UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.WASHINGTON, DC 20549
SCHEDULE 14A(Rule 14a-101)
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COOPER TIRE & RUBBER COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS:
The 20172019 Annual Meeting of Stockholders of Cooper Tire & Rubber Company (the “Company”) will be held at The Westin Detroit Metropolitan Airport, McNamara Terminal, 2501 Worldgateway Place, Detroit, Michigan 48242 on Friday, May 5, 2017,3, 2019, at 10:00 a.m., Eastern Daylight Time, for the following purposes:
(1) | To elect |
(2) | To ratify the selection of the Company’s independent registered public accounting firm for the year ending December 31, |
(3) | To approve, on a non-binding advisory basis, the Company’s named executive officer compensation. |
(4) |
To transact such other business as may properly come before the Annual Meeting or any postponement(s) or adjournment(s) thereof. |
Only holders of Common Stock of record at the close of business on March 10, 2017,8, 2019, are entitled to notice of and to vote at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Stephen Zamansky,
Senior Vice President,
General Counsel and& Secretary
Findlay, Ohio
March 20, 201721, 2019
Please mark, date, and sign the enclosed proxy and return it promptly in the enclosed addressed envelope, which requires no postage. In the alternative, you may vote by Internet or telephone. See page 2 of the proxy statement for additional information on voting by Internet or telephone. If you are present and vote in person at the Annual Meeting, the enclosed proxy card will not be used.
Table of Contents
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TABLE OF CONTENTS(continued)
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COOPER TIRE & RUBBER COMPANY
701 Lima Avenue, Findlay, Ohio 45840
March 20, 2017
21, 2019
PROXY STATEMENT
GENERAL INFORMATION AND VOTING
This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors of Cooper Tire & Rubber Company (the “Company,” “Cooper Tire,” “our,” “we,” or “us”) to be used at the Annual Meeting of Stockholders of the Company to be held on May 5, 2017,3, 2019, at 10:00 a.m., Eastern Daylight Time, at The Westin Detroit Metropolitan Airport, McNamara Terminal, 2501 Worldgateway Place, Detroit, Michigan 48242. This proxy statement and the related form of proxy were first mailed or made available to stockholders on or about March 20, 2017.21, 2019.
The purpose of the Annual Meeting is for stockholders to act on the matters outlined in the notice of Annual Meeting on the cover page of this proxy statement. These matters consist of (1) the election of eightten Directors, (2) the ratification of the selection of the Company’s independent registered public accounting firm for the year ending December 31, 2017,2019, (3) the approval, on a non-binding advisory basis, of the Company’s named executive officer compensation, (4) the recommendation, on a non-binding advisory basis, of the frequency of advisory votes on the Company’s named executive officer compensation, and (5)(4) the transaction of such other business as may properly come before the Annual Meeting or any postponement(s) or adjournment(s) thereof.
Each share of the Company’s Common Stock will be entitled to one vote on each matter. Only stockholders of record at the close of business on March 10, 2017,8, 2019 (the “record date”) will be eligible to vote at the Annual Meeting. As of the record date, there were 52,910,82350,114,865 shares of Common Stock outstanding. The holders of a majority of the shares of Common Stock issued and outstanding, and present in person or represented by proxy, constitute a quorum. Abstentions and “broker non-votes” with respect to a proposal will be counted to determine whether a quorum is present at the Annual Meeting.
If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to instruct that organization on how to vote the shares held in your account. “Broker non-votes” occur when an organization that holds shares for a beneficial owner has not received voting instructions with respect to the proposal from the beneficial owner. Whether such organization has the discretion to vote those shares on a particular proposal depends on the ballot item. If the organization that holds your shares does not have discretion and you do not give the organization instructions, the votes will be “broker non-votes,” which may have the same effect as votes against the proposal.
Below is a summary of the vote threshold required for passage of each agenda item and the effect of abstentions and “broker non-votes.”
Agenda Item 1. Except in the case of a contested election, each nominee for election as a Director who receives a majority of the votes cast with respect to such Director’s election by stockholders will be elected as a Director. In the case of a contested election, the nominees for election as Directors who receive the greatest number of votes will be elected as Directors. Abstentions and “broker non-votes” are not counted for purposes of the election of Directors.
Agenda Item 2. Although the Company’s independent registered public accounting firm may be selected by the Audit Committee of the Board of Directors without stockholder approval, the Audit Committee will consider the affirmative vote of a majority of the shares of Common Stock having voting power present in person or represented by proxy
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at the Annual Meeting to be a ratification by the stockholders of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2017.2019. As a result, abstentions will have the same effect as a vote cast against the proposal. As a routine matter, we do not expect “broker non-votes” with respect to this proposal.
Agenda Item 3. Although the advisory vote to approve named executive officer compensation is non-binding, the advisory vote allows our stockholders to express their opinions regarding named executive officer compensation. The Board will consider the affirmative vote of a majority of the shares of Common Stock having voting power present in person or represented by proxy at the Annual Meeting as approval of the compensation of the Company’s named executive officers for fiscal 2016.2018. Abstentions are counted as votes against and “broker non-votes” are not counted for purposes of the advisory vote to approve named executive officer compensation. As a result, if you own shares through a bank, broker-dealer, or similar organization, you must instruct your bank, broker-dealer, or other similar organization to vote in order for them to vote your shares.
Agenda Item 4. Although the advisory vote to recommend the frequency of advisory votes on the Company’s named executive officer compensation is non-binding, the advisory vote allows our stockholders to express their opinions regarding the frequency of stockholder votes regarding the Company’s named executive officer compensation. The Board will consider the option receiving the greatest number of votes (every one, two or three years) of the shares of Common Stock having voting power present in person or represented by proxy at the Annual Meeting as the frequency recommended by stockholders. However, because this vote is advisory and not binding on the Board of the Company in any way, the Board may decide that it is in the best interests of our stockholders and our Company to hold an advisory vote on named executive officer compensation more or less frequently than the option recommended by our stockholders. Abstentions and “broker non-votes” will have no effect on this proposal.
Stockholders may vote by completing, properly signing, and returning the accompanying proxy card, or by attending and voting at the Annual Meeting. If you properly complete and return your proxy card in time to vote, your proxy (one of the individuals named in the proxy card) will vote your shares as you have directed. If you sign and return the proxy card but do not indicate specific choices as to your vote, your proxy will vote your shares (i) to elect the nominees listed under “Nominees for Director,” (ii) for the ratification of the selection of the Company’s independent registered public accounting firm and (iii) for approval of the compensation of the Company’sCompany's named executive officers for fiscal year 2016 and (iv) for advisory votes on the Company’s named executive officer compensation to occur “every year.”
2018. Stockholders of record and participants in certain defined contribution plans sponsored by the Company (see below) may also vote by using a touch-tone telephone to call 1-800-690-6903, or by the Internet by accessing the following website:http://www.proxyvote.com.
Voting instructions, including your stockholder account number and personal proxy control number, are contained on the accompanying proxy card. You will also use this accompanying proxy card if you are a participant in the following defined contribution plans sponsored by the Company:
Those stockholders of record who choose to vote by telephone or Internet must do so no later than 11:59 p.m., Eastern Daylight Time, on May 4, 2017.2, 2019. All voting instructions from participants in the defined contribution plans sponsored by the Company and listed above must be received no later than 5:0011:59 p.m., Eastern Daylight Time, on May 3, 2017.April 30, 2019.
A stockholder may revoke a proxy by filing a notice of revocation with the Secretary of the Company, or by submitting a properly executed proxy card bearing a later date. A stockholder may also revoke a previously executed proxy (including one submitted by Internet or telephone) by attending and voting at the Annual Meeting, after requesting that the earlier proxy be revoked. Attendance at the Annual Meeting, without further action on the part of the stockholder, will not operate to revoke a previously granted proxy card. If the shares are held in the name of a bank, broker or other holder of record, the stockholder must obtain a proxy executed in his or her favor from the holder of record to be able to vote at the Annual Meeting.
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ELECTION OF DIRECTORS
In accordance with the Restated Certificate of Incorporation of the Company, the Board of Directors has fixed the total number of Directors to be elected at the Annual Meeting at eight.ten. All eightten of our Directors standing for reelection have a term that expires at this Annual Meeting and each has consented to stand for reelection. At this Annual Meeting, eightten Directors are being elected to serve for a term of office that will expire at the Annual Meeting of Stockholders in 2018.2020. In the event that any of the nominees becomes unavailable to serve as a Director before the Annual Meeting, the Board of Directors may designate a new nominee, and the persons named as proxies will vote for that substitute nominee.
The Board of Directors recommends that stockholders vote FOR the eightten nominees for Director.
STEVEN M. CHAPMAN | Group Vice President, China and Russia Cummins, Inc. | ||
Mr. Chapman, age | |||
Director Since 2006 |
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NOMINEES FOR DIRECTOR (Cont)
SUSAN F. DAVIS | Former Executive Vice President Asia-Pacific Region Johnson Controls | ||
Ms. Davis, age | |||
Director Since | 2016 |
KATHRYN P. DICKSON Former Senior Vice President Mattel, Inc. and President, American Girl Ms. Dickson, age 54, served as Senior Vice President for Mattel, Inc., a global learning, development and play company, and President of its American Girl subsidiary from February 2016 through December 2018. Prior to Mattel, Ms. Dickson served as Chief Marketing Officer for News America Marketing, Inc., a consumer focused marketing business, from February 2015 to February 2016. Prior to News America Marketing, Inc., Ms. Dickson served in various capacities, over more than 23 years, at General Mills, Inc., a global manufacturer and marketer of branded consumer foods, including as Vice President, Marketing Excellence and Vice President for global General Mills brands. Ms. Dickson holds a bachelor's degree in management from the United States Air Force Academy and a Master of Business Administration (MBA) from the University of California, Los Angeles. She served in the Air Force as a Captain. Ms. Dickson’s education, business management and marketing experience qualify her to continue serving as a member of the Board of Directors. Director Since 2018 |
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NOMINEES FOR DIRECTOR (Cont)
JOHN J. HOLLAND | President Greentree Advisors LLC | ||
Mr. Holland, age | |||
Director Since 2003 |
BRADLEY E. HUGHES | President | ||
Mr. Hughes, age | |||
Director Since | 2016 |
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NOMINEES FOR DIRECTOR (Cont)
TRACEY I. JOUBERT Chief Financial Officer Molson Coors Brewing Company Ms. Joubert, age 52, has served as Chief Financial Officer of Molson Coors Brewing Company since 2016. Molson Coors is a leading global brewer. Ms. Joubert was Executive Vice President and Chief Financial Officer of MillerCoors from 2012-2016 and served in a variety of increasingly responsible finance leadership roles at MillerCoors since 2003. A native of South Africa, Ms. Joubert holds bachelor’s degrees in commerce and accounting from the University of Witwatersrand in Johannesburg. She also serves on the Board of Directors of MillerCoors and Coors Brewing Company, subsidiaries of Molson Coors. Ms. Joubert’s education, board member experience, business management and finance experience qualify her to continue serving as a member of the Board of Directors. Director Since 2017 |
GARY S. MICHEL | President and Chief Executive Officer | ||
Mr. Michel, age | |||
Director Since 2015 |
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NOMINEES FOR DIRECTOR (Cont)
BRIAN C. WALKER Former President and Chief Executive Officer | |||
Herman Miller, Inc. Mr. | |||
Director Since |
ROBERT D. WELDING | Former Non-Executive Chairman Public Safety Equipment (Int’l) Limited | ||
Mr. Welding, age | |||
Director Since | 2007 |
Note: The beneficial ownership of the Directors and nominees in the Common Stock of the Company is shown in the table presented under the heading “Security Ownership of Management” in this proxy statement.
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RATIFICATION OF THE SELECTION OF THE COMPANY’S INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP served as the independent registered public accounting firm of the Company in 20162018 and has been retained by the Audit Committee to do so in 2017.2019. In connection with the audit of the 20172019 financial statements, the Company has engaged Ernst & Young LLP to perform audit services for the Company. The Board of Directors has directed that management submit the selection of the independent registered public accounting firm for ratification by the stockholders at the Annual Meeting.
Stockholder ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm is not required by the Company’s Bylaws or otherwise. However, the Board of Directors is submitting the selection of Ernst & Young LLP to the stockholders for ratification. If the stockholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain the firm. In such event, the Audit Committee may retain Ernst & Young LLP, notwithstanding the fact that the stockholders did not ratify the selection, or select another nationally recognized public accounting firm without resubmitting the matter to the stockholders. Even if the selection is ratified, the Audit Committee reserves the right in its discretion to select a different nationally recognized public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.
The Board of Directors recommends that stockholders vote FOR the ratification of the selection of the Company’s independent registered public accounting firm.
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PROPOSAL TO APPROVE, ON A NON-BINDING ADVISORY BASIS, THE
COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION
The Board of Directors is aware of the significant interest in executive compensation matters by investors and the general public. The Company is submitting this proposal, commonly known as a “say-on-pay” proposal, to stockholders. The Company is currently conducting say-on-pay votes every year and expects to hold the next say-on-pay vote in connection with its 20182020 Annual Meeting of Stockholders, subject to the Board of Directors’ consideration of the outcome of the vote on Agenda Item 4 described in this proxy statement.Stockholders. As required under the Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Securities Exchange Act of 1934, or the Exchange Act, we are asking you to cast a non-binding advisory vote to approve the Company’s named executive officer compensation through the consideration of the following resolution:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”
Our Compensation Committee has overseen the development and implementation of a compensation program that is discussed more fully in “Compensation Discussion and Analysis” and “Executive Compensation,” including the summary tables and narrative sections of this proxy statement.
The Company’s compensation program emphasizes a pay-for-performance philosophy. Performance-based annual cash incentive and cash and equity long-term incentive programs, collectively, are the majority of the targeted annual compensation for our named executive officers. These programs are designed to:
In executing a philosophy which begins with creating long-term value to stockholders, the Compensation Committee has established a framework for executive compensation that promotes a culture of performance and accountability with due consideration to risk management, transparency, and the need to adjust to rapidly changing market conditions. The program is heavily weighted toward pay at risk, with limited executive perquisites and benefits and clear line of sight to the link between important Company strategic goals and the rewards for achieving those objectives.
To further promote alignment with the interests of stockholders and a culture of enduring performance and accountability, the Company’sCompany's executives have stock ownership requirements and are bound by a clawback policy which allows for the recoupment of incentive payments in certain circumstances. The fully independent Compensation Committee believes that the executive compensation program is an essential factor in the Company’sCompany's strengthening of its leadership team and competitive position in the marketplace, both of which lead to business continuity and long-term value creation.
Because your vote is advisory, it will not be binding upon the Company, the Compensation Committee, or the Board of Directors. However, we value stockholders’ opinions, and the Board willexpects to carefully consider the outcome of the advisory vote on named executive officer compensation.
The Board of Directors recommends that the stockholders vote FOR approval, on a non-binding advisory basis, of the compensation of the Company’s named executive officers for fiscal year 2016.2018.
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TO RECOMMEND, ON A NON-BINDING ADVISORY BASIS, THE FREQUENCY OF ADVISORYVOTES ON THE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATON
Section 14A of the Exchange Act requires the Company to include in its proxy statement a non-binding advisory vote on the Company’s named executive officer compensation not less frequently than once every three years. Section 14A also requires us to include in our proxy statement this year a separate non-binding advisory vote regarding whether the non-binding advisory vote on named executive officer compensation should be held every one, two or three years. The proposal gives stockholders the opportunity to cast a non-binding, advisory vote to determine the frequency of advisory votes on the Company’s named executive officer compensation.
The Board of Directors has concluded that holding an annual advisory vote has been and will continue to be the most effective means for conducting and responding to a say-on-pay vote. Conducting an annual stockholder vote on named executive officer compensation provides stockholder input on named executive officer compensation practices and allows the Company to respond to stockholders concerns on an annual basis.
The accompanying proxy card allows stockholders to recommend that the advisory vote on the Company’s named executive officer compensation occur every one, two, or three years, or to abstain from voting on the matter. You are not voting to approve or disapprove the Board’s recommendation. The option receiving the greatest number of votes (every one, two or three years) will be considered the frequency recommended by stockholders. Because the vote is advisory, it will not be binding upon the Company, the Compensation Committee or the Board of Directors. However, we value stockholders’ opinions, and the Board will carefully consider the outcome of the advisory vote on the frequency of the advisory vote on named executive officer compensation.
The Board of Directors recommends that the stockholders vote for an advisory vote on the Company’s named executive officer compensation to occur EVERY YEAR.
COMPENSATION DISCUSSION AND ANALYSIS
Executive Compensation Design and Governing Principles | |||||
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Pay is tied to performance: | |||||
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Approximately 83% of the CEO’s target annual compensation and 70% of the other named executive officers’ target annual compensation is at-risk and varies | |||||
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There is an appropriate balance of annual and long-term incentives, and the metrics used in the annual plan are different from the metrics used in the long-term incentive plan. | |||||
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The annual incentive plan for the named executive officers is based upon the achievement of established corporate performance goals. | |||||
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Two-thirds of the long-term incentive opportunity is based on the achievement of established corporate performance goals. | |||||
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Dividend equivalents are not accrued or paid on performance awards that are not notionally earned. | |||||
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Executives who participate in the long-term incentive plan are required to meet minimum levels of stock ownership and the status of stock ownership is reviewed on an annual basis. | |||||
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None of the named executive officers has an employment agreement. | |||||
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Executive officers, including named executive officers, receive the same group benefits as other salaried employees, including health, life insurance, disability, and retirement benefits. They are also eligible | |||||
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Executive officer perquisites are limited and reviewed annually. There are no tax gross-ups on perquisites other than for travel expenses of a spouse when accompanying an executive to participate in business-related activities. | |||||
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The Company maintains a “double trigger” requirement for change in control severance benefits and for the acceleration of time-based equity awards, including restricted stock units and stock options (provided the awards are assumed or replaced with substantially equivalent awards). | |||||
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There are no excise tax gross-up provisions upon a change in control. | |||||
Benchmarking Philosophy and Risk Management | |||||
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The Compensation Committee references the market median with respect to establishing compensation levels for the named executive officers. | |||||
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To align with investor expectations and changes in the Company’s business and market | |||||
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The Compensation Committee monitors all equity grants under the 2014 Incentive Compensation Plan, and the Company’s three-year average burn rate is below the mean burn rate for the Russell 3000 companies in GICS group | |||||
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The compensation program risk evaluation process is formalized, including an annual review of plans as described in | |||||
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The Compensation Committee regularly reviews all forms of compensation, including all cash and equity-based compensation grants, non-qualified account balances, and payments due upon termination of employment. | |||||
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The Board has an established policy for recoupment (or clawback) of annual and long-term incentive compensation in the event of a restatement of reported financial results or if an employee has engaged in unethical conduct detrimental to the Company. | |||||
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The Board has adopted an anti-hedging and anti-pledging policy. | |||||
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Our executive compensation consultant is retained directly by and reports to the Compensation Committee, does not provide any services to management, and had no prior relationship with our CEO or any other named executive officer. | |||||
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The Company ended 2016 in a very strong position, increasing year-overchallenging 2018 with net income by 16.7%of $76.6 million compared to $95.4 million in the prior year. Operating profit decreased from $213$309.2 million in 2017 to $248$165.2 million and year-over-year operating profit by 8.4% from $354 million to $384 million. The Company also delivered a record operatingin 2018. Operating profit margin of 13.1% of sales and an increase in unit volume of 2.6%5.9%, while a decrease from 20152017, reflected improvement throughout the year as the Company's strategic initiatives began to 2016. In addition to these accomplishments, wetake hold. The Company remained a good stewardssteward of capital as reflected in the return on invested capital shown below.
Subsequent to the setting of annual targets for the 20162018 plan year, the Company made the decision to offer a lump-sum pension settlement opportunity to certain former employees to reduce future pension liability. As a result of such offers, which were paid out of pension plan assets, the Company incurred non-cash pension settlement charges of $11.5 million. The Compensation Committee determined to exclude the impact of such chargescertain items from the calculation of incentive awards. The2018 performance results shown below include an $11.5 million adjustment for the successful consummationpurpose of calculating incentive award payouts, as such items were deemed non-representative of the lump-sumcontinuing operations of the Company. These excluded items are:
Corporate Performance Metrics* |
2016 Targets | 2016 Performance | 2016 Reported | |||
Operating Profit | $370,000,000 | $395,849,000 | $384,387,000 | |||
Free Cash Flow | $75,000,000 | $111,063,000 | $111,063,000 | |||
Net Income | $227,000,000 | $256,087,000 | $248,381,000 | |||
Return on Invested Capital | 15.0% | 19.4% | 18.9% |
Corporate Performance Metrics* | 2018 Targets | 2018 Performance Results | 2018 Reported Results | ||||||
Operating Profit | $ | 275,000,000 | $ | 200,717,000 | $ | 165,245,000 | |||
Free Cash Flow | $ | 50,000,000 | $ | 66,331,000 | $ | 40,026,000 | |||
Net Income Attributable to Cooper Tire & Rubber Company | $ | 170,000,000 | $ | 108,218,000 | $ | 76,586,000 | |||
Return on Invested Capital | 15.0 | % | 10.1 | % | 10.0 | % |
* | For more information about how these performance metrics are calculated and reconciliations to amounts presented in the |
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Our Executive Officer Compensation Program Is Administered by the Compensation Committee
The Compensation Committee is responsible for performing the duties of the Board of Directors relatingrelated to the compensation of our executive officers and other senior management. During 2016,2018, our named executive officers werewere: Mr. Bradley E. Hughes, President and& Chief Executive Officer; Mr. Roy V. Armes, former Chairman, Chief Executive Officer, and President; Ms. Ginger M. Jones,Christopher J. Eperjesy, Senior Vice President and& Chief Financial Officer; Ms. Brenda S. Harmon,Mr. John J. Bollman, Senior Vice President and& Chief Human Resources Officer; and Mr. Stephen Zamansky, Senior Vice President, General Counsel & Secretary; and Secretary.Ms. Ginger M. Jones, former Senior Vice President & Chief Financial Officer. On December 10, 2018, Mr. HughesEperjesy joined the Company and was named President and Chief Executive Officer effective September 1, 2016, following Mr. Armes’s retirement on August 31, 2016. Prior to that date, Mr. Hughes served as ourappointed Senior Vice President and Chief Operating Officer. Subsequent compensation information will reflect Mr. Armes’s employment for a partial year.
Financial Officer, replacing Ms. Jones who retired from the Company on December 31, 2018.
With input, as appropriate, from management and our outside executive compensation consultant, the Compensation Committee reviews and approves all elements of our executive compensation program. Management is responsible for making recommendations to the Compensation Committee regarding executive officer compensation (except with respect to the CEO’s compensation) and effectively implementing our executive compensation program, as approved and overseen by the Compensation Committee.
The Compensation Committee retained Exequity LLP as its executive compensation consultant in 20162018 and utilized data from Aon Hewitt, an outside compensation consultant, for pay benchmarking.
Additional information about the role and processes of the Compensation Committee is presented under the heading “Executive Compensation Consultant Disclosure” and “Meetings of the Board of Directors and Its Committees - Compensation Committee” in this proxy statement.
Executive Compensation Philosophy and Approach
The Cooper Tire executive officer compensation program is incentive driven and designed to deliver value to our stockholders by driving long-term financial and operational performance. To accomplish this goal, we have structured our executive compensation program to attract, motivate and help retain the caliber of leadership required to meet these objectives. In the following sections, we will address our benchmarking process and philosophy, including how we set compensation levels and the separate, but integrated elements of our program.
Compensation Peer Groups
The Compensation Committee annually analyzes market benchmark data regarding base salary and annual and long-term incentive opportunities and periodically evaluates market benchmark data regarding other compensation elements. The Compensation Committee uses benchmarking data to assess market pay levels and program design. For each element of compensation and in the aggregate, the Committee sets compensation targets near the middle of the range offered by comparable companies.
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Peer Group for Pay Level Benchmarking - For 20162018 officer pay level, we engaged Aon Hewitt to provide general industry data from their Total Compensation Measurement (TCM) Survey on 104119 companies with revenues between $1.57from $1.5 billion and $5.9to $6.0 billion. The median revenue of these 104119 companies was approximately $3.06 billion.$3.07 billion (by comparison, Cooper Tire’s revenue for 2018 was about $2.81 billion). As an additional benchmark, we also conducted a review and analysis of compensation data for the CEO and CFO positions in the peer group listed below using 20162017 proxy information.
Peer Group for Program Design Benchmarking - For purposes of benchmarking executive compensation program design, the Compensation Committee periodically reviews a group of 17 companies (listed below) whose annual revenues range from approximately 50% to 250% of our revenues and who generally have similar characteristics to Cooper Tire with respect to capital-intensive manufacturing, producing and marketing a consumer-brandedbranded product, focusing on technology-driven products, and managing international operations. This group was changed in 2017. The median revenue for the following companies was $3.3about $2.9 billion in 2016.
2017.
American Axle & Manufacturing Holdings | Kennametal Inc. |
Cooper-Standard Holdings Inc. | Leggett & Platt Incorporated |
Crane Co. | Lennox International, Inc. |
Dana | Snap-on Incorporated |
Dover | SPX Corp. |
Flowserve Corporation | Steelcase Inc. |
Gentex | The Timken Company |
Harley-Davidson, Inc. | Tower International, Inc. |
Harsco Corporation |
Our Compensation Levels Are Set Considering Business Needs, Market Data and Other Factors
We use a comprehensive and structured approach in setting the compensation framework for all executive positions. We begin with a review of the Company’s overall strategy and the particular role each executive position is expected to play in achieving the strategic goals of the Company. Starting with this foundation and with the assistance of the Compensation Committee’s executive compensation consultant, we obtain and review relevant market benchmark data for each position regarding base salary, annual cash incentive opportunities, and long-term incentive award levels. We then determine an appropriate range of compensation for each position by assessing the market data in conjunction with the valuation of the position’s impact and importance in setting and achieving the strategic objectives of the Company. Informed by a review of all current and previously granted forms of compensation, competitive market data, organization strategies, and individual performance assessments, the Compensation Committee uses its judgment, rather than a formulaic approach, in setting target compensation for each named executive officer. In the event of death, disability, or retirement of a named executive officer, each year.
the annual incentive compensation is prorated for the period of time that the named executive officer was employed during the year; the performance-based stock units and cash awards are prorated for the period of the measurement period the named executive officer was employed; and all restricted stock units granted immediately vest if the death, disability, or retirement was at least 6 months from the date of grant, otherwise, they are forfeited. Retirement is defined as the earlier of age 65 or the date on which the sum of the named executive officer’s years of age and service equal 70.
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Elements of Our Compensation Program
We believe that our executive compensation program, by element and in total, best achieves our objectives. The majority of each named executive officer’s compensation opportunity is based on the achievement of important financial and strategic goals established at the beginning of the respective performance period. The primary elements of our executive compensation program, all key to the attraction, retention, and motivation of our named executive officers, are shown in the following table:
Element | Purpose | Nature of Component | ||
Base Salary | To value the competencies, skills, experience, and performance of individual executives. | Cash. Not “at risk.” Based on responsibility, experience and performance. Reviewed annually. | ||
Annual Incentive Compensation | To motivate and reward executives for the achievement of targeted financial goals. | Cash award. Performance-based and “at risk.” Amount earned will vary based | ||
Long-Term Incentive Compensation | To motivate and reward executives for the achievement of long-term goals and creation of stockholder value. | Equity and cash awards. Performance-based (for performance-based cash awards and performance-based stock units) and “at risk.” | ||
Non-Qualified Benefits | To attract the level of talent required to achieve strategic objectives and to promote continuity of leadership. | Supplementary benefit plan to make up for qualified plan benefits lost due to limits of the Code. |
We provide market competitive base salaries to attract and retain outstanding talent and to provide a fixed component of pay for our named executive officers. Base salaries are reviewed annually and are determined with consideration to the role of the executive, time in position,the officer's experience, competitive market data regarding similar roles in similar organizations, individual performance, budget, and other considerations. The Compensation Committee uses the median of market data as the general reference point for base salary decisions because it believes that the median is the best representation of competitive salaries in the market for similar roles and talent.
In setting base salaries for 2016,2018, the Compensation Committee considered the officer’s experience in his or herand current role, the impact of his or her role on the Company’s results, the overall quality and manner in which the officer performs his or herthe role, the financial position of the Company, and the value of retention.
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With input from management and its executive compensation consultant, the Compensation Committee reviews and discusses annual corporate and business unit performance metrics and targets, and the appropriateness of these performance metrics and targets considering the following primary factors prior to approval:
The Compensation Committee also establishesestablished a bonus pool aimed at potentially preserving the ability to deduct compensation paid under the annual incentive plan and the performance-based long-term incentive programs.programs under the historical exception for “performance-based compensation” under Section 162(m) of the Code. The bonus pool approach establishesestablished a maximum dollar amount and a maximum number of share units that cancould be paid to the Chief Executive Officer and certain other named executive officers from which the Compensation Committee maycould exercise negative discretion in determining the actual amounts paid under the annual and long-term incentive plans. The amounts the Compensation Committee approvedCode Section 162(m) exception for payment were below the maximum amounts established under the bonus pool.“performance-based compensation” has been repealed, effective for taxable years beginning after December 31, 2017, unless certain transition relief for certain compensation arrangements in place as of November 2, 2017 is available. Please also see the section titled “Other Program Design Elements –- Tax Deductibility of Executive Compensation” on pages page 21 and 22 for additional information regarding the pool structure and approach.
approach used for 2018.
Annual Incentive Compensation
Target Opportunities
The Compensation Committee uses the median of general industry market data from Aon Hewitt’s TCM Survey as the general reference point for target annual cash incentive opportunities because it believes that the median is the best representation of competitive annual cash incentive levels in the market for similar roles and talent. With regard to setting individual annual cash incentive opportunity levels, the Compensation Committee has the discretion to adjust the target opportunity levels as it deems appropriate. Typical reasons for adjusting an individual officer’s target annual cash incentive opportunity level above or below the market median include how longthe experience and performance of the officer, has been in his or her current role, the impact of the role upon the organization, and the multiple of salary needed to bring the total cash compensation of the executive to a competitive level. At the highest level of achievement, the annual cash incentive opportunity for our named executive officers was 200% of the target opportunity in 2016.2018. At a threshold level of performance, the incentive opportunity was 50% of the target in 2016,2018, with no incentive earned if performance was below the threshold achievement level.
Presented below are the target incentive awards for the named executive officers in 20162018 using eligible earnings (earned base salary) for the period of January 1, 2016,2018, through December 31, 2016,2018, and using annual incentive plan (AIP) target percentages for the full period.
Named Executive Officer | Eligible Earnings | Weighted Target Bonus | Target Incentive | ||||||
Mr. Hughes | $ | 958,996 | 120 | % | $ | 1,150,795 | |||
Mr. Eperjesy | $ | 30,137 | 75 | % | $ | 22,603 | |||
Mr. Bollman | $ | 411,055 | 65 | % | $ | 267,186 | |||
Mr. Zamansky | $ | 460,752 | 65 | % | $ | 299,489 | |||
Ms. Jones | $ | 525,000 | 75 | % | $ | 393,750 |
Named Executive Officer | Eligible Earnings | Weighted Target Bonus | Target Incentive | |||||||||
Mr. Hughes | $698,852 | 98.6 | %* | $688,967 | ||||||||
Mr. Armes | $758,955 | 140 | % | $1,062,537 | ||||||||
Ms. Jones | $499,180 | 75 | % | $374,385 | ||||||||
Ms. Harmon | $426,337 | 65 | % | $277,119 | ||||||||
Mr. Zamansky | $430,428 | 65 | % | $279,778 |
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*Mr. Hughes’s bonus target changed from 90% to 110% effective with his promotion to President & Chief Executive Officer on September 1, 2016.
Performance Metrics for 20162018
The performance metrics under the 2016 Annual Incentive Plan2018 AIP for the named executive officers were 65% corporate operating profit and 35% corporate free cash flow. The potential payout for each of the financial metrics ranged from 0% to 200% of target. The table below summarizes the threshold, target, and maximum goals as compared to actual results:
Performance Metric | Threshold Goal | Target Goal | Maximum Goal | Performance Result | Payout Attainment | ||||||||||
Corporate Operating Profit | $ | 175,000,000 | $ | 275,000,000 | $ | 344,000,000 | $ | 200,717,000 | 62.9 | % | |||||
Corporate Free Cash Flow | $ | 25,000,000 | $ | 50,000,000 | $ | 80,000,000 | $ | 66,331,000 | 154.4 | % |
Performance Metric | Threshold Goal | Target Goal | Maximum Goal | Performance Result | Results as a Percent of Target | |||||
Corporate Operating Profit | $225,000,000 | $370,000,000 | $450,000,000 | $395,849,000 | 132.3% | |||||
Corporate Free Cash Flow | $45,000,000 | $75,000,000 | $100,000,000 | $111,063,000 | 200.0% |
The following is the calculation of Corporate operating profit is equal to operating profit from the Company’s financial statements, adjustedOperating Profit for one-time non-cash pension settlement charge of $11,462,000.2018 for AIP purposes:
Operating Profit, as reported | $ | 165,245,000 | |
Plus: Goodwill Impairment Charge | 33,827,000 | ||
Plus: European Footprint Review Costs | 2,376,000 | ||
Less: Albany Tornado Activity | (731,000 | ) | |
Adjusted Operating Profit | $ | 200,717,000 |
Corporate free cash flow is defined as cash provided by continuing operations plus proceeds from the sale of assets, less capital expenditures and dividends, from the Company’s financial statements.
FollowingThe following is the calculation of corporate free cash flow for 2016:2018 for AIP purposes:
Cash Provided by Continuing Operations | $ | 309,795,000 | ||
Plus: Proceeds From Sale of Assets | 337,000 | |||
Less: Capital Expenditures | (175,437,000 | ) | ||
Less: Dividends | (23,632,000 | ) | ||
Corporate Free Cash Flow | $ | 111,063,000 |
Cash Provided by Continuing Operations | $ | 254,303,000 | |
Plus: Proceeds from Sale of Assets | 160,000 | ||
Plus: Discretionary Pension Contribution | 25,000,000 | ||
Plus: European Footprint Review Costs, net of tax of $491,000 | 1,885,000 | ||
Less: Capital Expenditures | (193,299,000 | ) | |
Less: Dividends | (21,138,000 | ) | |
Less: Albany Tornado Activity, net of tax of $151,000 | (580,000 | ) | |
Corporate Free Cash Flow | $ | 66,331,000 |
Presented below are the actual incentive awardsaward payouts for the named executive officers in 20162018 based upon eligible earnings for the period of January 1, 20162018 through December 31, 2016,2018, the target bonus percentage levels for the same period, and a weighted AIP achievement level of 156%94.9%.
Named Executive Officer | Eligible Earnings | Weighted Target Bonus | Actual Bonus at 156% | |||||
Mr. Hughes | $698,852 | 98.6% | $ | 1,074,789 | ||||
Mr. Armes* | $758,955 | 140% | $ | 1,657,558 | ||||
Ms. Jones | $499,180 | 75% | $ | 584,041 | ||||
Ms. Harmon | $426,337 | 65% | $ | 432,306 | ||||
Mr. Zamansky | $430,428 | 65% | $ | 436,454 |
*Mr. Armes actual bonus reflects amount earned through his retirement date of August 31, 2016.
Named Executive Officer | Eligible Earnings | Weighted Target Bonus | Actual Bonus | ||||||
Mr. Hughes | $ | 958,996 | 120 | % | $ | 1,092,105 | |||
Mr. Eperjesy | $ | 30,137 | 75 | % | $ | 21,450 | |||
Mr. Bollman | $ | 411,055 | 65 | % | $ | 253,559 | |||
Mr. Zamansky | $ | 460,752 | 65 | % | $ | 284,215 | |||
Ms. Jones | $ | 525,000 | 75 | % | $ | 373,669 |
Long-Term Incentive Compensation
The Compensation Committee approves long-term incentive awards on an annual basis for the named executive officers and other senior executives of the Company. Long-term incentive awards are granted under the Cooper Tire & Rubber Company 2014 Incentive Compensation Plan, which allows for a variety of forms of long-term incentives.
For 2016,2018, awards of restricted stock units (“RSUs”), performance-based stock units, and performance-based cash were granted, with each weighted approximately one-third of the total award. In determining the appropriate form or mix of long-term performanceincentive awards, the Compensation Committee considers such factors as the motivational impact of various components, alignment with stockholder interests, the attraction and retention of executive talent, the affordability of certain awards, and other business objectives which may prescribe or suggest the form or mix of awards at a particular time in the business cycle.
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Award Grant Timing and Pricing
For current executives in the plan, the grant date is typically the date of our February Compensation Committee meeting. For most new executives, the grant date may be as of, or shortly after, the hiring date of the newly eligible executive. The methodology to determine the number of options or sharesunits to grant and to establish the exercise price of equity-based awards is to average the high and low trading price of our common stock, as quoted on the New York Stock Exchange, on the date of grant.
Performance-Based Stock Units and Performance-Based Cash
Key design features of our performance-based stock units and performance-based cash grants include:
The financial metrics for the 20162018 measurement period of the 2014-2016, 2015-2017,2016-2018, 2017-2019, and 2016-20182018-2020 performance periods approved by the Compensation Committee at the beginning of 20162018 were net income (80% weighting) and return on invested capital (20% weighting). The Compensation Committee selected these performance metrics because net income and prudent management of capital are essential to the strategic and financial goals of the Company over each measurement period and the full three-year performance period.
The ultimate value of performance-based stock units is based on the Company’s financial results and the stock price, which aligns with long-term stockholder value creation. The ultimate value of performance-based cash is based solely on performance against the financial metrics. In 2016,2018, the potential payout on each of the financial metrics ranged from 0% to 200% of target.
The following table summarizes the threshold, target, and maximum performance goals for the 20162018 measurement period of the 2014-2016, 2015-2017,2016-2018, 2017-2019, and 2016-20182018-2020 performance periods, as compared to the performance results:
Performance Metric | Threshold Goal | Target Goal | Maximum Goal | Performance Result | Results as a Percent of Target | Threshold Goal | Target Goal | Maximum Goal | Performance Result | Payout Attainment | |||||||||||||||
Net Income | Net Income | $140,000,000 | $227,000,000 | $280,000,000 | $256,087,000 | 154.9% | $ | 102,000,000 | $ | 170,000,000 | $ | 213,000,000 | $ | 108,218,000 | 54.6 | % | |||||||||
Return on Invested Capital | Return on Invested Capital | 11.0% | 15.0% | 18.0% | 19.4% | 200.0% | 11.0 | % | 15.0 | % | 18.0 | % | 10.1 | % | 0.0 | % |
The following is the calculation of Net income is equal to net income from the Company’s financial statements, as adjustedIncome for a one-time non-cash pension settlement charge of $11,462,000, net of taxes of $3,756,000.2018 for long-term incentive purposes:
Net Income, as reported | $ | 76,586,000 | |
Plus: Goodwill Impairment Charge, no tax impact | 33,827,000 | ||
Plus: European Footprint Review Costs, net of tax of $491,000 | 1,885,000 | ||
Less: Tax Benefit of Discretionary Pension Contribution | (3,500,000 | ) | |
Less: Albany Tornado Activity, net of tax of $151,000 | (580,000 | ) | |
Net Income | $ | 108,218,000 |
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Return on invested capital is calculated by dividing after tax operating profit from the Company’s financial statements by the Company’s total invested capital. For 2018 long-term incentive compensation purposes, operating profit is adjusted for a one-time non-cash pension settlement charge of $11,462,000, net of taxes of $3,756,000, less income tax and the tax impact of net interest expense, by anthe goodwill impairment charge, European footprint review costs and Albany tornado activity, while the effective tax rate excludes the impact of the goodwill impairment charge. Invested capital is the average of debt and equity. The average ofending debt and equity is calculated by taking the sum of the balance at the end of fiscal year 2015 and the balance at the end of each quarter in fiscal year 2016 and dividing by five, also adjusted for the one-time non-cash pension settlement, net of taxes.last five quarters.
FollowingThe following is the calculation of return on invested capital for 2016: 2018 for long-term incentive purposes:
Numerator: | ||||
Operating Profit | $ | 384,387,000 | ||
One-Time Non-Cash Pension Settlement Charge | 11,462,000 | |||
Income Tax Expense | (119,555,000 | ) | ||
Net Interest Tax Effect | (7,019,000 | ) | ||
$ | 269,275,000 | |||
Denominator: | ||||
Average of Debt and Equity | $ | 1,389,596,000 | ||
Corporate Return on Invested Capital | 19.4 | % |
Numerator: | |||
Operating Profit, as reported | $ | 165,245,000 | |
Plus: Goodwill Impairment Charge | 33,827,000 | ||
Plus: European Footprint Review Costs | 2,376,000 | ||
Less: Albany Tornado Activity | (731,000 | ) | |
Adjusted Operating Profit | 200,717,000 | ||
Income Tax Expense on Adjusted Operating Profit | (45,362,042 | ) | |
Total: | $ | 155,354,958 | |
Denominator: | |||
Average of Debt and Equity | $ | 1,533,747,000 | |
Return on Invested Capital | 10.1 | % |
Performance-Based Stock Units
For the 2016-20182018-2020 performance period, the Compensation Committee granted individual target award opportunities for performance-based stock units, a portion of which could be notionally earned in 2016.
2018.
Presented below are the target numbers of performance-based stock units for the 20162018 measurement period (or “tranche”) of the 2014-2016, 2015-2017,2016-2018, 2017-2019, and 2016-20182018-2020 performance periods.
Target Performance-Based Stock Unit Award For 2016 | Target Performance-Based Stock Unit Award | |||||||||||||||||
Named Executive Officer | 2014-2016 Long-Term Incentive Performance Period | 2015-2017 Long-Term Incentive Performance Period | 2016-2018 Long-Term Incentive Performance Period | 2016-2018 Long-Term Incentive Performance Period | 2017-2019 Long-Term Incentive Performance Period | 2018-2020 Long-Term Incentive Performance Period | ||||||||||||
Mr. Hughes | 3,869 | 3,096 | 3,416 | 3,416 | 9,830 | 11,095 | ||||||||||||
Mr. Armes | 20,695 | 15,408 | 15,798 | |||||||||||||||
Mr. Eperjesy | — | — | — | |||||||||||||||
Mr. Bollman | — | 1,055 | 1,720 | |||||||||||||||
Mr. Zamansky | 1,910 | 1,959 | 2,206 | |||||||||||||||
Ms. Jones | — | 2,497 | 2,557 | 2,557 | 2,823 | 3,064 | ||||||||||||
Ms. Harmon | 2,736 | 1,844 | 1,892 | |||||||||||||||
Mr. Zamansky | 2,588 | 1,844 | 1,910 |
Performance-Based Cash
For the 2016-20182018-2020 performance period, the Compensation Committee also granted individual target award opportunities for performance-based cash, a portion of which could be notionally earned in 2016.
2018.
Presented below are the target performance-based cash awards for the 20162018 tranche of the 2014-2016, 2015-2017,2016-2018, 2017-2019, and 2016-20182018-2020 performance periods:
Target Performance-Based Cash Award | |||||||||
Named Executive Officer | 2016-2018 Long-Term Incentive Performance Period | 2017-2019 Long-Term Incentive Performance Period | 2018-2020 Long-Term Incentive Performance Period | ||||||
Mr. Hughes | $ | 125,556 | $ | 375,000 | $ | 401,363 | |||
Mr. Eperjesy | $ | — | $ | — | $ | — | |||
Mr. Bollman | $ | — | $ | 45,302 | $ | 62,223 | |||
Mr. Zamansky | $ | 70,200 | $ | 74,719 | $ | 79,796 | |||
Ms. Jones | $ | 94,000 | $ | 107,667 | $ | 110,834 |
Target Performance-Based Cash Award For 2016 | |||||||||
Named Executive Officer | 2014-2016 Long-Term Incentive Performance Period | 2015-2017 Long-Term Incentive Performance Period | 2016-2018 Long-Term Incentive Performance Period | ||||||
Mr. Hughes | $92,692 | $113,334 | $125,556 | ||||||
Mr. Armes | $495,834 | $564,000 | $580,711 | ||||||
Ms. Jones | — | $91,389 | $94,000 | ||||||
Ms. Harmon | $65,550 | $67,500 | $69,534 | ||||||
Mr. Zamansky | $62,000 | $67,500 | $70,200 |
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Amounts Notionally Earned for the 20162018 Measurement Period
In 2016,2018, there was an opportunity to notionally earn performance-based stock units and performance-based cash granted under the 2014-2016, the 2015-2017,2016-2018, 2017-2019, and the 2016-20182018-2020 performance periods. periods. Presented below are the performance-based stock units (“PBUs”) and the performance cash notionally earned for the 20162018 measurement period.
2016 Measurement Period | |||||||||||||
2014-2016 Performance Period | 2015-2017 Performance Period | 2016-2018 Performance Period | |||||||||||
Named Executive Officer | PBUs | Performance Cash | PBUs | Performance Cash | PBUs | Performance Cash | |||||||
Mr. Hughes | 6,341 | $151,922 | 5,074 | $185,754 | 5,599 | $205,786 | |||||||
Mr. Armes* | 22,613 | $541,781 | 16,836 | $616,264 | 17,262 | $634,524 | |||||||
Ms. Jones | — | — | 4,093 | $149,787 | 4,191 | $154,066 | |||||||
Ms. Harmon | 4,484 | $107,436 | 3,022 | $110,633 | 3,101 | $113,966 | |||||||
Mr. Zamansky | 4,242 | $101,618 | 3,022 | $110,633 | 3,130 | $115,058 |
*Mr. Armes’s PBUs andperiod based on the weighted performance cash values reflect amounts notionally earned through his retirement dateresults for 2018 of August 31, 2016.43.7 percent.
Measurement Period | ||||||||||||||||||
2016-2018 Performance Period | 2017-2019 Performance Period | 2018-2020 Performance Period | ||||||||||||||||
Named Executive Officer | PBUs | Performance Cash | PBUs | Performance Cash | PBUs | Performance Cash | ||||||||||||
Mr. Hughes | 1,493 | $ | 54,868 | 4,296 | $ | 163,875 | 4,849 | $ | 175,396 | |||||||||
Mr. Eperjesy | — | $ | — | — | $ | — | — | $ | — | |||||||||
Mr. Bollman | — | $ | — | 462 | $ | 19,797 | 752 | $ | 27,192 | |||||||||
Mr. Zamansky | 835 | $ | 30,678 | 857 | $ | 32,653 | 965 | $ | 34,871 | |||||||||
Ms. Jones | 1,118 | $ | 41,078 | 1,234 | $ | 47,051 | 1,339 | $ | 48,435 |
Amounts Earned for the 2014-20162016-2018 Performance Period
The table below summarizes the awards which were notionally earned in 2014, 20152016, 2017 and 20162018 for the now completed 2014-20162016-2018 performance period. These awards were paid in shares of common stock and cash in early 2017. 2019.
2014-2016 Performance Period | |||||||||||||||||
2014 Measurement Period | 2015 Measurement Period | 2016 Measurement Period | 2014-2016 Total Earned | ||||||||||||||
82.2% Achievement | 200% Achievement | 163.9% Achievement | |||||||||||||||
Named Executive Officer | PBUs | Performance Cash | PBUs | Performance Cash | PBUs | Performance Cash | PBUs | Performance Cash | |||||||||
Mr. Hughes | 3,180 | $ 76,193 | 7,738 | $185,384 | 6,341 | $151,922 | 17,259 | $413,499 | |||||||||
Mr. Armes* | 17,011 | $407,576 | 41,390 | $991,668 | 22,613 | $541,781 | 81,014 | $1,941,025 | |||||||||
Ms. Jones | — | — | — | — | — | — | — | — | |||||||||
Ms. Harmon | 2,249 | $53,882 | 5,472 | $131,100 | 4,484 | $107,436 | 12,205 | $292,418 | |||||||||
Mr. Zamansky | 2,127 | $50,964 | 5,176 | $124,000 | 4,242 | $101,618 | 11,545 | $276,582 |
*Mr. Armes’s PBUs and performance cash values reflect amounts notionally earned through his retirement date of August 31, 2016.
2016-2018 Performance Period | ||||||||||||||||||||||||
2016 Measurement Period | 2017 Measurement Period | 2018 Measurement Period | 2016-2018 Total Earned | |||||||||||||||||||||
163.9% Achievement | 00.0% Achievement | 43.7% Achievement | ||||||||||||||||||||||
Named Executive Officer | PBUs | Performance Cash | PBUs | Performance Cash | PBUs | Performance Cash | PBUs | Performance Cash | ||||||||||||||||
Mr. Hughes | 5,599 | $ | 205,787 | — | $ | — | 1,493 | $ | 54,868 | 7,092 | $ | 260,655 | ||||||||||||
Mr. Eperjesy | — | $ | — | — | $ | — | — | $ | — | — | $ | — | ||||||||||||
Mr. Bollman | — | $ | — | — | $ | — | — | $ | — | — | $ | — | ||||||||||||
Mr. Zamansky | 3,131 | $ | 115,058 | — | $ | — | 835 | $ | 30,678 | 3,966 | $ | 145,736 | ||||||||||||
Ms. Jones | 4,191 | $ | 154,066 | — | $ | — | 1,118 | $ | 41,078 | 5,309 | $ | 195,144 |
In accordance with the regulations established by the Securities and Exchange Commission for the 20162018 Summary Compensation Table, the “Stock Awards” column for 20162018 shows only the performance stock unitPBU tranches granted in 2016.2018. The “Non-Equity Incentive Plan Compensation” column for 20162018 shows the cash amounts notionally earned in 20142016, 2017 and 2015 and 20162018 for the now completed 2014-20162016-2018 performance period because these cash amounts became nonforfeitable and were fully earned after the end of 2016.2018. Likewise, in the 20162018 Grants of Plan-Based Awards Table, the Estimated Future Payouts Under Non-Equity Incentive Plan Awards column shows the performance cash tranches for each performance period.
Restricted Stock Units
The size of the restricted stock unit grants was determined with reference to the competitive benchmarking described on page 13, the Cooper Tire stock price, as well as individual performance and other long-term considerations.
The restricted stock units granted in 20162018 generally vest in equal annual installments of one-third per year beginning one year after the date of grant and are presented in the “20162018 Grants of Plan-Based Awards Table”Table that follows the 2018 Summary Compensation Table. Upon joining the Company, Mr. Eperjesy was awarded 15,000 restricted stock units which vest after a four year period.
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In order to attract high caliber leadership and promote management continuity among our named executive officers, we provide the following retirement benefits:
401(k) Plan.The Company provides a 401(k) retirement savings plan for eligible employees, including the named executive officers. Under the Spectrum Retirement Savings Plan, in which the named executive officers participate, participants may choose to contribute up to the annual limit determined by the Internal Revenue Service (“IRS”). |
Non-Qualified Supplementary Benefit Plan. The Non-Qualified Supplementary Benefit Plan is a non-elective deferred compensation plan. This plan is designed to make up for any qualified retirement plan benefits lost due to limits of the Code, and the named executive officers participate in the Non-Qualified Supplementary Benefit Plan only to the extent that full participation in our qualified plan is restricted by limits under the Code. |
For the executives who participate in the Company’s long-term incentive plan, including the named executive officers, retirement eligibility is defined as the earlier of the date the executive becomes age 65, or the date on which the sum of his or herthe executive officer's years of continuous employment with the Company and his or herthe executive officer's age equals at least 70 years.
The actuarial change from 2015 in our named executive officers’ pension benefit is presented in the “2016 Summary Compensation Table” on page 25. Detailed information about these pension plans is also presented in the “2016 Pension Benefits Table” and related disclosures on page 31.
Executive Deferred Compensation Plan
In order to provide executives an opportunity to defer earned salary or cash incentive awards, the Company offers aoffered an elective non-qualified deferred compensation plan. The plan allows selected senior management employees, including our named executive officers, to elect to defer receipt of up to 80% of their base salary and up to 100% of their annual incentive compensation each year (subject to an aggregate $10,000 minimum per year), until a date or dates chosen by the participant. We do not make matching or other employer contributions to the Executive Deferred Compensation Plan. Amounts deferred intoEffective December 31, 2017, future deferrals under this plan are credited to a notional account that is notionally invested inwere suspended and, therefore, the same investment vehicles offered in the 401(k) plan and/or Cooper Tire stock, at the participant’s election. The plan does not provide any fixed, above-market earnings opportunity. Detailed information aboutCompany no longer offers this plan is presented in the “2016 Non-Qualified Deferred Compensation Table” and related footnotes.non-qualified deferred compensation plan.
Perquisites and Other Compensation
We provide a limited annual allowance of $15,000 to cover the cost of financial planning services and an annual executive physical for our named executive officers. There is minimal use of the Company plane for personal use, and we do not provide a tax gross-up on the imputed income associated with any personal use of the Company plane by an executive. It is the Company’s policy to reimburse for and to gross up the imputed income associated with the travel costs of spouses who accompany the executives to participate in business-related activities. The value of the noted perquisites is detailed in the footnote to the “All Other Compensation” column of the 20162018 Summary Compensation Table on page 25.24.
Requirements to Maintain a Minimum Level of Stock Ownership
We believe that our named executive officers, whose business decisions impact our operations and results, should obtain and maintain a reasonable equity ownership in the Company. Toward that end, the Compensation Committee has established stock ownership guidelines for our named executive officers as outlined below: below for the named executive officers who were still serving as of December 31, 2018:
Officer | |||||||
Ownership Guideline | Targeted Achievement Date | ||||||
Mr. Hughes | 5X Base Salary | September 1, 2021 | |||||
Mr. | |||||||
3X Base Salary | December | ||||||
Mr. Bollman | 3X Base Salary | March 21, 2022 | |||||
Mr. Zamansky | 3X Base Salary | April 4, 2016 |
If any of our named executive officers do not satisfy the stock ownership guidelines in a timely manner, the Compensation Committee may take action, including requiring that 50% of an executive’s annual cash incentive be paid in stock; requiring that the executive retain 50% of the net after-tax shares following the exercise of any stock options or upon the vesting of other equity awards; requiring that 50% of the executive’s long-term incentive awards be paid in stock; or reducing the executive’s long-term incentive grants. All named executive officers, hadexcept Mr. Bollman, who joined the Company in March 2017, and Mr. Eperjesy who joined the Company in December 2018, met their respective ownership requirements as of March 1, 2017.2019.
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Clawback Policy
Our Board has adopted a policy that permits us to recoup the incentive compensation paid to our executives in certain circumstances. Under this policy, if the Company significantly restates its reported financial results, the Board will review the circumstances that caused such restatement, consider issues of accountability and oversight, and analyze the impact of such restatement on compensation paid or awarded to Company employees. If the restatement is the result of fraud or misconduct, the Board may elect to recover all annual cash incentive awards, long-term incentive awards, and other incentive-based compensation paid to the employees who engaged in such fraud or misconduct. Additionally, for participants in the Company’s long-term incentive plans, the Board may elect to recover amounts paid out to the extent the Company’s performance results were overstated as a result of such restatement, and, for all participants, the Board may adjust any unvested or notionally earned amounts related to the relevant
measurement period(s) to reflect the restatement. If the restatement is not the result of fraud or misconduct, the Board may adjust any unvested or notionally earned amounts related to the relevant measurement period(s) to reflect the restatement. The policy also provides that if the Board determines that any employee has engaged in unethical conduct detrimental to the Company, the Board may seek recoupment of all annual cash incentives, long-term incentives, or other incentive-based compensation paid to such employee during the period(s) of such unethical behavior, and cancel all unvested or notionally earned incentive-based compensation related to such period(s). Recovery under the Clawback Policy is in addition to any recoupment required or permitted by law, including the Sarbanes-Oxley Act of 2002 and common law, or by contract.
Hedging and Pledging Transactions
In order to align the interests of the Company’s officers and Directors with those of its stockholders and to address athe potential appearance of improper or inappropriate conduct, the Board of Directors has adopted a policy with respect to hedging and pledging of Common Stock or other equity securities of the Company (“Company Securities”). This anti-hedging policy prohibits Company officers and Directors, including certain family members of such persons, from hedging Company Securities, including short-selling, options, puts, calls, collars and exchange funds, as well as derivatives such as swaps, forwards and futures, or pledging or otherwise encumbering Company Securities as collateral for indebtedness. Persons subject to this policy will be afforded a reasonable opportunity to unwind or otherwise terminate any prohibited hedging transactions or arrangements existing as of the time such person becomes subject to the policy.
Tax Deductibility of Executive Compensation
The financial reporting and income tax consequences of the compensation elements are considered by the Compensation Committee when it analyzes the design and level of compensation. The Compensation Committee balances its objective of ensuring effective and competitive compensation packages with the desire to maximize the tax deductibility of compensation.
Regulations issued under Section 162(m) of the Internal Revenue Code providegenerally provides that compensation in excess of $1 million paid to the Chief Executive Officer and certain other named executive officers (and, beginning in 2018, certain former executive officers) will not be deductibledeductible. Historically, compensation that qualified as “performance-based compensation” under Section 162(m) of the Code could be excluded from this $1 million limit, but this exception has now been repealed, effective for taxable years beginning after December 31, 2017, unless it meets specified criteriacertain transition relief for being “performance-based.”certain compensation arrangements in place as of November 2, 2017 is available. The Compensation Committee prior to 2018 generally designsattempted to design and administersadminister certain of the executive incentive programs of the Company to potentially qualify for the performance-based exemption. ItHowever, it also reservesreserved the right to provide compensation that doesdid not or might not meet the exemption criteria if, in its sole discretion, it determinesdetermined that doing so advancesadvanced the business objectives of the Company.
Based on the repeal described above and the operation of Section 162(m) of the Code, compensation granted by the Compensation Committee may not qualify as “performance-based compensation” under certain circumstances. The Compensation Committee believes that the tax deduction limitation should not be permitted to compromise our ability to design and maintain executive compensation arrangements that will attract and retain the executive talent needed for the Company to compete successfully. Accordingly, achieving the desired flexibility in the design and delivery of compensation may result in compensation that in certain cases is not deductible for federal income tax purposes, and it is possible that awards intended to qualify as “performance-based compensation” may not so qualify. Moreover, even if the Compensation Committee intended to grant compensation that qualifies as “performance-based compensation” for purposes of Section 162(m) of the Code, we cannot guarantee that such compensation will so qualify or ultimately be deductible.
In 2014, the Compensation Committee implemented a bonus pool approach to potentially preserve the ability to deduct compensation paid under the AIP and the performance-based long-term incentive programs. The bonus pool approach establishesestablished a maximum dollar amount and a maximum number of share units that can be paid to the Chief
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Executive Officer and certain other named executive officers and excludes certain merger, acquisition, divestiture, or similar expenses. The bonus pool formula for the 20162018 AIP was based on the greater of 4% of operating profit or 5% of net cash provided by operating activities; the bonus pool formula for aggregate performance cash awarded under the 2016-20182018-2020 long-term incentive plan was based on the greater of 1.5% of cumulative operating profit for 2016, 2017,2018, 2019, and 20182020 or 2% of cumulative net cash provided by operating activities for 2016, 2017,2018, 2019, and 2018;2020; and the bonus pool for aggregate performance-based stock units awarded under the 2016-20182018-2020 long-term incentive plan was based upon 3% of cumulative operating profit for 2016, 2017,2018, 2019, and 20182020 or 4% of cumulative net cash provided by operating activities for 2016, 2017,2018, 2019, and 2018,2020, the greater of which is divided by the fair market value of the stock on the last day of the performance period. Within the limits of the respective bonus pools, the Compensation Committee determined the amounts paid under the annual and long-term incentive plans as previously described. However, the Company does not expect that awards made in 2018 will be able to qualify for the historical performance-based exemption under Section 162(m) of the Code due to its repeal.
Employment Agreements and Change in Control Plan
The Company has no current employment agreements with any of the named executive officers.
As a tool to facilitate attraction and retention of key executive talent, the Company has a change in control plan that covers each of the named executives.executive officers. Under this plan, benefits are received only in the event that an actual change in control and a qualifying termination occurs, or a qualifying termination occurs during a time when the Company is party to a definitive agreement, the consummation of which would result in a change in control, and thus such benefits are not considered part of annual compensation. We believe that a change in control plan maintains productivity, facilitates a long-term commitment to the organization, and encourages retention when,if, and if,when, we are confronted with the potential disruptive impact of a change in control of the Company.
See “Potential Payments Upon Termination or Change in Control” beginning on page 3330 for more information regarding these arrangements.
Compensation Plan for 20172019
When setting executive compensation for 2017,2019, the Compensation Committee took into account the results of the stockholder advisory vote on named executive officer compensation that occurred at the 20162018 Annual Meeting of Stockholders. As a substantial majority (approximately 94%95%) of the votes cast approved theour named executive officer compensation program described in our 20162018 proxy statement, the Compensation Committee applied the same general principles in determining the amounts and types of executive compensation for 20172019 as described below.
Base pay levels are set with reference to individual roles, impact, individual performance, and median levels of competitive market pay as determined by general market comparisons as described on page 14.
14.
Annual cash incentive opportunity levels are benchmarked against competitive norms as measured against general industry data from Aon Hewitt’s TCM Survey for similar executive positions.positions at the companies described in the Peer Group for Pay Level Benchmarking on page 13. Individual annual cash incentive opportunity levels are adjusted, if warranted, to maintain competitive compensation packages for our named executive officers.
The long-term incentive opportunity for 20172019 includes approximately one-third performance-based stock units, one-third performance-based cash, and one-third RSUs. Individual long-term incentive targets are benchmarked against appropriate market data and adjusted, if warranted, to maintain competitive compensation opportunity for our named executive officers.
Executive Compensation Consultant Disclosure
During the 20162018 fiscal year, the Compensation Committee engaged Exequity LLP to serve as an executive compensation consultant. Exequity provides research, data analysis, survey information and design expertise in developing compensation programs for executives. In addition, Exequity keeps the Compensation Committee apprised of regulatory developments and market trends related to executive compensation practices. A representative of Exequity typically attends meetings of the Compensation Committee and is available to participate in executive sessions. The Compensation Committee has considered the independence-related factors enumerated by the NYSE and the SEC and has concluded that Exequity is independent. In addition, the Compensation Committee has concluded that the work of Exequity in 20162018 did not raise any conflicts of interest.
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Compensation-Related Risk Assessment
The Compensation Committee periodically reviews the incentive plan policies and practices that apply to all of our non-represented employees to determine whether such policies and practices are reasonably likely to have a material adverse effect on the company.Company. As part of this process, during 2016,for 2018, the Compensation Committee, with the assistance of management and the human resources department, conducted a formal assessment of these compensation plans and practices. After conducting this assessment, both management and the Compensation Committee have determined that none of our compensation policies and practices createscreate any risks that are reasonably likely to have a material adverse effect on the Company.
The following report has been submitted by the Compensation Committee of the Board of Directors:
The Compensation Committee of the Board of Directors has reviewed and discussed the Company’s Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s definitive proxy statement on Schedule 14A for its 20172019 Annual Meeting, which is incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016,2018, each as filed with the Securities and Exchange Commission.
The foregoing report was submitted by the Compensation Committee of the Board and shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission or subject to Regulation 14A promulgated by the Securities Exchange Commission or Section 18 of the Exchange Act.
Respectfully submitted,
Robert D. Welding, Chairman
Steven M. Chapman
Susan F. Davis
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The following tables and narratives provide for the fiscal year ended December 31, 2016, descriptions of the cash compensation paid by the Company, as well as certain other compensation awarded, paid or accrued, during 2016 to our 2018 named executive officers, including:consisting of:
20162018 SUMMARY COMPENSATION TABLE
The following table shows compensation information for 2014, 2015,2016, 2017, and 20162018, as applicable, for our named executive officers.
Name and Principal Position(1) | Year | Salary | Bonus | Stock Awards(2) | Option Awards(3) | Non-Equity Incentive Plan Compensation(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(5) | All Other Compensation (6) | Total | |||||||||||||||||||||||
Bradley E. Hughes | 2016 | $ | 693,038 | $ | 1,883,319 | $ | 1,488,288 | $ | 158,554 | $ | 4,223,199 | |||||||||||||||||||||
Chief Executive Officer, | 2015 | $ | 559,912 | — | $ | 713,325 | — | $ | 1,243,478 | — | $ | 92,377 | $ | 2,609,092 | ||||||||||||||||||
and President | 2014 | $ | 497,989 | — | $ | 726,218 | $ | 398,144 | $ | 550,618 | — | $ | 72,164 | $ | 2,245,133 | |||||||||||||||||
Roy V. Armes | 2016 | $ | 758,955 | $ | 3,650,084 | $ | 3,598.583 | $ | 9,510 | $ | 176,127 | $ | 8,193,259 | |||||||||||||||||||
Former Chairman, | 2015 | $ | 1,103,344 | — | $ | 3,654,001 | — | $ | 4,362,087 | $ | 9,100 | $ | 249,154 | $ | 9,377,686 | |||||||||||||||||
Chief Executive | 2014 | $ | 1,071,911 | — | $ | 3,689,147 | $ | 1,851,910 | $ | 2,302,674 | $ | 8,709 | $ | 201,089 | $ | 9,125,440 | ||||||||||||||||
Officer, and President | ||||||||||||||||||||||||||||||||
Ginger M. Jones | 2016 | $ | 499,036 | $ | 467,771 | $ | 584,041 | $ | 109,142 | $ | 1,659,990 | |||||||||||||||||||||
Senior Vice President and | 2015 | $ | 470,574 | — | $ | 367,309 | — | $ | 705,000 | — | $ | 27,550 | $ | 1,570,433 | ||||||||||||||||||
Chief Financial Officer | 2014 | $ | 32,538 | — | $ | 479,025 | — | $ | 25,990 | — | — | $ | 537,553 | |||||||||||||||||||
Brenda S. Harmon | 2016 | $ | 426,312 | $ | 446,560 | $ | 724,725 | $ | 91,161 | $ | 1,688,758 | |||||||||||||||||||||
Senior Vice President and | 2015 | $ | 413,881 | — | $ | 459,835 | — | $ | 716,743 | — | $ | 60,050 | $ | 1,650,509 | ||||||||||||||||||
Chief Human Resources | 2014 | $ | 401,825 | — | $ | 664,210 | $ | 244,844 | $ | 396,786 | — | $ | 56,895 | $ | 1,764,560 | |||||||||||||||||
Officer | ||||||||||||||||||||||||||||||||
Stephen Zamansky | 2016 | $ | 430,401 | $ | 443,767 | $ | 713,036 | $ | 82,521 | $ | 1,669,725 | |||||||||||||||||||||
Senior Vice President, | 2015 | $ | 416,727 | — | $ | 449,096 | — | $ | 709,699 | $ | 56,957 | $ | 1,632,479 | |||||||||||||||||||
General Counsel and | 2014 | $ | 393,354 | — | $ | 651,295 | $ | 266,324 | $ | 381,393 | — | 46,922 | $ | 1,739,288 | ||||||||||||||||||
Secretary |
Name and Principal Position(1) | Year | Salary | Bonus(2) | Stock Awards(3) | Option Awards | Non-Equity Incentive Plan Compensation(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation(5) | Total | ||||||||||||||||
Bradley E. Hughes President & Chief Executive Officer | 2018 | $ | 958,479 | $ | — | $ | 2,084,621 | $ | — | $ | 1,352,760 | $ | — | $ | 68,081 | $ | 4,463,941 | ||||||||
2017 | $ | 927,791 | $ | — | $ | 1,748,491 | $ | — | $ | 412,422 | $ | — | $ | 173,797 | $ | 3,262,501 | |||||||||
2016 | $ | 693,038 | $ | — | $ | 1,883,319 | $ | — | $ | 1,488,288 | $ | — | $ | 158,554 | $ | 4,223,199 | |||||||||
Christopher J. Eperjesy Senior Vice President & Chief Financial Officer | 2018 | $ | 30,137 | $ | 175,000 | $ | 459,375 | $ | — | $ | 21,450 | $ | — | $ | — | $ | 685,962 | ||||||||
John J. Bollman Senior Vice President & Chief Human Resources Officer | 2018 | $ | 411,055 | $ | — | $ | 287,049 | $ | — | $ | 253,559 | $ | — | $ | 29,016 | $ | 980,679 | ||||||||
2017 | $ | 306,300 | $ | 50,000 | $ | 681,200 | $ | — | $ | — | $ | — | $ | 35,345 | $ | 1,072,845 | |||||||||
Stephen Zamansky Senior Vice President, General Counsel & Secretary | 2018 | $ | 460,752 | $ | — | $ | 459,169 | $ | — | $ | 429,951 | $ | — | $ | 29,180 | $ | 1,379,052 | ||||||||
2017 | $ | 444,723 | $ | — | $ | 442,159 | $ | — | $ | 245,633 | $ | — | $ | 69,689 | $ | 1,202,204 | |||||||||
2016 | $ | 430,401 | $ | — | $ | 443,767 | $ | — | $ | 713,036 | $ | — | $ | 82,521 | $ | 1,669,725 | |||||||||
Ginger M. Jones former Senior Vice President & Chief Financial Officer | 2018 | $ | 525,000 | $ | — | $ | 637,982 | $ | — | $ | 568,813 | $ | — | $ | 36,049 | $ | 1,767,844 | ||||||||
2017 | $ | 521,260 | $ | — | $ | 623,600 | $ | — | $ | 332,565 | $ | — | $ | 93,445 | $ | 1,570,870 | |||||||||
2016 | $ | 499,036 | $ | — | $ | 467,771 | $ | — | $ | 584,041 | $ | — | $ | 109,142 | $ | 1,659,990 |
(1) |
(2) | Upon joining the Company in 2018, Mr. Eperjesy received a signing bonus of $175,000. |
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(3) | Except as otherwise noted below, the amounts shown do not reflect compensation actually received by the named executive officer. The amounts shown in this column for 2018 are the aggregate grant date fair values computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB |
tranche of the 2016-2018 Long-Term Incentive Plan,2018 tranche of the 2018-2020 PBUs, the grant date value for each of the named executive officers was as follows: Mr. Hughes, $251,144; Mr. Armes, $1,161,469; Ms. Jones, $187,991; Ms. Harmon, $139,100; and Mr. Zamansky, $140,423.
(4) | The amounts shown in this column for |
(5) |
The amounts shown in this column for |
Amounts received by each named executive officer for 20162018 are identified and quantified in the table below:
Named Executive Officer | Company Contributions To Qualified Defined Contribution Plan | Company Contributions To Non- Qualified Defined Contribution Plan | Personal Spouse, and Dependent Travel | Tax Gross- Up Related to Travel Costs | Financial Planning Services | Executive Physical | Total | ||||||||||||||
Bradley E. Hughes | $ | 16,500 | $ | 40,997 | $ | 470 | $ | 379 | $ | 9,735 | $ | — | $ | 68,081 | |||||||
Christopher J. Eperjesy | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
John J. Bollman | $ | 16,500 | $ | 8,140 | $ | 608 | $ | 247 | $ | 2,575 | $ | 946 | $ | 29,016 | |||||||
Stephen Zamansky | $ | 16,500 | $ | 11,120 | $ | — | $ | — | $ | 1,560 | $ | — | $ | 29,180 | |||||||
Ginger M. Jones | $ | 16,500 | $ | 15,000 | $ | — | $ | — | $ | 2,150 | $ | 2,399 | $ | 36,049 |
Named Executive Officer | Company Contributions To Qualified Defined Contribution Plan | Company Contributions To Non-Qualified Defined Contribution Plan | Personal, Spouse, and Dependent Travel | Tax Gross-Up Related to Travel Costs | Financial Planning Services | Executive Physical | Total | |||||||
Bradley E. Hughes | $20,208 | $126,605 | $367 | $318 | $9,315 | $1,741 | $158,554 | |||||||
Roy V. Armes | $9,275 | $126,104 | $22,468 | $5,822 | $6,100 | $6,358 | $176,127 | |||||||
Ginger M. Jones | $20,208 | $82,715 | — | — | $4,540 | $1,679 | $109,142 | |||||||
Brenda S. Harmon | $20,208 | $61,620 | $468 | $406 | $6,625 | $1,834 | $91,161 | |||||||
Stephen Zamansky | $20,208 | $62,313 | — | — | $82,521 |
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20162018 GRANTS OF PLAN-BASED AWARDS TABLE
The following table shows all plan-based awards granted to our named executive officers during 2016.2018. The unvested portion of the stock awards identified in this table are also reported in the “Outstanding Equity Awards at 20162018 Fiscal Year-End Table” on page 29.28. All awards were granted under our 2014 Incentive Compensation Plan. For a summary of the incentive plan designs, see “Compensation and Discussion Analysis” beginning on page 11. 10.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | |||||||||||||||||||||||||||||||||||
Name (a) | Type(1) | Grant Date (b) | $ Threshold (2) (c) | $ Target (3) (d) | $ Maximum (4) (e) | # Threshold (5) (f) | # Target (6) (g) | # Maximum (7) (h) | All Other Stock Awards: Number of Shares of Stock or Units (#) | Value of Stock and Option Awards ($) (8) (i) | ||||||||||||||||||||||||||
Bradley E. | AIP | 2/18/2016 | $ | 344,484 | $ | 688,967 | $ | 1,377,934 | ||||||||||||||||||||||||||||
Hughes | PBU1 | 2/18/2016 | 1,935 | 3,869 | 7,738 | $ | 142,224 | |||||||||||||||||||||||||||||
PBU2 | 2/18/2016 | 1,548 | 3,096 | 6,192 | $ | 113,809 | ||||||||||||||||||||||||||||||
PBU3 | 2/18/2016 | 1,708 | 3,416 | 6,832 | $ | 125,572 | ||||||||||||||||||||||||||||||
PBU4 | 2/18/2016 | $ | 46,346 | $ | 92,692 | $ | 185,384 | |||||||||||||||||||||||||||||
PBU5 | 2/18/2016 | $ | 56,667 | $ | 113,334 | $ | 226,668 | |||||||||||||||||||||||||||||
PBU6 | 2/18/2016 | $ | 62,778 | $ | 125,556 | $ | 251,112 | |||||||||||||||||||||||||||||
RSU | 43,380 | $ | 1,501,714 | |||||||||||||||||||||||||||||||||
Roy V. | AIP | 2/18/2016 | $ | 531,269 | $ | 1,062,537 | $ | 2,125,074 | ||||||||||||||||||||||||||||
Armes | PBU1 | 2/18/2016 | 10,348 | 20,695 | 41,390 | $ | 760,748 | |||||||||||||||||||||||||||||
PBU2 | 2/18/2016 | 7,704 | 15,408 | 30,816 | $ | 566,398 | ||||||||||||||||||||||||||||||
PBU3 | 2/18/2016 | 7,899 | 15,798 | 31,596 | $ | 580,734 | ||||||||||||||||||||||||||||||
PBU4 | 2/18/2016 | $ | 247,917 | $ | 495,834 | $ | 991,668 | |||||||||||||||||||||||||||||
PBU5 | 2/18/2016 | $ | 282,000 | $ | 564,000 | $ | 1,128,000 | |||||||||||||||||||||||||||||
PBU6 | 2/18/2016 | $ | 290,356 | $ | 580,711 | $ | 1,161,422 | |||||||||||||||||||||||||||||
RSU | 47,394 | $ | 1,742,203 | |||||||||||||||||||||||||||||||||
Ginger M. | AIP | 2/18/2016 | $ | 187,193 | $ | 374,385 | $ | 748,770 | ||||||||||||||||||||||||||||
Jones | PBU2 | 2/18/2016 | 1,249 | 2,497 | 4,994 | $ | 91,790 | |||||||||||||||||||||||||||||
PBU3 | 2/18/2016 | 1,279 | 2,557 | 5,114 | $ | 93,995 | ||||||||||||||||||||||||||||||
PBU5 | 2/18/2016 | $ | 45,695 | $ | 91,389 | $ | 182,778 | |||||||||||||||||||||||||||||
PBU6 | 2/18/2016 | $ | 47,000 | $ | 94,000 | $ | 188,000 | |||||||||||||||||||||||||||||
RSU | 7,671 | $ | 281,986 | |||||||||||||||||||||||||||||||||
Brenda S. | AIP | 2/18/2016 | $ | 138,560 | $ | 277,119 | $ | 554,238 | ||||||||||||||||||||||||||||
Harmon | PBU1 | 2/18/2016 | 1,368 | 2,736 | 5,472 | 100,575 | ||||||||||||||||||||||||||||||
PBU2 | 2/18/2016 | 922 | 1,844 | 3,688 | 67,785 | |||||||||||||||||||||||||||||||
PBU3 | 2/18/2016 | 946 | 1,892 | 3,784 | $ | 69,550 | ||||||||||||||||||||||||||||||
PBU4 | 2/18/2016 | $ | 32,775 | $ | 65,550 | $ | 131,100 | |||||||||||||||||||||||||||||
PBU5 | 2/18/2016 | $ | 33,750 | $ | 67,500 | $ | 135,000 | |||||||||||||||||||||||||||||
PBU6 | 2/18/2016 | $ | 34,767 | $ | 69,534 | $ | 139,068 | |||||||||||||||||||||||||||||
RSU | 5,676 | $ | 208,650 | |||||||||||||||||||||||||||||||||
Stephen | AIP | 2/18/2016 | $ | 139,889 | $ | 279,778 | $ | 559,556 | ||||||||||||||||||||||||||||
Zamansky | PBU1 | 2/18/2016 | 1,294 | 2,588 | 5,176 | $ | 95,135 | |||||||||||||||||||||||||||||
PBU2 | 2/18/2016 | 922 | 1,844 | 3,688 | 67,785 | |||||||||||||||||||||||||||||||
PBU3 | 2/18/2016 | 955 | 1,910 | 3,820 | $ | 70,212 | ||||||||||||||||||||||||||||||
PBU4 | 2/18/2016 | $ | 31,000 | $ | 62,000 | $ | 124,000 | |||||||||||||||||||||||||||||
PBU5 | 2/18/2016 | $ | 33,750 | $ | 67,500 | $ | 135,000 | |||||||||||||||||||||||||||||
PBU6 | 2/18/2016 | $ | 35,100 | $ | 70,200 | $ | 140,400 | |||||||||||||||||||||||||||||
RSU | 5,730 | $ | 210,635 |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | |||||||||||||||||||||||||||||
Name | Type(1) | Grant Date | $ Threshold ($)(2) | $ Target ($)(3) | $ Maximum ($)(4) | # Threshold (#)(5) | # Target (#)(6) | # Maximum (#)(7) | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards ($)(8) | ||||||||||||||||||||
Bradley E. Hughes | AIP | $ | 575,398 | $ | 1,150,795 | $ | 2,301,590 | — | — | — | — | $ | — | |||||||||||||||||
PBU1 | 2/15/2018 | $ | — | $ | — | $ | — | 1,708 | 3,416 | 6,832 | — | $ | 118,112 | |||||||||||||||||
PBU2 | 2/15/2018 | $ | — | $ | — | $ | — | 4,915 | 9,830 | 19,660 | — | $ | 130,320 | |||||||||||||||||
PBU3 | 2/15/2018 | $ | — | $ | — | $ | — | 5,548 | 11,095 | 22,190 | — | $ | 375,015 | |||||||||||||||||
PBU4 | 2/15/2018 | $ | 62,778 | $ | 125,556 | $ | 251,112 | — | — | — | — | $ | — | |||||||||||||||||
PBU5 | 2/15/2018 | $ | 187,500 | $ | 375,000 | $ | 750,000 | — | — | — | — | $ | — | |||||||||||||||||
PBU6 | 2/15/2018 | $ | 200,682 | $ | 401,363 | $ | 802,726 | — | — | — | — | $ | — | |||||||||||||||||
RSU | 2/15/2018 | $ | — | $ | — | $ | — | — | — | — | 33,285 | $ | 1,204,085 | |||||||||||||||||
Christopher J. Eperjesy | AIP | 2/15/2018 | $ | 11,302 | $ | 22,603 | $ | 45,206 | — | — | — | — | $ | — | ||||||||||||||||
PBU1 | 2/15/2018 | $ | — | $ | — | $ | — | — | — | — | — | $ | — | |||||||||||||||||
PBU2 | 2/15/2018 | $ | — | $ | — | $ | — | — | — | — | — | $ | — | |||||||||||||||||
PBU3 | 2/15/2018 | $ | — | $ | — | $ | — | — | — | — | — | $ | — | |||||||||||||||||
PBU4 | 2/15/2018 | $ | — | $ | — | $ | — | — | — | — | — | $ | — | |||||||||||||||||
PBU5 | 2/15/2018 | $ | — | $ | — | $ | — | — | — | — | — | $ | — | |||||||||||||||||
PBU6 | 2/15/2018 | $ | — | $ | — | $ | — | — | — | — | — | $ | — | |||||||||||||||||
RSU | 12/10/2018 | $ | — | $ | — | $ | — | — | — | — | 15,000 | $ | 459,375 | |||||||||||||||||
John J. Bollman | AIP | 2/15/2018 | $ | 133,593 | $ | 267,186 | $ | 534,372 | — | — | — | — | $ | — | ||||||||||||||||
PBU1 | 2/15/2018 | $ | — | $ | — | $ | — | — | — | — | — | $ | — | |||||||||||||||||
PBU2 | 2/15/2018 | $ | — | $ | — | $ | — | 528 | 1,055 | 2,110 | — | $ | — | |||||||||||||||||
PBU3 | 2/15/2018 | $ | — | $ | — | $ | — | 860 | 1,720 | 3,440 | — | $ | 45,302 | |||||||||||||||||
PBU4 | 2/15/2018 | $ | — | $ | — | $ | — | — | — | — | — | $ | — | |||||||||||||||||
PBU5 | 2/15/2018 | $ | 22,651 | $ | 45,302 | $ | 90,604 | — | — | — | — | $ | — | |||||||||||||||||
PBU6 | 2/15/2018 | $ | 31,112 | $ | 62,223 | $ | 124,446 | — | — | — | — | $ | — | |||||||||||||||||
RSU | 2/15/2018 | $ | — | $ | — | $ | — | — | — | — | 5,160 | $ | 186,663 | |||||||||||||||||
Stephen Zamansky | AIP | 2/15/2018 | $ | 149,745 | $ | 299,489 | $ | 598,978 | — | — | — | — | $ | — | ||||||||||||||||
PBU1 | 2/15/2018 | $ | — | $ | — | $ | — | 955 | 1,910 | 3,820 | — | $ | 70,349 | |||||||||||||||||
PBU2 | 2/15/2018 | $ | — | $ | — | $ | — | 980 | 1,959 | 3,918 | — | $ | 72,867 | |||||||||||||||||
PBU3 | 2/15/2018 | $ | — | $ | — | $ | — | 1,103 | 2,206 | 4,412 | — | $ | 74,736 | |||||||||||||||||
PBU4 | 2/15/2018 | $ | 35,100 | $ | 70,200 | $ | 140,400 | — | — | — | — | $ | — | |||||||||||||||||
PBU5 | 2/15/2018 | $ | 37,360 | $ | 74,719 | $ | 149,438 | — | — | — | — | $ | — | |||||||||||||||||
PBU6 | 2/15/2018 | $ | 39,898 | $ | 79,796 | $ | 159,592 | — | — | — | — | $ | — | |||||||||||||||||
RSU | $ | — | $ | — | $ | — | — | — | — | 6,618 | $ | 239,406 | ||||||||||||||||||
Ginger M. Jones | AIP | 2/15/2018 | $ | 196,875 | $ | 393,750 | $ | 787,500 | — | — | — | — | $ | — | ||||||||||||||||
PBU1 | 2/15/2018 | $ | — | $ | — | $ | — | 1,279 | 2,557 | 5,114 | — | $ | 95,261 | |||||||||||||||||
PBU2 | 2/15/2018 | $ | — | $ | — | $ | — | 1,412 | 2,823 | 5,646 | — | $ | 97,550 | |||||||||||||||||
PBU3 | 2/15/2018 | $ | — | $ | — | $ | — | 1,532 | 3,064 | 6,128 | — | $ | 107,697 | |||||||||||||||||
PBU4 | 2/15/2018 | $ | 47,000 | $ | 94,000 | $ | 188,000 | — | — | — | — | $ | — | |||||||||||||||||
PBU5 | 2/15/2018 | $ | 53,834 | $ | 107,667 | $ | 215,334 | — | — | — | — | $ | — | |||||||||||||||||
PBU6 | 2/15/2018 | $ | 55,417 | $ | 110,834 | $ | 221,668 | — | — | — | — | $ | — | |||||||||||||||||
RSU | $ | — | $ | — | $ | — | — | — | — | 9,192 | $ | 332,521 |
(1) | AIP = Annual Incentive Plan; PBU1 = Performance-based stock units granted in the |
26
(2) | The amounts shown in column (c) with respect to AIP represent the threshold opportunity if all of the performance metrics are met. The threshold payout is based on |
(3) | The amounts shown in column (d) with respect to AIP represent the target opportunity if |
(4) | The amounts shown in column (e) with respect to AIP represent the maximum opportunity if |
(5) | The amounts shown in column (f) represent the threshold number of performance-based stock units that the executive would notionally earn for |
(6) | The amounts shown in column (g) represent the target number of performance-based stock units that the executive would notionally earn for |
(7) | The amounts shown in column (h) represent the maximum number of performance-based stock units that the executive would notionally earn for |
(8) | The amounts in column |
For more information about the compensation arrangements in which our named executive officers participate, see “Compensation Discussion and Analysis” beginning on page 11.
10.
27
OUTSTANDING EQUITY AWARDS AT 20162018 FISCAL YEAR-END TABLE
The following table shows all outstanding equity awards (stock options, performance-based stock units that have not been earned, and unvested restricted stock units) held by our named executive officers at the end of 2016.2018.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Number of Securities Underlying Unexercised Options (#) Unexercisable(1) | Option Exercise Price ($) | Grant Date | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3)(4) | |||||||||||||||||||||
Bradley E. | 26,760 | $ | 25.425 | February 21, 2013 | February 21, 2023 | — | — | — | — | |||||||||||||||||||||
Hughes | 21,650 | 10,825 | $ | 23.960 | February 20, 2014 | February 20, 2024 | — | — | — | — | ||||||||||||||||||||
66,965 | $2,601,597 | 9,928 | $385,703 | |||||||||||||||||||||||||||
48,410 | 10,825 | |||||||||||||||||||||||||||||
Roy V. Armes | 50,351 | $ | 23,960 | February 20, 2014 | August 31, 2021 | — | — | — | — | |||||||||||||||||||||
— | — | — | — | — | ||||||||||||||||||||||||||
144,776 | $5,624,538 | |||||||||||||||||||||||||||||
50,351 | ||||||||||||||||||||||||||||||
Ginger M. | 41,614 | $1,616,685 | 7,611 | $295,687 | ||||||||||||||||||||||||||
Jones | ||||||||||||||||||||||||||||||
Brenda S. | 18,000 | — | $ | 22.970 | February 23, 2011 | February 23, 2021 | — | — | — | — | ||||||||||||||||||||
Harmon | 17,553 | $ | 25.425 | February 21, 2013 | February 21, 2023 | — | — | — | — | |||||||||||||||||||||
13,314 | 6,657 | $ | 23.960 | February 20, 2014 | February 20, 2024 | — | — | — | — | |||||||||||||||||||||
19,381 | $752,964 | 5,628 | $218,648 | |||||||||||||||||||||||||||
48,867 | 6,657 | |||||||||||||||||||||||||||||
Stephen | — | — | — | — | — | |||||||||||||||||||||||||
Zamansky | 7,241 | $ | 23.960 | February 20, 2014 | February 20, 2024 | — | — | — | — | |||||||||||||||||||||
— | 19,466 | $756,247 | 5,664 | $220,046 | ||||||||||||||||||||||||||
— | 7,241 |
Option Awards | Stock Awards | ||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable (1) | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) | Grant Date | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3)(4) | ||||||||||||||||||||||
Bradley E. Hughes | 26,760 | — | $ | 25.425 | February 21, 2013 | February 20, 2023 | — | — | — | — | |||||||||||||||||||||
32,475 | — | $ | 23.96 | February 20, 2014 | February 19, 2024 | — | — | — | — | ||||||||||||||||||||||
78,118 | 2,525,555 | $ | 32,020 | 1,035,206 | |||||||||||||||||||||||||||
59,235 | — | ||||||||||||||||||||||||||||||
�� | |||||||||||||||||||||||||||||||
Christopher J. Eperjesy | 15,050 | $ | 486,567 | — | $ | — | |||||||||||||||||||||||||
John J. Bollman | 17,580 | $ | 568,361 | 4,495 | $ | 145,324 | |||||||||||||||||||||||||
Stephen Zamansky | 14,546 | $ | 470,271 | 6,371 | $ | 205,974 | |||||||||||||||||||||||||
Ginger M. Jones | 20,397 | 659,436 | 8,951 | $ | 289,386 |
(1) | The stock options |
(2) | Includes dividend equivalent units earned on outstanding restricted stock units. The amounts reported in this column will vest: for Mr. Hughes, as to |
on February 18, 2017, as to 6,757 units on December 31, 2017, as to 2,552 units on February 17, 2018, as to 2,798 units on February 18, 2018, as to 3,130 units on December 31, 2018, as to 2,552 units on February 17, 2019.
(3) | Value is based on the closing price of our common stock of |
(4) | Reflects the target payout opportunity for |
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20162018 OPTION EXERCISES AND STOCK VESTED TABLE
The following table shows our named executive officers’ exerciseexercises of stock options, plus the value realized at exercise by each named executive officer, and restricted stock awards that vested, plus the value realized by each named executive officer as a result of such vesting, during 2016.2018.
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||
(a) | (b) | (c) | (d) | (e) | ||||||||||||
Bradley E. Hughes | — | — | 19,718 | $704,480 | ||||||||||||
Roy V. Armes | 92,024 | $3,672,770 | 102,218 | $3,667,342 | ||||||||||||
Ginger M. Jones | — | — | 2,525 | 91,531 | ||||||||||||
Brenda S. Harmon | — | — | 16,323 | $573,747 | ||||||||||||
Stephen Zamansky | 13,397 | $523,005 | 15,914 | $557,449 |
Option Awards | Stock Awards | |||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||
Bradley E. Hughes | — | $ | — | 39,338 | $ | 1,329,098 | ||||||
Christopher J. Eperjesy | — | $ | — | — | $ | — | ||||||
John J. Bollman | — | $ | — | 4,012 | $ | 126,258 | ||||||
Stephen Zamansky | — | $ | — | 12,685 | $ | 456,243 | ||||||
Ginger M. Jones | — | $ | — | 17,315 | $ | 622,718 |
(1) | These amounts represent the fair market value of our common stock on the vesting date or distribution date multiplied by the number of shares that vested or were distributed. |
This table shows the actuarial present value of accumulated benefits payable to, and the number of years of service credited to Mr. Armes, who was the only named executive officer with a benefit under our now frozen defined benefit plan. Mr. Armes had a cash balance plan benefit under the Spectrum Retirement Plan, and a related supplementary benefit under the Non-Qualified Supplementary Benefit Plan.
Name | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefit | Payments During Last Fiscal Year | |||||||||
(a) | (b) | (c) | (d) | (e) | |||||||||
Roy V. Armes | Spectrum Retirement Plan | 9 | $45,800 | $0 | |||||||||
Non-Qualified Supplementary Benefit Plan – DB Account | 9 | $175,042 | $0 |
For purposes of the amounts reflected above under column (d), we have used the same assumptions that we use for financial reporting purposes under generally accepted accounting principles, except that we have assumed that the retirement age for Mr. Armes was his normal retirement age of 65. Mr. Armes has retired on August 31, 2016. His actual benefit under the qualified and non-qualified plans will be determined under the provisions of those plans as they apply to all participants. See Note 10 to our Consolidated Financial Statements in our Annual Report on Form 10-K for the twelve months ended December 31, 2016, for details as to our valuation method and the material assumptions applied in quantifying the present value of the current accrued benefit. See also our discussion of pension and postretirement benefits under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” beginning on page 28 of the Company’s Form 10-K for the year ended December 31, 2016.
Mr. Armes’s benefit under the Spectrum Retirement Plan may be paid in the form of an annuity, or in a lump sum, as he elects. A participant may receive the amount of his or her benefit in a lump sum payment upon termination of employment, subject to any Code Section 409A provisions. Payment of the benefit in an annuity form may not generally commence until the participant has reached age 55. The amount payable is not reduced by Social Security benefits payable to the participant.
20162018 NON-QUALIFIED DEFERRED COMPENSATION TABLE
This table shows certain information for 20162018 for each of our named executive officers under our non-qualified deferred compensation plans and programs. As noted above, Mr. Armes was the only named executive officer who had a benefit under the Non-Qualified Supplementary Plan that is related to the now frozen defined benefit (cash balance) plan.
Name | Executive Contributions ($)(1) | Company Contributions ($)(2) | Aggregate Earnings ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at 12/31/16 ($)(4) | |||||||||||||||
Bradley E. Hughes | — | $126,605 | $3,746 | — | $329,800 | |||||||||||||||
Non-Qualified Supplementary Benefit Plan | ||||||||||||||||||||
Roy V. Armes | ||||||||||||||||||||
Non-Qualified Supplementary Benefit Plan | — | $126,104 | $18,097 | — | $1,145,231 | |||||||||||||||
Deferred Restricted Stock Units | — | — | $130,557 | — | $3,507,572 | |||||||||||||||
Ginger M. Jones | ||||||||||||||||||||
Non-Qualified Supplementary Benefit Plan | — | $82,715 | $298.00 | — | $104,957 | |||||||||||||||
Brenda S. Harmon | ||||||||||||||||||||
Non-Qualified Supplementary Benefit Plan | — | $61,620 | $8,365 | — | $292,793 | |||||||||||||||
Stephen Zamansky | ||||||||||||||||||||
Non-Qualified Supplementary Benefit Plan | — | $62,313 | $1,873 | — | $159,983 |
Name | Executive Contributions In Last FY ($)(1) | Company Contributions In Last FY ($)(2) | Aggregate Earnings In Last FY ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at 12/31/2018 ($)(4) | ||||||||||
Bradley E. Hughes Non-Qualified Supplementary Benefit Plan | $ | — | $ | 40,997 | $ | 10,074 | $ | — | $ | 568,525 | |||||
Christopher J. Eperjesy Non-Qualified Supplementary Benefit Plan | $ | — | $ | — | $ | — | $ | — | $ | — | |||||
John J. Bollman Non-Qualified Supplementary Benefit Plan | $ | — | $ | 8,140 | $ | 66 | $ | — | $ | 12,129 | |||||
Stephen Zamansky Non-Qualified Supplementary Benefit Plan | $ | — | $ | 11,120 | $ | 1,572 | $ | — | $ | 252,240 | |||||
Ginger M. Jones Non-Qualified Supplementary Benefit Plan | $ | — | $ | 15,000 | $ | (12,744 | ) | $ | — | $ | 176,900 |
(1) | The amounts reported as Executive Contributions are fully reported in the |
(2) | The amounts reported as Company Contributions include amounts with respect to both base salary and annual incentive compensation earned by each named executive officer for |
(3) | None of the amounts reported as Aggregate Earnings are reported in the |
(4) | The Aggregate Balance at December 31, |
For more information about our non-qualified deferred compensation programs, see “Compensation Discussion and Analysis” beginning on page 11.10.
Non-Qualified Supplementary Benefit Plan
The Non-Qualified Supplementary Benefit Plan is a non-elective deferred compensation plan. The named executive officers participate in the Non-Qualified Supplementary Benefit Plan only to the extent that full participation in our qualified 401(k) plan (the Spectrum Investment Savings Plan) is restricted by limits under the Internal Revenue Code. Mr. Armes has an accrued benefit under the frozen cash balance plan.
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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
We are generally obligated to provide our named executive officers with certain payments or other forms of compensation upon a termination of employment or a change in control. The forms of such termination can involve voluntary termination, retirement, involuntary termination without cause, for cause termination, termination following a change in control, and the disability or death of the executive. The disclosure below describes the circumstances under which we may be obligated to provide our named executive officers (other than Mr. Armes)Ms. Jones) with payments or compensation. Additionally, the tables below reflect the estimated amounts of payments or compensation each of our named executive officers (other than Mr. Armes)Ms. Jones) may receive under particular circumstances in the event of termination of such named executive officer’s employment.
Payments to Mr. Armes
We were a party to an employment agreement with Mr. Armes. The initial term of employment for Mr. Armes was for three years beginning January 1, 2007, which term was automatically extended for one additional year commencing each January 1 after the commencement of the initial term. The employment agreement contains non-competition and non-solicitation provisions that extend for two years after any termination of employment. Certain compensation awards granted to Mr. Armes were also governed by the applicable compensation plans and award agreements. Below is a description of the payments or compensation Mr. Armes is entitled to as a result of his employment with us terminating on August 31, 2016.
Payments Made Upon Retirement
Mr. Armes received his then current base salary, to the extent unpaid through his termination date, plus the prorated portion of our annual and long-term incentive compensation programs based upon actual performance through the end of the applicable measurement period(s) to be distributed in accordance with the terms of the plans. Additionally, all outstanding stock options (or similar equity awards) will remain outstanding and exercisable in accordance with their terms. The vesting and distribution of restricted stock units will be in accordance with the terms of the grants. He will also Ms. Jones did not receive any accrued and vestedadditional compensation in connection with her retirement benefits, including underfrom the Company’s Non-Qualified Supplementary Benefit Plan.Company.
Payments to Other Named Executive Officers
Payments Made Upon Retirement, Death, or Disability
Upon (i) retirement by a named executive officer who is eligible to retire or (ii) death or disability, named executive officers receive the following:
Payments Made Upon Voluntary or Involuntary Termination Without Cause
Upon voluntary or involuntary termination without cause, named executive officers are entitled to payment of any earned and unpaid base pay as of the date of termination and vested benefits in accordance with the terms of the applicable plans.
Payments Made Upon Termination for Cause
Upon termination for cause, named executive officers are entitled to payment of any earned and unpaid base pay as of the date of termination and vested benefits in accordance with the terms of the applicable plans. All unpaid notionally earned annual and long-term compensation, stock options, and unvested restricted stock units are immediately forfeited.
Payments Made in Connection with a Change in Control
Following a change in control or a qualified pre-change in control termination such as when the Company is party to a definitive agreement the consummation of which would result in a change in control, named executive officers are entitled to receive the following payments and benefits:
30
Benefits upon closing of the change in control or a qualified termination under a potential change in control.
Additional benefits upon a termination without cause or a voluntary termination due to good reason within two years after a change in control.
All post-termination payments are conditioned upon the execution by the executive at the time of termination of a release of all claims against the Company.
Tabular Disclosure
Except as otherwise indicated, the amounts shown in the tables below assume that a named executive officer was terminated and, as applicable, a change in control occurred as of December 31, 2016,2018, and that the price of our Common Stock equals $38.85,$32.33, which was the closing price of our Common Stock on December 30, 2016,31, 2018, as reported on the New York Stock Exchange. Actual amounts that we may pay to any named executive officer upon termination of employment, however, can only be determined at the time of such named executive officer’s actual separation from Cooper Tire & Rubber Company.Tire.
31
Bradley E. Hughes
The following table shows the potential payments upon termination under various circumstances for Bradley E. Hughes, Chief Executive Officer and& President.
Benefits and Payments Upon Termination | Retirement on 12/31/16 (A) | Termination by Death on 12/31/16 | Termination by Disability on 12/31/16 | Termination Without Cause or for Good Reason on 12/31/16 | Termination for Cause or Without Good Reason on 12/31/16 | Termination Subsequent to a Change in Control on 12/31/16 | ||||||||||||||||||
Compensation: | ||||||||||||||||||||||||
Base Salary(1) | $ | — | ||||||||||||||||||||||
Annual Incentive Compensation(2) | $ | — | 1,074,789 | 1,074,789 | 1,074,789 | 1,074,789 | 1,074,789 | |||||||||||||||||
Cash Severance - Base Salary and Average Annual Incentive Compensation Multiple(3) | $ | — | 5,362,200 | |||||||||||||||||||||
Long-Term Incentive - Performance-Based Stock Units and Cash(4) | $ | — | 2,366,982 | 2,366,982 | 1,090,655 | 2,366,982 | ||||||||||||||||||
Stock Options(5) | $ | — | 869,566 | 869,566 | 869,566 | 869,566 | ||||||||||||||||||
Restricted Stock Units(6) | $ | — | 1,943,432 | 1,943,432 | 1,943,432 | |||||||||||||||||||
Benefits and Perquisites: | ||||||||||||||||||||||||
Pension Plan and Non-Qualified Supplementary Benefit Plan(7)(B) | $ | — | 329,800 | 329,800 | 329,800 | 329,800 | 329,800 | |||||||||||||||||
Executive Deferred Compensation Plan | $ | — | ||||||||||||||||||||||
Life, Accident, and Health Insurance(8) | $ | — | 37,917 | |||||||||||||||||||||
Retiree Medical and Life Insurance(9) | $ | — | ||||||||||||||||||||||
Excise Tax Gross-Up(10) | $ | — | ||||||||||||||||||||||
Outplacement Services(11) | $ | — | 135,000 | |||||||||||||||||||||
Total | $ | — | 6,584,569 | 6,584,569 | 3,364,810 | 1,404,589 | 12,119,686 |
Benefits and Payments Upon Termination | Retirement on (A) 12/31/2018 | Termination by Death on 12/31/2018 | Termination by Disability on 12/31/2018 | Termination Without Cause or for Good Reason on 12/31/2018 | Termination for Cause or Without Good Reason on 12/31/2018 | Termination Subsequent to a Change in Control on 12/31/2018 | ||||||||||||
Compensation: | ||||||||||||||||||
Base Salary(1) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||
Annual Incentive Compensation(2) | — | 1,092,105 | 1,092,105 | 1,092,105 | 1,092,105 | 1,092,105 | ||||||||||||
Cash Severance - Base Salary and Target Annual Incentive Compensation Multiple(3) | — | — | — | — | — | 6,180,906 | ||||||||||||
Long-Term Incentive-Performance-Based Stock Units and Cash(4) | — | 1,129,685 | 1,129,685 | 494,757 | — | 1,129,685 | ||||||||||||
Stock Options(5) | — | 456,594 | 456,594 | 456,594 | — | 456,594 | ||||||||||||
Restricted Stock Units(6) | — | 2,229,897 | 2,229,897 | — | — | 2,229,897 | ||||||||||||
Benefits and Perquisites: | ||||||||||||||||||
Non-Qualified Supplementary Benefit Plan(7) | — | 527,528 | 527,528 | 527,528 | 527,528 | 527,528 | ||||||||||||
Executive Deferred Compensation Plan | — | — | — | — | — | — | ||||||||||||
Life, Accident, and Health Insurance(8) | — | — | — | — | — | 56,853 | ||||||||||||
Outplacement Services(9) | — | — | — | — | — | 143,742 | ||||||||||||
Total | $ | — | $ | 5,435,809 | $ | 5,435,809 | $ | 2,570,984 | $ | 1,619,633 | $ | 11,817,310 |
(A) | Not eligible for retirement at 12/31/ |
Roy V. ArmesChristopher J. Eperjesy
The following table shows the potential payments upon termination under various circumstances for Roy V. Armes, Former Chairman,Christopher J. Eperjesy, Senior Vice President & Chief Executive Officer, and President.Financial Officer.
Benefits and Payments Upon Termination | Retirement on 12/31/16 (A) | Termination by Death on 12/31/16 | Termination by Disability on 12/31/16 | Termination Without Cause or for Good Reason on 12/31/16 | Termination for Cause or Without Good Reason on 12/31/16 | Termination Subsequent to a Change in Control on 12/31/16 | ||||||||
Compensation: | ||||||||||||||
Base Salary(1) | $ | — | ||||||||||||
Annual Incentive Compensation(2) | $ | 1,657,558 | ||||||||||||
Cash Severance - Base Salary and Average Annual Incentive Compensation Multiple(3) | $ | — | ||||||||||||
Long-Term Incentive - Performance-Based Stock Units and Cash(4) | $ | 10,038,170 | ||||||||||||
Stock Options(5) | $ | 749,726 | ||||||||||||
Restricted Stock Units(6) | $ | 6,595,875 | ||||||||||||
Benefits and Perquisites: | ||||||||||||||
Pension Plan and Non-Qualified Supplementary Benefit Plan(7) | $ | 1,320,273 | ||||||||||||
Executive Deferred Compensation Plan | $ | — | ||||||||||||
Life, Accident, and Health Insurance(8) | $ | — | ||||||||||||
Retiree Medical and Life Insurance(9) | $ | — | ||||||||||||
Excise Tax Gross-Up(10) | $ | — | ||||||||||||
Outplacement Services(11) | $ | — | ||||||||||||
Total | $ | 20,361,602 |
Benefits and Payments Upon Termination | Retirement on 12(A) 12/31/2018 | Termination by Death on 12/31/2018 | Termination by Disability on 12/31/2018 | Termination Without Cause or for Good Reason on 12/31/2018 | Termination for Cause or Without Good Reason on 12/31/2018 | Termination Subsequent to a Change in Control on 12/31/2018 | ||||||||||||
Compensation: | ||||||||||||||||||
Base Salary(1) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||
Annual Incentive Compensation(2) | — | 21,450 | 21,450 | 21,450 | 21,450 | 21,450 | ||||||||||||
Cash Severance - Base Salary and Target Annual Incentive Compensation Multiple(3) | — | — | — | — | — | 1,750,000 | ||||||||||||
Long-Term Incentive-Performance-Based Stock Units and Cash(4) | — | — | — | — | — | — | ||||||||||||
Stock Options(5) | — | — | — | — | — | — | ||||||||||||
Restricted Stock Units(6) | — | 486,567 | 486,567 | — | — | 486,567 | ||||||||||||
Benefits and Perquisites: | ||||||||||||||||||
Non-Qualified Supplementary Benefit Plan(7) | — | — | — | — | — | — | ||||||||||||
Executive Deferred Compensation Plan | — | — | — | — | — | — | ||||||||||||
Life, Accident, and Health Insurance(8) | — | — | — | — | — | 35,749 | ||||||||||||
Outplacement Services(9) | — | — | — | — | — | 75,000 | ||||||||||||
Total | $ | — | $ | 508,017 | $ | 508,017 | $ | 21,450 | $ | 21,450 | $ | 2,368,766 |
(A) |
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John J. Bollman
Ginger M. Jones
The following table shows the potential payments upon termination under various circumstances for Ginger M. Jones,John J. Bollman, Senior Vice President and& Chief FinancialHuman Resources Officer.
Benefits and Payments Upon Termination | Retirement on 12/31/16 (A) | Termination by Death on 12/31/16 | Termination by Disability on 12/31/16 | Termination Without Cause or for Good Reason on 12/31/16 | Termination for Cause or Without Good Reason on 12/31/16 | Termination Subsequent to a Change in Control on 12/31/16 | ||||||||||||||||||
Compensation: | ||||||||||||||||||||||||
Base Salary(1) | $ | — | ||||||||||||||||||||||
Annual Incentive Compensation(2) | $ | — | 584,041 | 584,041 | 584,041 | 584,041 | 584,041 | |||||||||||||||||
Cash Severance - Base Salary and Average Annual Incentive Compensation Multiple(3) | $ | — | 1,721,885 | |||||||||||||||||||||
Long-Term Incentive - Performance-Based Stock Units and Cash(4) | $ | — | 1,004,890 | 1,004,890 | 1,004,890 | |||||||||||||||||||
Stock Options(5) | $ | — | ||||||||||||||||||||||
Restricted Stock Units(6) | $ | — | 1,098,484 | 1,098,484 | 1,098,484 | |||||||||||||||||||
Benefits and Perquisites: | ||||||||||||||||||||||||
Pension Plan and Non-Qualified Supplementary Benefit Plan(7)(B) | $ | — | 104,957 | 104.957 | 104,957 | 104,957 | 104,957 | |||||||||||||||||
Executive Deferred Compensation Plan | $ | — | ||||||||||||||||||||||
Life, Accident, and Health Insurance(8) | $ | — | 35,803 | |||||||||||||||||||||
Retiree Medical and Life Insurance(9) | $ | — | ||||||||||||||||||||||
Excise Tax Gross-Up(10) | $ | — | ||||||||||||||||||||||
Outplacement Services(11) | $ | — | 76,500 | |||||||||||||||||||||
Total | $ | — | 2,792,372 | 2,792,372 | 688,998 | 688,998 | 4,626,560 |
Benefits and Payments Upon Termination | Retirement on (A) 12/31/2018 | Termination by Death on 12/31/2018 | Termination by Disability on 12/31/2018 | Termination Without Cause or for Good Reason on 12/31/2018 | Termination for Cause or Without Good Reason on 12/31/2018 | Termination Subsequent to a Change in Control on 12/31/2018 | ||||||||||||
Compensation: | ||||||||||||||||||
Base Salary(1) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||
Annual Incentive Compensation(2) | — | 253,559 | 253,559 | 253,559 | 253,559 | 253,559 | ||||||||||||
Cash Severance - Base Salary and Target Annual Incentive Compensation Multiple(3) | — | — | — | — | — | 1,314,154 | ||||||||||||
Long-Term Incentive-Performance-Based Stock Units and Cash(4) | — | 86,238 | 86,238 | — | — | 86,238 | ||||||||||||
Stock Options(5) | — | — | — | — | — | — | ||||||||||||
Restricted Stock Units(6) | — | 529,113 | 529,113 | — | — | 529,113 | ||||||||||||
Benefits and Perquisites: | ||||||||||||||||||
Non-Qualified Supplementary Benefit Plan(7) | — | 3,989 | 3,989 | 3,989 | 3,989 | 3,989 | ||||||||||||
Executive Deferred Compensation Plan | — | — | — | — | — | — | ||||||||||||
Life, Accident, and Health Insurance(8) | — | — | — | — | — | 28,872 | ||||||||||||
Outplacement Services(9) | — | — | — | — | — | 61,601 | ||||||||||||
Total | $ | — | $ | 872,899 | $ | 872,899 | $ | 257,548 | $ | 257,548 | $ | 2,277,526 |
(A) | Not eligible for retirement at 12/31/ |
Brenda S. Harmon
The following table shows the potential payments upon termination under various circumstances for Brenda S. Harmon, Senior Vice President and Chief Human Resources Officer.
Benefits and Payments Upon Termination | Retirement on 12/31/16 (A) | Termination by Death on 12/31/16 | Termination by Disability on 12/31/16 | Termination Without Cause or for Good Reason on 12/31/16 | Termination for Cause or Without Good Reason on 12/31/16 | Termination Subsequent to a Change in Control on 12/31/16 | ||||||||||||||||||
Compensation: | ||||||||||||||||||||||||
Base Salary(1) | $ | — | ||||||||||||||||||||||
Annual Incentive Compensation(2) | $ | 432,306 | 432,306 | 432,306 | 432,306 | 432,306 | 432,306 | |||||||||||||||||
Cash Severance - Base Salary and Average Annual Incentive Compensation Multiple(3) | $ | — | 1,418,092 | |||||||||||||||||||||
Long-Term Incentive - Performance-Based Stock Units and Cash(4) | $ | 1,514,021 | 1,514,021 | 1,514,021 | 1,514,021 | 1,514,021 | ||||||||||||||||||
Stock Options(5) | $ | 836,410 | 836,410 | 836,410 | 836,410 | 836,410 | ||||||||||||||||||
Restricted Stock Units(6) | $ | 369,969 | 369,969 | 369,969 | 369,969 | |||||||||||||||||||
Benefits and Perquisites: | ||||||||||||||||||||||||
Pension Plan and Non-Qualified Supplementary Benefit Plan(7)(B) | $ | 292,793 | 292,793 | 292,793 | 292,793 | 292,793 | 292,793 | |||||||||||||||||
Executive Deferred Compensation Plan | $ | — | ||||||||||||||||||||||
Life, Accident, and Health Insurance(8) | $ | — | 29,168 | |||||||||||||||||||||
Retiree Medical and Life Insurance(9) | $ | — | ||||||||||||||||||||||
Excise Tax Gross-Up(10) | $ | — | ||||||||||||||||||||||
Outplacement Services(11) | $ | — | 64,459 | |||||||||||||||||||||
Total | $ | 3,445,499 | 3,445,499 | 3,445,499 | 3,075,530 | 725,099 | 4,957,218 |
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Stephen Zamansky
The following table shows the potential payments upon termination under various circumstances for Stephen Zamansky, Senior Vice President, General Counsel and& Secretary.
Benefits and Payments Upon Termination | Retirement on 12/31/16 (A) | Termination by Death on 12/31/16 | Termination by Disability on 12/31/16 | Termination Without Cause or for Good Reason on 12/31/16 | Termination for Cause or Without Good Reason on 12/31/16 | Termination Subsequent to a Change in Control on 12/31/16 | ||||||||||||||||||
Compensation: | ||||||||||||||||||||||||
Base Salary(1) | $ | — | ||||||||||||||||||||||
Annual Incentive Compensation(2) | $ | — | 436,454 | 436,454 | 436,454 | 436,454 | 436,454 | |||||||||||||||||
Cash Severance - Base Salary and Average Annual Incentive Compensation Multiple(3) | $ | — | 1,431,706 | |||||||||||||||||||||
Long-Term Incentive - Performance-Based Stock Units and Cash(4) | $ | — | 1,474,452 | 1,474,452 | 729,651 | 1,474,452 | ||||||||||||||||||
Stock Options(5) | $ | — | 107,818 | 107,818 | 107,818 | 107,818 | ||||||||||||||||||
Restricted Stock Units(6) | $ | — | 372,183 | 372,183 | 372,183 | |||||||||||||||||||
Benefits and Perquisites: | ||||||||||||||||||||||||
Pension Plan and Non-Qualified Supplementary Benefit Plan(7)(B) | $ | — | 159,983 | 159,983 | 159,983 | 159,983 | 159,983 | |||||||||||||||||
Executive Deferred Compensation Plan | $ | — | ||||||||||||||||||||||
Life, Accident, and Health Insurance(8) | $ | — | 24,018 | |||||||||||||||||||||
Retiree Medical and Life Insurance(9) | $ | — | ||||||||||||||||||||||
Excise Tax Gross-Up(10) | $ | — | ||||||||||||||||||||||
Outplacement Services(11) | $ | — | 65,078 | |||||||||||||||||||||
Total | $ | — | 2,550,890 | 2,550,890 | 1,433,906 | 596,437 | 4,071,692 |
Benefits and Payments Upon Termination | Retirement on (A) 12/31/2018 | Termination by Death on 12/31/2018 | Termination by Disability on 12/31/2018 | Termination Without Cause or for Good Reason on 12/31/2018 | Termination for Cause or Without Good Reason on 12/31/2018 | Termination Subsequent to a Change in Control on 12/31/2018 | ||||||||||||
Compensation: | ||||||||||||||||||
Base Salary(1) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||
Annual Incentive Compensation(2) | — | 284,215 | 284,215 | 284,215 | 284,215 | 284,215 | ||||||||||||
Cash Severance - Base Salary and Target Annual Incentive Compensation Multiple(3) | — | — | — | — | — | 1,519,126 | ||||||||||||
Long-Term Incentive-Performance-Based Stock Units and Cash(4) | — | 403,134 | 403,134 | 276,705 | — | 403,134 | ||||||||||||
Stock Options(5) | — | — | — | — | — | — | ||||||||||||
Restricted Stock Units(6) | — | 411,367 | 411,367 | — | — | 411,367 | ||||||||||||
Benefits and Perquisites: | ||||||||||||||||||
Non-Qualified Supplementary Benefit Plan(7) | — | 241,119 | 241,119 | 241,119 | 241,119 | 241,119 | ||||||||||||
Executive Deferred Compensation Plan | — | — | — | — | — | — | ||||||||||||
Life, Accident, and Health Insurance(8) | — | — | — | — | — | 24,111 | ||||||||||||
Outplacement Services(9) | — | — | — | — | — | 69,051 | ||||||||||||
Total | $ | — | $ | 1,339,835 | $ | 1,339,835 | $ | 802,039 | $ | 525,334 | $ | 2,952,123 |
(A) | Not eligible for retirement at 12/31/ |
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Footnotes for Tabular Disclosure
(1) | As of December 31, |
(2) | Amounts shown are actual amounts payable in early |
(3) | Mr. Hughes would receive three (3) times the sum of base salary as of the end of |
(4) | Amounts shown are based on the performance-based stock units and performance-based cash notionally earned as of December 31, |
(5) | Total in-the-money/intrinsic dollar value of vested and non-vested stock options for change in control. Total in-the-money/intrinsic dollar value of vested and non-vested stock options for retirement, disability, or death with specific periods for exercise. |
(6) | Total dollar value of vested and non-vested restricted stock units for retirement, disability, death, and termination in connection with a change in control. Total dollar value of only vested restricted stock units for termination with cause or without good reason. When restricted stock units become vested, the grantee shall receive shares of common stock equal to the number of restricted units granted in addition to dividend equivalents earned. The common stock is to be delivered on the date specified by the grantee in their restricted stock award agreement. |
(7) | All vested Non-Qualified Supplementary Benefit Plan retirement plus investment savings benefits are payable to all participants upon termination. |
(8) | Present value of |
(9) | The amount shown reflects the total amount payable for outplacement assistance for, |
20162018 DIRECTOR COMPENSATION TABLE
Name (a) | Fees Earned or Paid in Cash ($)(1) (b) | Stock Awards ($)(2) (c) | Option Awards ($)(3) (d) | Total ($) (h) | ||||
Thomas P. Capo | $128,750 | $125,000 | — | $253,750 | ||||
Steven M. Chapman | $100,000 | $125,000 | — | $225,000 | ||||
Susan F. Davis | $75,000 | $125,000 | — | $200,000 | ||||
John J. Holland | $120,000 | $125,000 | — | $245,000 | ||||
John F. Meier* | $115,000 | $125,000 | — | $240,000 | ||||
Gary S. Michel | $100,000 | $125,000 | — | $225,000 | ||||
John H. Shuey | $100,000 | $125,000 | — | $225,000 | ||||
Robert D. Welding | $112,000 | $125,000 | — | $237,000 |
Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($) | Total($) | |||||||||||
Thomas P. Capo | $ | 237,000 | $ | 125,000 | $ | — | $ | 362,000 | |||||||
Steven M. Chapman | $ | 100,000 | $ | 125,000 | $ | — | $ | 225,000 | |||||||
Susan F. Davis | $ | 100,000 | $ | 125,000 | $ | — | $ | 225,000 | |||||||
Kathryn P. Dickson* | $ | — | $ | — | $ | — | $ | — | |||||||
John J. Holland | $ | 120,000 | $ | 125,000 | $ | — | $ | 245,000 | |||||||
Tracey I. Joubert | $ | 100,000 | $ | 125,000 | $ | — | $ | 225,000 | |||||||
Gary S. Michel | $ | 100,000 | $ | 125,000 | $ | — | $ | 225,000 | |||||||
John H. Shuey* | $ | 75,000 | $ | — | $ | — | $ | 75,000 | |||||||
Brian C. Walker* | $ | — | $ | — | $ | — | $ | — | |||||||
Robert D. Welding | $ | 115,000 | $ | 125,000 | $ | — | $ | 240,000 |
(1) | The amounts listed under “Fees Earned or Paid in Cash” represent the compensation amounts discussed in the narration below. The non-employee Directors who deferred |
(2) | These amounts are the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. See Note 9 to our Consolidated Financial Statements in our Annual Report on Form 10-K for the |
* | Ms. Dickson and Mr. Walker joined the Board on October 26, 2018, and Mr. Shuey did not stand for reelection at the 2018 Annual Meeting. |
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*Mr. Meier resigned from the Board on January 10, 2017.TABLE OF CONTENTS
Our Board of Directors makes compensation decisions for our non-employee Directors upon the recommendation of the Nominating and Governance Committee. Compensation of Directors is reviewed on an annual basis utilizing information on benchmarks and trends in director compensation provided by an independent consultant. Except as noted in the footnotes above, our non-employee Directors received the following compensation on an annual basis for the period January 1, 20162018 through December 31, 20162018:
|
Additionally, each non-employee Director received an annual grant of phantom stock units in an amount equal to $125,000 divided by the average of the highest and the lowest quoted selling price of a share of the Company’s common stock, as reported on the New York Stock Exchange Composite Tape, on the grant date for that particular year.
In 2018, the grant date was the date of the Annual Meeting, May 4, 2018.
Also, effective May 9, 2014, the Company changed the Share Ownership Guidelines for non-employee Directors from unit-based to monetary-based. All Directors are required to own at least $500,000 of our common stock, excluding options, and have five years from the date they join the Board to meet this requirement. As of the date of this proxy statement, each of our Directors, except Gary Michel, who joined the Board in October 2015, and Susan Davis, who joined the Board in February 2016, hashave served for 5 or more years, have met this requirement.
Our non-employee Directors also participate in our Amended and Restated 1998 non-employee Directors Compensation Deferral Plan, which we refer to as the Directors’ deferral plan. The Directors’ deferral plan permits our non-employee Directors to defer some or all of the fees payable to them for service on the Board of Directors. The amounts that our non-employee Directors defer, and dividend equivalents on those amounts, are converted to phantom stock units and credited to a bookkeeping account established for this purpose, or are invested in various alternative investment funds available from time to time. Deferred amounts may be transferred from phantom stock units into the alternative investment funds, but not back into phantom stock units. The amount of alternative investment funds will be equal to (1) the amount of phantom stock units to be transferred multiplied by (2) the average of the highest and the lowest quoted selling price of a share of our common stock, as reported on the New York Stock Exchange Composite Tape, on the date the phantom stock units were transferred (or, if there were no sales on the date the phantom stock units were transferred, the next preceding date during which a sale of our common stock occurred). Phantom stock units are settled in cash upon a Directors termination of service as a director, unless otherwise elected.
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For 2018, the ratio of the annual total compensation of Mr. Hughes, our Chief Executive Officer (“CEO Compensation”), to the median of the annual total compensation of all of our employees and those of our consolidated subsidiaries (other than Mr. Hughes) (“Median Annual Compensation”), was 89 to 1. We note that, due to our permitted use of reasonable estimates and assumptions in preparing this pay ratio disclosure, the disclosure may involve a degree of imprecision, and thus this pay ratio disclosure is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K using the data and assumptions described below. In this summary, we refer to the employee who received the Median Annual Compensation as the “Median Employee.” For purposes of this disclosure, the date used to identify the Median Employee was October 31, 2017 (the “Determination Date”). We have used the same Median Employee as we did for our 2017 pay ratio, because there has been a change in our employee population or employee compensation arrangements that we reasonably believe would significantly impact our pay ratio disclosure.
For purposes of this pay ratio disclosure, CEO Compensation was determined to be $4,463,941 which amount represents the total compensation reported for Mr. Hughes under the “2018 Summary Compensation Table” for 2018. Median Annual Compensation was determined to be $49,960.11 and was calculated by totaling for our Median Employee all applicable elements of compensation for 2018 in accordance with Item 402(c)(2)(x) of Regulation S-K.
To identify the Median Employee, we measured compensation for the period beginning on January 1, 2017 and ending on October 31, 2017 for 9,053 U.S. and non-U.S. employees, representing all full-time, part-time, seasonal and temporary employees for us and our consolidated subsidiaries as of the Determination Date. This number does not include any independent contractors or “leased” workers, as permitted by the applicable SEC rules.
This compensation measurement was calculated by totaling, for each employee, annual compensation which is defined as base salary, overtime wages, production allowances, commissions and bonus which represents the consistently applied compensation measure that we used for our pay ratio determination. Specifically excluded from the consistently applied compensation measure were relocation expense, severance payments and ex-patriate allowances. Further, we did not utilize any statistical sampling or cost-of-living adjustments for purposes of this pay ratio disclosure.
A portion of our employee workforce (full-time and part-time) identified above worked for less than the full fiscal year due to commencing employment after January 1, 2017. In determining the Median Employee, we annualized the total compensation for such individuals (but avoided creating full-time equivalencies) based on reasonable assumptions and estimates relating to our employee compensation program.
MEETINGSTHE BOARD’S ROLE IN RISK OVERSIGHT
The Board evaluates risk both collectively and as a function of its respective committees, including general oversight of (i) achievement of organizational objectives, including strategic objectives, to improve long-term organizational performance and enhance shareholder value, and sustainability objectives; (ii) the financial exposure of the Company; (iii) risk exposure as related to overall Company portfolio and impact on earnings; (iv) information technology security and risk; (v) compliance with environmental, health, safety and other laws and regulations and (vi) all systems, processes, and organizational structure and people responsible for finance and risk functions. Our Audit Committee assists our Board in fulfilling its oversight responsibilities by regularly reviewing risks associated with financial and accounting matters, as well as those related to financial reporting. In this regard, our Audit Committee monitors compliance and regulatory requirements and internal control systems. Our Audit Committee also reviews the process by which enterprise risk management is undertaken by the Company
Our Compensation Committee assists the Board with risk oversight through its review of compensation programs to help ensure such programs do not encourage excessive risk-taking. The Compensation Committee reviews base compensation levels, incentive compensation and succession plans to confirm the Company has appropriate practices in place to support the retention and development of the employees necessary to achieve the Company’s business goals and objectives.
Our Nominating and Governance Committee oversees the Company's risk management metrics process and assists the Board with risk oversight through its oversight of the Company’s sustainability matters. The Company’s Sustainability Committee, which is chaired by one of the Company’s named executive officers, has oversight and responsibility for monitoring the environmental, health, safety and social risks related to the Company and its operations, as well as other sustainability matters. The Sustainability Committee reports regularly to the Nominating
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and Governance Committee on the Company’s sustainability matters, including its commitment to environmental responsibility and the health and safety of its employees, contractors and the community.
The Board receives regular updates from these committees regarding their activities and also regularly reviews other risks, including risks of a more strategic nature. Key risks associated with the strategic plan of the Company are reviewed annually at a designated meeting of the Board and on an ongoing basis throughout the year. The involvement of the full Board in setting the Company’s business strategy is a key part of its assessment of management’s appetite for risk and also in determination of what constitutes an appropriate level of risk for the Company.
While our Board and its committees oversee risk management, the senior management team of the Company is charged with managing risk. The Company has a strong enterprise risk management process for identifying, assessing and managing risk, as well as monitoring the performance of risk mitigation strategies. The governance of this process is effected through the executive sponsorship of our senior management, and is led by officers and senior managers responsible for working across the business to manage enterprise level risks, identify emerging risks, and provides training on key risks, such as anti-corruption training at all levels of the Company. These leaders meet routinely and provide regular updates to our Board and its committees throughout the year.
The Board administers its risk oversight function as a component of its duties, but not in any capacity that has a specific effect on its leadership structure.
BOARD OF DIRECTORS AND ITS COMMITTEES
Corporate Governance
In connection with the retirement of Mr. Roy Armes, the Company’s former Chairman, Chief Executive Officer and President, and the election of Mr. Hughes as Chief Executive Officer and& President, on September 1, 2016, the Board determined to split the positions of Chairman and Chief Executive Officer, which previously had both been held by Mr. Armes. As a result, on September 1, 2016, Mr. Hughes became Chief Executive Officer, President and a Director of the Company, and Mr. Capo was appointed non-executive Chairman of the Board. In connection with this change, the position of independent Lead Director was suspended.
The Board has determined that this leadership structure, with Mr. Capo serving as the non-executive Chairman of the Board and Mr. Hughes serving as a Director and the Chief Executive Officer, is the most effective structure for the Company at this time. The Board believes that having an independent director serve as non-executive Chairman of the Board and Mr. Hughes serving as Chief Executive Officer strikes an effective balance between management and independent director participation in the Board process.
Although the Board believes that the existing leadership structure is currently in the best interests of the Company, the Board recognizes that no single leadership structure may be appropriate in all circumstances. Accordingly, the Board considers this issue as part of the succession planning process and considers it at least annually, including each time it elects the Chief Executive Officer. The Company’s governance guidelines provide the Board with the flexibility to continue to separate the positions of Chairman of the Board and Chief Executive Officer, or to combine the roles in the future if the Board determines that such a leadership structure would be a more efficient and effective structure for our Board, our business, our employees, and our stockholders.
The Board evaluates risk both collectively and as a functionCode of its respective committees, including general oversight of (i) the financial exposure of the Company, (ii) risk exposure as related to overall Company portfolio and impact on earnings, (iii) oversight for information technology security and risk, and (iv) all systems, processes, and organizational structure and people responsible for finance and risk functions. The Board administers its risk oversight function as a component of its duties, but not in any capacity that has a specific effect on its leadership structure.Conduct
Our Board has adopted a written Code of Conduct for our Directors, officers (including our principal executive officer, principal financial officer, and principal accounting officer) and employees. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding certain amendments to or waivers from our Code of Conduct by filing Current Reports on Form 8-K with the Securities and Exchange Commission, or promptly disclosing on our website any such amendments or waivers. We will make any amended Code of Conduct available at the Investor Relations/Governance link on our website athttp://www.coopertire.comus.coopertire.com/.
The information contained on or accessible through the Company’s website is not incorporated by reference in this proxy statement and should not be considered a part of this proxy statement.
Hedging and Pledging Transactions
In order to align the interests of the Company’s officers and Directors with those of its stockholders and to address athe potential appearance of improper or inappropriate conduct, the Board of Directors has adopted a policy with
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respect to hedging and pledging of Common Stock or other equity securities of the Company (“Company Securities”).Securities. This anti-hedging policy prohibits Company officers and Directors, including certain family members of such persons, from hedging Company Securities, including short-selling, options, puts, calls, collars and exchange funds, as well as derivatives such as swaps, forwards and futures, or pledging or otherwise encumbering Company Securities as collateral for indebtedness. Persons subject to this policy will be afforded a reasonable opportunity to unwind or otherwise terminate any prohibited hedging transactions or arrangements existing as of the time such person becomes subject to the policy.
Board of Directors
During 2016,2018, our Board of Directors held fiveseven Board meetings,four meetings of our Audit Committee, five meetings of our Compensation Committee, and fourfive meetings of our Nominating and Governance Committee. Each Director attended more than 75% of the aggregate number of meetings of the Board of Directors and meetings of Committees on which such Director served during the past fiscal year during their tenure on the Board.
The Board holds regular executive sessions without management present. Mr. Capo, the non-executive Chairman of the Board, presides at all Board meetings, including executive sessions.
Determination of Independence of Directors
The NYSE’s Corporate Governance Listing Standards require that all listed companies have a majority of independent directors. For a director to be “independent” under the NYSE listing standards, the board of directors of a listed company must affirmatively determine that the director has no material relationship with the Company, or its subsidiaries or affiliates, either directly or as a partner, stockholder, or officer of an organization that has a relationship with the Company or its subsidiaries or affiliates. The Board has adopted the NYSE listing standards as its categorical standards for making director independence determinations.
In making independence determinations, the Board has broadly considered all relevant facts and circumstances from the standpoint of both the Director and others. The Board has considered that we, our employees or our affiliates may have engaged in transactions or relationships with companies with which our Directors are associated. These transactions or relationships include purchasing products from companies for which our Directors are employees of or are on the board of directors. After these considerations, and in accordance with the NYSE listing standards, the Board has affirmatively determined that each Director serving during 2016,2018, other than Messrs. Armes andMr. Hughes, has no material relationship with us (either directly or as a partner, stockholder, or officer of an organization that has a relationship with us).
Additionally, the Board has determined that each of Mr. Capo, Mr. Chapman, Ms. Davis, Ms. Dickson, Mr. Holland, Ms. Joubert, Mr. Michel, Mr. Walker and Messrs. Capo, Chapman, Holland, Michel, Shuey and WeldingMr.Welding is “independent” under the NYSE listing standards, which provide that a Director is not independent if:
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Additionally, the Board has alsopreviously determined that Mr. MeierShuey was “independent”"independent" under the NYSE listing standards during his tenureperiod of Board service in 2016 and until he resigned from the Board in January 2017.2018.
We have a separately designated standing Audit Committee, which was established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee currently consists of Directors Holland (Chairman), Capo, Michel and Shuey.Joubert. All members have been determined to be financially literate and to be “independent” under the NYSE’s Corporate Governance Listing Standards and the Exchange Act. The Board has determined that Directors Holland, Capo and ShueyJoubert each qualifies as an “audit committee financial expert” due to histheir business experience and educational background described on pages 3background. The Audit Committee, among other things:
The functions of the Audit Committee are set forth in an Audit Committee Charter, which was adopted by the Board on February 4, 2004 and amended and restated on May 11, 2012, and is available on our website. In 2016,2018, we did not have any related person transactions, but our Audit Committee will review and discuss any related person, insider, or affiliated party transactions pursuant to the Audit Committee Charter. It is the written policy of the Company that the Audit Committee will review and discuss reports and disclosures of insider and affiliated party transactions.
Compensation Committee
We have a standing Compensation Committee, which is comprised of Directors Welding (Chairman), Chapman and Davis each of whom is “independent” under the NYSE’s Corporate Governance Listing Standards and the Exchange Act. Compensation decisions for the Company’s senior officers and other key executives are made by our Compensation Committee, and actions of the Committee are reported to the Board of Directors after each meeting.
The Compensation Committee:Committee, among other things:
The Compensation Committee has engaged Exequity LLP, an independent executive compensation consulting firm, to review and provide guidance regarding our total compensation program for named executive officers for 20172019 and to assist the Committee in monitoring and assessing compensation trends for senior management personnel, including the Chief Executive Officer.
The agenda for meetings of the Compensation Committee is determined by its Chairman with the assistance of our Senior Vice President and& Chief Human Resources Officer. Compensation Committee meetings are regularly attended by our Chief Executive Officer and our Senior Vice President and Chief Human Resources Officer. At each regular meeting, the Compensation Committee meets in executive session. The Compensation Committee’s Chairman reports on the Committee’sCommittee's actions and decisions on executive compensation matters to the Board of Directors. Independent advisorsadvisers and our Human Resources Department support the Compensation Committee in its duties and, along with our Chief Executive Officer and Senior Vice President and& Chief Human Resources Officer, may be delegated authority
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to fulfill certain administrative duties regarding the compensation programs. The Compensation Committee has authority under its charter to retain, approve fees for and terminate advisors,advisers, consultants, and agents as it deems necessary to assist in the fulfillment of its responsibilities. The Compensation Committee reviews the total fees paid to our outside consultants to ensure that they maintain their objectivity and independence when rendering advice to the Compensation Committee.
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Nominating and Governance Committee
We have a standing Nominating and Governance Committee, which is currently comprised of Directors Capo (Chairman), ShueyChapman, Michel and Welding, each of whom is “independent” under the New NYSE’s Corporate Governance Listing Standards. The Nominating and Governance Committee:Committee, among other things:
The Nominating and Governance Committee will consider candidates for Board membership proposed by our stockholders or other parties. Any recommendation must be in writing, accompanied by a description of the proposed nominee’s qualifications and other relevant biographical information, and an indication of the consent of the proposed nominee to serve. The recommendation should be addressed to the Nominating and Governance Committee of the Board of Directors, Attention: Secretary, Cooper Tire & Rubber Company, 701 Lima Avenue, Findlay, Ohio 45840. As of the date of this proxy statement, we have not received any director nominee recommendations from any stockholders.
The Nominating and Governance Committee uses a variety of sources to identify candidates for Board membership, including current members of the Board, our executive officers, individuals personally known to members of the Board and our executive officers and, as described above, our stockholders, as well as, from time to time, third party search firms. Ms. Dickson and Mr. HughesWalker, who waswere elected to the Board in September 2016 wasOctober 2018, were recommended to the Board by the Nominating and Governance Committee as part of the CEO succession planning process.after being identified by a third party search firm. The Nominating and Governance Committee may consider candidates for Board membership at its regular or special meetings held throughout the year.
The Nominating and Governance Committee uses the same manner and process for evaluating every candidate for Board membership regardless of the original source of the candidate’s nomination. Once the Nominating and Governance Committee has identified a prospective candidate, the Nominating and Governance Committee makes an initial determination whether to conduct an initial evaluation of the candidate, which consists of an interview by the Chair of the Nominating and Governance Committee. The Nominating and Governance Committee currently has not set specific, minimum qualifications or criteria for nominees that it proposes for Board membership, but evaluates the entirety of each candidate’s credentials. The Nominating and Governance Committee believes, however, that we will be best served if our Directors bring to the Board, a variety of experience and diverse backgrounds and, among other things, diversity with respect to background, experience, viewpoint, national origin, race, gender and skills, as well as, demonstrated integrity, executive leadership, and financial, marketing, or business knowledge and experience.
The Chair communicates the results of initial evaluation of candidates to the other Nominating and Governance Committee members, the Chairman of the Board or Lead Director, as applicable, and the Chief Executive Officer. If the Nominating and Governance Committee determines, in consultation with the Chairman of the Board or Lead Director, as applicable, and the Chief Executive Officer, that further consideration of the candidate is warranted, members of our senior management gather additional information regarding the candidate. The Nominating and Governance Committee or members of our senior management then conduct background and reference checks and any final interviews, as necessary, of the candidate. At that point, the candidate is invited to meet and interact with the members of the Board who are not on the Nominating and Governance Committee. The Nominating and Governance Committee then makes a final determination whether to recommend the candidate to the Board for Board membership.
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Neither the Nominating and Governance Committee nor the Board of Directors has a formal policy with regard to the consideration of diversity in identifying director nominees; however, how a specific nominee contributes to the diversity of the Board of Directors is considered by both the Nominating and Governance Committee and the Board of Directors in determining candidates for the Board.
We believe that Board tenure diversity is important and directors with many years of service provide the Board with a deep knowledge of our Company, while newer directors lend fresh perspectives. In 2018, the size of the Board was expanded to 10 members and within the past three and a half years, the Company has added six new directors. The average tenure of all Directors is 6.7 years.
Availability of Governance Guidelines, Code of Conduct, and Committee Charters
Our governance guidelines, Code of Conduct, and the charters for the Audit Committee, Compensation Committee, and Nominating and Governance Committee are available at the Investor Relations/Investors/Governance link on our website athttp://www.coopertire.comus.coopertire.com/.
In addition, stockholders may request a free printed copy of any of these materials by contacting:
Cooper Tire & Rubber Company
Attention: Corporate Secretary
701 Lima Avenue
Findlay, Ohio 45840
(419) 423-1321
Stockholder and Interested Party Communications with the Board
Our Board has adopted a process by which stockholders or interested parties may send communications to the Board, the non-employee Directors as a group, or any of the Directors. Any stockholder or interested party who wishes to communicate with the Board, the non-employee Directors as a group, or any Director may send a written communication addressed to:
Board of Directors —- Stockholder and Interested Party Communications
Attention: Corporate Secretary
Cooper Tire & Rubber Company
701 Lima Avenue
Findlay, Ohio 45840
The Secretary will review and forward each written communication (except, in his sole determination, those communications clearly of a marketing nature, those communications better addressed by a specific Company department, or those communications containing complaints regarding accounting, internal auditing controls, or auditing matters) to the full Board, the non-employee Directors as a group, or the individual Director(s) specifically addressed in the written communication. The Secretary will discard written communications clearly of a marketing nature. Written communications better addressed by a specific Company department will be forwarded to such department, and written communications containing complaints regarding accounting, internal auditing controls, or auditing matters will be forwarded to the Chairman of the Audit Committee.
Director Attendance at Annual Meetings
Our Board does not have a specific policy regarding Director attendance at our Annual Meetings. All of our then serving Directors, except for Mr. Michel, attended our 20162018 Annual Meeting.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors Chapman, Davis, Meier and Welding served as members of the Compensation Committee during 2016.2018. During 2016,2018, none of the members of the Compensation Committee was one of our or our subsidiaries’ officers or employees, was formerly one of our or our subsidiaries’ officers or had any relationship requiring disclosure pursuant to Item 404 of Regulation S-K. Additionally, during 2016,2018, none of our executive officers or Directors was a member of the board of directors, or on a committee thereof, of any other entity such that the relationship would be construed to constitute a committee interlock within the meaning of the rules of the Securities and Exchange Commission.
RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP served as the Company’s independent registered public accounting firm for 2016,2018 and has been appointed by the Audit Committee to continue in that capacity during 2017.2019. The Audit Committee’s decision to appoint Ernst & Young LLP has been ratified by the Board and will be recommended to the stockholders for ratification at the Annual Meeting. Ernst & Young LLP has advised the Company that neither the firm nor any of its members or associates has any direct or indirect financial interest in the Company. During 2016,2018, Ernst & Young LLP rendered both audit services, including an audit of the Company’s annual financial statements, and certain non-audit services. There is no understanding or agreement between the Company and Ernst & Young LLP that places a limit on audit fees since the Company pays only for services actually rendered and at what it believes are customary rates. Professional services rendered by Ernst & Young LLP are approved by the Audit Committee both as to the advisability and scope of the service, and the Audit Committee also considers whether such services would affect Ernst & Young LLP’s continuing independence.
Audit Fees
Ernst & Young LLP’s aggregate fees billed for 20152017 and 20162018 for professional services rendered by them for the audit of the Company’s annual financial statements, the audit of the effectiveness of the Company’s internal control over financial reporting required by the Sarbanes-Oxley Act of 2002, the review of financial statements included in the Company’s Quarterly Reports on Form 10-Q, and services that are normally provided in connection with statutory and regulatory filings or engagements for those years are listed below.
2017 - $2,332,553 | 2018 - $2,454,110 |
Audit-Related Fees
Ernst & Young LLP’s aggregate fees billed for 20152017 and 20162018 for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements, and are not reported under “Audit Fees” above, were:
2017 - $224,043 | 2018 - $166,355 |
Audit-related fees included fees for employee benefit plan audits and accounting consultation. All audit-related services were pre-approved.
Tax Fees
Ernst & Young LLP’s aggregate fees billed for 20152017 and 20162018 for professional services rendered by them for tax compliance, tax advice, and tax planning were:
2017 - $656,132 | 2018 - $1,202,513 |
Tax fees in 20152017 and 20162018 represented fees primarily for international tax planning and domestic and foreign tax compliance. All tax services were pre-approved.
All Other Fees
Ernst & Young LLP’s aggregate fees billed in 20152017 and 20162018 for products and services provided by them, other than those reported above under “Audit Fees,” “Audit-Related Fees,” and “Tax Fees,” were as follows:
2017 - $0 | 2018 - $0 |
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Audit Committee Pre-Approval Policies and Procedures
The Audit Committee has established a policy regarding pre-approval of all audit and non-audit services expected to be performed by the Company’s independent registered public accounting firm, including the scope of and fees for such services. Requests for audit services, audit-related services, tax services, and permitted non-audit services, each as defined in the policy, must be approved prior to the performance of such services. The policy prohibits the Company’s independent registered public accounting firm from providing certain services described in the policy as prohibited services.
Generally, requests for independent registered public accounting services are submitted to the Audit Committee by the Company’s Director of External Reporting (or other member of the Company’s senior financial management) and the Company’s independent registered public accounting firm for consideration at the Audit Committee’s regularly scheduled meetings. Requests for additional services in the categories mentioned above may be approved at subsequent Audit Committee meetings to the extent that none of such services are performed prior to their approval. The Chairman of the Audit Committee is also delegated the authority to approve independent registered public accounting services requests provided that the pre-approval is reported at the next meeting of the Audit Committee. All requests for independent registered public accounting services must include a description of the services to be provided and the fees for such services.
Auditor Attendance at 2017the 2019 Annual Meeting
Representatives of Ernst & Young LLP will be present at the Annual Meeting of Stockholders and will be available to respond to appropriate questions and to make a statement if they desire to do so.
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This report is submitted by all members of the Audit Committee, for inclusion in this proxy statement, with respect to the matters described in this report.
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the Committee reviewed and discussed with management the audited financial statements contained in the Company’s Annual Report on Form 10-K, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.
The Committee reviewed with the independent registered public accounting firm, who is responsible for expressing an opinion on the conformity of those audited financial statements with U.S. generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Committee by the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), including PCAOB Auditing Standard No. 1301,Communications With Audit Committees, the rules of the Securities and Exchange Commission, and other applicable regulations. The Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Committee concerning independence, and has discussed with the independent registered public accounting firm the independent registered public accounting firm’s independence. The Committee has concluded that the independent registered public accounting firm is, in fact, independent of the Company.
The Committee discussed with the Company’s senior internal auditing executive and independent registered public accounting firm the overall scope and plans for their respective audits. The Committee meets with the senior internal auditing executive and independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls including internal controls over financial reporting, and the overall quality of the Company’s financial reporting. The Committee held four meetings during the fiscal year 2016.
2018.
In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016,2018, for filing with the Securities and Exchange Commission.
Submitted by the Audit Committee of the Company’s Board of Directors:
John J. Holland, Chairman
Thomas P. Capo
Tracey I. Joubert
Gary S. Michel
John H. Shuey
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BENEFICIAL OWNERSHIP OF SHARES
The information in the table below sets forth those persons (including any “group” as that term is used in Section 13(d)(3) of the Exchange Act) known by the Company to be the beneficial owners of more than 5% of the Company’s Common Stock as of February 28, 20172019 (except as noted below).
The table does not include information regarding shares held of record, but not beneficially, by Delaware Charter Guarantee & Trust Company, dba Principal Trust Company, the trustee of the Cooper Tire & Rubber Company Spectrum Investment Savings Plan and other defined contribution plans sponsored by the Company or a subsidiary of the Company. As of December 31, 2016,2018, those plans held 1,379,4911,117,558 shares, or 2.60%2.23% of the Company’s outstanding Common Stock. The trustee, in its fiduciary capacity, has no investment powers and will vote the shares held in the plans in accordance with the instructions provided by the plan participants. If no such instructions are received, the provisions of the plans direct the trustee to vote such participant shares in the same manner in which the trustee was directed to vote the majority of the shares of the other participants who gave directions as to voting.
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | |||
Common Stock | The Vanguard Group(1) | 4,484,679 | 8.51% | |||
Common Stock | BlackRock, Inc.(2) | 3,850,474 | 7.31% | |||
Common Stock | RE Advisers Corporation and National Rural and Electric Cooperative Association(3) | 2,965,302 | 5.63% |
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||||
Common Stock | BlackRock, Inc.(1) | 7,480,493 | 14.93 | % | |||
Common Stock | The Vanguard Group(2) | 5,117,724 | 10.21 | % | |||
Common Stock | Dimensional Fund Advisors LP(3) | 4,248,425 | 8.48 | % | |||
Common Stock | DePrince, Race & Zolli, Inc.(4) | 2,718,552 | 5.42 | % | |||
Common Stock | LSV Asset Management(5) | 2,513,311 | 5.09 | % |
(1) |
BlackRock, Inc. filed a Schedule 13G/A with the SEC on January |
(3) | Dimensional Fund Advisors LP, filed a Schedule 13G with the SEC on February 8, 2019, indicating that as of December 31, 2018, Dimensional Fund Advisors LP, had sole voting power with respect to 4,122,251 shares and sole disposition power with respect to 4,248,425 shares. Dimensional Fund Advisors LP, has indicated that it is an investment adviser. The address of Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, TX 78746. |
(4) | DePrince, Race & Zollo, Inc., filed a Schedule 13G with the SEC on January 25, 2019, indicating that as of December 31, 2018, had sole voting power with respect to 2,172,183 shares and sole disposition power with respect to 2,718,552 shares. DePrince, Race & Zollo, Inc, has indicated that it is an investment adviser. The address of DePrince, Race & Zollo, Inc., is 250 Park Avenue South, Suite 250, Winter Park, FL 32789. |
(5) | LSV Asset Management filed a Schedule 13G with the SEC on February 13, 2019, indicating that as of December 31, 2018, LSV Asset Management had sole voting power with respect to 1,184,227 shares and sole dispositive power with respect to |
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SECURITY OWNERSHIP OF MANAGEMENT
The information that follows is furnished as of February 28, 2017,2019, to indicate beneficial ownership by our executive officers and Directors as a group and each named executive officer and Director, individually, of our Common Stock in accordance with Rule 13d-3 under the Exchange Act, as well as ownership of certain other Company securities and ownership of our Common Stock plus certain other Company securities:
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership of Common Stock | Percent of Class | Ownership of Other Securities | Ownership of Common Stock and Other Securities | Percent of Class | ||||||||
Roy V. Armes | 50,351 shs | (1) | * | 316,969 shs | (3)(4) | 367,320 | shs(1)(3)(4) | * | |||||
Thomas P. Capo | 0 shs | * | 50,598 shs | (2) | 50,598 | shs (2) | * | ||||||
Steven M. Chapman | 2,631 shs | (2) | * | 104,546 shs | (2) | 107,177 | shs (1)(2) | * | |||||
Susan F. Davis | 0 shs | * | 3,820 shs | (2) | 3,820 | shs (1)(2) | * | ||||||
Ginger M. Jones | 13,119 shs | * | 44,938 shs | (3)(4) | 58,057 | shs (3)(5) | * | ||||||
Brenda S. Harmon | 121,088 shs | (1) | * | 33,542 shs | (3)(4) | 154,630 | shs (1)(3)(4) | * | |||||
John J. Holland | 3,946 shs | * | 106,192 shs | (2) | 110,138 | shs (1)(2) | * | ||||||
Bradley E. Hughes | 171,176 shs | (1) | * | 107,260 shs | (3)(4) | 278,436 | shs (1)(3)(4) | * | |||||
Gary S. Michel | 0 shs | * | 3,820 shs | (2) | 3,820 | shs (1)(2) | * | ||||||
John H. Shuey | 0 shs | * | 12,827 shs | (2) | 12,827 | shs (2) | * | ||||||
Robert D. Welding | 1,500 shs | * | 66,275 shs | (2) | 67,775 | shs (2) | * | ||||||
Stephen Zamansky | 36,789 shs | * | 33,182 shs | (3)(4) | 69,971 | shs (3)(4) | * | ||||||
All executive officers and Directors as a group (11 persons) | 350,249 shs | (1) | 66% | 567,000 shs | (2) | 917,249 | shs (1)(2) | 1.74% |
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership of Common Stock | Percent of Class | Ownership of Other Securities | Ownership of Common Stock and Other Securities | Percent of Class | ||||||||||
John J. Bollman | 4,716 shs | * | 20,780 shs | (3)(4) | 25,496 shs | (3)(4) | * | ||||||||
Thomas P. Capo | — shs | * | 60,332 shs | (2) | 60,332 shs | (2) | * | ||||||||
Steven M. Chapman | 2,631 shs | * | 121,838 shs | (2) | 124,469 shs | (2) | * | ||||||||
Susan F. Davis | — shs | * | 12,343 shs | (2) | 12,343 shs | (2) | * | ||||||||
Kathryn P. Dickson | — shs | * | — shs | (2) | — shs | (2) | * | ||||||||
Christopher J. Eperjesy | — shs | * | 24,569 shs | (3)(4) | 24,569 shs | (3)(4) | * | ||||||||
John J. Holland | 4,042 shs | * | 117,365 shs | (2) | 121,306 shs | (2) | * | ||||||||
Bradley E. Hughes | 230,198 shs | (1) | * | 99,198 shs | (3)(4) | 329,396 shs | (3)(4) | * | |||||||
Tracey I. Joubert | — shs | * | 5,169 shs | (2) | 5,169 shs | (2) | * | ||||||||
Gary S. Michel | — shs | * | 12,343 shs | (2) | 12,343 shs | (2) | * | ||||||||
Brian C. Walker | — shs | * | — shs | (2) | — shs | (2) | * | ||||||||
Robert D. Welding | 3,000 shs | * | 76,415 shs | (2) | 77,915 shs | (2) | * | ||||||||
Stephen Zamansky | 58,958 shs | * | 20,050 shs | (3)(4) | 79,008 shs | (3)(4) | * | ||||||||
All executive officers and Directors as a group (13 persons) | 303,545 shs | (1) | 0.61 | % | 570,402 shs | 872,346 shs | (1)(2)(3)(4) | 1.74 | % |
(1) | Includes 59,235 shares obtainable on exercise of stock options by Mr. Hughes within 60 days following February 28, |
(2) | Pursuant to the Amended and Restated 1998 non-employee Directors Compensation Deferral Plan described above under “Director Compensation”, the following Directors have been credited with the following number of phantom stock units as of February 28, |
(3) | Includes the following number of restricted stock units for each of the following executive officers: |
(4) | Includes the number of performance-based stock units that were notionally earned by each of the following executive officers for |
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s Directors, executive officers, and persons who own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in beneficial ownership of Common Stock of the Company. Based solely upon a review of such reports and the representation of such Directors and officers, the Company believes that all reports due for Directors and officers during or for the year 20162018 were timely filed.
STOCKHOLDER PROPOSALS FOR THE ANNUAL MEETING IN 20182020
Any stockholder who intends to present a proposal at the Company’s 2020 Annual Meeting in 2018 and who wishes to have the proposal included in the Company’s proxy statement and form of proxy for that Annual Meeting must deliver the proposal to the Secretary of the Company, at the Company’s principal executive offices, so that it is received no later than November 20, 2017.22, 2019. In addition, if a stockholder intends to present a proposal at the Company’s 20182020 Annual Meeting without the inclusion of that proposal in the Company’s proxy materials and written notice of the proposal is not received by the Company on or between December 20, 201722, 2019 and January 19, 2018,21, 2020, in accordance with the Bylaws, proxies solicited by the Board for the 2018Company’s 2020 Annual Meeting will confer discretionary authority to vote on the proposal if presented at the 2020 Annual Meeting.
The Compensation Committee Report that begins on page 2423 of this proxy statement, disclosure regarding the Company’s Audit Committee and Audit Committee’s financial expert that begins on page 4539 of this proxy statement, and the Audit Committee Report on page 5144 of this proxy statement shall not be deemed to be incorporated by reference by any general statement incorporating this proxy statement by reference into any filing under the Securities Act of 1933, which we refer to as the Securities Act, or under the Exchange Act, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under the Securities Act or under the Exchange Act.
Only one Notice of Internet Availability of Proxy Materials or 20162018 Annual Report and proxy statement is being delivered to multiple stockholders sharing an address unless the Company received contrary instructions from one or more of the stockholders. If a stockholder at a shared address to which a single copy of the Notice of Internet Availability of Proxy Materials or 20162018 Annual Report and proxy statement were delivered wishes to receive a separate copy of the Notice of Internet Availability of Proxy Materials or 20162018 Annual Report or proxy statement, he or she should contact the Company’s Director of Investor Relations Department at 701 Lima Avenue, Findlay, Ohio 45840 or (419) 423-1321. The stockholder will be delivered, without charge, a separate copy of the Notice of Internet Availability of Proxy Materials or 20162018 Annual Report or proxy statement promptly upon request. If stockholders at a shared address currently receiving multiple copies of the Notice of Internet Availability of Proxy Materials or 20162018 Annual Report and proxy statement wish to receive only a single copy of these documents, they should contact the Company’s Director of Investor Relations Department in the manner provided above.
SOLICITATION AND OTHER MATTERS
The Board of Directors is not aware of any other matters that may come before the Annual Meeting. However, if any other matters properly come before the Annual Meeting, it is the intention of the persons named in the accompanying form of proxy to vote the proxy in accordance with their judgment on such matters.
The solicitation of proxies is being made by the Company, and the Company will bear the cost of the solicitation. The Company has retained Georgeson, 199 Water Street, 26th Floor, New York, New York, to aid in the solicitation of proxies, at an anticipated cost to the Company of approximately $7,000 plus expenses. The Company also will reimburse brokers and other persons for their reasonable expenses in forwarding proxy material to the beneficial owners of the Company’s stock. In addition to the solicitation by use of the mails, solicitations may be made by telephone, facsimile, or by personal calls, and it is anticipated that such solicitation will consist primarily of requests to brokerage houses, custodians, nominees, and fiduciaries to forward soliciting material to beneficial owners of shares held of record by such persons. If necessary, officers and other employees of the Company may by telephone, facsimile, or personally, request the return of proxies.
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Please mark, execute, and return the accompanying proxy, or vote by telephone or Internet, in accordance with the instructions set forth on the proxy form, so that your shares may be voted at the Annual Meeting. For information on how to obtain directions to be able to attend the Annual Meeting and vote in person, please contact the Company’s Secretary at 701 Lima Avenue, Findlay, Ohio 45840 or (419) 424-4319.
You may obtain copies of the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, free of charge upon written request to the Company at 701 Lima Avenue, Findlay, Ohio 45840, Attention: Secretary or call (419) 424-4319.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON MAY 5, 20173, 2019
This proxy statement, along with our Annual Report on Form 10-K for the fiscal year ended December 31, 20162018 and our 20162018 Annual Report, are available free of charge at http://www.proxyvote.com.
BY ORDER OF THE BOARD OF
DIRECTORS
Stephen Zamansky
Senior Vice President,
General Counsel and& Secretary
March 20, 2017
21, 2019
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