of 3M common stock outstanding as a result of its serving as investment manager of collective trust accounts. It further reported that Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 491,319 shares or 0.08 percent of 3M common stock outstanding as a result of its serving as investment manager of Australian investment offerings. Vanguard provides investment management services to the Company’s defined contribution plans in the U.S. through a co-mingled mutual fund vehicle. The 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan use this investment in their defined contribution investment choices. Fees paid for investment management of the fund are incorporated into the fund NAV on a daily basis and fully disclosed as an expense ratio for the fund. As a result, these fees are paid by participants in the Company’s defined contribution plans and are not paid by the Company. The total amount of the fees will fluctuate based on the plan participant allocation decisions. The fees paid are reviewed by the fiduciaries of the retirementemployee benefit plans and are determined to be reasonable for the services provided. | (2) | In a Schedule 13G filed with the Securities and Exchange Commission on February 13, 2020, State Street Corporation reported that, as of December 31, 2019, it had shared voting power with respect to 34,053,004 shares of 3M common stock and shared dispositive power with respect to 42,314,931 shares of 3M common stock. Of these shares, 11,668,839 shares were held as trustee or investment manager for certain 3M savings plans, including the Company’s Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan, which are 401(k) retirement savings plans. State Street Bank and Trust Company provides custody, investment management, and corporate finance services to the Company and a number of employee benefit plans sponsored by the Company and its affiliates. The 3M Voluntary Investment Plan and Employee Stock Ownership Plan, the 3M Savings Plan, and the 3M Retiree Welfare Benefit Plan utilize State Street Global Advisors, an affiliate of State Street Bank and Trust Company, as an investment manager. State Street Bank and Trust Company also provides custody services for the Company’s defined contribution plans in the U.S. Further, State Street Bank and Trust Company is a participant of 3M Company’s $3 billion five-year credit agreement dated November 15, 2019. In total, the Company and the various employee benefit plans paid fees of $1.6 million in 2019 to State Street Bank and Trust Company and its affiliates, a majority of which was paid by the participants in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan. In addition, the Trustee will charge the funds held by the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan an annual administration fee and transaction fees which are incorporated into the funds’ NAV. The fees paid are reviewed by the Company (with respect to the credit agreement) and the fiduciaries of the employee benefit plans and are determined to be reasonable for the services provided. |
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(3) | In a Schedule 13G/A filed with the Securities and Exchange Commission on February 5, 2020,1, 2022, BlackRock, Inc. reported that, as of December 31, 2019,2021, it had sole voting power with respect to 35,673,56936,218,909 shares and sole dispositive power with respect to 41,713,62841,810,186 shares, of which 30,79527,341 shares were held as investment manager for the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan. BlackRock, Inc. and its affiliates provide investment management services to several employee benefit plans sponsored by the Company and its Canadian affiliate. The 3M Voluntary Investment Plan and Employee Stock Ownership Plan, the 3M Savings Plan and the 3M Canada Company Master Trust utilize these investment management services. In total, the various employee benefit plans paid fees of $2.7$2.8 million in 20192021 to BlackRock, Inc. and its affiliates, a majority of which was paid by the participants in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan. In addition, the Trustee (BlackRock Institutional Trust Company, N.A.) will charge the funds held by the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan an annual administration fee and transaction fees which are incorporated into the funds’ NAV. The fees paid are reviewed by the fiduciaries of the employee benefit plans and are determined to be reasonable for the services provided. |
94(3) | In a Schedule 13G/A filed with the Securities and Exchange Commission on February 9, 2022, State Street Corporation reported that, as of December 31, 2021, it had shared voting power with respect to 22,358,548 shares of 3M common stock and shared dispositive power with respect to 30,979,936 shares of 3M common stock. Of these shares, 38,293 shares were held as investment manager for certain 3M savings plans, including the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan, which are 401(k) retirement savings plans. State Street Bank and Trust Company provides corporate finance services to the Company. The 3M Voluntary Investment Plan and Employee Stock Ownership Plan, the 3M Savings Plan, and the 3M Retiree Welfare Benefit Plan utilize State Street Global Advisors, an affiliate of State Street Bank and Trust Company, as an investment manager. Further, State Street Bank and Trust Company is a participant of 3M Company’s $3 billion five-year credit agreement dated November 15, 2019. In total, the Company and the various employee benefit plans paid fees of $0.6 million in 2021 to State Street Bank and Trust Company and its affiliates, a majority of which was paid by the participants in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan. In addition, during 2021, the Trustee charged the funds held by the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan an annual administration fee and transaction fees which are incorporated into the funds’ NAV. The fees paid are reviewed by the Company or fiduciaries of the employee benefit plans and are determined to be reasonable for the services provided. |
Table of Contents Other information Proxy statementStatement The Board of Directors (the “Board”) of 3M Company, a Delaware corporation (“3M” or the “Company”) is soliciting proxies for the Company’s Annual Meeting of Shareholders. You are receiving a Proxy Statement because you own shares of 3M common stock that entitle you to vote at the meeting. By use of a proxy you can vote, whether or not you attend the meeting. The Proxy Statement describes the matters we would like you to vote on and provides information on those matters so you can make an informed decision. The information included in this Proxy Statement relates to proposals to be voted on at the meeting (if properly presented), the voting process, 3M’s Board and Board committees, the compensation of directors and certain executive officers, and other required information. Purpose of the Annual Meeting The purpose of the Annual Meeting is to elect the directors identified in this Proxy Statement and to conduct the business described in the Notice of Annual Meeting. Participating in the Virtual Annual Meeting Admission How do I attend the 20202022 Virtual Annual Meeting? What do I need to bring? Only shareholders who held sharesIf you are a holder of 3M common stock as of the close of business on March 17, 2020,15, 2022, the record date, are invited to attend the Annual Meeting. To attend the meeting, you will need to pre-registeror your proxy holder may participate, vote, submit questions and bring an admission ticket andexamine a valid government issued photo identification. You will need to RSVP and print an admission ticket in advance list of shareholders of record via www.virtualshareholdermeeting.com/MMM2022 by visitingwww.proxyvote.comand following the instructions there. You will need theentering your 16-digit control number to accesswww.proxyvote.com.number. You can find your control number on:
•● | your proxy card included in this Proxy Statement if it was mailed to you; | •● | your Notice of Internet Availability of Proxy Materials if you received proxy materials via electronic delivery; or | •● | your voting instruction card if you hold your shares in street name through a broker or other nominee. |
You can view the meeting agenda, rules of conduct and procedures, and proxy materials for the Annual Meeting on the virtual meeting platform. If you lost your 16-digit control number or are not a shareholder, you will be able to attend the meeting by visiting www. virtualshareholdermeeting.com/MMM2022 and registering as a guest. If you enter the meeting as a guest, you will not be able to vote your shares or submit questions during the meeting. You may begin to log into the meeting platform 15 minutes prior to the meeting’s start time on the meeting date. The meeting will begin promptly at 8:30 a.m. Central Daylight Time on May 10, 2022. The virtual meeting platform is supported across browsers and devices running the current version of applicable software and plug-ins. Participants should give themselves plenty of time to log in and ensure they have a strong Wi-Fi connection and they can hear streaming audio prior to the start of the meeting. Will there be technical support for the meeting? If you encounter technical difficulties with the virtual meeting platform on the meeting day, please call the technical support number that will be posted on the meeting website. Technical support will be available starting at 8:15 a.m. Central Daylight Time and until the end of the meeting.
Table of Contents How do I submit questions at the meeting? Can I submit questions in advance of the meeting? We welcome questions from shareholders. If you are a record date shareholder with a 16-digit control number, you may be admittedsubmit questions both in advance of and during the meeting. If you wish to the meeting only if you havesubmit a valid legal proxy from a record date shareholder who has pre-registered and obtained an admission ticket. You must present that proxy and admission ticket, as well as a valid government issued photo identification, at the entrance to the meeting. On the dayquestion in advance of the meeting, an admission ticket, along with a valid government issued photo identification such as a driver’s licenseyou may use your 16-digit control number to access www.proxyvote.com. Questions may also be submitted shortly before or passport, must be presented in order to be admitted to the Annual Meeting. Please note that seating is limited, and admission is on a first-come, first-served basis.
For questions about admission to the Annual Meeting, please contact us at 1-800-3M HELPS (1-800-364-3577).
If you do not provide photo identification or comply with the other procedures outlined here, you will not be admitted to the Annual Meeting.
Use of cameras, recording devices, computers and other electronic devices, such as smartphones and tablets, will not be permitted at the meeting. For security reasons, you will be required to pass through metal detection screening before being granted access to the meeting. No large bags or packages are allowed at the meeting.
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How do I listen to the live webcast?
If you are unable to attend the Annual Meeting, you can listen to the live webcast of the business portion ofduring the meeting, by visitinglogging into the virtual meeting platform at http://investors.3M.comwww.virtualshareholdermeeting.com/MMM2022, select the “Q&A” button and type your questions into the “Submit a Question” field, and click “Submit.” Questions relevant to meeting matters will be answered during the meeting, subject to time constraints. To allow us to address questions from as many shareholders as possible, each shareholder will be limited to two questions. Questions from multiple shareholders on the same topic orwww.3M.comunder relating to the same topic may be grouped, summarized and answered together. We ask that all shareholders provide their name and contact details when submitting questions through the virtual meeting platform, so that we may address any individual concerns or follow up matters directly. Responses to questions relevant to meeting matters that we do not have time to respond to during the meeting will be posted to our Investor Relations — Annual Meeting Live Webcast.
Could emerging developments regarding the coronavirus affect our ability to hold an in-person Annual Meeting?
We are actively monitoring the coronavirus (COVID-19) situation. In the event it is not possible or advisable to hold our Annual Meeting in person, we will publicly announce, website at https://investors.3M.com as soon as practicable beforeafter the meeting. Questions regarding personal matters or matters not relevant to meeting matters will not be answered. Please refer to the Rules of Conduct and Procedures of the 2022 shareholder meeting that will be posted on the meeting a determination to hold the meeting solely by means of remote communication online. In that event, you or your proxyholder could participate, vote and examine the list of shareholders of record by accessing a designated website using your 16-digit control number. Please monitor our investor relations website athttps://investors.3m.comfor updated information.website.
Information about the Notice of Internet Availability of Proxy Materials Why did I receive a Notice of Internet Availability of the Proxy Materials and not the printed proxy materials? The Securities and Exchange Commission allows companies to furnish their proxy materials to shareholders over the Internet. As a result, we are mailing to many of our shareholders a Notice of Internet Availability of Proxy Materials instead of a paper copy of the proxy materials. In addition, we are providing the notice and proxy materials by e-mail to some of our shareholders who previously consented to electronic delivery of proxy materials. Those shareholders should have received an e-mail containing a link to the website where the proxy materials are available, as well as a link to the proxy voting website. All shareholders receiving the Notice of Internet Availability of Proxy Materials will have the ability to access the proxy materials over the Internet and to request to receive a paper copy of the proxy materials by mail. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the notice. In addition, the notice contains instructions on how you may request to receive proxy materials in printed form by mail or to access them electronically in connection with future distributions of proxy materials. Distributing proxy materials electronically conserves natural resources and reduces the costs of printing and distributing our proxy materials. Why did I receive a printed copy of the proxy materials and not the Notice of Internet Availability of Proxy Materials? We are providing some of our shareholders, including shareholders who have previously requested to receive paper copies of the proxy materials, with paper copies of the proxy materials instead of the Notice of Internet Availability of Proxy Materials. How do I view the proxy materials online? Go towww.proxyvote.comand follow the instructions to view the materials. You will need to provide the control number printed in the box marked by the arrow located on your Notice of Internet Availability of Proxy Materials (see example below — the information in the box is an example only — your number will be different and is unique to you). | 1234 5678 9012 3456 | |
Table of Contents What if I prefer to receive a paper copy of the proxy materials? You can easily request a paper copy of the proxy materials (including the Notice of Annual Meeting, Proxy Statement, and 20192021 Annual Report) at no cost by using one of the three methods below. You will need to provide the control number printed in the box marked by the arrow located on your Notice of Internet Availability of Proxy Materials (see example above — the information in the box is an example only — your number will be different and is unique to you). | By Internet
Logon at www.proxyvote.com; | | By Telephone
Call toll-free at 1-800-579-1639; or | | By sending an E-mail
Send to sendmaterial@proxyvote.com (simply provide in the subject line the control number printed in the box marked by the arrow from your Notice of Internet Availability of Proxy Materials; no other information is necessary). |
Can I request to receive my Notice of Internet Availability of Proxy Materials by e-mail rather than by mail? You may request to receive proxy materials for future meetings by e-mail viawww.proxyvote.comorwww.investordelivery.comand follow the electronic delivery enrollment instructions. If you choose to access future proxy materials electronically, you will receive an e-mail with instructions containing a link to the website where those materials are available and a link to the proxy voting website. Your election to access proxy materials by e-mail will remain in effect until you terminate it. Please note that you MAY NOT USE your Notice of Internet Availability of Proxy Materials to vote your shares; it is NOT a form for voting. If you return the Notice of Internet Availability of Proxy Materials in an attempt to vote your shares, that vote will not count. For more information about the Notice of Internet Availability of Proxy Materials, please visit: www.sec.gov/spotlight/proxymatters/e-proxy.shtml Please note that you MAY NOT USE your Notice of Internet Availability of Proxy Materials to vote your shares; it is NOT a form for voting. If you return the Notice of Internet Availability of Proxy Materials in an attempt to vote your shares, that vote will not count. | For more information about the Notice of Internet Availability of Proxy Materials, please visit:www.sec.gov/spotlight/ proxymatters/e-proxy.shtml |
Shareholders entitled to vote Each share of our common stock outstanding as of the close of business on March 17, 2020,15, 2022, the record date, is entitled to one vote at the Annual Meeting on each matter properly brought before the meeting. As of that date, there were 575,260,717569,171,905 shares of common stock issued and outstanding. Most 3M shareholders hold their shares through a broker, bank, trustee, or other nominee (which for simplicity we refer to as a “broker or other nominee”) rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially: Shareholderof Record | | If your shares are registered directly in your name with 3M’s transfer agent, EQ Shareowner Services, you are considered the shareholder of record of those shares and the Notice of Internet Availability of Proxy Materials, or if you requested paper delivery, a copy of these proxy materials are being sent directly to you by 3M. As the shareholder of record, you have the right to grant your voting proxy directly to 3M or to vote in personelectronically at the meeting. You may also vote on the Internet or by telephone, as described in the Notice of Internet Availability of Proxy Materials and below under the heading “Voting methods.” |
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BeneficialOwner | | If your shares are held by a broker or other nominee, you are considered the beneficial owner of shares held in street name and these proxy materials are being forwarded to you by your broker or other nominee who is considered the shareholder of record of those shares. As the beneficial owner, you have the right to direct your broker or other nominee on how to vote and are also invited to attend the meeting. However, since you are not the shareholder of record, you may not vote these shares in personelectronically at the meeting, unless you obtain a legal proxy from the broker or other nominee. Your broker or other nominee is obligated to provide you with a voting instruction card for you to use. You may also vote on the Internet or by telephone, as described in the Notice of Internet Availability of Proxy Materials and below under the heading “Voting methods.” If you fail to provide voting instructions to your broker or other nominee, it will have discretion to vote your shares with respect to Proposal 2, but not with respect to Proposals 1, 3, or 4 and 5 as described below under “Voting requirements to elect directors and approve each of the proposals described in this proxy statement.Proxy Statement.” |
Table of Contents | | | PlanAccounts | | If your shares are held in your account in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan, you are considered the beneficial owner of these shares and the trustee of the plans is considered the shareholder of record. Participants in 3M’s Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan may direct the trustee on how to vote the shares allocated to their account via the Internet, by telephone, or by signing and submitting the proxy card as described in the Notice of Internet Availability of Proxy Materials and below under the heading “Voting methods.” Participants in 3M’s Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan may also direct the trustee how to vote a proportionate number of allocated shares of common stock for which it has not received direction by following the same voting instructions. If you fail to direct the trustee how to vote your shares by following these instructions, the trustee will vote your shares as described in the proxy card. |
Proposals you are asked to vote on and the Board’s voting recommendations The following proposals are included in this Proxy Statement and are scheduled to be voted on at the meeting. 3M’s Board recommends that you vote your shares as indicated below. Proposals: | | The Board’s Voting Recommendations: | | Rationale for Support: | | For Further Details: | 1. | | Elect the eleven11 directors identified in this Proxy Statement, each for a term of one year. | | “FOR” “FOR” each nominee to the Board | | Our nominees are distinguished leaders who bring a mix of skills and qualifications to the Board and can represent the interests of all shareholders. | | Page 1319 | 2. | | Ratify the appointment of PricewaterhouseCoopers LLP as 3M’s independent registered public accounting firm for 2020.2022. | | “FOR” “FOR” | | Based on its assessment of the qualifications and performance of PricewaterhouseCoopers LLP (“PwC”), the Audit Committee believes that it is in the best interests of the Company and its shareholders to retain PwC. | | Page 4651 | 3. | | Approve, on an advisory basis, the compensation of our named executive officers. | | “FOR” “FOR” | | Our executive compensation program appropriately aligns our executives’ compensation with the performance of the Company and its business units as well as their individual performance. | | Page 5055 | 4. | | Shareholder proposal, on setting target amounts for CEO compensation, if properly presented at the meeting. | | “AGAINST” “AGAINST” | | See the Board’s opposition statement. | | Page 90102 | 5. | Shareholder proposal, if properly presented at the meeting. | | “AGAINST” | | See the Board’s opposition statement. | | Page 105 |
Other than the proposals described in this Proxy Statement, the Board is not aware of any other matters to be presented for a vote at the Annual Meeting. If you grant a proxy by telephone, Internet, or by signing and returning your proxy card, any of the persons appointed by the Board as proxy holders — Michael F. Roman, Nicholas C. Gangestad,Monish Patolawala, and Ivan K. FongKevin H. Rhodes — will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If any of our nominees is unavailable as a candidate for director, the above-named proxy holders will vote your proxy for another candidate or candidates as may be nominated by the Board of Directors.
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Voting requirements to elect directors and approve each of the proposals described in this proxy statementProxy Statement Quorum | | The presence of the holders of a majority of the outstanding shares of common stock entitled to vote at the Annual Meeting, present in person or represented by proxy, is necessary to constitute a quorum. Abstentions and “broker non-votes” are counted as present for purposes of determining a quorum. As discussed below, a “broker non-vote” occurs when a broker or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the broker or other nominee does not have discretionary voting power for that proposal and has not received instructions from the beneficial owner. | BrokerVoting | | Under NYSE rules, brokers have discretionary authority to vote their clients’ shares in “routine” matters (including Proposal 2, the ratification of PwC as our independent registered public accounting firm) so long as the beneficial owner of those shares did not provide voting instructions to the broker at least ten days before the shareholder meeting. Director elections, shareholder proposals, and theexecutive compensation matters, including say-on-pay proposal,and equity compensation plan proposals, are not considered “routine” matters for these purposes. As a result, if you do not provide your broker with instructions as to how to vote your shares, your broker will be prohibited from voting on Proposals 1, 3, 4 and 4,5, resulting in a “broker non-vote” with respect to those proposals. If you are a beneficial owner (other than as a participant in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan), your broker or other nominee is permitted to vote your shares on the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2020,2022, even if it does not receive voting instructions from you. | Election ofDirectors | | In accordance with 3M’s Bylaws, each director is elected by the vote of the majority of votes cast (which means the number of votes cast “for” a director’s election exceeds the number of votes cast “against” that director’s election, with “abstentions” and “broker non-votes” not counted as a vote cast either “for” or “against” that director’s election) with respect to that director’s election at this meeting for the election of directors at which a quorum is present. | | | The Nominating and Governance Committee has established procedures under which any incumbent director who is not elected shall offer to tender his or her resignation to the Board. In the event an incumbent director fails to receive a majority of the votes cast in the election, the Nominating and Governance Committee, or such other committee designated by the Board of Directors, shall make a recommendation to the Board of Directors as to whether to accept or reject the resignation of such incumbent director, or whether other action should be taken. The Board of Directors shall act on the resignation, taking into account the Committee’s recommendation, and publicly disclose (by issuing a press release and filing appropriate disclosure with the Securities and Exchange Commission) its decision regarding the resignation and, if such resignation is rejected, the rationale behind the decision within ninety (90) days following certification of the election results. The Nominating and Governance Committee in making its recommendation and the Board of Directors in making its decision each may consider any factors and other information that they consider appropriate and relevant. | | | An incumbent director who fails to receive a majority of the votes cast in the election and who tenders his or her resignation pursuant to the procedures described above shall remain active and engaged in Board activities while the Nominating and Governance Committee and the Board decide whether to accept or reject such resignation, or whether other action should be taken. However, it is expected that such incumbent director shall not participate in any proceedings by the Nominating and Governance Committee or the Board regarding whether to accept or reject such director’s resignation, or whether to take other action with respect to such director. | | | If the Board of Directors accepts a director’s resignation, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board of Directors may fill the resulting vacancy pursuant to the Bylaws. | All OtherProposals | | The affirmative “FOR” vote of a majority of those shares present in person or represented by proxy at the meeting and entitled to vote on the matter is required to approve Proposals 2, 3, 4 and 4.5. In tabulating the voting result for any particular proposal “broker non-votes” (if applicable) are not counted as votes “FOR” or “AGAINST” the proposal. An abstention will, however, be counted as entitled to vote on a proposal and will, therefore, have the effect of a vote “AGAINST.” |
Table of Contents Voting methods If you hold shares directly as the shareholder of record, you may vote by granting a proxy or by voting in personelectronically at the virtual Annual Meeting by requesting a ballot.Meeting. If you hold shares beneficially in street name, you may vote by submitting voting instructions to your broker or other nominee or in personelectronically at the Annual Meeting by requesting a legal proxy from your broker or other nominee. If you own shares beneficially as a participant in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan, you may vote by submitting voting instructions to the trustee. In most instances, you will be able to do this over the Internet, by telephone, or by mail. Even if you plan to attend the Annual Meeting, we recommend that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the Annual Meeting. Please refer to the summary instructions below and those included on your Notice of Internet Availability of Proxy Materials or proxy card or, for shares held in street name, the voting instruction card provided by your broker or other nominee. The Internet and telephone voting procedures are designed to authenticate shareholders by use of a control number and to allow you to confirm that your instructions have been properly recorded. If you vote by telephone or on the Internet, you do not need to return your proxy card. Telephone and Internet voting for shareholders of record will be available 24 hours a day, up until 10:59 p.m., Central Daylight Time, on May 11, 2020.9, 2022. Participants in 3M’s Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan may instruct the trustee how to vote their shares via the Internet, by telephone, or by signing and returning the proxy card by 10:59 p.m., Central Daylight Time, on May 10, 2020.8, 2022. VOTE BY INTERNETVote by Internet
www.proxyvote.com
www.proxyvote.com
| | If you have Internet access, you may submit your proxy from any location in the world 24 hours a day, 7 days a week. Have your proxy card or the Notice of Internet Availability of Proxy Materials in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. | VOTE BY TELEPHONE
Vote by Telephone
1-800-690-6903 | | If you live in the United States, you may use any touch-tone telephone to vote your proxy toll-free 24 hours a day, 7 days a week. Have your proxy card or the Notice of Internet Availability of Proxy Materials in hand when you call and follow the instructions. | VOTE BY MAILVote by Mail
Sign and mail your proxy card | | You may vote by signing and submitting your proxy card to the Company. If you provide specific voting instructions in your proxy card, your shares will be voted as you instruct. If you sign your proxy card, but do not provide voting instructions, your shares will be voted as the Board recommends. Mark, sign, and date your proxy card and return it in the postage-paid envelope provided so that it is received by May 11, 20209, 2022 (or by May 10, 20208, 2022 for participants in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan), to 3M Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. For shares held in street name, you may direct your broker or other nominee on how to vote your shares by following the instructions set forth in the voting instruction card that your broker or other nominee has provided. | VOTE IN PERSON
Vote Online at the Virtual Meeting
May 12, 2020 10, 2022 8:30 a.m., CDT Archer Hotel
3121 Palm Way
Austin, TX 78758 www.virtualshareholder meeting.com/MMM2022 | If | At the virtual Annual Meeting, if you are a shareholder of record, you may granthave not submitted your proxy prior to 3Mthe meeting, or if you wish to change your voting instructions, you will be able to vote in personyour shares electronically at the virtual Annual Meeting platform by requesting a ballot atclicking “Voting” on the meeting. If you are a street name holder, you may vote in person at the Annual Meeting only if you obtain a legal proxy from your broker or other nominee.meeting website. | | | |
ALL SHARES THAT HAVE BEEN PROPERLY VOTED AND NOT REVOKED WILL BE VOTED AT THE ANNUAL MEETING. ALL SHARES THAT HAVE BEEN PROPERLY VOTED AND NOT REVOKED WILL BE VOTED AT THE
ANNUAL MEETING. | | 2022 Proxy Statement | 115 |
Table of Contents 100Other information | 3M Company |
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Changing your vote You may change your proxy voting instructions at any time prior to the vote at the Annual Meeting. You may enter a new vote by using the Internet or the telephone or by mailing a new proxy card or new voting instruction card bearing a later date (which will automatically revoke your earlier voting instructions), so long as the new vote is received before the deadlines described above under the heading “Voting methods.” You may also change your vote by granting a new proxy or by voting in personelectronically at the virtual Annual Meeting. Counting the vote In the election of directors, you may vote “FOR” or “AGAINST” one or more of the nominees or you may “ABSTAIN.” Abstentions will have no effect on the outcome of the election of directors. For Proposals 2, 3, 4 and 4,5, you may vote “FOR,” “AGAINST,” or “ABSTAIN,” but please note that abstentions will have the same effect as a vote “AGAINST.” If you sign your proxy card or broker voting instruction card but provide no voting instructions, your shares will be voted in accordance with the recommendations of the Board. Shares held in your account in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan or the 3M Savings Plan will be voted by the trustee as described in “Shareholders entitled to vote” beginning on page 97. 112. Representatives of Broadridge Financial Solutions, Inc. will tabulate the votes and act as the inspectors of election. Confidentiality The Company’s Board of Directors has a policy that all shareholder proxies, ballots, and tabulations that identify shareholders are to be maintained in confidence. No such document will be available for examination, and the identity and vote of any shareholder will not be disclosed, except as necessary to meet legal requirements and allow the inspectors of election to certify the results of the shareholder vote. The policy also provides that inspectors of election for shareholder votes must be independent and cannot be employees of the Company. Occasionally, shareholders provide written comments on their proxy card that may be forwarded to 3M management. Results of the vote We will issue a press release announcing the preliminary voting results for items of business properly presented at the meeting and will disclose the results for those items in a Current Report on Form 8-K filed with the Securities and Exchange Commission within four business days of the Annual Meeting date. The press release with voting results will also be available on our website atwww.3M.com/profile/pressbox/index.jhtml. Delivery of documents to shareholders sharing an address Securities and Exchange Commission rules allow us to deliver a single copy of an annual report and proxy statement to any household not participating in electronic proxy material delivery at which two or more shareholders reside, if we believe the shareholders are members of the same family (a practice called “householding”). We believe that householding benefits both you and the Company by eliminating duplicate mailings to shareholders living at the same address and by reducing our printing and mailing costs. Each shareholder will continue to receive a separate proxy card or voting instruction card. Your household may have received a single set of proxy materials this year. If you prefer to receive your own copy now or in future years, please request a duplicate set by calling 1-800-579-1639, by going towww.proxyvote.com, by e-mailing sendmaterial@proxyvote.com, or by writing to 3M Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Alternatively, if your household received multiple sets of proxy materials this year, and members of your household who are entitled to receive proxy materials would all prefer to receive only a single set of proxy materials, you may submit such a request as specified in the preceding sentence. If a broker or other nominee holds your shares, you may continue to receive some duplicate mailings. Certain brokers will eliminate duplicate account mailings by allowing shareholders to consent to such elimination, or through implied consent if a shareholder does not request continuation of duplicate mailings. Since not all brokers and nominees may offer shareholders the opportunity this year to eliminate duplicate mailings, you may need to contact your broker or other nominee directly to discontinue duplicate mailings to your household. 2020 Proxy Statement116 | 1013M Company |
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List of shareholders A list of the shareholders of record entitled to vote at the Annual Meeting will be available for inspection online at the virtual Annual Meeting for any purpose germane to the meeting. The list also will be available for ten days prior to the meeting during normal business hours at 3M Center, St. Paul, MN 55144, by contacting the Secretary of the Company. Cost of proxy solicitation 3M will pay for the cost of preparing, assembling, printing, mailing, and distributing these proxy materials. You will need to obtain your own Internet access if you choose to access the proxy materials and/or vote over the Internet. In addition to mailing these proxy materials, the solicitation of proxies or votes may be made in person, by telephone, or by electronic communication by our directors, officers, and employees, who will not receive any additional compensation for these solicitation activities. We have hired Georgeson Shareholder Communications, Inc. to assist us in the distribution of proxy materials and the solicitation of votes. We will pay Georgeson Shareholder Communications, Inc. a fee of $20,000$22,000 plus expenses for these services. We will also reimburse brokerage houses and other custodians, nominees, and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to beneficial owners of stock. Transfer agent Our transfer agent is EQ Shareowner Services. All communications concerning shareholders of record accounts, including address changes, name changes, common stock transfer requirements, and similar issues can be handled by contacting EQ Shareowner Services at 1-800-401-1952 (U.S.), 651-450-4064 (outside the U.S.),www.shareowneronline.comwww.shareowneronline. com , or in writing, P.O. Box 64854, St. Paul, MN 55164-0854. Requirements for submission of shareholder proposals for next year’s Annual Meeting In order for a shareholder proposal to be considered for inclusion in 3M’s Proxy Statement for next year’s Annual Meeting, our Corporate Secretary must receive the proposal by November 25, 2020.23, 2022. Such proposals must be sent via registered, certified, or express mail (or other means that allows the shareholder to determine when the proposal was received by the Company) to: Ivan K. Fong, SeniorMichael M. Dai, Vice President, Associate General Counsel and Secretary, 3M Company, 3M Center, Building 220-13E-26A,220-9E-02, St. Paul, MN 55144-1000. Such proposals must comply with the Securities and Exchange Commission’s regulations regarding the inclusion of shareholder proposals in Company sponsored proxy materials, such as the shareholder continuing to own a minimum number of shares until the Annual Meeting and appearing in person or through an authorized representative at the meeting to present the proposal. Alternatively, shareholders intending to present a proposal at next year’s Annual Meeting without having it included in the Company’s Proxy Statement must comply with the requirements set forth in the Company’s Bylaws, a copy of which is available atwww.3M.comunder Investor Relations — Governance. Our Bylaws require, among other things, that our Corporate Secretary receive written notice from the shareholder no earlier than the close of business on November 25, 2020,23, 2022, and no later than the close of business on December 25, 2020.23, 2022. The notice must contain the information required by our Bylaws. Proposals received by the Corporate Secretary after the dates mentioned will not be included in the Proxy Statement or acted upon at next year’s Annual Meeting. By Orderorder of the Board of Directors.
Ivan K. FongMichael M. Dai
Senior Vice President, Associate General Counsel and Secretary
1022022 Proxy Statement | 3M Company117 |
Table of Contents Appendix A: Supplemental consolidated statement of income information Table of Contents
Appendix A - Supplemental consolidated statement of income information |
Reconciliation of GAAP to non-GAAP financial measures (millions, except per-share amounts) (unaudited) In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (GAAP), the Company also discusses non-GAAP measures that exclude special items. Operating income, net income attributable to 3M (hereafter referred to as “net income”), and diluted earnings per share attributable to 3M common shareholders (hereafter referred to as “diluted earnings per share”) are all measures for which 3M provides the reported GAAP measure and an adjusted measure (excluding special items). Special items are not in accordance with, nor are they a substitute for, GAAP measures. Special items represent significant charges or credits that are important to an understanding of the Company’s ongoing operations. The Company uses these non-GAAP measures to evaluate and manage the Company’s operations. The Company believes that discussion of results excluding special items is meaningful to investors as it provides a useful analysis of ongoing operating trends. The determination of special items may not be comparable to similarly titled measures used by other companies. The reconciliations provided below reconcile the non-GAAP financial measures with the most directly comparable GAAP financial measures for the twelve months ended December 31, 2019, 20182021, 2020 and 2017:2019: ADJUSTED EARNINGS PER SHAREAdjusted earnings per share (non-GAAP measure)
| | 2019 | 2021 | | 2020 | (Dollars in millions, except per share amounts) | | Reported GAAP Measure | | Adjustment for Significant Litigation Related Charges(a) | | Adjustment for loss on deconsolidation of Venezuelan subsidiary(b) | | Adjustment for Gas & Flame Sale Gain(c) | | Adjustment for Fourth Quarter Restructuring Items(d) | | Adjustment for Acelity and M*Modal Acquisitions(e) | | Adjusted Non-GAAP Measure | Reported GAAP Measure(a) | | Reported GAAP Measure | | Adjustment for Significant Litigation Related Charges(b) | | DDSD Sale Gain, net of Restructuring Items(c) | | | Adjusted Non-GAAP Measure | Net Sales | | $ | 32,136 | | | | | | | | | | | | | | | | | | $ | 32,136 | | $ | 35,355 | | $ | 32,184 | | | | | $ | 32,184 | Operating Income | | | 6,174 | | 762 | | — | | (112) | | 134 | | 63 | | 7,022 | | $ | 7,369 | | $ | 7,161 | | $ | 17 | | $ | (334 | ) | | $ | 6,844 | Operating Income Margin | | | 19.2% | | | | 21.9% | | | 20.8% | | 22.3% | | | | | | 21.3% | Net income attributable to 3M | | $ | 4,570 | | $ | 590 | | $ | 162 | | $ | (128) | | $ | 117 | | $ | 108 | | $ | 5,419 | | $ | 5,921 | | $ | 5,384 | | $ | (39 | ) | $ | (257 | ) | | $ | 5,088 | Earnings per diluted share | | $ | 7.81 | | $ | 1.01 | | $ | 0.28 | | $ | (0.21) | | $ | 0.20 | | $ | 0.18 | | $ | 9.27 | | $ | 10.12 | | $ | 9.25 | | $ | (0.07 | ) | $ | (0.44 | ) | | $ | 8.74 | Earnings per diluted share percent change | | | -12.1% | | | | -6.9% | | | 14.4% | | 18.4% | | | | | | | | -5.7% |
| | 2018 | | 2017 | (Dollars in millions, except per share amounts) | | Reported GAAP Measure | | Adjustment for MN NRD Resolution(f) | | Adjustment for Measurement Period Accounting of TCJA(g) | | CMD Sale Gain, net of Restructuring Items(h) | | Adjusted Non-GAAP Measure | | Reported GAAP Measure | | | Adjustment for TCJA(i) | | Adjusted Non-GAAP Measure | Net Sales | | $ | 32,765 | | | | | | | | | | | | | | | $ | 32,765 | | | $ | 31,657 | | | | | | | $ | 31,657 | | Operating Income | | | 7,207 | | | | 897 | | | | — | | | | (381) | | | | 7,723 | | | | 7,692 | | | | — | | | | 7,692 | | Operating Income Margin | | | 22.0% | | | | | | | | | | | | | | | | 23.6% | | | | 24.3% | | | | | | | | 24.3% | | Net income attributable to 3M | | $ | 5,349 | | | $ | 770 | | | $ | 176 | | | $ | (299) | | | $ | 5,996 | | | $ | 4,858 | | | $ | 762 | | | $ | 5,620 | | Earnings per diluted share | | $ | 8.89 | | | $ | 1.28 | | | $ | 0.29 | | | $ | (0.50) | | | $ | 9.96 | | | $ | 7.93 | | | $ | 1.24 | | | $ | 9.17 | | Earnings per diluted share percent change | | | 12.1% | | | | | | | | | | | | | | | | 8.6% | | | | -2.8% | | | | | | | | 12.4% | |
| | | 2019 | (Dollars in millions, except per share amounts) | | Reported GAAP Measure | | Adjustment for Significant Litigation Related Charges(b) | | Adjustment for loss on deconsolidation of Venezuelan subsidiary(d) | | Adjustment for Gas & Flame Sale Gain(e) | | | Adjustment for Fourth Quarter Restructuring Items(f) | | Adjustment for Acelity and M*Modal Acquisitions(g) | | Adjusted Non-GAAP Measure | Net Sales | | $ | 32,136 | | | | | | | | | | | | | | | | | | $ | 32,136 | Operating Income | | $ | 6,174 | | $ | 762 | | $ | — | | $ | (112 | ) | | $ | 134 | | $ | 63 | | $ | 7,022 | Operating Income Margin | | | 19.2% | | | | | | | | | | | | | | | | | | | 21.9% | Net income attributable to 3M | | $ | 4,570 | | $ | 590 | | $ | 162 | | $ | (128 | ) | | $ | 117 | | $ | 108 | | $ | 5,419 | Earnings per diluted share | | $ | 7.81 | | $ | 1.01 | | $ | 0.28 | | $ | (0.21 | ) | | $ | 0.20 | | $ | 0.18 | | $ | 9.27 | Earnings per diluted share percent change | | | -12.1% | | | | | | | | | | | | | | | | | | | -6.9% |
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FREE CASH FLOW
(non-GAAP measure)
| | 2019 | | | Reported Measure | | Adjustment for Significant Litigation Related Charges(a) | | Adjustment for loss on deconsolidation of Venezuelan subsidiary(b) | | Adjustment for Gas & Flame Sale Gain(c) | | Adjustment for Fourth Quarter Restructuring Items(d) | | Adjusted Non-GAAP Measure | Major GAAP Cash Flow Categories | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by operating activities | | $ | 7,070 | | | | | | | | | | | | | | | | | | | | | | Net cash provided by (used in) investing activities | | | (6,444) | | | | | | | | | | | | | | | | | | | | | | Net cash used in financing activities | | | (1,124) | | | | | | | | | | | | | | | | | | | | | | FREE CASH FLOW (non-GAAP measure) | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by operating activities | | $ | 7,070 | | | $ | 274 | | | $ | — | | | $ | (17) | | | $ | — | | | $ | 7,327 | | Purchases of property, plant and equipment | | | (1,699) | | | | | | | | | | | | | | | | | | | | (1,699) | | Free Cash Flow (j) | | $ | 5,371 | | | $ | 274 | | | $ | — | | | $ | (17) | | | $ | — | | | $ | 5,628 | | Net Income Attributable | | $ | 4,570 | | | $ | 590 | | | $ | 162 | | | $ | (128) | | | $ | 117 | | | $ | 5,311 | | Free Cash Flow Conversion (j) | | | 117.5% | | | | | | | | | | | | | | | | | | | | 106.0% | |
| | 2018 | | 2017 | | | Reported Measure | | Adjustment for MN NRD Resolution(f) | | Adjustment for Measurement Period Accounting of TCJA(g) | | CMD Sale Gain, net of Restructuring Items(h) | | Adjusted Non-GAAP Measure | | Reported Measure | | Adjustment for TCJA(i) | | Adjusted Non-GAAP Measure | Major GAAP Cash Flow Categories | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by operating activities | | $ | 6,439 | | | | | | | | | | | | | | | | | | | $ | 6,240 | | | | | | | | | | Net cash provided by (used in) investing activities | | | 222 | | | | | | | | | | | | | | | | | | | | (3,086) | | | | | | | | | | Net cash used in financing activities | | | (6,701) | | | | | | | | | | | | | | | | | | | | (2,655) | | | | | | | | | | FREE CASH FLOW (non-GAAP measure) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by operating activities | | $ | 6,439 | | | $ | 679 | | | | | | | $ | 24 | | | $ | 7,142 | | | $ | 6,240 | | | $ | 600 | | | $ | 6,840 | | Purchases of property, plant and equipment | | | (1,577) | | | | | | | | | | | | | | | | (1,577) | | | | (1,373) | | | | | | | | (1,373) | | Free Cash Flow (j) | | $ | 4,862 | | | $ | 679 | | | $ | — | | | $ | 24 | | | $ | 5,565 | | | $ | 4,867 | | | $ | 600 | | | $ | 5,467 | | Net Income Attributable | | $ | 5,349 | | | $ | 770 | | | $ | 176 | | | $ | (299) | | | $ | 5,996 | | | $ | 4,858 | | | $ | 762 | | | $ | 5,620 | | Free Cash Flow Conversion (j) | | | 90.9% | | | | | | | | | | | | | | | | 92.8% | | | | 100.2% | | | | | | | | 97.3% | |
Table of Contents | Appendix A: Supplemental consolidated statement of income information |
Free cash flow (non-GAAP measure) | | 2021 | | 2020 | | | Reported Measure | | | Adjustment for payment of previous excluded items(h) | | Adjusted Non- GAAP Measure | | | Reported Measure | | | Adjustment for Significant Litigation Related Charges(b) | | | | | DDSD Sale Gain, net of Restructuring Items(c) | | | Adjusted Non- GAAP Measure | | Major GAAP Cash Flow Categories | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by operating activities | | $ | 7,454 | | | | | | | | | | $ | 8,113 | | | | | | | | | | | | | | | | Net cash provided by (used in) investing activities | | $ | (1,317 | ) | | | | | | | | | $ | (580 | ) | | | | | | | | | | | | | | | Net cash used in financing activities | | $ | (6,145 | ) | | | | | | | | | $ | (5,300 | ) | | | | | | | | | | | | | | | Free cash flow (non-GAAP measure) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by operating activities | | $ | 7,454 | | | $ | 123 | | $ | 7,577 | | | $ | 8,113 | | | $ | 112 | | | | | $ | 12 | | | $ | 8,236 | | Purchases of property, plant and equipment | | $ | (1,603 | ) | | | | | $ | (1,603 | ) | | $ | (1,501 | ) | | | | | | | | | | | | $ | (1,501 | ) | Free Cash Flow(i) | | $ | 5,851 | | | $ | 123 | | $ | 5,973 | | | $ | 6,612 | | | $ | 112 | | | | | $ | 12 | | | $ | 6,736 | | Net Income Attributable | | $ | 5,921 | | | | | | $ | 5,921 | | | $ | 5,384 | | | $ | (39 | ) | | | | $ | (257 | ) | | $ | 5,088 | | Free Cash Flow Conversion(i) | | | 98.8% | | | | | | | 100.9% | | | | 122.8% | | | | | | | | | | | | | | 132.3% | |
| 2019 | | | Reported Measure | | | Adjustment for Significant Litigation Related Charges(b) | | Adjustment for loss on deconsolidation of Venezuelan subsidiary(d) | | Adjustment for Gas & Flame Sale Gain(e) | | | Adjustment for Fourth Quarter Restructuring Items(f) | | Adjusted Non-GAAP Measure | Major GAAP Cash Flow Categories | | | | | | | | | | | | | | | | | | | | | Net cash provided by operating activities | $ | 7,070 | | | | | | | | | | | | | | | | | | | Net cash provided by (used in) investing activities | $ | (6,444 | ) | | | | | | | | | | | | | | | | | | Net cash used in financing activities | $ | (1,124 | ) | | | | | | | | | | | | | | | | | | Free cash flow (non-GAAP measure) | | | | | | | | | | | | | | | | | | | | | Net cash provided by operating activities | $ | 7,070 | | | $ | 274 | | $ | — | | $ | (17 | ) | | $ | — | | $ | 7,327 | | Purchases of property, plant and equipment | $ | (1,699 | ) | | | | | | | | | | | | | | | $ | (1,699 | ) | Free Cash Flow(i) | $ | 5,371 | | | $ | 274 | | $ | — | | $ | (17 | ) | | $ | — | | $ | 5,628 | | Net Income Attributable | $ | 4,570 | | | $ | 590 | | $ | 162 | | $ | (128 | ) | | $ | 117 | | $ | 5,311 | | Free Cash Flow Conversion(i) | | 117.5% | | | | | | | | | | | | | | | | | 106.0% | |
Table of Contents Appendix A: Supplemental consolidated statement of income information | |
Return on invested capital RETURN ON INVESTED CAPITAL (non-GAAP measure)
| | 2019 | | | Reported Measure | | Adjustment for Significant Litigation Related Charges(a) | | Adjustment for loss on deconsolidation of Venezuelan subsidiary(b) | | Adjustment for Gas & Flame Sale Gain(c) | | Adjustment for Fourth Quarter Restructuring Items(d) | | Adjustment for Acelity and M*Modal Acquisitions(e) | | Adjusted Non-GAAP Measure | Net income including non-controlling interest | | $ | 4,582 | | | $ | 590 | | | $ | 162 | | | $ | (128 | ) | | $ | 117 | | | $ | 49 | | | $ | 5,372 | | Interest expense (after-tax) (1) | | | 359 | | | | | | | | | | | | | | | | | | | | | | | | 359 | | Adjusted net income (Return) | | $ | 4,941 | | | $ | 590 | | | $ | 162 | | | $ | (128 | ) | | $ | 117 | | | $ | 49 | | | $ | 5,731 | | Average shareholders’ equity (including non-controlling interest) (2) | | $ | 10,198 | | | $ | 327 | | | $ | — | | | $ | (8 | ) | | $ | 29 | | | $ | (3,512 | ) | | $ | 7,034 | | Average short-term and long-term debt (3) | | | 17,982 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 17,982 | | Average invested capital | | $ | 28,180 | | | $ | 327 | | | $ | — | | | $ | (8 | ) | | $ | 29 | | | $ | (3,512 | ) | | $ | 25,016 | | Return on Invested Capital (k) | | | 17.5% | | | | | | | | | | | | | | | | | | | | | | | | 22.9% | | (1) Effective income tax rate used for interest expense | | | 19.8% | | | | | | | | | | | | | | | | | | | | | | | | 19.8% | | (2) Calculation of average equity (includes non-controlling interest) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending total equity as of: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31 | | $ | 9,757 | | | $ | 424 | | | $ | — | | | $ | — | | | $ | — | | | $ | (947 | ) | | $ | 9,234 | | June 30 | | | 10,142 | | | | 418 | | | | — | | | | (31 | ) | | | — | | | | (935 | ) | | | 9,594 | | September 30 | | | 10,764 | | | | 149 | | | | — | | | | (3 | ) | | | — | | | | (4,173 | ) | | | 6,737 | | December 31 | | | 10,126 | | | | 316 | | | | — | | | | — | | | | 117 | | | | (7,990 | ) | | | 2,569 | | Average total equity | | $ | 10,198 | | | $ | 327 | | | $ | — | | | $ | (8 | ) | | $ | 29 | | | $ | (3,512 | ) | | $ | 7,034 | | (3) Calculation of average debt | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending short-term and long-term debt as of: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31 | | $ | 16,370 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 16,370 | | June 30 | | | 15,806 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 15,806 | | September 30 | | | 19,439 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 19,439 | | December 31 | | | 20,313 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 20,313 | | Average short-term and long-term debt | | $ | 17,982 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 17,982 | |
| 2021 | | 2020 | | | Reported Measure | | Reported Measure | | Adjustment for Significant Litigation Related Charges(b) | | | DDSD Sale Gain, net of Restructuring Items(c) | | | Adjusted Non-GAAP Measure | Net income including non-controlling interest | | $ | 5.929 | | $ | 5,388 | | $ | (39 | ) | | $ | (257 | ) | | $ | 5,092 | Interest expense (after-tax) (1) | | $ | 400 | | $ | 425 | | | | | | | | | | $ | 425 | Adjusted net income (Return) | | $ | 6.329 | | $ | 5,813 | | $ | (39 | ) | | $ | (257 | ) | | $ | 5,517 | Average shareholders’ equity (including non-controlling interest) (2) | | $ | 14,497 | | $ | 11,500 | | $ | 382 | | | $ | 30 | | | $ | 11,912 | Average short-term and long-term debt (3) | | $ | 17,991 | | $ | 20,413 | | $ | — | | | $ | — | | | $ | 20,413 | Average invested capital | | $ | 32,488 | | $ | 31,913 | | $ | 382 | | | $ | 30 | | | $ | 32,325 | Return on Invested Capital(j) | | | 19.5% | | | 18.2% | | | | | | | | | | | 17.1% | (1) Effective income tax rate used for interest expense | | | 17.8% | | | 19.6% | | | | | | | | | | | 19.6% | (2) Calculation of average equity (includes non-controlling interest) | | | | | | | | | | | | | | | | | | Ending total equity as of: | | | | | | | | | | | | | | | | | | March 31 | | $ | 13,828 | | $ | 10,209 | | $ | 373 | | | $ | — | | | $ | 10,582 | June 30 | | $ | 14,516 | | $ | 10,915 | | $ | 394 | | | $ | 46 | | | $ | 11,355 | September 30 | | $ | 14,530 | | $ | 11,943 | | $ | 388 | | | $ | 41 | | | $ | 12,372 | December 31 | | $ | 15,117 | | $ | 12,931 | | $ | 372 | | | $ | 35 | | | $ | 13,338 | Average total equity | | $ | 14,497 | | $ | 11,500 | | $ | 382 | | | $ | 30 | | | $ | 11,912 | (3) Calculation of average debt | | | | | | | | | | | | | | | | | | Ending short-term and long-term debt as of: | | | | | | | | | | | | | | | | | | March 31 | | $ | 18,187 | | $ | 22,495 | | $ | — | | | $ | — | | | $ | 22,495 | June 30 | | $ | 18,248 | | $ | 20,762 | | $ | — | | | $ | — | | | $ | 20,762 | September 30 | | $ | 18,165 | | $ | 19,598 | | $ | — | | | $ | — | | | $ | 19,598 | December 31 | | $ | 17,363 | | $ | 18,795 | | $ | — | | | $ | — | | | $ | 18,795 | Average short-term and long-term debt | | $ | 17,991 | | $ | 20,413 | | $ | — | | | $ | — | | | $ | 20,413 |
Table of Contents | | 2018 | | 2017 | | | Reported Measure | | Adjustment for MN NRD Resolution(f) | | Adjustment for Measurement Period Accounting of TCJA(g) | | CMD Sale Gain, net of Restructuring Items(h) | | Adjusted Non-GAAP Measure | | Reported Measure | | Adjustment for TCJA(i) | | Adjusted Non-GAAP Measure | Net income including non-controlling interest | | $ | 5,363 | | | $ | 770 | | | $ | 176 | | | $ | (263) | | | $ | 6,046 | | | $ | 4,869 | | | $ | 762 | | | $ | 5,631 | | Interest expense (after-tax) (1) | | | 268 | | | | | | | | | | | | | | | | 268 | | | | 208 | | | | | | | | 208 | | Adjusted net income (Return) | | $ | 5,631 | | | $ | 770 | | | $ | 176 | | | $ | (263) | | | $ | 6,314 | | | $ | 5,077 | | | $ | 762 | | | $ | 5,839 | | Average shareholders’ equity (including non-controlling interest) (2) | | $ | 10,407 | | | $ | (136) | | | $ | 207 | | | $ | 236 | | | $ | 10,714 | | | $ | 11,627 | | | $ | 191 | | | $ | 11,818 | | Average short-term and long-term debt (3) | | | 14,912 | | | | — | | | | — | | | | — | | | | 14,912 | | | | 12,156 | | | | (150) | | | | 12,006 | | Average invested capital | | $ | 25,318 | | | $ | (136) | | | $ | 207 | | | $ | 236 | | | $ | 25,626 | | | $ | 23,783 | | | | 41 | | | $ | 23,824 | | Return on Invested Capital (k) | | | 22.2% | | | | | | | | | | | | | | | | 24.6% | | | | 21.3% | | | | | | | | 24.5% | | (1) Effective income tax rate used for interest expense | | | 23.4% | | | | | | | | | | | | | | | | 20.0% | | | | 35.5% | | | | | | | | 35.5% | | (2) Calculation of average equity (includes non-controlling interest) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending total equity as of: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31 | | $ | 11,039 | | | $ | (139) | | | $ | 217 | | | $ | — | | | $ | 11,117 | | | $ | 11,040 | | | $ | — | | | $ | 11,040 | | June 30 | | | 10,428 | | | | (155) | | | | 217 | | | | 377 | | | | 10,867 | | | | 11,644 | | | | — | | | | 11,644 | | September 30 | | | 10,311 | | | | (155) | | | | 217 | | | | 285 | | | | 10,658 | | | | 12,202 | | | | — | | | | 12,202 | | December 31 | | | 9,848 | | | | (95) | | | | 176 | | | | 282 | | | | 10,211 | | | | 11,622 | | | | 762 | | | | 12,384 | | Average total equity | | $ | 10,407 | | | $ | (136) | | | $ | 207 | | | $ | 236 | | | $ | 10,714 | | | $ | 11,627 | | | $ | 191 | | | $ | 11,818 | | (3) Calculation of average debt | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending short-term and long-term debt as of: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31 | | $ | 15,660 | | | $ | — | | | $ | — | | | $ | — | | | $ | 15,660 | | | $ | 11,711 | | | $ | — | | | $ | 11,711 | | June 30 | | | 14,519 | | | | — | | | | — | | | | — | | | | 14,519 | | | | 11,301 | | | | — | | | | 11,301 | | September 30 | | | 14,846 | | | | — | | | | — | | | | — | | | | 14,846 | | | | 11,663 | | | | — | | | | 11,663 | | December 31 | | | 14,622 | | | | — | | | | — | | | | — | | | | 14,622 | | | | 13,949 | | | | (600) | | | | 13,349 | | Average short-term and long-term debt | | $ | 14,912 | | | $ | — | | | $ | — | | | $ | — | | | $ | 14,912 | | | $ | 12,156 | | | $ | (150) | | | $ | 12,006 | |
| Appendix A: Supplemental consolidated statement of income information |
| 2019 | | Reported Measure | | Adjustment for Significant Litigation Related Charges(b) | | Adjustment for loss on deconsolidation of Venezuelan subsidiary(d) | | Adjustment for Gas & Flame Sale Gain(e) | | | Adjustment for Fourth Quarter Restructuring Items(f) | | Adjustment for Acelity and M*Modal Acquisitions(g) | | | Adjusted Non-GAAP Measure | Net income including non-controlling interest | $ | 4,582 | | $ | 590 | | $ | 162 | | $ | (128 | ) | | $ | 117 | | $ | 49 | | | $ | 5,372 | Interest expense (after-tax) (1) | $ | 359 | | | | | | | | | | | | | | | | | | | $ | 359 | Adjusted net income (Return) | $ | 4,941 | | $ | 590 | | $ | 162 | | $ | (128 | ) | | $ | 117 | | $ | 49 | | | $ | 5,731 | Average shareholders’ equity (including non-controlling interest) (2) | $ | 10,198 | | $ | 327 | | $ | — | | $ | (8 | ) | | $ | 29 | | $ | (3,512 | ) | | $ | 7,034 | Average short-term and long-term debt (3) | $ | 17,982 | | $ | — | | $ | — | | $ | — | | | $ | — | | $ | — | | | $ | 17,982 | Average invested capital | $ | 28,180 | | $ | 327 | | $ | — | | $ | (8 | ) | | $ | 29 | | $ | (3,512 | ) | | $ | 25,016 | Return on Invested Capital(j) | | 17.5% | | | | | | | | | | | | | | | | | | | | 22.9% | (1) Effective income tax rate used for interest expense | | 19.8% | | | | | | | | | | | | | | | | | | | | 19.8% | (2) Calculation of average equity (includes non-controlling interest) | | | | | | | | | | | | | | | | | | | | | | | Ending total equity as of: | | | | | | | | | | | | | | | | | | | | | | | March 31 | $ | 9,757 | | $ | 424 | | $ | — | | $ | — | | | $ | — | | $ | (947 | ) | | $ | 9,234 | June 30 | $ | 10,142 | | $ | 418 | | $ | — | | $ | (31 | ) | | $ | — | | $ | (935 | ) | | $ | 9,594 | September 30 | $ | 10,764 | | $ | 149 | | $ | — | | $ | (3 | ) | | $ | — | | $ | (4,173 | ) | | $ | 6,737 | December 31 | $ | 10,126 | | $ | 316 | | $ | — | | $ | — | | | $ | 117 | | $ | (7,990 | ) | | $ | 2,569 | Average total equity | $ | 10,198 | | $ | 327 | | $ | — | | $ | (8 | ) | | $ | 29 | | $ | (3,512 | ) | | $ | 7,034 | (3) Calculation of average debt | | | | | | | | | | | | | | | | | | | | | | | Ending short-term and long-term debt as of: | | | | | | | | | | | | | | | | | | | | | | | March 31 | $ | 16,370 | | $ | — | | $ | — | | $ | — | | | $ | — | | $ | — | | | $ | 16,370 | June 30 | $ | 15,806 | | $ | — | | $ | — | | $ | — | | | $ | — | | $ | — | | | $ | 15,806 | September 30 | $ | 19,439 | | $ | — | | $ | — | | $ | — | | | $ | — | | $ | — | | | $ | 19,439 | December 31 | $ | 20,313 | | $ | — | | $ | — | | $ | — | | | $ | — | | $ | — | | | $ | 20,313 | Average short-term and long-term debt | $ | 17,982 | | $ | — | | $ | — | | $ | — | | | $ | — | | $ | — | | | $ | 17,982 |
(a) | In the first quarter of 2021, 3M changed the method it uses to calculate the market-related value of fixed income securities included in its pension and other postretirement plan assets. This change was applied retrospectively to all periods presented within 3M’s financial statements. The change did not impact consolidated operating income or net cash provided by operating activities but did impact the previously reported portion of pension and postretirement net periodic benefit cost (benefit) that was included within non-operating other expense (income) along with related consolidated income items such as net income and earnings per share. The 2020 restatement increased 2020 net income by $65 million and diluted earnings per share by $0.11. This increases the 2020 adjusted diluted earnings per share from $8.74 to $8.85 on a restated basis. The diluted earnings per share of $8.85 is the base amount for calculating the 14.4% earnings per diluted share percent increase in 2021. The net income amounts for 2020 and 2019 are not adjusted in the tables above in order to reflect the financial results used for measurements of the 2019 and 2020 performance periods. | (b) | In 2020, 3M recorded a net pre-tax charge of $17 million ($13 million after tax) related to PFAS (certain perfluorinated compounds) matters. The charge was more than offset by a reduction in tax expense of $52 million related to resolution of tax treatment with authorities regarding the previously disclosed 2018 agreement reached with the State of Minnesota that resolved the Natural Resources Damages lawsuit. These items, in aggregate, resulted in a $39 million after tax benefit. In 2019, the Company recorded significant litigation-related charges of $762 million ($590 million after tax) related to PFAS (certain perfluorinated compounds) matters and coal mine dust respirator mask lawsuits of which $214 million ($166 million after tax) occurred in the fourth quarter. | (c) | In the first quarter of 2020, 3M recorded a pre-tax gain of $2 million ($1 million loss after tax) related to the sale of its advanced ballistic protection business and recognition of certain contingent consideration. In the second quarter of 2020, 3M recorded a pre-tax gain of $387 million ($304 million after tax) related to the sale of its drug delivery business. In the second quarter of 2020, following the divestiture of substantially all of the drug delivery business, management approved and committed to undertake certain restructuring actions addressing corporate functional costs and manufacturing footprint across 3M in relation to the magnitude of amounts previously allocated/burdened to the divested business. As a result, 3M recorded a second quarter 2020 pre-tax charge of $55 million ($46 million after tax) and made a subsequent immaterial adjustment thereto. |
Table of Contents Appendix A: Supplemental consolidated statement of income information | |
| | (b)(d) | In the second quarter of 2019, 3M recorded a pre-tax charge of $162 million related to the deconsolidation of the Company’s Venezuelan subsidiary. | | | (c)(e) | In August 2019, 3M closed on the sale of its gas and flame detection business, a leader in fixed and portable gas and flame detection, to Teledyne Technologies Incorporated. 3M’s gas and flame business was part of the overall October 2017 acquisition of underlying legal entities and associated assets of Scott Safety. This business has annual sales of approximately $120 million. The transaction resulted in a pre-tax gain of $112 million that was reported within the Company’s Safety and Industrial business. | | | (d)(f) | During the fourth quarter of 2019, in light of a slower than expected 2019 and to realign 3M’s organizational structure and operating model to improve growth and operational efficiency, respectively, management approved and committed to undertake certain restructuring actions. The Company recorded a fourth quarter 2019 pre-tax charge of $134 million. | | | (e)(g) | In February 2019, 3M completed the acquisition of all of the ownership interests of the technology business of M*Modal for $0.7 billion$700 million of cash, net of cash acquired, and assumption of $0.3 billion$300 million of M*Modal’s debt. In October 2019, 3M completed the acquisition of all of the ownership interests of Acelity Inc. and its KCI subsidiaries for consideration of $4.5 billion net of cash acquired as shown in the table below, and assumption of $2.3 billion of debt. | | | (f)(h) | In February 2018,During 2021, 3M reached an agreement with the State of Minnesota that resolved the previously disclosed Natural Resource Damages (NRD) lawsuit filed by the State against the Companymade payments related to certain PFCs present in the environment. Under the terms of the settlement, 3M agreed to provide an $850 million grant to the Statepreviously adjusted items for a special “3M Water Quality and Sustainability Fund.” This Fund will enable projects that support water sustainability in the Twin Cities East Metro region, such as continued delivery of water to residents and enhancing groundwater recharge to support sustainable growth. The projects will also result in habitat and recreation improvements, such as fishing piers, trails, and open space preservation. 3M recorded a charge of $897 million ($770 million after-tax), inclusive of legal fees and other related obligations, in the first quarter of 2018 associated with the resolution of this matter. |
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(g) | During the first quarter of 2018, 3M recorded a tax expense of $217 million related to a measurement period adjustment to the provisional amounts recorded in December 2017 from the enactment ofPFAS (certain perfluorinated compounds) matters, the Tax Cuts and Jobs Act (TCJA). In, and the fourth quarter 2018, 3M finalized the tax impact related to TCJA with a reversal of previously recorded tax expense in the amount of $41 million. | | | (h) | In June 2018, 3M completed the sale of substantially all of its Communication Markets Division and reflected a pre-tax gain of $494 million as a result of this divestiture. Additionally, in December 2018, completed the sale of the remaining telecommunications system integration services portion of the business based in Germany and reflected a pre-tax gain of $15 million as a result of this divestiture. Both divestitures were reported within the Company’s Electronics and Energy business. During the second quarter and fourth quarter of 2018, management approved and committed to undertake certain restructuring actions related to addressing corporate functional costs following the Communication Markets Divisiondrug delivery business divestiture. These actions resulted in a second quarter 2018 pre-tax charge of $105 million and a fourth quarter 2018 pre-tax charge of $22 million, net of adjustments for reductions in cost estimates. | | | (i) | During the fourth quarter of 2017, 3M recorded a net tax expense of $762 million related to the enactment of the Tax Cuts and Jobs Act (the “TCJA”). The expense is primarily related to the TCJA’s transition tax on previously unremitted earnings of non-U.S. subsidiaries and was net of remeasurement of 3M’s deferred tax assets and liabilities considering the TCJA’s newly enacted tax rates and certain other impacts. This provisional amount was subject to adjustment during the measurement period of up to one year following the December 2017 enactment of the TCJA, as provided by recent SEC guidance. In addition to reporting financial results in accordance with GAAP, the Company also provides non-GAAP measures that adjust for the net impact of enactment of the TCJA. This item represents a significant charge that impacted the Company’s financial results. Income, earnings per share, and the effective tax rate are all measures for which 3M provides the reported GAAP measure and an adjusted measure. The adjusted measures are not in accordance with, nor are they a substitute for, GAAP measures. Because of the TCJA, the Company made a $600 million pension contribution to its U.S. defined benefit pension plan. This contribution did not impact 2017 net income, but it did impact Free Cash Flow Conversion and ROIC. The Company considers these non-GAAP measures in evaluating and managing the Company’s operations. The Company believes that discussion of results adjusted for this item is meaningful to investors as it provides a useful analysis of ongoing underlying operating trends. | | | (j) | Free cash flow and free cash flow conversion are not defined under GAAP. Therefore, they should not be considered a substitute for income or cash flow data prepared in accordance with GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The Company defines free cash flow conversion as free cash flow divided by net income attributable to 3M. The Company believes free cash flow and free cash flow conversion isare meaningful to investors as they are useful measures of performance and the Company uses these measures as an indication of the strength of the Company and its ability to generate cash. In 2017, net cash provided by operating activities was impacted by 3M’s enactment of the TCJA, along with a U.S. pension contribution of $600 million that 3M made following the signing of tax reform. On a combined basis, these items benefited free cash flow conversion by three percentage points. Refer to the proceeding “Cash Flows from Operating Activities” section for discussion of additional items that impacted operating cash flow. Refer to the proceeding “Cash Flows from Investing Activities” section for discussion on capital spending for property, plant and equipment. | | | (k)(j) | Return on Invested Capital (ROIC) is not defined under U.S. generally accepted accounting principles.GAAP. Therefore, ROIC should not be considered a substitute for other measures prepared in accordance with GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines ROIC as adjusted net income (net income including non-controlling interest plus after-tax interest expense) divided by average invested capital (equity plus debt). The Company believes ROIC is meaningful to investors as it focuses on shareholder value creation. |
Table of Contents Appendix B: Meaning of certain terms Except as otherwise noted, capitalized terms used in the Compensation Discussion and Analysis of this Proxy Statement have the meaning specified below. 2020Adjusted NetIncome | | means the net income of 3M as reported in its Consolidated Statement of Income, as adjusted to exclude special items. | AIP | | means the broad-based Annual Incentive Plan by which the Company provides annual incentive compensation to approximately 33,000 eligible employees. | Committee | | means the Compensation and Talent Committee of the Board of Directors of 3M Company. | Economic Profit | | means the adjusted net income of 3M (net income including non-controlling interest plus after-tax interest expense, as reported in its Consolidated Statement of Income) or a business unit operating income, minus income taxes, adjusted to exclude certain special items and the impact of acquisitions or divestitures in the year each acquisition or divestiture is completed (unless such acquisition or divestiture is included in the operating plan for the business unit), less a charge (10 percent in 2021) for the capital used to generate such operating income. The Economic Profit metric measured versus 3M’s prior year results is calculated using total Company average invested capital (equity plus debt, as reported in its Consolidated Balance Sheet), while the Economic Profit metric measured versus plan is calculated using only accounts receivable and inventories of the relevant business unit as capital. | Earnings per Share (EPS) Growth | | means the percentage increase or decrease in 3M’s diluted earnings per share attributable to 3M common shareholders (as reported in its Consolidated Statement of Income) for a year as compared to the previous year, in each case, as adjusted to exclude certain special items. | Free Cash Flow | | means the sum of 3M’s operating cash flows minus capital expenditures, as adjusted to exclude certain special items. | Free Cash Flow Conversion | | means the sum of 3M’s operating cash flows minus capital expenditures, divided by net income, as adjusted to exclude certain special items. | Free Cash Flow Growth | | means the percentage increase or decrease in 3M’s Free Cash Flow for a year as compared to the previous year. | GAAP | | means generally accepted accounting principles in the United States. | Local Currency Sales | | means the net sales of 3M (as reported in its Consolidated Statement of Income) or a business unit, in local currency, adjusted to exclude the impact of acquisitions or divestitures in the year each acquisition or divestiture is completed (unless such acquisition or divestiture is included in the operating plan for the business unit). | Net Cash Provided by Operating Activities | | means the amount of cash generated by the regular operating activities of 3M, calculated as Net Income less non-cash expenses and adjusted for changes in working capital. The amount of cash generated by the regular operating activities of 3M will not include cash generated from activities of the type included in the investing (such as capital expenditures, sales of equipment, investment activity, acquisition and divestitures) or financing sections (such as debt and equity transactions) of the Company’s cash flow statement. | Net Income | | means Net Sales minus (a) all Operating Expenses and (b) all interest, taxes, and other non-operating expenses, in each case, of 3M or a business unit. | Net Sales | | means gross sales of the relevant business unit minus returns, allowances, customer rebates, trade promotion funds, cash discounts, and other sources of variable consideration, as reflected in the consolidated financial statements and related notes set forth in the Company’s 2022 Annual Report on Form 10-K. | Operating Cash Flow Conversion | | means the Net Cash Provided by Operating Activities divided by Net Income. |
| | 2022 Proxy Statement | 107123 |
Table of Contents Appendix B: Meaning of certain terms | |
Operating Expenses | | means all costs and expenses that are related in any way to the operating activities of 3M or a business Unit, including all costs and expenses that are part of cost of goods sold; selling, general and administrative expenses; research and development expenses; depreciation and amortization; and gains or losses on sales of businesses or equipment. | Operating Income | | means Net Sales minus Operating Expenses. | Organic SalesGrowth | | means the percentage amount by which 3M’s net sales (as reported in its Consolidated Statement of Income) for a year increase or decrease as compared to the previous year. For this purpose, 3M’s net sales will be adjusted to exclude currency effects and neutralize sales attributable to acquisitions or divestitures for the 12-month period following the date each acquisition is completed. | Peer Groups | | means both 3M’s executive compensation peer group and the survey peer group, each as described under “Use of market data” in the Compensation Discussion and Analysis section of this Proxy Statement. | Relative Organic Volume Growth | | means the amount by which the percentage increase or decrease in 3M’s net sales (as reported in its Consolidated Statement of Income) for a year as compared to the previous year exceeds the percentage increase or decrease in worldwide real sales growth over the same period, as reflected in the Worldwide Industrial Production Index published by IHS Markit. For this purpose, 3M’s net sales are adjusted to neutralize price and currency effects and, during the 12-month period following the date of each acquisition or divestiture, the sales attributable to such acquired or divested business or products. | Relative Organic Sales Growth | | means the amount by which 3M’s Organic Sales Growth for a year exceeds the percentage increase or decrease in a market benchmark measured over the same period. For this purpose, the market benchmark is a blend of Worldwide Industrial Production Index and Global Domestic Product, in each case, as published by IHS Markit. | Return on Invested Capital (ROIC) | | means the operating income of 3M (as reported in its Consolidated Statement of Income), plus interest income and minus income taxes, adjusted to exclude certain special items and the impact of acquisitions in the year each acquisition is completed, divided by the average invested capital (equity plus debt, as reported in its Consolidated Balance Sheet). | Total Cash Compensation | | means the total of an individual’s base salary and annual incentive compensation. | Total Direct Compensation | | means the total of an individual’s Total Cash Compensation plus the compensation value of their annual long-term incentive compensation awards (which is based on their grant date fair value as measured under accounting standards). |
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| ADMISSION TICKET AND PHOTO ID REQUIRED FORPARTICIPATING IN THE VIRTUAL ANNUAL SHAREHOLDER MEETING | Please note that you must pre-register and bring an admission ticket and a valid photo IDFor information on how to attend the 2022 virtual shareholder meeting, see “Participating in the Virtual Annual Meeting. For more details, please read “Annual Meeting Admission”Meeting” on page 95110 of the Proxy Statement.
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| | | | This Proxy Statement was printed on recycled paper with soy based inks in a facility that uses 100% renewable wind energy.124 | 3M Company |
Table of Contents
3M CENTER
BLDG. 220-9E-02
ST. PAUL, MN 55144-1000
| SCAN TO
VIEW MATERIALS & VOTE | |
VOTE BY INTERNET -www.proxyvote.com or scan the QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 10:59 p.m. Central Daylight Time on May 11, 2020*. Have your proxy card in hand when you access the Web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 10:59 p.m. Central Daylight Time This Proxy Statement was printed on May 11, 2020*recycled paper with soy based inks in a facility that uses 100% renewable wind energy.
Table of Contents 3M CENTER BLDG. 220-9E-02 ST. PAUL, MN 55144-1000 | | VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 10:59 p.m. Central Daylight Time on May 9, 2022*. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/MMM2022 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 10:59 p.m. Central Daylight Time on May 9, 2022*. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to 3M Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717, so that it is received by May 11, 2020*9, 2022*. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by 3M Company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
*Up until 10:59 p.m. Central Daylight Time on May 10, 2020,8, 2022, for participants in 3M’s3M's Voluntary Investment Plan and Employee Stock Ownership Plan and the 3M Savings Plan.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E96940-P32436-Z76245
| D71912-P65091-Z81630 | | KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY
| | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
3M COMPANY | | | | | | | | | | | | The Board of Directors recommends you vote FOR proposals 1, 2 and 3: | | | | | | | | | | | | | 1. | To elect 11 members to the Board of Directors, each for a term of one year. | | | | | | | | | | | | | | Nominees: | | For | Against | Abstain | | | | | | | | | | 1a. Thomas "Tony" K. Brown | | o | o | o | | | | | | | | | | 1b. Pamela J. Craig | | o | o | o | | | | | | | | | | 1c. David B. Dillon | | o | o | o | | | | | | | | | | 1d. Michael L. Eskew | | o | o | o | | | | | | | | | | 1e. James R. Fitterling | | o | o | o | | | | | | | | | | 1f. Amy E. Hood | | o | o | o | | | | | | | | | | 1g. Muhtar Kent | | o | o | o | | | | | | | | | | 1h. Suzan Kereere | | o | o | o | | | | | | | | | | 1i. Dambisa F. Moyo | | o | o | o | | | | | | | | | | 1j. Gregory R. Page | | o | o | o | | | | | | | | | | 1k. Michael F. Roman | | o | o | o | | | | | | | | | 1. | To elect eleven members to the Board of Directors, each for a term of one year. | | | | | | | | | | | | | | | | | | Nominees: | | For | | Against | | Abstain | | | | | | | | | | | | 1a. | Thomas “Tony” K. Brown | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1b. | Pamela J. Craig | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1c. | David B. Dillon | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1d. | Michael L. Eskew | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1e. | Herbert L. Henkel | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1f. | Amy E. Hood | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1g. | Muhtar Kent | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1h. | Dambisa F. Moyo | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | For address changes and/or comments, please check this box and write them on the back where indicated. | | | | | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | | | | | | 1i. | Gregory R. Page | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1j. | Michael F. Roman | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1k. | Patricia A. Woertz | | ☐ | | ☐ | | ☐ | | | | | | | | | | 2. | To ratify the appointment of PricewaterhouseCoopers LLP as 3M’s independent registered public accounting firm. | | ☐ | | ☐ | | ☐ | | | | | | | | | 3. | Advisory approval of executive compensation. | | ☐ | | ☐ | | ☐ | | | | | | | | The Board of Directors recommends you vote AGAINST proposal 4: | | For | | Against | | Abstain | | | | | | | | | 4. | Shareholder proposal on setting target amounts for CEO compensation. | | ☐ | | ☐ | | ☐ | | | | | | | | | NOTE: Such other business as may properly come before the meeting or any adjournment or postponement thereof. | | | | | | |
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. |
| | Signature [PLEASE SIGN WITHIN BOX] | Date |
| | Signature (Joint Owners) | Date |
Table of Contents
NOTICE OF 2020 ANNUAL MEETING OF SHAREHOLDERS*
Tuesday, May 12, 2020, 8:30 a.m. Central Daylight Time
Archer Hotel
3121 Palm Way
Austin, Texas 78758
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available atwww.proxyvote.com.
If you plan to attend the meeting in person, please register and print an admission ticket in advance atwww.proxyvote.com, following the instructions set forth in the Proxy Statement. You will need the 16-digit control number printed on the other side of this proxy card.
Questions? Please contact us at 1-800-364-3577
*We are actively monitoring the coronavirus (COVID-19) situation. In the event it is not possible or advisable to hold our Annual Meeting in person, we will publicly announce, as soon as practicable before the meeting, a determination to hold the meeting solely by means of remote communication online. In that event, you or your proxyholder could participate, vote and examine the list of shareholders of record by accessing a designated website using your 16-digit control number. Please monitor our investor relations website at https://investors.3m.com for updated information.
E96941-P32436-Z76245
3M COMPANY
The Board of Directors solicits this proxy for use at the Annual Meeting on Tuesday, May 12, 2020.
The shareholder(s) whose signature(s) appear(s) on the reverse side of this proxy card hereby appoint(s) Ivan K. Fong, Nicholas C. Gangestad, and Michael F. Roman or any of them, each with full power of substitution, as proxies, to vote all shares of common stock in 3M Company which the shareholder(s) would be entitled to vote on all matters which may properly come before the 2020 Annual Meeting of Shareholders and any adjournments thereof. THE PROXIES SHALL VOTE SUBJECT TO THE DIRECTION INDICATED ON THE REVERSE SIDE OF THIS CARD. THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION UPON OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. THE PROXIES WILL VOTE AS THE BOARD OF DIRECTORS RECOMMENDS WHERE A CHOICE IS NOT SPECIFIED.
FOR PARTICIPANTS IN 3M’S VOLUNTARY INVESTMENT PLAN AND EMPLOYEE STOCK OWNERSHIP PLAN (VIP), AND THE 3M SAVINGS PLAN:
In accordance with the terms of the VIP and Savings Plan, shares allocated to the respective accounts in these plans on the record date will be voted by the trustee, State Street Bank and Trust Company, in accordance with the instructions indicated on the reverse side of this card, and in accordance with the judgment of the trustee upon other business as may properly come before the meeting and any adjournments or postponements thereof. In addition, participants, as named fiduciaries for voting purposes in the VIP and the Savings Plan, may instruct State Street (as VIP and the Savings Plan trustee) how to vote a proportionate number of the allocated shares for which no instructions are received by following the same instructions. If no instructions are provided or if this card is not received on or before May 10, 2020, shares held in the respective accounts in the VIP and the Savings Plan will be voted by the trustee in the same proportion that the other participants in the VIP and the Savings Plan direct the trustee to vote shares in the respective accounts.
| | | | | Address changes/comments: | | | | | | |
(If
| 2. | To ratify the appointment of PricewaterhouseCoopers LLP as 3M's independent registered public accounting firm. | | o | o | o | | | | | | | | | 3. | Advisory approval of executive compensation. | | o | o | o | | | | | | | | | The Board of Directors recommends you notedvote AGAINST proposals 4 and 5: | | | | | | | | | | | | | 4. | Shareholder proposal on publishing a report on environmental costs. | | o | o | o | | | | | | | | | 5. | Shareholder proposal on China audit. | | o | o | o | | | | | | | | | NOTE: Such other business as may properly come before the meeting or any Address Changes/Comments above, please mark corresponding box on the reverse side.)adjournment or postponement thereof. | | | | | | | | | | | | Please e-mail your address changes or comments to: investorrelations@3M.com | | | | | |
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. (Continued, and must be signed and dated on the other side)
| | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | Date | | Signature (Joint Owners) | Date | |
Table of Contents NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS* Tuesday, May 10, 2022, 8:30 a.m. Central Daylight Time www.virtualshareholdermeeting.com/MMM2022 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. *To prioritize the health and well-being of our shareholders due to concerns relating to COVID-19, and to leverage technology to enable shareholder participation from any location, the 2022 Annual Meeting will be held exclusively online at www.virtualshareholdermeeting.com/MMM2022. To be admitted to the virtual-only Annual Meeting, you need to enter the 16-digit control number printed on the other side of this proxy card. At the virtual Annual Meeting, you or your proxyholder may participate, vote, type in your question, and examine a list of shareholders of record. If you wish to submit questions in advance of the online meeting, you may do so by using your 16-digit control number to access www.proxyvote.com. D71913-P65091-Z81630 3M COMPANY The Board of Directors solicits this proxy for use at the Annual Meeting on Tuesday, May 10, 2022. The shareholder(s) whose signature(s) appear(s) on the reverse side of this proxy card hereby appoint(s) Kevin H. Rhodes, Monish Patolawala, and Michael F. Roman or any of them, each with full power of substitution, as proxies, to vote all shares of common stock in 3M Company which the shareholder(s)would be entitled to vote on all matters which may properly come before the 2022 Annual Meeting of Shareholders and any adjournments or postponements thereof. THE PROXIES SHALL VOTE SUBJECT TO THE DIRECTION INDICATED ON THE REVERSE SIDE OF THIS CARD. THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION UPON OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. THE PROXIES WILL VOTE AS THE BOARD OF DIRECTORS RECOMMENDS WHERE A CHOICE IS NOT SPECIFIED. FOR PARTICIPANTS IN 3M'S VOLUNTARY INVESTMENT PLAN AND EMPLOYEE STOCK OWNERSHIP PLAN (VIP), AND THE 3M SAVINGS PLAN: In accordance with the terms of the VIP and Savings Plan, shares allocated to the respective accounts in these plans on the record date will be voted by the trustee, The Bank of New York Mellon, in accordance with the instructions indicated on the reverse side of this card, and in accordance with the judgment of the trustee upon other business as may properly come before the meeting and any adjournments or postponements thereof. In addition, participants, as named fiduciaries for voting purposes in the VIP and the Savings Plan, may instruct The Bank of New York Mellon (as VIP and the Savings Plan trustee) how to vote a proportionate number of the allocated shares for which no instructions are received by following the same instructions. If no instructions are provided or if this card is not received on or before May 8, 2022, shares held in the respective accounts in the VIP and the Savings Plan will be voted by the trustee in the same proportion that the other participants in the VIP and the Savings Plan direct the trustee to vote shares in the respective accounts. (Continued, and must be signed and dated on the other side)
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