Corporate Governance At A Glance | | | | | | | | | | | | | | | | | | | | | | Leadership Structure | • | | | • Our Chairman is independent. He interacts closely with our Chief Executive Officer | | • | The independent Board members elect our Chairman annually. Among other duties, our Chairman leads executive sessions of the independent directors to discuss certain matters without management present | | | | | | | | | | | | | | Board Composition | • | | | • Currently, the Board has fixed the number of directors at 12 | | 13* • | The board regularly assesses its performance through Board and committee self-evaluations | | | | | | | | | | | | | | Board Independence | • | 11 | | • 12 out of 1213 of our directors are independent | | independent* • | Our CEO is the only management director | | | | | | | | | | | | | | Board Committees | • | | | • We have four Board committees – Executive, Audit, Corporate Governance & Public Policy, and Compensation & Organization | | • | With the exception of the Executive Committee (our Chairman, Committee Chairs and CEO serve on this committee), all other committees are composed entirely of independent directors | | | | | | | | | | | | | | Management
Succession Planning | •
| | | • The Board actively monitors our succession planning and people development and receives regular updates on employee engagement, diversity and retention matters | | • | At least twice per year, the Board reviews senior management succession and development plans | | | | | | | | | | | | | | Director Stock Ownership | • | | | • Our directors are required to receive at least half of their annual retainer in shares of our common stock -– and must hold these shares during their entire tenure on the Board | | | | | | | | | | | | | | Risk Oversight | • | | | • Our full Board is responsible for risk oversight, and has designated committees to have particular oversight of certain key risks. • Our Board oversees management as management fulfills its responsibilities for the assessment and mitigation of risks and for taking appropriate risks | | | | | | | | | | | | | | Accountability to
Stockholders | •
| | | • We use majority voting in uncontested director elections | • | We have annual election of directors | | • | We implemented a “3-3-20”"3-3-20" proxy access by-law provision in November 2016 which enables our stockholders to nominate directors and have their eligible nominees included in the proxy statement with our nominees | | • | We actively reach out to our stockholders through our engagement program | | • | Stockholders can contact our Board, our Chairman or management by regular mail | | | | | | | | | | | | |
- *
- Following the 2018 Annual Meeting, the Board will have 10 members, 9 of which are independent.
BOARD LEADERSHIP STRUCTURE The Board regularly considers the appropriate leadership structure for the Corporation. It has concluded that the Corporation and its stockholders are best served by the Board retaining discretion to determine whether the same individual should serve as both Chief Executive Officer and Chairman of the Board, or whether the Chairman of the Board should be an independent director. The Board believes that it is important to retain the flexibility to make this determination at any given point in time based on what it believes will provide the best leadership structure for the Corporation, taking into account the needs of the Corporation at that time. Due to the high level of transition in the Corporation’sCorporation's executive leadership and the dynamic business environment in 2013 and 2014, the Board chose to implement a non-executive, independent Chairman role in January 2014 to allow the Chief Executive Officer to strategically focus on the associated business challenges. David S. Sutherland currently serves as the independent Chairman of the Board. If the Chairman of the Board is not independent, the independent directors annually elect from among themselves a a Lead Director. If the Chairman of the Board is independent, the Chairman’sChairman's duties also include the duties of the Lead Director. The duties of the Lead Director are as follows: - •
- chair executive sessions of the non-employee directors;
- •
- serve as a liaison between the Chief Executive Officer and the independent directors;
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- approve Board meeting agendas and, in consultation with the Chief Executive Officer and the independent directors, approve Board meeting schedules to ensure there is sufficient time for discussion of all agenda items;
- •
- approve the type of information to be provided to directors for Board meetings;
- •
- be available for consultation and direct communication with the Corporation's stockholders;
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- call meetings of the independent directors when necessary and appropriate; and
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- perform other duties as the Board may from time to time designate.
10 |United States Steel Corporation | 2018 Proxy Statement  • | chair executive sessions of the non-employee directors; | | | • | serve as a liaison between the Chief Executive Officer and the independent directors; | | | • | approve Board meeting agendas and, in consultation with the Chief Executive Officer and the independent directors, approve Board meeting schedules to ensure there is sufficient time for discussion of all agenda items; | | | • | approve the type of information to be provided to directors for Board meetings; | | | • | be available for consultation and direct communication with the Corporation’s stockholders; | | | • | call meetings of the independent directors when necessary and appropriate; and | | | • | perform other duties as the Board may from time to time designate. |
Table of Contents
|  | United States Steel Corporation | 2017 Proxy Statement | 11 |
Corporate Governance
BOARD’SBOARD'S ROLE IN RISK OVERSIGHT
Pursuant to its charter, the Audit Committee is responsible for reviewing and discussing the Corporation’sCorporation's policies with respect to the assessment of risks and risk management, including the following: • | the guidelines and policies that govern the process by which the assessment and management of the Corporation’s exposure to risk are handled by senior management; and | | | • | the Corporation’s major risk exposures and the steps management has taken to monitor and control such exposures. |
- •
- the guidelines and policies that govern the process by which the assessment and management of the Corporation's exposure to risk are handled by senior management; and
- •
- the Corporation's major risk exposures and the steps management has taken to monitor and control such exposures.
The Corporation’sCorporation's Internal Audit group provides regular reports to the Audit Committee on the results of various internal audit projects and provides recommendations for the enhancement of operational functions in order to reduce certain risks. Although the Audit Committee has primary responsibility for overseeing risk management, each of our other Board committees also considers the risks within their specific areas of responsibility. For example, the charter of the Compensation & Organization Committee gives it responsibility for assessing whether the Corporation’sCorporation's compensation and organization policies and practices for executives and non-executives are reasonably likely to create a risk that could have a material adverse effect on the Corporation. Pursuant to its charter, the Corporate Governance & Public Policy Committee considers the risks associated with legislative, regulatory and public policy issues affecting the Corporation’sCorporation's businesses and operations. Each committee regularly reports to the full Board on theirits respective activities, including, when appropriate, those activities related to risk assessment and risk management oversight. The Board, as a whole, also considers risk assessment and risk management. For example, the Board annually reviews the Corporation’sCorporation's strategic plan which includes a review of risks related to: safety, environmental, operating and competitive matters; political and regulatory issues; employee and labor issues; and financial results and projections. Management regularly provides updates to the Board related to legal and compliance risks and cyber-security matters. The Chief Risk Officer is responsible for the Corporation’sCorporation's financial and business risk management, including the assessment, analysis and monitoring of business risk and opportunities and the identification of strategies for managing risk. The Chief Risk Officer provides regular reports to the Audit Committee and Board of Directors on these matters. The Corporation believes that its leadership structure, as described above, supports the Board’sBoard's role in risk oversight.
BOARD OVERSIGHT OF STRATEGY A primary responsibility of our Board is oversight of our business strategy. At each regular Board meeting throughout the year, our Board reviews our strategy, operating plans, and overall financial performance, and progress on each, and provides significant guidance and feedback. In addition, at least one multi-day meeting each year is dedicated to focus on our long-term strategic planning. The Board also devotes significant time to reviewing our capital allocation strategy. Annually, our Board reviews and approves our capital authorization and spending budgets, which are designed to strategically deploy capital intended to facilitate investments required to achieve operational excellence, drive business growth and generate strong returns. Our capital allocation is aligned to support our strategic priorities, with a focus on preserving a strong balance sheet, a strong liquidity profile and financial flexibility. To oversee management's performance in executing our strategy, the Board receives regular updates and actively engages in dialogue with our executive management team. Members of our Board also periodically visit our facilities to monitor the execution of our strategy in our business units, and to assess areas for improvement or potential risk. BOARD OVERSIGHT OF SUCCESSION PLANNING Our Board and management consider succession planning and peopleprofessional development to be an integral part of the Corporation’sCorporation's long-term strategy. The Compensation & Organization Committee is responsible for monitoring our management succession and development plans and receives regular updates on employee engagement, diversity and retention matters, which are reported to the full Board. At least twice annually, our full Board reviews senior management management succession and development plans with our CEO. Our CEO then presents to the independent directors his evaluations and recommendation of future candidates for the CEO position and other senior leadership roles and potential succession timing for those positions, including under emergency circumstances. The Board also reviews and discusses development plans for individuals identified as high-potential candidates for senior leadership positions.
BOARD REFRESHMENT Our Board maintains a robust process in which the members focus on identifying, considering and evaluating potential board candidates. Our Corporate Governance & Public Policy Committee leads this process by considering prospective candidates at its meetings. In identifying appropriate candidates through a thoughtful evaluation, supported by its outside consultants, the committee is focused on aligning the skills, experience and characteristics of our Board with the strategic development of the company. Among other things, the members aim to strike a balance between the knowledge that comes from longer-term service on the Board with the fresh insights that can come from United States Steel Corporation | 2018 Proxy Statement |11
Table of Contents adding new members to the Board. The following shows our board refreshment process: Identification of Candidates The Corporate Governance & Public Policy Committee reviews candidates identified by an independent search firm or recommended by our directors, officers or stockholders, taking into consideration the qualifications and requirements outlined in our Corporate Governance Principles, as well as the skills and experience already represented on the Board. Assessment and Interviews The committee seeks input from other Board members and senior management to evaluate nominees for director and interviews appropriate candidates to confirm their qualifications, interest and availability for Board service. Nomination and Election Upon a recommendation from the Corporate Governance & Public Policy Committee, the Board determines whether to elect a director candidate and optimal committee placement. Onboarding We conduct a comprehensive onboarding process for new directors, including site visits, to provide an understanding of our business, opportunities and challenges.
12 | United States Steel Corporation | 2017 Proxy Statement
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Corporate Governance
BOARD SELF-ASSESSMENTS Each year, the Board conducts annual self-evaluations to determine whether it and its committees are functioning effectively and whether its governing documents continue to remain appropriate. Our Board’sBoard's self-evaluation is facilitated by a wide range of questions related to topics including operations, composition of the board, responsibilities, governing documents and resources. The Board evaluation also includes an assessment of whether the Board (i) has the appropriate mix of skills, experience and other characteristics, including those described earlier, and (ii) is made up of a sufficiently diverse group of people. The process is designed and overseen by the Corporate Governance & Public Policy Committee, and the results of the evaluations are discussed by the full Board. Each standing committee, other than the Executive Committee, annually reviews its own performance and reports the results and any recommendations to the Board.
INDEPENDENCE The following non-employee directors are independent within the definitions of independence of both the New York Stock Exchange (“NYSE”)(NYSE) listing standards and the U.S. Securities and Exchange Commission (“SEC”)(SEC) standards for Audit Committee members: Patricia Diaz Dennis, Dan O. Dinges, John G. Drosdick, John J. Engel, Murry S. Gerber, Stephen J. Girsky, Paul A. Mascarenas, Glenda G. McNeal, Eugene B. Sperling, Robert J. Stevens, David S. Sutherland and Patricia A. Tracey. The Corporation has incorporated the NYSE and SEC independence standards into its own categorical standards for independence. The Board has affirmatively determined that none of the directors or nominees for director, other than Mr. Longhi,Burritt, has a material relationship with the Corporation. The Board made such determination based on all relevant facts and circumstances. In making its determination of director independence, the Board of Directors considered the fact that U. S. Steel purchased certain goods and services from WESCO International, Inc. (WESCO) in 2016.2017. Mr. Engel is the Chairman, President and Chief Executive Officer of WESCO. The Board determined that Mr. Engel did not have a direct or indirect material interest in these transactions and that the transactions were undertaken in the ordinary course of business. In addition, the value of materials purchased by U. S. Steel in 20162017 was less than 2% of WESCO’sWESCO's annual gross revenues. As a result, the Board concluded that these transactions would not affect Mr. Engel’sEngel's independence. Additionally, the Board considered the fact that U. S. Steel indirectly sold products to Cabot Oil & Gas Corporation (“Cabot”("Cabot") in 2016.2017. Mr. Dinges is the Chairman, President and Chief Executive Officer of Cabot. The Board determined that Mr. Dinges did not have a direct or indirect material interest in these transactions and that the transactions were undertaken in the ordinary course of business, and that the products sold by U. S. Steel were less than 2% of Cabot’sCabot's annual gross revenues. Accordingly, the Board concluded that these transactions would not affect Mr. Dinges’Dinges' independence. The Board affirmatively determined that each member of the Audit Committee: (i) did not accept directly or indirectly any consulting, advisory, or other compensatory fee from the Corporation or any of its subsidiaries, (ii) was not an affiliated person of the Corporation or any of its subsidiaries, and therefore (iii) satisfied the NYSE’sNYSE's enhanced independence standards for audit committee members. The Board also determined that: (i) no member of the Compensation & Organization Committee has a relationship to the Corporation which is material to that director’sdirector's ability to be independent from management in connection with the duties of a compensation committee member, and (ii) each member of the Compensation & Organization Committee therefore satisfies the independence requirements of NYSE listing standards.
12 |United States Steel Corporation | 2018 Proxy Statement
Table of Contents DIRECTOR RETIREMENT POLICY Our Corporate Governance Principles require any non-employee director to retire at the first annual meeting of stockholders after he or she reaches the age of 74. However, the Board may grant exceptions to this policy on a case-by-case basis. Each employee director must retire from the Board when he or she ceases to be an executive officer of the Corporation, except that the Chief Executive Officer may remain on the Board after retirement as an employee, at the Board's request, through the last day of the month in which he or she turns 70. Our Corporate Governance Principles also provide that directors who undergo a significant change in their business or professional careers shall volunteer to resign from the Board. At the 2018 Annual Meeting of Stockholders, Mr. Drosdick's term will expire and he will retire from the Board pursuant to the mandatory director retirement policy. BOARD COMMITTEES Under our by-laws and the general corporation law of the State of Delaware, U. S. Steel’sSteel's state of incorporation, the business and affairs of U. S. Steel are managed under the direction of the Board of Directors. The non-employee directors hold regularly scheduled executive sessions without management. The directors spend considerable time preparing for Board and committee meetings. The Board has three principal committees, each of which is comprised exclusively of independent directors: (i) the Audit Committee; (ii) the Compensation & Organization Committee; and (iii) the Corporate Governance & Public Policy Committee. Each of thesethe principal committees has a written charter adopted by the Board, which are available on the Corporation’s Corporation's website (www.ussteel.com). The committee charters are regularly reviewed and updated to incorporate best practices and prevailing governance trends. | | United States Steel Corporation | 2017 Proxy Statement | 13 |
Corporate Governance The Board also has an Executive Committee that acts on, and reports to the Board on, matters that arise between Board meetings.
The table below showsEach principal committee is required to have at least three members, each of whom is considered independent. Each of the currentprincipal committee memberships of non-employee directors:
Director | | Audit
Committee | | Compensation &
Organization
Committee | | Corporate
Governance
& Public Policy
Committee | Patricia Diaz Dennis | | | | X | | X | Dan O. Dinges | | X | | X | | | John G. Drosdick | | | | X | * | | John J. Engel | | X | * | | | | Murry S. Gerber | | X | | X | | | Stephen J. Girsky | | X | | | | X | Paul A. Mascarenas | | | | X | | X | Glenda G. McNeal | | X | | | | X | David S. Sutherland** | | X | | | | X | Robert J. Stevens | | | | X | | X | Patricia A. Tracey | | | | X | | X* |
* | Committee Chair. | | | ** | Chairman of the Board. |
charters require the committee to perform a self-evaluation and review its charter annually. Each committee may in its sole discretion, retain or obtain the advice of outside advisers, including any consultant, independent legal counsel or other adviser, at the Corporation’sCorporation's expense to assist the committee in fulfilling its duties and responsibilities. responsibilities. The Board also has an Executivetable below shows the current committee memberships of our directors:
| | | | | | | | | | | | | | | | | | | Director
| | Audit
Committee
| | Compensation &
Organization
Committee
| | Corporate
Governance
& Public Policy
Committee
| | Executive
Committee
|
|---|
| | | | | | | | | | David B. Burritt | | | | | | | | X | | | | | | | | | | | Patricia Diaz Dennis | | | | X | | X | | | | | | | | | | | | | Dan O. Dinges | | | | C | | | | X | | | | | | | | | | | John G. Drosdick | | | | X | | | | | | | | | | | | | | | John J. Engel | | C | | | | | | X | | | | | | | | | | | Murry S. Gerber | | X | | X | | | | | | | | | | | | | | | Stephen J. Girsky | | X | | | | X | | | | | | | | | | | | | Paul A. Mascarenas | | X | | | | X | | | | | | | | | | | | | Glenda G. McNeal | | X | | | | X | | | | | | | | | | | | | Eugene B. Sperling | | X | | | | X | | | | | | | | | | | | | David S. Sutherland* | | | | | | | | X | | | | | | | | | | | Robert J. Stevens | | | | X | | X | | | | | | | | | | | | | Patricia A. Tracey | | | | X | | C | | X | | | | | | | | | | | TOTAL MEETINGS HELD: | | 5 | | 6 | | 5 | | | | | | | | | | | | |
C = Committee consistingChair. *Chairman of Messrs. Sutherland and Longhi. The Executive Committee acts on, and reports to the Board on, matters that arise between Board meetings.Board.
United States Steel Corporation | 2018 Proxy Statement |13
Audit Committee
Table of Contents Pursuant to its charter, the Audit Committee’sCommittee's duties and responsibilities include: • | reviewing and discussing with management and the independent registered public accounting firm matters related to the annual audited financial statements, quarterly financial statements, earnings press releases and the accounting principles and policies applied; | | | • | reviewing and discussing with management and the independent registered public accounting firm matters related to the Corporation’s internal controls over financial reporting; | | | • | reviewing the responsibilities, staffing and performance of the Corporation’s internal audit function; | | | • | reviewing issues that arise with respect to the Corporation’s compliance with legal or regulatory requirements and corporate policies dealing with business conduct; | | | • | being directly responsible for the appointment (subject to stockholder ratification), compensation, retention, and oversight of the work of the Corporation’s independent registered public accounting firm, while possessing the sole authority to approve all audit engagement fees and terms as well as all non-audit engagements with such firm; and | | | • | discussing policies with respect to risk assessment and risk management. |
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- reviewing and discussing with management and the independent registered public accounting firm matters related to the annual audited financial statements, quarterly financial statements, earnings press releases and the accounting principles and policies applied;
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- reviewing and discussing with management and the independent registered public accounting firm matters related to the Corporation's internal controls over financial reporting;
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- reviewing the responsibilities, staffing and performance of the Corporation's internal audit function;
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- reviewing issues that arise with respect to the Corporation's compliance with legal or regulatory requirements and corporate policies dealing with business conduct;
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- being directly responsible for the appointment (subject to stockholder ratification), compensation, retention, and oversight of the work of the Corporation's independent registered public accounting firm, while possessing the sole authority to approve all audit engagement fees and terms as well as all non-audit engagements with such firm; and
- •
- discussing policies with respect to risk assessment and risk management.
The charter requires the Audit Committee to perform an annual self-evaluation, review its charter each year and meet at least five times each year. During the fiscal year ended December 31, 2016, the Audit Committee held five meetings.
The Audit Committee annually requests PwCPriceWaterhouseCoopers LLP (PwC) to prepare a self-assessment utilizing the Center for Audit Quality, External Auditor Assessment Tool. This best practice assists the Audit Committee in its oversight role and annual evaluation of PwC to assess the quality of the audit and to recommend the retention of PwC. Based on this assessment, we believe the quality of PwC’sPwC's services, communication and interaction with the Audit Committee is of a high standard. The charter also requires the Audit Committee to be comprised of at least three directors, each of whom is independent and financially literate, and at least one of whom must have accounting or related financial management expertise. Under the charter, no director who serves on the audit committees of more than two other public companies may serve on the Audit Committee, unless the Board determines that such simultaneous service will not impair the ability of such director to effectively serve on the Audit Committee. No member of the Audit Committee serves on the audit committees of more than two other publicly traded companies. The Board has determined that John J. Engel, the Committee’sCommittee's chairman, Dan O. Dinges, Murry S. Gerber and Stephen J. Girsky and David S. Sutherland meet the SEC’sSEC's definition of audit committee financial expert.
14 | United States Steel Corporation | 2017 Proxy Statement
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Compensation & Organization Committee |
Corporate Governance
Compensation & Organization Committee
Pursuant to its charter, the Compensation & Organization Committee’sCommittee's duties and responsibilities include: • | determining and approving, with the Board, the CEO’s compensation level based on the evaluation of the CEO’s performance; | | | • | approving the compensation of the “executive officers” of the Corporation as defined under Section 16 of the Securities Exchange Act of 1934; | | | • | reviewing the Corporation’s executive management succession plans annually with the Board; | | | • | administering the plans and programs under which short-term and long-term incentives are awarded to executive officers and approving such awards; | | | • | assessing whether the Corporation’s compensation and organization policies and practices are reasonably likely to create a risk that could have a material adverse effect on the Corporation; | | | • | considering the most recent stockholder advisory vote on executive compensation in connection with determining executive compensation policies and decisions; | | | • | reviewing with management and recommending to the Board the Compensation Discussion and Analysis (CD&A) section of the proxy statement and producing the committee report for inclusion in the proxy statement; and | | | • | adopting and amending certain employee benefit plans and designating participants therein. |
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- determining and approving, with the Board, the CEO's compensation level based on the evaluation of the CEO's performance;
- •
- approving the compensation of the "executive officers" of the Corporation as defined under Section 16 of the Securities Exchange Act of 1934;
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- reviewing the Corporation's executive management succession plans annually with the Board;
- •
- administering the plans and programs under which short-term and long-term incentives are awarded to executive officers and approving such awards;
- •
- assessing whether the Corporation's compensation and organization policies and practices are reasonably likely to create a risk that could have a material adverse effect on the Corporation;
- •
- considering the most recent stockholder advisory vote on executive compensation in connection with determining executive compensation policies and decisions;
- •
- reviewing with management and recommending to the Board the Compensation Discussion and Analysis (CD&A) section of the proxy statement and producing the committee report for inclusion in the proxy statement; and
- •
- adopting and amending certain employee benefit plans and designating participants therein.
The Compensation & Organization Committee has retained Pay Governance, LLC as its consultant to assist it in evaluating executive compensation. The consultant reports directly to the Compensation & Organization Committee. The Compensation & Organization Committee retains sole authority to hire the consultant, approve its compensation, determine the nature and scope of its services, evaluate its performance, and terminate its engagement. A representative of the consultant attended all in-person meetings of the Compensation & Organization Committee in 2016. 2017. The consultant provides various executive compensation services to the Compensation & Organization Committee, which generally include advising the Compensation & Organization Committee on the principal aspects of our executive compensation program and changing industry practices and providing market information and analysis regarding the competitiveness of our program design and our award values in relationship to their performance. During 2016,2017, the consultant performed the following specific services: - •
- provided presentations on executive compensation trends, and best practices and recent developments;
14 |United States Steel Corporation | 2018 Proxy Statement • | provided presentations on executive compensation trends, and best practices and recent developments; | | | • | prepared competitive assessments by position for each element of compensation and for compensation in the aggregate; |
Table of Contents • | reviewed drafts and commented on the CD&A and related compensation tables for the proxy statement; | | | • | reviewed the peer group used for compensation benchmarking purposes and recommended changes, if appropriate; and | | | • | attended executive sessions of the Compensation & Organization Committee.Corporate Governance |
- •
- prepared competitive assessments by position for each element of compensation and for compensation in the aggregate;
- •
- reviewed drafts and commented on the CD&A and related compensation tables for the proxy statement;
- •
- reviewed the peer group used for compensation benchmarking purposes and recommended changes, if appropriate; and
- •
- attended executive sessions of the Compensation & Organization Committee.
The consultant provided no services to management during 2016. 2017. The Compensation & Organization Committee has assessed the independence of the consultant pursuant to the NYSE listing standards and SEC rules and concluded that no conflict of interest exists that would prevent the consultant from serving as an independent consultant to the Compensation & Organization Committee. The Compensation & Organization Committee also obtains input from the CEO with regard to compensation for other executives. Our CEO recommends the level of base salary increase (if any), the annual incentive award, and the long-term incentive award value for all of our executive officers, including the other named executive officers (other than himself). These recommendations are based upon his assessment of each executive officer’sofficer's performance, the performance of the individual’sindividual's respective business or function, and employee retention considerations. The Compensation & Organization Committee reviews the CEO’sCEO's recommendations and approves any compensation changes affecting our Section 16 executive officers. The Compensation & Organization Committee’s charter requires the committee to perform a self-evaluation and charter review annually. The charter also requires that the committee be comprised of at least three directors, each of whom is independent.
During the fiscal year ended December 31, 2016, the Compensation & Organization Committee held six meetings. Committee agendas are established in consultation among management, the Committee chair and the Compensation & Organization Committee’sCommittee's independent compensation consultant. The Compensation & Organization Committee meets in executive session without management for at least a portion of each regular meeting.
In 2016,2017, the Compensation & Organization Committee considered reports and analysis that it had requested of management and its independent consultant concerning risks associated with the Corporation’sCorporation's compensation and organization policies and practices.
| | United States Steel Corporation | 2017 Proxy Statement | 15 |
Corporate Governance & Public Policy Committee |
Corporate Governance
Corporate Governance & Public Policy Committee
The Corporate Governance & Public Policy Committee serves as the Corporation’sCorporation's governance and nominating committee. Pursuant to its charter, the duties and responsibilities of this committee include: • | Identifying and evaluating nominees for director and selecting, or recommending that the Board select, the director nominees for the next annual meeting of stockholders; | | | • | making recommendations to the Board concerning the appropriate size and composition of the Board and its committees; | | | • | making recommendations to the Board concerning the compensation of non-employee directors; | | | • | recommending to the Board a set of corporate governance principles applicable to the Corporation, reviewing such principles annually and recommending appropriate changes to the Board; | | | • | reviewing relationships with, and communications to and from, the investment community, including the Corporation’s stockholders; |
- •
- Identifying and evaluating nominees for director and selecting, or recommending that the Board select, the director nominees for the next annual meeting of stockholders;
- •
- making recommendations to the Board concerning the appropriate size and composition of the Board and its committees;
- •
- making recommendations to the Board concerning the compensation of non-employee directors;
- •
- recommending to the Board a set of corporate governance principles applicable to the Corporation, reviewing such principles annually and recommending appropriate changes to the Board;
- •
- reviewing relationships with, and communications to and from, the investment community, including the Corporation's stockholders;
• | reviewing matters and discussing risk relating to legislative, regulatory and public policy issues affecting the Corporation’s businesses and operations; | | | • | reviewing and approving codes of conduct applicable to employees and principal operating units; and | | | • | assessing and making recommendations concerning overall corporate governance to the extent specific matters are not the assigned responsibility of other board committees. |
- •
- reviewing matters and discussing risk relating to legislative, regulatory and public policy issues affecting the Corporation's businesses and operations;
- •
- reviewing public policy issues likely to be of interest to various stakeholders of the Corporation, including employee health and safety, environmental, energy and trade matters;
- •
- reviewing and approving codes of conduct applicable to employees and principal operating units; and
- •
- assessing and making recommendations concerning overall corporate governance to the extent specific matters are not the assigned responsibility of other board committees.
The Corporate Governance & Public Policy Committee’sCommittee's charter gives the committee the sole authority to retain and terminate any search firm to be used to identify director candidates, including sole authority to approve the search firm’sfirm's fees and other retention terms. United States Steel Corporation | 2018 Proxy Statement |15
Under the charter, the Corporate Governance & Public Policy Committee must: (i) be comprisedTable of at least three directors, each of whom is independent, and (ii) perform a self-evaluation and charter review annually. During the fiscal year ended December 31, 2016, the Corporate Governance & Public Policy Committee held six meetings.Contents
DIRECTOR RETIREMENT POLICY
Our Corporate Governance Principles require any non-employee director to retire at the first annual meeting of stockholders after he or she reaches the age of 74, however, the Board can grant exceptions to this policy on a case-by-case basis.
Each employee director must retire from the Board when he or she ceases to be an executive officer of the Corporation, except that the Chief Executive Officer may remain on the Board after retirement as an employee, at the Board’s request, through the last day of the month in which he or she turns 70.
Our Corporate Governance Principles also provide that directors who undergo a significant change in their business or professional careers shall volunteer to resign from the Board. In 2016, Ms. Tracey retired from her position at HP Enterprise Services and submitted an offer to resign from our Board in accordance with the provisions of our Corporate Governance Principles. The Corporate Governance & Public Policy Committee determined that Ms. Tracey’s change in status did not impact her qualifications to serve on the Board and recommended that the Board reject her offer of resiganation. After consideration, the Board approved that recommendation and agreed to reject her offer of resignation.
16 | United States Steel Corporation | 2017 Proxy Statement
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Director Compensation
DIRECTOR COMPENSATION
Our Corporate Governance Principles provide that each non-employee director shall be paid compensation as the Board may determine from time to time. Directors who are employees of U. S. Steel receive no compensation for their service on the Board. The objective of U. S. Steel’sSteel's director compensation programs is to enable the Corporation to attract and retain as directors individuals of substantial accomplishment with demonstrated leadership capabilities. In order to align the interests of directors with the interests of stockholders, our non-employee directors participate in the Deferred Compensation Program for Non-Employee Directors and the Non-Employee Director Stock Program, each of which is described below. For 2016, Non-employee2017, non-employee directors were paid an annual retainer fee of $200,000.$240,000. Committee Chairs and the Chairman of the Board were paid an additional annual fee of $20,000 and $50,000, respectively. No meeting fees or committee membership fees are paid. Under our Deferred Compensation Program for Non-Employee Directors, each non-employee director is required to defer at least 50% of his or her retainer in the form of Common Stock Units and may elect to defer up to 100%. A Common Stock Unit is what is sometimes referred to as “phantom stock”"phantom stock" because initially no stock is actually issued. Instead, we keep a book entry account for each director that shows how many Common Stock Units he or she has. When a director leaves the Board, he or she receives actual shares of common stock corresponding to the number of Common Stock Units in his or her account. The ongoing value of each Common Stock Unit equals the market price of the common stock. When dividends are paid on the common stock, we credit each account with equivalent amounts in additional Common Stock Units. If U. S. Steel were to undergo a change in control resulting in the removal of a non-employee director from the Board, that director would receive a cash payment equal to the value of his or her deferred stock account. Under our Non-Employee Director Stock Program, upon joining our Board, each non-employee director is eligible to receive a grant of up to 1,000 shares of common stock. In order to qualify, each director must first have purchased an equivalent number of shares in the open market during the 60 days following the first date of his or her service on the Board. The Corporate Governance & Public Policy Committee reviews and sets director compensation on a semi-annualan annual basis. In November 2016, Thethe committee reviewed information and recommendations from Pay Governance, an independent compensation consultant, for the same comparator group of 24 companies the Compensation & Organization Committee uses for determining compensation for our executives, as well as for a larger general comparator group of 151 companies in a similar revenue range as the Corporation. After reviewing the information presented by Pay Governance, as well as other public information on the topic, the committee determined that the plan design was consistent with market trends, but that the amount of our directors’directors' annual base retainer, which was set in 2011, was below the 25th percentile and significantly below the 50thpercentile of both comparator groups. The Corporate Governance & Public Policy Committee determined torecommended, and the Board approved, an increase in the annual director compensation retainer to $240,000 beginning in 2017, in order to align the compensation level with the median of both comparator groups. No increase was made to the additional amounts paid to the board chair or to committee chairs. In 2017, the Corporate Governance & Public Policy Committee reviewed director compensation information of the peer group and a general comparator group, and made no changes to the director compensation fees for 2018. Mr. Sutherland's annual retainer was temporarily increased by $150,000, effective March 1, 2018, in connection with his assumption of additional duties. The following table sets forth certain information concerning the compensation of non-employee directors in 2016:2017: | | | | | | | | | | | | | | | | | | | | DIRECTOR COMPENSATION | | | | | | | | | | | | | | | | | | | | | | | Name | | | Fees Earned
or Paid in
Cash
($) | | | Stock
Awards(1)(2)
($) | | | Option
Awards
($) | | | Non-Equity
Incentive Plan
Compensation
($) | | | All Other
Compensation
($) | | | Total
($) | | | | | | | | | | | | | | | | | | | | | | | Patricia Diaz Dennis | | | 120,000 | | | 120,000 | | | 0 | | | 0 | | | 0 | | | 240,000 | | | | | | | | | | | | | | | | | | | | | | | Dan O. Dinges | | | 63,333 | | | 190,000 | | | 0 | | | 0 | | | 0 | | | 253,333 | | | | | | | | | | | | | | | | | | | | | | | John G. Drosdick | | | 123,333 | | | 130,000 | | | 0 | | | 0 | | | 0 | | | 253,333 | | | | | | | | | | | | | | | | | | | | | | | John J. Engel | | | 130,000 | | | 130,000 | | | 0 | | | 0 | | | 0 | | | 260,000 | | | | | | | | | | | | | | | | | | | | | | | Murry S. Gerber | | | 120,000 | | | 120,000 | | | 0 | | | 0 | | | 0 | | | 240,000 | | | | | | | | | | | | | | | | | | | | | | | Stephen J. Girsky | | | 0 | | | 240,000 | | | 0 | | | 0 | | | 0 | | | 240,000 | | | | | | | | | | | | | | | | | | | | | | | Paul A. Mascarenas | | | 120,000 | | | 120,000 | | | 0 | | | 0 | | | 0 | | | 240,000 | | | | | | | | | | | | | | | | | | | | | | | Glenda G. McNeal | | | 120,000 | | | 120,000 | | | 0 | | | 0 | | | 0 | | | 240,000 | | | | | | | | | | | | | | | | | | | | | | | Eugene B. Sperling | | | 50,000 | | | 75,435 | | | 0 | | | 0 | | | 0 | | | 125,435 | | | | | | | | | | | | | | | | | | | | | | | Robert J. Stevens | | | 0 | | | 240,000 | | | 0 | | | 0 | | | 0 | | | 240,000 | | | | | | | | | | | | | | | | | | | | | | | David S. Sutherland | | | 43,500 | | | 246,500 | | | 0 | | | 0 | | | 0 | | | 290,000 | | | | | | | | | | | | | | | | | | | | | | | Patricia A. Tracey | | | 130,000 | | | 130,000 | | | 0 | | | 0 | | | 0 | | | 260,000 | | | | | | | | | | | | | | | | | | | | | | |
16 |United States Steel Corporation | 2018 Proxy Statement
DIRECTOR COMPENSATION
| Name | | Fees Earned
or Paid in
Cash
($) | | Stock
Awards(1)(2)
($) | | Option
Awards
($) | | Non-Equity
Incentive Plan
Compensation
($) | | All Other
Compensation(3)
($) | | Total
($) | | | Patricia Diaz Dennis | | 100,000 | | 100,000 | | 0 | | 0 | | 0 | | 200,000 | | | Dan O. Dinges | | 50,000 | | 150,000 | | 0 | | 0 | | 0 | | 200,000 | | | John G. Drosdick | | 110,000 | | 110,000 | | 0 | | 0 | | 0 | | 220,000 | | | John J. Engel | | 110,000 | | 110,000 | | 0 | | 0 | | 0 | | 220,000 | | | Murry S. Gerber | | 100,000 | | 100,000 | | 0 | | 0 | | 0 | | 200,000 | | | Stephen J. Girsky | | 0 | | 152,473 | | 0 | | 0 | | 10,000 | | 162,473 | | | Paul A. Mascarenas | | 83,333 | | 102,473 | | 0 | | 0 | | 0 | | 185,806 | | | Glenda G. McNeal | | 100,000 | | 100,000 | | 0 | | 0 | | 0 | | 200,000 | | | Robert J. Stevens | | 0 | | 200,000 | | 0 | | 0 | | 0 | | 200,000 | | | David S. Sutherland | | 0 | | 250,000 | | 0 | | 0 | | 0 | | 250,000 | | | Patricia A. Tracey | | 110,000 | | 110,000 | | 0 | | 0 | | 0 | | 220,000 | |
Table of Contents | | United States Steel Corporation | 2017 Proxy Statement | 17 |
| Stock Ownership of Directors and Executive Officers |
- (1)
- The amount shown represents the aggregate grant date fair value, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (ASC 718), as described in the Corporation's financial statements for the year ended December 31, 2017 included in the Corporation's annual report on Form 10-K for 2017. All of the 2017 stock awards represent Common Stock
OwnershipUnits under the Deferred Compensation Program for Non-Employee Directors, except in the case of Mr. Sperling, where $50,000 represents Common Stock Units under the Deferred Compensation Program for Non-Employee Directors and Executive Officers$25,435 represents shares awarded under the Non-Employee Director Stock Program.
- (2)
- The aggregate stock awards outstanding at the end of 2017 for each director listed in the table represent Common Stock Units under the Deferred Compensation Program for Non-Employee Directors and shares of stock awarded under the Non-Employee Director Stock Program.
(1) | The amount shown represents the aggregate grant date fair value, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (ASC 718), as described in the Corporation’s financial statements for the year ended December 31, 2016 included in the Corporation’s annual report on Form 10-K for 2016. All of the 2016 stock awards represent Common Stock Units under the Deferred Compensation Program for Non-Employee Directors, except in the case of: (i) Mr. Girsky, where $133,333 represents Common Stock Units under the Deferred Compensation Program for Non-Employee Directors and $19,140 represents shares awarded under the Non-Employee Director Stock Program; and (ii) Mr. Mascarenas, where $83,333 represents Common Stock Units under the Deferred Compensation Program for Non-Employee Directors and $19,140 represents shares awarded under the Non-Employee Director Stock Program. | | | (2) | The aggregate stock awards outstanding at the end of 2016 for each director listed in the table represent Common Stock Units under the Deferred Compensation Program for Non-Employee Directors. | | | (3) | The amounts shown represent contributions made under the U. S. Steel Matching Gift program. Under this program, United States Steel Foundation, Inc. matches charitable contributions made by directors and employees to eligible organizations, subject to certain limitations and conditions as set forth in the program.STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS |
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The Board has adopted stock ownership and holding requirements for executive officers. These requirements are described under the caption “A Culture of Ownership”"Stock Ownership and Holding Guidelines" in the Compensation Discussion and Analysis section of this proxy statement. Non-employee directors are required to hold equity interests in the Corporation in the form of stock-based deferred compensation. This requirement is a part of our Corporate Governance Principles. Each non-employee director is required to defer at least 50% of his or her annual retainer as stock-based compensation under the Deferred Compensation Program for Non-Employee Directors. Amounts deferred are credited to the director’sdirector's deferred stock account in the form of Common Stock Units. No amounts are paid to the director from the deferred stock account until the director leaves the Board, at which time he or she receives actual shares of common stock corresponding to the number of Common Stock Units in his or her account. The Board and management believe that such deferral, by continually building each director’sdirector's equity interest in the Corporation, provides a meaningful continued interest in the Corporation that is tied to the stockholders’stockholders' interest because the stock issued upon a director’sdirector's departure from the Board reflects all changes in the market value of U. S. Steel common stock from the date of deferral. Each non-employee director is in compliance with the requirement described in this paragraph. The following table sets forth the number of shares of U. S. Steel common stock beneficially owned as of February 27, 201726, 2018* by each director and director nominee, by each executive officer named in the Summary Compensation Table and by all directors and executive officers as a group. No director or executive officer beneficially owned, as of the applicable date, any equity securities of U. S. Steel other than those shown.
| | | | | | | | | | | Name
| | Shares
Beneficially
Owned*
| |
|---|
| | | | | | Kevin P. Bradley(1) | | Shares
Beneficially
Owned* | 46,933 | | James E. Bruno | | | | | Scott D. Buckiso(1)(3) | | 67,766 | 71,225 | | | | | | | | David B. Burritt(1)(3) | | 157,026 | 198,508 | | | | | | | | Patricia Diaz Dennis(2)(3) | | 22,503 | 26,058 | | | | | | | | Dan O. Dinges(2)(3) | | 48,859 | 53,208 | | | | | | | | John G. Drosdick(2)(3) | | 53,267 | 54,767 | | | | | | | | John J. Engel(2)(3) | | 38,691 | 42,645 | | | | | | | | Suzanne R. Folsom(1)(3) | | 70,416 | 62,600 | | | | | | | | Murry S. Gerber(2)(3) | | 164,345 | 171,969 | | | | | | | | Stephen J. Girsky(2) | | 19,349 | 28,785 | | | | | | | | Mario Longhi(1)(3) | | 380,462 | 300,430 | | | | | | | | Paul A. Mascarenas(2) | | 10,864 | 17,883 | | | | | | | | Douglas R. Matthews(1)(3) | | 169,403 | 214,128 | | | | | | | | Glenda G. McNeal(2)(3) | | 41,383 | 45,084 | | | | | | | | David J. Rintoul(1) | | | 56,512 | | | | | | | | Pipasu H. Soni(1) | | | 25,153 | | | | | | | | Eugene B. Sperling(2) | | | 7,422 | | | | | | | | Robert J. Stevens(2)(3) | | 43,006 | 50,429 | | | | | | | | David S. Sutherland(2)(3) | | 88,792 | 106,422 | | | | | | | | Patricia A. Tracey(2)(3) | | 42,818 | 46,803 | | | | | | | | All Directors and Executive Officers as a group (22(25 persons)(1)(2)(3) | | 1,758,388 |
* | Does not include fractional shares. | | 1,784,523 | | (1) | Includes shares which may be acquired upon exercise of outstanding options which are or will become exercisable within 60 days of February 27, 2017 in the following amounts: Mr. Burritt: 18,260; Ms. Folsom: 16,130; Mr. Longhi: 58,100; Mr. Matthews: 104,962; Mr. Bruno: 5,513; and all executive officers as a group: 331,728. | | | | (2) | Includes those Common Stock Units granted under the Deferred Compensation Program for Non-Employee Directors that are convertible into shares of common stock upon departure from the Board in the following amounts: Ms. Diaz Dennis: 20,503; Mr. Dinges: 46,859; Mr. Drosdick: 51,267; Mr. Engel: 36,691; Mr. Gerber: 30,145; Mr. Girsky: 16,349; Mr. Mascarenas: 8,864; Ms. McNeal: 39,330; Mr. Stevens: 41,006; Mr. Sutherland: 86,715; Vice Admiral Tracey: 41,160; and all directors as a group: 418,889. | | | (3) | The total number of shares beneficially owned by all directors and executive officers as a group constitutes approximately 1.0% of the outstanding shares of common stock of U. S. Steel. |
- *
- Does not include fractional shares. Amounts shown for Mr. Longhi and Ms. Folsom are as of their termination dates, June 30, 2017 and December 29, 2017, respectively.
- (1)
- Includes shares which may be acquired upon exercise of outstanding options which are or will become exercisable within 60 days of February 26, 2018 in the following amounts: Mr. Buckiso: 47,476; Mr. Burritt: 28,266; Mr. Matthews: 132,122; Mr. Rintoul: 16,196; Mr. Soni: 5,180; and all executive officers as a group: 282,496.
United States Steel Corporation | 2018 Proxy Statement |17 Communications from Stockholders and Interested Parties |
Communications
- (2)
- Includes those Common Stock Units granted under the Deferred Compensation Program for Non-Employee Directors that are convertible into shares of common stock upon departure from
Stockholdersthe Board in the following amounts: Ms. Diaz Dennis: 24,058; Mr. Dinges: 51,208; Mr. Drosdick: 52,767; Mr. Engel: 40,645; Mr. Gerber: 33,769; Mr. Girsky: 23,285; Mr. Mascarenas: 14,383; Ms. McNeal: 43,019; Mr. Sperling: 5,422; Mr. Stevens: 48,116; Mr. Sutherland: 94,334; Vice Admiral Tracey: 45,145; and Interested Partiesall directors as a group: 476,155.
- (3)
- The total number of shares beneficially owned by all directors and executive officers as a group constitutes approximately 1.0% of the outstanding shares of common stock of U. S. Steel.
COMMUNICATIONS FROM STOCKHOLDERS AND INTERESTED PARTIES
COMMUNICATIONS FROM STOCKHOLDERS AND INTERESTED PARTIES |
Stockholders and interested parties may send communications through the Secretary of the Corporation to the: (1) Board, (2) Committee Chairs, (3) Chairman of the Board, or (4) outside directors as a group. The Secretary will collect, organize and forward to the directors all communications that are appropriate for consideration by the directors. Examples of communications that would not be considered appropriate for consideration include solicitations for products or services, employment matters, and matters not relevant to stockholders generally, to the functioning of the Board, or to the affairs of the Corporation. The Secretary of the Corporation may be contacted at: Corporate Secretary, United States Steel Corporation, 600 Grant Street, Suite 1500, Pittsburgh, PA 15219.
POLICY WITH RESPECT TO RELATED PERSON TRANSACTIONS
POLICY WITH RESPECT TO RELATED PERSON TRANSACTIONS |
The Board of Directors of the Corporation has adopted a written policy that requires certain transactions with related persons to be approved or ratified by its Corporate Governance & Public Policy Committee. For purposes of this policy, related persons include: (i) any person who is, or at any time since the beginning of the Corporation’sCorporation's last fiscal year was, a director or executive officer of the Corporation or a nominee to become a director of the Corporation; (ii) any person who is the beneficial owner of more than 5% of any class of the Corporation’sCorporation's voting securities; and (iii) any immediate family member of any person described in (i) or (ii). The types of transactions that are subject to this policy are transactions, arrangements or relationships (or any series of similar transactions, arrangements or relationships) in which the Corporation, or any of its subsidiaries, was, is or will be a participant and in which any related person had, has or will have a direct or indirect material interest and the aggregate amount involved will or may be expected to exceed $120,000. The standards applied by the Corporate Governance & Public Policy Committee when reviewing transactions with related persons include: (a) the benefits to the Corporation of the transaction; (b) the terms and conditions of the transaction and whether such terms and conditions are comparable to the terms available to an unrelated third party or to employees generally; and (c) the potential for the transaction to affect the independence or judgment of a director or executive officer of the Corporation. Under the policy, certain transactions are deemed to be automatically pre-approved and do not need to be brought to the Corporate Governance & Public Policy Committee for individual approval. The transactions whichthat are automatically pre-approved include: (i) transactions involving compensation to directors and executive officers of the type that is required to be reported in the Corporation’sCorporation's proxy statement; (ii) indebtedness for ordinary business travel and expense payments; (iii) transactions with another company at which a related person’sperson's only relationship is as an employee (other than an executive officer), a director or beneficial owner of less than 10 percent10% of any class of equity securities of that company, provided that the amount involved does not exceed the greater of $1,000,000 or 2% of that company’scompany's consolidated gross annual revenues; (iv) transactions where the interest of the related person arises solely from the ownership of a class of equity securities of the Corporation, and all holders of that class of equity securities receive the same benefit on a pro rata basis; (v) transactions where the rates or charges involved are determined by competitive bid; (vi) transactions involving the rendering of services as a common or contract carrier or public utility at rates or charges fixed in conformity with law or governmental regulation; and (vii) transactions involving services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture or similar services. There were no transactions that required approval of the Corporate Governance & Public Policy Committee under this policy during 2016.2017.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE |
Under Section 16(a) of the Securities Exchange Act of 1934, our directors and executive officers and persons holding more than ten percent10% of any class of our equity securities, are required to file with the SEC initial reports of their ownership of our common stock and reports of changes in such ownership. To our knowledge, based on information furnished to us during 2017, there were no late filings by any U. S. Steel directors, executive officers or other persons subject to Section 16(a) of the Securities Exchange Act of 1934 required to be disclosed in this proxy statement. In December 2017, an amendment to the applicable Form 3 was filed for each of Christine Breves and Scott Buckiso disclosing ownership of phantom shares through the Corporation's Supplemental Thrift Program. These shares were inadvertently omitted from the initial Forms 3 that were timely filed upon their designation as an "executive officer" under the federal securities laws.
18 |United States Steel Corporation | 2018 Proxy Statement
Table of Contents | | United States Steel Corporation | 2017 Proxy Statement | 19Certain Legal Matters |
On October 2, 2017, an Amended Shareholder Class Action Complaint was filed in Federal Court in the Western District of Pennsylvania consolidating previously-filed actions. Separately, four related shareholder derivative lawsuits were filed in State and Federal courts in Pittsburgh. The underlying consolidated class action lawsuit alleges that the Corporation, certain current and former officers, an upper level manager of the Corporation and the financial underwriters who participated in the August 2016 secondary public offering, violated federal securities laws in making false statements and/or failing to discover and disclose material information regarding the financial condition of the Corporation. The lawsuit claims that this conduct caused a prospective class of plaintiffs to sustain damages during the period of January 27, 2016 and April 25, 2017 as a result of the prospective class purchasing the Corporation's common stock at artificially inflated prices and/or suffering losses when the price of the common stock dropped. The derivative lawsuits generally make the same allegations against the same officers and also allege that certain members of the Board of Directors failed to exercise appropriate control and oversight over the Corporation and were unjustly compensated. They seek to recover losses that were allegedly sustained. The Corporation is vigorously defending these matters.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS |
Proposal 2: Advisory VoteThe following table furnishes information concerning all persons known to U. S. Steel who beneficially own five percent or more of the voting stock of U. S. Steel:
| | | | | | | | | | | | | | | | | | | | | | | | | Class
| | Name and Address of Beneficial Owner
| | Amount and Nature of
Beneficial Ownership
| | Percent
of Class
| |
|---|
| | | | | | | | | | | | | | U. S. Steel Common Stock | | The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355 | | | 15,079,047 | | | 8.61% | | | | | | | | | | | | | | | | U. S. Steel Common Stock | | Blackrock, Inc.(2)
55 East 52nd street
New York, NY 10055 | | | 14,848,328 | | | 8.5% | | | | | | | | | | | | | |
- (1)
- Based on
Executive CompensationSchedule 13G filed on February 9, 2018, which indicates that The Vanguard Group had sole voting power over 93,513 shares, shared voting power over 30,804 shares, sole dispositive power over 14,969,105 shares and shared dispositive power over 109,942 shares.
- (2)
- Based on Schedule 13G filed on January 23, 2018, which indicates that Blackrock, Inc. had sole voting power over 14,167,063 shares, shared voting power over no shares, sole dispositive power over 14,848,328 shares and shared dispositive power over no shares.
United States Steel Corporation | 2018 Proxy Statement |19
Table of Contents Proposal 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION |
PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION
PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION |
Pursuant to Section 14A of the Securities Exchange Act of 1934, we are seeking an advisory vote from our stockholders on the following resolution to approve the compensation of the named executive officers (“NEOs”("NEOs") listed in the compensation tables of this proxy statement: RESOLVED, that the stockholders of United States Steel Corporation (the “Corporation”"Corporation") approve, on an advisory basis, the compensation of the Named Executive Officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission in the Corporation’sCorporation's proxy statement for the 20172018 Annual Meeting of Stockholders, including the Compensation Discussion and Analysis, compensation tables and narrative discussions.
We intend to offer this non-binding advisory vote at each of our annual meetings. Although it is not binding, we and the Board welcome our stockholders’stockholders' views on our NEOs’NEOs' compensation and will carefully consider the outcome of this advisory vote consistent with the best interests of all stockholders. At the 20162017 Annual Meeting of Stockholders, approximately 79%92% of the votes cast were “For”"For" our advisory vote on executive compensation. We value the feedback we receive from regular engagement with our stockholders, and are encouraged by the positive support we have received over the past several years for our compensation program and recognition of our responsiveness to stockholders. In April 2016,2017, we contactedcontinued our long-standing engagement with our largest stockholders representing more than 50%both during and outside of our outstanding stock andthe proxy season. In each of the last two years, we've met with or held telephonic meetings with stockholders holdingrepresenting approximately 25%. These discussions, held prior to our annual meeting, were focused primarily on how our compensation program aligns with our strategy and company performance. In November and December 2016, we contacted stockholders representing approximately 40%20% of our outstanding stock, and meetings were accepted by those representing approximately 15%.stock. In addition, some stockholders indicated they did not believe a call was necessary at the time. All of the stockholders provided positive feedback regarding recent changes to our executive
compensation program and support the pay-for-performance nature of our compensation program. The Compensation & Organization Committee considered this feedback when reviewing the incentive compensation programs for 2017. 2018. In considering this advisory vote, we encourage you to read the Compensation Discussion and Analysis, the compensation tables and other relevant information in this proxy statement for additional details on our executive compensation programs and the 20162017 compensation paid to our named executive officers. | | |  | | The Board recommends that you vote "FOR" the resolution approving the compensation of our Named Executive Officers. |
The Board recommends that you vote “FOR” the resolution approving the compensation of our Named Executive Officers.
COMPENSATION & ORGANIZATION COMMITTEE REPORT
COMPENSATION & ORGANIZATION COMMITTEE REPORT |
The Compensation & Organization Committee of the Board of Directors of the Corporation has reviewed and discussed the Compensation Discussion and Analysis with management. Based on such review and discussion, the Compensation & Organization Committee recommended to the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the Corporation’sCorporation's Annual Report on Form 10-K for the year-ended December 31, 2016.2017. | | | | Dan O. Dinges, Chairman | | John G. Drosdick Chairman | Dan O. Dinges | | Patricia Diaz Dennis | Paul A. Mascarenas | | Murry S. Gerber | | Robert J. Stevens | | Patricia A. Tracey |
20 |United States Steel Corporation | 2018 Proxy Statement
| Compensation Discussion and Analysis |
Compensation Discussion and Analysis
COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION DISCUSSION AND ANALYSIS |
This Compensation Discussion and Analysis (“("CD&A”&A") contains a discussion of the material elements of compensation awarded to, earned by, or paid to the Corporation’s “NamedCorporation's "Named Executive Officers” (“NEOs” Officers" ("NEOs"), including our principal executive officer, the principal financial
officer, and the next three most highly compensated executive officers of U. S. Steel in 2016. The titles2017, as well as individuals who served as our principal executive officer and interim principal financial officer during a portion of executives used in this CD&A reflect the title of each executive during 2016.2017.
U. S. Steel’s Named Executive Officers in 2016
| | | Mario LonghiU. S. Steel's Named Executive Officers in 2017* | | | | | | David B. Burritt | | President & Chief Executive Officer | | | | | David B. BurrittKevin P. Bradley | | Executive Vice President & Chief Financial Officer | | | | | | Douglas R. Matthews | | Senior Vice President – Industrial, Service Center and Mining Solutions | | | | | | Scott D. Buckiso | | Senior Vice President – European Solutions & President, U. S. Steel Kosice | | | | | | David J. Rintoul | | Senior Vice President – Tubular Business | | | | | | Mario Longhi | | Former President & Chief Executive Officer | | | | | | Suzanne R. Folsom | | Former General Counsel, Chief Compliance Officer & Senior Vice President – Government Affairs | | | | | Douglas R. MatthewsPipasu H. Soni | Senior | Former Interim Chief Financial Officer; Vice President – Industrial, Service Center and Mining SolutionsFinance |
- *
- As a result of the following changes, there are eight named executive officers for 2017: Mario Longhi stepped down as Chief Executive Officer on May 8, 2017. As of that date, David B. Burritt was promoted from Executive Vice President, Chief Operating Officer & Acting Chief Financial Officer to President & Chief Executive Officer. Pipasu Soni, the Corporation's Vice President – Finance, served as Interim Chief Financial Officer from May to July 2017 while a permanent search was conducted to fill the vacancy created by Mr. Burritt's promotion. Ms. Folsom resigned from her position as General Counsel, Chief Compliance Officer & Senior Vice President as of December 29, 2017. Mr. Rintoul retired from the Corporation on February 28, 2018.
| | | | | | | | | | | | | | | | | James E. BrunoExecutive Summary | Senior Vice President – Automotive Solutions | | | |
Executive Summary
Our executive compensation program is designed to attract, reward and retain executives who make significant contributions through operational and financial achievements aligned with the goals and philosophy of our Carnegie Way transformation. The Compensation & Organization Committee (the “Committee”) is guided by five compensation principles highlighted below and discussed in more detail on page 28.
• | | Our executive compensation program is designed to attract, reward and retain executives who make significant contributions through operational and financial achievements aligned with the goals and philosophy of our long-term strategy. The Compensation & Organization Committee (the "Committee") is guided by five compensation principles highlighted below and discussed in more detail on page 28. • Align Pay with Stockholder Interests • Pay Fair and Competitive Compensation | | • Link Compensation to Company Performance and Strategy • Retain Executives • Provide Equity-Focused and Tax-Efficient Rewards These principles reflect a strong pay-for-performance culture. Furthermore, the structure of our compensation program and the pay outcomes for executives demonstrate our commitment to linking compensation to company performance and strategy. | | | •
| Fair
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Earning the Right to Grow and CompetitiveDriving Sustainable Profitable Growth |
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Over the past few years, U. S. Steel, like the American steel industry in general, has faced difficult market conditions as a result of macroeconomic challenges, including significant reductions in the market price of steel, global overcapacity and record levels of unfairly traded imports, slow growth globally, a strong U.S. dollar, and markedly low energy prices. In the face of these challenging conditions, we initiated a process that provides the framework for a multi-year transformation to return our company to top quartile performance and sustainable profitability through the business cycle.We are on a mission to become an industry leader by striving to create a sustainable competitive advantage with a customer-centric focus on: delivering high-quality, value-added products on time every time; collaborating with our customers to develop innovative solutions that address their most challenging needs, including new advanced high-strength steels to meet fuel efficiency and safety requirements for automotive customers and new premium connections that provide strong, durable connections between pipes used by energy customers in oil and gas drilling; generating |
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economic profit through active participation in relevant markets; and creating and maintaining a competitive cost structure centered around operational flexibility. As part of this process, we have aligned our company with commercial entities to drive customer intimacy in order to foster innovation and be more responsive to their needs. We focus on our strengths, how we can create the most value for our stockholders and best serve our customers, with committed and engaged executives and employees.We have launched a series of initiatives that we believe will enable us to achieve true operational excellence by improving our performance across our core business processes, including commercial, supply chain, manufacturing, procurement, innovation, and operational and functional support. Our highly talented, capable and collaborative employees are the driving force behind many of these continuous improvement projects, and their efforts are creating a culture where accountability and high performance are valued and celebrated. |
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United States Steel Corporation | 2018 Proxy Statement |21
Table of Contents • | Link Pay to Performance | | | • | Retain Executives | | | • | Equity-FocusCompensation Discussion and Tax-EfficientAnalysis – Executive Summary |
These principles reflect
Foundational to all our efforts is our belief that we must operate as a strong pay-for-performance culture. Furthermore,principled company committed to a code of conduct that is rooted in our Gary Principles and our core values, the structuremost important of which is safety – of our compensation programemployees, our environment, and the pay outcomesour facilities and equipment. These core beliefs have served us well for executives demonstratemuch of our history, and our commitment to linking compensation to company performance and strategy.
The Carnegie Way: Earningthem remains as strong as the Right to Grow and Driving Sustainable Profitable Growth
Over the past few years, U. S. Steel, like the American steel industry in general, has faced difficult market conditions as a result of macroeconomic challenges, including significant reductions in the market price of steel, global overcapacity and record levels of unfairly traded imports, slow growth globally, a strong U.S. dollar, and markedly low energy prices. In the face of these challenging conditions, in 2013products we initiated a transformational process called the Carnegie Way. This process provides the framework for a multi-year journey to return our company to iconic status and sustainable profitability.
The objective of the Carnegie Way is to focus our executives and employees throughout the organization on the factors we can control. Accomplishing this objective includes creating a lower and more flexible cost structure that will produce stronger and more consistent results across industry cycles to mitigate the financial impact of the volatility in our industry. We are focused on the development of differentiated, innovative products, processes and approaches to doing business – through a culture of collaboration, accountability and demonstrating results. As part of this process, we have reorganized our company into commercial entities to facilitate close collaboration with our customers in order to foster innovation and to be more responsive to their needs. The
Carnegie Way is our culture and the way we run the business. We focus on our strengths, how we can create the most value for our stockholders and best serve our customers, with committed and engaged executives and employees.
make every day. Our success in this transformation is predicated on having the right leaders to guide the Corporation and successfully execute on our strategy, so it is critical to attract and retain the highest level of executive talent. We believe we have the right leadership team, which includes highly experienced executives from both inside and outside of the steel industry, to continue to lead the Corporation through the operational, market and regulatory hurdles facing our business. Our executive compensation program has been structured to closely align with the objectives of the Carnegie Way transformation: attract, reward and retain talented executives; focus our executives on the goals that are within their control and support our strategy; and clearly and closely align with company performance, and the long-term interests of stockholders, using measurable financial metrics. We believe both the structure of our compensation programs and the pay outcomes for executives demonstrate our strong commitment to linking compensation to company performance and strategy.
Executive Leadership Transition
In May 2017, Mario Longhi announced his retirement from the Corporation after serving as the Corporation's Chief Executive Officer since 2013. David B. Burritt, who has been with the Corporation since 2013 and served most recently as President and Chief Operating Officer, was promoted to President & Chief Executive Officer and appointed as a member of the Board of Directors. The promotion of Mr. Burritt reinforces the Board's confidence in the Corporation's leadership team and commitment to the long-term transformational strategy initiated by Mr. Longhi. The Corporation's 2017 highlights and accomplishments, described on the next page, are a testament to the successful transition of executive leadership, and Mr. Burritt's intense focus on continuous improvement in the areas of safety, quality, delivery and cost. | | United States Steel Corporation | 2017 Proxy Statement | 21 |
In connection with his retirement, Mr. Longhi entered into a separation agreement with the Corporation, which provided for, among other things, pro rata vesting of certain 2015 and 2016 long-term incentive awards, a pro rata portion of any award under the annual incentive compensation plan, and certain retirement benefits. Under the agreement, Mr. Longhi forfeited all of his 2017 long-term incentive awards. This agreement is described in more detail on page 36. 22 |United States Steel Corporation | 2018 Proxy Statement
| Compensation Discussion and Analysis – Executive Summary |
Compensation Discussion and Analysis – Executive Summary
20162017 Highlights and Accomplishments
We began 2016 facing many of the same macroeconomic headwinds as 2015, including historically low steel prices. While these financial uncertainties pointed to another challenging year in 2016, we remained focused on using the Carnegie Way as our guide and executed on strategic priorities critical to the Corporation’s success amidOur successful navigation through the industry downturn.downturn in 2015 and 2016 better positioned us to benefit from improved industry conditions in 2017, although we continued to face challenges driven by uncertain geopolitical factors. We delivered significant improvement in our Tubular segment, and had continued success from our European operations. We recognized the need to accelerate our plans to revitalize our assets in our North American Flat-Rolled operations through a strategic investment program. The unrelentingcontinued focus of our executive team and employees on clear actions to improveour long-term strategic goals of improving our balance sheet, enhanceenhancing operating efficiency and create fairnessreliability, and competitionseeking robust enforcement of our trade laws, again led to a successful year and helped move us another step closer to achieving sustainable profitability. We made good progress in 2017, and strive for greater achievement in the marketplace were successfully achieved, as evidenced by improvements in our stock price and earnings. While we are proud of these results, our transformation efforts are still underway.year ahead.
The following are highlights and accomplishments from 2016:2017: • | Our stock price increased by more than 300%, reflecting strong execution on our strategy and improved market conditions | | | • | Realized $745 million of additional Carnegie Way benefits in 2016, building upon the $575 million and $815 million in Carnegie Way benefits realized in 2014 and 2015, respectively, underscoring the success of this transformational process | | | • | Ended 2016 with positive operating cash flow of $727 million and adjusted EBITDA of $510 million, despite beginning the year at historically low steel prices and facing the lowest full-year average realized prices since 2004 | | | • | Strong year-end liquidity of approximately $2.9 billion, including cash on hand of $1.5 billion, which supports our goal of maintaining a healthy balance sheet | | | • | Reduced long-term debt by over $100 million in 2016 which contributed to the reduction of net debt by more than 50% since 2013 | | | • | Successfully completed a $980 million debt offering and a $500 million equity offering, which provide for future financial flexibility | | | • | Improved working capital by nearly $600 million, and over $1 billion over the last two years. |
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- Implemented comprehensive safety program enhancements for employees and contractors, to help achieve our goal of a safe return home every day
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- Out-performed the Bureau of Labor Statistics and AISI industry safety benchmarks in both OSHA Recordable Days and Days Away From Work
- •
- Finished 2017 with adjusted EBITDA of $1.087 billion, more than double 2016 adjusted EBITDA; and with positive operating cash flow of $802 million
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- Strong year-end liquidity of $3.350 billion, highest since 2001, including $1.553 billion of cash on hand, which supports our goal of maintaining a healthy balance sheet
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- Reduced total debt by over $300 million, contributing to net debt reduction by 50% over the last three years and achieving our lowest net debt since 2007
- •
- Successfully completed a $750 million debt offering, providing for future financial flexibility
• | Continued to aggressively address unfair trade practices through landmark legal action against producers and distributors abroad that continue to violate domestic regulations, and led industry efforts to clarify and enforce existing laws. These actions, if successful, will be instrumental in ensuring U. S. Steel is competing on a level playing field | | | • | Out-performed the BLS and AISI industry safety benchmarks in both OSHA Recordable Days and Days Away From Work |
Because
- •
- Continued improvement in working capital by achieving cash conversion cycle time at industry leading performance, a 50% reduction over the
challenging market conditions we have faced in recentlast four years are likely
- •
- Made a $75 million voluntary contribution to
continueour defined benefit pension plan, strengthening our pension plan as part of our liability management strategy, and adding to the over $400 million improvement in the near-term,funded status of our pension and other post-employment benefit plans from 2016 to 2017
- •
- Improved customer experience by reducing quality claims 9% in 2017, and implemented delivery improvement projects to achieve the highest service level in past four years
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- Conducted first-ever company-wide employee inclusion survey
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- Continue to lead the steel industry's efforts to strengthen and enforce trade laws against unfairly traded imports
Asset revitalization and Innovation In 2017 we are taking actionable steps nowannounced a $2 billion strategic initiative to respondrevitalize the assets in our North American Flat-Rolled segment. The program is focused on improving company critical assets to deliver 15-20% EBITDA returns over three to four years, through a consistent focus on improving safety, quality, delivery and return thecost. The Corporation views this program as essential to stable profitability. We are also planning long-term initiatives that are designedimproving predictability and our ability to benefit our business and performance regardless of external market factors. • | Near-Term Steps to Return to Profitability. Our management team took several critical actions in 2016, including: idling facilities; right-sizing the organization; and exiting parts of the business where it is not possible to earn an economic profit. These were tough decisions for the executive team and, despite the challenging economic circumstances, U. S. Steel ended 2016 as a more streamlined organization focused on generating economic profit across all business cycles. We continue to focus on improving our product mix with more value-added solutions that differentiate U. S. Steel from our competitors. Our management team is confident that, as market conditions continue to improve, we will realize further benefits from this strategy. | | | • | Longer-Term Steps to Improve Our Position. We continue to take steps to improve our position for the long-term. In May, we completed a $980 million offering of senior secured notes, which allowed us to repay near-term debt. In August we completed a $500 million equity offering. The focus on improving the balance sheet and strategically accessing the |
22 | United States Steel Corporation | 2017 Proxy Statement
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Compensation Discussion and Analysis – Executive Summary
capital markets enables the Corporation to move forwardcompete effectively in the Carnegie Way processindustry. As we revitalize our assets, we expect to increase profitability, productivity and open avenuesoperational consistency, and reduce volatility.
In addition to investing in improvements of our leaders and current assets, we're also focused on the future growth and investment. We have identified critical assets on which we plan to deploy additional capital investment and increased revitalization spending to continue driving improvementsby investing in our reliabilityglobal workforce and quality while loweringthe innovation that will create tomorrow's steel solutions today. We've continued our ongoing cost basis. We plan to use our strong cash and liquidity positions to expedite aggressive efforts around the revitalization of our facilities and to fund additional growth projects. This approach will enhance the ongoing development of the differentiated solutionsnext generation of advanced high-strength steels (AHSS) for the automotive industry to solve its most pressing challenges. Years of work on AHSS technology culminated with the announcement in September 2017 of the commencement of construction of a new continuous galvanizing line at our PRO-TEC Coating Company joint venture that make uswill feature proprietary technology developed in part by our company. We also launched a top strategic business partner fornew proprietary semi-premium tubular connection – EAGLE SFHTM and sold our customers.first orders of USS-LIBERTY LDTM connections to meet the needs of our customers in the oil and gas industry and to position U. S. Steel as a stronger company by 2020.
United States Steel Corporation | 2018 Proxy Statement |23
Compensation Discussion and Analysis – Executive Summary |
Maintaining Pay-for-Performance Approach through Industry Cycles The Committee believes it is critical to align our compensation program with the goals of the Carnegie Way as we carry out our strategic turnaround initiatives in a challenging operating and unpredictable economic environment. Therefore, our compensation structure balances the following: • | a strong pay-for-performance approach that links financial performance to the incentive opportunities realized by our executives; | | | • | measurable performance metrics in our incentive plans that support our strategic and financial goals; | | | • | alignment of management interests with the long-term interests of our stockholders; and |
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- a strong pay-for-performance approach that links financial performance to the incentive opportunities realized by our executives;
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- measurable performance metrics in our incentive plans that support our strategic and financial goals;
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- alignment of management interests with the long-term interests of our stockholders; and
- •
- our need to retain executives best qualified to guide the Corporation through its transformation.
The elements of compensation provided to our executives include: base salary, short-term annual incentive compensation, long-term incentive compensation, retirement benefits, and other compensation. The distribution of compensation among the various compensation elements is based on the Committee’sCommittee's belief that to link pay to performance, most of an executive’sexecutive's compensation should be paid in the form of performance-based variable compensation with a greater emphasis on variable components for the most senior executives who have greater responsibility for the performance of the business.
Variable, at-risk compensation accounted for 73%74% of our CEO’sCEO's target compensation in 2016.2017. Based on this strong pay-for-performance alignment, realizable compensation for our CEO over the last three years is 37%42% above the target value granted during the period. Notable aspects of 
- *
- Amounts shown reflect annual target compensation for the Corporation's current President and CEO and do not reflect actual amounts paid to Mr. Burritt in 2017 because his compensation
include: (i) the long-term performance awards paid out twicewas increased in the last three performance periods, averaging 42% of target; and (ii) the average three-year payout under the annual incentive compensation plan for our CEO is 139% of target,connection with no payouthis promotion in 2015.May 2017.
24 |United States Steel Corporation | 2018 Proxy Statement
| | United States Steel Corporation | 2017 Proxy Statement | 23 |
| Compensation Discussion and Analysis – Executive Summary |
Compensation Discussion and Analysis – Executive Summary
Compensation Elements The following table highlights the key elements of our performance-based compensation structure. Goals for each incentive component are set at the beginning of the performance period for the entire period and above market performance is required for the target payout to be made under the relative TSR metric. | | | | | | Element |
| | Form |
| | Description and Performance Metrics
|
|---|
| | | | | | | Base Salary | | Fixed Cash | | Market competitive levels that take into account scope and complexity of role and individual qualifications, experiences and internal value to the Corporation | Annual IncentiveCompensation Plan (AICP) | | | | | | | | | | Performance-Based Cash | Net sales –funding trigger (no payout under plan if not met) | | | | | | | | Annual Incentive | | Performance-Based Cash | | EBITDA–weighted 50% | | | | | | | | Compensation Plan (AICP) | | | | Cash flow –weighted 50% | | | | | | | | | | | | Individual performance –modifier on award amount | Long-Term Incentive Program(LTIP) | | | | | | | | Performance-Based Awards (60%)*
Performance-Based Equity (30%)
| | Relative TSR –measured over a 3-year period; requires above market performance for target payout to be made | | | | | | | | Long-Term Incentive Program | | Performance-Based Cash (30%) | | ROCE–measured over a 3-year period | | | | | | | | (LTIP) | | Time-Based RSUs (20%)* | | Supports retention and linked to stock price performance | | | | | | | | | | Stock Options (20%)* | | Measured relative to appreciation in stock price |
- *
- Percentage of award at target grant
* | Percentage of award at target grant |
Compensation Decisions and Outcomes Demonstrate Alignment with Performance Compensation Decisions for 2016
In early 2016, theThe Committee approved the following items based on several factors, including: the Corporation’s 2015Corporation's 2016 performance; outlook for 20162017 performance; continued development and execution of the Carnegie Way transformationlong-term strategy; assumption of additional duties in connection with executive leadership changes and responsibilities of each of our NEOs; among other criteria.
• | Salaries: No change was made to the CEO’s base salary for 2016. While the Committee has generally set base salaries above median to support recruitment and retention during the period of transition, no increase was made for the CEO or any other named executive officers for 2016, other than Mr. Bruno, in recognition of the Corporation’s lower financial performance in 2015 and continued market challenges. Mr. Bruno received a base pay increase in 2016 to better align his base salary with other NEOs in the Corporation and comparable roles across our peer group. | | | • | Annual Incentive: Target incentive percentages for NEOs did not increase for 2016. Our NEOs earned cash incentives under the AICP based on rigorous goals set in early 2016 that were exceeded through superior performance. These incentives were paid in early 2017. | | | • | Long-Term Incentive: The grant date value of the 2016 long-term grant for each NEO decreased from 2015. In order to avoid a windfall of shares to any executive during a period of depressed stock price, the Committee adjusted the target LTIP award using an assumed share price greater than the grant date fair market value to determine the number of shares to be granted. The grant date value of Mr. Longhi’s LTIP award decreased from $7,535,000 in 2015 to $6,887,837 in 2016. |
CEO Compensation Decisions for 2017- •
- Salary: In connection with his promotion to CEO, the Committee set the base salary of Mr. Burritt below the median for the CEO position, which is lower than that of the former CEO. Following the leadership change, the Committee determined to set a greater percentage of the CEO's target compensation as incentive-based compensation.
- •
- Annual Incentive: Mr. Burritt's target incentive percentage under our AICP was increased to 140% of base salary in connection with his promotion to CEO (down from the 150% target of our prior CEO). Mr. Burritt did not receive an annual cash incentive award for 2017.
- •
- Long-Term Incentive: The target value of Mr. Burritt's LTIP award increased from $2,750,000 to $6,100,000 in connection with his promotion to CEO (below the 2016 target of $8,750,000 for our prior CEO).
- •
- Total Compensation: Mr.
Longhi’sBurritt's target pay decreased from 2015increased in connection with his elevation to 2016. However, because payouts were made under the AICProle of President & CEO, though it remains lower than the total target compensation of our former CEO by $4 million. The amounts shown for 2016 performance, his actual total pay for 2016, as disclosedMr. Burritt in the Summary Compensation Table increased from 2015 whenreflect his service for a portion of the NEOs did not receive cash incentive payouts under the AICP.year as Executive Vice President & Chief Financial Officer and Chief Operating Officer.
The Committee believes pay decisions for 20162017 demonstrate the significant link between executive compensation and company performance, and accountability of our executives to deliver value to our stockholders. Other Compensation Decisions Generally base salaries and target AICP and LTIP grants did not increase for our NEOs in 2017. The Committee did approve an increase in base salary, AICP target and LTIP target for Mr. Buckiso to better align his compensation with other NEOs and comparable roles across our organization and the peer group. Additionally, in February 2017, Mr. Soni was promoted to Vice President – Finance and received a corresponding increase in all compensation elements, consistent with other executives at the Vice President level. Compensation Outcomes: Payouts Reflect Corporate Performance The Committee considers a mix of cash and equity awards over both the short-term and long-term as a critical balance in reinforcing U. S. Steel’sSteel's commitment to performance alignment. This strong pay-for-performance alignment is clearly reflected in amounts actually earned by our NEOs based on the achievement of metrics established by the Committee for the short-term and long-term incentive plans. The average annual incentive payout over the last three years for our named executive officers is 137%94% of target, and no payouts were made in 2015 based on actualthe Corporation's financial performance. Below target performance award payouts have been made under our long-term incentive plan during this same time period, with no payouts for the 2012-20142014 performance awards, 2014-2016 or 2015-2017 ROCE performance awards and nobelow target payout for the 2014-2016 ROCE2015-2017 TSR performance awards.
United States Steel Corporation | 2018 Proxy Statement |25
24 | United States Steel Corporation | 2017 Proxy Statement
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Compensation Discussion and Analysis – Executive Summary |
Compensation Discussion and Analysis – Executive Summary
The following table illustrates how our performance has affected the payout of our short-term incentives and how the performance of our common stock affects the value of the long-term incentives that would be received by our Chief Executive Officer based on our closing stock price of $33.01$35.19 on December 29, 2017: | | | | | | | | | | | | | | | | | | Annual Incentive(1) | | Stock Options | | | Restricted Stock(3) | | | Performance Awards(4) | | | | | | | | | | | | | | | | | | Year | | | % of Target Award Paid | | Exercise
Price | | Intrinsic
Value(2) | | | Value as a % of
Grant Value | | | Award Payout as a %
of Target | | | | | | | | | | | | | | | | | | 2017 | | | 0% | | $39.265 | | $0 | | | 90% | | | 87% | | 2016 | | | 201% | | $14.780 | | $20.41 | | | 238% | | | 200% | | 2015 | | | 0% | | $24.780 | | $10.41 | | | 142% | | | 74% | | | | | | | | | | | | | | | | | |
- (1)
- The "Annual Incentive" column indicates the percentage of the Target Award earned under our Annual Incentive Compensation Plan. See page 30
2016:for an explanation of Mr. Burritt's award.
- (2)
- The "Intrinsic Value" column shows the amount (if any) by which the market value of our shares underlying an option exceeds the exercise price at December 29, 2017. If the exercise price exceeds the market price, the stock options have no intrinsic value.
- (3)
- The "Restricted Stock" column shows the market value on December 29, 2017, of the shares underlying the restricted stock units as a percentage of the market value on the grant date. To the extent that the market value has declined, the dollar amount of the value of the restricted stock units reflected in the Summary Compensation Table will also decline.
- (4)
- The "Performance Awards" column indicates the percentage of the performance awards that would be paid out based on our TSR as compared to the TSR of the peer group companies and ROCE. The information in the table reflects the assumption that the performance periods for the 2015, 2016 and 2017 performance awards ended on December 29, 2017.
| | | Annual Incentive(1) | | Stock Options | | | Restricted Stock | (3) | | | Performance Awards(4) | | | Year | | % of Target Award Paid | | Exercise
Price | | | Intrinsic
Value(2) | | | Value as a % of
Grant Value | | | Award Payout as a %
of Target | | | 2016 | | | 201% | | $ | 14.780 | | | $ | 18.230 | | | | 223 | % | | | 97% | | | 2015 | | | 0% | | $ | 24.780 | | | $ | 8.230 | | | | 133 | % | | | 67.5% | | | 2014 | | | 227% | | $ | 24.285 | | | $ | 8.725 | | | | 136 | % | | | 75% | |
(1) | The “Annual Incentive” column indicates the percentage of the Target Award earned under our Annual Incentive Compensation Plan. | | | (2) | The “Intrinsic Value” column shows the amount (if any) by which the market value of our shares underlying an option exceeds the exercise price. If the exercise price exceeds the market price, the stock options have no intrinsic value. | | | (3) | The “Restricted Stock” column shows the market value on December 31, 2016, of the shares underlying the restricted stock units as a percentage of the market value on the grant date. To the extent that the market value has declined, the dollar amount of the value of the restricted stock units reflected in the Summary Compensation Table will also decline. | | | (4) | The “Performance Awards” column indicates the percentage of the performance awards that would be paid out based on our TSR as compared to the TSR of the peer group companies and ROCE. The information in the table reflects the assumption that the performance periods for the 2014, 2015 and 2016 performance awards ended on December 31, 2016. |
CEO Realizable Pay 
Three-Year (2014 - 2016) Aggregate CEO Compensation
* | The long-term incentive realizable value is greater than the target value primarily due to the dramatic stock price increase ranging between 133% - 233% above grant date values, as illustrated in the table at the top of this page. | | |
| | United States Steel Corporation | 2017 Proxy Statement | 25 |
Compensation Discussion and Analysis – Executive Summary
Changes to 2017 Compensation Program The Committee approved the following changes to our compensation program in 2016 to more closely align it with our current strategy, position and performance results. TheseNo changes were informed,made to the design of the AICP or the LTIP for 2017. The following modification was made in part, by feedbackrecognition of the experienced executive hires that have been made over recent years, in order to ensure they receive full and fair benefits under the Corporation's retirement programs.
- •
- Vesting Upon Retirement –For LTIP awards granted in 2017 and later, the Committee
received from stockholders duringrevised the Corporation’s regular engagementvesting requirements, so that awards shall be prorated upon
retirement: (i) after 30 years of service and (ii) at age 55 with investors.10 years of service; and fully vested upon retirement, provided the executive remains employed with the Corporation for at least six months following the grant date: (i) at age 60 with 5 years of service, and (ii) at age 65. The revision is not applicable to participants in the Supplemental Pension Program, which includes Mr. Matthews. 26 |United States Steel Corporation | 2018 Proxy Statement
• | Adopted New Performance Peer Group– In February 2016, the Committee created a second, more industry focused peer group consisting of 12 domestic steelCompensation Discussion and steel-related companies against which we measure TSR for purposes of the relative TSR performance awards (described in more detail later under “Peer Group” discussion). | | | • | Adopted a Negative TSR CapAnalysis –In February 2016, the Committee added a cap to the relative TSR performance awards to address the potential of negative returns over a performance period (described in more detail later under “TSR Performance Awards” discussion). Executive Summary |
• | Replaced EBIT with EBITDA for AICP Metric – In February 2016, the Committee replaced EBIT with EBITDA as a performance metric under our Annual Incentive Compensation Plan to align external and internal communication regarding financial performance. | | | • | Equally Weighted EBITDA and Cash Flow– For 2016 AICP performance, EBITDA and Cash Flow are equally weighted, in order to place a greater emphasis on the Corporation’s strategic focus on cash flow. In prior years, EBIT accounted for 60% of the award and Cash Flow for 40%. | | | • | Alignment of Safety Metric with OSHA Guidance– Recent OSHA guidance indicated that incentive programs that deny or decrease compensation based on the occurrence of work-related injuries discourages injury reporting. As such, the Committee removed the safety-based component of the AICP. However, as safety remains a core value of the Corporation, the Committee and the Board reserve the right to impose negative discretion on incentive awards depending on certain circumstances. |
Commitment to Stockholder Engagement on Executive Compensation In 2016, the Corporation engaged2017, we continued our long-standing engagement efforts with its largestour stockholders both during and outside of the proxy season. In April 2016, we contacted stockholders representing more than 50%each of our outstanding stock andthe last two years, we've met with or held telephonic meetings with stockholders holding approximately 25%.representing over 20% of our outstanding stock. These discussions held prior to our annual meeting, were focused primarily on howour business strategy and the alignment of our compensation program aligns withto our strategy and company performance. In November and December 2016, we contacted stockholders representing approximately 40% of our outstanding stock, and meetings were accepted by those representing approximately 15%. Many of ouraddition, some stockholders indicated they did not believe a call was necessary and indicated their support for our compensation and governance practices. The Board, as well as management, prioritizes constructive communication with our investors to learn about their views of the Corporation and our governance and compensation practices. In addition to the frequent communication our CEO and Investor Relations team has with our stockholders, we maintainhave maintained ongoing dialogue with our largest stockholders regarding our corporate governance and executive compensation program since 2012. The feedback we receive from these discussions is carefully considered by the Board and the Committee, and we believe the strong support for our say-on-pay proposal over the last few years is evidence of the careful attention we pay to the feedback given to us by our stockholders, and our ability to decisively take action and incorporate their perspectives in our programs. Based on our 20162017 meetings, we determined that our stockholders are supportive of the strong link between pay and performance embedded in our executive compensation program. As a result of engagement with investors over Over the years, the Committee haswe have implemented changes to our compensation practices to further align pay with performance and enhanced disclosure regarding the rationale behind certain compensation decisions. For example, in 2014 we increased the weighting of performance awards in our long-term program to 60% and added ROCE as a second performance metric in the plan (in addition to TSR). These actions were taken in response to feedback we consistently heard from our stockholders that a larger percentage of equity awards should be performance-based and that the long-term program should include a capital return metric.
26 | United States Steel Corporation | 2017 Proxy Statement | | |
Compensation Discussion and Analysis – Executive Summary
Compensation Governance Practices Our compensation program is designed to promote exceptional performance and align the interests of our executives with the interests of our stockholders while discouraging executives from excessive risk-taking. Our executive compensation is directly aligned with company performance and measurable financial metrics. | Compensation & Organization Committee Practices |
- ✓
- Considers the results of the most recent say-on-pay advisory vote by stockholders and has implemented proactive communications with stockholders to gain input and feedback when making executive compensation decisions
- ✓
- Undertakes a goal setting process that is used to arrive at rigorous short-term and long-term performance goals under our incentive plans that are aligned to key corporate strategic and financial goals
- ✓
- Engages in and leads a robust CEO performance evaluation process
- ✓
- Engages and consults with its own independent compensation consultant
- ✓
- Has established formal selection criteria for the executive compensation and relative TSR peer groups and annually reviews peer group composition
- ✓
- Annually reviews tally sheets analyzing executive compensation levels and structures, including amounts payable in various termination scenarios
- ✓
- Annually reviews the risks associated with our compensation programs and has implemented various risk mitigating practices and policies, such as:
- •
- Targeting the majority of our executives' compensation in long-term performance based awards using multiple equity and cash vehicles
- •
- Implementing rigorous executive stock ownership and holding requirements
- •
- Utilizing multiple performance measures that focus on company-wide metrics and placing a cap on potential incentive payments
- ✓
- Our Change in Control Severance Plan establishes a "double trigger," requiring participants to be terminated without "cause," or voluntarily "for good reason" following a change in control prior to receipt of any payment of severance benefits
- ✓
- Maintains a "clawback" policy that applies to executive officers and provides for the recoupment of incentive awards under certain conditions in the event the Corporation's financial statements are restated
- ✓
- Maintains Anti-Hedging and Pledging Policies that prohibit all employees and directors from engaging in any transaction that is designed to hedge or offset any decrease in our stock price and prohibits executive officers and directors from pledging our stock as collateral for a loan or holding shares in a margin account
- ✓
- No payment of tax gross-ups to any executives for any payments relating to a change in control
United States Steel Corporation | 2018 Proxy Statement |27  | Considers the results of the most recent say-on-pay advisory vote by stockholders and has implemented proactive communications with stockholders to gain input and feedback when making executive compensation decisions | | | | Undertakes a goal setting process that is used to arrive at rigorous short-term and long-term performance goals under our incentive plans that are aligned to key corporate strategic and financial goals | | | | Engages in and leads a robust CEO performance evaluation process | | | | Engages and consults with its own independent compensation consultant | | | | Has established formal selection criteria for the executive compensation and relative TSR peer groups and annually reviews peer group composition | | | | Annually reviews tally sheets analyzing executive compensation levels and structures, including amounts payable in various termination scenarios | | | | Annually reviews the risks associated with our compensation programs and has implemented various risk mitigating practices and policies, such as: |
| • | Targeting the majority of our executives’ compensation in long-term performance based awards using multiple equity and cash vehicles | | | | | • | Implementing rigorous executive stock ownership and holding requirements | | | | | • | Utilizing multiple performance measures that focus on company-wide metrics and placing a cap on potential incentive payments |
Table of Contents | Our Change in Control Severance Plan establishes a “double trigger,” requiring participants to be terminated without “cause,” or voluntarily “for good reason” following a change in control prior to receipt of any payment of severance benefits | | | | Maintains a “clawback” policy that applies to executive officers and provides for the recoupment of incentive awards under certain conditions in the event the Corporation’s financial statements are restated | | | | Maintains Anti-Hedging and Pledging Policies that prohibit all employees and directors from engaging in any transaction that is designed to hedge or offset any decrease in our stock price and prohibits executive officers and directors from pledging our stock as collateral for a loan or holding shares in a margin account | | | | No payment of tax gross-ups to any executives for any payments relating to a change in control |
| | United States Steel Corporation | 2017 Proxy Statement | 27 |
Compensation Discussion and Analysis |
Compensation Discussion and Analysis
Executive Compensation in Detail |
Executive Compensation in Detail
Compensation Principles Our executive compensation program is designed to attract, reward and retain executives who make significant contributions through operational and financial achievement aligned with the goals and philosophy of our Carnegie Way transformation and the long-term interests of stockholders. The following five principles support these objectives and guide the design of our compensation program:
| | | | Compensation Principle |
| | Compensation Design
|
|---|
| | | | | Align Pay with Stockholder Interests | | • More than 73% Approximately 60% of target compensation opportunity is performance based for our CEO (51%-67%(average of 44% for other NEOs). • Equity incentives comprise a significant portion of an executive’sexecutive's compensation. • Executives are subject to rigorous stock ownership and holding requirements. • Performance metrics, applied to 60% of our long-term program, align with our annual and long-term strategic objectives. | | | | | | Pay Fair and Competitive Compensation | | • Executive compensation is targeted to be competitive with our peer group. • Our compensation programs are focused on objective corporate performance measures and individual performance. | | | | | Link PayCompensation to Company Performance and Strategy | | • Balance of compensation elements that focus on both short-term and long-term performance and goals. • Short-term incentives are based on annual financial performance (i.e., EBITDA and cash flow), and individual performance. • Long-term incentives are tied to the Corporation’sCorporation's relative TSR and return on capital employed (ROCE). | | | | | | Retain Executives | | • Our long-term incentive grants include restricted stock units and performance awards that may retain some value in a period of stock market decline. | | | | | Equity-FocusProvide Equity-Focused and Tax-Efficient Rewards | | • The largest portion of an executive’sexecutive's compensation is in the form of long-term equity incentives, which preserves cash. • Our compensation programs are designed to preserve corporate tax deductions. |
Compensation Program Elements Short-Term Incentive Compensation |
The purpose of our Annual Incentive Compensation Plan (AICP) is to align our executive officers’officers' compensation with the achievement of annual performance goals that support our business strategy. Typically, the short-term incentive awards are paid in cash, but the Committee retains discretion to provide the award in cash, stock, or a combination of both. The AICP is designed to focus executives primarily on cash generation and profitability. It is funded each year based on the the achievement of a pre-determined net sales performance goal, and once funded, actual amounts earned are based on the achievement of cash flow and earnings before interest, taxes, depreciation and amortization (EBITDA) performance measures. Final awards may be increased or decreased based on individual performance. The Committee determined that cash flow and EBITDA were the appropriate measures to drive the transformation required to achieve our goal of sustainable profitability.
28 |United States Steel Corporation | 2018 Proxy Statement
| Compensation Discussion and Analysis |
Compensation Discussion and Analysis
| | | | | | Performance Measure |
| | How it Works |
| | Rationale/Description |
|---|
| | |
| Net Sales | | Determines if plan is funded; no payouts are made if net sales goal is not achieved | | The Committee sets the funding threshold as a value of net sales to more fully align the objective with the Corporation’sCorporation's focus on shipping profitable tons, rather than on volume produced | | | | | | | | Cash Flow* | | Determines 50% of award payout | | Financial performance measure intended to focus the organization on the generation of the cash required to reduce debt and fund investments that will yield profitable returns in the future | | | | | | | | EBITDA** | | Determines 50% of award payout | | Financial performance measure intended to focus the organization on operating at sustainable, profitable levels | | | | | | | | Individual Performance | | Modifier; Committee may increase award byup to 30% or reduce or eliminate based on individual performance | | Based on an assessment of the executive’sexecutive's individual performance, including the contribution to overall corporation results and attainment of operational and strategic goals, and the priorities of profitability, customer focus, operational excellence and building a high performing organization, as well as internal equity fairness, and the impact of significant research, development and innovation |
* | Cash flow is defined as earnings before interest, taxes, depreciation, depletion, and amortization (EBITDA) for consolidated worldwide operations, plus or minus changes in current receivables, inventories, and current accounts payable and accrued expenses, less consolidated worldwide capital expenditures. EBITDA for consolidated worldwide operations means earnings (loss) before interest and income taxes as reported in the consolidated statements of operations of the Corporation, plus or minus the effect of items not allocated to segments (excluding post-retirement benefit expenses) as disclosed in the notes to the consolidated financial statements, plus depreciation, depletion and amortization as reported in the consolidated statements of cash flows of the Corporation. | | | ** | Total EBITDA shall mean earnings before interest and taxes as reported in the consolidated statements of operations of United States Steel Corporation, plus or minus the effect of items not allocated to segments (excluding postretirement benefit expenses) as disclosed in the notes to the consolidated financial statements of United States Steel Corporation, plus depreciation, depletion and amortization as reported in the consolidated statements of cash flows of United States Steel Corporation. Segment EBITDA shall mean, for the Performance Period, EBITDA for each business unit. Unless contemplated in the approved performance target, EBITDA excludes charges or credits for business dispositions, acquisitions, asset sales, asset impairments, workforce reductions, shutdowns, and amounts not allocated to business segments. |
- *
- Cash flow is defined as earnings before interest, taxes, depreciation, depletion, and amortization (EBITDA) for consolidated worldwide operations, plus or minus changes in current receivables, inventories, and current accounts payable and accrued expenses, less consolidated worldwide capital expenditures. EBITDA for consolidated worldwide operations means earnings (loss) before interest and income taxes as reported in the consolidated statements of operations of the Corporation, plus or minus the effect of items not allocated to segments (excluding post-retirement benefit expenses) as disclosed in the notes to the consolidated financial statements, plus depreciation, depletion and amortization as reported in the consolidated statement of cash flows of the Corporation.
- **
- Total EBITDA shall mean earnings before interest and taxes as reported in the consolidated statement of operations of United States Steel Corporation, plus or minus the effect of items not allocated to segments (excluding postretirement benefit expenses) as disclosed in the notes to the consolidated financial statements of United States Steel Corporation, plus depreciation, depletion and amortization as reported in the consolidated statement of cash flows of United States Steel Corporation. Segment EBITDA shall mean, for the Performance Period, EBITDA for each business unit. Unless contemplated in the approved performance target, EBITDA excludes charges or credits for business dispositions, acquisitions, asset sales, asset impairments, workforce reductions, shutdowns, and amounts not allocated to business segments.
The target award under the AICP for each NEO is equal to the target percentage applied to the executive’sexecutive's base salary. The following table shows the actual amount awarded by the Committee after consideration of the executive’sexecutive's individual performance. 20162017 Annual Incentive Payout
| | | | | | | | | | | | | | Executive
| | Target Award
as % of
Base Salary(1)
| | Target
Award(2)
| | Total
Payout
Rate(3)
| | Actual
Amount
Awarded(4)
| |
|---|
| | | | | | | | | | | | | | | Burritt | | | 140% | | $ | 1,189,130 | | | 91% | | $ | — | | | | | | | | | | | | | | | | | Bradley | | | 100% | | $ | 300,003 | | | 91% | | $ | 273,003 | | | | | | | | | | | | | | | | | Matthews | | | 80% | | $ | 432,800 | | | 86% | | $ | 409,429 | | | | | | | | | | | | | | | | | Buckiso | | | 60% | | $ | 247,500 | | | 101% | | $ | 324,968 | | | | | | | | | | | | | | | | | Rintoul | | | 70% | | $ | 349,300 | | | 98% | | $ | 393,661 | | | | | | | | | | | | | | | | | Longhi | | | 150% | | $ | 1,125,000 | | | 91% | | $ | 1,023,750 | | | | | | | | | | | | | | | | | Folsom | | | 80% | | $ | 560,000 | | | 91% | | $ | — | | | | | | | | | | | | | | | | | Soni(5) | | | 60% | | $ | 206,250 | | | 91% | | $ | 206,457 | | | | | | | | | | | | | | | | |
- (1)
- "Base Salary" for purposes of determining the AICP award is the actual salary earned for 2017. Messrs. Longhi and Bradley served for a portion of the year, and the table above reflects the prorated target AICP award.
- (2)
- The "Target Award" is the amount that would be paid to the executive assuming the Corporation achieves its target performance objectives and before consideration of individual performance. The target amount for Mr. Burritt was calculated by prorating the applicable target for his service as Chief Financial Officer (100% earned base salary) and Chief Executive Officer (140% earned based salary).
- (3)
- The "Total Payout Rate" is determined by the Corporation's actual performance measured against the 2017 performance metrics and before individual performance is considered. Differences in the payout rate are the result of variances in EBITDA weighting for the business segments, as described on page 30.
- (4)
- The "Actual Amount Awarded" is the amount awarded by the Committee after consideration of individual performance. In accordance with her separation agreement, Ms. Folsom was not entitled to receive an AICP award for 2017.
- (5)
- Mr. Soni was appointed as an executive officer on February 1, 2017 and only eligible for AICP payments as of that date. He is eligible to receive payment under the Corporation's non-executive short-term incentive payment program for the portion of the year he was a non-executive.
United States Steel Corporation | 2018 Proxy Statement |29 | Executive | | Target Award
as % of
Base Salary(1) | | Target
Award(2) | | Total
Payout
Rate(3) | | Actual
Amount
Awarded(4) | | Longhi | | 150% | | $ | 2,250,000 | | 175% | | $ | 4,528,125 | | Burritt | | 100% | | $ | 800,000 | | 175% | | $ | 1,820,000 | | Folsom | | 80% | | $ | 560,000 | | 175% | | $ | 1,274,000 | | Matthews | | 80% | | $ | 432,800 | | 175% | | $ | 833,140 | | Bruno | | 55% | | $ | 221,925 | | 175% | | $ | 466,043 |
Table of Contents (1) | “Base Salary” is the actual salary earned for 2016. | | | (2) | The “Target Award” is the amount that would be paid to the executive assuming the Corporation achieves its target performance objectivesCompensation Discussion and before consideration of individual performance. | | | (3) | The “Total Payout Rate” is determined by the Corporation’s actual performance measured against the 2016 performance metrics and before individual performance is considered. | | | (4) | The “Actual Amount Awarded” is the amount awarded by the Committee after consideration of individual performance.Analysis |
Setting Corporate Performance Goals and Determining Results In setting the goals under the AICP for 2016,2017, the Committee considered the Corporation’sCorporation's performance over the past five years, the businessannual operating plan for the year,2017, industry performance, and the Corporation’sCorporation's business transformation efforts. In general, the maximum performance goals were set at an amount that would require the Corporation to achieve a substantial level of Carnegie Way benefitsoperational improvements through asset revitalization and at a level that would generate sufficient earnings to pay the incremental cost of the incentive payments while maintaining an equivalent amount of cash on the Corporation’sCorporation's balance sheet. The goals were considered a significant stretch given the challenging market conditions impacting the Corporation whenover the goals were setestablished in early 2016. In addition to determining individual targets, the Committee approved EBITDA goals for each NEO. For the CEO CFO and general counsel,CFO, the EBITDA goal is based on the total company
| | United States Steel Corporation | 2017 Proxy Statement | 29 |
Compensation Discussion and Analysis
results, which generally measures the operational results of all business segments. For executives assigned to a specific segment, the EBITDA goal is 50% based on the EBITDA goal for that segment and 50% based on total company EBITDA (for Messrs.Mr. Matthews, and Bruno, this was the Flat-Rolled segment; for Mr. Rintoul, this was the Tubular segment; and for Mr. Buckiso, this was the European segment). This segment allocation of the EBITDA goal is intended to create stronger corporate, business segment and individual accountability by tying an executive’sexecutive's award to the performance of the segments for which he or she is directly responsible. We concluded 20162017 with a total of $10.3$12.25 billion in net sales, therefore the award pool was funded for 20162017 because the net sales goal of $7$8.5 billion was achieved. The payout rate (prior to adjustment for individual performance) was determined based on achievement of the performance measures described in the table below. This payout rate demonstrates the performance alignment design of our plan. The 20162017 payout under the annual incentive compensation plan averaged 209%104% of target for our NEOs who received a payout, and the average payout for our NEOs over the last three years is 137%94% of target (in each case, including adjustments made for individual performance).
20162017 AICP Corporate Performance Targets And Results
($ are in Millions)
| | | | | | | | | | | | | | | | | Performance Measure
| | Minimum
| | Target
| | Maximum
| | Actual
| | Payout Rate(1) Prior
to Adjustment for
Individual Performance
| |
|---|
| | | | | | | | | | | | | | | | | | Cash Flow | | $ | 393 | | $ | 492 | | $ | 772 | | $ | 528 | | | 110% | | | | | | | | | | | | | | | | | | | | EBITDA: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Flat-Rolled | | | 724 | | | 954 | | | 1,204 | | | 732 | | | 52% | | | | | | | | | | | | | | | | | | | | Tubular | | | (116 | ) | | (46 | ) | | 4 | | | (48 | ) | | 99% | | | | | | | | | | | | | | | | | | | | Europe | | | 301 | | | 396 | | | 441 | | | 403 | | | 112% | | | | | | | | | | | | | | | | | | | | Total EBITDA | | $ | 924 | | $ | 1,319 | | $ | 1,674 | | $ | 1,087 | | | 71% | | | | | | | | | | | | | | | | | | | |
- (1)
- The payout rate is 100% at target increasing to 175% of target for performance at the maximum level and decreasing to 50% of target for performance at the minimum threshold level.
| Performance Measure | | Minimum | | | Target | | | Maximum | | | Actual | | | Payout Rate(1)Prior
to Adjustment for
Individual Performance | | | Cash Flow | | $ | 350 | | | $ | 386 | | | $ | 440 | | | $ | 800 | | | | 175% | | | EBITDA: | | | | | | | | | | | | | | | | | | | | | | Flat-Rolled | | | (40 | ) | | | (15 | ) | | | 25 | | | | 345 | | | | 175% | | | Tubular | | | (59 | ) | | | (54 | ) | | | (48 | ) | | | (237 | ) | | | 0% | | | Europe | | | 153 | | | | 158 | | | | 163 | | | | 265 | | | | 175% | | | Total EBITDA | | $ | 200 | | | $ | 236 | | | $ | 290 | | | $ | 510 | | | | 175% | |
(1) | The payout rate is 100% at target increasing to 175% of target for performance at the maximum level and decreasing to 50% of target for performance at the minimum threshold level. |
Individual Performance Goals and Results In determining the CEO’sCEO's annual incentive, the Committee considers, among other things, the CEO’sCEO's individual performance in delivering results for the established value creation drivers of profitability, customer focus, operational excellence and high performing organization. The CEO’sCEO's individual performance objectives are reviewed by the Committee and approved by the Board. A similar evaluation is performed by the CEO with respect to all other executive officers using similar measures and objectives. The Committee sets performance goals for each annual period based on expected business results for the upcoming year, which are intended to be challenging stretch goals. The Committee uses its business judgment in reviewing each of these individual items and does not assign specific quantitative weighting to such items. The following provides a brief summary of each NEO’sNEO's individual performance and contribution to the Corporation in 2016: 2017 considered by the Committee in determining each individual's performance modifier: David Burritt – Mr. Burritt was named President & Chief Executive Officer on May 8, 2017, following his promotion to President & Chief Operating Officer on February 28, 2017. Since Mr. Burritt became CEO, U. S. Steel has delivered three consecutive quarters of reliable and consistent operational and financial results. As a result of these efforts, the Corporation's stock price at the end of the year was 165% of the stock price on the date that Mr. Burritt was promoted. Mr. Burritt's intense focus on improvements to achieve operational excellence, not only improved financial flexibility and strengthened the balance sheet to reduce risk, but also enabled the Corporation to make strategic investments for our customers in Generation 3 Advanced High Strength Steels, Premium Connections, and facilitate future growth. The rewards of these strategies began to be realized in 2017 with a return to profitability for the first time since 2014, the best net debt since 2007, and the best liquidity since 2001. 30 |United States Steel Corporation | 2018 Proxy Statement
Table of Contents | Compensation Discussion and Analysis |
Upon assuming leadership of the Corporation, Mr. Burritt quickly focused on realigning and assigning a new CHRO, CFO, and SVP with responsibility for Asset Revitalization, and established a focused execution strategy for safety, quality, delivery and cost to stabilize operations and enable continuous improvement for the Corporation's long-term success. Recognizing the need to develop a high performing organization, he launched the talent development theme of "Pivot to the People," the safety initiative "Culture of Caring," and conducted the first ever comprehensive "Inclusion Survey," while making difficult choices to streamline the organization and upgrade the talent. In keeping with the intent to improve all aspects of the business, the Board and Mr. Burritt determined that further improvement in the Corporation's culture is needed to ensure the exceptional operational and financial progress made in 2017 endures. In spite of returning to profitability with the best balance sheet in recent years, Mr. Burritt, after discussions with the Board, did not receive his annual cash incentive award for 2017, reflecting Mr. Burritt's personal responsibility for and commitment to creating a workplace climate meeting the highest standards of accountability, fairness, and respect. In 2018, Mr. Burritt will focus on continuing to drive strong operational and financial excellence while building a highly engaged workforce and high performance culture. Kevin Bradley – Mr. Bradley joined the Corporation in July 2017, assuming responsibility for all of U. S. Steel's financial enterprise, including Financial Planning & Analysis; Accounting & External Reporting; Credit, Tax and Treasury Services; Investor Relations; and Corporate Strategy. Upon his arrival, Mr. Bradley assessed the global finance enterprise and launched the Talent to Value capability targeting best practice procedures to ensure high integrity financial reporting and to foster excellence in the financial function of the Corporation. Mr. Bradley has intensified the enterprise focus on strengthening the balance sheet. Putting the Corporation on a path to de-risk and improve the overall efficiency of its capital structure. He is working closely with his team, bringing new thinking and perspective across the organization to accelerate the transformation of U. S. Steel to a stronger and more profitable company. Mr. Bradley has meaningfully contributed to the stability and consistency of the financial performance across the Corporation. He quickly established himself as a key member of the leadership team. Douglas Matthews – Mr. Matthews led the North American Flat-Rolled Industrial, Service Center and Mining Solutions (ISC&M) commercial entity in 2017. Through his continued successful implementation of our transformational strategy, the ISC&M team contributed to noteworthy North American Flat-Rolled EBITDA improvement in 2017. Operations led by Mr. Matthews also meaningfully improved service to our customers, including a 22% improvement in customer claims for industrial customers and significant delivery improvements for all end users. Mr. Matthews also oversaw the successful restart of Keetac mining operations and the Granite City hot strip mill. He also implemented meaningful employee engagement to achieve strong safety performance, particularly in the second half of the year. Mr. Matthews' ability to maintain collaborative relationships with his peers, customers and union contacts benefit the Corporation in all aspects of operations. Mr. Matthews assumed interim leadership over the Tubular segment, as well, following Mr. Rintoul's retirement in February 2018. Scott Buckiso – Mr. Buckiso led the European Solutions commercial entity, which is comprised of our Slovakian operations, supplying Automotive, Appliance, Electrical, Packaging and Construction products throughout Europe. Through his superior leadership, the European segment delivered over $400 million EBITDA in 2017, a 52% improvement from 2016. After several unfortunate contractor safety incidents, he prioritized contractor safety performance, implemented dramatic changes to the safety program (including contractor safety procedures), and saw new safety records achieved for both OSHA recordable rate and consecutives days without an OSHA recordable case for both USSK personnel and contractors. Mr. Buckiso's team also achieved production records across nearly every line, and delivered exceptional quality performance for their customers. Mr. Buckiso provided superior leadership regarding environmental sustainability, reducing CO2 emissions and increasing recycling projects and commercial activity across our European operations. Mr. Buckiso's industry knowledge and focused leadership continues to solidify the segment as a strong performer for the Corporation. David Rintoul – Mr. Rintoul provided leadership of the Tubular segment in 2017, as the business segment began to recover from an oil & gas industry downturn and realized substantial EBITDA improvement over 2016. Under Mr. Rintoul's leadership, the Tubular group achieved a 25% improvement in OSHA recordable performance and had strong environmental performance. Mr. Rintoul also oversaw improvements in production quality and cost. He led the group's international expansion, as customers were serviced in the Middle East and South Pacific. Mr. Rintoul also further supported his customers by overseeing the development of innovative products for complex drilling. Mr. Rintoul's strong leadership, particularly during challenging times, positioned the segment for recovery and strengthened long-term partnerships in the industry. Mr. Rintoul retired from the Corporation as of February 28, 2018. Mario Longhi– Mr. Longhi provided superior leadership of the Corporation’sCorporation's transformation efforts through ongoing implementation and application of the Carnegie Way method as the disciplined and structured approach for improving business performance. The Corporation exceeded the 2016 business plan by delivering significant benefits from our strategic imperatives of working capital improvements, incremental Carnegie Way benefits, financial flexibility and profitability priorities. Mr. LonghiHe also set the tone for dedicated commitment to the Corporation’s long-standing core values, including safety, and developed and implemented a revised Corporate Safety Steering Team to ensure safety is fully integrated into overall business decisions. In 2016 the Corporation’s OSHA Recordable Injury and Days Away from Work rates were significantly better than the Bureau of Labor Statistics and American Iron and Steel Institute industry benchmarks. In addition, Mr. Longhi continued his efforts to strengthen relationships with federal, state and local decision makers and served as a zealous advocate for the steel industry during the negotiation and consideration of essential trade legislationCorporation and the Corporation’s trade casesindustry in frontWashington D.C. Mr. Longhi retired in June 2017.
Pipasu Soni – Mr. Soni was promoted to Vice President – Finance in February 2017 where he was accountable for the Financial Planning & Analysis, Controllership, Treasury, Strategy and M&A functions. He served as Interim Chief Financial Officer and Principal Financial Officer for a brief time in 2017 following the promotion of Mr. Burritt to CEO and prior to Mr. Bradley's hiring. Mr. Soni worked to establish criteria for a "best in class" finance function United States Steel Corporation | 2018 Proxy Statement |31
Table of Contents Compensation Discussion and Analysis |
including reallocating resources, implementing processes and enhancing systems to support the long-term strategy of the U.S. International Trade Commission.Corporation. Following Mr. Longhi continuedBradley's hiring, Mr. Soni transitioned to provide strong strategic leadershipthe interim CFO for the ISC&M commercial entity, working closely with operations to developcreate an accountable culture that immediately resulted in incremental profit for the Corporation’s focus onFlat-Rolled business. Ms. Folsom was not eligible to receive an award under the customer through disciplined concentration on quality, delivery performance and creating customer value through strategic choices. Mr. Longhi also enhanced the overall performance of the organization by attracting, retaining, and developing top talent through improved Carnegie Way leadership training, targeted retention programs, and a continued focus on talent differentiation and diversity. David Burritt– Mr. Burritt provided outstanding leadership in all of U. S. Steel’s strategic and financial matters, including those relating to Finance, Strategy & Transformation, Revenue Management, North American Flat-Rolled Commercial Entities, Procurement & Supply Chain, Information Technology, Human Resources, Investor Relations, and Corporate Communications. Mr. Burritt led the design, development and deployment of the corporate strategic imperatives, which along with a greater cash consciousness, were prioritized to improve the Corporation’s balance sheet. Under his leadership, the Corporation successfully mitigated its debt risk through a $980 million debt offering, attained additional capital to invest in the Corporation’s assets through a $500 million public equity offering, and improved the funding of the pension plan by contributing $100 million of common stock. Mr. Burritt led efforts to increased cash-positive market share by attracting and retaining higher-value customers. Mr. Burritt set rigorous processes and2017 AICP.
30 | United States Steel Corporation | 2017 Proxy Statement
| | |
Long-Term Incentive Compensation |
Compensation Discussion and Analysis
protocols to not only support high integrity financial reporting, but also to drive Carnegie Way benefits and make timely and effective decisions around cost, revenue and staffing to achieve timeless improvements on structural and operating costs. Through Mr. Burritt’s financial and strategic leadership, the Corporation achieved positive operating cash flow of $727 million and positive adjusted EBITDA of $510 million for the year, significant increases from 2015 despite lower average realized prices and lower revenue for the year.
Suzanne R. Folsom– Ms. Folsom provided exceptional leadership to Legal, Compliance, Government Affairs, International Trade and Public Policy, Environmental Affairs, Corporate Security, Aircraft, Real Estate, Labor Relations, and U. S. Steel’s joint ventures. Ms. Folsom led several strategic initiatives this year, including: achieving success in the steel industry’s trade cases in the United States; filing the unprecedented Section 337 complaint with the U.S. International Trade Commission seeking an investigation into the trade practices of the largest Chinese steel producers; leading the successful public policy efforts to address global overcapacity and the illegal trade practices that have wreaked havoc in the American steel market, threatening our national economic health and our national security; successfully achieving resolution and ratification for the successor collective bargaining agreements with the United Steelworkers; guiding continuing efforts towards a resolution for the complex Companies’ Creditors Arrangement Act (CCAA) process for U. S. Steel’s unprofitable Canadian subsidiary; and providing sage legal counsel on a number of significant strategic corporate matters. Ms. Folsom is a crucial member of the executive management team who not only provides superior legal and compliance advice and strategy, but also business acumen and analysis to ensure that the Corporation operates with proper protocols, practices and controls to meet global business requirements, mitigate risk and create value for its stakeholders.
Douglas Matthews– Mr. Matthews led the North American Flat-Rolled Industrial, Service Center and Mining Solutions commercial entity in 2016. Through his continued successful implementation of Carnegie Way methodology into our largest operating segment, Mr. Matthews realized a significant per ton cost improvement in 2016. Operations led by Mr. Matthews also meaningfully improved process quality, and mining operation production costs. By providing steel-making expertise and deep industry knowledge, Mr. Matthews also played a critical role in the successful final determination hearings with the U.S. International Trade Commission for the three flat-roll trade cases. In addition, Mr. Matthews led the business related aspects of the successful negotiation of three-year collective bargaining agreements with the United Steelworkers that were ratified in early 2016. Mr. Matthews’ ability to maintain collaborative relationships with his peers, customers and union contacts benefit the Corporation in all aspects of operations.
James Bruno– Mr. Bruno led the North American Flat-Rolled Automotive Solutions commercial entity in 2016, and also provided leadership over the Corporation’s innovation program. In this role, he used the Carnegie Way to improve delivery of products to our automotive customers to the highest level in the past five years and quality performance to the best level in two years. Under Mr. Bruno’s leadership, Automotive Solutions exceeded its annual goal for growth of advanced high strength steel products, and saw the first shipments of production orders of Gen3 steels. Mr. Bruno also oversaw improvements in working capital for the second consecutive year and a five-year production high for our Great Lakes Works facility. Mr. Bruno also implemented a best in class strategic asset management program. Mr. Bruno’s industry knowledge and detail focused leadership has strengthened the Corporation’s long-term partnerships in the automotive industry.
Long-Term Incentive Compensation
Equity awards under the long-term incentive program (LTIP) are allocated among: • | Performance-based awards (60% of LTIP award in 2016) | | | • | Stock options (20%) | | | • | Restricted stock units (RSUs) (20%) |
- •
- Performance-based awards (60% of LTIP award in 2017)
- •
- Stock options (20%)
- •
- Restricted stock units (RSUs) (20%)
The Committee believes that these three long-term incentive vehicles best accomplish the objectives of aligning pay with performance and retaining executives. InOn February and May 2016,28, 2017, the Committee granted the long-term incentive awards set forth in the table below.
Long-Term Incentive Awards Granted in 2016*2017 | Executive | | Target
Equity-Based
Performance
Awards | | | Stock
Options | | | Restricted
Stock
Units | | | Grant Date
Fair Value
Of Equity
Awards | | | Target
Cash-Based
Performance
Awards | | | Longhi | | | 140,960 | | | | 228,300 | | | | 96,420 | | | $ | 4,262,837 | | | $ | 2,625,000 | | | Burritt | | | 44,300 | | | | 71,750 | | | | 30,300 | | | $ | 1,339,672 | | | $ | 825,000 | | | Folsom | | | 22,960 | | | | 37,180 | | | | 15,700 | | | $ | 694,229 | | | $ | 427,500 | | | Matthews | | | 17,960 | | | | 29,090 | | | | 12,290 | | | $ | 543,221 | | | $ | 334,500 | | | Bruno | | | 6,690 | | | | 10,820 | | | | 4,570 | ** | | $ | 202,130 | | | $ | 124,500 | |
* | In 2016, the Long-Term Incentive Award grant values were reduced. In order to avoid the potential of a windfall to executives that could result from awarding shares during a period of depressed stock price (which the Corporation experienced at the beginning of 2016 when the grant values were set), the Committee used an assumed higher share price when converting the grant value into shares to be awarded. As a result, the overall LTIP grant decreased by approximately 20% from 2015. Additionally, the performance awards were granted in February 2016, but the time-based stock options and RSUs were not granted until May 2016. Because of the bifurcated grant and because of the method used to reduce the grant value, the overall LTIP grants do not precisely align with the 60%, 20%, 20% structure described above. | | | ** | Mr. Bruno also received the second installment of his new-hire grant and a retention grant in 2016. These awards are not reported in this table, but are described under the heading “Other Awards” on page 33. |
| | United States Steel Corporation | 2017 Proxy Statement | 31 |
| | | | | | | | | | | | | | | | | Executive
| | Target
Equity-Based
Performance
Awards
| | Stock
Options
| | Restricted
Stock
Units
| | Grant Date
Fair Value
Of Equity
Awards
| | Target
Cash-Based
Performance
Awards
| |
|---|
| | | | | | | | | | | | | | | | | | Burritt(1) | | | 52,190 | | | 73,550 | | | 34,990 | | $ | 3,443,947 | | $ | 1,476,000 | | | | | | | | | | | | | | | | | | | | Bradley(2) | | | 13,080 | | | 15,730 | | | 7,580 | | $ | 612,624 | | $ | 262,500 | | | | | | | | | | | | | | | | | | | | Matthews | | | 6,750 | | | 12,170 | | | 5,680 | | $ | 780,240 | | $ | 334,500 | | | | | | | | | | | | | | | | | | | | Buckiso | | | 3,030 | | | 5,460 | | | 2,550 | | $ | 350,199 | | $ | 150,000 | | | | | | | | | | | | | | | | | | | | Rintoul | | | 4,940 | | | 8,900 | | | 4,150 | | $ | 570,627 | | $ | 244,500 | | | | | | | | | | | | | | | | | | | | Longhi(3) | | | 53,010 | | | 95,520 | | | 44,560 | | $ | 6,124,630 | | $ | 2,625,000 | | | | | | | | | | | | | | | | | | | | Folsom(4) | | | 8,630 | | | 15,560 | | | 17,260 | | $ | 1,597,331 | | $ | 427,500 | | | | | | | | | | | | | | | | | | | | Soni | | | 2,510 | | | 4,530 | | | 2,110 | | $ | 290,134 | | $ | 124,500 | | | | | | | | | | | | | | | | | | | |
- (1)
- The amounts shown for Mr. Burritt include his annual grant made on February 28, 2017 as part of his compensation as Chief Financial Officer, and
Analysisan additional grant made on May 31, 2017 in connection with his promotion to President & CEO.
- (2)
- Mr. Bradley's awards were granted on August 1, 2017 shortly following his date of hire.
- (3)
- In connection with his retirement, Mr. Longhi forfeited 100% of the long-term incentive awards granted in 2017 because he was not employed for at least six months after the date of grant.
- (4)
- Amounts include a special grant of 10,000 RSUs made in January 2017, vesting of which was accelerated as part of her separation agreement. The grant date fair value of equity awards amount shown for Ms. Folsom includes the incremental value attributed to the acceleration of the special grant of 10,000 RSUs. Pursuant to her separation agreement, Ms. Folsom is entitled to pro rata vesting of the performance awards, stock options and RSUs granted as part of her annual LTIP award in February 2017. As a result of her separation, Ms. Folsom forfeited 7,636 options, 3,563 RSUs, 5,993 TSR-based performance awards and $296,875 of cash-based performance awards at termination of her employment.
Performance-Based Awards (60% of LTIP Award Value) Performance awards provide an incentive for executives to earn shares and cash based on our performance over a three-year performance period, with goals set at the beginning of each performance period. The performance awards do not pay dividends or carry voting privileges prior to vesting. In 2016,2017, the three-year performance period began on January 1, 2016,2017, and will end on December 31, 20182019 (the “2016"2017 Performance Period”Period"). The value of the performance awards granted under the 20162017 Performance Period was divided equally between relative TSR performance awards (which are equity-based) and ROCE performance awards.awards (which are cash-based). The three-year goals focus management on driving attractive returns on the capital we employ and on increasing stockholder value. TSR Performance Awards TSR performance awards are based on relative performance, with the payout determined based on the rank of the Corporation’sCorporation's TSR compared to the TSR of peer group companies over the three-year performance period.period (see the "Long-Term Incentive Plan Performance Peer Group" on page 38). TSR is determined based on the following formula: final price plus dividends per share for the performance period, divided by the initial price, raised to 1/3, minus 1. The initial price and final price used are the average closing price for the 20 business days prior to the first and last day of the performance period, respectively. 32 |United States Steel Corporation | 2018 Proxy Statement
Table of Contents | Compensation Discussion and Analysis |
As noted in the table below, above market performance at the 60th60th percentile is required for target payout, and no payout is made for performance below the 30th30th percentile.
| | | | | | | | Level |
| | 20162017
Relative TSR Ranking |
| | Award Payout as a %
of Target(1)
| |
|---|
| | | | | | | | | | <30th30th percentile | | | 0% | | Threshold | | | | | | | 30thThreshold
| | 30th percentile | | | 50% | | Target | | | | | | | 60thTarget
| | 60th percentile | | | 100% | | Maximum | | | | | | | 90thMaximum
| | 90th percentile | | | 200% | |
(1) | Interpolation is used to determine actual awards between the threshold, target, and maximum levels. | | | | | |
- (1)
- Interpolation is used to determine actual awards between the threshold, target, and maximum levels.
Beginning with the 2016 performance period, the Committee adopted a new peer group consisting of 12 domestic steel or steel-related companies for use in evaluating relative TSR (described in more detail under “Peer Group” beginning on page 35). In addition, the Committee approved a new policy beginning with 2016 grantsorder to address any potential pay for performance disconnect should the Corporation’sCorporation's TSR be negative over the performance period (regardless of relative performance). payouts may be capped as follows:
• | Payout is capped at target if the Corporation’s TSR is 0% to -5% on a compound annual growth rate (“CAGR”) basis; | | | • | Payout is capped at threshold if the Corporation’s TSR is lower than -5% to -10% on a CAGR basis; and |
- •
- Payout is capped at target if the Corporation's TSR is 0% to -5% on a compound annual growth rate ("CAGR") basis;
- •
- Payout is capped at threshold if the Corporation's TSR is between -5% to -10% on a CAGR basis; and
- •
- Payout is forfeited if the
Corporation’sCorporation's TSR is lower than -10% on a CAGR basis.
2013 Performance Awards
The performance periodnegative cap policy is effective for the 2013 performance awards ended on May 12, 2016. The Corporation’s relative annualized TSR compared to the selected peer group was at the 31.03 percentile,grants made in 2016 and resulted in a payout of 51.7% of the target award, as shown in the table below. Messrs. Longhi and Matthews are the only NEOs who received a payout for the 2013 performance awards because Messrs. Burritt and Bruno and Ms. Folsom were not yet employed by the Corporation when the grants were made.
| | Shares Granted
at Target | | Shares vested as a
result of payout | | Payout Rate | | Delivered Value | | | Longhi | 29,310 | | 15,153 | | 51.7% | | $212,142 | | | Matthews | 12,110 | | 6,261 | | 51.7% | | $87,654 | |
32 | United States Steel Corporation | 2017 Proxy Statement
| | |
Compensation Discussion and Analysislater.
ROCE Performance Awards The payout is determined based on our weighted average cost of capital (noted as return on capital employed or “ROCE”"ROCE"), over the three-year performance period. ROCE is measured based on our consolidated worldwide EBIT, as adjusted, divided by our consolidated worldwide capital employed, as adjusted, over the three-year performance period. The weighted average ROCE is a three-year performance metric calculated based on the ROCE achieved in the first, second, and third years of the performance period, weighted at 20%, 30%, and 50% respectively. The ROCE awards payout at 50% at the threshold level, 100% at the target level, and 200% at the maximum level. ROCE performance goals are not disclosed during an ongoing performance period due to competitive reasons. Beginning in 2015, the ROCE awards were granted in cash, rather than shares, to mitigate dilutive effects of a share grant. 20142015 Performance Awards
The performance period for the 20142015 performance awards ended on December 31, 2016.2017. The value of the 20142015 performance awards was equally divided between relative TSR performance awards and ROCE performance awards. While the relative TSR performance met the performance goals, the ROCE performance did not, resulting in an overall payout of 75%37% of the target award. Each of the relative TSR and ROCE goals, results and payouts are described below. 20142015 TSR Performance Awards
The Corporation’sCorporation's relative annualized TSR compared to the selected peer group for the performance period was at the 75th44th percentile, and resulted in a payout of 150%74% of the target award. The payout for our NEOs is shown below. Messrs. Bradley and Soni did not receive a payout because they were not employed by the Corporation when the grant was made. Mr. BrunoBuckiso did not receive a payout because he was not yet employed byeligible for TSR shares when the Corporation when the2015 grant was made. | | | | | | | | | | | | | |
| | Shares Granted
at Target
| | Shares vested as a
result of payout
| | Payout Rate
| | Delivered Value*
| |
|---|
| | | | | | | | | | | | | | | Burritt | | | 33,070 | | | 24,495 | | | 74.07% | | | $1,077,535 | | | | | | | | | | | | | | | | | Matthews | | | 13,410 | | | 9,933 | | | 74.07% | | | $436,953 | | | | | | | | | | | | | | | | | Rintoul | | | 9,800 | | | 7,259 | | | 74.07% | | | $319,232 | | | | | | | | | | | | | | | | | Longhi** | | | 105,210 | | | 60,611 | | | 74.07% | | | $2,666,278 | | | | | | | | | | | | | | | | | Folsom** | | | 17,130 | | | 12,336 | | | 74.07% | | | $542,661 | | | | | | | | | | | | | | | | |
- *
- Delivered value is based on the fair market value of the shares on February 27, 2018, the date of vesting.
- **
- Pursuant to their respective separation agreements, the vesting for Mr. Longhi and Ms. Folsom is pro rated based on the last date of employment.
| | | Shares Granted
at Target | | Shares vested as a
result of payout | | Payout Rate | | Delivered Value | | Longhi | | 102,820 | | 154,230 | | 150 | % | | $ | 5,171,332 | | Burritt | | 34,110 | | 51,165 | | 150 | % | | $ | 1,715,562 | | Folsom | | 15,230 | | 22,845 | | 150 | % | | $ | 765,993 | | Matthews | | 15,230 | | 22,845 | | 150 | % | | $ | 765,993 |
20142015 ROCE Performance Awards
The actual ROCE performance for the performance period was below the threshold for payment, resulting in no payout. 2014-20162015-2017 Return on Capital Employed (ROCE) Performance Targets and Results
| | | | | | | | | | | | | | | Performance Targets
| |
| |
| | Actual Results and Weighting
| | Payout Rate
| |
|---|
| | | | | | | | | | | | | | | | Threshold | | | 5% | | | | Year 1 (20%) | | | –4.9% | | | | | | | | | | | | | | | | | | | | | Target | | | 10% | | | | Year 2 (30%) | | | 0.0% | | | | | | | | | | | | | | | | | | | | | Maximum | | | 15% | | | | Year 3 (50%) | | | 10.3% | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2015-2017 Period | | | 4.2% | | | 0% | | | | | | | | | | | | | | | | | |
United States Steel Corporation | 2018 Proxy Statement |33
Table of Contents | Performance Targets | Actual Results and Weighting | Payout Rate | | | Threshold | | 5 | % | Year 1 (20%) | 12.6 | % | | | | Target | | 10 | % | Year 2 (30%) | -4.9 | % | | | | Maximum | | 15 | % | Year 3 (50%) | 0.0 | % | | | | | | | | 2014-2016 Period | 1.1 | % | 0.0% | |
Compensation Discussion and Analysis |
Restricted Stock Units (20% of LTIP Award Value) Restricted stock units (RSUs) are awards that deliver shares of common stock and accumulated dividends upon vesting. Restricted stock unitsRSUs generally vest ratably on each of the first, second and third anniversaries of the grant date, subject to the executive’sexecutive's continued employment on each vesting date. The Committee believes that restricted stock unitsRSUs provide the best retention benefits among our long-term incentives, especially during times of challenging economic and industry conditions. They also enable our executives to build ownership in the Corporation, which addresses a key compensation objective. Additionally, because of the downside risk of owning stock, restricted stock units discourage executives from taking excessive risks that would not be in the best long-term interest of stockholders. Stock Options (20% of LTIP Award Value) Stock options are “at-risk”"at-risk" awards that reward executives for an increase in the Corporation’sCorporation's stock price over the term of the option. The value of the options is limited to the appreciation of our stock price, if any, above the option’soption's exercise price after the option becomes exercisable and before it expires. Stock options are: • | exercisable for a term of ten years; | | | • | subject to ratable vesting on each of the first, second and third anniversaries of the grant date; and | | | • | subject to continued employment on each vesting date. |
- •
- exercisable for a term of ten years;
- •
- subject to ratable vesting on each of the first, second and third anniversaries of the grant date; and
- •
- generally subject to continued employment on each vesting date.
On May 31, 2016,February 28, 2017, the Committee granted traditional stock options with an exercise price based on the fair market value on the date of grant, which was $14.78.$39.265. Other Awards Mr. Bradley received a one-time cash award of $125,000 as part of his new-hire incentive. In February 2016,January 2017, Ms. Folsom was granted 10,000 RSUs with a three-year cliff vesting schedule. As part of her separation agreement, the Committee accelerated the vesting of that award. In 2017, Mr. BrunoSoni received a cash award of $30,000, which was the second-installment of a new hire incentive. Changes to the 2018 Compensation Program - •
- Added Cash Conversion Cycle as an AICP Metric : In recognition of the Corporation's intense focus on cash efficiency, the Committee decided to replace the AICP Cash Flow metric with Cash Conversion Cycle (CCC). This metric is measured in days. EBITDA remains the second
installmentAICP metric.
- •
- Changed Weighting of
his new hire grant of equity which consisted of 27,450 restricted stock units. Additionally in 2016, Mr. Bruno received a retention grant of equity consisting of 16,915 restricted stock units. In each caseAICP Metrics: The Committee rebalanced the RSUs cliff-vest on the third anniversaryweighting of the grant date.two metrics under the AICP to 70% EBITDA and 30% CCC. Previously EBITDA and Cash Flow were equally weighted.
- •
- Elimination of Stock Options from LTIP: The Committee eliminated stock options from the types of awards granted as part of the 2018 annual long-term awards. The annual awards for 2018 are composed of 40% RSUs and 60% performance awards (30% based on TSR, and 30% based on ROCE). Stock options previously made up 20% of the long-term grant.
- •
- Long-Term ROCE Performance Awards to be Granted in Stock: Half of the long-term performance awards are based on our ROCE metric. Since 2015 these awards have been granted in and pay out in cash. For 2018, the Committee granted these awards in equity to further align executive compensation with stockholder interests.
- •
- Revised Long-Term TSR Goals:The Committee revised the goals for the long-term TSR metric. The Committee believes the goals remain rigorous, as they still require above-market performance to achieve target payout. The revisions better align with the Committee's objective of providing long-term compensation that is both rigorous but achievable.
| | | | |
| | 2017 Grant
| | 2018 Grant
|
|---|
| | | | | | | Threshold: | | | | United States Steel Corporation | 2017 Proxy Statement | 3330th % | | Target: | | 60th % | | 55th % | | Maximum: | | 90th % | | 80th % | | | | | | |
Fixed Compensation and Benefits |
Compensation Discussion and Analysis
Fixed Compensation and Benefits
Base Salary Base salary is designed to compensate for the required day-to-day activities and responsibilities of each position. Base salary is set at a market competitive level to enable the Corporation to attract and retain talent. Actual salary levels take into account such factors as the contribution of the incumbent, individual qualifications and experiences, and internal value to the Corporation. Base salary is paid in cash. Benefits NEOs participate in many of the benefits provided to non-represented employees generally, including vacation and holiday benefits, insurance benefits, disability benefits, and medical and prescription drug programs. We believe these benefits support our overall retention objectives. 34 |United States Steel Corporation | 2018 Proxy Statement
Table of Contents | Compensation Discussion and Analysis |
Retirement Programs We provide the retirement benefits described below in order to attract and retain talented executive officers. We believe our retirement programs are reasonable in light of competitive pay practices and the total compensation of our executives. Tax-Qualified Plans The Corporation maintains the following tax-qualified retirement programs (together, the “Qualified Plans”"Qualified Plans"): • | United States Steel Corporation Plan for Employee Pension Benefits, Revision of 2003 (the “Pension Plan”), which is a defined benefit plan; and | | | • | United States Steel Corporation Savings Fund Plan for Salaried Employees (the “Savings Plan”), which is a 401(k) defined contribution plan. |
- •
- United States Steel Corporation Plan for Employee Pension Benefits, Revision of 2003 (the "Pension Plan"), which is a defined benefit plan; and
- •
- United States Steel Corporation Savings Fund Plan for Salaried Employees (the "Savings Plan"), which is a 401(k) defined contribution plan.
Participation in the Pension Plan was closed to new entrants on July 1, 2003 and benefits under the plan were frozen for all non-represented participants on December 31, 2015. Mr.Messrs. Matthews wasand Buckiso were the only NEONEOs covered by the Pension Plan and the related non-qualified plansNon Tax-Qualified Pension Plan described below. Mr. Matthews is the only NEO covered by the Supplemental Pension Program described below. Beginning in 2016, for all non-represented employees, the Corporation makes a contribution to a “Retirement Account”"Retirement Account" under the Savings Plan, which is in addition to any matching contributions made under the Savings Plan. Prior to 2016, non-represented employees who were covered by the Pension Plan were not eligible to receive Retirement Account contributions. In 2016,2017, all of the NEOs received matching contributions and Retirement Account contributions under the Savings Plan and participated in the related non-qualified plans described below. Non Tax-Qualified Plans The Corporation maintains the following non tax-qualified programs (together, the “Non-Qualified Plans”"Non-Qualified Plans") that are designed to provide retirement benefits to executives and other high-level employees of the Corporation and its affiliates: - •
- United States Steel Corporation Non Tax-Qualified Pension Plan (the
“Non"Non Tax-Qualified Pension Plan”Plan");
• | United States Steel Corporation Executive Management Supplemental Pension Program (the “Supplemental Pension Program”); | | | • | United States Steel Corporation Supplemental Thrift Program (the “Supplemental Thrift Program”); | | | • | United States Steel Corporation Non Tax-Qualified Retirement Account Program (the “Non Tax-Qualified Retirement Account Program”); and | | | • | United States Steel Corporation Supplemental Retirement Account Program (the “Supplemental Retirement Account Program”). |
•United States Steel Corporation Executive Management Supplemental Pension Program (the "Supplemental Pension Program");
•United States Steel Corporation Supplemental Thrift Program (the "Supplemental Thrift Program");
•United States Steel Corporation Non Tax-Qualified Retirement Account Program (the "Non Tax-Qualified Retirement Account Program"); and
•United States Steel Corporation Supplemental Retirement Account Program (the "Supplemental Retirement Account Program").Benefits under the Non Tax-Qualified Pension Plan and Supplemental Pension Program were frozen on December 31, 2015 when the tax qualified Pension Plan was frozen for all non-represented participants. The purpose of the Non Tax-Qualified Pension Plan, the Supplemental Thrift Program, and the Non Tax-Qualified Retirement Account Program is to provide benefits that are not permitted to be provided under the Qualified Plans due to certain limits under the Internal Revenue Code. The benefit accrual formulas under these Non-Qualified Plans are approximately equal to the formulas under the respective Qualified Plans. The purpose of the Supplemental Pension Program and the Supplemental Retirement Account Program is to provide pension benefits based upon compensation paid under our short-term incentive compensation plans, which is excluded under the Qualified Plans. We provide a retirement benefit based on incentive pay to enable our executives (who receive more of their pay in the form of incentive compensation) to receive a comparable retirement benefit. Benefits under the Supplemental Pension Program and the Supplemental Retirement Account Program are subject to service-based and age-based restrictions. Unless the Corporation consents, benefits under the Supplemental Pension Program are not payable if the executive voluntarily terminates employment (1) prior to age 60 or before completing 15 years of service, or (2) within 36 months of the date coverage under the program commenced. Similarly, unless the Corporation consents, benefits under the Supplemental Retirement Account Program are not payable if the executive voluntarily terminates employment (1) prior to age 55 or before completing 10 years of service (or, if earlier, attaining age 65), or (2) within 36 months of the date coverage under the program commenced. We believe that these restrictions help to support our retention objectives. For more information on our retirement programs, see thePension Benefitstable andNon-Qualified Deferred Compensation table later in this proxy statement. Perquisites and Security As part of the Carnegie Way initiative,In 2014, we examined the perquisites that historically have been offered to executives, and have eliminated or reduced many of them, and none have been extended to any executive hired after November 2014. We continue to provide a limited number of reasonable perquisites
34 | United States Steel Corporation | 2017 Proxy Statement | | |
Compensation Discussion and Analysis
as a recruiting and retention tool and to ensure the health and safety of our key executives. The perquisites available to our NEOs in 20162017 are described in the footnotes to the Summary Compensation Table on page 40 of this proxy statement. In general, the perquisites: • | facilitate the ability of our executives to do their jobs without undue distractions or delays; | | | • | have clear business-related purposes; | | | • | ensure accurate personal tax reporting of the financial intricacies of our compensation programs; and | | | • | provide a measure of security unavailable elsewhere. |
- •
- facilitate the ability of our executives to do their jobs without undue distractions or delays;
- •
- have clear business-related purposes;
- •
- ensure accurate personal tax reporting of the financial intricacies of our compensation programs; and
- •
- provide a measure of security unavailable elsewhere.
The perquisites provided maximize the safe and efficient use of our executives’executives' time and, by facilitating the development United States Steel Corporation | 2018 Proxy Statement |35
Table of Contents Compensation Discussion and Analysis |
of commercial and other business relationships, provide a significant benefit to the Corporation and its stockholders. The perquisites provided to the NEOs in 2016, other than the CEO, were limited to tax preparation and financial planning and relocation benefits. The perquisites we provide include residential and personal security services to employees who are the subject of a credible and specific threat on account of his or her role with the Corporation. The level of security provided depends upon the nature of the threat. In 2016, Mr.2017, Messrs. Longhi, was the only NEO who wasBurritt and Buckiso were provided with security services. The Board believes that providing personal security in response to threats arising because of employment by the Corporation is business-related. We do not provide gross-up payments to cover personal income taxes that may be attributable to any of the perquisites except for (a) relocation, and (b) tax equalization and (c) expenses and travel related to expatriate assignments. These gross-ups are also provided to non-executive employees. Change in Control Arrangements The Corporation’sCorporation's Change in Control Severance Plan (the “CIC Plan”"CIC Plan") became effective on January 1, 2016, and generally provides for the payment of severance benefits to certain eligible executives, including each of the named executive officers, in the event their employment with the Corporation terminates involuntarily following a change in control of the Corporation. The Corporation previously maintained individual change in control agreements with certain executives. The CIC Plan supplanted the agreements, but provides for substantially similar terms. The CIC Plan enables our executives to evaluate corporate transactional opportunities that may be in the best interests of the Corporation’sCorporation's stockholders, while limiting concerns about the potential impact of such opportunities on their job security. Under the CIC Plan, payments require a “double"double trigger,”" meaning the named executive officer is eligible for change in control severance payments and benefits in the event that he or she is terminated without cause or voluntarily for good reason in connection with a change in control. In general, upon a change in control and termination each of our named executive officersNEOs are entitled to a payment equivalent to a multiple of his or her salary and bonus..annual incentive award For Messrs. Longhi and Burritt and Ms. Folsom,Bradley, the severance payment multiple is 2.5x and for Messrs. Matthews, Rintoul, Buckiso is 2x and Brunofor Mr. Soni is 2x.1x. Neither Mr. Longhi nor Ms. Folsom are entitled to a change in control severance payment following termination of employment with the Corporation. We do not provide gross-up payments to cover personal income taxes that may be attributable to payments under the CIC Plan. See “Potential"Potential Payments Upon Termination or Change in Control”Control" for additional information regarding the quantification of these potential payments and benefits. Letter Agreements In general, the Corporation does not enter into long-term employment agreements with its executives, but may enter into agreements for a limited period of time to attract or retain experienced professionals for high level positions. TheUnder the terms of his offer of employment, Mr. Bradley is entitled to a severance payment of two times his annual base salary and target bonus if he is terminated without cause prior to July 27, 2019. Under the terms of a letter agreement with Mr. Buckiso which expires on November 20, 2018, Mr. Buckiso may become entitled to a payment of up to three and a half times his salary and target annual incentive award upon the occurrence of certain events. Separation Agreements In connection with his retirement, Mr. Longhi entered into a separation agreement with the Corporation, doesproviding for, among other things, pro rata vesting of certain equity grants made in 2015 and 2016. Under his agreement and because Mr. Longhi was not have any current agreementsemployed for at least six months after the 2017 annual award grant date, Mr. Longhi forfeited the entirety of his 2017 long-term incentive awards. Under the agreement, Mr. Longhi agreed to a general release of claims, and non-solicitation, non-competition and non-disparagement provisions. In connection with its NEOs.her resignation from the Corporation, Ms. Folsom entered into a separation agreement providing for, among other things, (i) pro-rata vesting of various outstanding annually-granted performance awards, restricted stock unit grants and stock option awards; (ii) accelerated vesting of 10,000 restricted stock units that otherwise would not be vested as of her resignation; and (iii) cash payment of $1,260,000 in 12 installments and $50,000 in lieu of outplacement services. Under the agreement, Ms. Folsom agreed to a general release of claims, and non-solicitation, non-competition and non-disparagement provisions.
The Compensation Process
Independent Consultant and Management Input The Committee retained Pay Governance, LLC as its independent consultant to assist in the evaluation of executive compensation programs and in setting executive officers’officers' compensation. The use of an independent consultant provides additional assurance that the Corporation’sCorporation's executive compensation programs are reasonable and consistent with the Corporation’sCorporation's objectives. The consultant reports directly to the Committee and does not perform services for management without the express approval of the Committee. There were no services performed by the consultant for management in 2016.2017. The consultant regularly participates in Committee meetings, including executive sessions, and advises the Committee with respect to compensation trends and best practices, plan design, and the reasonableness of individual compensation awards. With respect to the CEO’sCEO's compensation, the Committee makes its determinations based upon its evaluation of the CEO’sCEO's performance and with input from its consultant. Each year, the Committee reviews with the Board of Directors the CEO’sCEO's goals and objectives, and the evaluation of the CEO’sCEO's performance with respect to the prior year’s approved CEOyear's goals and objectives. The CEO does not participate in the 36 |United States Steel Corporation | 2018 Proxy Statement
Table of Contents | Compensation Discussion and Analysis |
presentations to, or discussions with, the Committee in connection with the setting of his compensation. Tally Sheets The Committee uses tally sheets to evaluate the total compensation and projected payments to the named executive officers under various termination scenarios. This analysis is undertaken annually to assist the Committee in determining whether the compensation package of each named executive officer is appropriately aligned with our compensation philosophy and the compensation practices of our peers. Peer Group Groups The Committee also considers relevant market pay practices in its decision making process. The Committee uses the peer group data below as a frame of reference to guide executive compensation decisions.
| | United States Steel Corporation | 2017 Proxy Statement | 35 |
Compensation Discussion and Analysis
How Peer Group Is Used: | • | serve as a market reference when making compensation decisions and designing program features | | | • | assess the competitiveness of each element of compensation and compensation in total | | | • | serve as the standard for evaluating total shareholder return for long-term incentive purposes | | | • | serve as a reference when analyzing pay-for-performance alignment |
How Peer Group Was Selected: | • | large companies primarily from the Materials sector or Industrials sector within the Global Industry Classification Standard (GICS) classification codes | | | • | companies similar in complexity - specifically, companies that have: | | | | • | revenues that range from half to double that of the Corporation; | | | | | • | capital intensive businesses as indicated by lower asset turnover ratios; | | | | | • | market capitalization reasonably aligned with the Corporation; and | | | | | • | similar employee levels | | | • | acceptable levels of financial and stockholder performance and a higher company stock price volatility (referred to as “beta”) to align with that of the Corporation | | | • | elimination of companies with unusual compensation practices (e.g., company founders who receive little or no compensation and companies that are subsidiaries of other companies) |
The Corporation’s 2016 peer group included the following companies: | AK Steel Holding Corporation | | Lear Corp. | | | | | | Alcoa Inc. | | Masco Corporation | | | | | | Allegheny Technologies Inc. | | Navistar International Corporation | | | | | | Cliffs Natural Resources Inc. | | Nucor Corporation | | | | | | Commercial Metals Company | | PACCAR Inc. | | | | | | Cummins Inc. | | Parker-Hannifin Corporation | | | | | | Deere & Company | | PPG Industries Inc. | | | | | | Eastman Chemical Co. | | Reliance Steel & Aluminum Co. | | | | | | Eaton Corporation plc | | Steel Dynamics Inc. | | | | | | Freeport-McMoRan Copper & Gold Inc. | | Terex Corp. | | | | | | Illinois Tool Works Inc. | | Textron Inc. | | | | | | Ingersoll-Rand Plc | | The Goodyear Tire & Rubber Company | | | | | | International Paper Company | | Weyerhaeuser Co. | | | | | | Johnson Controls Inc. | | Whirlpool Corp. |
36 | United States Steel Corporation | 2017 Proxy Statement | | |
Compensation Discussion and Analysis
For 2017, the Corporation has removed Johnson Controls Inc., Deere & Company, International Paper Company and PACCAR Inc. from the executive compensation benchmarking peer group. These companies no longer meet the revenue and other guidelines the Corporation uses to select peers.
New Long-Term Incentive Plan Performance Peer Group for 2016
In February 2016, the Committee approved the use of a second peer group that will be used for evaluating long-term performance. Therefore, beginning with the 2016 Performance Period, the Corporation will utilizeutilizes two peer groups as described below:
• | Executive Compensation Peer Group.- •
- Executive Compensation Peer Group. The peer group below is used to benchmark and assess the competitiveness of the compensation of our named executive officers.
- •
- Performance Peer Group. The
executive compensation peer group will continue to be used to benchmark and assess the competitiveness of the compensation of our named executive officers.
| | | • | Performance Peer Group.The performance peer group, which is more industry focused, is used to evaluate the long-term performance of our company for purposes of the relative TSR performance award. The performance peer group is being utilized to evaluate our performance against a targeted group of companies in our industry that we believe we need to outperform to be successful over the long term. |
We created the new performance peer group, because executive compensation arrangements and practices are influenced by business complexity and company size, and manywhich is more industry focused, is used to evaluate the long-term performance of our company for purposes of the relative TSR performance award. The performance peer group is being utilized to evaluate our performance against a targeted group of companies in our industry competitorsthat we believe we need to outperform to be successful over the long term.
Long-Term Incentive Plan Executive Compensation Peer Group The Executive Compensation peer group is used to serve as a market reference when making compensation decisions and designing program features and assess the competitiveness of each element of compensation and compensation in total. We also use this peer group as a reference when analyzing pay-for-performance alignment. The Executive Compensation Peer Group was selected based on the following criteria: - •
- large companies primarily from the Materials sector or Industrials sector within the Global Industry Classification Standard (GICS) classification codes
- •
- companies similar in complexity – specifically, companies that have:
- •
- revenues that range from half to double that of the Corporation;
- •
- capital intensive businesses as indicated by lower asset turnover ratios;
- •
- market capitalization reasonably aligned with the Corporation; and
- •
- similar employee levels
- •
- acceptable levels of financial and stockholder performance and a higher company stock price volatility (referred to as "beta") to align with that of the Corporation
- •
- elimination of companies with unusual compensation practices (e.g., company founders who receive little or no compensation and companies that are
much smaller than U. S. Steel. subsidiaries of other companies)
In setting the executive compensation peer group, the Committee considered a set of broader, industrial peers who might compete with the Corporation for talent as well as companies outside of the material/industrial industry who might attract our executives that have skills transferable outside of the metals industry. 
United States Steel Corporation | 2018 Proxy Statement |37
Table of Contents Compensation Discussion and Analysis |
For 2018, Alcoa Corp. was added to the executive compensation peer group. Long-Term Incentive Plan Performance Peer Group The Committee believes the use of a performance peer group is appropriate because executive compensation arrangements and practices are influenced by business complexity and company size, and many of our industry competitors are much smaller than U. S. Steel. The performance peer group consists of twelve domestic companies in the steel industry. The use of a second peer group or index for evaluating TSR is a common practice among our peers. Because steel industry companies have traded differently from many of our large industrial peers since 2012, the use of a second peer group is more appropriate when evaluating relative TSR performance. Peers were selected based on criteria that included: • | specific domestic steel or steel-related industry; | | | • | five-year stock price correlation greater than 0.50; and | | | • | stock price beta greater than 1.0. |
- •
- specific domestic steel or steel-related industry;
- •
- five-year stock price correlation greater than 0.50; and
- •
- stock price beta greater than 1.0.
The 2017 Performance Peer Group consists of the following companies: AK Steel Holding Corporation Allegheny Technologies Inc. Carpenter Technology Corporation Cliffs Natural Resources Inc. Commercial Metals Company Nucor Corporation Olympic Steel Inc. Reliance Steel & Aluminum Co. Schnitzer Steel Industries, Inc. Steel Dynamics Inc. TimkenSteel Corporation Worthington Industries, Inc.
No changes were made to the Performance Peer Group for 2018.
| AK Steel Holding Corporation | | | | Allegheny Technologies Inc. | | | | Carpenter Technology Corporation | | | | Cliffs Natural Resources Inc. | | | | Commercial Metals Company | | | | Nucor Corporation | | | | Olympic Steel Inc. | | | | Reliance Steel & Aluminum Co. | | | | Schnitzer Steel Industries, Inc. | | | | Steel Dynamics Inc. | | | | TimkenSteel Corporation | | | | Worthington Industries, Inc.Compensation Policies and Other Considerations |
In conjunction with the adoption of the new performance peer group for use in our relative TSR performance award plan, we adopted a negative TSR cap which is explained in further detail in the preceding section entitled “TSR Performance Awards.”
Compensation Policies and Other Considerations
Stock Ownership and Holding Guidelines We have comprehensive stock ownership and holding guidelines designed to align the interests of our executive officers with those of the Corporation’sCorporation's stockholders. As shown in the table below, our executives are required to accumulate and retain a minimum level of ownership in the Corporation’sCorporation's common stock based upon the salary midpoint for their position: Executive | | | Executive**
| | Ownership Requirement(1)Requirement*
(Multiple of Salary Midpoint)
|
|---|
| | | | LonghiBurritt | | 6x | Burritt | | | Bradley | | 3x | Folsom | | | Matthews | | 3x | Matthews | | | Buckiso | | 3x | Bruno | | | Soni | | 3x1x | | | | |
(1) | Unvested restricted stock units count towards the ownership requirement.
|
- *
- Unvested restricted stock units count towards the ownership requirement.
- **
- The table below does not include Messrs. Longhi and Rintoul or Ms. Folsom, who were not employed with the Corporation as of the date of filing.
Under our stock ownership guidelines, Mr. LonghiBurritt has a stock ownership requirement of six times6x his salary midpoint. Messrs. Burritt,Bradley, Matthews, and Bruno and Ms. FolsomBuckiso each have a stock ownership requirement of three times3x their salary midpoint; and Mr. Soni has an ownership requirement of 1x his salary midpoint. The stock ownership guidelines require that an executive must retain 100% of the after-tax value of stock acquired upon the vesting of restricted stock units and performance awards and 100% of the after-tax value of shares issued upon the exercise of stock options until the ownership requirement is satisfied. All of the NEOs are in compliance with the terms of the policy.
| | United States Steel Corporation | 2017 Proxy Statement | 37 |
Compensation Discussion and Analysis
Anti-Hedging and Pledging We have a policy that prohibits all directors and employees, including the named executive officers, from engaging in any transaction that is designed to hedge or offset any decrease in our stock price. Our anti-pledging policy prohibits directors and executive officers, including the named executive officers, from pledging our stock as collateral for a loan or holding shares in a margin account. Clawback Policy The Board has adopted a policy setting forth procedures to recover payment if an executive engaged in any fraud or misconduct, including gross negligence that caused or partially caused the need for a material restatement of the Corporation’sCorporation's publicly filed financial results. For any periods as to which a performance-based award was paid or credited to the executive, such award shall be subject to reduction, cancellation or reimbursement to the Corporation at the Board’sBoard's discretion. This policy is set forth in our Corporate Governance Principles which are available on our website www.ussteel.com. 38 |United States Steel Corporation | 2018 Proxy Statement
Table of Contents | Compensation Discussion and Analysis |
Compensation and Risk Management The Committee’sCommittee's compensation consultant annually performs a risk assessment of our executive compensation program and, based on its most recent review, the consultant has determined that our compensation program contains a variety of features that mitigate unnecessary risk taking, including the following: • | Compensation Mix: Executive officers receive a mixture of short-term and long-term incentives in addition to base salary. Long-term incentives, which are paid mostly in equity, make up the majority of our executives’ compensation; | | | • | Capped Awards: Payments under our short-term incentive plan are capped at 227% of target and our performance awards are capped at 200% of target; |
• | Performance Metrics: Different metrics are used in the short-term and long-term incentive programs; and | | | • | Stock Ownership: Executive officers are required to own a significant amount of common stock determined as a multiple of their salary midpoint. |
- •
- Compensation Mix: Executive officers receive a mixture of short-term and long-term incentives in addition to base salary. Long-term incentives, which are paid mostly in equity, make up the majority of our executives' compensation;
- •
- Capped Awards: Payments under our short-term incentive plan are capped at 227% of target and our performance awards are capped at 200% of target;
- •
- Performance Metrics: Different metrics are used in the short-term and long-term incentive programs; and
- •
- Stock Ownership: Executive officers are required to own a significant amount of common stock determined as a multiple of their salary midpoint.
For these reasons, the Committee concluded that our 20162017 compensation and organization policies and practices are not reasonably likely to create a risk that could have a material adverse effect on the Corporation. Accounting and Tax Considerations In determining executive compensation, the Committee considers, among other factors, the possible tax consequences to the Corporation. Tax consequences, including but not limited to tax deductibility by the Corporation, are subject to many factors (such as changes in the tax laws and regulations or interpretations thereof) that are beyond the control of the Corporation. In addition, the Committee believes that it is important for it to retain maximum flexibility in designing compensation programs that meet its stated objectives. For these reasons, the Committee, while considering tax deductibility as one of the factors in determining compensation, does not limit compensation to those levels or types of compensation that will be deductible by the Corporation. For a detailed discussion of the accounting impacts on various elements of long-term incentive compensation, see footnote 14 to the Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 20162017 filed with the SEC on February 28, 2017.21, 2018.
United States Steel Corporation | 2018 Proxy Statement |39
Table of Contents 38 | United States Steel Corporation | 2017 Proxy Statement | | |
Executive Compensation Tables |
Executive Compensation Tables
EXECUTIVE COMPENSATION TABLES
EXECUTIVE COMPENSATION TABLES |
The titles of executives used in the compensation tables of this proxy statement reflect the titlecurrent titles of each executive during 2016.executive. Summary Compensation Table The following table sets forth certain compensation information for U. S. Steel’sSteel's Chief Executive Officer (CEO), Chief Financial Officer (CFO) and the three other most highly compensated executive officers (referred to as “Named"Named Executive Officers”Officers" or “NEOs”"NEOs") who rendered services to U. S. Steel and its subsidiaries during 2017. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name
| | Year(1)
| | Salary(2)
($)
| | Bonus(3)
($)
| | Stock
Awards(4)(5)
($)
| | Option
Awards(4)(6)
($)
| | Non-Equity
Incentive
Compensation(7)
($)
| | Change in
Pension
Value &
Nonqualified
Deferred
Compensation
Earnings(8)
($)
| | All Other Compensation(9)
($)
| | Total
($)
| |
|---|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | David B. Burritt | | | 2017 | | $ | 929,710 | | | — | | $ | 2,459,987 | | $ | 983,960 | | | — | | — | | $ | 320,543 | | $ | 4,694,200 | | | President & Chief | | | 2016 | | $ | 800,000 | | | — | | $ | 891,720 | | $ | 447,864 | | $ | 1,820,000 | | — | | $ | 116,000 | | $ | 4,075,584 | | | Executive Officer | | | 2015 | | $ | 780,250 | | | — | | $ | 1,375,213 | | $ | 549,991 | | | — | | — | | $ | 291,041 | | $ | 2,996,495 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Kevin P. Bradley
Executive Vice
President & Chief
Financial Officer | | | 2017 | | $ | 300,003 | | $ | 125,000 | | $ | 437,707 | | $ | 174,918 | | $ | 273,003 | | — | | $ | 56,382 | | $ | 1,367,013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Douglas R. Matthews | | | 2017 | | $ | 541,000 | | | — | | $ | 557,285 | | $ | 222,954 | | $ | 409,429 | | $162,208 | | $ | 162,752 | | $ | 2,055,628 | | | Senior Vice President - | | | 2016 | | $ | 541,000 | | | — | | $ | 361,605 | | $ | 181,580 | | $ | 833,140 | | $225,984 | | $ | 91,565 | | $ | 2,234,874 | | | Industrial, Service Center and Mining Solutions | | | 2015 | | $ | 537,000 | | | — | | $ | 557,600 | | $ | 222,988 | | | — | | $399,272 | | $ | 45,340 | | $ | 1,762,200 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Scott D. Buckiso
Senior Vice President -
European Solutions &
President USSK | | | 2017 | | $ | 412,500 | | | — | | $ | 250,171 | | $ | 100,027 | | $ | 324,968 | | $48,226 | | $ | 539,827 | | $ | 1,675,719 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | David J. Rintoul
Senior Vice President -
Tubular Business | | | 2017 | | $ | 499,000 | | | — | | $ | 407,579 | | $ | 163,048 | | $ | 393,661 | | — | | $ | 145,012 | | $ | 1,608,300 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mario Longhi | | | 2017 | | $ | 750,000 | | | — | | $ | 4,374,704 | | $ | 1,749,926 | | $ | 1,023,750 | | — | | $ | 796,752 | | $ | 8,695,132 | | | Former President & | | | 2016 | | $ | 1,500,000 | | | — | | $ | 2,837,507 | | $ | 1,425,049 | | $ | 4,528,125 | | — | | $ | 632,670 | | $ | 10,923,351 | | | Chief Executive Officer | | | 2015 | | $ | 1,428,750 | | | — | | $ | 4,374,953 | | $ | 1,749,972 | | | — | | — | | $ | 1,054,990 | | $ | 8,608,665 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Suzanne R. Folsom | | | 2017 | | $ | 700,000 | | | — | | $ | 1,036,022 | | $ | 285,059 | | | — | | — | | $ | 1,923,374 | | $ | 3,944,455 | | | Former General Counsel, | | | 2016 | | $ | 700,000 | | | — | | $ | 462,105 | | $ | 232,078 | | $ | 1,274,000 | | — | | $ | 124,620 | | $ | 2,792,803 | | Chief Compliance Officer
& Senior Vice President -
Government Affairs | | | 2015 | | $ | 668,750 | | | — | | $ | 712,364 | | $ | 285,036 | | | — | | — | | $ | 474,546 | | $ | 2,140,696 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pipasu H. Soni
Vice President - Finance,
Former Interim CFO | | | 2017 | | $ | 367,917 | | $ | 30,000 | | $ | 207,144 | | $ | 82,990 | | $ | 215,853 | | — | | $ | 61,193 | | $ | 965,097 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- (1)
- Amounts are not reported for 2015 and 2016 if the executive was not an NEO in those years. Mr. Bradley was hired in 2017 and Messrs. Buckiso, Rintoul and Soni were not Named Executive Officers in 2015 and 2016.
| Name | Year(1) | Salary(2)
($) | | Bonus(3)
($) | | Stock
Awards(4)(5)
($) | | Option
Awards(4)(6)
($) | | Non-Equity
Incentive
Plan
Compensation(7)
($) | | Change in
Pension
Value &
Nonqualified
Deferred
Compensation
Earnings(8)
($) | | All Other
Compensation(9)
($) | | Total
($) | | | Mario Longhi | 2016 | $ | 1,500,000 | | | — | | $ | 2,837,507 | | $ | 1,425,049 | | $ | 4,528,125 | | | N/A | | $ | 632,670 | | $ | 10,923,351 | | | President & Chief | 2015 | $ | 1,428,750 | | | — | | $ | 4,374,953 | | $ | 1,749,972 | | | — | | | N/A | | $ | 1,054,990 | | $ | 8,608,665 | | | Executive Officer | 2014 | $ | 1,186,250 | | | — | | $ | 6,028,882 | | $ | 1,507,036 | | $ | 4,007,981 | | | N/A | | $ | 481,364 | | $ | 13,211,513 | | | David B. Burritt | 2016 | $ | 800,000 | | | — | | $ | 891,720 | | $ | 447,864 | | $ | 1,820,000 | | | N/A | | $ | 116,000 | | $ | 4,075,589 | | | Executive Vice | 2015 | $ | 780,250 | | | — | | $ | 1,375,213 | | $ | 549,991 | | | — | | | N/A | | $ | 291,041 | | $ | 2,996,495 | | | President & Chief | 2014 | $ | 715,750 | | | — | | $ | 2,000,054 | | $ | 499,962 | | $ | 1,558,261 | | | N/A | | $ | 137,341 | | $ | 4,911,368 | | | Financial Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | Suzanne R. Folsom | 2016 | $ | 700,000 | | | — | | $ | 462,105 | | $ | 232,078 | | $ | 1,274,000 | | | N/A | | $ | 124,620 | | $ | 2,792,803 | | | General Counsel, Chief | 2015 | $ | 668,750 | | | — | | $ | 712,364 | | $ | 285,036 | | | — | | | N/A | | $ | 474,546 | | $ | 2,140,696 | | | Compliance Officer & | 2014 | $ | 506,775 | | $ | 255,000 | | $ | 1,117,794 | | $ | 447,985 | | $ | 1,046,500 | | | N/A | | $ | 185,167 | | $ | 3,559,221 | | | Senior Vice President - | | | | | | | | | | | | | | | | | | | | | | | | | | | Government Affairs | | | | | | | | | | | | | | | | | | | | | | | | | | | Douglas R. Matthews | 2016 | $ | 541,000 | | | — | | $ | 361,605 | | $ | 181,580 | | $ | 833,140 | | $ | 225,984 | | $ | 91,565 | | $ | 2,234,874 | | | Senior Vice President - | 2015 | $ | 537,000 | | | — | | $ | 557,600 | | $ | 222,988 | | | — | | $ | 399,272 | | $ | 45,340 | | $ | 1,762,200 | | | Industrial, Service | 2014 | $ | 518,750 | | | — | | $ | 892,866 | | $ | 222,967 | | $ | 882,000 | | $ | 1,491,171 | | $ | 43,745 | | $ | 4,051,499 | | | Center and Mining | | | | | | | | | | | | | | | | | | | | | | | | | | | Solutions | | | | | | | | | | | | | | | | | | | | | | | | | | | James E. Bruno | 2016 | $ | 403,500 | | | — | | $ | 619,554 | | $ | 67,538 | | $ | 466,043 | | | N/A | | $ | 58,662 | | $ | 1,615,297 | | | Senior Vice President - | | | | | | | | | | | | | | | | | | | | | | | | | | | Automotive Solutions | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (1) | Amounts are not reported for 2015 and 2014 if the executive was not an NEO in those years. Mr. Bruno was not a Named Executive Officer in 2014 and 2015. | | | (2) | Salaries provided reflect the actual amount earned in each year. Salary in 2014 for Ms. Folsom reflects a partial year based on her hire date of January 27, 2014. | | | (3) | Bonus includes cash hiring incentive. | | | (4) | Stock and option award grant date values are computed in accordance with Accounting Standard Codification Topic 718 (ASC 718), as described in footnote 14 to the financial statements included in the Corporation’s Annual Report on Form 10-K for the year-ended December 31, 2016 which was filed with the SEC on February 28, 2017. The Stock Awards column includes restricted stock units and performance awards that are reported at the target number of shares and the grant date fair value of such awards includes a factor for the probable performance outcome of the performance awards which are based on TSR, and excludes the effect of estimated forfeitures. The maximum payout for the performance awards is 200% of target. In 2014 the Stock Awards column includes a performance grant based on an internal financial performance goal. In the event that these awards would be paid at maximum payouts the totals in the stock awards column would be: $9,044,000 for Mr. Longhi, $3,000,000 for Mr. Burritt, $1,340,000 for Ms. Folsom, and $1,340,000 for Mr. Matthews. Mr. Bruno did not receive the 2014
- (2)
- Salaries provided reflect the actual amount earned in each year. Salary in 2017 for Mr. Bradley reflects a partial year based on his hire date of July 27, 2017.
- (3)
- Bonus includes cash hiring incentive.
- (4)
- Stock and option award grant date values are computed in accordance with Accounting Standard Codification Topic 718 (ASC 718), as described in footnote 14 to the financial statements included in the Corporation's Annual Report on Form 10-K for the year-ended December 31, 2017 which was filed with the SEC on February 21, 2018. The Stock Awards column includes restricted stock units and performance awards that are reported at the target number of shares and the grant date fair value of such awards includes a factor for the probable performance outcome of the performance awards which are based on TSR, and excludes the effect of estimated forfeitures. The maximum payout for the performance awards is 200% of target. In the event that these awards would be paid at maximum payouts, the maximum payments for the portion of the stock awards column that is allocated to performance awards would be in 2015: $1,673,342 for Mr. Burritt, $678,546 for Mr. Matthews, $495,880 for Mr. Rintoul, $5,323,626 for Mr. Longhi, and $866,778 for Ms. Folsom. Messrs. Bradley, Buckiso, and Soni did not receive the 2015 Performance Share Grant. The potential maximum payouts in 2016 would be: $879,798 for Mr. Burritt, $356,686 for Mr. Matthews, $132,864 for Mr. Buckiso, $260,762 for Mr. Rintoul, $2,799,466 for Mr. Longhi and $455,986 for Ms. Folsom. Messrs. Bradley and Soni did not receive the 2016 Performance Share Grant. The potential maximum payouts in 2017 would be: $2,951,826 for Mr. Burritt, $525,292 for Mr. Bradley, $668,520 for Mr. Matthews, $300,092 for Mr. Buckiso, $489,258 for Mr. Rintoul, $5,250,110 for Mr. Longhi, $854,716 for Ms. Folsom and $248,590 for Mr. Soni. These amounts do not include the value of restricted stock units included in the stock awards column.
- (5)
- The grant date fair market value used to calculate compensation expense in accordance with ASC 718 for the NEOs is $39.27 for our 2017 restricted stock unit grants, $14.78 per share for our 2016 restricted stock unit grants, and $24.78 for our 2015 restricted stock unit grants. Performance
Share Grant. | | | (5) | The grant date fair market value used to calculate compensation expense in accordance with ASC 718 for the NEOs is $14.78 for our 2016 restricted stock unit grants, $24.78 per share for our 2015 restricted stock unit grants, and $24.29 for our 2014 restricted stock unit grants. For 2016 and 2015, performance award grants were granted in two portions, one cash grant based on a 3-year weighted average return on capital employed measure and disclosed in the Grants of Plan-Based Awards table, and the second equity grant based on a total shareholder return measure. For 2014, performance award grants were granted in two portions, one equity grant based on a 3-year weighted average return on capital employed measure, and the second equity grant based on a total shareholder return measure. The grant date fair market value used to calculate the 2016 performance awards based on TSR is $10.02; $24.95 per share for our 2015 performance awards based on TSR; $23.71 per share for our performance awards based on ROCE, and $21.99 per share for our 2014 TSR shares. Ms. Folsom also received a 2014 new hire grant of equity which consisted of 8,800 restricted stock units and 20,000 stock options. The grant date fair market value used to calculate compensation expense in accordance with ASC 718 for Ms. Folsom’s new hire grant is $25.56 per share for the restricted stock units and $11.25 per share for the stock options. For further detail, see our Annual Report on Form 10-K for the year-ended December 31, 2014, financial statement footnote 14. Mr. Bruno received a second installment of his new hire grant of equity in 2016 which consisted of 27,450 restricted stock units and a retention grant of equity which consisted of 16,915 restricted stock units. The grant date fair market value used to calculate compensation expense in accordance with ASC 718 for Mr. Bruno’s new hire grant is $8.56 per share for the restricted stock units and $14.78 per share for the retention grant. For further detail, see our Annual Report on Form 10-K for the year-ended December 31, 2016, Financial Statement footnote 14. | | | (6) | The grant date fair market value used to calculate compensation expense in accordance with ASC 718, is $6.24 per share for our 2015 stock option grants; $10.04 per share for our 2015 stock option grants, and $9.93 per share for our 2014 stock option grants. For further detail, see our report on Annual Report on Form 10-K for the year-ended December 31, 2016, Financial Statement footnote 14. |
| | United States Steel Corporation | 2017 Proxy Statement | 39 |
Executive Compensation Tables
(7) | The Non-Equity Incentive Plan Compensation benefits are short-term incentive awards and represent the aggregate amount of incentive awards earned pursuant to the Corporation’s Annual Incentive Compensation Plan (“AICP”). | | | (8) | These amounts represent the aggregate increase in actuarial value on an accumulated benefit obligation (ABO) basis that accrued to each Named Executive Officer in 2016 under the Corporation’s retirement plans and programs, calculated using the same assumptions used for the Corporation’s annual financial statements except that retirement age is assumed to be the normal retirement age for the respective plans. Key assumptions, and the present value of the accumulated benefits for each executive reflecting all benefits earned as of December 31, 2016 by the executive under each plan and letter agreement, are shown under the 2016 Pension Benefits table. The values reported in the earnings column of the 2016 Nonqualified Deferred Compensation table are not included here because the earnings are not above-market and are not preferential. These amounts exclude any benefits to be paid from plans of formerly affiliated companies. | | | (9) | Components of “All Other Compensation” are as follows: |
| | ALL OTHER COMPENSATION IN 2016 | | | U. S. Steel | | | | | | | | | | Savings | | Non Qualified Defined | | | | | | | | Plan | | Contribution Plan | | | | | | | Name | Contributions(a) | | Accruals(b) | | Perquisites(c) | | TOTAL | | | Longhi | $ 36,750 | | $ | 180,750 | | $ | 415,170 | | $ | 632,670 | | | Burritt | $ 34,525 | | $ | 81,475 | | | — | | $ | 116,000 | | | Folsom | $ 30,916 | | $ | 70,583 | | $ | 23,120 | | $ | 124,620 | | | Matthews | $ 32,295 | | $ | 46,150 | | $ | 13,120 | | $ | 91,565 | | | Bruno | $ 26,654 | | $ | 32,008 | | | — | | $ | 58,662 | | | | | | | | | | | | | | | |
| (a) | U. S. Steel Savings Plan Contributions include: (i) employer matching contributions that were made in the form of the Corporation’s common stock and (ii) other non-elective employer contributions known as Retirement Account contributions that were made to the executive’s 401(k) account in the U. S. Steel Savings Plan (a federal income tax-qualified defined contribution plan also known as a “401(k) plan”) during the most recently completed fiscal year. | | | | | (b) | The Non Qualified Defined Contribution Plan Accruals include accruals under the following programs: | | | |
| • | The Supplemental Thrift Program, in which benefits accrue in the form of phantom shares of U. S. Steel common stock equal to the portion of the Corporation’s matching contributions to the U. S. Steel Savings Plan that cannot be provided due to the statutory limits on covered compensation and annual contributions. | | | | | • | The Non Tax-Qualified Retirement Account Program, which provides book accruals equal to the amount of Retirement Account contributions that cannot be provided under the U. S. Steel Savings Plan due to the statutory limits on covered compensation and annual contributions. | | | | | • | The Supplemental Retirement Account Program, which provides book accruals equal to the applicable Retirement Account contribution rate (8.5% for all NEOs ) under the U. S. Steel Savings Plan multiplied by incentive compensation paid under our short-term incentive compensation program. | | | |
| (c) | The amounts shown for Mr. Longhi include the cost of financial planning, tax preparation, company paid executive physical, a club membership used for business purposes, $259,611 for personal security detail and $127,897 for personal aircraft use. The aggregate incremental cost of the personal use of corporate aircraft is calculated using the rate per flight hour for the type of corporate aircraft used. The rates are published twice per year by a nationally recognized and independent service. The calculated incremental costs for personal flights include the costs related to all flight hours flown in connection with the personal use. The Corporation consistently applies allocation methods for flights that are not entirely either business or personal. The amounts shown for Ms. Folsom include the cost of financial planning, tax preparation, and a relocation settlement allowance. Amounts shown for Mr. Matthews include the cost of financial planning and tax preparation. Not included in All Other Compensation are the values of dividends paid on restricted stock awards because these amounts are considered in determining the grant date fair market value shown under the “Stock Awards” column of the Summary Compensation Table. |
40 | United States Steel Corporation | 2017 Proxy Statement | | |
Executive Compensation Tables
Grants of Plan-Based Awards table, and the second equity grant based on a total
40 |United States Steel Corporation | 2018 Proxy Statement
Table of Contents | Executive Compensation Tables |
shareholder return (TSR) measure. The grant date fair market value used to calculate the 2017 performance awards based on TSR is $49.52; $10.02 per share for our 2016 performance awards based on TSR; and $24.95 per share for our 2015 TSR shares. Mr. Burritt received a 2017 annual grant of equity in conjunction with his promotion to President and Chief Executive Officer which consisted of 20,980 restricted stock units and 35,530 performance shares based on TSR. The grant date fair market value used to calculate compensation expense in accordance with ASC 718 for Mr. Burritt's grant is $20.69 per share for the restricted stock units and $18.32 per share for the performance award based on TSR. Mr. Bradley received a 2017 new hire grant of equity which consisted of 7,580 restricted stock units and 13,080 performance shares based on TSR. The grant date fair market value used to calculate compensation expense in accordance with ASC 718 for Mr. Bradley's grant is $23.10 per share for the restricted stock units and $20.08 per share for the performance award based on TSR. Ms. Folsom received a 2017 retention grant of equity which consisted of 10,000 restricted stock units. The grant date fair market value used to calculate compensation expense in accordance with ASC 718 for Ms. Folsom's grant is $32.36 per share for the restricted stock units. For further detail, see our Annual Report on Form 10-K for the year-ended December 31, 2017, financial statement footnote 14.
- (6)
- The grant date fair market value used to calculate compensation expense in accordance with ASC 718, is $18.32 per share for our 2017 stock option grants; $6.24 per share for our 2016 stock option grants, and $10.04 per share for our 2015 stock option grants. For further detail, see our report on Annual Report on Form 10-K for the year-ended December 31, 2017, Financial Statement footnote 14. Mr. Burritt received a 2017 annual grant of equity in conjunction with his promotion to President and Chief Executive Officer which consisted of 43,530 stock options. The grant date fair market value used to calculate compensation expense in accordance with ASC 718 for Mr. Burritt's grant is $9.97 per share for the stock options. Mr. Bradley received a 2017 new hire grant of equity which consisted of 15,730 stock options. The grant date fair market value used to calculate compensation expense in accordance with ASC 718 for Mr. Bradley's grant is $11.12 per share for the stock options. For further detail, see our Annual Report on Form 10-K for the year-ended December 31, 2017, financial statement footnote 14.
- (7)
- The Non-Equity Incentive Plan Compensation benefits are short-term incentive awards and represent the aggregate amount of incentive awards earned pursuant to the Corporation's Annual Incentive Compensation Plan ("AICP"). The amount shown for Mr. Soni also includes $9,396 awarded pursuant to the Corporation's short-term incentive plan.
- (8)
- These amounts represent the aggregate increase in actuarial value on an accumulated benefit obligation (ABO) basis that accrued to each Named Executive Officer in 2017 under the Corporation's retirement plans and programs, calculated using the same assumptions used for the Corporation's annual financial statements except that retirement age is assumed to be the normal retirement age for the respective plans. Key assumptions, and the present value of the accumulated benefits for each executive reflecting all benefits earned as of December 31, 2017 by the executive under each plan are shown under the 2017 Pension Benefits table. The values reported in the earnings column of the 2017 Nonqualified Deferred Compensation table are not included here because the earnings are not above-market and are not preferential. These amounts exclude any benefits to be paid from plans of formerly affiliated companies.
- (9)
- Components of "All Other Compensation" are as follows:
| | | | | | | | | | | | | | | | | | | | | | | ALL OTHER COMPENSATION IN 2017 | | | | | | | | | | | | | | | | | | | | | | | Name | | | U. S. Steel
Savings
Plan
Contributions(a) | | | Non Qualified
Defined
Contribution Plan
Accruals(b) | | | International Tax
Gross Ups &
Reimbursements(c) | | | Separation
Payments(d) | | | Perquisites(e) | | | TOTAL | | | | | | | | | | | | | | | | | | | | | | | Burritt | | $ | 35,333 | | $ | 254,175 | | | — | | | — | | $ | 31,035 | | $ | 320,543 | | Bradley | | $ | 39,396 | | $ | 2,896 | | | — | | | — | | $ | 14,090 | | $ | 56,382 | | Matthews | | $ | 26,148 | | $ | 123,114 | | | — | | | — | | $ | 13,490 | | $ | 162,752 | | Buckiso | | $ | 31,750 | | $ | 64,265 | | $ | 423,885 | | | — | | $ | 19,927 | | $ | 539,827 | | Rintoul | | $ | 37,920 | | $ | 73,404 | | $ | 7,322 | | | — | | $ | 26,366 | | $ | 145,012 | | Longhi | | $ | 36,500 | | $ | 457,140 | | | — | | $ | 112,198 | | $ | 190,914 | | $ | 796,752 | | Folsom | | $ | 31,417 | | $ | 178,373 | | | — | | $ | 1,699,023 | | $ | 14,561 | | $ | 1,923,374 | | Soni | | $ | 35,192 | | $ | 26,001 | | | — | | | — | | | — | | $ | 61,193 | | | | | | | | | | | | | | | | | | | | | | |
- (a)
- U. S. Steel Savings Plan Contributions include: (i) employer matching contributions that were made in the form of the Corporation's common stock and (ii) other non-elective employer contributions known as Retirement Account contributions that were made to the executive's 401(k) account in the U. S. Steel Savings Plan (a federal income tax-qualified defined contribution plan also known as a "401(k) plan") during the most recently completed fiscal year.
- (b)
- The Non Qualified Defined Contribution Plan Accruals include accruals under the following programs:
- •
- The Supplemental Thrift Program, in which benefits accrue in the form of phantom shares of U. S. Steel common stock equal to the portion of the Corporation's matching contributions to the U. S. Steel Savings Plan that cannot be provided due to the statutory limits on covered compensation and annual contributions.
- •
- The Non Tax-Qualified Retirement Account Program, which provides book accruals equal to the amount of Retirement Account contributions that cannot be provided under the U. S. Steel Savings Plan due to the statutory limits on covered compensation and annual contributions.
- •
- The Supplemental Retirement Account Program, which provides book accruals equal to the applicable Retirement Account contribution rate (8.5% for all NEOs) under the U. S. Steel Savings Plan multiplied by incentive compensation paid under our short-term incentive compensation programs.
- (c)
- Payments related to international assignments. For Mr. Buckiso this includes taxes paid on his behalf to his host country tax jurisdiction of $263,713, housing benefits of $49,990, U. S. tax gross-ups of $68,886, an international assignment premium and home leave benefits.
- (d)
- Payments to Mr. Longhi include $112,198 for unused vacation. Payments to Ms. Folsom include $112,773 for unused vacation, $276,250 in incremental value relating to a change in the vesting terms of her January 31, 2017 stock award, and $1,310,000 in other payments related to her separation agreement.
- (e)
- The amount shown for Mr. Burritt includes personal aircraft use and dues and initial fees for a club membership used for business purposes. The aggregate incremental cost of the personal use of corporate aircraft is calculated using the rate per flight hour for the type of corporate aircraft used. The rates are published twice per year by a nationally recognized and independent service. The calculated incremental costs for personal flights include the costs related to all flight hours flown in connection with the personal use. The Corporation consistently applies allocation methods for flights that are not entirely either business or personal. The amount shown for Mr. Bradley includes relocation expenses. The amount shown for Mr. Matthews includes financial planning services. The amount shown for Mr. Buckiso includes the cost of a company provided automobile. Amounts shown for Mr. Rintoul include a company paid executive physical. The amount shown for Mr. Longhi includes $133,429 for personal aircraft use, $38,540 for personal security, and the cost of financial planning services. The amount shown for Ms. Folsom includes the cost of financial planning services. Not included in All Other Compensation are the values of dividends paid on restricted stock awards because these amounts are considered in determining the grant date fair market value shown under the "Stock Awards" column of the Summary Compensation Table.
United States Steel Corporation | 2018 Proxy Statement |41
Table of Contents Executive Compensation Tables |
Grants of Plan-Based Awards The following table summarizes the grant of non-equity incentive compensation and equity-based incentive compensation to each Named Executive Officer in 2016.2017. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| |
| |
| |
| |
| |
| |
| |
| | All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(7)
(#)
| | All Other
Option
Awards:
Number of
Securities
Underlying
Options(8)
(#)
| |
| |
| |
| |
|---|
| |
| |
| | Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(3)
| | Estimated Future Payouts
Under Equity Incentive
Plan Awards(6)
| |
| |
| | Grant Date
Fair Value
of Stock
and Option
Awards(10)
($)
| |
|---|
| |
| |
| | Exercise
Price of
Option
Awards(9)
($/Share)
| | Closing
Price on
Grant
Date
($/Share)
| |
|---|
Name
| | Plan
Name(1)
| | Grant
Date(2)
| | Threshold(4)
($)
| | Target
($)
| | Maximum(5)
($)
| | Threshold
(#)
| | Target
(#)
| | Maximum
(#)
| |
|---|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Burritt | | AICP | | | 3/27/2017 | | $ | 594,565 | | $ | 1,189,130 | | $ | 2,705,271 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | LTIP | | | 2/28/2017 | | $ | 412,500 | | $ | 825,000 | | $ | 1,072,500 | | | 8,330 | | | 16,660 | | | 33,320 | | | 14,010 | | | 30,020 | | $ | 39.265 | | $ | 38.72 | | $ | 1,925,072 | | | | LTIP | | | 5/31/2017 | | $ | 325,500 | | $ | 651,000 | | $ | 846,300 | | | 17,765 | | | 35,530 | | | 71,060 | | | 20,980 | | | 43,530 | | $ | 20.685 | | $ | 20.85 | | $ | 1,518,875 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Bradley | | AICP | | | 3/27/2017 | | $ | 150,002 | | $ | 300,003 | | $ | 682,508 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | LTIP | | | 8/1/2017 | | $ | 131,250 | | $ | 262,500 | | $ | 341,250 | | | 6,540 | | | 13,080 | | | 26,160 | | | 7,580 | | | 15,730 | | $ | 23.095 | | $ | 22.72 | | $ | 612,625 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Matthews | | AICP | | | 3/27/2017 | | $ | 216,400 | | $ | 432,800 | | $ | 984,620 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | LTIP | | | 2/28/2017 | | $ | 167,250 | | $ | 334,500 | | $ | 434,850 | | | 3,375 | | | 6,750 | | | 13,500 | | | 5,680 | | | 12,170 | | $ | 39.265 | | $ | 38.72 | | $ | 780,239 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Buckiso | | AICP | | | 3/27/2017 | | $ | 123,750 | | $ | 247,500 | | $ | 563,063 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | LTIP | | | 2/28/2017 | | $ | 75,000 | | $ | 150,000 | | $ | 195,000 | | | 1,515 | | | 3,030 | | | 6,060 | | | 2,550 | | | 5,460 | | $ | 39.265 | | $ | 38.72 | | $ | 350,198 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Rintoul | | AICP | | | 3/27/2017 | | $ | 174,650 | | $ | 349,300 | | $ | 794,658 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | LTIP | | | 2/28/2017 | | $ | 122,250 | | $ | 244,500 | | $ | 317,850 | | | 2,470 | | | 4,940 | | | 9,880 | | | 4,150 | | | 8,900 | | $ | 39.265 | | $ | 38.72 | | $ | 570,627 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Longhi | | AICP | | | 3/27/2017 | | $ | 562,500 | | $ | 1,125,000 | | $ | 2,559,375 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | LTIP | | | 2/28/2017 | | $ | 1,312,500 | | $ | 2,625,000 | | $ | 3,412,500 | | | 26,505 | | | 53,010 | | | 106,020 | | | 44,560 | | | 95,520 | | $ | 39.265 | | $ | 38.72 | | $ | 6,124,630 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Folsom | | AICP | | | 3/27/2017 | | $ | 280,000 | | $ | 560,000 | | $ | 1,274,000 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | LTIP | | | 1/31/2017 | | | — | | | — | | | — | | | — | | | — | | | — | | | 10,000 | | | — | | | — | | $ | 32.71 | | $ | 599,850 | | | | LTIP | | | 2/28/2017 | | $ | 213,750 | | $ | 427,500 | | $ | 555,750 | | | 4,315 | | | 8,630 | | | 17,260 | | | 7,260 | | | 15,560 | | $ | 39.265 | | $ | 38.72 | | $ | 997,481 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Soni | | AICP | | | 3/27/2017 | | $ | 103,125 | | $ | 206,250 | | $ | 469,219 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | LTIP | | | 2/28/2017 | | $ | 62,250 | | $ | 124,500 | | $ | 161,850 | | | 1,255 | | | 2,510 | | | 5,020 | | | 2,110 | | | 4,530 | | $ | 39.265 | | $ | 38.72 | | $ | 290,134 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- (1)
- AICP refers to the Corporation's Annual Incentive Compensation Plan. LTIP refers to the Long-Term Incentive Compensation Program under the United States Steel Corporation 2005 Stock Incentive Plan and the United States Steel 2016 Omnibus Incentive Compensation Plan.
- (2)
- The grant date for the AICP represents the date that the Compensation & Organization Committee (the "Committee") established the annual incentive targets for the 2017 performance period.
- (3)
- Our NEOs received non-equity incentive awards under the AICP and LTIP in 2017. For a discussion of the plans, the 2017 performance targets and the 2017 award amounts, see the Short-Term Incentive Compensation and Long-Term Incentive Compensation sections in the "Compensation Discussion and Analysis" included in this proxy statement. Amounts shown reflect the amount that would be paid to each executive at each performance level, before consideration of individual performance.
- (4)
- The threshold level for the AICP award is based upon the lowest possible payouts for earnings before interest, taxes, depreciation, and amortization (EBITDA) (25% of target) and cash flow (25% of target) for a combined threshold of 50%. In addition, individual performance is also considered and can increase an award by up to 30% or reduce or eliminate the award. The threshold level for the LTIP grant is based on 50% of the incentive target performance for return on capital employed (ROCE) performance award described in footnote 6.
- (5)
- The maximum level for the AICP award is based on 175% of the target award multiplied by the maximum personal performance adjustment of 130%. The maximum award under the LTIP ROCE performance awards is 200% of the target award.
- (6)
- Performance award grants were made on February 28, 2017 to all NEOs except for Mr. Bradley, whose award was granted on August 1, 2017, shortly following his date of hire. For 2017, performance awards represent approximately 60% of the total annual grant value, with half of the award value granted in cash long-term incentives based on the Corporation's three-year weighted average return on capital employed (ROCE) as the performance measure, and the other half of the award value granted in equity based on total shareholder return (TSR). ROCE weighted average return is based on 20% weighting of year one of the performance period, 30% weighting on the second year of the performance period and 50% weighting on the third year of the performance period. Vesting is performance-based and will occur, if at all, following the end of the three-year performance period (the "performance period") on the date the Committee meets to determine the Corporation's actual performance for the performance period. The payout is based upon the three-year weighted average ROCE for the period for the cash portion, and the rank of our TSR compared to the TSR of the companies in the peer group for the equity portion. Performance awards do not pay dividends or carry voting privileges. Executives may receive grants of options and restricted stock units in addition to performance awards under the LTIP. We have not engaged in any repricing or other material modification of any outstanding options or other equity-based award under the plan.
- (7)
- Restricted stock unit grants were made on February 28, 2017 to all NEOs except Mr. Bradley. The units are time-based awards subject to ratable vesting over a three-year period with one-third of the granted shares vesting on February 28, 2018; an additional one-third of the shares vesting on February 28, 2019; and the remaining one-third of the shares vesting on February 28, 2020, subject in each case to continued employment through the vesting dates. Additional RSU grants were made on May 31, 2017 to Mr. Burritt. The units are time-based awards subject to ratable vesting over a three-year period with one-third of the granted shares vesting on May 31, 2018; an additional one-third of the shares vesting on May 31, 2019; and the remaining one-third of the shares vesting on May 31, 2020, subject in each case to continued employment through the vesting dates. Restricted stock unit grants were made on August 1, 2017 to Mr. Bradley. The units are time-based awards subject to ratable vesting over a three-year period with one-third of the granted shares vesting on August 1, 2018; an additional one-third of the shares vesting on August 1, 2019; and the remaining one-third of the shares vesting on August 1, 2020, subject in each case to continued employment through the vesting dates.
- (8)
- Option grants were made on February 28, 2017 to all NEOs except Mr. Bradley. The option grants are time-based, with a ten-year term and vest over a three-year period with one-third of the granted shares vesting on February 28, 2018; an additional one-third of the shares vesting on February 28, 2019; and the remaining one-third of the shares vesting on February 28, 2020, subject in each case to continued employment on the vesting dates. Additional option grants were made on May 31, 2017 to Mr. Burritt. The option grants are time-based, with a ten-year term and vest over a three-year period with one-third of the granted shares vesting on May 31, 2018; an additional one-third of the shares vesting on May 31, 2019; and the remaining one-third of the shares vesting on May 31, 2020, subject in each case to continued employment on the vesting dates. Option grants were made on August 1, 2017 to Mr. Bradley. The option grants are time-based, with a ten-year term and vest over a three-year period with one-third of the granted shares vesting on August 1, 2018; an additional one-third of the shares vesting on August 1, 2019; and the remaining one-third of the shares vesting on August 1, 2020, subject in each case to continued employment on the vesting dates.
- (9)
- Exercise Price of Option Awards represents the fair market value on the date of grant.
- (10)
- This column represents the full grant date fair market value for the equity incentive awards, stock awards and option awards, calculated in accordance with ASC 718 based on the average of the high and low stock price on the date of the grant. The restricted stock units accrue dividends at a non-preferential rate ($0.05) per share (as of the last announced dividend) that are paid when the underlying restricted stock units vest. The value of these dividends is reflected in the fair market value of the restricted stock unit grant. Restricted stock units carry no voting privileges. The target number of TSR performance awards is also based on the fair market value on the date of grant and includes a factor predicting the probable outcome of the performance goal for the grant. The factor for the February 28, 2017 performance award grant was 126.0185%, the factor for the May 31, 2017 performance award grant was 88.5801%, and the factor for the August 1, 2017 performance award grant was 86.9257% as determined by a third-party consultant using a Monte Carlo valuation model. The maximum payout for the ROCE performance awards is 200% of target. Accordingly, if maximum share payouts were achieved for such performance awards, the aggregate grant date fair value for such awards would be twice the target amount disclosed in the table related to such performance awards. The value shown for Ms. Folsom includes the incremental value attributed to the change in vesting terms of her January 2017 grant.
42 |United States Steel Corporation | 2018 Proxy Statement
Table of Contents | | | | | | | | | | | | | | | | All Other | | All Other | | | | | | | | | | | | | | | | | | | | | | | | Stock | | Option | | | | | | | | | | | | Estimated Future Payouts | | Estimated Future Payouts | | Awards: | | Awards: | | | | | | Grant Date | | | | | | Under Non-Equity Incentive | | Under Equity Incentive | | Number of | | Number of | | Exercise | | Closing | | Fair Value | | | | | | Plan Awards(3) | | Plan Awards(6) | | Shares of | | Securities | | Price of | | Price on | | of Stock | | | | | | | | | | | | | | | | | | Stock or | | Underlying | | Option | | Grant | | and Option | | | | Plan | Grant | Threshold(4) | | Target | | Maximum(5) | | Threshold | | Target | | Maximum | | Units(7) | | Options(8) | | Awards(9) | | Date | | Awards(10) | | | Name | Name(1) | Date(2) | ($) | | ($) | | ($) | | (#) | | (#) | | (#) | | (#) | | (#) | | ($/Share) | | ($/Share) | | ($) | | | Longhi | AICP | 1/25/2016 | $ | 1,125,000 | | $ | 2,250,000 | | $ | 5,118,750 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | LTIP | 2/22/2016 | $ | 1,312,500 | | $ | 2,625,000 | | $ | 5,250,000 | | | 70,480 | | | 140,960 | | | 281,920 | | | — | | | — | | | — | | $ | 8.48 | | $ | 1,412,419 | | | | LTIP | 5/31/2016 | | — | | | — | | | — | | | — | | | — | | | — | | | 96,420 | | | 228,300 | | $ | 14.78 | | $ | 14.47 | | $ | 2,850,136 | | | Burritt | AICP | 1/25/2016 | $ | 400,000 | | $ | 800,000 | | $ | 1,820,000 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | LTIP | 2/22/2016 | $ | 412,500 | | $ | 825,000 | | $ | 1,650,000 | | | 22,150 | | | 44,300 | | | 88,600 | | | — | | | — | | | — | | $ | 8.48 | | $ | 443,886 | | | | LTIP | 5/31/2016 | | — | | | — | | | — | | | — | | | — | | | — | | | 30,300 | | | 71,750 | | $ | 14.78 | | $ | 14.47 | | $ | 895,698 | | | Folsom | AICP | 1/25/2016 | $ | 280,000 | | $ | 560,000 | | $ | 1,274,000 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | LTIP | 2/22/2016 | $ | 213,750 | | $ | 427,500 | | $ | 855,000 | | | 11,480 | | | 22,960 | | | 45,920 | | | — | | | — | | | — | | $ | 8.48 | | $ | 230,059 | | | | LTIP | 5/31/2016 | | — | | | — | | | — | | | — | | | — | | | — | | | 15,700 | | | 37,180 | | $ | 14.78 | | $ | 14.47 | | $ | 464,124 | | | Matthews | AICP | 1/25/2016 | $ | 216,400 | | $ | 432,800 | | $ | 984,620 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | LTIP | 2/22/2016 | $ | 167,250 | | $ | 334,500 | | $ | 669,000 | | | 8,980 | | | 17,960 | | | 35,920 | | | — | | | — | | | — | | $ | 8.48 | | $ | 179,959 | | | | LTIP | 5/31/2016 | | — | | | — | | | — | | | — | | | — | | | — | | | 12,290 | | | 29,090 | | $ | 14.78 | | $ | 14.47 | | $ | 363,226 | | | Bruno | AICP | 1/25/2016 | $ | 110,963 | | $ | 221,925 | | $ | 504,879 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | LTIP | 2/22/2016 | $ | 62,250 | | $ | 124,500 | | $ | 249,000 | | | 3,345 | | | 6,690 | | | 13,380 | | | 27,450 | | | — | | | — | | $ | 8.48 | | $ | 302,006 | | | | LTIP | 5/31/2016 | | — | | | — | | | — | | | — | | | — | | | — | | | 21,485 | | | 10,820 | | $ | 14.78 | | $ | 14.47 | | $ | 385,087 | |
| | (1) | AICP refers to the Corporation’s Annual Incentive Compensation Plan. LTIP refers to the Long-Term Incentive Compensation Program under the United States Steel Corporation 2005 Stock Incentive Plan and the United States Steel 2016 Omnibus Incentive Compensation Plan. | | | (2) | The grant date for the AICP represents the date that the Compensation & Organization Committee (the “Committee”) established the annual incentive targets for the 2016 performance period. | | | (3) | Our NEOs received non-equity incentive awards under the AICP and LTIP in 2016. For a discussion of the plans, the 2016 performance targets and the 2016 award amounts, see the Short-Term Incentive Compensation and Long-Term Incentive Compensation sections in the “Compensation Discussion and Analysis” included in this proxy statement. | | | (4) | The threshold level for the AICP award is based upon the lowest possible payouts for earnings before interest, taxes, depreciation, and amortization (EBITDA) (25% of target) and cash flow (25% of target) for a combined threshold of 50%. In addition, individual performance is also considered and can increase an award by up to 30% or reduce or eliminate the award. The threshold level for the LTIP grant is based on 50% of the incentive target performance for return on capital employed (ROCE). | | | (5) | The maximum level for the AICP award is based on 175% of the target award multiplied by the maximum personal performance adjustment of 130%. The maximum award under the LTIP non-equity incentive is 200% of the target award. | | | (6) | Performance award grants were made on February 22, 2016 to all NEOs. For 2016, performance awards represent approximately 60% of the total annual grant value, with half of the award value granted in cash long-term incentives based on the Corporation’s three-year weighted average return on capital employed (ROCE) as the performance measure, and the other half of the award value granted in equity based on total shareholder return (“TSR”). ROCE weighted average return is based on 20% weighting of year one of the performance period, 30% weighting on the second year of the performance period and 50% weighting on the third year of the performance period. Vesting is performance-based and will occur, if at all, following the end of the three-year performance period (the “performance period”) on the date the Committee meets to determine the Corporation’s actual performance for the performance period. The payout is based upon the three-year weighted average ROCE for the period for the cash portion, and the rank of our total shareholder return compared to the total shareholder returns for the companies in the peer group for the equity portion. Performance awards do not pay dividends or carry voting privileges. Executives may receive grants of options and restricted stock units in addition to performance awards under the LTIP. We have not engaged in any repricing or other material modification of any outstanding options or other equity-based award under the plan. | | | (7) | Restricted stock unit grants were made on May 31, 2016 to all NEOs. The units are time-based awards subject to ratable vesting over a three-year period with one-third of the granted shares vesting on May 31, 2017; an additional one-third of the shares vesting on May 31, 2018; and the remaining one-third of the shares vesting on May 31, 2019, subject in each case to continued employment through the vesting dates. Restricted stock unit grants to Mr. Bruno included a second installment of his new hire grant of 27,450 shares on February 22, 2016 and a retention grant of 16,915 shares on May 31, 2016, both of which are time-based awards subject to cliff vesting on the third anniversary of the date of grant. | | | (8) | Option grants were made on May 31, 2016 to all NEOs. The option grants are time-based, with a ten-year term and vest over a three-year period with one-third of the granted shares vesting on May 31, 2017; an additional one-third of the shares vesting on May 31, 2018; and the remaining one-third of the shares vesting on May 31, 2019, subject in each case to continued employment on the vesting dates. | | | (9) | Exercise Price of Option Awards represents the fair market value on the date of grant. | | | (10) | This column represents the full grant date fair market value for the equity incentive awards, stock awards and option awards, calculated in accordance with ASC 718 based on the average of the high and low stock price on the date of the grant. The restricted stock units accrue dividends at a non-preferential rate ($0.05) per share (as of the last announced dividend) that are paid when the underlying restricted stock units vest. The value of these dividends is reflected in the fair market value of the restricted stock unit grant. Restricted stock units carry no voting privileges. The target number of TSR performance awards is also based on the fair market value on the date of grant and includes a factor predicting the probable outcome of the performance goal for the grant. The factor for the 2015 performance award grant was 117.0849%, determined by a third-party consultant using a Monte Carlo valuation model. The maximum payout for the ROCE performance awards is 200% of target. Accordingly, if maximum share payouts were achieved for such performance awards, the aggregate grant date fair value for such awards would be twice the target amount disclosed in the table related to such performance awards. |
| | United States Steel Corporation | 2017 Proxy Statement | 41 |
| Executive Compensation Tables |
Executive Compensation Tables
Outstanding Equity Awards at 20162017 Fiscal Year-End | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | | Grant
Date | | | Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable | | | Number of
Securities
Underlying
Unexercised
Options(1)
(#)
Unexercisable | | | Option
Exercise
Price
($) | | | Option
Expiration
Date(2) | | | Number of
Shares or
Units of
Stock
That Have
Not
Vested(3)
(#) | | | Market Value
of Shares or
Units of
Stock That
Have Not
Vested(4) ($) | | | Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That
Have Not
Vested(5) (#) | | | Equity Incentive
Plan Awards: Market
or Payout Value of
Unearned Shares,
Units or Other
Rights That Have
Not Vested(4)(5) ($)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Burritt | | | 5/27/2014 | | | 16,780 | | | — | | $ | 24.285 | | | 5/27/2024 | | | — | | | — | | | — | | | — | | | | | 2/24/2015 | | | 18,260 | | | 18,260 | | $ | 24.780 | | | 2/24/2025 | | | 7,400 | | $ | 260,406 | | | 33,070 | | $ | 861,977 | | | | | 2/22/2016 | | | — | | | — | | | — | | | — | | | — | | | — | | | 44,300 | | $ | 3,117,834 | | | | | 5/31/2016 | | | 23,916 | | | 47,834 | | $ | 14.780 | | | 5/31/2026 | | | 20,200 | | $ | 710,838 | | | — | | | — | | | | | 2/28/2017 | | | — | | | 30,020 | | $ | 39.265 | | | 2/28/2027 | | | 14,010 | | $ | 493,012 | | | 16,660 | | $ | 512,572 | | | | | 5/31/2017 | | | — | | | 43,530 | | $ | 20.690 | | | 5/31/2027 | | | 20,980 | | $ | 738,286 | | | 35,530 | | $ | 1,093,138 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Bradley | | | 8/1/2017 | | | — | | | 15,730 | | $ | 23.095 | | | 8/1/2027 | | | 7,580 | | $ | 266,740 | | | 13,080 | | $ | 402,427 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Matthews | | | 5/27/2008 | | | 1,600 | | | — | | $ | 169.225 | | | 5/27/2018 | | | — | | | — | | | — | | | — | | | | | 5/26/2009 | | | 11,660 | | | — | | $ | 29.805 | | | 5/26/2019 | | | — | | | — | | | — | | | — | | | | | 5/25/2010 | | | 7,680 | | | — | | $ | 45.650 | | | 5/25/2020 | | | — | | | — | | | — | | | — | | | | | 5/31/2011 | | | 10,730 | | | — | | $ | 45.805 | | | 5/31/2021 | | | — | | | — | | | — | | | — | | | | | 5/29/2012 | | | 19,960 | | | — | | $ | 22.305 | | | 5/29/2022 | | | — | | | — | | | — | | | — | | | | | 5/28/2013 | | | 22,080 | | | — | | $ | 25.000 | | | 5/28/2023 | | | — | | | — | | | — | | | — | | | | | 5/27/2014 | | | 22,450 | | | — | | $ | 24.285 | | | 5/27/2024 | | | — | | | — | | | — | | | — | | | | | 2/24/2015 | | | 14,806 | | | 7,404 | | $ | 24.780 | | | 2/24/2025 | | | 3,000 | | $ | 105,570 | | | 13,410 | | $ | 349,535 | | | | | 2/22/2016 | | | — | | | — | | | — | | | — | | | — | | | — | | | 17,960 | | $ | 1,264,025 | | | | | 5/31/2016 | | | 9,696 | | | 19,394 | | $ | 14.780 | | | 5/31/2026 | | | 8,194 | | $ | 288,347 | | | — | | | — | | | | | 2/28/2017 | | | — | | | 12,170 | | $ | 39.265 | | | 2/28/2027 | | | 5,680 | | $ | 199,879 | | | 6,750 | | $ | 207,675 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Buckiso | | | 5/27/2008 | | | 450 | | | — | | $ | 169.225 | | | 5/27/2018 | | | — | | | — | | | — | | | — | | | | | 5/26/2009 | | | 3,960 | | | — | | $ | 29.805 | | | 5/26/2019 | | | — | | | — | | | — | | | — | | | | | 5/25/2010 | | | 1,890 | | | — | | $ | 45.650 | | | 5/25/2020 | | | — | | | — | | | — | | | — | | | | | 5/31/2011 | | | 3,250 | | | — | | $ | 45.805 | | | 5/31/2021 | | | — | | | — | | | — | | | — | | | | | 5/29/2012 | | | 7,410 | | | — | | $ | 22.305 | | | 5/29/2022 | | | — | | | — | | | — | | | — | | | | | 5/28/2013 | | | 7,240 | | | — | | $ | 18.640 | | | 5/28/2023 | | | — | | | — | | | — | | | — | | | | | 5/27/2014 | | | 8,970 | | | — | | $ | 24.285 | | | 5/27/2024 | | | — | | | — | | | — | | | — | | | | | 2/24/2015 | | | 5,920 | | | 2,960 | | $ | 24.780 | | | 2/24/2025 | | | 1,200 | | $ | 42,228 | | | — | | | — | | | | | 2/22/2016 | | | — | | | — | | | — | | | — | | | — | | | — | | | 6,690 | | $ | 470,842 | | | | | 5/31/2016 | | | 3,606 | | | 7,214 | | $ | 14.780 | | | 5/31/2026 | | | 3,047 | | $ | 107,224 | | | — | | | — | | | | | 2/28/2017 | | | — | | | 5,460 | | $ | 39.265 | | | 2/28/2027 | | | 2,550 | | $ | 89,735 | | | 3,030 | | $ | 93,223 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Rintoul | | | 5/27/2008 | | | 1,400 | | | — | | $ | 169.225 | | | 5/27/2018 | | | — | | | — | | | — | | | — | | | | | 5/26/2009 | | | 7,640 | | | — | | $ | 29.805 | | | 5/26/2019 | | | — | | | — | | | — | | | — | | | | | 5/25/2010 | | | 2,880 | | | — | | $ | 45.650 | | | 5/25/2020 | | | — | | | — | | | — | | | — | | | | | 5/31/2011 | | | 8,950 | | | — | | $ | 45.805 | | | 5/31/2021 | | | — | | | — | | | — | | | — | | | | | 2/24/2015 | | | — | | | 5,414 | | $ | 24.780 | | | 2/24/2025 | | | 2,194 | | $ | 77,207 | | | 9,800 | | $ | 255,439 | | | | | 2/22/2016 | | | — | | | — | | | — | | | — | | | — | | | — | | | 13,130 | | $ | 924,089 | | | | | 5/31/2016 | | | — | | | 14,180 | | $ | 14.780 | | | 5/31/2026 | | | 5,994 | | $ | 210,929 | | | — | | | — | | | | | 2/28/2017 | | | — | | | 8,900 | | $ | 39.265 | | | 2/28/2027 | | | 4,150 | | $ | 146,039 | | | 4,940 | | $ | 151,987 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Longhi | | | 5/27/2014 | | | 50,580 | | | — | | $ | 24.285 | | | 6/30/2020 | | | — | | | — | | | — | | | — | | | | | 2/24/2015 | | | 58,100 | | | 19,367 | | $ | 24.780 | | | 6/30/2020 | | | — | | | — | | | — | | | — | | | | | 5/31/2016 | | | 76,100 | | | 6,341 | | $ | 14.780 | | | 6/30/2020 | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Folsom | | | 1/27/2014 | | | 6,667 | | | — | | $ | 25.560 | | | 12/29/2020 | | | — | | | — | | | — | | | — | | | | | 5/27/2014 | | | 7,484 | | | — | | $ | 24.285 | | | 12/29/2020 | | | — | | | — | | | — | | | — | | | | | 2/24/2015 | | | 9,463 | | | 8,938 | | $ | 24.780 | | | 12/29/2020 | | | — | | | — | | | — | | | — | | | | | 5/31/2016 | | | 12,393 | | | 16,352 | | $ | 14.780 | | | 12/29/2020 | | | — | | | — | | | — | | | — | | | | | 2/28/2017 | | | — | | | 7,924 | | $ | 39.265 | | | 12/29/2022 | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Soni | | | 4/26/2016 | | | — | | | — | | | — | | | — | | | 12,500 | | $ | 439,875 | | | — | | | — | | | | | 5/31/2016 | | | 3,670 | | | 7,340 | | $ | 14.780 | | | 5/31/2026 | | | 3,100 | | $ | 109,089 | | | — | | | — | | | | | 2/28/2017 | | | — | | | 4,530 | | $ | 39.265 | | | 2/28/2027 | | | 2,110 | | $ | 74,251 | | | 2,510 | | $ | 77,224 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
United States Steel Corporation | 2018 Proxy Statement |43 | | | | | Option Awards | | Stock Awards | | | | | | | | | | | | | | | Number of | | | | | Equity Incentive | | | | | | | | | Number of | | Number of | | | | | | | Shares or | | | | | Plan Awards: | | Equity Incentive | | | | | | | Securities | | Securities | | | | | | | Units of | | Market Value | | | Number of | | Plan Awards: Market | | | | | | | Underlying | | Underlying | | | | | | | Stock | | of Shares or | | | Unearned Shares, | | or Payout Value of | | | | | | | Unexercised | | Unexercised | | Option | | | | | That Have | | Units of | | | Units or Other | | Unearned Shares, | | | | | | | Options | | Options(1) | | Exercise | | | Option | | Not | | Stock That | | | Rights That | | Units or Other | | | | | Grant | | (#) | | (#) | | Price | | | Expiration | | Vested(2) | | Have Not | | | Have Not | | Rights That Have | | | Name | | Date | | Exercisable | | Unexercisable | | ($) | | | Date | | (#) | | Vested(3)($) | | | Vested(4)(#) | | Not Vested(3)(4)($) | | | Longhi | | 2/25/2014 | | — | | — | | | | — | | | — | | — | | | | — | | | 154,230 | | | $ | 5,091,132 | | | | | 2/25/2014 | | — | | — | | | | — | | | — | | — | | | | — | | | — | | | $ | — | | | | | 5/27/2014 | | — | | 50,580 | | | $ | 24.285 | | | 5/27/2024 | | 20,684 | | | $ | 682,779 | | | — | | | | — | | | | | 2/24/2015 | | — | | 116,200 | | | $ | 24.780 | | | 2/24/2025 | | 47,080 | | | $ | 1,554,111 | | | 142,034 | | | $ | 4,688,542 | | | | | 2/22/2016 | | — | | — | | | | — | | | — | | — | | | | — | | | 273,462 | | | $ | 9,026,981 | | | | | 5/31/2016 | | — | | 228,300 | | | $ | 14.780 | | | 5/31/2026 | | 96,420 | | | $ | 3,182,824 | | | — | | | | | | | Burritt | | 9/3/2013 | | 152,810 | | — | | | $ | 25.000 | | | 9/3/2023 | | — | | | | — | | | — | | | | — | | | | | 2/25/2014 | | — | | — | | | | — | | | — | | — | | | | — | | | 51,165 | | | $ | 1,688,957 | | | | | 2/25/2014 | | — | | — | | | | — | | | — | | — | | | | — | | | — | | | $ | — | | | | | 5/27/2014 | | 33,560 | | 16,780 | | | $ | 24.285 | | | 5/27/2024 | | 6,864 | | | $ | 226,581 | | | — | | | | — | | | | | 2/24/2015 | | 18,260 | | 36,520 | | | $ | 24.780 | | | 2/24/2025 | | 14,800 | | | $ | 488,548 | | | 44,645 | | | $ | 1,473,731 | | | | | 2/22/2016 | | — | | — | | | $ | | | | | | — | | | | — | | | 85,942 | | | $ | 2,836,945 | | | | | 5/31/2016 | | — | | 71,750 | | | $ | 14.780 | | | 5/31/2026 | | 30,300 | | | $ | 1,000,203 | | | | | | | | | | Folsom | | 1/27/2014 | | — | | 6,667 | | | $ | 25.560 | | | 1/27/2024 | | 2,934 | | | $ | 96,851 | | | — | | | | — | | | | | 2/25/2014 | | — | | — | | | | — | | | — | | — | | | | — | | | 22,845 | | | $ | 754,113 | | | | | 2/25/2014 | | — | | — | | | | — | | | — | | — | | | | — | | | — | | | $ | — | | | | | 5/27/2014 | | 14,966 | | 7,484 | | | $ | 24.285 | | | 5/27/2024 | | 3,060 | | | $ | 101,011 | | | — | | | | — | | | | | 2/24/2015 | | 9,463 | | 18,927 | | | $ | 24.780 | | | 2/24/2025 | | 7,667 | | | $ | 253,088 | | | 23,126 | | | $ | 763,389 | | | | | 2/22/2016 | | — | | — | | | | — | | | — | | — | | | | — | | | 44,542 | | | $ | 1,470,331 | | | | | 5/31/2016 | | — | | 37,180 | | | $ | 14.780 | | | 5/31/2026 | | 15,700 | | | $ | 518,257 | | | — | | | | — | | | Matthews | | 5/29/2007 | | 1,480 | | — | | | $ | 109.315 | | | 5/29/2017 | | — | | | | — | | | — | | | | — | | | | | 5/27/2008 | | 1,600 | | — | | | $ | 169.225 | | | 5/27/2018 | | — | | | | — | | | — | | | | — | | | | | 5/26/2009 | | 11,660 | | — | | | $ | 29.805 | | | 5/26/2019 | | — | | | | — | | | — | | | | — | | | | | 5/25/2010 | | 7,680 | | — | | | $ | 45.650 | | | 5/25/2020 | | — | | | | — | | | — | | | | — | | | | | 5/31/2011 | | 10,730 | | — | | | $ | 45.805 | | | 5/31/2021 | | — | | | | — | | | — | | | | — | | | | | 5/29/2012 | | 19,960 | | — | | | $ | 22.305 | | | 5/29/2022 | | — | | | | — | | | — | | | | — | | | | | 5/28/2013 | | 22,080 | | — | | | $ | 25.000 | | | 5/28/2023 | | — | | | | — | | | — | | | | — | | | | | 2/25/2014 | | — | | — | | | | — | | | — | | — | | | | — | | | 22,845 | | | $ | 754,113 | | | | | 2/25/2014 | | — | | — | | | | — | | | — | | — | | | | — | | | — | | | $ | — | | | | | 5/27/2014 | | 14,966 | | 7,484 | | | $ | 24.285 | | | 5/27/2024 | | 3,060 | | | $ | 101,011 | | | — | | | | — | | | | | 2/24/2015 | | 7,403 | | 14,807 | | | $ | 24.780 | | | 2/24/2025 | | 6,000 | | | $ | 198,060 | | | 18,104 | | | $ | 597,613 | | | | | 2/22/2016 | | — | | — | | | | — | | | — | | — | | | | — | | | 34,842 | | | $ | 1,150,134 | | | | | 5/31/2016 | | — | | 29,090 | | | $ | 14.780 | | | 5/31/2026 | | 12,290 | | | $ | 405,693 | | | — | | | | — | | | Bruno | | 2/24/2015 | | 2,756 | | 5,514 | | | $ | 24.780 | | | 2/24/2025 | | 12,324 | | | $ | 406,815 | | | 6,737 | | | $ | 222,388 | | | | | 2/22/2016 | | — | | — | | | | — | | | — | | 27,450 | | | $ | 906,125 | | | 12,979 | | | $ | 428,437 | | | | | 5/31/2016 | | — | | 10,820 | | | $ | 14.780 | | | 5/31/2026 | | 21,485 | | | $ | 709,225 | | | — | | | | — | |
| | (1) | All options vest in equal increments on the first three anniversaries of the date of grant, subject in each case to employment on the respective vesting dates or to pro rata vesting for retirement during the vesting period. | | | (2) | All restricted stock units vest in equal increments on the first three anniversaries of the date of grant, subject in each case to employment on the respective vesting dates or to pro rata vesting for retirement during the vesting period; except for the two installments of restricted stock unit new hire grants awarded to Mr. Bruno in 2015 and 2016 pursuant to his offer letter, which is conditioned on continued employment with the Corporation and subject to three-year cliff vesting on the third anniversary of the date of grant. Mr. Bruno also received a retention grant in 2016 which is also conditioned on continued employment with the Corporation and subject to three-year cliff vesting on the third anniversary of the date of grant. | | | (3) | Value is based on $33.01 per share, which was the closing price of the stock on December 30, 2016. | | | (4) | The 2014 LTIP award was an equity-based award, split equally between relative TSR and ROCE performance metrics. The 2014 performance period ended on December 31, 2016. Using stock prices and dividends reported since the beginning of the performance period, we estimate that, through December 31, 2016, the Corporation has performed at the 75th percentile relative to a peer group which resulted in a final award of 150% of target for the relative TSR portion. The 2014 ROCE equity award performance was below threshold; and is valued at zero as of December 31, 2016. | | | | In 2015 and 2016, the performance LTIP was split between an equity award based on TSR relative to a peer group and a long-term performance cash award based on ROCE. Based on performance through December 31, 2016, the 2015 TSR equity award is performing at a level that would earn a payout at 135% of plan and based on the first year of the performance period, the 2016 TSR equity award is performing at a level that would earn a payout at 194% of target. The ROCE cash awards for 2015 and 2016 are not shown on this table and based on performance through year one and year two these awards are indicating below threshold results.
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Executive Compensation Tables |
- (1)
- All options vest in equal increments on the first three anniversaries of the date of grant, subject in each case to employment on the respective vesting dates or, for the 2015 and 2016 grants, to pro rata vesting for retirement during the vesting period. For the options granted in 2017, the options fully vest upon attainment of age 60 with 5 years of service, or age 65, provided that the executive is employed for at least six months following the date of grant. Such options partially vest after 30 years of service or attainment of age 55 with 10 years of service.
- (2)
- Options generally expire 10 years after the date of grant. Upon a retirement or a "termination with consent," options granted prior to 2017 expire three years after the date of termination of employment, and options granted in 2017, expire five years after the date of termination of employment.
- (3)
- All restricted stock units vest in equal increments on the first three anniversaries of the date of grant, subject in each case to employment on the respective vesting dates or to pro rata vesting for retirement during the vesting period; For the RSUs granted in 2017, the RSUs fully vest upon attainment of age 60 with 5 years of service, or age 65, provided that the executive is employed for at least six months following the date of grant. Such RSUs partially vest after 30 years of service or attainment of age 55 with 10 years of service. Notwithstanding the foregoing, the restricted stock unit retention grant awarded to Ms. Folsom in 2017 and the restricted stock unit new hire grant issued to Mr. Soni in 2016, are conditioned on continued employment with the Corporation and subject to three-year cliff vesting on the third anniversary of the date of grant. The vesting of Ms. Folsom's grant was accelerated pursuant to her separation agreement.
- (4)
- Value is based on $35.19 per share, which was the closing price of the stock on December 29, 2017.
- (5)
- The performance LTIP was split between an equity award based on TSR relative to a peer group and a long-term performance cash award based on ROCE. The 2015 performance period ended on December 31, 2017. Using stock prices and dividends reported since the beginning of the performance period, we estimate that, through December 31, 2017, the Corporation has performed at the 44th percentile relative to a peer group which resulted in a final award of 74.07% of target for the relative TSR portion. The 2015 ROCE equity award performance was below threshold and is valued at zero as of December 31, 2017. Based on performance through December 31, 2017, the 2016 TSR equity award is performing at a level that would earn a payout at 200% of plan and based on the first year of the performance period, the 2017 TSR equity award is performing at a level that would earn a payout at 87.43% of target. The ROCE cash awards for 2015, 2016 and 2017 are not shown on this table. Based on performance through December 31, 2017 these awards are indicating below threshold results for 2015 and above target results for 2016 and 2017.
Executive Compensation Tables
Option Exercises and Stock Vested in 2016 2017 The following table illustrates for each Named Executive Officer, on an aggregate basis, the value realized from the exercise of stock options and from the vesting of restricted stock awards and performance awards in 2016.2017. | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards
| | | | | | | | | | | | | | | | | Name | | | Number of
Shares
Acquired
on Exercise
(#) | | | Value
Realized on
Exercise(1)
($) | | | Number of
Shares
Acquired
on Vesting
(#) | | | Value
Realized on
Vesting(2)
($) | | | | | | | | | | | | | | | | | Burritt | | | 204,630 | | $ | 3,275,641 | | | 75,529 | | $ | 2,629,825 | | Bradley | | | — | | | — | | | — | | | — | | Matthews | | | — | | | — | | | 33,001 | | $ | 1,154,341 | | Buckiso | | | — | | | — | | | 3,947 | | $ | 100,501 | | Rintoul | | | 32,263 | | $ | 362,569 | | | 22,396 | | $ | 775,939 | | Longhi | | | — | | | — | | | 230,594 | | $ | 8,007,682 | | Folsom | | | 24,429 | | $ | 365,150 | | | 37,905 | | $ | 1,306,726 | | Soni | | | — | | | — | | | 1,550 | | $ | 32,054 | | | | | | | | | | | | | | | | |
- (1)
- Represents the difference between the market value on the date of exercise and the exercise price for the number of shares exercised.
- (2)
- Represents the market value on the vesting date of time-vested restricted awards and performance awards which had met the performance criteria. Value shown is before taxes.
| | Option Awards | | Stock Awards | | | | Number of | | | | | | | | | | Shares | | | | Number of | | | | | | Acquired | | Value | | Shares | | Value | | | | on | | Realized on | | Acquired | | Realized on | | | | Exercise | | Exercise(1) | | on Vesting | | Vesting(2) | | | Name | (#) | | ($) | | (#) | | ($) | | | Longhi | | 443,250 | | $ | 4,118,445 | | | 86,110 | | $ | 1,174,358 | | | Burritt | | — | | | — | | | 64,493 | | $ | 1,116,811 | | | Folsom | | 13,333 | | $ | 152,931 | | | 9,826 | | $ | 93,350 | | | Matthews | | — | | | — | | | 16,121 | | $ | 215,969 | | | Bruno | | — | | | — | | | 1,116 | | $ | 8,381 | |
(1) | Represents the difference between the market value on the date of exercise and the exercise price for the number of shares exercised. | | | (2) | Represents the market value on the vesting date of time-vested restricted awards and performance awards which had met the performance criteria. Value shown is before taxes. |
Pension Benefits The following table illustrates the actuarial present value of pension benefits accumulated by Named Executive Officers as of December 31, 2016.2017. Messrs. Longhi, Burritt,Matthews and Bruno and Ms. Folsom are not eligible to participate inBuckiso were the Corporation’sonly NEOs covered by the Corporation's defined benefit pension plans which was closed to new entrants in 2013, and for which benefit accruals were frozen for all non-represented participants on December 31, 2015. | | | | | | | | | | Name
| | Plan Name
| | Number
of Years
Credited
Service(1)
(#)
| | Present
Value of
Accumulated
Benefit(2)
($)
| |
|---|
| | | | | | | | | | | Matthews | | U. S. Steel Pension Plan | | | 25 | | $ | 1,233,622 | | | | Non Tax-Qualified Pension Plan | | | 25 | | $ | 1,008,900 | | | | Supplemental Pension Program | | | 25 | | $ | 2,174,051 | | | | Total | | | — | | $ | 4,416,573 | | | | | | | | | | | | | Buckiso | | U. S. Steel Pension Plan | | | 25 | | $ | 1,111,560 | | | | Non Tax-Qualified Pension Plan | | | 25 | | $ | 124,588 | | | | Total | | | — | | $ | 1,236,148 | | | | | | | | | | | | |
- (1)
- Service shown represents credited service years (rounded) used to calculate accrued benefits as of December 31, 2017. Credited service was frozen on December 31, 2015.
- (2)
- Accumulated benefit at December 31, 2017. The present value of accumulated benefits is calculated using the assumptions used in the preparation of the Corporation's financial statements contained in the Annual Report on Form 10-K, except that retirement age is assumed to be the normal retirement age for the respective plans.
| | | Number | | Present | | | | | of Years | | Value of | | | | | Credited | | Accumulated | | | | | Service(1) | | Benefit(2) | | | Name | Plan Name | (#) | | ($) | | | Matthews | U. S. Steel Pension Plan | | 25 | | $ | 1,187,172 | | | | Non Tax-Qualified Pension Plan | | 25 | | $ | 976,760 | | | | Supplemental Pension Program | | 25 | | $ | 2,090,433 | | | | Total | | — | | $ | 4,254,365 | |
(1) | Service shown represents credited service years (rounded) used to calculate accrued benefits as of December 31, 2016. | | | (2) | Accumulated benefit at December 31, 2016. The present value of accumulated benefits is calculated using the assumptions used in the preparation of the Corporation’s financial statements contained in the Annual Report on Form 10-K, except that retirement age is assumed to be the normal retirement age for the respective plans. Key assumptions used for the calculations in this table and in the Summary Compensation Table include a 4.25% discount rate for the 2015 calculations (3.75% for 2014 and 4.5% for 2013); a lump sum rate assumption of 3.0% for 2015 (3.0% for 2014 and 3.0% for 2013) assuming the Section 417(e) minimum was not applicable; a 100% lump sum benefit election for all plans; and unreduced benefit ages, which at December 31, 2015, Key assumptions used for the calculations in this table and in the Summary Compensation Table include a 4.00% discount rate for the 2017 calculations (4.00% for 2016 and 4.25% for 2015); a lump sum rate assumption of 3.0% for 2017 (3.0% for 2016 and 3.0% for 2015) assuming the Section 417(e) minimum was not applicable; a 100% lump sum benefit election for all plans; and unreduced benefit ages, which at December 31, 2017, are age 62 for the U. S. Steel Pension Plan and age 60 for the Non Tax-Qualified Pension Plan and the Supplemental Pension Program.44 |United States Steel Corporation | 2018 Proxy Statement
Table of Contents | Executive Compensation Tables |
U. S. Steel Pension Plan and age 60 for the Non Tax-Qualified Pension Plan and the Supplemental Pension Program. |
U. S. Steel Pension Plan
The United States Steel Corporation Plan for Employee Pension Benefits, Revision of 2003 (“("U. S. Steel Pension Plan”Plan") provides defined benefits for substantially all non-represented, domestic employees who were hired before July 1, 2003. Messrs. Burritt, Bradley, Rintoul, Longhi, Burritt, and BrunoSoni who were hired in 2013, 2017, 2007, 2012 2013, and 20142016 respectively, and Ms. Folsom, who was hired in 2014, are not participants in the U. S. Steel Pension Plan and the related nonqualified plans. Mr. Matthews is a participantand Mr. Buckiso are participants under the U. S. Steel Pension Plan and the related non-qualified plans.plans as noted under "Pension Plan Compensation" on page 55. Benefits under the U. S. Steel Pension Plan and the related non qualifiednon-qualified plans described below were frozen for all non-represented participants on December 31, 2015. The U. S. Steel Pension Plan is designed to provide eligible employees with replacement income during retirement. The two primary benefits provided to non-represented employees are based on final earnings (the “Final"Final Earnings Benefit”Benefit") and career earnings (the “Career"Career Earnings Benefit”Benefit") formulas. Benefits may be paid as an actuarially determined lump sum in lieu of monthly pension payments. The Internal Revenue Code (the “Code”"Code") limits the amount of pension benefits that may be paid from tax-qualified pension plans. The Final Earnings Benefit component is based on a formula using a specified percentage (dependent on years of service) of average monthly earnings which is determined from the
| | United States Steel Corporation | 2017 Proxy Statement | 43 |
Executive Compensation Tables
five consecutive 12-month calculation periods in which the employee’semployee's aggregate earnings were the highest during the last ten 12-month calculation periods of continuous service prior to retirement. Incentive compensation is not considered when determining average monthly earnings. Eligibility for an unreduced Final Earnings Benefit under the U. S. Steel Pension Plan is based on attaining at least 30 years of credited service or at least age 62 with 15 years of credited service. In addition to years of service and earnings while employed by the Corporation, service and earnings for certain purposes include those accrued while working for certain affiliated companies. The annual normal retirement benefit under the Career Earnings Benefit component is equal to 1.3% of total career earnings. Incentive compensation is not considered when determining total career earnings. Career Earnings Benefits commenced prior to attaining normal retirement or age 62 with 15 years of service, but after attaining age 58, are subject to an early commencement reduction equal to one-quarter of one percent for each month the commencement of pension payments precedes the month in which the participant attains the age of 62 years and one month.years. Career Earnings Benefits commenced prior to attaining age 58 are based on 1.0% of total career earnings and subject to a larger early commencement reduction. If he had retired on December 31, 2016,2017, Mr. Matthews’Matthews' annual Career Earnings Benefits would have been reduced by 56.60%53.33%, and if Mr. Buckiso had retired on December 31, 2017, his annual Career Earnings Benefits would have been reduced by 58.88%. Benefits accrued for each executive for the purpose of calculating both the Final Earnings and Career Earnings Benefits are limited to the executive’sexecutive's unreduced base salary and foreign service premium, if any, subject to the compensation limit under the Code.
U. S. Steel Pension Plan Calculation Assumptions The present value of accumulated benefit obligations represents the actuarial value of benefits earned by the executives under the U. S. Steel Pension Plan. Assumptions used in the calculations include an unreduced benefit age of 62, the election of a lump sum option and estimatedcredited service, and career earnings and final average earnings as of December 31, 2015. Estimated finalFinal average earnings were developedis based on the average of the actual monthly salaries paid in the highest five consecutive 12 month periodsperiod during the ten years preceding December 31, 2015. The salary amounts include base salary, excluding incentive compensation. For these calculations, the executive’s unreduced base salary is used to the extent necessary to avoid the adverse effects of the temporary reduction in base salary that was effective between July 1, 2009 and July 1, 2010. The number of years of credited service in the 20162017 Pension Benefits table shows the number of years earned and used to calculate the accrued benefits reported.
Non Tax-Qualified Pension Plan |
The purpose of the United States Steel Corporation Non Tax-Qualified Pension Plan (“("Non Tax-Qualified Pension Plan”Plan") is to compensate individuals for the loss of benefits under the U. S. Steel Pension Plan that occur due to certain limits established or required under the Code. The amount payable under the Non Tax-Qualified Pension Plan is equal to the difference between the benefits the executive actually receives under the U. S. Steel Pension Plan and the benefits that the executive would have received under the U. S. Steel Pension Plan except for the limitations imposed by the Code. Benefits under the Non Tax-Qualified Pension Plan were frozen on December 31, 2015. Benefits paid under the Non Tax-Qualified Pension Plan are in the form of an actuarially determined lump sum payable to the executive upon termination of employment, subject to the six-month waiting period under Section 409A of the Code for specified employees.
Non Tax-Qualified Pension Plan Calculation Assumptions The present value of accumulated benefit obligations represents the actuarial value of benefits earned by the executives under the Non Tax-Qualified Pension Plan and is based on the same provisions and eligibility status as determined under the U. S. Steel Pension
Plan. Assumptions used in the calculations include an unreduced benefit age of 62, the election of a lump sum option and credited service, and estimated career earnings and final average earnings as of December 31, 2015.
United States Steel Corporation | 2018 Proxy Statement |45
Supplemental Pension Program
Table of Contents Executive Compensation Tables |
Supplemental Pension Program |
The purpose of the United States Steel Corporation Executive Management Supplemental Pension Program (the “Supplemental"Supplemental Pension Program”Program") is to provide a pension benefit for executives and certain non-executives who participate in the U. S. Steel Pension Plan with respect to compensation paid under the short-term incentive compensation plans of the Corporation, its subsidiaries, and its joint ventures.Corporation. Benefits under the Supplemental Pension Program were frozen on December 31, 2015. Executives with at least 15 years of continuous service become eligible to receive a benefit under the Supplemental Pension Program at retirement or termination of employment. Benefits will not be payable under the program with respect to an executive who (a) terminates employment prior to age 60 or (b) terminates employment within 36 months of the date coverage under the Supplemental Pension Program begins, unless, in either case, the Corporation consents to the termination; provided, however, such consent is not required for terminations because of death or involuntary termination,
44 | United States Steel Corporation | 2017 Proxy Statement
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Executive Compensation Tables
other than for cause. Distributions are subject to the six-month waiting period under Section 409A of the Code for specified employees. An executive’sexecutive's average earnings are used to calculate the benefit under the Supplemental Pension Program and are defined as the average monthly earnings derived from the total short-term incentive (described as Non-Equity Incentive Plan Compensation in the Summary Compensation Table in this proxy statement) paid or credited to the executive under the Annual Incentive Compensation Plan with respect to the three calendar years for which total short-term incentive payments were the highest out of the last ten consecutive calendar years prior to the executive’s termination. Short-term incentive payments payable for the calendar year in which termination occurs would be considered if such payment produces average earnings greater than that determined atexecutive's termination. Benefits are paid as an actuarially determined lump sum. Such lump sum cannot be less than the lump sum value determined using the executive’s highest monthly accrued benefit under the Supplemental Pension Program.
Supplemental Pension Program Calculation Assumptions The present value of accumulated benefit obligations represents the actuarial value of benefits earned through December 31, 2015 by an executive under the Supplemental Pension Program. Assumptions used in the calculations include a normal retirement age of 60, a lump sum payment, and credited service and average earnings as of December 31, 2015. Credited service under the Supplemental Pension Program is the same as under the U. S. Steel Pension Plan.
Non-Qualified Deferred Compensation
Non-Qualified Deferred Compensation |
The following table provides information with respect to accruals for each NEO under the Corporation’sCorporation's non-qualified defined contribution plans in 2016. 20162017. 2017 Year-End Aggregate Balances are as of December 31, 2016.2017. | | | | | | | | | | | | | Executive
| | Plan Name
| | 2017 Company
Contributions/
Accruals(1)
| | 2017 Aggregate
Earnings(2)
| | 2017 Year-End
Aggregate
Balance
| |
|---|
| | | | | | | | | | | | | | Burritt | | Supplemental Thrift Program | | $ | 43,116 | | $ | 30,079 | | $ | 253,717 | | | | Non Tax-Qualified Retirement Account Program | | $ | 56,359 | | $ | 21,258 | | $ | 215,368 | | | | Supplemental Retirement Account Program | | $ | 154,700 | | $ | 36,211 | | $ | 335,623 | | | | Total | | $ | 254,175 | | $ | 87,548 | | $ | 804,708 | | | | | | | | | | | | | | | | Bradley | | Supplemental Thrift Program | | $ | 2,896 | | $ | 14 | | $ | 2,910 | | | | Non Tax-Qualified Retirement Account Program | | $ | — | | $ | — | | $ | — | | | | Supplemental Retirement Account Program | | $ | — | | $ | — | | $ | — | | | | Total | | $ | 2,896 | | $ | 14 | | $ | 2,910 | | | | | | | | | | | | | | | | Matthews | | Supplemental Thrift Program | | $ | 21,640 | | $ | 19,413 | | $ | 192,381 | | | | Non Tax-Qualified Retirement Account Program | | $ | 30,657 | | $ | 6,480 | | $ | 64,624 | | | | Supplemental Retirement Account Program | | $ | 70,817 | | $ | 9,255 | | $ | 80,072 | | | | Total | | $ | 123,114 | | $ | 35,148 | | $ | 337,077 | | | | | | | | | | | | | | | | Buckiso | | Supplemental Thrift Program | | $ | 12,750 | | $ | 6,229 | | $ | 54,362 | | | | Non Tax-Qualified Retirement Account Program | | $ | 15,313 | | $ | 2,928 | | $ | 31,703 | | | | Supplemental Retirement Account Program | | $ | 36,202 | | $ | 27,353 | | $ | 189,020 | | | | Total | | $ | 64,265 | | $ | 36,510 | | $ | 275,085 | | | | | | | | | | | | | | | |
46 |United States Steel Corporation | 2018 Proxy Statement | | | 2016 Company | | | | 2016 Year-End | | | | | Contributions/ | | 2016 Aggregate | | Aggregate | | | Executive | Plan Name | Accruals(1) | | Earnings(2) | | Balance | | | Longhi | Supplemental Thrift Program | | $ | 75,000 | | | $ | 289,769 | | | $ | 440,683 | | | | Non Tax-Qualified Retirement Account Program | | $ | 105,750 | | | $ | 20,606 | | | $ | 381,469 | | | | Supplemental Retirement Account Program | | $ | — | | | $ | 28,368 | | | $ | 429,741 | | | | Total | | $ | 180,750 | | | $ | 338,743 | | | $ | 1,251,893 | | | Burritt | Supplemental Thrift Program | | $ | 36,000 | | | $ | 115,100 | | | $ | 180,523 | | | | Non Tax-Qualified Retirement Account Program | | $ | 45,475 | | | $ | 6,880 | | | $ | 137,752 | | | | Supplemental Retirement Account Program | | $ | — | | | $ | 9,553 | | | $ | 144,712 | | | | Total | | $ | 81,475 | | | $ | 131,533 | | | $ | 462,987 | | | Folsom | Supplemental Thrift Program | | $ | 30,917 | | | $ | 88,295 | | | $ | 141,199 | | | | Non Tax-Qualified Retirement Account Program | | $ | 39,667 | | | $ | 6,373 | | | $ | 106,124 | | | | Supplemental Retirement Account Program | | $ | — | | | $ | 7,410 | | | $ | 92,615 | | | | Total | | $ | 70,584 | | | $ | 102,078 | | | $ | 339,938 | | | Matthews | Supplemental Thrift Program | | $ | 19,325 | | | $ | 102,704 | | | $ | 151,329 | | | | Non Tax-Qualified Retirement Account Program | | $ | 26,825 | | | $ | 663 | | | $ | 27,488 | | | | Supplemental Retirement Account Program | | $ | — | | | $ | — | | | $ | — | | | | Total | | $ | 46,150 | | | $ | 103,367 | | | $ | 178,817 | | | Bruno | Supplemental Thrift Program | | $ | 14,455 | | | $ | 33,720 | | | $ | 56,612 | | | | Non Tax-Qualified Retirement Account Program | | $ | 17,553 | | | $ | 1,648 | | | $ | 35,038 | | | | Supplemental Retirement Account Program | | $ | — | | | $ | 213 | | | $ | 2,662 | | | | Total | | $ | 32,008 | | | $ | 35,581 | | | $ | 94,312 | |
Table of Contents (1) | Accruals are included in the All OtherExecutive Compensation column of the Summary Compensation Table (see footnote 9 to that table for more detail.) Accruals in prior years have been reported in prior years under All Other Compensation in the Summary Compensation Table. | | | (2) | Determined by taking the balance at the end of 2016, less 2016 accruals, less the balance at the beginning of 2016, and adding dividend equivalents.Tables |
| | | | | | | | | | | | | Executive
| | Plan Name
| | 2017 Company
Contributions/
Accruals(1)
| | 2017 Aggregate
Earnings(2)
| | 2017 Year-End
Aggregate
Balance
| |
|---|
| | | | | | | | | | | | | | Rintoul | | Supplemental Thrift Program | | $ | 14,970 | | $ | 14,800 | | $ | 173,024 | | | | Non Tax-Qualified Retirement Account Program | | $ | 19,465 | | $ | 22,619 | | $ | 200,413 | | | | Supplemental Retirement Account Program | | $ | 38,969 | | $ | 30,412 | | $ | 258,453 | | | | Total | | $ | 73,404 | | $ | 67,831 | | $ | 631,890 | | | | | | | | | | | | | | | | Longhi | | Supplemental Thrift Program | | $ | 30,000 | | $ | (145,860 | ) | $ | 326,109 | | | | Non Tax-Qualified Retirement Account Program | | $ | 42,250 | | $ | 56,507 | | $ | 480,225 | | | | Supplemental Retirement Account Program | | $ | 384,890 | | $ | 99,815 | | $ | 914,446 | | | | Total | | $ | 457,140 | | $ | 10,462 | | $ | 1,720,780 | | | | | | | | | | | | | | | | Folsom | | Supplemental Thrift Program | | $ | 30,417 | | $ | 25,469 | | $ | 194,052 | | | | Non Tax-Qualified Retirement Account Program | | $ | 39,667 | | $ | 21,106 | | $ | 166,896 | | | | Supplemental Retirement Account Program | | $ | 108,290 | | $ | 30,851 | | $ | 231,756 | | | | Total | | $ | 178,374 | | $ | 77,426 | | $ | 592,704 | | | | | | | | | | | | | | | | Soni | | Supplemental Thrift Program | | $ | 7,500 | | $ | 1,754 | | $ | 9,254 | | | | Non Tax-Qualified Retirement Account Program | | $ | 8,401 | | $ | 152 | | $ | 8,553 | | | | Supplemental Retirement Account Program | | $ | 10,100 | | $ | 1,496 | | $ | 11,596 | | | | Total | | $ | 26,001 | | $ | 3,402 | | $ | 29,403 | | | | | | | | | | | | | | | |
- (1)
- Accruals are included in the All Other Compensation column of the Summary Compensation Table (see footnote 9 to that table for more detail.) Accruals in prior years have been reported in prior years under All Other Compensation in the Summary Compensation Table.
- (2)
- Determined by taking the balance at the end of 2017, less 2017 accruals, less the balance at the beginning of 2017, and adding dividend equivalents.
Supplemental Thrift Program The purpose of the United States Steel Corporation Supplemental Thrift Program (the “Supplemental"Supplemental Thrift Program”Program") is to compensate individuals for the loss of matching contributions by the Corporation under the U. S. Steel Savings Plan that cannot be provided due to the statutory limits on covered compensation (which limit was $265,000$270,000 in 2016)2017) and combined Corporation and individual annual contributions (whichannual contributions (which limit was $53,000$54,000 in 2016)2017). Under the Supplemental Thrift Program, executives accrue benefits in the form of phantom shares of U. S. Steel common stock. In the aggregate, the benefit accruals under the Supplemental Thrift Program and the matching contributions under the U. S. Steel Savings Plan may equal up to 6% of the executive’sexecutive's eligible base salary.
| | United States Steel Corporation | 2017 Proxy Statement | 45 |
Executive Compensation Tables An executive receives a lump sum distribution of the benefits payable under this program upon his or her (a) termination of employment with five or more years of continuous service, (b) termination of employment, prior to attaining five years of continuous service, with the consent of the Corporation, or (c) pre-retirementbecause of death, subject to the six-month waiting period under Section 409A of the Code for specified employees.
Non Tax-Qualified Retirement Account Program The purpose of the United States Steel Corporation Non Tax-Qualified Retirement Account Program is to compensate individuals for the loss of Retirement Account contributions that cannot be provided under the U. S. Steel Savings Plan due to the statutory limits on covered compensation (which was $265,000$270,000 in 2016)2017) and combined Corporation and individual annual contributions (which limit was $53,000$54,000 in 2016)2017). Retirement Account contributions are non-elective employer contributions that are in addition to the matching contributions made by the Corporation under the U. S. Steel Savings Plan. All of the NEOs participate in the the Non Tax-Qualified Retirement Account Program. Under the Non Tax-Qualified Retirement Account Program, accrued benefits are recorded in a notional account and credited with earnings as if the account had been invested in the U. S. Steel Savings Plan. In the aggregate, benefit accruals under this program and the Retirement Account contributions under the U. S. Steel Savings Plan shall equal 8.5% of the executive’sexecutive's eligible base salary. Benefits under this program are payable in a lump sum distribution following the termination of employment (a) after completing three years of continuous service, or (b) prior to completing three years of continuous service, with the consent of the Corporation; provided, however, such consent is not required for terminations because of death or involuntary termination, other than for cause. Payments are subject to the six-month waiting period under Section 409A of the Code for specified employees.
Supplemental Retirement Account Program The purpose of the Supplemental Retirement Account Program is to provide Retirement Account contributions with respect to compensation paid under the short-term incentive compensation plans of the Corporation, its subsidiaries, and its joint ventures. All of the NEOs participate in the program. Mr. Matthews will receive his first accrual in March 2017 based on his award under the Annual Incentive Compensation Plan for 2016, the first year he participated in the program. Corporation. Accrued benefits under the Supplemental Retirement Account Program are recorded in a hypothetical account and credited with United States Steel Corporation | 2018 Proxy Statement |47
Table of Contents earnings as if the account had been invested in the U. S. Steel Savings Plan. Executives who complete at least 10 years of continuous service (or, if earlier, attain age 65) become eligible to receive a benefit under the Supplemental Retirement Account Program at retirement or termination of employment. Benefits will not be payable under the program with respect to an executive who (a) terminates employment (a) prior to age 55 or (b) terminates employment within 36 months of the date coverage under the program begins, unless the Corporation consents to the termination; provided, however, such consent is not required for terminations because of death or involuntary termination, other than for cause. Benefits under the Supplemental Retirement Account Program are payable in the form of a lump sum distribution following termination of employment, subject to the six-month waiting period under Section 409A of the Code for specified employees.
46 | United States Steel Corporation | 2017 Proxy Statement
| | |
Potential Payments Upon Termination or Change in Control |
Potential Payments Upon Termination or Change in Control
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL |
The compensation and benefits payable to our executives upon termination vary depending upon the event triggering the termination and the executive’sexecutive's relevant employment facts at the time of termination. For purposes of the tables and discussions and discussions included in this section, we have assumed the following termination scenarios (the column references are to the columns in the tables that follow):
Termination Scenarios Voluntary Termination (with Consent) or Retirement –
Voluntary Termination (with Consent) or Retirement –(Column A) |
This termination scenario assumes retirement pursuant to a retirement plan. Benefits under the Supplemental Pension Program are not payable to an executive who voluntarily terminates employment prior to age 60, unless the Corporation consents to such termination. We have assumed the Corporation’sCorporation's consent to retire prior to age 60 under this scenario; however, the Corporation usually reserves its consent for an executive who has served the Corporation well, is not leaving for an opportunity at another company, and is not leaving prior to the development of his or her successor. With respect to long-term incentives, the Compensation & Organization Committee (the “Committee”"Committee") has discretion to terminate unvested awards upon termination. While the Committee reserves the right to decide these matters on a case-by-case basis, its practice has been to prorate the vesting of the shares scheduled to vest during the current vesting period for the time employed during the current vesting period (for example, in the case of stock options and restricted stock units, seventen months worked during the twelve-month vesting period from June 2016March 2017 to May 2017February 2018 would result in a vesting of seven-twelfthsten-twelfths of the number of shares scheduled to vest in May 2017,February 2018, with no such pro rata vesting for the shares scheduled to vest after May 2017)February 2018). Given our assumption under this scenario that the Committee has consented to the executive’sexecutive's retirement, the pro rata vesting discussed above has been applied to the calculations in the table below.tables below with the following exception. For the 2017 long-term incentive awards, the awards are fully vested if the executive attained age 60 with 5 years of service or age 65 prior to retirement, provided the executive is employed for at least six months following the date of grant and is not a participant in the Supplemental Pension Program.
Voluntary Termination (Without Consent) or Involuntary Termination (for Cause) – (Column
Voluntary Termination (Without Consent) or Involuntary Termination (for Cause) –(Column B) |
This termination scenario assumes that the Corporation does not consent to an executive’sexecutive's voluntary termination of his or her employment prior to age 60, or that the Corporation terminates the executive’sexecutive's employment for cause. Under these conditions, the Committee is not likely to exercise any have in favor of the executive and, accordingly, we have not assumed the exercise of any discretion in favor of executives with respect to unvested awards for purposes of the calculations in the tables below.
Involuntary Termination (Not for Cause) – (Column
Involuntary Termination (Not for Cause) –(Column C) |
Events that could cause the Corporation to terminate an executive’sexecutive's employment involuntarily, not for cause, include the curtailment of certain lines of business or a facility shutdown where the executive’sexecutive's services are no longer required due to business conditions or an organizational realignment. Prior to the involuntary termination, the executive may be eligible for benefits under our Supplemental Unemployment Benefit Program for Non-Union Employees, which may include the payment of a percentage of base salary, basic life and health insurance. For purposes of determining the vesting of equity awards upon termination, we have assumed the executive’sexecutive's employment was terminated on December 31, 2016.2017. Awards are prorated upon termination for purposes of the calculations in the tables below.below with the following exception. For the 2017 long-term incentive awards, the awards are fully vested if the executive attained age 60 with 5 years of service or age 65 prior to the involuntary termination, provided the executive is employed for at least six months following the date of grant and is not a participant in the Supplemental Pension Program.
48 |United States Steel Corporation | 2018 Proxy Statement
Change in Control and Termination – (Column D)
Table of Contents | Potential Payments Upon Termination or Change in Control |
Change in Control and Termination –(Column D) |
All of the NEOs are covered by the Corporation’sCorporation's Change in Control Severance Plan (the “CIC Plan”"CIC Plan"), effective January 1, 2016, as described in the Compensation Discussion and Analysis insection of the proxy statement. In addition to the severance benefits paid pursuant to the CIC Plan, all long-term incentive awards would vest upon a change in control and a termination, and benefits would be paid according to each benefit plan’splan's provisions following the termination of an executive’sexecutive's employment in connection with a change in control. The following discussion describes the events and circumstances that would trigger payments under the CIC Plan. Generally, payments are triggered upon the occurrence of both a Change in Control of the Corporation and termination of the executive’sexecutive's employment by the Corporation other than for cause. Under the CIC Plan, each executive agrees to remain in the employ of the Corporation until the earlier of (i) a date three months after a Change in Control and (ii) a date six months after a Potential Change in Control (as defined below). Payments are also triggered if the executive terminates his or her employment for Good Reason (as defined below); however, in order for the Corporation to be obligated to pay the benefits under the contract, all Good Reason terminations must also involve an actual Change in Control (if the Good Reason termination occurs prior to a Change in Control, the Change in Control must be a 409A Change in Control; see definition below).
| | United States Steel Corporation | 2017 Proxy Statement |47 |
Potential Payments Upon Termination or Change in Control
Following a Change in Control, if there is a termination by the Corporation (other than for Cause or Disability) or by the executive for Good Reason, the executive is entitled to the following benefits: - •
- Accrued compensation and benefits;
- •
- Cash severance;
- •
- Supplemental Retirement Benefit;
- •
- Welfare Benefits;
- •
- Outplacement services;
- •
- Supplemental Savings Plan Benefit – equal to the unvested portion of the Corporation's contributions on behalf of the executive under the tax-qualified and non tax-qualified savings plans; and
- •
- Legal fees – reimbursement for legal fees incurred as a result of termination of employment and incurred in contesting or disputing such termination or seeking to enforce any right or benefit under the CIC Plan or in connection with any tax audit relating to Sections 4999 (excise taxes) or 409A (deferred compensation) of the Code.
• | Accrued compensation and benefits; | | | • | Cash severance; | | | • | Supplemental Retirement Benefit; | | | • | Welfare Benefits; | | | • | Outplacement services; | | | • | Supplemental Savings Benefit - equal to the unvested portion of the Corporation’s contributions on behalf of the executive under the tax-qualified and non tax-qualified savings plans; and | | | • | Legal fees - reimbursement for legal fees incurred as a result of termination of employment and incurred in contesting or disputing such termination or seeking to enforce any right or benefit under the CIC Plan or in connection with any tax audit relating to Sections 4999 (excise taxes) or 409A (deferred compensation) of the Code. |
A “"Good ReasonReason"” termination involves a voluntary termination following any of these events: - •
- An executive is assigned duties inconsistent with his or her position;
- •
- Reduction in base salary;
- •
- Relocation in excess of 50 miles from the executive's current work location;
- •
- Failure to continue all of the Corporation's employee benefit, incentive compensation, bonus, stock option and stock award plans, programs, policies, practices or arrangements in which the executive participates or failure of the Corporation to continue the executive's participation therein at amounts and levels relative to other participants;
- •
- Failure of the Corporation to obtain agreement from any successor to the Corporation to assume and perform the CIC Plan; or
- •
- Any termination that is not effected pursuant to a Notice of Termination (a Notice of Termination is to be given by the Corporation in connection with any termination for cause or disability and the executive must give a notice of termination in connection with a termination for good reason).
• | An executive is assigned duties inconsistent with his or her position; | | | • | Reduction in base salary; | | | • | Relocation in excess of 50 miles from the executive’s current work location; | | | • | Failure to continue all of the Corporation’s employee benefit, incentive compensation, bonus, stock option and stock award plans, programs, policies, practices or arrangements in which the executive participates or failure of the Corporation to continue the executive’s participation therein at amounts and levels relative to other participants; | | | • | Failure of the Corporation to obtain agreement from any successor to the Corporation to assume and perform the CIC Plan; or | | | • | Any termination that is not effected pursuant to a Notice of Termination (a Notice of Termination is to be given by the Corporation in connection with any termination for cause or disability and the executive must give a notice of termination in connection with a termination for good reason). |
A “"Change in ControlControl"” happens under the CIC Plan if any of the following occurs: - •
- A person (defined to include individuals, corporations, partnerships, etc.) acquires 20% or more of the voting power of the Corporation;
• | A merger occurs involving the Corporation except (a) a merger with at least a majority of continuing directors or (b) a merger constituting the disposition of a division, business unit or subsidiary; | | | • | A change in the majority of the Board of Directors; | | | • | A sale of all or substantially all of the assets of the Corporation; or | | | • | Stockholder approval of a plan of complete liquidation. |
- •
- A
“merger occurs involving the Corporation except (a) a merger with at least a majority of continuing directors or (b) a merger constituting the disposition of a division, business unit or subsidiary;
- •
- A change in the majority of the Board of Directors;
- •
- A sale of all or substantially all of the assets of the Corporation; or
- •
- Stockholder approval of a plan of complete liquidation.
A "Potential Change in Control”" occurs if: • | The Corporation enters into an agreement that would result in a Change in Control; | | | • | A person acquires 15 percent or more of the voting power of the Corporation; | | | • | There is a public announcement by any person of intentions that, if consummated, would result in a Change in Control; or | | | • | The Corporation’s Board of Directors passes a resolution stating that a Potential Change in Control has occurred. |
- •
- The Corporation enters into an agreement that would result in a Change in Control;
- •
- A
“person acquires 15 percent or more of the voting power of the Corporation;
- •
- There is a public announcement by any person of intentions that, if consummated, would result in a Change in Control; or
- •
- The Corporation's Board of Directors passes a resolution stating that a Potential Change in Control has occurred.
A "409A Change in Control”" is similar to a Change in Control, except that it meets the requirements of Section 409A of the Code. The main difference between the two definitions is that a 409A Change in Control requires a person to acquire 30% of the total voting power of the Corporation’sCorporation's stock, while a Change in Control requires a person to acquire 20% of the total voting power of the Corporation’sCorporation's stock. A 409A Change in Control must occur prior to any payment in the event the termination precedes the Change in Control. In other words, payments under the CIC Plan are due to the executive if: - •
- there is an involuntary termination by the Corporation (other than for cause or disability) or a voluntary termination by the executive for Good Reason;
United States Steel Corporation | 2018 Proxy Statement |49
Table of Contents • | there is an involuntary termination by the Corporation (other than for causePotential Payments Upon Termination or disability) or a voluntary termination by the executive for Good Reason; | | | • | the executive reasonably demonstrates that an Applicable Event (defined below) has occurred; and | | | • | a 409A Change in Control occurs within twenty-four months following the termination. |
An “
- •
- the executive reasonably demonstrates that an Applicable Event (defined below) has occurred; and
- •
- a 409A Change in Control occurs within twenty-four months following the termination.
An"Applicable Event"” (a term used for various purposes, including defining points at which compensation amounts and periods are measured) means a Change in Control, Potential Change in Control or actions of a third party who has taken steps reasonably calculated to effect a Change in Control. To the extent required by Section 409A of the Code, payments would be delayed six months following the applicable reference date. As mentioned above, a “double trigger”"double trigger" must occur prior to the Corporation incurring any liability under the CIC Plan; that is, for there to be payments under the CIC Plan, both of the following must occur: (i) a termination and (ii) a Change in Control (or, in some cases, a 409A Change in Control).
Disability and Death
Disability and Death(Columns E and F) |
Employees with at least 15 years of continuous service who are covered by the U. S. Steel Pension Plan and become totally and permanently disabled prior to age 65 are eligible to retire on a permanent incapacity pension. The criteria for a disability termination under the Long-Term Incentive Compensation Program are the same as for a disability termination under Section 409A of the Code. If an employee with at least 15 years of service dies while actively employed, benefits under the Corporation’sCorporation's qualified and non-qualified plans are calculated as if the employee had retired on the date of his or her death.
48 | United States Steel Corporation | 2017 Proxy Statement | | |
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination Tables The following tables were developed using the above termination scenarios, and an estimation of the amounts that would be payable to each NEO under the relevant scenario. A discussion of each of the types of compensation follows the tables. Amounts shown for Mr. Longhi and Ms. Folsom reflect actual amounts that they became entitled to at their termination of employment. Non-qualified retirement benefits and equity awards will be distributed six months after their termination dates. The estimated present values of the benefits provided to the NEOs under each of these termination scenarios were determined using the following assumptions: - 1.
- Unless otherwise noted, the tables reflect values as of December 31, 2017 that NEOs would have been entitled to, following, or in connection with a termination of
employment, with the triggering event occurring on December 31, 2017; 1. | Unless otherwise noted, the tables reflect values as of December 31, 2016 that NEOs would have been entitled to, following, or in connection with a termination of employment, with the triggering event occurring on December 31, 2016; |
- 2.
- The stock price used for valuation purposes for the long-term incentive awards was the closing stock price on December 29, 2017, which was $35.19;
- 3.
- The normal life expectancy obtained from the 1971 Group Annuity Mortality Tables, or, for a permanent incapacity type of pension, life expectancy obtained from the Disabled Life Expectancy Tables (wages and salaried) based on the Corporation's experience, made gender neutral on a nine to one male/female ratio; and
- 4.
- The December 31, 2017 Pension Benefit Guaranty Corporation interest rate of 0.75% was used to determine 2017 lump sum payment amounts.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Potential Payments Upon Termination
| |
|---|
| |
| | A
| | B
| | C
| | D
| | E
| | F
| |
|---|
Executive
| | Component
| | Voluntary
Termination
(with Consent)
or Retirement(1)
| |
Voluntary
Termination
(Without
Consent) or
Involuntary
Termination
(For Cause)
| | Involuntary
Termination
(Not for
Cause)(2)
| | Change in
Control and
Termination
| | Disability(3)
| | Death
| |
|---|
| | | | | | | | | | | | | | | | | | Burritt | | Severance & Compensation Elements | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | — | | | — | | | $ | 300,000 | | | $ | 4,408,666 | | | — | | | — | | | | | Short-Term Incentive | | | $ | 1,082,109 | | | — | | | $ | 1,082,109 | | | — | | | $ | 1,082,109 | | | $ | 1,082,109 | | | | | Stock Options (Unvested)(4) | | | $ | 688,676 | | | — | | | $ | 688,676 | | | $ | 2,428,749 | | | $ | 2,428,749 | | | $ | 2,428,749 | | | | | Restricted Stock (Units)(4) | | | $ | 704,890 | | | — | | | $ | 704,890 | | | $ | 2,202,542 | | | $ | 2,202,542 | | | $ | 2,202,542 | | | | | Performance Stock Award(5) | | | $ | 5,037,322 | | | — | | | $ | 5,037,322 | | | $ | 9,403,783 | | | $ | 7,124,923 | | | $ | 7,124,923 | | | | | | | | | | | | | | | | | | | | | | Benefits | | | | | | | | | | | | | | | | | | | | | | | Non-Qualified Deferred Compensation | | | $ | 804,708 | | | $ | 215,368 | | | $ | 804,708 | | | $ | 804,708 | | | $ | 804,708 | | | $ | 804,708 | | | | | Welfare Benefits | | | — | | | — | | | — | | | $ | 4,884 | | | — | | | — | | | | | Supplemental Retirement Benefit(7) | | | — | | | — | | | — | | | $ | 579,209 | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | TOTAL | | | $ | 8,317,705 | | | $ | 215,368 | | | $ | 8,617,705 | | | $ | 19,832,541 | | | $ | 13,643,031 | | | $ | 13,643,031 | | | | | | | | | | | | | | | | | | |
50 |United States Steel Corporation | 2018 Proxy Statement
Table of Contents 2. | The stock price used for valuation purposes for the long-term incentive awards was the closing stock price on December 30, 2016, which was $33.01; | | | 3. | The normal life expectancy obtained from the 1971 Group Annuity Mortality Tables,Potential Payments Upon Termination or for a permanent incapacity type of pension, life expectancy obtained from the Disabled Life Expectancy Tables (wages and salaried) based on the Corporation’s experience, made gender neutral on a nine to one male/female ratio; and | | | 4. | The December 31, 2016 Pension Benefit Guaranty Corporation interest rate of 1.25% was used to determine 2016 lump sum payment amounts.Change in Control |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Potential Payments Upon Termination (Cont'd.)
| |
|---|
| |
| | A
| | B
| | C
| | D
| | E
| | F
| |
|---|
Executive
| | Component
| | Voluntary
Termination
(with Consent)
or Retirement(1)
| |
Voluntary
Termination
(Without
Consent) or
Involuntary
Termination
(For Cause)
| | Involuntary
Termination
(Not for
Cause)(2)
| | Change in
Control and
Termination
| | Disability(3)
| | Death
| |
|---|
| | | | | | | | | | | | | | | | | | Bradley | | Severance & Compensation Elements | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | — | | | — | | | $ | 1,400,000 | | | $ | 2,500,008 | | | — | | | — | | | | | Short-Term Incentive | | | $ | 273,003 | | | — | | | $ | 273,003 | | | — | | | $ | 273,003 | | | $ | 273,003 | | | | | Stock Options (Unvested)(4) | | | $ | 26,428 | | | — | | | $ | 26,428 | | | $ | 190,254 | | | $ | 190,254 | | | $ | 190,254 | | | | | Restricted Stock (Units)(4) | | | $ | 37,055 | | | — | | | $ | 37,055 | | | $ | 266,740 | | | $ | 266,740 | | | $ | 266,740 | | | | | Performance Stock Award(5)(6) | | | $ | 309,144 | | | — | | | $ | 309,144 | | | $ | 927,433 | | | $ | 463,716 | | | $ | 463,716 | | | | | | | | | | | | | | | | | | | | | | Benefits | | | | | | | | | | | | | | | | | | | | | | | Non-Qualified Deferred Compensation | | | $ | 2,910 | | | — | | | $ | 2,910 | | | $ | 2,910 | | | $ | 2,910 | | | $ | 2,910 | | | | | Welfare Benefits | | | — | | | — | | | — | | | $ | 59,421 | | | — | | | — | | | | | Supplemental Retirement Benefit(7) | | | — | | | — | | | — | | | $ | 424,029 | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | TOTAL | | | $ | 648,540 | | | — | | | $ | 2,048,540 | | | $ | 4,370,795 | | | $ | 1,196,623 | | | $ | 1,196,623 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Matthews | | Severance & Compensation Elements | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | — | | | — | | | $ | 297,550 | | | $ | 2,225,427 | | | — | | | — | | | | | Short-Term Incentive | | | $ | 409,429 | | | — | | | $ | 409,429 | | | — | | | $ | 409,429 | | | $ | 409,429 | | | | | Stock Options (Unvested)(4) | | | $ | 179,720 | | | — | | | $ | 179,720 | | | $ | 472,908 | | | $ | 472,908 | | | $ | 472,908 | | | | | Restricted Stock (Units)(4) | | | $ | 227,644 | | | — | | | $ | 227,644 | | | $ | 593,796 | | | $ | 593,796 | | | $ | 593,796 | | | | | Performance Stock Award(5) | | | $ | 1,718,641 | | | — | | | $ | 1,718,641 | | | $ | 2,841,483 | | | $ | 2,403,138 | | | $ | 2,403,138 | | | | | | | | | | | | | | | | | | | | | | Benefits | | | | | | | | | | | | | | | | | | | | | | | Pension Plan Compensation | | | $ | 6,855,416 | | | $ | 1,994,691 | | | $ | 9,607,690 | | | $ | 9,607,690 | | | $ | 7,313,755 | | | $ | 5,840,218 | | | | | Non-Qualified Deferred Compensation | | | $ | 337,077 | | | $ | 257,005 | | | $ | 337,077 | | | $ | 337,077 | | | $ | 337,077 | | | $ | 337,077 | | | | | Welfare Benefits | | | — | | | — | | | — | | | $ | 58,878 | | | — | | | — | | | | | Supplemental Retirement Benefit(7) | | | — | | | — | | | — | | | $ | 288,816 | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | TOTAL | | | $ | 9,727,927 | | | $ | 2,251,696 | | | $ | 12,777,751 | | | $ | 16,426,075 | | | $ | 11,530,103 | | | $ | 10,056,566 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Buckiso | | Severance & Compensation Elements | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | — | | | — | | | $ | 233,750 | | | $ | 693,750 | | | — | | | — | | | | | Short-Term Incentive | | | $ | 324,968 | | | — | | | $ | 324,968 | | | — | | | $ | 324,968 | | | $ | 324,968 | | | | | Stock Options (Unvested)(4) | | | $ | 68,644 | | | — | | | $ | 68,644 | | | $ | 178,052 | | | $ | 178,052 | | | $ | 178,052 | | | | | Restricted Stock (Units)(4) | | | $ | 91,424 | | | — | | | $ | 91,424 | | | $ | 239,187 | | | $ | 239,187 | | | $ | 239,187 | | | | | Performance Stock Award(5)(6) | | | $ | 532,153 | | | — | | | $ | 532,153 | | | $ | 994,821 | | | $ | 798,194 | | | $ | 798,194 | | | | | | | | | | | | | | | | | | | | | | Benefits | | | | | | | | | | | | | | | | | | | | | | | Pension Plan Compensation | | | $ | 1,140,213 | | | $ | 1,140,213 | | | $ | 2,946,953 | | | $ | 2,946,953 | | | $ | 2,214,217 | | | $ | 1,123,611 | | | | | Non-Qualified Deferred Compensation | | | $ | 275,085 | | | $ | 86,065 | | | $ | 275,085 | | | $ | 275,085 | | | $ | 275,085 | | | $ | 275,085 | | | | | Welfare Benefits | | | — | | | — | | | — | | | $ | 63,611 | | | — | | | — | | | | | Supplemental Retirement Benefit(7) | | | — | | | — | | | — | | | $ | 226,889 | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | TOTAL | | | $ | 2,432,487 | | | $ | 1,226,278 | | | $ | 4,472,977 | | | $ | 5,618,348 | | | $ | 4,029,703 | | | $ | 2,939,097 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Rintoul | | Severance & Compensation Elements | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | — | | | — | | | $ | 212,075 | | | $ | 1,807,929 | | | — | | | — | | | | | Short-Term Incentive | | | $ | 393,661 | | | — | | | $ | 393,661 | | | — | | | $ | 393,661 | | | $ | 393,661 | | | | | Stock Options (Unvested)(4) | | | $ | 131,386 | | | — | | | $ | 131,386 | | | $ | 345,774 | | | $ | 345,774 | | | $ | 345,774 | | | | | Restricted Stock (Units)(4) | | | $ | 271,949 | | | — | | | $ | 271,949 | | | $ | 434,175 | | | $ | 434,175 | | | $ | 434,175 | | | | | Performance Stock Award(5) | | | $ | 1,683,651 | | | — | | | $ | 1,683,651 | | | $ | 2,077,279 | | | $ | 1,756,768 | | | $ | 1,756,768 | | | | | | | | | | | | | | | | | | | | | | Benefits | | | | | | | | | | | | | | | | | | | | | | | Non-Qualified Deferred Compensation | | | $ | 631,890 | | | $ | 631,890 | | | $ | 631,890 | | | $ | 631,890 | | | $ | 631,890 | | | $ | 631,890 | | | | | Welfare Benefits | | | — | | | — | | | — | | | $ | 44,889 | | | — | | | — | | | | | Supplemental Retirement Benefit(7) | | | — | | | — | | | — | | | $ | 223,263 | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | TOTAL | | | $ | 3,112,537 | | | $ | 631,890 | | | $ | 3,324,612 | | | $ | 5,565,199 | | | $ | 3,562,268 | | | $ | 3,562,268 | | | | | | | | | | | | | | | | | | |
United States Steel Corporation | 2018 Proxy Statement |51
Potential Payments Upon Termination
Table of Contents | | | | | A | | B | | C | | D | | | E | | | F | | | | | | | | Voluntary | | | | | | | | | | | | | | | | | | Termination | | | | | | | | | | | | | | | | | | (Without | | | | | | | | | | | | | | | | Voluntary | | Consent) or | | Involuntary | | | | | | | | | | | | | | Termination | | Involuntary | | Termination | | Change in | | | | | | | | | | | | (with Consent) | | Termination | | (Not for | | Control and | | | | | | | | Executive | | Component | | or Retirement(1) | | (For Cause) | | Cause)(2) | | Termination | | | Disability(3) | | | Death | | Longhi | | Severance & Compensation Elements | | | | | | | | | | | | | | | | | | | Cash Severance | | | — | | | — | | $ | 450,000 | | $ | 7,291,667 | | | — | | | — | | | | Short-Term Incentive | | $ | 4,528,125 | | | — | | $ | 4,528,125 | | | — | | $ | 4,528,125 | | $ | 4,528,125 | | | | Stock Options (Unvested)(4) | | $ | 1,465,169 | | | — | | $ | 1,465,169 | | $ | 5,559,546 | | $ | 5,559,546 | | $ | 5,559,546 | | | | Restricted Stock (Awards/Units)(4) | | $ | 1,664,760 | | | — | | $ | 1,664,760 | | $ | 5,419,714 | | $ | 5,419,714 | | $ | 5,419,714 | | | | Performance Stock Award(5) | | $ | 13,250,593 | | | — | | $ | 13,250,593 | | $ | 18,806,688 | | $ | 17,330,322 | | $ | 17,330,322 | | | | Benefits | | | | | | | | | | | | | | | | | | | | | | Non-Qualified Deferred Compensation | | $ | 1,251,893 | | $ | 381,469 | | $ | 1,251,892 | | $ | 1,251,892 | | $ | 1,251,892 | | $ | 1,251,892 | | | | Welfare Benefits | | | — | | | — | | | — | | $ | 41,492 | | | — | | | — | | | | Supplemental Retirement Benefit(7) | | | — | | | — | | | — | | $ | 1,944,923 | | | — | | | — | | | | TOTAL | | $ | 22,160,540 | | $ | 381,469 | | $ | 22,610,599 | | $ | 40,315,922 | | $ | 34,089,599 | | $ | 34,089,599 | | | | | | | | | | | | | | | | | | | | | | | | Executive | | Component | | | | | | | | | | | | | | | | | | | | Burritt | | Severance & Compensation Elements | | | | | | | | | | | | | | | | | | | Cash Severance | | | — | | | — | | $ | 240,000 | | $ | 4,000,000 | | | — | | | — | | | | Short-Term Incentive | | $ | 1,820,000 | | | — | | $ | 1,820,000 | | | — | | $ | 1,820,000 | | $ | 1,820,000 | | | | Stock Options (Unvested)(4) | | $ | 464,990 | | | — | | $ | 464,990 | | $ | 1,754,969 | | $ | 1,754,969 | | $ | 1,754,969 | | | | Restricted Stock (Awards/Units)(4) | | $ | 530,273 | | | — | | $ | 530,273 | | $ | 1,715,332 | | $ | 1,715,332 | | $ | 1,715,332 | | | | Performance Stock Award(5) | | $ | 4,253,454 | | | — | | $ | 4,253,454 | | $ | 5,999,633 | | $ | 5,535,686 | | $ | 5,535,686 | | | | Benefits | | | | | | | | | | | | | | | | | | | | | | Non-Qualified Deferred Compensation | | $ | 462,987 | | $ | 137,752 | | $ | 462,987 | | $ | 462,987 | | $ | 462,987 | | $ | 462,987 | | | | Welfare Benefits | | | — | | | — | | | — | | | 3,912 | | | — | | | — | | | | Supplemental Retirement Benefit(7) | | | — | | | — | | | — | | | 782,760 | | | — | | | — | | | | TOTAL | | $ | 7,531,704 | | $ | 137,752 | | $ | 7,771,704 | | $ | 14,719,593 | | $ | 11,288,974 | | $ | 11,288,974 |
| | United States Steel Corporation | 2017 Proxy Statement | 49 |
Potential Payments Upon Termination or Change in Control |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Potential Payments Upon Termination (Cont'd.)
| |
|---|
| |
| | A
| | B
| | C
| | D
| | E
| | F
| |
|---|
Executive
| | Component
| | Voluntary
Termination
(with Consent)
or Retirement(1)
| |
Voluntary
Termination
(Without
Consent) or
Involuntary
Termination
(For Cause)
| | Involuntary
Termination
(Not for
Cause)(2)
| | Change in
Control and
Termination
| | Disability(3)
| | Death
| |
|---|
| | | | | | | | | | | | | | | | | | Longhi | | Severance & Compensation Elements | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | $ | 112,198 | | | — | | | — | | | — | | | — | | | — | | | | | Short-Term Incentive | | | $ | 1,023,750 | | | — | | | — | | | — | | | — | | | — | | | | | Stock Options (Unvested)(4) | | | $ | 331,030 | | | — | | | — | | | — | | | — | | | — | | | | | Restricted Stock (Units)(4) | | | $ | 370,375 | | | — | | | — | | | — | | | — | | | — | | | | | Performance Stock Award(5) | | | $ | 7,767,155 | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | Benefits | | | | | | | | | | | | | | | | | | | | | | | Non-Qualified Deferred Compensation | | | $ | 1,720,780 | | | — | | | — | | | — | | | — | | | — | | | | | Welfare Benefits | | | $ | 19,243 | | | — | | | — | | | — | | | — | | | — | | | | | Supplemental Retirement Benefit(7) | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | TOTAL | | | $ | 11,344,531 | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Folsom | | Severance & Compensation Elements | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | $ | 1,422,773 | | | — | | | — | | | — | | | — | | | — | | | | | Short-Term Incentive | | | — | | | — | | | — | | | — | | | — | | | — | | | | | Stock Options (Unvested)(4) | | | $ | 426,789 | | | — | | | — | | | — | | | — | | | — | | | | | Restricted Stock (Units)(4) | | | $ | 852,407 | | | — | | | — | | | — | | | — | | | — | | | | | Performance Stock Award(5) | | | $ | 2,095,687 | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | Benefits | | | | | | | | | | | | | | | | | | | | | | | Non-Qualified Deferred Compensation | | | $ | 592,704 | | | — | | | — | | | — | | | — | | | — | | | | | Welfare Benefits | | | $ | 31,376 | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | TOTAL | | | $ | 5,421,736 | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Soni | | Severance & Compensation Elements | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | — | | | — | | | $ | 75,000 | | | $ | 589,950 | | | — | | | — | | | | | Short-Term Incentive | | | $ | 215,853 | | | — | | | $ | 215,853 | | | — | | | $ | 215,853 | | | $ | 215,853 | | | | | Stock Options (Unvested)(4) | | | $ | 43,698 | | | — | | | $ | 43,698 | | | $ | 149,809 | | | $ | 149,809 | | | $ | 149,809 | | | | | Restricted Stock (Units)(4) | | | $ | 52,504 | | | — | | | $ | 492,379 | | | $ | 623,215 | | | $ | 623,215 | | | $ | 623,215 | | | | | Performance Stock Award(5)(6) | | | $ | 108,759 | | | — | | | $ | 108,759 | | | $ | 326,242 | | | $ | 163,139 | | | $ | 163,139 | | | | | | | | | | | | | | | | | | | | | | Benefits | | | | | | | | | | | | | | | | | | | | | | | Non-Qualified Deferred Compensation | | | $ | 29,403 | | | — | | | $ | 29,403 | | | $ | 29,403 | | | $ | 29,403 | | | $ | 29,403 | | | | | Welfare Benefits | | | — | | | — | | | — | | | $ | 63,344 | | | — | | | — | | | | | Supplemental Retirement Benefit(7) | | | — | | | — | | | — | | | $ | 253,626 | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | TOTAL | | | $ | 450,217 | | | — | | | $ | 965,092 | | | $ | 2,035,589 | | | $ | 1,181,419 | | | $ | 1,181,419 | | | | | | | | | | | | | | | | | | |
- (1)
- The term "with Consent" means consent with respect to each component of pay. This termination scenario typically involves retirement pursuant to a retirement plan or, if an NEO has not yet attained the necessary age and service requirements for retirement, a voluntary termination with consent.
- (2)
- The value shown for cash severance benefits represents the total that would be paid over a specified period. Cash severance amounts shown for Mr. Longhi and Ms. Folsom also include payments for accrued and unused vacation.
- (3)
- All benefit amounts would become payable on May 31, 2018 under a permanent incapacity pension, five months following a disabling event that occurred on December 31, 2017.
- (4)
- The annual restricted awards and option awards include pro rata vesting on each grant date anniversary. The retention award granted to Mr. Soni will vest 100% on the third anniversary of the date of the grant. The vesting of the restricted stock award granted in January 2017 to Ms. Folsom was accelerated upon her termination of employment.
- (5)
- Values shown for the Performance awards are calculated as follows:
- •
- The values shown for the 2015 equity award for TSR and the cash award for ROCE are based on the actual value at the end of the Performance Period on December 31, 2017.
- •
- The 2015 TSR grant finished the Performance Period at the 44th percentile of the peer group indicating a payout of 74.07% of the target number of shares. The 2015 ROCE grant ended the Performance Period with below threshold results indicating that the entire award will be forfeited.
- •
- The values shown for the 2016 and 2017 TSR equity and ROCE cash grants in columns A and C represent a pro-rated award based on the number of months worked during the performance period divided by the total number of months in the performance period multiplied by the expected performance through December 2017.
52 |United States Steel Corporation | 2018 Proxy Statement
Table of Contents | Potential Payments Upon Termination or Change in Control |
- •
- In the event of a Change in Control,
Potential Payments Upon Termination (Cont’d.)
| | | | | A | | B | | C | | D | | | E | | | F | | | | | | | | Voluntary | | | | | | | | | | | | | | | | | | Termination | | | | | | | | | | | | | | | | | | (Without | | | | | | | | | | | | | | | | Voluntary | | Consent) or | | Involuntary | | | | | | | | | | | | | | Termination | | Involuntary | | Termination | | Change in | | | | | | | | | | | | (with Consent) | | Termination | | (Not for | | Control and | | | | | | | | Executive | | Component | | or Retirement(1) | | (For Cause) | | Cause)(2) | | Termination | | Disability(3) | | | Death | | Folsom | | Severance & Compensation Elements | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | — | | | — | | $ | 140,000 | | $ | 3,150,000 | | | — | | | — | | | | Short-Term Incentive | | $ | 1,274,000 | | | — | | $ | 1,274,000 | | | — | | $ | 1,274,000 | | $ | 1,274,000 | | | | Stock Options (Unvested)(4) | | $ | 280,340 | | | — | | $ | 280,340 | | $ | 948,527 | | $ | 948,527 | | $ | 948,527 | | | | Restricted Stock (Awards/Units)(4) | | $ | 353,967 | | | — | | $ | 353,967 | | $ | 969,207 | | $ | 969,207 | | $ | 969,207 | | | | Performance Stock Award(5) | | $ | 2,082,905 | | | — | | $ | 2,082,905 | | $ | 2,987,866 | | $ | 2,747,319 | | $ | 2,747,319 | | | | Benefits | | | | | | | | | | | | | | | | | | | | | | Non-Qualified Deferred Compensation | | $ | 339,938 | | | — | | $ | 339,938 | | $ | 339,938 | | $ | 339,938 | | $ | 339,938 | | | | Welfare Benefits | | | — | | | — | | | — | | $ | 60,411 | | | — | | | — | | | | Supplemental Retirement Benefit(7) | | | — | | | — | | | — | | $ | 839,739 | | | — | | | — | | | | TOTAL | | $ | 4,331,150 | | | — | | $ | 4,471,150 | | $ | 9,295,688 | | $ | 6,278,991 | | $ | 6,278,991 | | | | | | | | | | | | | | | | | | | | | | | | Executive | | Component | | | | | | | | | | | | | | | | | | | | Matthews | | Severance & Compensation Elements | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | — | | | — | | $ | 297,550 | | $ | 1,947,600 | | | — | | | — | | | | Short-Term Incentive | | $ | 833,140 | | | — | | $ | 833,140 | | | — | | $ | 833,140 | | $ | 833,140 | | | | Stock Options (Unvested)(4) | | $ | 191,999 | | | — | | $ | 191,999 | | $ | 717,471 | | $ | 717,471 | | $ | 717,471 | | | | Restricted Stock (Awards/Units)(4) | | $ | 220,342 | | | — | | $ | 220,342 | | $ | 704,764 | | $ | 704,764 | | $ | 704,471 | | | | Performance Stock Award(5) | | $ | 1,793,933 | | | — | | $ | 1,793,933 | | $ | 2,501,893 | | $ | 2,313,843 | | $ | 2,313,843 | | | | Benefits | | | | | | | | | | | | | | | | | | | | | | Pension Plan Compensation | | $ | 6,393,658 | | $ | 1,806,023 | | $ | 9,076,573 | | $ | 9,076,573 | | $ | 6,933,042 | | $ | 5,564,257 | | | | Non-Qualified Deferred Compensation | | $ | 178,817 | | $ | 178,817 | | $ | 178,817 | | $ | 178,817 | | | $ 178,817 | | $ | 178,817 | | | | Welfare Benefits | | | — | | | — | | | — | | $ | 54,378 | | | — | | | — | | | | Supplemental Retirement Benefit(7) | | | — | | | — | | | — | | $ | 283,699 | | | — | | | — | | | | TOTAL | | $ | 9,611,889 | | $ | 1,984,840 | | $ | 12,592,354 | | $ | 15,465,195 | | $ | 11,681,077 | | $ | 10,312,292 | | | | | | | | | | | | | | | | | | | | | | | | Executive | | Component | | | | | | | | | | | | | | | | | | | | Bruno | | Severance & Compensation Elements | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | — | | | — | | $ | 82,600 | | $ | 1,269,850 | | | — | | | — | | | | Short-Term Incentive | | $ | 466,043 | | | — | | $ | 466,043 | | | — | | $ | 466,043 | | $ | 466,043 | | | | Stock Options (Unvested)(4) | | $ | 57,269 | | | — | | $ | 57,269 | | $ | 242,629 | | $ | 242,629 | | $ | 242,629 | | | | Restricted Stock (Awards/Units)(4) | | $ | 60,078 | | | — | | $ | 1,857,638 | | $ | 2,022,160 | | $ | 2,022,160 | | $ | 2,022,160 | | | | Performance Stock Award(5)(6) | | $ | 387,113 | | | — | | $ | 387,113 | | $ | 650,825 | | $ | 580,670 | | $ | 580,670 | | | | Benefits | | | | | | | | | | | | | | | | | | | | | | Non-Qualified Deferred Compensation | | $ | 94,312 | | | — | | $ | 94,312 | | $ | 94,312 | | $ | 94,312 | | $ | 94,312 | | | | Welfare Benefits | | | — | | | — | | | — | | $ | 53,746 | | | — | | | — | | | | Supplemental Retirement Benefit(7) | | | — | | | — | | | — | | $ | 359,002 | | | — | | | — | | | | TOTAL | | $ | 1,064,815 | | | — | | $ | 2,944,975 | | $ | 4,692,524 | | $ | 3,405,814 | | $ | 3,405,814 |
(1) | The term “with Consent” means consent with respect to each component of pay. This termination scenario typically involves retirement pursuant the performance period is ended on the date of the CIC and the actual performance is calculated based on the abbreviated Performance Period to determine the "Achieved Performance Award." The balance of the award if any is forfeited and the "Achieved Performance Award" remains subject to employment restrictions through the third anniversary date of the grant unless the Grantee's employment is terminated without cause after a retirement plan. Retirement is generally not applicable to the NEOs because they have not yet attained the necessary age and service requirements for retirement and, accordingly, the amounts set forth in this column are payable to them only in the event of a voluntary termination with consent. | | | (2) | The value shown for cash severance benefits represents the total that would be paid over a specified period. | | | (3) | All benefit amounts would become payable on May 31, 2017 under a permanent incapacity or a deferred vested pension, five months following a disabling event that occurred on December 31, 2016. | | | (4) | The annual restricted awards and option awards include pro rata vesting on each grant date anniversary, for February grants to NEOs there are ten months (March through December) and for May grants to NEOs there are seven months (June through December) counted toward service for the unvested portion of the stock option, or restricted stock unit awards under certain termination events. For the annual awards granted in January 2014 to Ms. Folsom, there are eleven months counted toward service for the unvested portion of the stock options, restricted stock unit and restricted stock awards under certain termination events. These terms also apply in the case of the retention restricted stock units granted to Mr. Bruno, except that the retention restricted stock units would also fully vest upon an involuntary termination by the Corporation other than for cause or a voluntary termination with consent, and would be forfeited upon retirement. |
50 | United States Steel Corporation | 2017 Proxy Statement | | |
Potential Payments Upon Termination or Change in Control before the third anniversary date of the grant, in which the award will be immediately vested and released.
- •
- In the event of disability or death, the awards are immediately vested and distributed based on the following rules:
Death or Disability prior to the end of the first year of the Performance Period – 0% vested Death or Disability at or after the end of the first year of the Performance Period but prior to the end of the second year of the Performance Period – 50% vested (5) | Values shown for the Performance awards are calculated as follows: |
Death or Disability at or after the end of the second year of the Performance Period – 100% vested | • | The values shown for the 2014 equity awards for both TSR and ROCE are based on the actual value at the end of the Performance Period on December 31, 2016. | | | | | • | The 2014 TSR grant finished the Performance Period at the 75thpercentile of the peer group indicating a payout of 150% of the target number of shares. The 2014 ROCE grant ended the Performance Period with below threshold results indicating that the entire award will be forfeited. | | | | | • | The values shown for the 2015 and 2016 TSR equity and ROCE cash grants in columns A and C represent a pro-rated award based on the number of months worked during the performance period divided by the total number of months in the performance period multiplied by the expected performance through December 2016. | | | | | • | In the event of a Change in Control, the performance period is ended on the date of the Change in Control and the actual performance is calculated based on the abbreviated Performance Period to determine the “Achieved Performance Award.” The balance of the award if any is forfeited and the “Achieved Performance Award” remains subject to employment restrictions through the third anniversary date of the grant unless the Grantee’s employment is terminated without cause after a Change in Control before the third anniversary date of the grant, in which the award will be immediately vested and released. | | | | | • | In the event of disabilty or death, the awards are vested and distributed at the end of the relevant performance period, provided the relevent performance goals are achieved, based on the following rules: | | | Death or Disability prior to the end of the first year of the Performance Period - 0% vested | | | Death or Disabiilty at or after the end of the first year of the Performance Period but prior to the end of the second year of the Performance Period - 50% vested | | | Death or Disability at or after the end of rhe second year of the Performance Period - 100% vested |
(6) | Mr. Bruno did not receive Performance Awards in 2014. The vesting outcomes described in footnote 5 reflect his 2015 and 2016 grants of performance awards. | | | (7) | The Supplemental Retirement Benefit is equal to the sum of (i) the Retirement Account contributions that would have been received under the U. S. Steel Savings Plan and the Corporation’s related non tax-qualified plans if his employment would have continued for an additional 36 months plus earnings, and (ii) the amount they would have received under the U. S. Steel Savings Plan and the related non tax-qualified plans if they were fully vested on December 31st. |
| | United States Steel Corporation | 2017 Proxy Statement | 51 |
- (6)
- Mr. Buckiso did not receive Performance Awards in 2015. The vesting outcomes described in footnote 5 reflect his 2016 and 2017 grants of performance awards. Messrs. Bradley and Soni did not receive Performance Awards in 2015 or 2016. The vesting outcomes described in footnote 5 reflect their 2017 performance awards.
- (7)
- For all NEOs, the Supplemental Retirement Benefit is equal to the sum of (i) the Retirement Account contributions that would have been received under the U. S. Steel Savings Plan and the Corporation's related non tax-qualified plans if his employment would have continued for an additional 36 months plus earnings, and (ii) the amount they would have received under the U. S. Steel Savings Plan and the related non tax-qualified plans if they were fully vested on December 31st.
Potential Payments Upon Termination or Change in Control
Termination and Change-in-Control Provisions No cash severance payments are made with respect to an executive’sexecutive's termination of employment due to voluntary termination (with consent or retirement) (Column A), voluntary termination (without consent) or involuntary termination for cause (Column B), disability (Column E) or death (Column F). Under our broad-based Supplemental Unemployment Benefit Program covering most non-represented employees, monthly cash benefits are payable to executives for up to 12 months (depending on years of service) while on layoff in the event of an involuntary termination not for cause (Column C). Cash severance is one of the payments made to executives under the Change in Control Severance Plan in the event of a termination in connection with a Change in Control (Column D). Under the plan, payment would be made in a lump sum amount equal to 2.5 times2.5x for Messrs. Longhi and Burritt and Ms. Folsom, and two timesBradley, 2x for Messrs. BrunoBuckiso, Matthews and MatthewsRintoul, and 1x for Mr. Soni the sum of (a) base salary and (b) the current target under the short-term incentive compensation program (or, if higher than the target, the average short-term incentive compensation for the prior three years). The benefits under the Supplemental UnemployementUnemployment Benefits Program and the Change in Control Program are contingent upon the execution of an agreement which contains a general release of claims and confidentiality, non-disparagement and non-solicitation provisions.
Following a voluntary termination with the Committee’sCommittee's consent or a retirement pursuant to a retirement plan (Column A), a disability (Column E), or death (Column F), an executive would be entitled to receive a short-term incentive award if (a) the relevant performance goals are achieved, (b) the executive is employed for at least six months during the performance period, and (c) the Committee does not exercise its discretion to reduce or eliminate the award. For purposes of the short-term incentive program, retirement means a termination of employment after having completed 30 years of service, attainment of age 60 with 5 years of service, or attainment of age 65. If an executive’sexecutive's employment terminates voluntarily without the Committee’sCommittee's consent or involuntarily (Columns B and C), regardless of whether the termination is for cause or not for cause, no short-term incentive award is payable. Because the cash severance payment, discussed above, includes a multiple of the target short-term incentive, no payments are made pursuant to the short-term incentive program in the event of a Change in Control (Column D).
Following a voluntary termination with the Committee’sCommittee's consent or a retirement pursuant to a retirement plan (Column A), and subject to the Committee's discretion, (i) a prorated number of an executive’sexecutive's unvested stock options granted in 2015 and 2016 would vest based on the number of complete months worked during the vesting period subjectand (ii) the stock options granted in 2017 would fully vest if the executive attained age 60 with 5 years of service or age 65 prior to termination, provided the Committee’s discretion.executive is employed for at least six months following the date of grant and is not a participant in the Supplemental Pension Program and partially vest after 30 years of service or after attainment of age 55 with 10 years of service. The remaining unvested options would be forfeited. In the event of a disability (Column E) or death (Column F), all unvested options vest immediately. All vested options granted under the current stock plan remain exercisable for three years (five years for options granted in 2017) after termination or, if less, until the original expiration date. United States Steel Corporation | 2018 Proxy Statement |53
Table of Contents Potential Payments Upon Termination or Change in Control |
If an executive’sexecutive's employment terminates voluntarily without the Committee’sCommittee's consent or involuntarily for cause (Column B), all remaining unvested options are forfeited. For involuntary terminations that are not for cause (Column C), we have assumed that the executive terminated employment on December 31, 20162017 and that a prorated number of options vested based on the number of complete months worked during the vesting year (May 2016(February 2017 to February 2018 for the 2017 grant, May 2017 to May 20172018 for the 2016 grant, and February 20152017 to February 20162018 for the 2015 grant and May 2014 to May 2015 for the 2014 grant). Stock options include a “double-trigger”"double-trigger" and require a termination in connection with a Change in Control (Column D) in order for the vesting to be accelerated. Unvested stock options would not be forfeited if (i) employment is terminated during a potential change in control period by the Corporation for other than cause or disability or by the executive for good reason and (ii) a 409A Change in Control occurs within twenty-four months following the commencement of the potential change in control period.
Following a voluntary termination with the Committee’sCommittee's consent or a retirement pursuant to a retirement plan (Column A), and subject to the Committee's discretion, (i) a prorated number of an executive’sexecutive's unvested restricted stock units granted in 2015 and 2016 would vest based on the number of complete months worked during the vesting period subjectand (ii) the restricted stock units granted in 2017 would fully vest if the executive attained age 60 with 5 years of service or age 65 prior to termination, provided the Committee’s discretion.executive is employed for at least six months following the date of grant and is not a participant in the Supplemental Pension Program and partially vest after 30 years of service or after attainment of age 55 with 10 years of service. The remaining unvested restricted stock units would be forfeited. In the event of a disability (Column E) or death (Column F), all unvested restricted stock units vest immediately. As described in the footnotes to the table above, different provisions may apply in the case of retention restricted stock units granted to Mr. Bruno. If an executive’sexecutive's employment terminates voluntarily without the Committee’sCommittee's consent or involuntarily for cause (Column B), all remaining unvested restricted stock units are forfeited. For involuntary terminations that are not for cause (Column C) we have assumed that the executive terminated employment on December 31, 20162017 and that a prorated number of restricted stock units vested based on the number of complete months worked during the vesting year (May 2016(February 2017 to February 2018 for the 2017 grant, May 2017 to May 20172018 for the 2016 grant, February 20152017 to February 20162018 for the 2015 grant and May 2014 to May 2015 for the 2014)grant).
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Potential Payments Upon Termination or Change in Control
Restricted stock units require a termination in connection with a Change in Control (Column D) in order for the vesting to be accelerated. Unvested restricted stock units would not be forfeited if (i) employment is terminated during a potential change in control period by the Corporation for other than cause or disability or by the executive for good reason and (ii) a 409A Change in Control occurs within twenty-four months following the commencement of the potential change in control period.
Following a voluntary termination with the Committee’sCommittee's consent or a retirement pursuant to a retirement plan (Column A), and provided that the relevant performance goals are achieved, (i) the prorated value of the performance awards granted in 2015 and 2016 would vest based on the number of complete months worked during the relevant performance period (each is approximately three years), and (ii) the performance awards granted in 2017 would fully vest if the executive attained age 60 with 5 years of service or age 65 prior to termination, provided that the relevant performance goals are achieved.executive is employed for at least six months following the date of grant and is not a participant in the Supplemental Pension Program and partially vest after 30 years of service or after attainment of age 55 with 10 years of service. For performance awards for which the performance goals are achieved, a modified proration is used in the event of a death (Column F) or disability (Column E) allowing 0% of the achieved award if such event occurs prior to the completion of the first third of the performance period, 50% of the achieved award if such event occurs on or after completion of the first third, but prior to completion of the second third, of the performance period, and 100% of the achieved award for events occurring on or after completion of the second third of the performance period. This modified proration effectively shortens the post-termination waiting period to a maximum of two years, thereby allowing an estate to potentially close within two years, since there would be no value allowed for performance awards granted within one year of a participant’sparticipant's death. If an executive’sexecutive's employment terminates voluntarily without the Committee’sCommittee's consent or involuntarily for cause (Column B), all remaining unvested performance awards are forfeited. For involuntary terminations that are not for cause (Column C) we have assumed that the executive terminated employment on December 31, 20162017 and that a prorated number of performance awards vested based on the number of complete months worked during the relevant performance period. Performance awards require a termination in connection with a Change in Control (Column D) in order for the vesting to be accelerated. For these awards, the performance period would end upon the change in control; however, the awards would not vest until the earlier to occur of a termination 54 |United States Steel Corporation | 2018 Proxy Statement
Table of Contents | Potential Payments Upon Termination or Change in Control |
within 24 months of the change in control or the normal vesting date. Unvested performance awards would not be forfeited if (i) employment is terminated during a potential change in control period by the Corporation for other than cause or disability or by the executive for good reason and (ii) a 409A Change in Control occurs within twenty-four months following the commencement of the potential change in control period.
Pension Plan Compensation |
Pension Plan Compensation includes benefits under the following plans:following: U. S. Steel Pension Plan Benefits under the U. S. Steel Pension Plan are payable on behalf of Mr.Messrs. Matthews and Buckiso under each of the termination of employment scenarios. Refer to the “Pension Benefits”"Pension Benefits" section for a description of the U. S. Steel Pension Plan. Benefits under the U. S. Steel Pension Plan may be payable under the Non Tax-Qualified Pension Plan to the extent they are limited by the qualified plan limitations established byunder the Internal Revenue Code. If an executive is placed on involuntary layoff status as of December 31, 20162017 (Column C), the executive would be eligible to remain on layoff for a period of up to two years. Having satisfied certain age and service requirements, Mr.Messrs. Matthews and Buckiso would each be eligible to commence a Rule-of-70/80 early retirement option on December 31, 20172018 after being on layoff for one year. The present value amounts shown for an involuntary termination not for cause (Column C) reflect enhanced benefits attributable to the additional age and continuous service accrued while on layoff, the lower early-commencement charges, and a temporary $400 monthly pension benefit that is payable until the executive becomes eligible for a public pension. If an executive becomes inactive on December 31, 20162017 due to a disability (Column E), which is determined to be a permanent incapacity, the executive would be eligible to commence a Permanent Incapacity early retirement on May 31, 2017,2018, which is five months after the qualifying disability. The present value amounts shown reflect enhanced benefits attributable to the additional age and continuous service accrued during the five-month period, and the lower early-commencement charges, but not the temporary $400 monthly pension benefit that is payable until the executive becomes eligible for a public pension or, if earlier, governmental disability benefits. If the employment of an executive is terminated due to death (Column F), death benefits become payable to the survivor (typically his or her spouse) or, if there is no spouse, to the executive’sexecutive's estate. The present value amounts shown are equal to the higher of (i) the actuarial equivalent of the executive’sexecutive's pension benefit (excluding the survivor and surviving spouse’sspouse's benefits) that would have been payable if the executive had retired on the date of death, or (ii) the value of the survivor and surviving spouse’sspouse's benefits as defined in the U. S. Steel Pension Plan.
Non Tax-Qualified Pension Plan Benefits from the Non Tax-Qualified Pension Plan are payable on behalf of Mr.Messrs. Matthews and Buckiso under each of the termination of employment scenarios. Refer to the “2016"2017 Pension Benefits -– Non Tax-Qualified Pension Plan”Plan" section for a description of the Non Tax-Qualified Tax-Qualified Pension Plan. The present value amounts shown for the various termination scenarios vary based upon the total amount payable under the U. S. Steel Pension Plan before the application of the statutory limitations established by the Internal Revenue Code.
| | United States Steel Corporation | 2017 Proxy Statement | 53 |
Potential Payments Upon Termination or Change in Control
Supplemental Pension Program Benefits from the Supplemental Pension Program are payable on behalf of Mr. Matthews under each of the termination of employment scenarios other than a voluntary termination without consent or an involuntary termination for cause (Column B), since Mr. Matthews, the only eligible NEO, has at least 15 years of continuous service as of December 31, 2016. 2017. Mr. Buckiso is a participant in the U. S. Steel Pension Plan; however, participation in the Supplemental Pension Program was frozen in March 2011 before Mr. Buckiso became eligible for the plan. The present value amounts shown for an involuntary termination not for cause (Column C), a change in control and termination (Column D), and a disability (Column E) reflect enhanced benefits attributable to the additional age and continuous service accrued while onlater commencement due to layoff status and duringbecause of an involuntary termination or the five-month period following the disability event, respectively.
event. If the employment of an executive is terminated due to death (Column F), death benefits become payable to the surviving spouse or, if there is no spouse, to the executive’sexecutive's estate. The present value amounts shown are equal to the actuarial equivalent of the executive’sexecutive's pension benefit (excluding the surviving spouse’sspouse's benefits) that would have been payable with the Corporation’sCorporation's consent if the executive had retired on the date of death.
United States Steel Corporation | 2018 Proxy Statement |55
Non-Qualified Deferred Compensation
Table of Contents Potential Payments Upon Termination or Change in Control |
Non-Qualified Deferred Compensation |
Non-Qualified Deferred Compensation includes benefits under the following plans: Supplemental Thrift Program The conditions for a payment of benefits under the Supplemental Thrift Program include the attainment of five years of continuous service. For Mr.Messrs. Matthews, Rintoul and Buckiso, this condition has been met and therefore, this benefit is payable under all termination scenarios. Because Messrs. Longhi, Burritt, Bradley and Bruno and Ms. FolsomSoni have not yet attained five years of continuous service, this benefit is only payable if employment is terminated with the consent of the Corporation or if the executive dies prior to retirement. For Mr. Longhi and Ms. Folsom, the Corporation consented to the payment of this benefit.
Non Tax-Qualified Retirement Account Program The conditions for a payment of benefits under the Non Tax-Qualified Retirement Account Program include the attainment of three years of continuous service. For Messrs. Burritt, Matthews, Rintoul and Buckiso, this condition has been met and therefore, this benefit is payable under all termination scenarios. Because Mr. Bruno Messrs. Bradley and Ms. Folsom hadSoni have not yet met this condition asattained three years of December 31, 2016, continuous service, this benefit is only payable if their employment is terminated with the consent of the Corporation or if the executive dies prior to retirement. Mr. Longhi and Ms. Folsom met the conditions for payment of this benefit.
Supplemental Retirement Account Program The conditions for a payment of benefits under the Supplemental Retirement Account Program include the termination of employment after completing at least 10 years of continuous service or, if earlier, on or after the attainment of age 65. In addition, benefits are not payable if the participant terminates employment prior to age 55 or within 36 months of becoming a participant in the Plan. Because Messrs. Longhi, Bruno and Burritt and Ms. FolsomMr. Rintoul meets these conditions, this benefit is payable under all termination scenarios. For Messrs. Burritt, Bradley, Matthews, Buckiso and Soni, who have not yet completed 10 years of service and all are under age 65,met these conditions, this benefit is only payable if (a) termination of employment occurs prior to age 65 with the consent of the Corporation, (b) employment is involuntarily terminated other than for cause, or (c) death prior to retirement. For Mr. Longhi and Ms. Folsom, the Corporation consented to the payment of this benefit.
The amount shown for a change in control and termination (Column D) represents the estimated cost of providing active employee insurance coverage to the executive for a period of 36 months or, if earlier, until the executive’s 65thexecutive's 65th birthday.
Supplemental Retirement Benefit |
The supplemental retirement benefit represents the increase in retirement benefits to an executive in the event of a termination in connection with a change in control (Column D) and is paid pursuant to the CIC Plan (see “Termination"Termination Scenarios -– Change in Control and Termination”Termination", above). For all NEOs, the Supplemental Retirement Benefit is equal to the sum of (i) the Retirement Account contributions that would have been received under the U. S. Steel Savings Plan and the Corporation’sCorporation's related non tax-qualified plans if their employment would have continued for an additional 36 months plus earnings, and (ii) the amount they would have received under the U. S. Steel Savings Plan and the related non tax-qualified plans if they were fully vested on December 31st.
Outplacement Services and Excise Tax Gross-Up |
In the event of a termination in connection with a change in control (Column D), the CIC Plan provides for the payment of reasonable costs for outplacement services (two year maximum) for all terminations following an Applicable Event. Gross-up payments are not provided to cover excise taxes imposed under Section 4999 of the Code for an executive who receives compensation under a Change in Control termination scenario (Column D).
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54 | United States Steel Corporation | 2017 Proxy Statement | | |
Table of Contents Proposal 3: Advisory Vote on FrequencyCEO Pay Ratio
We are committed to a compensation program that is internally equitable to motivate our employees to advance the strategy of Stockholder Vote on Executive Compensationthe Corporation and enhance stockholder value. The disclosure below presents the ratio of annual total compensation of our CEO to the annual total compensation of our Median Employee (defined below), excluding our CEO. PROPOSAL 3: ADVISORY VOTE ON FREQUENCY OF STOCKHOLDER VOTE ON EXECUTIVE COMPENSATION
This year stockholders will be asked to vote on how frequently they would like to cast an advisory vote regardingBecause Mr. Burritt did not serve as our CEO for the entirety of 2017, for purposes of this disclosure, the annual total compensation for the CEO was determined by annualizing the compensation of Mr. Burritt based on his compensation as of October 1, 2017. This amount differs from Mr. Burritt's "Total Compensation" reported in the Corporation’s named executive officers. By votingSummary Compensation Table on page 40 of this proposal, which is also an advisory vote, stockholders may indicate whether they would prefer an advisory vote on named executive officer compensation every year, every two years or every three years.
After careful considerationproxy statement because he served as CEO for only for a portion of the frequency alternatives,year, and, consequently, actually earned a lower salary and lower compensation under the Board believesAICP and LTIP while he served as our Chief Financial Officer and Chief Operating Officer.
We calculated each employee's annual total cash compensation to identify our Median Employee. The calculation of annual total cash compensation of each employee was determined by calculating the total cash compensation over the twelve-months ended October 1, 2017 (the "Determination Date"). Pay elements that conducting an advisory vote on executive compensation every year is appropriate for U. S. Steel and its stockholders at this time. While the Corporation’s compensation policies and procedures are developed with long term objectives in mind, the Board believes that stockholder votes every year will permit stockholders to express their views on our compensation practices on a regular basis and provide us with more direct and immediate feedback.
Although this vote is advisory and not binding on the Board of Directors or the Corporation, the Board will carefully consider the outcome of the vote when making future decisions regarding the frequency of advisory votes on executive compensation. However, the Board may decide that it iswere included in the best interestsannual total cash compensation for each employee are:
Salary, base wages and/or overtime received (as applicable); - •
- annual incentive payment received for performance in fiscal year 2016 (for non-represented employees);
- •
- cash incentive payments, based on production (for represented employees only);
- •
- Quarterly profit sharing payments (for represented employees only); and
- •
- Other cash payments (including payments related to shift differential, holidays and vacations) (for represented employees only).
Our calculation includes all full-time, part-time, temporary and seasonal employees of the Corporation and its stockholders to hold an advisory vote more or less frequentlyconsolidated subsidiaries employed as of October 1, 2017 (other than the alternative that receivesCEO). Also, included in the most votesdata were 129 leased employees employed by third parties for whom we determined the compensation. All of our stockholders.thirteen employees located in the Czech Republic, France, Germany, United Arab Emirates, Canada and Italy, representing less than 5% of our total employee population, were excluded due to administrative challenges related to collecting the necessary data for these employees. We excluded 3, 3, 3, 1, 2 and 1 employees from the Czech Republic, France, Germany, United Arab Emirates, Canada and Italy, respectively. Our total U.S. employee and non-U.S. employee population (including leased employees), during the twelve-month period ended October 1, 2017, was 27,637, which is the number of employees used to determine that the excluded employees represent less than 5% of our total employee population. We applied a foreign currency exchange rate to all compensation elements paid in currencies other than U.S. dollars. The Board recommendsWe determined the Median Employee by: (i) calculating the annual total cash compensation described above for each employee; (ii) ranking the annual total cash compensation of all employees except for the CEO, from lowest to highest; and (iii) identifying the employee with the median total cash compensation (who we refer to as the "Median Employee"). Once the Median Employee was determined, that stockholders vote to conduct future advisory votes on executiveemployee's annual total compensation on an ANNUAL basis.was calculated in the same manner as the "Total Compensation" shown for our CEO in the "Summary Compensation Table."
| | United States Steel Corporation | 2017 Proxy Statement | 55 |
| | | | | Median Employee 2017 Total
Compensation
$72,635 | | CEO 2017 Total Compensation
(Annualized)
$5,618,557 | |
2017 CEO Pay Ratio = 77:1 |
Proposal 4: ApprovalThe annual total compensation for fiscal year 2017 for our CEO was $5,618,557 (on an annualized basis) and for the Median Employee was $72,635. The resulting ratio of Amendmentour CEO's annual total compensation, calculated as described above, to the annual total compensation of the 2016 Omnibus Incentive Compensation Planour Median Employee for fiscal year 2017 is 77 to Increase the Number of Authorized Shares by 6.3 Million Shares1.
Proposal 4: Approval of Amendment of the 2016 Omnibus Incentive Compensation Plan to Increase the Number of Authorized Shares by 6.3 Million Shares
Our Board of Directors upon recommendation of the Compensation & Organization Committee (the “Committee”), has approved an amendment to the United States Steel Corporation 2016 Omnibus Incentive Compensation Plan (the “2016 Plan” or “Plan”), subject to approval by our stockholders at the Annual Meeting, to increase the number| 2018 Proxy Statement |57
Table of shares authorized for issuance under the Plan by 6.3 million shares (the “Share Increase Amendment”).Contents The purpose of the 2016 Plan is to attract, retain and motivate employees and non-employee directors of outstanding ability and to align their interests with those of the Corporation’s stockholders. The availability of an adequate number of shares available for issuance under the 2016 Plan is an important factor in fulfilling these purposes.
The Plan currently authorizes the issuance of 7,200,0000 shares of common stock. The Committee expects that if the stockholders approve the Share Increase Amendment, the number of shares available under the 2016 Plan will be sufficient for approximately two or three years based on current expected equity grant practices. If the proposed Share Increase Amendment is not approved by our stockholders, the 2016 Plan will continue in effect in its present form and we will continue to grant equity awards under the terms of the 2016 Plan until the shares remaining available for issuance are exhausted, which the Committee estimates will occur in 2018 based on current expected equity grant practices. Failure of our stockholders to approve the Share Increase Amendment also will not affect the rights of existing award holders under the 2016 Plan or under any previously granted awards under the 2016 Plan.
Highlights of the 2016 Plan
• | No repricing of stock options or stock appreciation rights without stockholder approval; | | | • | Dividends and dividend equivalents may not be paid with respect to performance awards before the performance goals are achieved and the performance awards are earned; | | | • | Minimum vesting period of 12 months, except in the event of death, disability, retirement, termination of employment without cause or a change in control; |
• | Minimum 30% change in control trigger; | | | • | Consummation of transaction required for change in control; | | | • | “Double trigger” vesting of awards upon a change in control; | | | • | No liberal share recycling; and | | | • | Recoupment policy of incentive awards.Audit Committee Report |
Background
The 2016 Plan adopted by the Board and approved by the stockholders in 2016 authorizes the issuance of 7,200,000 shares of common stock for equity granted after the date of the 2016 Annual Meeting. The 2016 Plan replaced the Corporation’s 2005 Stock Incentive Plan (the “2005 Plan”), and no new awards may be issued under the 2005 Plan, although outstanding awards under the 2005 Plan granted before the approval of the 2016 Plan remain outstanding according to their terms.
In determining the number of shares of common stock to be requested by the Share Increase Amendment, the Committee considered the needs of the Corporation’s long term incentive program and the potential dilution that awarding the requested shares may have on the existing stockholders. An independent compensation advisor assisted the Committee in determining the appropriate number of shares to be requested. The advisor
examined a number of factors, including the Corporation’s burn rate and an overhang analysis, taking into account equity awards made under the 2016 Plan and awards made under the 2005 Plan.
The burn rate is the total equity awards granted by the Corporation in a fiscal year divided by the weighted average common stock outstanding in the year indicated. In fiscal 2014, 2015 and 2016, the Corporation made equity awards representing a total of 2,808,440 shares, 2,719,532 shares and 2,771,672 shares, respectively. Under the ISS Proxy Advisor Services (“ISS”) burn rate methodology, one full value share is equivalent to two stock options. If the performance awards that were not earned and were forfeited are excluded, then the ISS adjusted three-year average burn rate would be 1.94% as shown in the table below. This is below the applicable ISS 2017 burn rate cap of 2.86%.
56 | United States Steel Corporation | 2017 Proxy Statement | | |
Proposal 4: Approval of Amendment of the 2016 Omnibus Incentive Compensation Plan to Increase the Number of Authorized Shares by 6.3 Million Shares
| | | | | | | | | | | Weighted Average | | | | | | | | | | | | | | | Common | | | | | Fiscal | | | | | | Performance | | Total Granted/ | | Stock | | | | | Year | | Options Granted | | RSUs Granted | | Awards Earned(1) | | Earned(2) | | Outstanding | | Burn Rate | | | 2014 | | 1,516,440 | | 746,430 | | 0 | | 2,636,085 | | 145,164,000 | | 1.82% | | | 2015 | | 1,638,540 | | 807,432 | | 0 | | 2,849,688 | | 146,094,000 | | 1.95% | | | 2016 | | 1,333,210 | | 1,120,332 | | 62,101 | | 3,106,860 | | 151,199,000 | | 2.05% | | | | | | | | | | | 3-Year Average | | 1.94% | |
(1) | In fiscal 2014, 2015 and 2016, the Corporation granted performance awards representing a total of 545,570 shares, 273,560 shares, and 308,130 shares, respectively. | | | (2) | Under the ISS burn rate methodology, the “Total Granted/Earned” is equal to the number of options granted plus 1.5 times the number of RSUs granted and performance awards earned. |
An additional metric used to measure the cumulative dilutive impact of an equity program is overhang. The calculation of overhang can be described as (A+B) / (A+B+C) where:
• | A is the number of outstanding stock options and outstanding full value awards; | | | • | B is the number of shares available for future grant under the proposed plan; and | | | • | C is the total outstanding shares of common stock. |
As of December 31, 2016, the Corporation had 5,693,211 outstanding stock options with a weighted average remaining term of 5.96 years, and a weighted average exercise price of $29.94. As of that date, the Corporation had 1,593,155 outstanding full value awards, and 5,524,364 shares available
for future grant under the 2016 Plan. As of that date, the Corporation had 173,810,176 outstanding shares of Common Stock. This results in an overhang of 7.37%.
Because this proposal does not contemplate the amount or timing of specific equity awards in the future, and because historic rates of awards may not be indicative of future rates of awards, it is not possible to calculate with certainty the number of years of awards that will be available and the amount of subsequent dilution that may ultimately result from such awards. However, the current rationale and practices of the Committee with respect to equity awards is set forth in the “Long-Term Incentive Compensation” section and elsewhere in the Compensation Discussion & Analysis section of this proxy statement.
Summary of the 2016 Omnibus Incentive Compensation Plan
The following is a summary of the main features of the 2016 Plan. This summary is qualified in its entirety by the specific terms of the 2016 Plan, which is incorporated into this proposal by reference
to Exhibit 10.1 of the Corporation’s quarterly report on Form 10-Q for the quarter ending March 31, 2016, which was filed with the U.S. Securities and Exchange Commission on April 27, 2016.
Purpose
The purpose of the Plan is to attract, retain and motivate employees and non-employee directors of outstanding ability
and to align their interests with those of the Corporation’s stockholders.
Eligibility
All employees, non-employee directors and other service providers of the Corporation or any subsidiary or affiliate are eligible to receive various stock and cash-based awards
under the Plan. As of December 31, 2016, the Corporation had approximately 327 employees and eleven non-employee directors eligible to receive awards under the Plan.
Shares Subject to the 2016 Plan
The maximum number of shares of U. S. Steel common stock which may be issued under the 2016 Plan is 7,200,000 shares, subject to proportionate adjustment in the event of stock splits and similar events. If approved by the stockholders, the Share Increase Amendment would increase the maximum number of shares that may be issued under the Plan to 13.5 million shares, subject to proportionate adjustment in the event of stock splits and similar events.
For purposes of measuring the number of shares issued under the Plan, each stock option or appreciation right, will reduce the number of shares available under the Plan by one share, except to the extent the award is settled in cash. All other awards, unless settled in cash, reduce the number of shares available
under the Plan by 1.73 shares for each such share to which the award relates. Shares delivered in payment of the exercise price of an award or to satisfy withholding obligations, or which are repurchased through the use of option proceeds are counted against the number of shares granted, and are not again available for awards under the Plan. All shares covered by an appreciation right that is exercised and settled in shares are also counted against the number of shares granted.
The number of shares to which an award under the 2016 Plan relates is counted against the number of shares available for issuance at the time of grant unless such number of shares cannot be determined at that time, in which case the number of shares actually distributed pursuant to the award is counted against the
| | United States Steel Corporation | 2017 Proxy Statement | 57 |
Proposal 4: Approval of Amendment of the 2016 Omnibus Incentive Compensation Plan to Increase the Number of Authorized Shares by 6.3 Million Shares
number of available shares at the time of distribution. If, and to the extent, any award granted under the 2016 Plan or the 2005 Plan is forfeited or otherwise terminates without the issuance of shares or if payment is made to the participant in the form of cash, cash equivalents or other property other than shares, any shares that are not issued with respect to such award, to the extent of any such forfeiture or termination or alternative payment, are again available for issuance under the 2016 Plan at the rate for which the award was originally subtracted from the number of shares under the 2005 Plan or 2016 Plan, as applicable.
If the exercise price of an award is paid by a participant by delivery of shares or by withholding shares issuable upon
exercise or if shares are delivered or withheld for the satisfaction of tax withholding obligation, or if shares are repurchased by the Corporation with option proceeds, the number of shares covered by the award equal to the number of shares so delivered, withheld or repurchased are counted against the number of shares granted and are not again available for awards under the 2016 Plan.
Shares distributed pursuant to an award may be, in whole or part, authorized and unissued shares or treasury shares. No awards may be granted under the 2016 Plan after April 26, 2026.
Administration
Except in the case of awards to non-employee directors, the 2016 Plan is administered by a committee of the Board consisting of at least three members of the Board who qualify as an “outside director” as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), a “non-employee director” as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and an “independent” director under the rules of the New York Stock Exchange. The Committee administers awards made to employees of the Corporation. In the case of awards to non-employee directors, the 2016 Plan is administered by the Board.
The Committee has full and final authority to interpret and administer the Plan and to determine the persons who receive awards, type or types of awards, the number of shares covered by each award and to what extent and what circumstances an
award may be settled in cash, shares, other awards or property or accelerated, vested, canceled, forfeited, exchanged or surrendered. All decisions made by the Committee pursuant to the terms of the Plan are final, conclusive and binding on all persons, including the Corporation, its subsidiaries and participants.
The Committee may delegate to one or more officers, managers and/or agents of the Corporation the authority to perform administrative and other functions under the Plan. The Committee may also delegate to one or more officers of the Corporation the authority to grant awards to participants who are not directors or executive officers (as defined under Section 16 of the Exchange Act), subject to limitations established by the Committee and applicable law.
Types of Awards
The types of awards that may be granted include but are not limited to: (1) stock options, (2) restricted stock, (3) restricted stock units, (4) performance awards and (5) other stock-based awards, including appreciation rights. Each of these types of awards is described below.
Stock Options. The Plan provides for the grant of nonstatutory stock options. The option price for each stock option may not be less than 100% of the fair market value of the Corporation’s common stock on the date of grant. Fair market value, for purposes of the Plan, is generally the average of the publicly reported high and low sale prices per share of the Corporation’s common stock on the date of grant.
A stock option may be subject to such restrictions and other terms and conditions, if any, as shall be determined, in its discretion, by the Committee. All options have a term of ten years from the date of grant. The option price for each stock option will be payable upon exercise in cash, or by such other method authorized by the Committee, including by delivery or withholding of U. S. Steel common stock issued pursuant to such option price for the shares being purchased.
Restricted Stock. Shares of the Corporation’s common stock may be issued subject to such restrictions and conditions as the Committee may specify, including but not limited to service requirements and performance goals (see “Performance Awards” below). From the date a restricted stock award is
effective, the awardee will be a stockholder with respect to the restricted stock award and will have all the rights of a stockholder with respect to such shares, including the right to vote the shares and to receive all dividends and other distributions paid with respect to the shares, subject only to the restrictions imposed by the Committee.
Restricted Stock Units. Restricted stock units provide for the issuance of the Corporation’s common stock subject to such restrictions and conditions, including but not limited to service requirements and performance goals (see “Performance Awards” below), as the Committee may impose. The awardee will not be a stockholder with respect to the restricted stock units and will not have the rights of a stockholder with respect to such units until the shares are issued upon the vesting of the award. The Committee may determine to pay dividend equivalents relative to the shares that ultimately vest.
Performance Awards. Performance awards are based on the achievement during a specified performance period of one or more performance goals established by the Committee at the time of the award. These awards may be designated as performance shares or performance cash awards. Performance shares are denominated in shares of common stock and may be paid in shares or cash. Performance cash awards are denominated in dollars, have an initial value that is established by the Committee at the time of grant, and may be paid in cash or shares.
58 | United States Steel Corporation | 2017 Proxy Statement | | |
Proposal 4: Approval of Amendment of the 2016 Omnibus Incentive Compensation Plan to Increase the Number of Authorized Shares by 6.3 Million Shares
The Committee will set forth in writing the performance goals applicable to the award, the performance period during which the achievement of the performance goals shall be measured, the amount that may be earned by the participant based on the achievement of the performance goals and such other terms and conditions applicable to the award as the Committee may, in its discretion, determine. The Committee may retain the discretion to reduce (but not to increase) the amount of a performance award which will be earned based on the achievement of performance goals. Dividends and dividend equivalents may accrue, but may not be paid with respect to performance awards before the performance goals are achieved and the performance awards are earned.
Performance goals may be based on one or more of the following objective performance measures and expressed in either, or a combination of, absolute or relative values or rates of change and on a gross or net basis: safety performance, stock price, capital expenditures, earnings per share, earnings per share growth, return on capital employed, return on invested capital, return on capital, costs, net income, net income growth, operating margin, revenues, revenue growth, revenue from operations, net sales, expenses, income from operations as a percent of capital employed, income from operations, income from operations per ton shipped, tons shipped, cash flow, market share, return on equity, return on assets, earnings (including EBITDA and EBIT), operating cash flow, operating cash flow as a percent of capital employed, economic value added, gross margin, total stockholder return, stockholder equity, debt, debt to stockholder equity, debt to earnings (including EBITDA and EBIT), interest expense and/ or other fixed charges, earnings (including EBITDA and EBIT) to interest expense and/or other fixed charges, environmental emissions improvement, workforce diversity, number of accounts, workers’ compensation claims, budgeted amounts, cost per hire, turnover rate, and/or training costs and expenses.
Performance goals based on such performance measures may be based either on the performance of the participant, the Corporation, a subsidiary or subsidiaries, affiliate, any branch, department, business unit or other portion thereof under such measure for the performance period and/or upon a comparison of such performance with the performance of a peer group of corporations, prior performance periods or other measure selected or defined by the Committee at the time of making a performance award. The Committee may in its discretion also determine to use other objective performance measures as performance goals; however, the compensation awarded in connection with performance measures other than those identified above will not satisfy the exemption for “performance based compensation” under Section 162(m) of the Code. (See “Federal Income Tax Consequences –Other Tax Matters” below.)
The Committee determines and certifies in writing whether the applicable performance goal or goals were achieved, or the level of such achievement, and the amount, if any, earned by the participant based upon such performance.
Other Stock-Based Awards. The Committee may grant to eligible employees, in lieu of salary or cash bonus, such other awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of the Corporation’s common stock, including, without limitation, purchase rights, appreciation rights, shares of common stock awarded without restrictions or conditions, subject to the limitations of the Plan, convertible securities, exchangeable securities or other rights convertible or exchangeable into shares of common stock, as the Committee in its discretion may determine. The Committee will determine the terms and conditions of other stock-based awards. Appreciation rights may not be granted at a price less than the fair market value of the underlying shares on the date of grant.
Award Limits
In order to permit awards to qualify as “performance-based compensation” under Section 162(m) of the Code, awards may not be granted in any calendar year to any participant in excess of the following aggregate limits, subject to the adjustments described below:
• | For stock options and appreciation rights, 1,000,000 shares (this limit applies separately to each type of award). | | | • | For restricted stock and restricted stock units, 1,000,000 shares (the limit applies separately to each award). | | | • | For performance shares, 1,000,000 shares (or the cash value thereof). | | | • | For performance cash awards, $20,000,000 in value. |
The aggregate grant date fair value of awards that may be granted to any individual non-employee director in any single calendar year shall not exceed $500,000. This limit does not apply to any awards made at the election of a non-employee director in lieu of all or a portion of any annual committee cash retainers or other similar cash based payments.
In the event a dividend or other distribution is declared on the Corporation’s stock, or if the outstanding stock is changed into or exchangeable for a different number or kind of stock or securities of the Corporation or another corporation, the award limitations above, and any shares remaining in the Plan that are not subject to outstanding awards, shall be adjusted in an equitable manner as determined by the Committee.
Vesting
All awards granted under the Plan will provide for vesting based on employment or service for a period of at least twelve (12) months from the date on which such award is granted and there is no acceleration of vesting to be more rapid than vesting after twelve (12) months, except in connection with death,
disability, retirement, involuntary termination of employment or service without cause or a change in control. However, up to five percent of the aggregate number of shares authorized for issuance under the 2016 Plan may be issued pursuant to awards that do not satisfy these vesting restrictions.
| | United States Steel Corporation | 2017 Proxy Statement | 59 |
Proposal 4: Approval of Amendment of the 2016 Omnibus Incentive Compensation Plan to Increase the Number of Authorized Shares by 6.3 Million Shares
Repricing and Reload Options Prohibited
The Committee may not, without stockholder approval (1) amend or modify the terms of any outstanding option or appreciation right to reduce the exercise price or (2) cancel, exchange or permit or accept the surrender of any outstanding option or appreciation right in exchange for an option or appreciation right
with an exercise price that is less than the exercise price of the original option or appreciation right, or an award, cash or other securities for purposes of repricing the option or appreciation right. No option may be granted to any individual on account of the use of shares to exercise a prior option.
Change in Control
Unless otherwise determined by the Committee, if a change in control occurs and within two (2) years thereafter a participant’s employment is terminated either (i) involuntarily for any reason other than cause or, (ii) in the case of a member of executive management, as determined by the Committee, voluntarily by the participant for good reason, then (1) all outstanding stock options, and other awards under which the participant may have rights the exercise of which is restricted or limited, shall become fully exercisable and remain exercisable until the expiration date of such award and (2) all restrictions or limitations, including
risks of forfeiture and deferrals, on awards subject to restrictions or limitations under the Plan shall lapse. All performance goals applicable to performance awards shall be measured over the shortened performance period ending on the date of the change in control. Unless otherwise determined by the Committee at the time of grant, scheduled vesting dates for performance-based awards are not affected by a change in control, and all awards remain payable on the dates provided in the underlying award agreements and the Plan.
Miscellaneous
The Board may amend, alter, suspend, discontinue or terminate the Plan at any time without stockholder approval except to the extent that stockholder approval is required by law or stock exchange rules or if the amendment, alteration or other change materially increases the benefits accruing to participants, increases the number of shares available under the Plan or modifies the requirements for participation under the Plan or if the Board determines that stockholder approval is advisable.
Without the consent of the participant, no amendment, suspension or termination of the Plan or any award may materially and adversely affect the rights of such participant under any previously granted award.
The Committee may determine that an award shall be forfeited and/or any value received from the award is subject to recovery under any law, government regulation, stock exchange listing requirement or any policy adopted by the Corporation.
Plan Benefits
The actual amount of awards to be received by or allocated to participants or groups under the Plan is not determinable in advance because the selection of participants who receive awards under the Plan, and the size and type of awards, are
generally determined by the Committee in its discretion. The following table reflects the award of stock options under the 2016 Plan as of December 31, 2016.
Stock Option Grants Under the 2016 Plan
(executive titles below reflect titles held in 2016)
Name and position | | Number of Shares Underlying Options | | Mario Longhi, President & CEO | | 228,300 | | David Burritt, Executive Vice President & Chief Financial Officer | | 71,750 | | Suzanne Folsom, General Counsel, Chief Compliance Officer & Senior Vice President - Government Affairs | | 37,180 | | Douglas Matthews, Senior Vice President - Industrial, Service Center & Mining | | 29,090 | | James Bruno, Senior Vice President - Automotive Solutions | | 10,820 | | Executive Officers as a Group (10 Persons) | | 450,580 | | Non-Executive Director Group | | 0 | | All Employees (excluding Executive Officers) as a Group | | 882,630 | |
The closing price of the Corporation’s common stock underlying the options was $38.19 on February 27, 2017.
Federal Income Tax Consequences
The following is a brief summary of the federal income tax consequences of the grant and exercise of awards under present law. It should not be taken as tax advice by Plan participants, who are urged to consult their individual tax advisors. Except as
described in “Other Tax Matters” below, the Corporation generally will be entitled to a corresponding deduction in the same amount of compensation recognized as taxable income by the participant.
60 | United States Steel Corporation | 2017 Proxy Statement | | |
Proposal 4: Approval of Amendment of the 2016 Omnibus Incentive Compensation Plan to Increase the Number of Authorized Shares by 6.3 Million Shares
Nonqualified Stock Options. A participant who is awarded a nonqualified stock option will not recognize any taxable income for federal income tax purposes upon receipt of the award. Upon exercise of the option, the amount by which the fair market value of the shares received, determined as of the date of exercise, exceeds the option price generally will be taxable to the participant as ordinary income. If the option price of a nonstatutory stock option is paid in whole or in part with shares of the Corporation’s common stock, no income, gain or loss will be recognized by the participant on the receipt of shares delivered in payment of the option price. The fair market value of the remainder of the shares received upon exercise of the option, less the amount of cash, if any, paid upon exercise generally will be taxable as ordinary income.
Restricted Stock. A participant who is awarded restricted stock will not recognize any taxable income for federal income tax purposes in the year of the award, provided the shares are subject to restrictions on transfer and a substantial risk of forfeiture. However, a participant may elect under Section 83(b) of the Code to recognize ordinary income on the date of grant equal to the difference (if any) between the then-fair market value of the shares determined without regard to the restrictions and the amount, if any, paid for the shares. If the participant does not make a Section 83(b) election, in the year in which the shares first become transferable or are no longer subject to a substantial risk of forfeiture, the participant will recognize ordinary income equal to the difference, if any, between the then-fair market value of the shares and the amount, if any, paid for the shares.
Restricted Stock Units and Performance Awards. A participant who is awarded restricted stock units, performance shares or performance cash awards will not recognize any taxable income for federal income tax purposes upon receipt of the award. Any shares of common stock or cash received pursuant to the award generally will be taxable as ordinary income in the year in which the participant receives such shares of common stock or cash.
Appreciation Rights. A participant will not recognize any taxable income for federal income tax purposes upon receipt of appreciation rights. The value of any common stock or cash received in payment of appreciation rights generally will be taxed
as ordinary income in the year in which the participant receives the common stock or cash.
Other Tax Matters. The lapse of vesting or other restrictions on a stock option or appreciation right, restricted stock and restricted stock units, or the deemed achievement or fulfillment of performance goals for awards, in connection with the occurrence of a change in control, in certain circumstances, may result in (i) a 20% federal excise tax (in addition to federal income tax) to the participant and (ii) the unavailability of a compensation deduction which would otherwise be allowable to the Corporation as explained above.
Except for stock options and appreciation rights, and certain restricted stock awards, restricted stock unit awards and performance awards that meet the requirements of the Plan and are based on the performance measures described therein, the Corporation may not be eligible for a compensation deduction which would otherwise be allowable for compensation paid to any employee if, as of the close of the tax year, the employee is the chief executive officer of the Corporation or is among the three other highest compensated officers for that tax year for whom compensation is required to be reported to stockholders under the Securities Exchange Act, as amended, to the extent the total compensation paid to such employee in such year exceeds $1,000,000.
Additional Information. Stock options and appreciation rights, performance awards, restricted stock and restricted stock unit awards that are based on performance measures set forth in the Plan and otherwise meet the requirements of the Plan may qualify as “performance-based compensation” that is exempt from the $1,000,000 annual federal income tax deduction limit imposed by Section 162(m) of the Code on compensation paid to each of the Corporation’s chief executive officer and three other most highly compensated executive officers in each fiscal year. Because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) of the Code and the regulations issued thereunder, no assurance can be given, notwithstanding the Corporation’s efforts, that compensation intended by the Corporation to satisfy the requirements for deductibility under Section 162(m) of the Code will in fact do so.
Board Recommendation
The Board recommends a vote FOR the approval of the Share Increase Amendment to the 2016 Plan.
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Proposal 5: Approval of Amended and Restated Certificate of Incorporation
PROPOSAL 5: APPROVAL OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
At the 2014 Annual Meeting of Stockholders, the Corporation’s stockholders approved the elimination of the Board’s classified structure over a three year period. The progressive declassification process is detailed in the Corporation’s Restated Certificate of Incorporation, as amended. The process of declassifying the Board will be complete as of the 2017 Annual Meeting of Stockholders, at which time all directors will be elected for an annual term.
Our Board of Directors has unanimously approved and declared the advisability of an amendment and restatement to the Restated Certificate of Incorporation (the “Amended Certificate”) to (i) eliminate all references to the classified structure of the board, and (ii) incorporate all amendments into a singular document for administrative ease. The Board is submitting the proposed Amended Certificate to the stockholders of the Corporation for their approval at the 2017 Annual Meeting of Stockholders.
The complete text of the proposed Amended and Restated Certificate of Incorporation is set forth in Appendix B.
If the Amended Certificate is approved by the affirmative vote of stockholders holding a majority of the outstanding shares of the Corporation, the Amended Certificate will become effective upon the filing of the Amended and Restated Certificate
of Incorporation with the Secretary of State of the State of Delaware. The Corporation intends to file the Amended Certificate promptly following stockholder approval.
The Board recommends the Amended Certificate because, as of the 2017 Annual Meeting of Stockholders, all of Corporation’s directors will be subject to election or re-election on an annual basis as a result of the declassification of the Board, which was approved by the Corporation’s stockholders at the 2014 annual meeting of stockholders. The Amended Certificate is intended to eliminate all references to the classified board structure, as it will no longer be applicable to the Corporation following the 2017 Annual Meeting of Stockholders.
If the Amended Certificate is not approved by the affirmative vote of a majority of our outstanding shares at the 2017 Annual Meeting, the Restated Certificate of Incorporation will not be amended and restated, and the current Restated Certificate of Incorporation will remain in effect.
Accordingly, our Board declares the advisability of the Amended Certificate to eliminate references to a classified board structure, directs that the Amended Certificate be considered at the Corporation’s 2017 Annual Meeting of Stockholders, and unanimously recommends that stockholders voteFOR approval of this proposal.
The Board recommends a vote FOR approval of the amended and restated Certificate of Incorporation.
62 | United States Steel Corporation | 2017 Proxy Statement | | |
Audit Committee Report
Audit Fees The following table shows the fees paid to PricewaterhouseCoopers LLP (“PwC”("PwC") for professional services for 20162017 and 2015:2016: | | | | | | | | | | | | | | | | | | | | | (Dollars in millions) | | | | | | 2017 | | | 2016 | | | | | | | | | | | | Audit(1) | | $ | 5.1 | | $ | 5.1 | | | | | | | | | | | | Audit-Related(2) | | $ | 0.4 | | $ | 0.3 | | | | | | | | | | | | Tax | | $ | — | | $ | — | | | | | | | | | | | | All Other | | $ | — | | $ | — | | | | | | | | | | | | Total | | $ | 5.5 | | $ | 5.4 | | | | | | | | | | |
- (1)
- Audit fees were for: the audit of U. S. Steel's annual financial statements; the audit of U. S. Steel's internal control over financial reporting required under the Sarbanes-Oxley Act; audits of certain subsidiaries, statutory and regulatory audits; the issuance of comfort letters, and consents; and the review of SEC regulatory filings.
- (2)
- Audit-related fees were for employee benefit plan audits and procedures required by agreement or government agencies as well as audit and internal control review procedures associated with the implementation of new accounting standards.
| | | (Dollars in millions) | | | | | 2016 | | | 2015 | | | Audit(1) | | $ | 5.1 | | | $ | 6.4 | | | Audit-Related(2) | | $ | 0.3 | | | $ | 0.3 | | | Tax(3) | | $ | — | | | $ | 0.1 | | | All Other(4) | | $ | — | | | $ | 0.1 | | | Total | | $ | 5.4 | | | $ | 6.9 | |
(1) | Audit fees were for: the audit of U. S. Steel’s annual financial statements; the audit of U. S. Steel’s internal control over financial reporting required under the Sarbanes-Oxley Act; audits of certain subsidiaries, statutory and regulatory audits; the issuance of comfort letters, and consents; and the review of SEC regulatory filings. | | | (2) | Audit-related fees were for employee benefit plan audits and procedures required by agreement or government agencies. | | | (3) | Tax fees were for services involving advice and consultation on tax matters. | | | (4) | All other fees were for advisory services, including risk vulnerability assessment and recommendation projects. All other fees also include fees for training and an annual software license renewal. |
Pre-Approval Policy The Audit Committee has the sole authority to pre-approve all audit engagement fees and terms as well as all non-audit engagements with PwC. The Audit Committee has delegated to its chairman the authority to approve non-audit non-audit engagements of less than $500,000 between Audit Committee meetings. In 20152016 and 2016,2017, all of the above services were pre-approved by the Audit Committee in accordance with this pre-approval policy.
AUDIT COMMITTEE REPORTAudit Committee Report
Our committeeThe Audit Committee has reviewed and discussed U. S. Steel’sSteel's audited financial statements for the year ended December 31, 20162017 with U. S. Steel’sSteel's management. We have discussed with the independent registered public accounting firm, PricewaterhouseCoopers LLP (PwC), the matters required to be discussed by Statements on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380),1301 "Communication with Audit Committees," as adopted by the Public Company Accounting Oversight Board in Rule 3200T.Board. We also discussed with U. S. Steel’sSteel's management its assessment of the effectiveness of U. S. Steel’sSteel's internal control over financial reporting as of December 31, 2016,2017, and PwC’sPwC's opinion on the effectiveness of U. S. Steel’sSteel's internal
control over financial reporting as of December 31, 2016.2017. We have received the written disclosures and the letter from PwC required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’saccountant's communications with the audit committee concerning independence, and we have discussed with PwC its independence. Based on the aforementioned review and discussions, we recommended to the Board that the audited financial statements for U. S. Steel be included in U. S. Steel’sSteel's Annual Report on Form 10-K for the year ended December 31, 2016,2017, for filing with the Securities and Exchange Commission. | | | John J. Engel, Chairman
Paul Mascarenas
Murry S. Gerber | | Stephen J. Girsky | Dan O. Dinges |
Glenda G. McNeal
Eugene B. Sperling |
58 |United States Steel Corporation | 2018 Proxy Statement
Table of Contents Murry S. Gerber | David S. SutherlandProposal 3: Ratification of the Appointment of PricewaterhouseCoopers LLP as Independent Registered Public Accounting Firm |
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PROPOSAL 3: RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
Proposal 6: Ratification of the Appointment of Pricewaterhousecoopers LLP as Independent Registered Public Accounting Firm
PROPOSAL 6: RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Pursuant to the authority provided by its charter, the Audit Committee has appointed PricewaterhouseCoopers LLP (PwC) as the independent registered public accounting firm for U. S. Steel for the current fiscal year. Although action by the stockholders in this matter is not required by law or the Corporation’sCorporation's by-laws, the Audit Committee believes that it is appropriate to seek stockholder ratification of this appointment in light of the important role played by the independent registered public accounting firm in maintaining the integrity of the Corporation’sCorporation's financial controls and reporting. If the appointment of PwC is not ratified by the stockholders, the Audit Committee will reconsider its appointment and review its future selection of an independent registered public accounting firm in light of that result. However, the Audit Committee may decide to maintain its appointment of PwC. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such change would be in the best interests of the Corporation and our stockholders. PwC has served as the independent auditor (now referred to as the independent registered public accounting firm) of U. S. Steel for many years. We believe that PwC’sPwC's knowledge of U. S. Steel’sSteel's business and its organization gained through this period of service is quite valuable. Partners and employees of PwC assigned to the U. S. Steel engagement are periodically rotated, thus giving U. S. Steel the benefit of new thinking and approaches in the audit area. The Audit Committee annually requests PwC to prepare a self-assessment utilizing the Center for Audit Quality, External Auditor Assessment Tool. This best practice assists the Audit Committee in its oversight role and annual evaluation of PwC to assess the quality of the audit and to recommend the retention of PwC. Based on this assessment, we believe the quality of PwC’sPwC's services, communication and interaction with the Audit Committee is of a high standard. We expect representatives of PwC to be present at the annual meeting with an opportunity to make a statement if they desire to do so and to be available to respond to appropriate questions. For fiscal year 2016,2017, PwC performed professional services for U. S. Steel in connection with audits of the financial statements of U. S. Steel, and of U. S. Steel’sSteel's internal control over financial reporting as of December 31, 2016,2017, and audits of certain subsidiaries and certain pension and other employee benefit plans. PwC has also reviewed quarterly reports and other filings with the Securities and Exchange Commission and other agencies and provided advice and consultation on tax matters. The Board recommends a vote FOR the ratification of the appointment of PwC as our independent registered public accounting firm.
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Stock Ownership of Certain Beneficial Owners
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table furnishes information concerning all persons known to U. S. Steel to beneficially own five percent or more of the voting stock of U. S. Steel:
| | | | | | Amount and NatureThe Board recommends a vote FOR the ratification of | Percent the appointment of PwC as our independent registered public accounting firm. | Class | Name and Address of Beneficial Owner | Beneficial Ownership | of Class | U. S. Steel Common Stock | The Vanguard Group | 15,204,084 | 8.81%(1) | | 100 Vanguard Blvd. | | | | Malvern, PA 19355 | | | U. S. Steel Common Stock | Blackrock, Inc. | 13,155,605 | 7.6%(2) | | 55 East 52ndstreet | | | | New York, NY 10055 | | |
United States Steel Corporation | 2018 Proxy Statement |59
Table of Contents (1) | Based on Schedule 13G filed on February 9, 2017, which indicates that The Vanguard Group had sole voting power over 98,566 shares, shared voting power over 17,404 shares, sole dispositive power over 15,096,602 shares and shared dispositive power over 107,482 shares. | | | (2) | Based on Schedule 13G filed on January 26, 2017, which indicates that Blackrock, Inc. had sole voting power over 12,543,948 shares, shared voting power over no shares, sole dispositive power over 13,155,605 shares and shared dispositive power over no shares. |
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Questions and Answers About the Annual Meeting and Voting |
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING |
Questions and Answers About the Annual Meeting and Voting
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
You may vote if you were a holder of United States Steel Corporation (“("U. S. Steel”Steel" or the “Corporation”"Corporation") common stock at the close of business on February 27, 2017.26, 2018. You may vote on: - •
- the election of the ten nominees recommended by the Board of Directors and identified elsewhere in this proxy statement;
- •
- the advisory vote on executive compensation; and
- •
- the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2018.
• | the election of the twelve nominees recommended by the Board of Directors and identified elsewhere in this proxy statement; | | | • | the advisory vote on executive compensation; | | | • | the advisory vote on the frequency of the stockholder vote on executive compensation; | | | • | the approval of the amendment to the 2016 Omnibus Incentive Compensation Plan to issue additional shares; | | | • | the approval of the amended and restated Certificate of Incorporation; and | | | • | the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2017. |
3. | 3. How does the Board recommend I vote? |
The Board recommends that you vote: - •
- FOR each of the nominees for director;
- •
- FOR approval of the Corporation's executive compensation; and
- •
- FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2018.
• | FOR each of the nominees for director; | | | • | FOR approval of the Corporation’s executive compensation; | | | • | FOR ANNUAL stockholder votes of executive compensation; | | | • | FOR the approval of the amendment to the 2016 Omnibus Incentive Compensation Plan to issue additional shares; | | | • | FOR the approval of the amended and restated Certificate of Incorporation; and | | | • | FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2017. |
You may vote by telephone or over the Internet by following the instructions on the enclosed proxy card (or, if you own your shares through a broker or other intermediary, on the voting instruction card). You may also vote by marking, signing and dating the enclosed proxy card or voting instruction card and returning it in the prepaid envelope. If you receive a Notice of Internet Availability of Proxy Materials (“Notice”("Notice"), you may vote by following the instructions contained in the Notice. The proxy committee will vote your shares in accordance with your instructions. If you sign, date and return a proxy card but do not mark the boxes showing how you wish to vote, the proxy committee will vote your shares:FOR each of the nominees for director;FOR approval of the Corporation’sCorporation's executive compensation; andFOR ANNUAL stockholder votes on executive compensation;FOR the approval of the amendment to the 2016 Omnibus Incentive Compensation Plan to issue additional shares;FOR the approval of the amendment and restatement of the Restated Certificate of Incorporation; andFOR ratification of the appointment of PricewaterhouseCoopers LLP. Unsigned proxy cards will not be voted at all. If you are a stockholder of record (that is, if you are registered on our books), you may also vote in person by attending the meeting. If you are not a stockholder of record (for example, if you hold your shares in “street name”"street name"), you will need to obtain a legal proxy from your broker, bank or other holder of record in order to vote in person at the meeting.
5. | 5. May I change my vote? |
If you are a stockholder of record, you may change your vote or revoke your proxy at any time before your shares are voted at the meeting by doing any of the following: • | voting again by telephone or over the Internet; | | | • | sending us a proxy card dated later than your last vote; | | | • | notifying the Corporate Secretary of U. S. Steel in writing; or | | | • | voting at the meeting. |
- •
- voting again by telephone or over the Internet;
- •
- sending us a proxy card dated later than your last vote;
- •
- notifying the Corporate Secretary of U. S. Steel in writing; or
- •
- voting at the meeting.
If you hold your shares in “street"street name,”" please refer to the information forwarded by your bank, broker or other holder of record for procedures on revoking or changing your voting instructions. 6. | 6. How many outstanding shares are there? |
At the close of business on February 27, 2017,26, 2018, which is the record date for the meeting, there were 174,290,761176,184,431 shares of U. S. Steel common stock outstanding. Each share is entitled to one vote. 7. | 7. How many votes are required to elect a director or approve a proposal? |
Proposal 1 – Election of Directors. Each director is elected by a vote of the majority of the votes cast with respect to that director’sdirector's election. The term “a"a majority of the votes cast”cast" means that the number of votes cast “for”"for" a director’sdirector's election exceeds the number of votes cast “against”"against" the director’sdirector's election. Abstentions and broker non-votes are not counted as votes cast either “for”"for" or “against”"against" the director’sdirector's election. Proposal 2 – Advisory Vote on Executive Compensation. The advisory vote on executive compensation requires a majority of the votes cast by the holders of the shares present in person at the meeting or represented by proxy and entitled to vote. Because this vote is advisory, it will not be binding on the Board or the Corporation; however, the Board and its Compensation & Organization Committee will review the voting results and take them into consideration when making future executive compensation decisions. Abstentions and broker non-votes have no effect on the proposal.
66 | United States Steel Corporation | 2017 Proxy Statement
| | |
Questions and Answers About the Annual Meeting and Voting
Proposal 3 – Advisory Vote on Frequency of Stockholder Vote on Executive Compensation. The advisory vote regarding the frequency of the stockholder vote on executive compensation requires a majority of the votes cast by the holders of the shares present in person at the meeting or represented by proxy and entitled to vote. Because this vote is advisory, it will not be binding on the Board or the Corporation; however, the Board will review the voting results and take them into consideration when making future decisions regarding how often to hold the advisory vote on executive compensation. Abstentions and broker non-votes have no effect on the proposal. Proposal 4 – Amendment to the 2016 Omnibus Incentive Compensation Plan. The amendment of the 2016 Omnibus Incentive Compensation Plan to issue additional shares must be approved by a majority the votes cast by the holders of the shares present in person at the meeting or represented by proxy and entitled to vote. Abstentions and broker non-votes have no effect on the proposal.
Proposal 5 – Amended and Restated Certificate of Incorporation. The amendment and restatement of the Restated Certificate of Incorporation must be approved by a majority of the outstanding shares entitled to vote. Abstentions and broker non-votes have the same effect as a vote against the proposal.
Proposal 6 – Ratification of Appointment of Independent Registered Public Accounting Firm. The ratification of the appointment of the independent registered public accounting firm must be approved by a majority of the votes cast by the holders of the shares present in person at the meeting or represented by proxy and entitled to vote. Abstentions have no effect on the proposal.
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Table of Contents 8. Questions and Answers About the Annual Meeting and Voting | |
8. What are broker non-votes?
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