UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Definitive Proxy Statement |
Definitive Additional Materials |
Soliciting Material under §240.14a-12 |
United Technologies Corporation
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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PROXY STATEMENT Notice of the 2015 Annual Meeting |
OUR COMMITMENTS THEY FOCUS OUR |
Performance Our customers have a choice, and how we perform determines whether they choose us. We aim high, set ambitious goals and deliver results, and we use customer feedback to recalibrate when necessary. We move quickly and make timely, well-reasoned decisions because our future depends on them. We invest authority where it needs to be, in the hands of the people closest to the customer and the work.
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Opportunity
Our employees’ ideas and inspiration create opportunities constantly, and without limits. We improve continuously everything we do as a company and as individuals. We support and pursue lifelong learning to expand our knowledge and capabilities and to engage with the world outside UTC. Confidence spurs us to take prudent risks, to experiment, to cooperate with each other and, always, to learn from the consequences of our actions.
Innovation We are a company of ideas that are nurtured by a commitment to research and development. The achievements of our founders inspire us to reach always for the next innovative and powerful and marketable idea. We seek and share ideas openly and encourage diversity of experience and opinion. |
Responsibility Successful businesses improve the human condition. We maintain the highest ethical, environmental and safety standards everywhere and we encourage and celebrate our employees’ active roles in their communities. |
Results We are a preferred investment because we meet aggressive targets whatever the economic environment. We communicate honestly and forthrightly to investors, and deliver consistently what we promise. We are a company of realists and optimists and we project these values in everything we do. |
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February 24, 2012
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
Dear Fellow Shareowner:
You are cordially invited to attend UTC’s 2012Notice of Annual Meeting of Shareowners. The meeting will be held on Shareowners
March 13, 2015
Meeting Information
TIME AND DATE:
April 11, 2012 in the Riviera Theatre located at 225 King Street, in Charleston, South Carolina. The doors will27, 2015
2:00 p.m. Eastern Daylight Time (doors open at 1:30 p.m. and)
LOCATION:
PGA National Resort, the meeting will begin at 2:00 p.m., Eastern Daylight Time. The meeting will addressBritish Open Ballroom
400 Avenue of the following matters:Champions
Palm Beach Gardens, Florida 33418
Agenda
1. | Election of |
2. | Appointment of |
3. | An advisory vote to approve the compensation of |
4. | Other business, if properly raised. |
Shareowners of record
Who may vote:
If you owned shares of UTC Common Stock (“Common Stock”) at the close of business on February 15, 2012, the record date for the meeting, and their representatives authorized by proxy will beMarch 2, 2015, you are entitled to attend and vote at the meeting.
meeting either in person or by proxy. YOUR VOTE IS VERY IMPORTANT. PLEASE SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AS SOON AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. Most shareowners have
How to attend:
Please request a choiceticket in advance by following the instructions on page 65. For security reasons,please be prepared to show photo identification. If you need special assistance because of voting overa disability, please contact our Corporate Secretary’s Office by calling: 860-728-7870, sending an email to: corpsec@corphq.utc.com, or writing to: Corporate Secretary, UTC, One Financial Plaza, Hartford, CT 06103.
Election to receive electronic delivery of future annual meeting materials:
You can expedite delivery, avoid costly mailings and help us conserve natural resources by confirming in advance your preference for electronic delivery. For further information on how to take advantage of this cost-saving service, please see pages 68 and 69. You can always receive a printed copy on request.
By order of the Internet, by telephone or by using a traditional proxy card. Board of Directors.
Peter J. Graber-Lipperman
Vice President, Secretary & Associate General Counsel
Review Your Proxy Statement and Vote in One of Four Ways
![]() | VIA THE INTERNET Visit the website listed on your proxy card | ![]() | BY MAIL Sign, date and return your proxy card in the enclosed envelope |
![]() | BY TELEPHONE Call the telephone number listed | ![]() | BY MOBILE DEVICE Scan the QR code included with your proxy materials |
Please refer to the enclosed proxy materials or the information forwarded by your bank, broker or other holder of record to see which voting methods are available to you.
![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners | i |
This year we will again seek to conserve natural resources and reduce annual meeting costs by electronically disseminating annual meeting materials as permitted under rules ofsummary highlights selected information in this Proxy Statement. Please review the Securities and Exchange Commission. Many shareowners will receive a Notice of Internet Availability of Proxy Materials containing instructions on how to access annual meeting materials via the Internet. Shareowners can also request mailed paper copies if preferred.
Since seating is limited, please request a ticket in advance in order to attend. Please refer to page 4 of the accompanyingentire Proxy Statement and UTC’s Annual Report for further information concerning tickets.2014 before voting your shares.
Annual Meeting Agenda
Proposal | Page Numbers | Required Vote | Board Recommendation |
| 1–8 | Votes FOR a nominee must exceed votes AGAINST that nominee. | FOR each director nominee |
Proposal 2:Appointment of PricewaterhouseCoopers LLP as Independent Auditor for 2015 | 61–62 | Approval by a majority of the votes making up the quorum. | FOR |
Proposal 3:Advisory, non-binding approval of Named Executive Officer Compensation | 63–64 | Votes FOR the proposal must exceed votes AGAINST it. | FOR |
Financial Performance
2014 was a year of strong financial performance for UTC, with a 4% increase in net sales, all of which was attributable to organic growth. In addition, we achieved a 10% increase in diluted earnings per share and a 7% increase in dividends paid to our shareowners. These accomplishments were all the more impressive considering our heavy investment in production development and the number of new products launched during the year.
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PROXY STATEMENT SUMMARY
Strategic Performance
In 2014, Pratt & Whitney and UTC Aerospace Systems (“UTAS”) had a number of strategic accomplishments, with over 50 new engine and system programs underway and an unprecedented ramp-up for the production of Pratt & Whitney’s revolutionary PurePower®Geared TurbofanTM(“GTF”) engine. Our integrated “go-to-market” strategy has positioned us to win multiple systems on many aircraft platforms, including the Embraer E2 and the recently unveiled Gulfstream G500 and G600 aircraft. The first flight of Airbus’ A320neo, which is powered by the GTF engine, has marked a new chapter in UTC’s history that is expected to bring Pratt & Whitney back to production levels last seen in the 1980s.
This year also brought significant strategic wins at Sikorsky Aircraft. These include, most notably, the U.S. Presidential Helicopter Program, the U.S. Air Force Combat Rescue Helicopter, and the selection of the Sikorsky-Boeing team to develop a helicopter for the U.S. Army’s Joint Multi-Role Technology Demonstrator program, paving the way for the next generation of vertical lift aircraft based on Sikorsky’s X2TMtechnology.
On the commercial side, UTC Building & Industrial Systems (“BIS”) celebrated its one-year anniversary as an organization centrally focused on delivering premium, integrated building solutions for an increasingly urban world. With the creation of BIS, we can now achieve more effective product and sales coordination, deliver greater synergies and serve our customers more efficiently. BIS’ expansive portfolio of high-technology building solutions positions UTC to win more projects and to capture additional market share well into the future. These efforts have already proven successful, resulting in contract wins at the Midfield Terminal Complex of the Abu Dhabi International Airport, where Otis will provide 335 units and Carrier will supply 16 expanded-capacity chillers.
COMPANY AWARDS IN 2014
Most Admired Aerospace & Defense Companies
Fortune Magazine
Most Respected CompaniesBarron’s 500
World’s Greenest CompaniesNewsweek Magazine
One of the best 2014 proxy disclosures
Corporate Secretary Magazine
America’s Top Corporations for
Women’s Business Enterprises
Women’s Business Enterprise National Council
Top Organizations for Multicultural
Business OpportunitiesDiversityBusiness.com
Finalist for exemplary Compensation Discussion & Analysis (CD&A) in a proxy disclosure
New York Stock Exchange’s Corporate Board Member Magazine
R&D 100 Award for the development of two breakthrough eco-friendly technologies
(EcoTuff®corrosion inhibitor and a portable aluminum deposition system)R&D Magazine
Best Chief Financial Officer in the Capital Goods/Industrials—Aerospace & Defense Sector as voted by both buy-side and sell-side analysts
Institutional Investor Magazine
One of the best places to work for lesbian, gay, bisexual and transgender employees
Human Rights Campaign’s 2015 Corporate Equality
Top Corporate PartnerINROADS
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PROXY STATEMENT SUMMARY
Executive Compensation Overview
Our executive compensation program has four primary components: base salary, annual bonus, performance share units (“PSUs”) and stock appreciation rights (“SARs”). Each of these compensation elements serves a specific purpose in our compensation strategy. Base salary is an essential component to any market-competitive compensation program. Annual bonus motivates the achievement of short-term company and business unit goals. The Committee on Compensation & Executive Development (the “Committee”) views long-term compensation (i.e., PSUs and SARs) as the foundation of our program, which is why these elements make up the greatest portion of our senior management’s compensation. Long-term compensation opportunities drive our executives to focus on strategies that promote sustainable growth.
The following chart reflects the compensation decisions made by the Committee in 2014 for the three Named Executive Officers (“NEOs”) listed in the Summary Compensation Table who continue to serve as executive officers of the Company as of the date of this Proxy Statement.
TOTAL DIRECT COMPENSATION(1)(2)
(1) | With respect to the other NEOs, Mr. Chênevert resigned as Chairman & Chief Executive Officer on November 23, 2014 and retired as an employee of the Company on January 3, 2015, Mr. Longo's role as Acting Chief Financial Officer ended on December 31, 2014, and Mr. Bellemare left UTC effective January 31, 2015. |
(2) | Total direct compensation, as discussed in detail on page 40, reflects compensation decisions made by the Committee based on its evaluation of each NEO’s performance during 2014. It includes: 2014 base salary adjustments, 2014 annual bonus and the long-term incentive grant made on January 2, 2015. It does not include other compensation shown in the Summary Compensation Table, which is not based on 2014 performance. |
PLEASE CONFIRM YOUR PREFERENCE FOR ELECTRONIC DELIVERY OF FUTURE ANNUAL MEETING MATERIALS.You can expedite delivery and avoid costly mailings by confirming in advance your preference for electronic delivery. For further information on how to take advantage of this cost-saving service, please see page 52 of the enclosed Proxy Statement.
2014 PROGRAM CHANGES
TABLE OF CONTENTSThe Committee made the following changes to UTC’s executive compensation program during or applicable to 2014:
• | For the portion of PSUs that vest contingent upon UTC’s total shareowner return (“TSR”) relative to the S&P 500, we now cap payouts at 100% of target if UTC generates a negative TSR over the applicable three-year performance period, even if relative TSR exceeds the target. This change became effective beginning with the PSUs granted on January 2, 2015. |
• | To better align with market practice, our TSR threshold payout level for PSUs has been adjusted from 0% to 50%, effective beginning with PSUs granted on January 2, 2014. |
• | UTC’s clawback policy has been updated to clarify that an executive’s negligence (including the negligent supervision of a subordinate) can be a basis for a clawback of compensation. |
• | All Executive Leadership Group (“ELG”) members are no longer eligible for a 5% of base salary perquisite allowance. |
• | To provide a more relevant peer comparison, Intel Corporation was removed from our Compensation Peer Group (“CPG”), while Chevron Corporation, Danaher Corporation and Eaton Corporation were added. |
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PROXY STATEMENT SUMMARY
Director Experience
The Board of Directors and its Committee on Nominations and Governance believe that diversity in experience and perspective are of the utmost importance for achieving sound decisions that drive shareowner value. The Board also believes that varying periods of tenure among our directors provide a constructive blend of institutional knowledge with a fresh external viewpoint. The following charts reflect the broad experience and tenure of our Board of Directors:
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PROXY STATEMENT SUMMARY
Board Nominees
You are being asked to cast votes for eleven directors. Directors are elected annually by majority voting.
All nominees meet the New York Stock Exchange (“NYSE”) governance standards for director independence, except for Mr. Hayes, who is not independent due to his position as an executive officer.
Director | Committee | Other Public | ||
Nominee | Age | Since | Membership | Company Boards |
JOHN V. FARACI | 65 | 2005 | A – Member | 2 |
Retired Chairman & Chief Executive Officer, International Paper | N&G – Member | |||
F – Chair | ||||
JEAN-PIERRE GARNIER | 67 | 1997 | N&G – Member | 2 |
Chairman, Actelion Ltd. | C&ED – Chair | |||
PIR – Member | ||||
GREGORY J. HAYES | 54 | 2014 | F – Member | 1 |
United Technologies Corp., President and Chief Executive Officer | ||||
EDWARD A. KANGAS | 70 | 2008 | A – Chair | 4 |
Former Chairman & Chief Executive Officer, Deloitte, Touche, Tohmatsu | N&G – Member | |||
C&ED – Member | ||||
ELLEN J. KULLMAN | 59 | 2011 | A – Member | 1 |
Chair & Chief Executive Officer, DuPont | F – Member | |||
PIR – Member | ||||
MARSHALL O. LARSEN | 66 | 2012 | F – Member | 3 |
Former Chairman, President & Chief Executive Officer, Goodrich Corp. | PIR – Member | |||
HAROLD McGRAW III | 66 | 2003 | N&G – Member | 2 |
Chairman, McGraw Hill Financial, Inc. | C&ED – Member | |||
F – Member | ||||
RICHARD B. MYERS | 73 | 2006 | A – Member | 3 |
Ret. General, U.S. Air Force, Former Chairman, U.S. Joint Chiefs of Staff | N&G – Member | |||
C&ED – Member | ||||
H. PATRICK SWYGERT | 71 | 2001 | A – Member | 1 |
President Emeritus, Howard University | N&G – Chair | |||
C&ED – Member | ||||
ANDRÉ VILLENEUVE | 70 | 1997 | A – Member | 0 |
Chairman, ICE Benchmark Administration Ltd. | F – Member | |||
PIR – Member | ||||
CHRISTINE TODD WHITMAN | 68 | 2003 | N&G – Member | 1 |
President, Whitman Strategy Group | F – Member | |||
PIR – Chair |
AAudit N&GNominations & Governance C&EDCompensation & Executive Development FFinance PIRPublic Issues Review
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PROXY STATEMENT SUMMARY
Governance Highlights
As part of UTC’s commitment to high ethical standards, our Board follows sound governance practices.These practices are described in more detail in our Corporate Governance Guidelines, which can be found in the Corporate Governance section of our website.
Independence | • | 10 out of our 11 nominees are independent. |
• | Our CEO is the only management director. | |
• | All of the Board Committees that meet regularly, other than the Finance Committee, are composed exclusively ofindependent directors. | |
Independent Chairman of | • | In November 2014, the Board of Directors elected Edward A. Kangas to serve as non-executive Chairman of the Board. |
the Board | • | Mr. Kangas is independent under NYSE standards. |
• | The Chairman serves as liaison between management and the other non-management directors, presides at meetings ofthe Board and has authority to call meetings of the Board. | |
Executive Sessions | • | The independent directors regularly meet in private without management. |
• | The Chairman presides at these executive sessions. | |
Board Oversight of | • | The Board monitors UTC’s systematic approach to identifying and assessing risks faced by UTC and our business units. |
Risk Management | • | The Audit Committee reviews our overall enterprise risk management policies and practices, financial risk exposures andthe delegation of risk oversight responsibilities to other Board Committees. |
Stock Ownership | • | Non-management directors must hold at least $520,000 of Common Stock (or Common Stock equivalents) within five years of joining |
Requirements | the Board. | |
• | Our CEO must, within five years of attaining that position, hold Common Stock (or Common Stock equivalents) valued atsix times base salary. | |
• | Members of our Executive Leadership Group must, within five years of appointment to the group, hold Common Stock (orCommon Stock equivalents) valued at three times base salary. | |
Incentive Plans | • | The goal setting processes for the annual and long-term incentive plans are annually reviewed by the Committee on Compensation & |
Executive Development to ensure that appropriate, rigorous, yet attainable targets are set. | ||
• | Repricing or cash buyouts of underwater options are strictly forbidden under the UTC Long-Term Incentive Plan. | |
• | We do not allow pledging or hedging of UTC shares by our executives or our non-employee directors for any purpose. | |
We have a robust clawback policy, which allows us to recoup compensation in the case of misconduct or negligencecausing significant harm to the Corporation. We have adopted enhancements to this policy multiple times over the years. | ||
Board Practices | • | The Board and each of its committees conduct annual self-evaluations by completing a detailed questionnaire to assesswhether each group is functioning effectively, to receive input on the performance of the Board and each committee andto consider areas in which directors believe performance could improve. |
• | The director candidate criteria are adjusted as needed to ensure that our Board as a whole continues to reflect theappropriate mix of skills and experience. | |
• | Directors may not stand for election after age 72, absent special circumstances approved by the Board. | |
Accountability | • | All directors stand for election annually. |
• | In uncontested elections, directors must be elected by a majority of votes cast. |
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Table of Contents
UNITED TECHNOLOGIES CORPORATION
PROXY STATEMENT
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the Annual Meeting, please submit your proxy or voting instructions as soon as possible so that your shares can be voted at the meeting in accordance with your instructions.
The Board of Directors is soliciting proxies for the 2012 Annual Meeting of Shareowners of United Technologies Corporation (“UTC”, the “Company” or the “Corporation”) to be held on April 11, 2012. This Proxy Statement is being made available to shareowners beginning on or about February 24, 2012.
Important Notice Regarding the Availability of Proxy Materials for the Shareowner Meeting to be held on April 11, 2012.27, 2015. UTC’s 2012 Proxy Statement for the 2015 Annual Meeting, and our Annual Report to Shareowners for 20112014 are both available free of charge at:www.proxyvote.com. References in this Proxy Statement and accompanying materials to Internet websites are for the convenience of readers. Information available at www.proxyvote.com.or through these websites is not incorporated by reference in this Proxy Statement.
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GENERAL INFORMATION REGARDING THE ANNUAL MEETINGProposal 1: Election of Directors
How doesProxy Statement.The Board of Directors of United Technologies Corporation (“UTC”, the “Company” or the “Corporation”) is soliciting proxies to be voted at our 2015 Annual Meeting of Shareowners on April 27, 2015 and at any postponed or reconvened meeting. We expect that this Proxy Statement will be mailed and made available to shareowners beginning on or about March 13, 2015. The meeting will address the three matters listed in the Notice of Meeting, the first of which is the election of directors.
We are seeking your support for the election of the eleven candidates that the Board has nominated to serve on the Board of Directors recommend that I vote onDirectors. We believe these nominees have qualifications consistent with our position as a large, diversified industrial corporation with operations throughout the mattersworld. We also believe these nominees have the experience and perspective to be considered atguide the meeting?The following proposals will be considered atCompany as we innovate and develop new products, compete in a broad range of markets around the meeting:world, and adjust to rapidly changing technologies, business cycles and competition.
Board Membership Criteria and Nomination Process
YOUR VOTE IS VERY IMPORTANT! Please vote your shares in advance of the meeting, using one of the voting methods described below.
WhoThe Board and its Committee on Nominations and Governance believe that it is entitled to vote?You are entitled to vote the shares of UTC Common Stock (“Common Stock”)important that you owned at the close of business on February 15, 2012, which is referred to as the “record date.” Most UTC shareowners hold their shares through a broker, bank, trustee or another nominee, rather than directly in their own name, and as such are referred toour directors, as a “beneficial owner” of shares held in street name.Beneficial owners are entitled to direct their intermediary on how to vote the shares credited to their account. If you are abeneficial owner of Common Stock, your intermediary will either forward to you printed copies of the Proxy Statement and the Annual Report or will provide you with instructions on how you can access the proxy materials electronically, in either case along with instructions for directing the intermediary on how to vote your shares as described below in the response to the question “How can I vote my shares?”.
Alternatively, if your shares are registered directly in your name with UTC’s stock registrar and transfer agent, Computershare Trust Company, N.A. (“Computershare”), you are considered theregistered shareowner for those shares. As theregistered shareowner, yougroup, have the right to vote those shares as described below in the response to the question “How can I vote my shares?” A list ofregistered shareowners entitled to vote at the meeting will be available at UTC’s offices, One Financial Plaza, Hartford, CT, during the ten-day period prior to the meeting, and at the meeting location during the meeting.
How can I vote my shares? Most shareowners, whether they are beneficial or registered shareowners may vote via the Internet, by telephone, by mail or by attending the Annual Meeting and voting by ballot.following attributes:
• | Senior business or government leadership experience | ||
• | Public company board experience | ||
• | International business or government experience | ||
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• | An objective, independent and informed approach to complex and sensitive business decisions | ||
• | Extensive knowledge, experience and judgment | ||
• | An appreciation of the | ||
• | Diversity of | ||
• | Loyalty to the | ||
• | The highest integrity and | ||
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SUBJECT MATTER | • | Global / international expertise | |
EXPERTISE | • | Industry / technical expertise | |
• | Financial and accounting expertise | ||
• | Government or | ||
• | Regulatory compliance expertise | ||
• | Risk management expertise | ||
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In order to authenticate your vote, the InternetIndividuals on our Board also possess other particular skills and telephone voting facilities require the entry of your confidential voter control number shown on the voting materials you received. If you vote via the Internet or by telephone, you do not need to return a proxy card or voting instruction card.Internet and telephone voting facilities will be available 24 hours a day until 11:59 p.m., Eastern Daylight Time, on April 10, 2012 (exceptqualifications. These include experience in the casefinancial services industry, the military, government and academia, expertise in sustainability and environmental issues, and knowledge of participants in the UTC Employee Savings Plan, who must submit voting instructions by 11:00 a.m. Eastern Daylight Time on April 9, 2012, as described below).
How can I vote my shares held in the UTC Employee Savings Plan? You can direct the voting of your proportionate interest in shares of Common Stock held by the ESOP Fundsystems and the Common Stock Fund under the UTC Employee Savings Plan by returning a voting instruction card or by providing voting instructions via the Internet or by telephone. If you do not provide voting instructions (or if your instructions are incomplete or unclear) as to one or more of the matters to be voted on, the trustee will vote your proportionate interest in shares held by the ESOP Fund for the voting choice that receives the greatest number of votes based on voting instructions received from ESOP Fund participants. The trustee also will vote your uninstructed proportionate interest in shares held by the Common Stock Fund for the voting choice that receives the greatest number of votes based on voting instructions received from Common Stock Fund participants. The trustee will vote all shares of Common Stock held in the ESOP Fund not allocated to participant accounts for the voting choice that receives the greatest number of votes from ESOP Fund participants who submit voting instructions with respect to their allocated shares.
IMPORTANT NOTICE TO PARTICIPANTS IN THE UTC EMPLOYEE SAVINGS PLAN: Broadridge Financial Solutions (“Broadridge”), the independent tabulator of votes, must receive your voting instructions by 11:00 a.m., Eastern Daylight Time, on April 9, 2012 in order to tabulate the voting instructions of Savings Plan participants and communicate those instructions to the Savings Plan trustee, who will vote your shares.Because the Savings Plan trustee will vote shares held in the Savings Plan as described above, Savings Plan participants will not be able to vote at the meeting their shares held in the Savings Plan.
Who will count the vote? Will votes be confidential? Representatives of Broadridge will receive and tabulate proxies, act as the independent Inspectors of Election, supervise the voting, decide the validity of proxies and certify their count of all votes and ballots. Broadridge has been instructed that the vote of each shareowner must be kept confidential and may not be disclosed (except in the event of legal proceedings or, in the event of a contested proxy solicitation, to permit the solicitation of the votes of undecided shareowners).
Why did I receive in the mail a one-page Notice of Internet Availability of Proxy Materials rather than a full set of proxy materials? Securities and Exchange Commission (“SEC”) rules allow companies to provide shareowners with access to proxy materials over the Internet rather than mailing the materials to shareowners. To conserve natural resources and reduce costs, we are sending to many of our shareowners a Notice of Internet Availability of Proxy Materials. The Notice provides instructions for accessing the proxy materials on the website referred to in the Notice or for requesting printed copies of the proxy materials. The Notice also provides instructions for requesting the delivery of the proxy materials for future Annual Meetings in printed form by mail or electronically by email.
How will the proxy holders vote my shares? Your shares will be voted in accordance with your instructions, whether those instructions are given via the Internet, by telephone or by mail. If you are a registered shareowner and sign and return a proxy card or vote via the Internet or by telephone but do not indicate how your shares are to be voted on one or more of the matters listed, the proxy holders will be authorized to vote your uninstructed shares:technology.
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PROPOSAL 1Election of Directors
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If you hold your shares throughOur Board believes it is critical to our success to have directors who represent the interests of shareowners by bringing a brokerdiversity of perspectives to Board deliberations and Company oversight. The Committee on Nominations and Governance regularly reviews with the Board the qualifications that are most important in selecting candidates to serve as directors, taking into account UTC’s diverse operations and the mix of capabilities and experience represented on the Board. As part of its annual evaluation of its effectiveness as a group, the Board considers whether its composition as a whole reflects a mix of skills and perspectives that is appropriate to meet the Company’s needs. Based on these considerations, the Board makes adjustments in the priorities given to different qualifications when identifying candidates.
Diversity
While we do not provide your broker with voting instructions, under the ruleshave a specific policy on diversity of the New York Stock ExchangeBoard, our Corporate Governance Guidelines (“NYSE”Governance Guidelines”), your broker, with only limited exceptions, will not be permitted provide that candidates for the Board should have the ability to vote your shares. Ascontribute to maintaining a diversity of perspectives in Board deliberations, in addition to being objective, independent and informed. The Board believes this diversity is critical to our success. The Committee on Nominations and Governance seeks accomplished and highly qualified candidates who have broad experience and perspective to oversee the matters to be voted on at the meeting:global operations of a large and diversified industrial public company. We believe our Board reflects a broad diversity of professional backgrounds, skills and experiences.
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• | Two director nominees serve on the board of a non-U.S. public company |
| Two director nominees are women |
• | One director nominee is African American |
To the extent that a broker does not receive voting instructions, we anticipate that the broker may submit a proxy card that votes uninstructed shares “FOR” or “AGAINST” the appointment of the Independent Auditor, but indicates that the broker is not voting on each of the other matters submitted for a vote of shareowners at the meeting. The broker’s withholding of a vote in these circumstances is referred to as a “broker non-vote”. The impact of broker non-votes in connection with the matters being submitted to a vote of shareowners at the meeting is discussed below in response to the question“How many votes are needed for the adoption of other matters submitted to a shareowner vote at the meeting?”.
UTC’s Restated Certificate of Incorporation and Bylaws give shareowners the right to cumulate their votes in the election of directors. When voting for the election of directors, each shareowner is entitled to a number of votes equal to the number of shares of Common Stock owned multiplied by the number of directors to be elected. This number of votes may be cast for a single nominee or distributed as votes in favor of two or more nominees, in the discretion of the shareowner.
Because the telephone and Internet voting facilities do not accommodate cumulative voting, registered shareowners wishing to exercise cumulative voting rights must submit a proxy card by mail or, if voting in person at the Annual Meeting, a ballot, that specifies the shareowner’s allocation of votes among the nominees. Beneficial shareowners must contact the broker, bank, trustee or other nominee through which they own shares in order to obtain directions on how to exercise cumulative voting rights using their voting instruction card or to request a legal proxy in order to vote their shares directly.
The Board of Directors is soliciting discretionary authority to cumulate votes with respect toCommittee considers candidates who are suggested by directors, management and shareowners and who meet the election ofqualifications UTC seeks in its directors. Accordingly, the granting ofA shareowner may recommend a proxydirector candidate by return ofsubmitting a signed proxy card or the submission of voting instructions in writing without providing instructions with respect to cumulative voting or by telephone or via the Internet will confer on the designated proxy holders discretionary authority to exercise cumulative voting. In exercising cumulative voting, the proxy holders will be authorized to apply the shareowner’s votes in favor of the election of some or all of the nominees in the manner as the Board of Directors shall recommend or otherwise in the discretion of the proxy holders, except that none of the shareowner’s votes will be cast for any nominee as to whom the shareowner has given instructions to vote against or abstain from voting. If a shareowner does not wish to grant the proxy holders authority to cumulate the shareowner’s votes in the election of directors, the shareowner must explicitly state such objection on the shareowner’s proxy card or voting instruction card, as applicable.
Who can attend the Annual Meeting and how can I request tickets? If you were a registered shareowner or beneficial shareowner of Common Stock at the close of business on February 15, 2012, you or your authorized proxy may attend the Annual Meeting. Since seating is limited, we ask that shareowners request tickets in advance to attend. If your shares are registered in your name on the records of Computershare, or if you are a beneficial owner of shares through a UTC employee savings plan, you can request tickets by sending an email request to the Corporate Secretary at corpsec@corphq.utc.com or by writingletter addressed to the Corporate Secretary. If you hold shares through a broker, bank, trustee or other intermediary, youThe Company may request a ticket by writingalso engage search firms from time to the Corporate Secretarytime to assist in identifying and including a copy of an account statement or a legal proxy from the intermediary, in either case showing your ownership of shares as of February 15, 2012. If you forget to bring a ticket, you will be admitted to the meeting only if seats remain available and you provide proof of identification and satisfactory evidence that you were a registered shareowner or beneficial shareowner of Common Stock as of February 15, 2012. All persons seeking admittance to the meeting will be required to provide proof of identification.
PROPOSAL 1: ELECTION OF DIRECTORSevaluating qualified candidates.
General Information Concerning the Board of Directors.UTC’sNominees
Our entire Board is elected annually by theour shareowners. The Board, upon the recommendation of the Committee on Nominations and Governance, has nominated for election as directors at the Annual Meeting the twelve nomineeseleven individuals listed below,in this Proxy Statement, each of whom is a current director. The Board has determinedbelieves that each ofnominee brings to the nominees listed bringsBoard a range of strong skills and extensive experience, to theas highlighted in each nominee’s biographical information on pages 3 through 8. The Board givingbelieves that the nominees as a group possess the appropriate skills to exercise the Board’s oversight responsibilities.
Current director Charles R. Lee is not standing for re-election and will retire from the Board on April 11, 2012 in accordance with
UTC’s Corporate Governance Guidelines which require that directors to retire from the Board as of the annual meeting followingafter they reach age 72, absent special circumstances approved by the attainmentBoard. In nominating the eleven candidates to stand for election at the 2015 Annual Meeting, the Board exercised this discretion with respect to General Richard B. Myers and H. Patrick Swygert. Due to General Myers’ extensive senior leadership experience involving military, global security and geopolitical issues relevant to UTC’s businesses, the Board determined that it is in the interest of the Company to waive the normal retirement policy to allow General Myers to stand for election in 2015. Mr. Swygert will have reached age 72. The Directors extend their
sincere appreciation to72 by the date of the Annual Meeting. In view of Mr. Lee for his dedicated serviceSwygert’s role as Chairman of the Committee on Nominations and Governance and as a member of UTC’stwo additional key Board of Directors and as Chairman ofcommittees, the Board’s Finance Committee.Board also believes it is beneficial to waive the normal retirement policy to allow Mr. Swygert to stand for election in 2015.
If any of the Board’s nominees become unavailable prior to the Annual Meeting to serve as a director, the Board may select a replacement nominee or reduce the number of directors to be elected. The proxy holders will vote the shares for which they serve as proxy for any replacement candidate nominated by the Board.
2 | ![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners |
Nominees. PROPOSAL 1Election of Directors
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREOWNERS VOTEFOR EACH OF THE FOLLOWING NOMINEES:
JOHN V. FARACI | |||||
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Retired Chairman & Age:65 Committees: Audit | MR. FARACI served as Chairman & Chief Executive Officer of International Paper (paper, packaging and distribution) from 2003 to 2014. Earlier in 2003, he was elected President and a director of International Paper, and previously served as Executive Vice President and Chief Financial Officer from 2000 to 2003. From 1995 to 1999, he was Chief Executive Officer and managing director of Carter Holt Harvey Ltd., a | former majority-owned subsidiary of International Paper, located in New Zealand. Mr. Faraci joined International Paper in 1974. He serves on the Boards of Directors of PPG Industries, Inc. and ConocoPhillips. Mr. Faraci also serves on the Boards of Directors of the National Fish and Wildlife Foundation and Denison University. He is a Trustee of the American Enterprise Institute and a member of the Council on Foreign Relations. | |||
Skills and Expertise | |||||
![]() | CEO EXPERIENCE | ||||
Retired CEO. Served as International Paper’s Chairman & CEO from 2003 through 2014. | |||||
![]() | BROAD INTERNATIONAL EXPOSURE | ||||
Extensive leadership experience at a large international corporation with worldwide operations. Experience overseeing extensive strategic changes in International Paper’s business portfolio. Commitment to responsible stewardship of natural resources and sustainability reporting. | |||||
![]() | HIGH LEVEL OF FINANCIAL EXPERTISE | ||||
Audit committee financial expert, based on oversight of CFO and prior experience as CFO. | |||||
JEAN-PIERRE GARNIER | |||||
![]() | |||||
![]() Chairman, Age:67 Director since1997 Committees: Compensation & Executive | DR. GARNIERis Chairman of Actelion Ltd. (biopharmaceuticals) and an Operating Partner at Advent International (global private equity). He previously served as Chief Executive Officer of Pierre Fabre SA from 2008 to 2010 and as Chief Executive Officer and Executive Member of the Board of Directors of GlaxoSmithKline plc from 2000 to 2008. Dr. Garnier served as Chief Executive Officer of SmithKline Beecham plc in 2000 and as Chief Operating Officer and Executive Member of the Board of Directors of SmithKline Beecham plc from 1996 to 2000. Dr. Garnier also | is a director of Renault S.A. In 2009, he was made a Knight Commander of the British Empire. In 2007, he was promoted from Chevalier to Officier de la Légion d’Honneur of France. In 2006, he was named to the global list of top 20 CEOs by the Best Practice Institute. Dr. Garnier was previously Chairman of NormOxys, Inc. from 2010 to 2011, and a board member of the Stanford Advisory Council on Interdisciplinary Biosciences, Weill Cornell Medical College and the Dubai International Capital Advisory Board. He is a member of the Advisory Board of the Newman’s Own Foundation. | |||
Skills and Expertise | |||||
![]() | BROAD INTERNATIONAL EXPOSURE | ||||
Extensive knowledge of international markets and operations acquired through service as a CEO and as a director of several large public companies, and also as chairman of several developing companies in Europe and the U.S. | |||||
![]() | CEO EXPERIENCE | ||||
Served as CEO for two large public companies. Experience overseeing the integration of large public companies post-merger. | |||||
![]() | HIGH LEVEL OF FINANCIAL LITERACY | ||||
Audit committee financial expert, based on oversight of CFO. Extensive expertise in executive compensation practices in U.S. and Europe. | |||||
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PROPOSAL 1Election of Directors
GREGORY J. HAYES | |||||
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![]() President and Chief Age:54 Committees: Executive | MR. HAYES was elected President and Chief Executive Officer of United Technologies Corporation on November 23, 2014. He previously served as Senior Vice President & Chief Financial Officer of UTC from September 2008 through November 2014, as Vice President, Accounting and Finance from 2006 to 2008, as Vice President, Accounting and Controls from 2004 to 2006, as Vice President and Controller from 2003 to 2004, and as Vice President, Financial Planning & Analysis for the Hamilton Sundstrand segment of | UTC from 1999 to 2003. Mr. Hayes joined UTC in 1999 through the merger with Sundstrand Corporation, where he had been employed since 1989. He is a Certified Public Accountant. Mr. Hayes has been a member of the Board of Directors of Nucor Corporation since 2014, where he serves on the Audit Committee, the Compensation and Executive Development Committee and the Governance and Nominating Committee. Mr. Hayes is a member of the Board of Directors of the New England Air Museum. | |||
Skills and Expertise | |||||
![]() | HIGH LEVEL OF FINANCIAL EXPERTISE | ||||
Substantial financial and accounting oversight experience gained as CFO and in other senior financial positions with UTC and through service on the Audit Committee of the Board of Directors of Nucor Corporation. | |||||
![]() | CEO EXPERIENCE | ||||
Has served as UTC’s President and CEO since November 2014. | |||||
![]() | EXTENSIVE KNOWLEDGE OF COMPANY’S BUSINESS | ||||
Through six years of experience as CFO of UTC and previous senior financial leadership positions, has gained deep understanding of UTC’s operations, complex financial transactions and the operational and financial impact of numerous acquisitions, divestitures and restructuring actions, as well as the integration of major operations. | |||||
4 | ![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners |
PROPOSAL 1Election of Directors
EDWARD A. KANGAS | |||||
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![]() Former Chairman & Age:70 Committees: Audit | MR. KANGASwas elected non-executive Chairman of the Board of Directors of United Technologies Corporation on November 23, 2014. He previously served as Chairman and Chief Executive Officer of Deloitte, Touche, Tohmatsu (audit and tax services) from 1989 to 2000. He has served as non-executive Chairman of the Board at Tenet Healthcare Corporation since July 2003, and | is a Board member of Hovnanian Enterprises Inc., Intuit Inc. and Intelsat S.A. Mr. Kangas previously served as a director of Allscripts Healthcare Solutions, Inc. from 2010 to 2012, and Eclipsys Corporation from 2004 to 2010. He is a past Chairman of the National Multiple Sclerosis Society and is a trustee of the Committee for Economic Development. | |||
Skills and Expertise | |||||
![]() | HIGH LEVEL OF FINANCIAL EXPERTISE | ||||
Extensive financial and accounting expertise acquired through oversight of audits of public companies in diverse industries. | |||||
![]() | CEO EXPERIENCE | ||||
Experience as CEO of a major accounting firm, in addition to his experience as chair of another public company. | |||||
![]() | RISK OVERSIGHT/MANAGEMENT EXPERIENCE | ||||
Through extensive experience with a major global accounting firm, qualifies as an audit committee financial expert and has acquired significant experience in risk management and oversight. | |||||
ELLEN J. KULLMAN | |||||
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![]() Chair & Chief Executive Age:59 Director since2011 Committees: Audit | MRS. KULLMANhas served as Chair of the Board of Directors of E.I. du Pont de Nemours and Company (basic materials and innovative products and services for diverse industries) since December 2009. She has also served as Chief Executive Officer of DuPont since January 2009 and as a director of DuPont since 2008. Mrs. Kullman served as President of DuPont from October 2008 to December 2008. From June 2006 through September 2008, she served as Executive Vice President. Prior to that, Mrs. Kullman was Group Vice President-DuPont Safety | & Protection. She is Chair of the U.S.-China Business Council and is a member of the U.S.-India CEO Forum, the Business Council, the National Academy of Engineering, the Board of Directors of Catalyst and the Board of Change the Equation (CTEq). Mrs. Kullman is co-chair of the National Academy of Engineering Committee on Changing the Conversation: From Research to Action. She also serves on the Board of Trustees of Tufts University and the Board of Overseers at Tufts University School of Engineering. | |||
Skills and Expertise | |||||
![]() | CEO EXPERIENCE | ||||
Active CEO of innovative S&P 100 company with global operations. | |||||
![]() | TECHNOLOGY-RELATED PRODUCT DEVELOPMENT/MARKETING | ||||
Through career at DuPont, has acquired extensive experience in the application of market-driven science to new product development. | |||||
![]() | BROAD INTERNATIONAL EXPOSURE | ||||
Based on experience acquired at DuPont, able to provide significant insights on implementation of business strategies in global markets. | |||||
![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners | 5 |
PROPOSAL 1Election of Directors
MARSHALL O. LARSEN | |||||
![]() | |||||
![]() Former Chairman, Age:66 Committees: Finance | MR. LARSENserved as Chairman, President and Chief Executive Officer of Goodrich Corporation from 2003 until July 2012, when Goodrich was acquired by UTC. He was elected as President and Chief Operating Officer of Goodrich in February 2002, and as a director in April 2002. From 1995 through 2002, Mr. Larsen served as Executive Vice President of Goodrich and | President and Chief Operating Officer of Goodrich Aerospace. Mr. Larsen joined Goodrich in 1977. Mr. Larsen is a former Chairman of the U.S. Aerospace Industries Association, and serves as a director of Lowe’s Companies Inc., Becton, Dickinson and Company, and Air Lease Corporation. He is active in numerous community activities. | |||
Skills and Expertise | |||||
![]() | CEO EXPERIENCE | ||||
Through service as CEO of Goodrich Corporation, has acquired extensive business and leadership experience in aerospace industry. | |||||
![]() | EXTENSIVE KNOWLEDGE OF COMPANY’S BUSINESS, INDUSTRY AND OPERATIONS | ||||
In-depth knowledge of aerospace industry, conditions affecting the industry and key customers. | |||||
![]() | HIGH LEVEL OF FINANCIAL LITERACY | ||||
Based on oversight of CFO at Goodrich, acquired extensive financial knowledge. Extensive senior management experience has also provided broad knowledge of governance, regulatory and risk management issues facing large public companies. | |||||
HAROLD MCGRAW III | |||||
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![]() Chairman, McGraw Hill Age:66 Director since2003 Committees: Compensation & Executive | MR. MCGRAWhas been Chairman of the Board of McGraw Hill Financial, Inc. (ratings, benchmarks and analytics for financial markets) since 1999. He served as Chief Executive Officer of McGraw Hill from 1998 to November 2013 and as President and Chief Operating Officer from 1993 to November 2013. He is also a director of Phillips 66, and previously served as a director of ConocoPhillips from 2005 to 2012. Mr. McGraw is | Chairman of the Emergency Committee for American Trade, International Chamber of Commerce and the U.S. Trade Representative’s Advisory Committee for Trade Policy & Negotiations. He is the former Chairman of The Business Roundtable. In addition, he serves on the boards of the Asia Society, the Committee Encouraging Corporate Philanthropy, the New York Public Library and Carnegie Hall. | |||
Skills and Expertise | |||||
![]() | CEO EXPERIENCE | ||||
Has served as Chairman of McGraw Hill Financial since 1999 and previously served as CEO of that large global enterprise. | |||||
![]() | HIGH LEVEL OF FINANCIAL LITERACY | ||||
Expertise on transformational changes to business portfolios, with focus on enhancements to shareowner value. | |||||
![]() | BROAD INTERNATIONAL EXPOSURE | ||||
Through experience as CEO, service as a director at several large global companies and leadership roles in other organizations, has acquired broad knowledge of global trade and business activities in diverse and challenging economic conditions. | |||||
6 | ![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners |
PROPOSAL 1Election of Directors
RICHARD B. MYERS | |||||
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![]() Ret. General, U.S. Air Age:73 Committees: Audit | GENERAL MYERS,a retired U.S. Air Force General, served as Chairman of the U.S. Joint Chiefs of Staff from 2001 to 2005. He was the principal military adviser to the President, Secretary of Defense, and the National Security Council. He was appointed Vice Chairman by President Clinton, which included acting as Chairman of the Joint Requirements Oversight Council, Vice Chairman of the Defense Acquisition Board, and member of the National Security Council Deputies Committee and the Nuclear Weapons Council. He also serves on the boards of | Aon Corporation, Deere & Company, Northrop Grumman and Rivada Networks. General Myers is the Foundation Professor of Military History and Leadership at Kansas State University and holds the Colin Powell Chair for National Security Leadership, Ethics and Character at the National Defense University. He is a member of the Defense Health Board and Chairman of the USO Board of Governors. He also serves on the boards of several other non-profits, including Fisher House and MRIGlobal, and is Chairman of the Kansas State University Foundation. | |||
Skills and Expertise | |||||
![]() | GOVERNMENT AND GEOPOLITICAL EXPERIENCE | ||||
Extensive senior leadership experience with military, global security and geopolitical issues of significant relevance to UTC’s businesses. | |||||
![]() | EXTENSIVE KNOWLEDGE OF COMPANY’S BUSINESS, INDUSTRY AND OPERATIONS | ||||
Based on extensive experience in military and U.S. Government, provides important perspectives on opportunities and challenges for UTC’s government contracting businesses. | |||||
![]() | RISK OVERSIGHT/LEADERSHIP EXPERIENCE | ||||
Provides important insights into organizational adjustment to address diverse economic and strategic challenges. | |||||
H. PATRICK SWYGERT | |||||
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![]() President Emeritus, Age:71 Director since2001 Committees: Audit | MR. SWYGERTserved as President of Howard University from 1995 to 2008. He served as President of the University at Albany, State University of New York from 1990 to 1995, and as Executive Vice President of Temple University from 1987 to 1990. Mr. Swygert also serves on the Board of Directors of The Hartford Financial | Services Group Inc. He is a member of the Advisory Council for the Smithsonian Institution’s National Museum of African American History and Culture and the D.C. Emancipation Commemoration Commission, and serves on the Board of the National Capital Medical Center. | |||
Skills and Expertise | |||||
![]() | HIGH LEVEL OF FINANCIAL LITERACY | ||||
Experience in leadership roles at major educational institutions, as well as service on board audit and risk committees at two public companies, has given him extensive knowledge of financial and disclosure considerations. | |||||
![]() | GOVERNMENT AND GEOPOLITICAL EXPERIENCE | ||||
Based upon his experience in senior leadership at three major universities and participation in other civic and government advisory organizations, provides important perspectives on organizational transformation, government relations, and cultural and civic issues. | |||||
![]() | RISK OVERSIGHT/MANAGEMENT EXPERIENCE | ||||
Through experience in strategic planning, risk management and governance, provides important insights into risk management and governance in diverse economic conditions. | |||||
![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners | 7 |
PROPOSAL 1Election of Directors
ANDRÉ VILLENEUVE | |||||
![]() | |||||
![]() Chairman, ICE Age:70 Committees: Audit | MR. VILLENEUVEis Chairman of ICE Benchmark Administration Limited (part of The ICE Group). He was Chairman of the City of London’s International Regulatory Strategy Group, which works closely with the U.K. government on financial services regulatory issues, from 2007 to 2013. He is a member of the Advisory Council of TheCityUK. He was Chairman of NYSE Euronext LIFFE from 2003 to 2009. Mr. Villeneuve joined Reuters in 1967, was based in London, Belgium, Latin America and the U.S., and served as President, Reuters America from 1980 to 1990 and Executive Director of Reuters PLC from 1989 to 2000. He was Chairman of Instinet Corporation, an electronic | brokerage subsidiary of Reuters, from 1990 to 1999, and Executive Chairman from 1999 to 2002. He was Chairman of Promethee, the French think tank, from 1998 to 2002, and Non-Executive Director of Aviva PLC from 1996 to 2006 and of the Lloyd’s of London Franchise Board from 2010 to 2014. He was a member of the U.K. Chancellor’s High Level Financial Services Group, a non-executive director of IFSL (International Financial Services London), IFRI (Institut Français des Relations Internationales) and Euroarbitrage. Mr. Villeneuve is a Grand Officer of the Order of Leopold II of Belgium. | |||
Skills and Expertise | |||||
![]() | BROAD INTERNATIONAL EXPOSURE | ||||
Extensive business and financial experience in the U.K., Belgium, Latin America and the U.S. | |||||
![]() | HIGH LEVEL OF FINANCIAL LITERACY | ||||
Extensive expertise in financial markets and complex securities. Qualifies as audit committee financial expert. | |||||
![]() | GOVERNMENT AND GEOPOLITICAL EXPERIENCE | ||||
As a participant in several government advisory boards, has acquired significant insights into financial market and economic trends. | |||||
CHRISTINE TODD WHITMAN | |||||
![]() | |||||
![]() President, The Whitman Age:68 Director since2003 Committees: Finance | GOVERNOR WHITMANserved as Administrator of the U.S. Environmental Protection Agency from January 2001 through June 2003. She was Governor of the State of New Jersey from 1994 through 2001. Governor Whitman has served as President of The Whitman Strategy Group (environmental and public policy consulting) since December 2004. She is a member of the Boards of Directors of Texas Instruments Incorporated and S.C. Johnson & Son, Inc. Governor Whitman is a | member of the Council on Foreign Relations and Chair of the Board of the American Security Project. In addition, she serves on the Board of Trustees of the Eisenhower Fellowship Foundation and as Chair of its Executive Committee, and on the Senior Advisory Committee of the Institute of Politics at Harvard University. Governor Whitman also is Co-Chair of the Clean Safe Energy Coalition and a member of the Board of Directors of the Center for Sustainable Shale Development. | |||
Skills and Expertise | |||||
![]() | GOVERNMENT AND GEOPOLITICAL EXPERIENCE | ||||
Extensive senior leadership experience in U.S. and state executive functions. Provides important perspectives on environmental, public policy and government relations issues. | |||||
![]() | RISK OVERSIGHT/MANAGEMENT EXPERIENCE | ||||
Through her career in government and private industry, has acquired extensive expertise in management and oversight of complex environmental and other risks and public policy matters. | |||||
![]() | EXTENSIVE GOVERNANCE EXPERIENCE | ||||
Based on experience as a director of several large companies, as well as her service in government, provides important insights into effective governance and leadership structures. | |||||
8 | ![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners |
Our Commitment to Sound Corporate Governance
LOUIS R. CHÊNEVERT,
UTC is committed to strong corporate governance practices designed to maintain high standards of oversight, integrity and ethics, while promoting growth in long-term shareowner value.
Our governance structure enables independent, experienced and accomplished directors to provide advice, insight and oversight to advance the interests of the Company and our shareowners. UTC has long maintained sound governance standards, as reflected in our Code of Ethics and Governance Guidelines and in our systematic approach to risk management. We are committed to transparent financial reporting and strong internal controls.
We encourage you to visit the Corporate Governance section of our website (http://www.utc.com/Our-Company/Corporate-Governance/Pages/default.aspx) where you will find detailed information about corporate governance at UTC, including: | |
• | Our Governance Guidelines |
• | Charters for our Board Committees |
• | Our Code of Ethics |
• | Our Certificate of Incorporation and Bylaws |
• | Information about our Ombudsman/DIALOG program, which allows UTC employees to raise questions confidentially and outside the usual management channels |
• | How shareowners and other interested persons may address concerns to the Board of Directors |
Board Leadership Structure
INDEPENDENT CHAIRMAN
On November 23, 2014, the Board elected Edward A. Kangas, an independent director, to serve as non-executive Chairman &of the Board.
In February 2015, the Board approved changes to UTC’s Bylaws and Governance Guidelines to define the responsibilities of a non-executive Chairman, which are more fully described below.
The Committee on Nominations and Governance periodically reviews our governance practices and leadership structure. Under UTC’s Governance Guidelines, the Board has no fixed policy on whether or not to have a non-executive chairman. The Board believes this determination should be made based on the Company’s best interests in light of the circumstances at the time and experience. In deciding which board leadership structure it believes will provide the most effective leadership and board oversight for the Company, the Board considers a range of factors including, but not limited to: the Company’s operating and financial performance under the existing board leadership structure; recent or anticipated changes in the Chief Executive Officer United Technologies Corporation. Mr. Chênevert was elected Chairman & Chief Executive Officerrole; the effectiveness of current processes and structures for Board interaction with and oversight of management; the Board’s desire for additional measures during periods of transition; and the importance, at any particular time, of maintaining a single voice in January 2010. He previously served as Presidentleadership communications and Chief Executive Officer from April 2008 through December 2009, as PresidentBoard oversight, both internally and Chief Operating Officer from March 2006 through April 2008,with investors. The Board has combined and as President ofseparated the Pratt & Whitney division of UTC from April 1999 through March 2006. Mr. Chênevert is Vice-Chairman of The Business Council, a member of the US-India CEO Forum and Business Roundtable, and is a founding director and Chairman of the Board of Directors for the Friends of HEC Montréal. He also serves on the Board of Directors of Cargill, the Congressional Medal of Honor Foundation and is Chairman of the Yale Cancer Center’s Advisory Board. In 2005, Mr. Chênevert was inducted as a Fellow of the American Institute of Aeronautics and Astronautics (AIAA). Mr. Chênevert is 54 and has been a UTC director since 2006.
Mr. Chênevert’s qualifications for election to UTC’s Board include his demonstrated leadership skills and extensive operating executive experience acquired in major aerospace and advanced technology businesses with global activities. He is highly experienced in driving operational excellence, development of innovative technologies and attainment of financial objectives under a variety of economic and competitive conditions.
JOHN V. FARACI has been Chairman and Chief Executive Officer of International Paper (paper, packaging and distribution) since 2003. Earlier in 2003, he was elected President and a director of International Paper, and previously served as Executive Vice President and Chief Financial Officer, with additional corporate responsibility for the company’s former majority-owned New Zealand subsidiary, Carter Holt Harvey. He joined International Paper in 1974. He serves as Chairman of the US-Brazil CEO Forum. He is a member of the Board of Directors of the American Forest & Paper Association and the National Fish and Wildlife Foundation and a member of the Board of Trustees of the American Enterprise Institute. He is also a member of the Moscow School of Management – SKOLKOVO Advisory Board and the Denison University Board of Trustees. Mr. Faraci is 62 and has been a UTC director since 2005.
Mr. Faraci’s qualifications for election to UTC’s Board include his ability to provide the perspective of an active Chief Executive Officer, based upon his leadership experience at a large international corporation with operations worldwide. He has overseen significant changes in International Paper’s portfolio of businesses while continuing its commitment to responsible stewardship of natural resources, as affirmed in published sustainability reports. Mr. Faraci qualifies as an audit committee financial expert due to his experience as Chief Executive Officer in supervising the principal financial officer at International Paper, as well as his previous experience as CFO for International Paper.
JEAN-PIERRE GARNIER, Ph.D., has served as Chairman of the Board of Directors of Actelion Ltd. (biopharmaceuticals) since September 2011. He previously served as Chief Executive Officer of Pierre Fabre SA (pharmaceuticals and cosmetics) from 2008 to 2010 and as Chief Executive Officer and Executive Member of the Board of Directors of GlaxoSmithKline plc (pharmaceuticals) from 2000 to 2008. Dr. Garnier served as Chief Executive Officer of SmithKline Beecham plc in 2000 and as Chief Operating Officer and Executive Member of the Board of Directors of SmithKline Beecham plc from 1996 to 2000. Dr. Garnier is also a director of Renault S.A. and Chairman of Cerenis Therapeutics (biopharmaceutical development). In 2009, he was made a Knight Commander of the British Empire. In 2007, he was promoted from Chevalier to Officier de la Légion d’Honneur of France. In 2006, he was named to the global list of top 20 CEOs by the Best Practice Institute. He was previously Chairman of NormOxys, Inc. (biopharmaceuticals) from 2010 to 2011, and a board member of the Stanford Advisory Council on Interdisciplinary Biosciences, Weill Cornell Medical College and the Dubai International Capital Advisory Board. He is currently an operating partner at Advent International (global private equity) and a member of the Board of Trustees of the Paul Newman Foundation. Dr. Garnier is 64 and has been a UTC director since 1997.
Dr. Garnier’s qualifications for election to UTC’s Board include his ability to bring to the Board his broad international perspective, as well as his experience as CEO for two large public companies with global operations. Following the merger in 2000 of Glaxo Welcome plc and SmithKline Beecham, Dr. Garnier oversaw the successful integration of these two large companies involved to a significant extent in different sectors of the pharmaceutical industry. Due to his many years of experience leading large organizations in the U.S. and in Europe, Dr. Garnier also has extensive expertise in executive compensation programs in these markets.
JAMIE S. GORELICK is a partner at the international law firm, WilmerHale, having joined the firm in 2003. Ms. Gorelick represents companies on regulatory, compliance, governance and enforcement issues. She has held numerous positions in the U.S. Government, serving as Deputy Attorney Generalpast and
![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners | 9 |
CORPORATE GOVERNANCE
will continue to exercise its judgment under the circumstances at the time to determine the board leadership structure that it believes will provide appropriate leadership, direction and oversight, while facilitating the effective functioning of both the Board and management. Taking these considerations into account, the Board has concluded that the separation of the United States, as General Counselroles of the Department of Defense, as Assistant to the Secretary of Energy, and as a member of the bipartisan National Commission on Terrorist Threats Upon the United States. Ms. Gorelick is currently a member of the boards of the John D. and Catherine T. MacArthur Foundation, the Washington Legal Clinic for the Homeless, and The Urban Institute. She is a member of the Council on Foreign Relations. In February 2012, Ms. Gorelick became a member of the Board of Directors of Amazon.com, Inc. She previously served as a director of Schlumberger, Ltd. from 2002 to 2010. Ms. Gorelick is 61 and has been a UTC director since 2000.
Ms. Gorelick’s qualifications for election to UTC’s Board include her extensive experience in government, which is beneficial to UTC as a major government contractor, as well as her experience counseling on complex litigation, investigation and compliance matters. Ms. Gorelick is co-chair of WilmerHale’s Defense, National Security and Government Contracts Practice Group. She provides important insights on government relations, public policy and contracting matters due to her extensive experience in the public sector.
EDWARD A. KANGAS served as Chairman and Chief Executive Officer best serves the interests of Deloitte, Touche, Tohmatsu (auditshareowners and tax services) from 1989the Company at this time.
The Board believes it is important to 2000. He has servedmaintain flexibility as Non-Executiveto the Board’s leadership structure, but firmly supports maintaining a non-management director in a leadership role at all times, whether as non-executive Chairman ofor Lead Director. Accordingly, on February 2, 2015, the Board at Tenet Healthcare Corporation since July 2003, and is a board member of Allscripts Healthcare Solutions, Inc., Hovnanian Enterprises Inc. and Intuit Inc. He is a past Chairman of the National Multiple Sclerosis Society and is an Executive Committee member of the Committee for Economic Development. Mr. Kangas is 67 and has been a UTC director since 2008.
Mr. Kangas’ qualifications for electionapproved changes to UTC’s Bylaws and Governance Guidelines to require that the Board include his extensive financial and accounting expertise, acquired through oversightelect a non-management director to serve as Lead Director when the role of Deloitte’s audits of public companies in a wide range of industries. His service as non-executive chairman of a healthcare company and as a director of a housing and a technology company add to his general industry knowledge relevant to UTC and its businesses. Mr. Kangas qualifies as an audit committee financial expert.
ELLEN J. KULLMAN has served as Chair of E.I. du Pont de Nemours and Company (basic materials and innovative products and services for diverse industries) since January 2010, asChairman is held by the Chief Executive Officer or another UTC executive. The Board believes that when the roles of DuPont since January 2009 and as a director of DuPont since 2008. Mrs. Kullman served as President of DuPont from October 2008 to December 2008. From June 2006 through September 2008, she served as Executive Vice President responsible for DuPont Coatings & Color Technologies; DuPont Electronic & Communication Technologies; DuPont Performance Materials; DuPont Safety & Protection; Marketing & Sales; Pharmaceuticals; Risk Management; and Safety & Sustainability. Prior to that, Mrs. Kullman was Group Vice President-DuPont Safety & Protection. She is a member of the US-India CEO Forum, the Business Council, and the executive committee of SCI-America. Mrs. Kullman is co-chair of the National Academy of Engineering Committee on Changing the Conversation: From Research to Action. She is on the board of trustees of Tufts University and serves on the board of overseers at Tufts University School of Engineering. Mrs. Kullman formerly served as a director of General Motors Company from 2004 to 2008. She is 56 and has been a UTC director since January 2011.
Mrs. Kullman’s qualifications for election to UTC’s Board include her experience as Chair and CEO of an S&P 100 company with a 200 plus year history of innovation and diverse operations worldwide. She brings extensive experience in the application of market-driven science to the development of important franchises and brands, with focus on sustainable products and enhancement of shareowner value during periods of economic growth and challenge. She has deep experience and offers insights in the implementation of business strategies in major global markets, including many of importance to UTC.
RICHARD D. MCCORMICK served as Chairman of the Board of U S WEST, Inc. (telecommunications) from June 1998 until his retirement in May 1999. He was Chairman, President and Chief Executive Officer of U S WEST, Inc. from May 1992 until June 1998. In addition, he isare combined, having a former Chairman and Honorary ChairmanLead Director to coordinate the activities of the International Chamber of Commerce, a former Chairmanindependent directors and Chairman Emeritus of the United States Council for International Business, a trustee of the Denver Art Museum, Vice President of the Denver Art Museum Foundation and Director Emeritus of Creighton University. He servedto serve as a director of Wells Fargo from 1983 through 2011 (including service on the board of a predecessor bank), and as a director of Nortel Networks Corporation and Nortel Networks Limited from 2005 to 2009. Mr. McCormick is 71 and has been a UTC director since 1999.
Mr. McCormick’s qualifications for election to UTC’s Board include his ability to offer the perspectives of a former CEO of a major public company that successfully adjusted to significant structural and technological changes in its industry. His service as Chairman of the International Chamber of Commerce and the United States Council for International Business allows him to provide important insights into issues facing companies with extensive international operations. Due to his experience supervising the principal financial officer of U S WEST, Mr. McCormick also qualifies as an audit committee financial expert.
HAROLD MCGRAW III has been Chairman of the Board of The McGraw-Hill Companies (global information services) since 1999 and President and Chief Executive Officer of McGraw-Hill since 1998. Mr. McGraw was President and Chief Operating Officer of McGraw-Hill from 1993 to 1998. He is also a director of ConocoPhillips. Mr. McGraw is Chairman of the Emergency Committee for American Trade, the United States Council for International Business, and the U.S.-India Business Council. He also serves on the US-India CEO Forum, the U.S. Trade Representative’s Advisory Committee for Trade Policy and Negotiations, and the executive committee of The Business Roundtable. In addition, he chairs the Committee Encouraging Corporate Philanthropy and serves on the boards of many organizations including the Council for Economic Education, the New York Public Library, Carnegie Hall, and the National Academy Foundation. Mr. McGraw is 63 and has been a UTC director since 2003.
Mr. McGraw’s qualifications for election to UTC’s Board include his extensive experience as an active CEO of a leading provider of global information services with a diverse portfolio of knowledge-based businesses. Under his leadership, McGraw-Hill has undergone significant changes, with rigorous focus on strategic growth of its portfolio of businesses and enhancement of shareowner value in a variety of economic and market conditions. McGraw-Hill is a recognized global leader in providing critical financial, construction and aerospace industry data and other reports relied upon by major companies and investors.
RICHARD B. MYERS, Ret. U.S. Air Force General, served as Chairman of the U.S. Joint Chiefs of Staff from 2001 to 2005. He was the principal military adviser to the President, Secretary of Defense, and the National Security Council. He was appointed Vice Chairman by President Clinton, which included acting as Chairman of the Joint Requirements Oversight Council, Vice Chairman of the Defense Acquisition Board, and member of the National Security Council Deputies Committee and the Nuclear Weapons Council. He also serves on the boards of Aon Corporation, Deere & Company, Northrop Grumman and Rivada Networks. General Myers is the Foundation Professor of Military History at Kansas State University and holds the Colin Powell Chair of National Security Leadership, Character and Ethics at the National Defense University. He is a member of the Defense Health Board. General Myers is 69 and has been a UTC director since 2006.
General Myers’ qualifications for election to UTC’s Board include his deep experience in military affairs, as well as global security and geo-political issues acquired during his distinguished career in the military and service as Chairman of the Joint Chiefs of Staff. General Myers served as the principal military advisor to national leaders during the earliest stages of the U.S. response to the attacks of September 11, 2001. General Myers provides UTC with critical leadership experience and perspectives on opportunities and challenges for UTC’s government contracting businesses.
H. PATRICK SWYGERT served as President of Howard University from 1995 to 2008. Mr. Swygert served as President of the University at Albany, State University of New York from 1990 to 1995, and as Executive Vice President of Temple University from 1987 to 1990. He also serves on the board of The Hartford Financial Services Group Inc. Mr. Swygert served as a director of Fannie Mae from 2000 to 2008. Mr. Swygert is a member of the Advisory Council for the Smithsonian Institution’s National Museum of African American History and Culture, the D.C. Emancipation Commemoration Commission, the U.S. National Commission for the United Nations Educational, Scientific and Cultural Organization (UNESCO), and the Eisenhower Fellowship Foundation. Mr. Swygert is 68 and has been a UTC director since 2001.
Mr. Swygert’s qualifications for election to UTC’s Board include his leadership skills in overseeing the financial and academic revitalization of two major universities, as well as his ability to provide important perspectives on a wide range of government relations and civic issues. In addition to his senior leadership experience in academia, Mr. Swygert also has had a distinguished career in government service, in the law and as a law professor.
ANDRÉ VILLENEUVE is Chairman of the City of London’s International Regulatory Strategy Group. He served as Non-Executive Chairman of LIFFE (now part of NYSE Euronext group), the London futures and derivatives exchange, from 2003 to 2009. He was an executive director of Reuters from 1989 to 2000. He was Chairman of Instinet Corp., an electronic brokerage subsidiary of Reuters, from 1990 to 1999, and Executive Chairman from 1999 to 2002. Mr. Villeneuve was Chairman of Promethee, the French think tank, from 1998 to 2002 and non-executive director of Aviva PLC from 1996 to 2006. He served as a non-executive director of IFRI (Institut Francais des Relations Internationales) from 2003 to 2009 and EuroArbitrage from 2003 to 2009. He is a non-executive director of the Lloyds Franchise Board, IFSL (International Financial Services London), TheCityUK and serves on several City of London steering groups. Mr. Villeneuve is 67 and has been a UTC director since 1997.
Mr. Villeneuve’s qualifications for election to UTC’s Board include his ability to offer a broad international perspective on issues considered byliaison between the Board and his extensive expertise in financial markets for complex securities and financial information services. Mr. Villeneuve’s supervision of principal financial officers of several large businesses of Reuters qualifies him as an audit committee financial expert. He provides important perspectives on financial markets and financial and economic trends.
CHRISTINE TODD WHITMAN served as Administratormanagement will enhance the effectiveness of the U.S. Environmental Protection Agency from January 2001 through June 2003. She was Governor of the State of New Jersey from 1994 through 2001. She has served as President of The Whitman Strategy Group (environment and public policy consulting) since December 2004. Governor Whitman is a member of the Board of Directors of Texas Instruments Incorporated, S.C. Johnson & Son, Inc., the Council on Foreign Relations and the American Security Project. In addition, she serves on the board of trustees of the Eisenhower Fellowship Foundation and as Chair of its Executive Committee, and the Steering Committee of The Cancer Institute of New Jersey. She is a member of the National Council of the National Parks Conservation Association. Governor Whitman is 65 and has been a UTC director since 2003.
Governor Whitman’s qualifications for election to UTC’s Board include her ability to provide important perspectives on environmental, public policy and government relations issues, based on her extensive experience leading national environmental initiatives and her service as Governor of the State of New Jersey. She is able to provide insights on a broad range of current and developing issues due to her firm’s active consulting practice on environmental and public policy issues.
Security Ownership of Directors, Nominees, Executive Officers and Certain Beneficial Owners.The following table shows, as of February 15, 2012, the shares of UTC Common Stock beneficially owned (as that term is defined under SEC Rule 13d-3) by each director, each nominee for election as a director, each of the named executive officers listed in the Summary Compensation Table on page 36 of this Proxy Statement (the “Named Executive Officers”) and allindependent directors, and executive officers asprovide a group. Each director, nominee and executive officer, and thechannel for non-management directors and executive officers as a group beneficially owned less than 1% of the outstanding shares of UTC Common Stock. Except as otherwise indicated in footnotes to the table below, each of the listed persons and the members of the group had sole voting power and sole investment power with respect to the shares shown as beneficially owned.candidly raise issues or concerns for Board consideration.
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Name | Shares as to which listed person has right to acquire beneficial ownership within 60 days by exercise of stock options | Shares as to which listed person has right to acquire ownership within 60 days upon conversion of RSUs | Shares as to which listed person has right to acquire ownership within 60 days upon conversion of DSUs | |||||||||
L. Chênevert | 2,152,000 | — | — | |||||||||
J. Faraci | — | 1,998 | 24,681 | |||||||||
J. Garnier | 21,000 | — | 55,227 | |||||||||
J. Gorelick | 28,400 | — | 31,403 | |||||||||
E. Kangas | — | 2,248 | 15,874 | |||||||||
E. Kullman | — | 1,297 | 1,743 | |||||||||
C. Lee | 29,800 | — | 48,660 | |||||||||
R. McCormick | 21,000 | — | 51,524 | |||||||||
H. McGraw III | 13,000 | 2,668 | 31,868 | |||||||||
R. Myers | — | 1,763 | 15,426 | |||||||||
H. Swygert | — | 3,341 | 39,028 | |||||||||
A. Villeneuve | 21,000 | — | 52,078 | |||||||||
C. Whitman | 13,000 | 2,668 | 19,161 | |||||||||
A. Bellemare | 218,500 | — | — | |||||||||
G. Darnis | 1,052,000 | — | — | |||||||||
G. Hayes | 534,400 | — | — | |||||||||
D. Michaud-Daniel | 90,600 | — | — | |||||||||
Directors & Executive Officers as a group (24 in total) | 5,873,500 | 15,983 | 386,673 |
The following table sets forth information as to those holders known to UTC to be beneficial owners, asBoard believes that term isthe existence of an independent, non-executive Chairman or Lead Director, with defined under SEC Rule 13d-3,responsibilities that include participation in planning meeting agendas, also enhances oversight of more than five percentrisk management. The Chairman or a Lead Director, and any of the outstanding shares of Common Stock as of December 31, 2011.other non-management directors, are free at any time to raise matters at Board and committee meetings.
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State Street Corporation State Street Financial Center 1 Lincoln Street Boston, MA 02111 | 111,016,437 | (1) | 12.24 | %(1) | ||||
BlackRock, Inc. 40 East 52nd Street New York, NY 10022 | 52,966,788 | 5.84 | % |
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Stock Ownership Guidelines. To strengthen the alignmentUTC’s non-management directors meet in regularly scheduled executive sessions without any members of management withpresent, and in additional executive sessions as requested by directors. In practice, these executive sessions occur before or after most Board meetings. The purpose of these executive sessions is to promote open and candid discussion among the interests of shareowners, the Board has adopted stock ownership guidelines for members of the Board and members of UTC’s Executive Leadership Group (“ELG”). The ELG includes UTC’s most senior executives. Non-employee members of the Board of Directors are required to own shares of Common Stock, tax deferred stock units or other common share equivalents having a value equal to at least five times the applicable annual base cash retainer amount (currently $96,000, resulting in a requirement that the person own shares with a market value of at least $480,000) within five years of joining the Board. The Chief Executive Officer (“CEO”) is required to own shares or common share equivalents having a value equal to at least six times base salary within five years of attaining that position. Other members of the ELG are required to own shares or common share equivalents having a value equal to three times their base salary within five years of joining the senior management group.
In addition to the shares of Common Stock shown in the table on page 11 as beneficially owned, each of the executive officers listed in the table below holds instruments that correspond in value to a share of Common Stock and accordingly are viewed as common share equivalents under UTC’s stock ownership guidelines.non-management directors.
Director Independence | ||
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Director Independence.The Board has adopted independence standards for directors that meetsatisfy the independence requirements set forth in the NYSE corporate governance rulesrequirements for companies listed companies. UTC’son the New York Stock Exchange (“NYSE”). You can find more details about these standards are included in UTC’s Corporateour Governance Guidelines, which are available on UTC’s website at http://www.utc.com/Governance/Board+of+Directors. Guidelines.
The Board has affirmatively determined that each of the nominees for election as a director at the Annual Meeting, other than Mr. Chênevert,Hayes, is independent of UTC in accordance withunder these independence standards. Specifically, none of the nominees, other than Mr. Chênevert,Hayes, has a business, financial, family or other relationship with UTC that is considered to be material under UTC’s independence standards (other than their relationship as a director and shareowner of UTC), except for relationships that are immaterial under UTC’s independence standards.shareowner). In determining that each such director is independent,the independence of our directors, the Board considered allthe relevant facts and circumstances bearing on the independence of each of the nominees, including charitable contributions that UTC made to non-profit organizations with which directorssome nominees are or have been associated. The BoardIt also considered that UTCsales and its subsidiaries,purchases of products and services, in the ordinary course of business, sell productsbetween UTC (or its subsidiaries) and services to, and purchase products and services from, companies at whichwhere some of the nominees are or have been employed as officers or serve as directors. executive officers.
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CORPORATE GOVERNANCE
In all cases that the Board considered for 2012, 2013 and 2014, the payments UTC made or received and the charitable contributions UTC made fell well below the thresholds in our independence standards (the greater of $1 million or 2% of total gross revenues of the other organization). None of the payments made or received by UTC or the payments received or made by UTC, in each of the years 2009, 2010 and 2011 did not exceedexceeded the greater of $1 million or 0.5% of the other organization’s total revenues. These levels are well below the thresholds in UTC’s independence standards, which are set at the greater of $1 million or 2% of total gross revenues of the other organization.
The following table identifiesshows the relationships that existed in 20112014 and were considered by the Board in making its determination regardingdetermining the independence of the nominees.
DIRECTOR INDEPENDENCE DETERMINATIONS: RELATIONSHIPS CONSIDERED
Director | Organization and Director’s Relationship |
| Type of Transaction, Relationship or Arrangement of | Total 2014
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| International Paper(Corporation) Chairman & CEO (until his retirement from those positions late in 2014) | $ $ | |||||||||
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| DuPont | (Corporation) Chair | $ 32,677,272;$ | ||||||||
HAROLD MCGRAW III | McGraw Hill Financial, Inc.(Corporation) Chairman | $2,592,589 | |||||||||
RICHARD B. MYERS | United Services Organization (USO) (Non-profit supporting U.S. troops and families) Chairman | Contributions received from UTC. | (1) | ||||||||
| Howard University(Educational Institution) Professor, former President | Purchases from UTC, principally of elevator maintenance services; contributions and recruiting fees received from UTC. | $457,143 | ||||||||
Eisenhower Fellowship Foundation (Non-profit providing fellowships to mid-career emerging leaders) Board member | Contributions received from UTC. | (1) | |||||||||
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CORPORATE GOVERNANCE
CommitteesMajority Voting for Directors
Under UTC’s Bylaws, in order for a director to be elected at the annual meeting in an uncontested election, a majority of the Board.votes cast with respect to the director’s election must be cast “for” the director. Abstentions and broker non-votes are not considered votes cast. In an uncontested election of directors, any incumbent director who receives a greater number of votes “against” than votes “for” his or her election must, under UTC’s Governance Guidelines, promptly tender a resignation to the Committee on Nominations and Governance. The Committee must then recommend to the Board, within 90 days after the election, whether to accept or reject the resignation. The director who tendered a resignation may not participate in this decision. Regardless of whether the Board accepts or rejects the tendered resignation, the Company must then promptly file a Report on Form 8-K with the Securities and Exchange Commission (“SEC”) in which it publicly discloses and explains the Board’s decision.
If a director’s resignation is accepted, the Committee also will recommend to the Board whether the vacancy should be filled or the size of the Board should be reduced.
Board Committees
The five standing committees of the Board consist ofare: the Audit Committee, the Committee on Nominations and Governance, the Committee on Compensation and Executive Development, the Finance Committee and the Public Issues Review Committee. Each committee,of these Committees, other than the Finance Committee, is composed solelyexclusively of directors determined by the Board to be independent. The charterChair of each committee is available on UTC’s website at http://www.utc.com/Governance/Board+of+Directors.
The Audit Committee assists the Board in its oversight of the integrity of UTC’s financial statements, the qualifications and independence of the Independent Auditor and UTC’s policies and practices to assess and manage exposure to risk. The Committee nominates, for appointment by shareowners, an accounting firm to serve as Independent Auditor and is responsible for the compensation, retention and oversight of the Independent Auditor. Directors Faraci (Chair), Kangas, McCormick, Myers, Swygert and Villeneuve are members of the Committee. The Board has determined that Directors Faraci, Kangas, McCormick and Villeneuve are audit committee financial experts within the meaning of the rules of the Securities and Exchange Commission. During 2011, the Committee held eight meetings.
The Committee on Nominations and Governance identifies and periodically reviews the qualifications that the Board considers important in selecting candidates for service as a director and, when there is a vacancy on the Board, identifies, evaluates and recommends candidates for nomination by the Board for election by the shareowners or for election by the Board if the Board decides to fill a vacancy that arises between shareowner meetings. The Committee also reviews and recommends to the Board appropriate governance practices and compensation for directors. Directors Faraci, Garnier, Lee, McCormick (Chair), McGraw and Whitman are members of the Committee. During 2011, the Committee held four meetings.
The Committee has determined that candidates for the Board should have the following qualifications:
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The Committee considers candidates meeting these criteria who are suggested by directors, management and shareowners. UTC from time to time engages one or more search firms to assist in the identification and evaluation of qualified candidates. A shareowner may recommend a director candidate by submitting a letter addressed to the Corporate Secretary.
When a Board vacancy arises, the Committee seeks to identify the most capable candidates available who meet the Board’s criteria for nomination and who will be able to serve the best interests of all shareowners. In view of the geographic diversity of UTC’s operations and its global profile, the Board believes that it is important for the Board to seek candidates who, in addition to representing the interests of shareowners in general, will also contribute to the diversity of perspectives present in Board deliberations. The Committee assesses the effectiveness of UTC’s nomination policies on an annual basis, as part of the Board’s evaluation of its effectiveness as a group. In the course of this performance evaluation, the Board considers whether the Board’s composition reflects an appropriate mix of skills, experience and diversity, in relation to the needs of the Company. Adjustments are made as appropriate in priorities for identification of candidates.
The Committee on Compensation and Executive Development has the responsibilities described in the Compensation Discussion and Analysis set forth beginning on page 19 of this Proxy Statement, which include review and oversight of executive compensation and development programs, approval of corporate goals and objectives relevant to CEO compensation, setting the CEO’s compensation based on an evaluation of performance in light of these goals and objectives, review of long-term incentive plans and annual incentive compensation, and oversight of compensation policies and practices as they relate to risk management. The Committee makes compensation decisions affecting the executive officers and members of UTC’s Executive Leadership Group (the “ELG”), consisting of approximately 30 of UTC’s most senior executives. The Chairman & CEO and the Senior Vice President, Human Resources and Organization (“SVP, HR”) determine compensation of other executives and oversee program administration. The Committee also reviews management development and succession policies and programs.
Directors Garnier (Chair), Gorelick, Kangas, Lee, McCormick, McGraw and Swygert are members of the Committee. While the Chairman & CEO and the SVP, HR attend Committee meetings regularly by invitation, the Committee, subject to Board oversight, is the final decision maker regarding the compensation paid to each of the Named Executive Officers and the other members of the ELG, while also providing oversight of compensation practices for other executive officers. The Committee considers certain matters in executive session. The Committee’s Chair reports to the Board on actions taken at each meeting. During 2011,Each of the Committee held six meetings. The CommitteeCommittees listed below has authority to retain approve fees for and terminate independent advisers to assist in the fulfillment of its responsibilities.responsibilities, to approve the adviser’s fees and to terminate their engagements.
The Finance Committee reviews and makes recommendations to the Board on the management of the financial resources of UTC and major financial strategies, acquisitions and divestitures, and other significant transactions. The Committee also is responsible for oversight of risk management policies with regard to financial, capital and insurance risks. Directors Chênevert, Faraci, Gorelick, Kullman, Lee (Chair), Myers, Villeneuve and Whitman are members of the Committee. During 2011, the Committee held five meetings.
The Public Issues Review Committee reviews UTC’s charitable contributions program, community relations programs, political action committee, and responses to important public issues such as equal employment opportunity, the environment, and safety in the workplace. The Committee also reviews UTC’s annual Corporate Responsibility Report and oversees risk management policies and practices with regard to social responsibility, reputation, safety and the environment. Directors Garnier, Gorelick, Kullman, McGraw, Myers, Swygert, Villeneuve and Whitman (Chair) are members of the Committee. During 2011, the Committee held four meetings.
Leadership Structure and Lead Director. The Committee on Nominations and Governance reviews UTC’s governance practices and leadership structure. UTC’s Governance Guidelines state that there is no fixed policy on whether the roles of Chairman of the Board and Chief Executive Officer should be separate or combined, with this decision to be made based on the best interests of UTC considering the circumstances from time to time. Currently, these roles are combined with Louis R. Chênevert serving as both the Chairman of the Board and the Chief Executive Officer. Given UTC’s strong financial performance over extended periods, the Board considers that UTC has been well-served by its combined leadership structure over the years. The Board also considers that in the context of UTC’s global and diverse operations, UTC’s current combined leadership structure provides important benefits through effective internal and external communication of critical strategies and business priorities.
The Board believes UTC’s unitary leadership structure is appropriately balanced by the designation of a Lead Director role and the independence of a substantial majority of the Board, including twelve of the thirteen members of the Board during 2011 and eleven of the twelve current nominees for director.
UTC’s non-management directors meet in regularly scheduled executive sessions without any members of management present and also, from time to time, in unscheduled, ad hoc executive sessions requested by one or more non-management directors. The purpose of these executive sessions is to promote open and candid discussion among the non-management directors. The Lead Director is selected from among non-management directors by the non-management directors. The Lead Director’s duties include: (i) presiding at all meetings of the Board at which the Chairman is not present, including executive sessions of the non-management directors; (ii) serving as liaison between the Chairman and the non-management directors; (iii) calling meetings of the non-management directors; (iv) participating with the Chairman in planning and setting schedules and agendas for Board meetings to be held during the year; (v) determining with the Chairman the quantity and timeliness of information to be provided to directors; (vi) annually communicating to the CEO the Board’s evaluation of his or her performance; and (vii) performing such other functions as the Board may direct. Currently, Richard D. McCormick serves as Lead Director.
The Board believes that UTC’s leadership structure facilitates the Board’s oversight of risk management and communication with management, because the Board has named a Lead Director with defined responsibilities including participation in planning meeting agendas. The Lead Director and each of the other directors are encouraged to raise matters at any time for consideration at Board and committee meetings.
Board Oversight of Risk Management. UTC has adopted enterprise risk management policies based on the Integrated Framework of the Committee of Sponsoring Organizations (“COSO”). Under UTC’s policies, the presidentscharter of each of UTC’s major business units are responsible for identifying risks that could affect achievement of business goals and strategies, assessing the likelihood and potential impact of significant risks, prioritizing risks and actions to be taken in response, and regularly reporting to the CEO on actions to monitor and manage significant risks in order to remain within UTC’s range of risk tolerance. The CEO, Chief Financial Officer and General Counsel periodically reportCommittee is available on UTC’s risk management policies and practices to relevant Board committees and to the full Board. The Audit Committee annually reviews UTC’s major financial risk exposures and a number of operational, compliance, reputational and strategic risks, including practices to monitor and manage those risks. The Audit Committee also reviews and discusses UTC’s overall policies and practices for enterprise risk management, including the delegation of oversight for additional areas of risk to the appropriate Board committees. As described in the following table, each of the other Board committees is responsible for oversight of risk management practices for categories of risks relevant to their functions. The Board as a whole also reviews risk management practices and a number of significant risks in the course of their reviews of corporate strategy, business plans, reports of Board committee meetings and other presentations.website at:http://www.utc.com/Our-Company/Corporate-Governance/Pages/Governance-Documents-and-Policies.aspx.
AUDIT COMMITTEE | |||
| Edward A. Kangas (Chair) John V. Faraci Ellen J. Kullman Richard B. Myers H. Patrick Swygert André Villeneuve | ||
appointment by shareowners, an accounting firm to serve as Independent Auditor. The Committee
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COMMITTEE ON NOMINATIONS AND GOVERNANCE | |
2014 Meetings: 4 H. Patrick Swygert (Chair) John V. Faraci Jean-Pierre Garnier Edward A. Kangas Harold McGraw III Richard B. Myers Christine T. Whitman | The Committee on Nominations and Governanceidentifies and periodically reviews the qualifications that the Board uses to select candidates for service as a director. When there is a vacancy on the Board, the Committee identifies, evaluates and recommends candidates to be nominated by the Board for election by our shareowners (or to be elected by the Board if it chooses to fill a vacancy arising between shareowner meetings). The Committee seeks to identify the most capable candidates available who meet the Board’s criteria for nomination and who will be able to serve the best interests of all shareowners. The Committee also reviews and recommends to the Board appropriate governance practices and compensation for directors. The Committee assesses the effectiveness of UTC’s nomination policies on an annual basis, as part of the Board’s evaluation of its effectiveness as a group. For more information about how the Committee identifies candidates, see the discussion of Board membership criteria and the nomination process in Proposal 1—Election of Directors on pages 1 and 2 of this Proxy Statement. |
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CORPORATE GOVERNANCE
COMMITTEE ON COMPENSATION AND EXECUTIVE DEVELOPMENT | |||
2014 Meetings: 6 Jean-Pierre Garnier (Chair) Edward A. Kangas Harold McGraw III Richard B. Myers H. Patrick Swygert | The Committee on Compensation and Executive Development | The Committee also makes compensation decisions affecting the executive officers and the members of UTC’s Executive Leadership Group (the “ELG”), consisting of approximately 25 to 30 of UTC’s most senior executives. The CEO and the Senior Vice President, Human Resources & Organization determine the compensation of other executives and oversee compensation program administration. The Committee also reviews our programs and policies for management development and succession. While the President and CEO and the Senior Vice President, Human Resources & Organization attend Committee meetings regularly by invitation, the Committee, subject to Board oversight, is the final decision-maker regarding the compensation paid to each of the named executive officers listed in UTC’s proxy statement and the other members of the ELG. It also oversees compensation practices for other executive officers. The Committee considers certain matters in executive session. | |
2014 Meetings: 4 John V. Faraci (Chair) Gregory J. Hayes Ellen J. Kullman Marshall O. Larsen Harold McGraw III André Villeneuve Christine T. Whitman | The Finance Committeereviews, and as appropriate makes recommendations to the Board on, the management of the Company’s financial resources and strategies. It considers plans for significant acquisitions and divestitures and their potential financial impact, and monitors progress on pending and completed transactions. The Committee also reviews significant financing programs in support of business objectives; policies with respect to investments and uses of cash; significant capital appropriations; dividend policies; share repurchase programs; risks and exposures related to capital structure, liquidity, financing, pension funding and investment |
PUBLIC ISSUES REVIEW COMMITTEE | |||
2014 Meetings: 4 Christine T. Whitman (Chair) Jean-Pierre Garnier Ellen J. Kullman Marshall O. Larsen André Villeneuve | The Public Issues Review Committee |
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CORPORATE GOVERNANCE
Meeting Attendance
The Board met eight times during 2011.2014. Each director attended 75% or more of the aggregate number of meetings of the Board and committees on which he or she served. The Board’s policy is that each director, if standing for re-election, should attend the Annual Meeting of Shareowners if his or her schedule permits.unless there is an unavoidable scheduling conflict. All of the current directors attended the last Annual Meeting held in April 2011.
Compensation Discussion and Analysis
Executive Summary2014.
Director Stock Ownership Requirements
This Compensation Discussion and Analysis (“CD&A”) describes UTC’s executive compensation program and reviews actions taken
To strengthen alignment with the interests of shareowners, non-management directors are required to own shares of Common Stock, deferred stock units or other Common Stock equivalents having a value equal to at least five times the annual base cash retainer. Non-management directors must achieve this ownership level within five years after first becoming a member of the Board. In 2014, the base cash retainer was $104,000, thereby establishing an ownership requirement of at least $520,000. Each of the non-management directors is in compliance with this ownership requirement.
How We Manage Risk
OUR RISK MANAGEMENT FRAMEWORK
During 2014, UTC revised its enterprise risk management policies to conform to the criteria established in the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in 2013. Under our policies, the presidents of major business units are responsible for identifying risks that could affect achievement of business goals and strategies, assessing the likelihood and potential impact of significant risks, prioritizing the risks that are identified and the actions to be taken to address these risks. The presidents of major business units report to the CEO on actions to monitor and manage significant risks in order to remain within UTC’s range of risk tolerance.
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CORPORATE GOVERNANCE
BOARD RISK OVERSIGHT
The CEO, Chief Financial Officer and General Counsel periodically report on UTC’s risk management policies and practices to relevant Board committees and to the full Board. The Audit Committee annually reviews major financial risk exposures and a number of Directors’operational, compliance, reputational and strategic risks, as well as practices to monitor and manage those risks. The Audit Committee also reviews UTC’s overall policies and practices for enterprise risk management, including the delegation of oversight for particular areas of risk to the appropriate Board committees. As a whole, the Board reviews risk management practices and a number of significant risks in the course of its review of corporate strategy, business plans, reports of Board committee meetings and other presentations.
Board and Committee Risk Oversight Responsibilities
Board/Committee | Primary Areas of Risk Oversight |
Full Board | Risk management process and structure, strategic risks associated with UTC’s business plan, and other significant risks such as major litigation, business development risks and succession planning. |
Audit Committee | Major financial risk exposures; significant operational, compliance, reputational, strategic and cyber security risks; and overall policies and practices for enterprise risk management. |
Committee on Nominations and Governance | Risks and exposures related to corporate governance, leadership structure, effectiveness of Board and committeeoversight; and review of director candidates, conflicts of interest and director independence. |
Committee on Compensation and Executive Development | Risks related to executive recruitment, assessment, development, retention and succession policies and programs;and risks associated with compensation policies and practices, including incentive compensation. |
Finance Committee | Risks and exposures related to capital structure, liquidity, financing, pension funding and investment performance, and significant capital transactions, including acquisitions and divestitures. |
Public Issues Review Committee | Risks related to the environment and workplace safety, equal employment opportunity, responses to important public issues, government relations and other matters involving reputational risks. |
COMPENSATION AND RISK MITIGATION
The Committee on Compensation and Executive Development (the “Committee”) concerningbelieves that executive compensation should be contingent on performance relative to pre-established targets and objectives. Our executives must achieve these targets and objectives in a manner consistent with UTC’s ethical standards and internal policies. The Committee firmly believes that executive compensation should not reward accomplishments that compromise UTC’s standards or long-term shareowner value.
Compensation arrangements, if not properly designed and administered, can encourage excessive risk taking and jeopardize long-term Company performance and shareowner value. Therefore, one of the 2011goals of UTC’s executive compensation program is to motivate executives in a manner that appropriately balances financial opportunity and risk. UTC mitigates compensation-related risk to its long-term performance, ethical standards and reputation by monitoring risk under our Enterprise Risk Management (“ERM”) program.
Enterprise Risk Management Program.The Board of Directors annually reviews the ERM to identify, monitor and manage risk throughout the Company and its business units. The ERM program recognizes executive compensation as a potential risk factor. UTC mitigates this risk in the following ways:
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CORPORATE GOVERNANCE
• | Aligning Employee and Shareowner Interests.The Committee’s selection of performance metrics is also designed to set an appropriate balance between short- and long-term objectives. Long-term incentive awards, which include Stock Appreciation Rights (“SARs”) and Performance Share Units (“PSUs”), make up the largest portion of compensation for our senior executives. SARs have a three-year vesting period and a ten-year term, with compensation delivered contingent on share price appreciation. The vesting of our PSUs is based on an earnings per share (“EPS”) growth metric and a relative total shareowner return (“TSR”) metric, both measured over a three-year period. The Committee believes these metrics provide an appropriate measure of long-term financial performance and sustainable growth. We believe these broad-based measures correlate with shareowner value and, by design, do not reward selective or narrow objectives that could be achieved independent of the Company’s overall best interests. |
• | Requiring Rigorous Executive Share Ownership.To further encourage a long-term focus on sustainable performance and shareowner value creation, we also require our senior executives to own a significant amount of UTC Common Stock or stock units. Our CEO, Mr. Hayes, has a share ownership requirement equal to six times his base salary. Share holdings of other ELG members must equal at least three times their base salary within five years of appointment to the ELG. Non-employee directors are also required to own shares or stock units equal to five times the cash portion of the annual base retainer. |
• | Prohibiting Hedging.To avoid undermining the goals of our share ownership policy, UTC prohibits directors and executive officers from entering into short sales of our securities or similar transactions where potential gains are linked to a decline in the value of our Common Stock. Recipients of equity awards may not enter into any agreement that has the effect of transferring or exchanging any economic interest in an award for any other consideration. |
• | Maintaining a Comprehensive Clawback Policy.UTC has a comprehensive policy on recoupment (“clawback”) of executive compensation. This policy applies to both our annual and long-term compensation programs. Clawbacks can result in significant financial penalties and award forfeitures. In the event of a financial restatement or recalculation of a financial metric applicable to an award, the Company has the right to recover annual bonus payments and gains realized from vested long-term incentive awards from any executive (including all NEOs) involved in an action found to have caused the restatement or recalculation. The amount subject to recoupment will, at a minimum, equal the difference between what the executive received and what the executive would have received under the corrected financial metrics over at least the three-year period before the restatement. Clawbacks of bonuses, long-term incentive awards and compensation realized from prior awards also may be triggered by violations of our Code of Ethics, failure to meet employee health and safety standards or exposing UTC to excessive risk, as determined under the ERM program. Our policy provides the Company the right to recover compensation when an executive’s negligence (including the negligent supervision of a subordinate) causes significant harm to UTC’s interests. The policy also permits public disclosure of the circumstances surrounding the Committee’s decision to seek recoupment where the Committee determines such disclosure is appropriate and would not expose the Company to legal risk. |
• | Upholding Strict Post-Employment Covenants.ELG members may not engage in activities after termination or retirement that are detrimental to UTC, such as disclosing proprietary information, soliciting UTC employees and engaging in competitive activities. Violations can result in a clawback of long-term incentive awards. |
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Annual Retainer
2014 Retainers. In 2014, the compensation of non-employee directors consisted of a retainer that was paid partially in cash and partially in deferred stock units (“DSUs”). If a director served in multiple roles, his or her annual cash retainer and annual DSU award was based on the capacity for which the level of compensation was the highest. The following table shows the annual retainer amounts in effect for non-employee directors for service from April 2014 to April 2015:
Element | Base Retainer | Non-Executive Chairman of the Board | Audit Committee Chair | Committee on Compensation and Executive Development Chair | Other Committee Chairs | Audit Committee Member |
Cash | $104,000 | $184,000 | $120,000 | $112,000 | $110,000 | $116,000 |
Deferred Stock Units | $156,000 | $276,000 | $180,000 | $168,000 | $165,000 | $174,000 |
Total | $260,000 | $460,000 | $300,000 | $280,000 | $275,000 | $290,000 |
Non-employee directors receive 40% of their total annual retainer in cash and 60% in DSUs. Alternatively, they may elect to receive their entire retainer in DSUs. The number of DSUs credited to each director in 2014 was calculated by dividing the cash value of the director’s compensation by $117.70, the NYSE closing price per share of UTC Common Stock (“Common Stock”) on April 28, 2014, the date of the 2014 Annual Meeting. Directors do not receive additional compensation for attending regularly scheduled Board and Committee meetings. However, non-employee directors receive an additional $5,000 for each special meeting they attend in person. There was one special meeting of the Board in 2014.
Following termination of a non-employee director’s service, DSUs are converted into shares of Common Stock. The distribution of shares of Common Stock can be made in either a lump-sum payment upon retirement or in ten- or fifteen-year installments.
On November 23, 2014, Mr. Kangas was elected non-executive Chairman of the Board. Following a comprehensive review of the market compensation for this role, the Committee on Nominations and Governance approved a $200,000 incremental retainer in addition to the current base retainer for non-employee directors.
Changes for 2015. Effective April 27, 2015, the base retainer for non-employee directors will increase by $20,000 to $280,000. Committee Chairs will receive an additional $5,000, except for the Finance Committee Chair, who will receive an additional $10,000 above the base retainer. The Audit Committee Chair will not receive an additional increase. These adjustments were made to better align non-employee director compensation with the market. The percentage allocation between cash and DSUs did not change.
One-Time RSU Awards for New Directors
Non-employee directors receive a one-time $100,000 restricted stock unit (“RSU”) award when first elected to the Board. This award vests ratably over five years and is distributed to the director in shares of Common Stock upon retirement, termination or death. No director received an RSU award in 2014.
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COMPENSATION OF DIRECTORS
TREATMENT OF DIVIDENDS
When UTC pays a dividend on Common Stock, each director’s DSUs and RSUs are credited with additional DSUs and RSUs, equal in value to the dividend paid on the corresponding number of shares of Common Stock.
2014 DIRECTOR COMPENSATION
Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | All Other Compensation ($) | Total ($) |
EDWARD A. KANGAS(3) | $5,000 | $370,000 | $0 | $375,000 |
JOHN V. FARACI | $5,000 | $290,000 | $0 | $295,000 |
JEAN-PIERRE GARNIER | $5,000 | $280,000 | $0 | $285,000 |
JAMIE S. GORELICK | $0 | $260,000 | $2,070 | $262,070 |
ELLEN J. KULLMAN | $121,000 | $174,000 | $747 | $295,747 |
MARSHALL O. LARSEN | $5,000 | $260,000 | $1,946 | $266,946 |
HAROLD MCGRAW III | $109,000 | $156,000 | $0 | $265,000 |
RICHARD B. MYERS | $121,000 | $174,000 | $0 | $295,000 |
H. PATRICK SWYGERT | $121,000 | $174,000 | $16,533(4) | $311,533 |
ANDRÉ VILLENEUVE | $5,000 | $290,000 | $0 | $295,000 |
CHRISTINE T. WHITMAN | $115,000 | $165,000 | $0 | $280,000 |
(1) | Consists of the 2014 annual cash retainer that directors did not elect to receive in DSUs and an additional $5,000 paid to each non-employee director who attended a special 2014 Board meeting in person. |
(2) | Consists of the grant date fair value of DSU awards credited to the account of the director, including the portion of the annual cash retainer that the director elected to receive in DSUs, calculated in accordance with the Compensation—Stock Compensation Topic of the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”). The assumptions made in the valuation of these awards can be found in Note 12, Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 2014 Annual Report on Form 10-K. As of December 31, 2014, non-employee directors held the following: |
Name | Number of Unvested RSUs Attributable to Initial $100,000 RSU Grant | Number of Deferred Stock Units, Restricted Stock and Vested RSUs | Number of Outstanding Stock Options |
Edward A. Kangas | — | 29,716 | — |
John V. Faraci | — | 37,942 | — |
Jean-Pierre Garnier | — | 74,492 | 6,000 |
Jamie S. Gorelick | — | 44,821 | — |
Ellen J. Kullman | 253 | 8,395 | — |
Marshall O. Larsen | 761 | 8,955 | — |
Harold McGraw III | — | 44,453 | 6,000 |
Richard B. Myers | — | 24,030 | — |
H. Patrick Swygert | — | 52,288 | — |
André Villeneuve | — | 69,922 | — |
Christine T. Whitman | — | 28,696 | 6,000 |
(3) | For his services as Lead Director, Mr. Kangas’ annual retainer was $40,000 above the base retainer for non-employee directors and for his services as the non-executive Chairman of the Board, Mr. Kangas’ annual retainer was $200,000 above the base retainer for non-employee directors. In determining his 2014 compensation, these amounts were prorated for the portion of the director compensation cycle that he held these positions. |
(4) | Consists of a premium payment on a life insurance policy used to fund Mr. Swygert’s participation in the Directors’ Charitable Gift Program. Mr. Swygert is the only non-employee director for whom UTC still pays a premium, as this program was closed to directors elected after February 2003. Mr. Swygert derives no financial benefit from this program. All insurance proceeds are payable to up to four charitable organizations designated by him and tax deductions accrue solely to UTC. |
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This section contains required information about certain “beneficial owners” of our Common Stock as that term is defined under SEC rules.
Directors, Board Nominees, and Executive Officers
The following table shows the number of shares of Common Stock beneficially owned, as of March 2, 2015, by each of our current directors, each of whom is a nominee for election as a director, by each of the named executive officers listed in the Summary Compensation Table on page 3649 of this Proxy Statement, and by all of the current directors and executive officers as a group. Each director and executive officer, and the directors and executive officers as a group, beneficially owned less than 1% of the outstanding shares of Common Stock as of that date. Except as explained in the footnotes to the following table, each person listed, and the members of the group, had sole voting power and sole investment power with respect to the shares shown.
Name | Shares Beneficially Owned |
John V. Faraci | 37,942 |
Jean-Pierre Garnier | 92,202 |
Gregory J. Hayes | 273,951(1) |
Edward A. Kangas | 29,716 |
Ellen J. Kullman | 8,648 |
Marshall O. Larsen | 15,148 |
Harold McGraw III | 54,058 |
Richard B. Myers | 24,030 |
H. Patrick Swygert | 53,288 |
André Villeneuve | 69,922 |
Christine T. Whitman | 39,346 |
Alain M. Bellemare(2) | 209,087 |
Louis R. Chênevert(3) | 1,886,183(4) |
Geraud Darnis | 600,949(5) |
Charles D. Gill, Jr. | 210,560(6) |
Peter F. Longo(7) | 33,630 |
Directors & Executive Officers as a group (21 in total) | 1,947,337(8) |
(1) | Includes 2,066 shares of Common Stock for which Mr. Hayes’ spouse holds voting and investment power. |
(2) | As previously disclosed, Alain M. Bellemare, President & Chief Executive Officer of UTC Propulsion & Aerospace Systems, left the Company at the end of January 2015. He no longer serves as an executive officer of the Company. |
(3) | As previously disclosed, Louis R. Chenêvert resigned as Chairman & Chief Executive Officer, effective November 23, 2014. |
(4) | Includes 28,146 shares held in a family charitable foundation. Mr. Chenêvert shares with family members voting and dispositive power with respect to such shares. |
(5) | Includes 11,834 shares of Common Stock for which Mr. Darnis’ spouse holds voting and investment power. |
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STOCK OWNERSHIP INFORMATION
(6) | Includes 1,546 shares of Common Stock for which Mr. Gill’s spouse holds voting and investment power. |
(7) | As previously disclosed, Peter F. Longo served as Acting Chief Financial Officer from November 23, 2014 through December 31, 2014. |
(8) | Consists of holdings of those directors and executive officers who continue to serve in such positions as of March 2, 2015. Excludes holdings of Messrs. Bellemare, Chênevert and Longo as they no longer served in such a position as of that date. |
The preceding table includes shares as to which the listed person or the members of the group had the right to acquire beneficial ownership at any time within 60 days after March 2, 2015 by exercising stock appreciation rights (“SARs”) or stock options and, in the case of non-management directors, upon the settlement of restricted stock units (“RSUs”) or deferred stock units (“DSUs”) as a result of their resignation or retirement from the Board as set forth in the following table. The preceding table also includes, for all but one of the executive officers, Savings Restoration Plan Units credited to the account of the officer in respect of the Company contributions to match 60% of the officer’s payroll contributions to his or her account under the Plan.
Name | Shares as to which listed person has right to acquire beneficial ownership within 60 days by exercise of stock options or SARs(1) | Shares as to which listed person has right to acquire ownership within 60 days upon conversion of RSUs | Shares as to which listed person has right to acquire ownership within 60 days upon conversion of DSUs |
J. Faraci | — | 2,138 | 35,804 |
J. Garnier | 6,000 | — | 68,092 |
G. Hayes | 186,107 | — | — |
E. Kangas | — | 2,406 | 27,310 |
E. Kullman | — | 1,388 | 7,260 |
M. Larsen | — | 1,332 | 8,384 |
H. McGraw III | 6,000 | 2,855 | 41,598 |
R. Myers | — | 1,887 | 22,143 |
H. Swygert | — | 3,575 | 48,713 |
A. Villeneuve | — | — | 65,122 |
C. Whitman | 6,000 | 2,855 | 25,841 |
A. Bellemare | 122,612 | — | — |
L. Chênevert | 1,200,752 | — | — |
G. Darnis | 450,818 | — | — |
C. Gill, Jr. | 169,233 | — | — |
P. Longo | 23,595 | — | — |
Directors & Executive Officers as a group (21 in total)(2) | 1,119,471 | 18,436 | 350,267 |
(1) | For the executive officers, includes the net number of shares of Common Stock issuable upon exercise of vested SARs. Following vesting, SARs are exerciseable for an amount of shares of Common Stock having a value equal to the increase in value of a share of Common Stock from the date the SARs were granted through the date of exercise, times the number of SARs granted. For purposes of this table, the net number of shares of Common Stock issuable has been estimated using the NYSE closing price for a share of Common Stock on December 31, 2014, which was $115.00. |
(2) | Consists of holdings of those directors and executive officers who continue to serve in such positions as of March 2, 2015. Excludes holdings of Messrs. Bellemare, Chênevert and Longo as they no longer served in such a position as of that date. |
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STOCK OWNERSHIP INFORMATION
Beneficial Owners of More Than 5% of UTC Common Stock
The following table shows all holders known to us to be beneficial owners of more than 5% of the outstanding shares of Common Stock as of December 31, 2014.
Name and Address | Shares | Percent of Class |
State Street Corporation(1) State Street Financial Center One Lincoln Street Boston, MA 02111 | 105,379,932 | 11.6% |
BlackRock, Inc.(2) 55 East 52nd Street New York, NY 10022 | 51,933,863 | 5.7% |
The Vanguard Group 100 Vanguard Boulevard Malvern, PA 19355 | 50,504,078 | 5.5% |
(1) | State Street Corporation, acting in various fiduciary capacities, reported in an SEC filing that as of December 31, 2014 it held sole voting power with respect to zero shares of Common Stock, shared voting power with respect to 105,379,932 shares of Common Stock, sole dispositive power with respect to zero shares of Common Stock, and shared dispositive power with respect to 105,379,932 shares of Common Stock. State Street Corporation also reported that its wholly-owned subsidiary, State Street Bank & Trust Company, held 62,752,549 of these shares in its capacity as Trustee for UTC’s Employee Savings Plan Master Trust. State Street Corporation disclaims beneficial ownership of the reported shares, except in its fiduciary capacity. |
(2) | BlackRock, Inc., reporting on behalf of various subsidiaries, reported in an SEC filing that as of December 31, 2014 it held sole voting power with respect to 42,541,111 shares of Common Stock, shared voting power with respect to zero shares of Common Stock, sole dispositive power with respect to 51,933,863 shares of Common Stock, and shared dispositive power with respect to zero shares of Common Stock. |
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Executive Compensation:
Compensation Discussion and Analysis
In this section, we discuss our compensation philosophy and describe the compensation program for our President and Chief Executive Officer (“CEO”) and our senior leadership team. We explain how our Board’s Committee on Compensation and Executive Development (the “Named “Committee”) determines compensation for our senior executives and its rationale for specific 2014 decisions. We also discuss the evolution of our program and how it is structured to advance its fundamental objective: aligning our executive’s compensation with the long-term interests of UTC shareowners.
Executive Officers” or “NEOs”Summary
Our executive compensation program is designed to reward financial results and effective strategic leadership, key elements in building sustainable value for shareowners. We believe our program’s performance metrics align the interests of our shareowners and senior executives by correlating the timing and amount of actual pay to our short-, medium- and long-term performance. Our program requires ethical and responsible conduct in pursuit of these goals.
We actively seek and highly value feedback from shareowners and their advisors concerning our compensation program. Since our last Annual Meeting of Shareowners, senior management has communicated directly with institutional investors holding over 330 million shares of UTC Common Stock (“Common Stock”).
The Committee’s fundamental objectives are: (i) basing
In addition, we carefully benchmark our executive compensation opportunities on measurabledecisions against a relevant group of peer companies—all of which are potential competitors for the caliber of executive talent required to manage a complex, global and multi-industry company like UTC.
As a result of our effective program design, our continued shareowner engagement and our rigorous benchmarking process, we achieved 93% support from our shareowners for our 2014 Say-on-Pay proposal. This level of support was even higher than 2013, which we interpreted as an endorsement of our compensation program and policies.
In 2014, our Say-on-Pay proposal received 93% support from our shareowners. |
2014 PERFORMANCE
We delivered robust financial and operating performance and strategic accomplishments; and (ii) substantially and directly aligning selected performance criteria with shareowner interests. Consistent with these objectives, the Committee has focused the program onin 2014, as evidenced by our solid earnings growth free cash flow and shareowner return. UTC’s 175% total shareowner return (“TSR”)organic sales growth. Our 2014 compensation decisions recognize this performance, while also reinforcing our long-term focus.
This long-term focus is reflected in several key strategic accomplishments that, in our view, position UTC well not only for the next five to ten years, but for the next 40+ years. These accomplishments are expected to fuel UTC’s organic sales growth through 2020 at a rate which will significantly outpace growth in global gross domestic product. They include:
• | Pratt & Whitney and UTC Aerospace Systems’ (“UTAS”) next generation product wins are expected to generate nearly $900 billion in potential future revenues over the life of these programs. |
• | Over 50 new aerospace engine and system programs are currently underway, the highest number ever seen at UTC. |
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EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
• | The successful first flight of the Airbus A320neo aircraft powered by two Pratt & Whitney PW1100G-JM engines and supported by numerous components and systems from UTAS. |
• | Sikorsky attained key strategic program wins that present opportunities for over $15 billion in future potential revenues over the course of these programs. They include: |
• | The Turkish Utility Helicopter Program; | |
• | The U.S. Presidential Helicopter Program; and | |
• | The U.S. Air Force Combat Rescue Helicopter Program. |
• | UTC Building & Industrial Systems (“UTC BIS”) was awarded a contract for the Midfield Terminal Complex at the Abu Dhabi International Airport, where Otis will provide 335 units and Carrier will supply 16 expanded-capacity chillers. |
• | UTC BIS was also awarded a contract by the Land Transport Authority of Singapore to supply and install 411 escalators and 167 GeN2®elevators for a Mass Rapid Transit project—the largest new equipment project win in Otis’ 160-year history. |
2014 Financial Results | |
• | Net sales increased by 4% to $65.1 billion |
• | Diluted earnings per share increased by 10% to $6.82 |
• | $5.6 billion in free cash flow |
• | Dividends per share increased by 7%, marking the 78thconsecutive year our shareowners have received dividends |
FINANCIAL RESULTS (3 AND 10 YEARS)*
* | For 2012 and 2014, net income and diluted earnings per share metrics reflect continuing operations, as reported in the 2014 Annual Report on Form 10-K. 2005 net income, diluted earnings per share, and net sales represent values reported in the 2005 Annual Report on Form 10-K and subsequently restated for the effect of new accounting standards. The 2005 amounts have not been adjusted for discontinued operations. For the definitions of net income, earnings, free cash flow and other measures used for our incentive compensation plans and for a reconciliation from cash flow to free cash flow, refer to page 47 of this Proxy Statement. |
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EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
SHAREOWNER VALUE CREATION
The Committee believes that long-term incentive goals should directly correlate with the creation of long-term shareowner value. This concept is an essential component of our Guiding Principles, as discussed on page 28. Our ability to generate sustainable TSR over a ten-year period ending on December 31, 2011, more than three times2014 is noteworthy and we believe that our executive compensation program design has contributed to this achievement. UTC’s 11% annualized TSR over this period significantly outpaced the Dow Jones Industrial Average and five times(8%), the Standard & Poor’s 500 Index (“S&P 500”500 (8%), reflects and our Compensation Peer Group (7%) (our Compensation Peer Group (“CPG”) is detailed on page 30). The following chart illustrates UTC’s performance relative to differing comparator groups and time periods.
TOTAL SHAREOWNER RETURN: UTC VS. PEER GROUPS*
* | TSR values are provided by S&P Capital IQ and are calculated on an annualized basis as of December 31, 2014. For the Compensation Peer Group composite values, returns are calculated individually for each peer company, then a weighted average is calculated based on each company’s market capitalization at the beginning of the measurement period. |
Response to 2014 Say-on-Pay Vote Each year, we carefully consider our shareowner Say-on-Pay results from the preceding year. In 2014, 93% of the votes submitted (excluding abstentions and broker non-votes) supported our 2013 executive compensation decisions. This result was three percentage points higher than the 90% favorable vote we received in 2013 with respect to our 2012 compensation decisions. We interpreted the results of the 2014 vote—and positive three-year voting trend—as an endorsement of our compensation program’s design and direction. Our 2014 Outreach Program In 2014, we continued to engage with our shareowners to solicit their feedback on UTC’s executive compensation program. We also sought input from third-party consultants and proxy advisory firms. Analysis of Shareowner Feedback As it does each year, the Committee considered shareowner feedback in its ongoing assessment of our compensation elements. This feedback, along with factors such as external market data and staff compensation recommendations, helps the Committee in its review of our program. |
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EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
CEO TRANSITION
Mr. Hayes served as Senior Vice President & Chief Financial Officer (“SVP & CFO”) until November 23, 2014. Upon Mr. Chênevert’s resignation as Chairman & Chief Executive Officer on November 23, 2014, the Board of Directors elected Mr. Hayes to the position of President and Chief Executive Officer of the Company. In recognition of Mr. Hayes’ new role and increased responsibilities, the Committee took the following actions:
• | Increased his base salary from $920,000 (his base salary as of April 1, 2014) to $1.3 million |
• | Increased his target annual bonus opportunity from 100% to 165% of base salary (pro-rating these percentages based on the portion of the year for which he served as SVP & CFO and the portion for which he served as President and CEO) |
For 2014, the Committee approved a $1.6 million annual bonus for Mr. Hayes based on a favorable assessment of his overall performance. This amount substantially aligned with the annual bonus financial performance factor for the Company (see page 34 for a discussion of this performance factor). Based on this performance assessment and Mr. Hayes�� expanded role, the Committee also increased his 2015 long-term incentive (“LTI”) grant (granted on January 2, 2015) to $8.03 million in order to better align his award with that of peer company CEOs.
The chart below outlines Mr. Hayes’ total direct compensation program’s focus on long-term performance. Earnings per share (“EPS”), a keyfor the past three years. The amounts for 2014 reflect the Committee’s pay decisions associated with Mr. Hayes’ transition to the role of President and CEO, while the 2013 and 2012 amounts reflect the Committee’s pay decisions related to his performance as SVP & CFO.
CEO TOTAL DIRECT COMPENSATION(1)
(1) | Total direct compensation is described in detail on page 40 of this Proxy Statement. |
(2) | Reflects the grant date fair value of Mr. Hayes’ January 2, 2015 long-term incentive award, calculated in accordance with the Compensation - Stock Compensation Topic of the FASB ASC, but excluding the effects of estimated forfeitures. The grant consists of 165,500 SARs and 39,500 PSUs. The NYSE closing price of our Common Stock on the date of grant was $115.04 per share. |
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EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
Our Core Executive Compensation Practices
We continually monitor the evolution of best compensation practices and make changes to our programs as necessary to achieve sound corporate governance. Some of the most important practices incorporated into our program metric, increased 203% from $1.81 to $5.49 overinclude the same period. UTC’s TSR exceeded these indices over the preceding 5-year period as well. With respect to near-term performance metrics, UTC’s 2011 earnings perfollowing:
REVIEW OF PAY VERSUS PERFORMANCE.The Committee continually reviews the relationship between CEO compensation and Company performance. MEDIAN COMPENSATION TARGETS.All compensation elements for our executives are targeted at the median of our CPG. RIGOROUS AND DIVERSIFIED PERFORMANCE METRICS. The Committee annually reviews performance goals for our annual and long-term incentive awards to confirm that we are using diversified and rigorous, yet attainable targets. CLAWBACK OF COMPENSATION.We continue to monitor our clawback policy and make changes when necessary, as the Committee believes this policy is a critical element of sound corporate governance. In this regard, we have made revisions twice since 2011 that have further strengthened our policy. SUBSTANTIAL SHARE OWNERSHIP GUIDELINES.Our share ownership requirements are as follows: six times base salary for the CEO; three times base salary for other members of the ELG (including our other NEOs); and five times the base annual cash retainer for non-employee directors. NO PLEDGING OF SHARES.Our directors and executive officers are not permitted to pledge UTC shares as collateral for loans or for any other purpose. NO HEDGING.UTC does not allow directors and executive officers to enter into short sales of UTC Common Stock or similar transactions where potential gains are linked to a decline in the price of our shares. NO REPRICING.Stock option and SAR exercise prices are set at the grant date market price and may not be reduced or replaced with stock options or SARs with a lower exercise price without shareowner approval (except to adjust for stock splits or similar transactions). | NO CASH BUYOUTS OF UNDERWATER STOCK OPTIONS OR SARS.UTC does not allow buyouts of underwater stock options or SARs under any circumstance. Award recipients may not sell, assign or transfer their interest in any long-term incentive award (including underwater stock options and SARs) to a third party in exchange for cash or other consideration. MARKET-COMPETITIVE RETIREMENT PROGRAMS. We eliminated defined benefit pensions for executives hired on or after January 1, 2010. For legacy executives, we ceased using the traditional final average earnings pension formula on December 31, 2014 and replaced it with a cash balance formula. NO PERQUISITE ALLOWANCES.A cash perquisite allowance was eliminated for individuals appointed to the ELG after June 2012, and was eliminated for all ELG members, including our NEOs, in 2014. NO EMPLOYMENT CONTRACTS.The Committee believes that fixed-term executive employment contracts that guarantee minimum levels of compensation over multiple years do not enhance shareowner value. Accordingly, our NEOs do not have employment contracts. ELIMINATION OF CASH SEVERANCE.To better align our program with our shareowners’ interests, the Committee eliminated the cash severance benefit for ELG members appointed on or after May 2013. Members will continue to receive a one-time RSU award upon appointment to the ELG that may, under certain circumstances, vest when they leave the Company. RESTRICTIVE COVENANTS.Our ELG members are subject to restrictive covenants upon separation from UTC, including non-compete, non-solicitation and non-disclosure obligations. |
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EXECUTIVE COMPENSATIONCompensation Discussion and free cash flow generation reached all time highs.Analysis
OUR CORE EXECUTIVE COMPENSATION PRACTICES (CONTINUED)
LIMITATIONS ON CHANGE-IN-CONTROL ARRANGEMENTS.We terminated our change-in-control program for ELG members appointed on or after June 2009. We also substantially reduced benefits for those ELG members still in the program. For example, we do not provide excise tax reimbursements or gross-ups, and we no longer continue retirement benefit accruals or healthcare benefits following a change-in-control. USE OF DOUBLE TRIGGERS.All change-in-control severance arrangements for pre-2009 ELG members have a double, rather than a single, trigger for benefit eligibility. This means that a change-in-control will not automatically entitle an executive to severance benefits; the executive must also lose his or her job or suffer a significant adverse change to employment terms and conditions. | REVIEW OF COMPENSATION PEER GROUP.Our CPG is reviewed periodically by the Committee and adjusted, when necessary, to ensure that its composition remains a relevant and appropriate comparison for our executive compensation program. REVIEW OF COMMITTEE CHARTER.The Committee reviews its charter regularly to maintain strong oversight and governance practices. |
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EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
How We Make Compensation Decisions
OUR EXECUTIVE COMPENSATION PHILOSOPHY
The Committee believes that this offers strong support for the design and administration of UTC’s executive compensation program. The Committee also notes that shareowners overwhelmingly approved the Committee’s executive compensation program design and oversight with a 98% favorable advisory vote at the 2011 Annual Meeting.
Key financial and strategic achievements for 2011 included:
Financial Results
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Guiding Principles
Long-term shareowner interests and executive compensation opportunities must align.align with and enhance long-term shareowner value. This fundamental principle guides the Committeecore philosophy is embedded in its oversight and designall aspects of UTC’sour executive compensation programs. The Committee believesprogram and is reflected in an important set of guiding principles. We believe that the application of these principles enables us to create a meaningful link between long-term, sustainable growth for a large, complex, global enterprise operating in extremely competitiveour shareowners and diverse businesses, such as UTC, long-term shareowner value is significantly enhanced by adherence to the following guiding principles:compensation outcomes.
GUIDING PRINCIPLES
RESPONSIBILITY![]() | COMPETITIVENESS![]() | |
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A substantial portion of compensation should |
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LONG-TERM FOCUS![]() | SHAREOWNER ALIGNMENT![]() | |
For our most senior executives, long-term stock-based compensationopportunities should significantly outweigh short-term | The financial interests of executives should be aligned with the long-terminterests of our shareowners through stock-based compensation andperformance metrics that correlate with long-term shareowner value. |
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Compensation OverviewROLE OF THE COMMITTEE ON COMPENSATION AND EXECUTIVE DEVELOPMENT
UTC’s compensation program includes fixed and variable elements, emphasizing long-term incentives and performance metrics. Utilizing data from UTC’s Compensation Peer Group (“CPG”), the Committee establishes targets for the value of each compensation element. The Committee, setswhich consists of five independent directors, is responsible for overseeing the annual cash bonus opportunitiesdevelopment and fixedadministration of our executive compensation elements, including base salary, pensionprogram.
Responsibilities.The Committee makes all compensation decisions concerning our CEO and the other benefits, at the approximate CPG median. Long-term incentive compensation opportunities are tied to UTC stock and longer-term corporate performance metrics. The potential valuemembers of long-term incentive awards exceeds the CPG median for UTC’s most senior executives. Consistent with the program’s emphasis on performance and alignment with shareowner interests, the Committee has set the target for long-term incentive awards at the 65th percentile of the CPG.
Each NEO is a member of UTC’sour Executive Leadership Group (“ELG”), comprisedsubject to review by the other independent directors. The ELG is made up of UTC’sbetween 25 to 30 of our most senior executives.executives, including each of our current 2014 Named Executive Officers (“NEOs”) listed in the Summary Compensation elements specific to the members of the ELG include a one-time, ELG restricted stock unit (“RSU”) retention award, enhanced life insurance, medical and disability benefits, a perquisite allowance and enhanced severance protection. As consideration for these
benefits, ELG members assume certain obligations, including, protective covenants and share ownership requirements discussed under“Compensation and Risk”Table on page 3449 of this Proxy Statement.
Compensation and Corporate Governance
The Committee believes that the executive compensation program and UTC corporate governance are directly related. Compensation design helps drive corporate strategies and priorities. Implementation must always occur within the boundaries of internal and external governance standards. Adherence to UTC’s ethical standards and corporate policies are non-negotiable prerequisites to the realization of executive compensation gains. More generally, and as discussed throughout this CD&A, compensation practices should align with shareowner interests. In this regard, the Committee continually monitors evolving governance standards and shareowner inputs, as evidenced by the following actions taken over the last several years:
Executive Compensation ProgramsCommittee’s other responsibilities include:
Designing executive compensation plans and programs | ||
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à | Considering input from UTC’s shareowners regarding executive compensation decisions and policies | |
à | Reviewing and approving incentive plan targets and | |
à | Assessing each ELG member’s performance relative to |
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Change-in-Control ArrangementsEXECUTIVE COMPENSATIONCompensation Discussion and Analysis
Evaluating the competitiveness of each ELG member’s total compensation package | ||
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The Senior Vice President, Human Resources & Organization, along with UTC’s Human Resources staff and an independent compensation consultant, assist the Committee with these tasks.
The Committee’s charter, which sets out the Committee’s responsibilities, can be found on our website at:
http://www.utc.com/Our-Company/Corporate-Governance/Pages/Governance-Documents-and-Policies.aspx
Directors’ CompensationPerformance Evaluation Process.The Committee has established a process for evaluating the performance of the Company, the President and CEO and the other ELG members. At its first meeting every year, the Committee reviews financial, strategic and operational objectives for the CEO, both for the upcoming year and for a longer-term period. At this meeting, the Committee also evaluates the performance of the President and CEO and other NEOs for the previous year.
The Committee uses a combination of qualitative and quantitative factors to conduct a broad and balanced assessment of performance relative to both internal and external measures.
OVERVIEW OF EVALUATION PROCESS
Performance Against Internal Measures |
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Achievement versus previously established goals— | • |
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Retirement Programs
ROLE OF THE CEO
Our CEO has no role in the Committee’s determination of his compensation. For the other members of the ELG, including the NEOs, the CEO presents the Committee with recommendations for each element of compensation. He bases these recommendations upon his assessment of each individual’s performance, the performance of each executive’s business unit and/or function, benchmark information and retention risk. The Committee reviews the CEO’s recommendations, makes appropriate adjustments and approves compensation changes at its discretion, subject to review by the other independent directors.
ROLE OF THE COMPENSATION CONSULTANT
The Committee retained Pearl Meyer & Partners (“Pearl Meyer”) to serve as its executive compensation consultant for 2014. While Pearl Meyer may make recommendations on the form and amount of compensation, the Committee makes all decisions regarding the compensation of our NEOs and other ELG members.
During 2014, Pearl Meyer advised the Committee on a variety of subjects, including compensation plan design and trends, pay-for-performance analytics, benchmarking norms and other such matters. Pearl Meyer reports directly to the Committee, participates in meetings as requested and communicates with the Committee Chair between meetings as necessary. Pearl Meyer attended four meetings in person in 2014.
Prior to engaging Pearl Meyer, the Committee reviewed the firm’s qualifications, as well as its independence and any potential conflicts of interest. Pearl Meyer does not perform other services for or receive other fees from UTC, other than incidental amounts (less than $6,000 in 2014) related to participation in certain business-related surveys. The Committee has the sole authority to modify or approve Pearl Meyer’s compensation, determine the nature and scope of its services, evaluate its performance, terminate the engagement and hire a replacement or additional consultant at any time.
The Committee also utilizes market data provided by Towers Watson and Aon Hewitt for benchmarking and other purposes. This benchmark data consists of information that is generally available to other Towers Watson and Aon Hewitt clients. Neither Towers Watson nor Aon Hewitt made recommendations to the Committee or management on peer group composition or on the form, amount or design of executive compensation in 2014.
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Peer Group BenchmarkingEXECUTIVE COMPENSATIONCompensation Discussion and Analysis
The
PEER GROUP BENCHMARKING
We compare our executive compensation program to programs at the 26 companies that make up our Compensation Peer Group consists of 24 major U.S.(“CPG”). The Committee believes that these companies selected by the Committee with similarprovide a relevant comparison based on their similarity to UTC in size and complexity, determined bytaking into account factors such as revenue, market capitalization, global scope of operations and diversified product portfolios and other characteristics.portfolios. Like UTC, 1312 of the 24 CPGthese 26 companies are included in the Dow Jones Industrial Average.Average components. The compensation opportunities typically available andCPG is constructed to serve the management skill set generally required atspecific purpose of benchmarking executive compensation. We do not use the financial performance of the CPG as a target for our executive compensation awards. The CPG’s composition reflects a mix of both industry and non-industry peers that we view as realistic competitors for the senior executive talent UTC seeks. In its 2014 review of the CPG, the Committee removed Intel Corporation and added Chevron, Danaher and Eaton. Chevron, like UTC, is a Dow Jones Industrial Average and Fortune 100 company, with broad service offerings. Similar to UTC, Danaher and Eaton are industrial manufacturing companies make them likely competitorsthat require a highly technical pool of UTC for executive talent. Based on these substantial similarities, the Committee believes CPG companies are relevant for purposes of benchmarking compensation at UTC.
UTC’s Compensation Peer Group consists of the following companies:
Company | Fiscal Year-End | Revenue** (millions) | 12/31/2011 Market (millions) | Employees** | ||||||||||||
3M Co.* | 12/11 | $29,611 | $56,800 | 80,057 | ||||||||||||
AT&T Inc.* | 12/11 | $126,723 | $179,232 | 256,420 | ||||||||||||
Boeing Co.* | 12/11 | $68,735 | $54,624 | 160,500 | ||||||||||||
Caterpillar Inc.* | 12/11 | $60,138 | $58,584 | 125,099 | ||||||||||||
Deere & Co. | 10/11 | $31,629 | $31,259 | 61,278 | ||||||||||||
Dow Chemical Co. | 12/11 | $59,985 | $33,989 | 52,000 | ||||||||||||
E. I. duPont de Nemours & Co.* | 12/11 | $37,961 | $42,398 | 60,000 | ||||||||||||
Emerson Electric Co. | 9/11 | $24,222 | $34,257 | 133,200 | ||||||||||||
General Dynamics Corp. | 12/11 | $32,677 | $23,671 | 95,100 | ||||||||||||
General Electric Co.* | 12/11 | $141,547 | $189,082 | 287,000 | ||||||||||||
Hewlett-Packard Co.* | 10/11 | $127,245 | $51,109 | 349,600 | ||||||||||||
Honeywell International Inc. | 12/11 | $36,529 | $42,040 | 130,000 | ||||||||||||
Intel Corp.* | 12/11 | $53,999 | $123,481 | 100,100 | ||||||||||||
International Business Machines Corp.* | 12/11 | $106,916 | $216,724 | 426,751 | ||||||||||||
International Paper Co. | 12/11 | $26,034 | $12,937 | 59,500 | ||||||||||||
Johnson & Johnson* | 12/11 | $65,030 | $179,089 | 118,000 | ||||||||||||
Johnson Controls, Inc. | 9/11 | $40,833 | $21,271 | 162,000 | ||||||||||||
Lockheed Martin Corp. | 12/11 | $46,499 | $26,177 | 123,000 | ||||||||||||
Northrop Grumman Corp. | 12/11 | $26,412 | $15,280 | 117,100 | ||||||||||||
Pfizer Inc.* | 12/11 | $67,425 | $166,346 | 110,600 | ||||||||||||
Procter & Gamble Co.* | 6/11 | $82,559 | $183,746 | 129,000 | ||||||||||||
Raytheon Co. | 12/11 | $24,857 | $16,744 | 71,000 | ||||||||||||
Tyco International Ltd. | 9/11 | $17,355 | $21,579 | 102,000 | ||||||||||||
Verizon Communications Inc.* | 12/11 | $110,875 | $113,583 | 193,900 | ||||||||||||
25th percentile | $31,125 | $25,550 | 91,339 | |||||||||||||
50th percentile | $50,249 | $46,753 | 120,500 | |||||||||||||
75th percentile | $72,191 | $134,197 | 160,875 | |||||||||||||
90th percentile | $121,969 | $182,392 | 277,826 | |||||||||||||
United Technologies Corp.* | 12/11 | $58,190 | $66,309 | 199,900 | ||||||||||||
UTC Percentile Rank | 55% | 66% | 83% |
We also monitor other Fortune 100 companies, as well as data from a broader range of companies, for insight on general compensation trends and to supplement CPG data when appropriate.
THE COMPENSATION PEER GROUP INCLUDES
THE FOLLOWING COMPANIES:
Companies inBluerepresent DJIA companies
PEER GROUP DATA*
Market | |||
Revenue | Capitalization | ||
(in millions) | (in millions) | Employees | |
25th Percentile | $32,592 | $46,504 | 72,675 |
50th Percentile | $47,603 | $70,294 | 114,667 |
75th Percentile | $90,766 | $170,369 | 127,059 |
UTC | $65,100 | $104,578 | 211,500 |
UTC Rank | 62% | 68% | 77% |
Peer company data provided by S |
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EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
OUR COMPENSATION BENCHMARKS
To ensure that our executive compensation program is sufficiently competitive, the Committee believes that the value of each UTC compensation element should be targeted to align with market benchmarks. UTC therefore targets base salary, annual bonus and long-term incentive awards at the median of the CPG.
All compensation targets are aligned with our Compensation Peer Group median. |
The
As part of its annual review process, the Committee also reviews compensation data from Fortune 100 companies and from a broader sample of over 400 companies provided by Towers Watson. This broader information enhances the Committee’s insight into compensation trends generally and supplements the CPG data for business unit compensation decisions, when appropriate. The Committee benchmarksevaluates each element of our executive population’s compensation separately.relative to the market. Individual compensation can,may fall above or below these market benchmarks based on the Committee’s discretion. In exercising its discretion, the Committee may consider Company and individual performance, job scope, retention risk and other factors that it determines are relevant to its evaluation.
How We Structure Our Executive Compensation
PRINCIPAL ELEMENTS OF COMPENSATION
The following elements make up our executive compensation program:
BASE SALARY![]() | ![]() | ANNUAL BONUS![]() | ![]() | LONG-TERM INCENTIVES![]() | ![]() | RETIREMENT BENEFITS![]() |
• Performance Share Units | • Pension | |||||
• Stock Appreciation Rights | • Pension Preservation | |||||
• 401(k) Savings Plan | ||||||
• Savings Restoration Plan |
LINKING PAY TO PERFORMANCE
The Committee uses a combination of performance metrics and time horizons to promote and reward superior financial performance.
PERFORMANCE METRICS AND TIME HORIZONS
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Short-Term | Medium-Term | Long-Term | |
1-YEAR | 3 YEARS | 10 YEARS | |
Annual Bonus | Performance Share Units | Stock Appreciation Rights | |
• Earnings | • EPS Growth | • Share Price Appreciation | |
• Free Cash Flow to | • Relative TSR | ||
Net Income Ratio | |||
• Individual | |||
Achievements |
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EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
BASE SALARY
To help UTC attract and retain the most qualified executive talent, we provide competitive base salaries to our executives targeted at the CPG median. Base salary constitutes a significant portion of our NEOs’ fixed compensation (which also includes pension benefits and other benefits such as health, life and disability insurance). Each year the Committee reviews recommendations from the CEO regarding base salary adjustments for ELG members, including the other NEOs. The Committee has complete discretion to modify or approve these recommendations. The CEO has no input and does not participate in any way in the Committee’s determination of his own base salary. Actual salaries will vary from benchmark medians and targetsthe CPG median target based on factors such as performance, job scope abilities and responsibilities, experience, tenure, individual performance, retention risk. Compensation decisionsrisk, external market data and internal pay equity.
ANNUAL INCENTIVE COMPENSATION
Overview
Our NEOs’ 2014 annual incentive awards were determined based on three distinct elements:
ANNUAL INCENTIVE AWARD
(1) | Mr. Hayes’ 2014 annual bonus target was prorated for the portion of the year for which he served as SVP & CFO and for the portion of the year for which he served as President and CEO. |
(2) | Earnings and the ratio of free cash to net income under the UTC Annual Executive Incentive Compensation Plan are defined for both the Corporate Office and our business units on page 47. Refer to page 33 for details on how we weight each performance metric specifically for Corporate Office and business unit executives. |
Target Annual Incentive Award
The Committee approves the target annual incentive award for each ELG member’s position, including the positions held by our NEOs. Target annual incentive awards are equal to a percentage of base salary and vary among executives based on specific roles and responsibilities within the organization. While target award levels generally reflect values that approximate the median of the CPG, actual award payouts are based on both the financial and individual performance factors.
Each year in its annual review of executive compensation, the Committee considers whether any adjustments to annual incentive award target percentages are appropriate. This past year, it adjusted the target percentages for certain ELG members, either to reflect expanded roles and responsibilities or to maintain market competitiveness. Target annual incentive awards for each of the NEOs, are discussed under“Named Executive Officer Compensation” beginning on page 30.
Pay Mix
Overallexcept Mr. Longo, were adjusted (see “Annual Incentive Award” graphic above for individual NEO and ELG member compensation is substantially contingent on performance. The Committee selects individual and business performance metrics designed to link actual compensation amounts with factors that contribute to shareowner value. Fixed compensation elements, such as base salary, pension and other benefits are designed to be market competitive for purposes of attraction and retention. These elements comprise a relatively small portion of the overall compensation package and are aimed generally at the CPG median. As the following charts illustrate, base salary comprises only 8% of CEO compensation and 12% for the other NEOs. Also as shown, 21% of the CEO’s and 19% of the other NEOs’ total pay is allocated to annual bonus. Approximately 69% of the CEO’s and 66% of other NEOs’ total pay is allocated to long-term incentive compensation, higher than for the balance of the executive population.
targets).
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The UTC executive compensation program targets cash compensation (i.e., base salaryEXECUTIVE COMPENSATIONCompensation Discussion and annual bonus) forAnalysis
How We Determine Annual Incentive Award Payouts
Actual award payouts are based on both financial and individual performance, as shown in the NEOsgraphic on page 32.
Financial Performance Factor
To determine the financial performance factors, the Committee measures Company and other ELG members at approximately the CPG median. Actual cash compensation will vary with base salary adjustments andbusiness unit performance relative to two pre-established financial metrics:
• | Earnings. The earnings target for the Company is a fixed net income goal that the Committee sets each December for the following year and aligns with the expected performance the Company communicated externally to investors at that time. Earnings targets for our business units are based on each business’ anticipated opportunities and challenges for the upcoming year. |
• | Free Cash Flow to Net Income (“FCF / NI”) Ratio. The Company’s target FCF / NI ratio is set to generally align with the expected performance communicated to investors each December for the following year. FCF / NI ratio targets are established for each business unit based on their strategic business plan for the year and contribute to the overall goal set for the Company. For the definition of how we calculate the ratio of FCF / NI for both UTC and our business units, refer to page 47 of this Proxy Statement. |
Performance relative to these targets determines the financial performance factors for our Corporate Office executives and for each of our business units. The Committee reviews the calculated financial performance factors relative to target inand retains discretion to adjust the final factor (see “Use of Discretion” on page 34).
The annual bonus program. The Committee targets ELG long-term incentive compensation opportunities at approximatelypool is determined by multiplying the 65th percentile offinancial performance factors by the CPG. This above medianaggregate target value reflects the program’s emphasis on performance-based compensation opportunities linked directly to long-term shareowner value.
Allocation of long-term incentive awards between stock appreciation rights (“SARs”) and performance share units (“PSUs”) also varies by executive level. PSUs vest if, and to the extent, company-wide performance targets are achieved. PSUs comprise half of the value of ELG members’ long-term incentive awards, a higher allocation thanannual bonus amounts for the executive population generally.Corporate Office and each business unit. The Committee determined this was appropriate because ELG membersresulting Corporate Office and business unit pools are more likelythen allocated among eligible executives based on individual performance (see page 34 for details on the individual performance factor).
The metrics and weightings used to directly impact UTC’sdetermine the Company and business unit’s financial performance relative to the established targets.
Board Consultantfactors for 2014 are as follows:
CORPORATE(1)(2) | BUSINESS UNITS(1)(2)(3) | |
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(1) | Financial performance factors are subject to discretionary adjustments by the Committee. |
(2) | Refer to page 47 to see how we calculate earnings and the ratio of FCF / NI for our Corporate and business unit executives. |
(3) | Business unit financial performance measurements reflect UTC’s business unit segment reporting. Otis and UTC Climate, Controls & Security (“UTC CCS”) each continue to report their financial and operational results as separate segments, which is consistent with how we allocate resources and measure performance of these businesses. |
(4) | UTC performance (comprised of UTC Earnings weighted at 24% and UTC FCF / NI weighted at 16%) makes up 40% of the entire financial performance factor for business unit executives. |
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EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
The Committee does not relybelieves that the methodology described above accomplishes the following objectives:
• | Aligns incentives with our annual strategic business plan; |
• | Establishes challenging but achievable bonus targets for our executives; and |
• | Sets targets that are consistent with the assessment of opportunities and risks for the upcoming year, as communicated to our investors. |
Individual Performance Factor
Our NEOs also begin the year with individual strategic, operational and/or financial objectives. Based on an external compensation consultant to determine orMr. Hayes’ assessment of each NEO’s performance against these objectives, he may recommend the amount or form of senior executive or outside director compensation. UTC obtains market data from Towers Watson that the Committee make a discretionary adjustment to increase or decrease the bonus determined by the financial performance factor. The Committee considers these recommendations and makes adjustments as it deems relevant for benchmarking and other purposes. Towers Watson’s database is comprised of widely available information which is generally accessible to other Towers Watson clients. Towers Watson does not make recommendations to the Committee or management on peer group composition or on the form, amount or design of executive compensation. Should the Committee engage a consultantappropriate. Mr. Hayes plays no role in the future for the purposeCommittee’s determination of making specific compensation recommendations, it would select a consultant with no other material relationship with UTC.
Fixed Compensationhis own annual incentive award.
Use of Discretion
The principal elements of fixed NEO compensation are base salary, pension, benefits (e.g., health, life and disability insurance) and a perquisite allowance. UTCCommittee sets annual bonus targets the aggregate value of fixed compensation at the CPG median to support attraction and retention objectives.
Base Salary.Base salaries are targeted at approximately the CPG median. Individual base salaries vary based on job scope, tenure, retention risk and performance. NEO base salary decisions are more fully discussed under “Named Executive Officer Compensation” on page 30.
Pension.The Pension Benefits table on page 41 details NEO retirement benefits. Executive pension benefits under the CB formula are approximately at the CPG median when compared to other cash balance formulas. The FAE formula covers executives hired before 2003 and is approximately at the median when compared to CPG companies with traditional fixed benefit pension plan designs. The CB formula will replace the FAE formula for all eligible employees on January 1, 2015. Any employee hired on or after January 1, 2010 is not eligible for pension benefits under the FAE or CB formula and instead participates in an enhanced Company 401(k) plan. The Pension Preservation Plan, an unfunded program with the same benefit formula applicable to the broad-based, tax qualified salaried employee pension plan, provides pension benefits in excess of IRC limits. The Company also maintains an unfunded program (i.e., Savings Restoration Plan) that provides matching contributions at the same rate as the underlying 401(k) plan, based on compensation in excess of the IRC limits. The overall value of retirement benefits is consistent with competitive market trends and UTC’s program objective of maintaining a median leveloffering payout opportunities that align with Company, business unit and individual performance. However, the Committee retains the authority to make upward or downward adjustments if it determines that performance relative to pre-established targets does not accurately reflect the overall quality of fixed compensation.
Health and Welfare Benefits.Actively employed ELG members receive life insurance coverage equal to three times their projected age 62 base salary. Upon retirement,performance for the policy is funded to provide a life insurance benefit equal to two times age 62 (projected or actual) base salary. The ELG long-term disability plan protects 100% of base salaryyear. While the financial metrics remain the primary basis for one-year following disability, and thereafter, decreases 5% per year until a permanent level of 80% is reached. ELG members participatedetermining actual bonus amounts, the Committee has made discretionary adjustments in the same health benefit programs offeredpast to other employees, with the only difference beingboth financial performance factors and individual performance factors. Examples of situations that ELG members are eligible for comprehensive annual physicals.
Perquisites.ELG members receivecould result in a perquisite allowance equal to 5% of annual base salary. An executive may elect to allocate the allowance to the reimbursement of UTC company car lease paymentspositive or paid to the executive in cash. Footnotes (6)(b) and (c) to the Summary Compensation table on page 36 provide information on each NEO’s perquisite allowance. Mr. Chênevert also has access to the corporate aircraft for personal travel, in accordance with UTC’s security policy.
Variable Compensation
Incentive compensation programs are designed to link compensation directly to UTC’s results. The programs utilize three forms of awards, each with quantifiable performance metrics:negative adjustment include:
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| An executive’s failure to adhere to UTC’s Code of Ethics, Enterprise Risk Management program or other Company policies |
Financial Performance Goals and Results for 2014
Earnings.The Committee believes2014 earnings target for UTC was set at the net income level that earnings growth and free cash flow provide reliable measurements of overall business performance. UTC’s three-year TSR versus thatcorresponds to the midpoint of the S&P 500 compares UTC shareowner returns against2014 EPS range we communicated to investors in December 2013, when we projected an EPS range of $6.55 to $6.85. The midpoint of this range was $6.70 per share, which corresponded to a broad-based and widely accepted investor benchmarknet income target of publicly traded companies. Because long-term share price appreciation and dividends generally correspond with long-term Corporate Office performance, the TSR metric provides a performance-based compensation opportunity related directly$6.145 billion. For 2014, actual net income equaled $6.220 billion, adjusted to shareowner value and substantially correlated with overall corporate results.
Short-Term Awards
Annual Bonuses.UTC and business unit financial performance, as well as individual performance determine$6.243 billion for annual bonus amounts. The Committee establishes a target annual incentive award and individual performance objectives for each NEO. In addition, the Committee establishes business performance measures that determine the funding and size of bonus pools established separately for each UTC business unit and the Corporate Office. The following graphic illustrates how the individual bonus awards are determined. Target level performance generally results in annual bonus values approximately at the CPG median.
For purposes of this formula, earnings for the Corporate Office means diluted EPS, as reported in UTC’s Annual Report on Form 10-K. For the business units, earnings represent an internal metric calculated using operating profit excluding restructuring costs, non-recurring items andafter eliminating the impact of significant acquisitions and divestitures. Free cash flowa non-recurring charge unrelated to operating performance for an issue predating the Corporate Office equals consolidated
net cash flows provided by operating activities less capital expenditures (as reported in the Annual Report on Form 10-K for both components). Free cash flow for each of the business units is an internal management measure of cash performance that consists of net cash generated from operating activities less capital expenditures with adjustments for the net cash flow impact of restructuring and other costs and non-recurring items. Net income for the Corporate Office equals UTC net income attributable to common shareowners, as reported in the Annual Report on Form 10-K. Net income for the business units is defined as each business unit’s respective share of UTC net income attributable to common shareowners with adjustments for the net income impact associated with restructuring and other costs and non-recurring items.
The Committee set the Corporate Office 2011also approved specific earnings growth target at 10%, based on its view that earnings growth at that level presented a significant, but realistic challenge, and aligned with management’s expectations communicated to investors prior to the start of the year. This target also aligned with market expectationsgoals for comparable companies reflected in analyst earnings estimates. Business unit earnings growth targetseach business unit. These goals ranged between 0%6% and 10% based on15%, and reflected the Committee’s assessment of each business unit’s external environmentmarket conditions and challenges.the specific challenges and opportunities anticipated for 2014.
Free Cash Flow to Net Income Ratio.In December 2013, the Committee approved a FCF / NI goal equal to 92% for the Company. The Committee again integrated a metric of free cash flow as a percentage of net income into the formula, reflecting its viewbelieves that cash flow performance correlates withis a relevant measure of the overall quality and sustainability of earnings performance. As in prior years,earnings. For each business unit, the 2011FCF / NI target was set at a level which, if attained, would achieve the FCF / NI target established for the entire Company. For 2014, UTC’s free cash flow target equaled 100%90% of net income attributable to common shareowners.income.
2014 Results.Earnings performance equaled 122% of target and the FCF / NI ratio equaled 98% of target, resulting in a blended financial performance factor of 112% of target for the Company.
34 | ![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners |
EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
LONG-TERM INCENTIVE COMPENSATION
Types of Incentives Used
Our NEOs receive two types of annual equity-based long-term incentive awards: Performance Share Units (“PSUs”) and Stock Appreciation Rights (“SARs”). For 2014, PSUs comprised slightly more than half of ELG members’ annual long-term incentive awards. The Committee concluded that achieving double digit earnings growth with matching free cash flow constituted a challenging targetremaining portion of their annual long-term incentive award was granted in the contextform of difficult external market conditions.SARs. The number of PSUs and SARs awarded is based on a target value. These awards are subject to a three-year vesting period and other terms and conditions, as described in the award statements and the United Technologies Long-Term Incentive Plan (“LTIP”).
The Committee decided that additional upside opportunity shouldalso approves special equity grants from time-to-time for purposes such as recruitment, retention or to drive the achievement of certain strategic performance goals. These grants can be providedissued in different forms, as appropriate, including SARs, PSUs, restricted stock, restricted stock units or performance-based SARs. A special performance-based SAR grant was issued to better calibrate program opportunity and risk, and thus, increased the award pool maximum from 160% to 200% of target for 2011. This increase aligns with competitive market practice, placing the overall program opportunity approximately at the CPG median.
The Committee sets annual individual bonus targets with the objective of offering above median cash bonus opportunity for above median performance. It is important to note that the Committee retains discretion to adjust award pool amounts and individual awards if it determines that measured performance does not accurately reflect the quality of actual performance. Examples of factors that might result in a positive or negative adjustment relative to calculated results include: (i) material and unforeseen circumstances beyond management’s control that affect performance relative to the established targets (negatively or positively); (ii) performance relative to corporate responsibility objectives; and (iii) adherence to the Code of Ethics, the Enterprise Risk Management program and other UTC policies. The Committee has made discretionary adjustments in the past and retains the authority to do so in the future. Because the Committee retains this discretion, the annual bonuses of the NEOs are reported in the Bonus column of the Summary Compensation TableMr. Darnis during 2014, as described on page 36, rather than the Non-Equity Incentive Plan Compensation column even though these payments are substantially based on measured performance against pre-established targets. The Committee believes flexibility is important to assure that each executive’s bonus payment is aligned with individual performance for the year. NEO annual bonuses for 2011 are discussed under “Named Executive Officer Compensation” beginning on page 30.51.
For 2012, the Committee again selected earnings growth and cash flow performance metrics for the annual bonus plan. It continues to believe that such metrics align well with shareowner expectations and interests.
Long-Term Awards
Annual long-term incentive awards consist of PSUs and SARs.
Performance Share Units.
PSUs vest at the end of a three-year performance cyclemeasurement period, if and to the extent UTC meets pre-established performance targets. At the end ofCompany has met the performance cycle, eachgoals established by the Committee. Each vested PSU converts into one share of UTC Common Stock. Unvested PSUs do not earn dividends. For PSUs awarded in 2011, the Committee established EPS growth and relative TSR targets, with each target applicable to 50% of the PSUs awarded, as follows:
ANNUAL EPS GROWTH (50% of award) | TSR (50% of award) | |||||||
Level of Performance Achieved | Percent of EPS Portion Vesting | Level of Performance Achieved Relative to S&P 500 | Percent of TSR Portion Vesting | |||||
Minimum | 7% | 0% | 37.5th percentile | 0% | ||||
Target | 10% | 100% | 50th percentile | 100% | ||||
Maximum | 13% | 200% | 75th percentile | 200% |
Metrics
The Committee believes both absolute and relative metrics provide appropriate goals for our long-term incentive awards. Our PSU awards currently use two metrics: an absolute earnings per share (“EPS”) growth metric and a relative total shareowner return (“TSR”) versus the S&P 500 metric (see page 47 for details on how we calculate these metrics). Each metric receives a 50% weighting. Vesting is determined independently for each metric.
Setting Performance Goals
Earnings Per Share Growth. The Committee approved a three-year EPS compound annual growth rate of 10% as the target for the 2014 PSU grant. This goal is based on our three-year strategic business plan and represents a challenging, yet attainable goal that aligns with the expectations we communicated to shareowners in the December prior to the beginning of the performance period.
Relative Total Shareowner Return. For the 2014 PSU grant, the Committee set a cumulative three-year TSR performance target at the 50th percentile relative to the S&P 500.
We believe that comparing UTC’s TSR to companies within the S&P 500 provides an appropriate and external benchmark against which to measure thefor measuring our share price performance ofas a large capitalization company such as UTC. The Committee selected an S&P 500 benchmark, rather thancompany. We do not set TSR goals relative to the performance of our CPG, because the more limited composition of the CPGwhich serves the specific purpose of measuring the competitiveness of UTC’sour compensation elements rather than relativeprogram. We believe the S&P 500 provides a more comprehensive and relevant comparison for our share price performance. UnlikeAlso, unlike the widely acceptedCPG, the S&P 500 the CPG doesis not provide an established benchmark for these purposes.a self-selected, customized benchmark.
Consistent with 2010 awards, in setting PSU targets for 2011, the Committee again determined that due
Generally, our PSUs are designed to global financial market volatility it could not reliably project a challenging yet realistic three-year cumulative EPS growth target. Therefore, in lieudeliver median compensation at target levels of a cumulative three-year target, the Committee elected to retain the flexibility to review and set EPS growth targets separately for each of the three years in the performance cycle to evaluate external impacts on company performance.
EPS growth targets are set at the beginning of each year and provide the Committee with the ability to re-calibrate performance in response to the operating environment. Under this approach, the vesting of one-third of the EPS growth component of the PSU award will be calculated annually. For 2011, the Committee set an EPS growth target at 10%. The Committee set the 2012 EPS growth target at 9%, subject to adjustment for financial impacts of the pending Goodrich acquisition. The payment of the award remains contingent on continued employment through the end of the three-year performance cycle (except in the event of retirement, disability or death). The Committee again selected EPS growth and relative TSR asperformance. As a result, below-target performance levels will generate below-median payouts and above-target performance levels will generate above-median payouts.
![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners | 35 |
EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
The following charts show the percentage of the 2014 PSUs that will vest based on the levels of performance achieved for each metric:
EPS GROWTH (WEIGHTED 50%) | TSR VS. S&P 500 (WEIGHTED 50%) |
![]() | |
Performance Awards Vesting
PSUs granted at the start of 2012 vested at 90% of target. We believe this result, based on 0% relative TSR vesting and 180% EPS growth vesting, aligns with the overall performance of the Company during the 2012-2014 performance period and the corresponding value received by our shareowners during those three years.
Additionally, the performance period associated with the first tranche of the special performance-based SAR award granted in 2012 to Mr. Bellemare and Mr. Longo ended on December 31, 2014. 50% of the SARs granted vested at 99% of target, metrics for the 2012 PSU award.based on performance relative to earnings, revenue, return on sales and organizational objectives. The remaining 50% of SARs granted are subject to performance targets measured through December 31, 2016.
Stock Appreciation Rights.A SAR entitles
SARs entitle the holderaward recipient to receive, at the time of exercise, shares of UTC Common Stock with a market value equal to the difference between anthe exercise price which is equal to the(the closing price of UTC’s Common Stock on the date of grant,grant) and the market price of UTC Common Stock on the date of exercise.the SARs have a ten-year termare exercised. SARs vest and become exercisable beginningafter three years afterand expire ten years from the date of grant. If the award. The value realized upon exerciseemployment of the executive terminates prior to the vesting date, the award is settledforfeited, except in sharesthe case of UTC Common Stock. The Committee views share price appreciation asdeath, disability, qualifying retirement or qualifying separation following a particularly relevant measure of long-term performance since it correlates directly with shareowner value. The Committee believeschange-in-control.
It is the Committee’s view that prior SAR and stock option awards have provided an important stock-based incentive for management’s successful achievement ofmanagement to achieve objectives that are aligned with shareowners’ long-term interests, including productivity, innovation, growth and business
balance objectives aligned with shareowners’ interests. UTC’s balance. SAR awards directly link NEO compensation to share price appreciation, reflecting the creation of long-term value for both executives and shareowners. The ten-year term of these awards has been a driving force behind our long-term performance, as measured by our ten-year TSR, overwhich outpaced both the Dow Jones Industrial Average and the S&P 500. For the ten-year period endedending on December 31, 2011 was 175%2014, UTC’s cumulative TSR equaled 176%, substantiallysignificantly exceeding the performance of the Dow Jones Industrial Average at 57%114% and the S&P 500 at 33%110%.
Other Programs
EMPHASIS ON “AT RISK” PAY
“At risk” compensation — meaning compensation that is directly contingent on performance — made up 86% of our CEO’s and 87% of our other NEOs’ compensation received for 2014 (i.e., base salary, annual bonus and long-term incentives). Annual bonuses and long-term incentive awards are subject to the achievement of pre-established performance targets and are designed to link directly to shareowner value. Base salary and other fixed elements of compensation are essential to any compensation program and necessary for the recruitment and retention of top talent. However, we believe that “at risk” compensation for our most senior executives should significantly outweigh base salaries. Our 2014 compensation reflects this philosophy.
36 | ![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners |
EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
The following charts show the basic pay mix for our CEO and other NEOs for 2014, which illustrates the significant portion of compensation that is “at risk.”
PAY MIX
CEO* | OTHER NEOs* | |
![]() | ![]() |
* | For both pay mix charts, the base salary and annual and long-term incentive awards shown reflect the values disclosed in the Summary Compensation Table on page 49. The above charts exclude Mr. Chênevert’s compensation, as he was not eligible for a 2014 annual incentive award. |
OTHER COMPENSATION ELEMENTS
Retirement and Deferred Compensation Benefits
The Committee maintains retirement and deferred compensation plans to help UTC attract and retain the most highly talented senior executives. Over the years, the Committee has modified these programs to ensure competitive alignment with an evolving market. We believe the overall value of our retirement and deferred compensation programs are consistent with the marketplace and approximates the CPG median.
The Pension Benefits table on page 55 and the Nonqualified Deferred Compensation table on page 56 detail the retirement benefits and deferred compensation values for each of our NEOs. All of the NEOs are eligible to participate in the following retirement and deferred compensation plans:
Plan* | Description | |
UTC Employee Retirement Plan | Employees, including our NEOs, who were hired before January 1, 2010, are eligible to participate in this tax-qualified pension plan. Effective December 31, 2014, participating employees who were covered by the final average earnings (“FAE”) formula of this plan transitioned to a cash balance formula. As a result, the cash balance formula, which had already been in effect for newer plan participants, will now apply to all participants who were covered by the FAE as of December 31, 2014. | |
Pension Preservation Plan | An unfunded, non-qualified retirement plan utilizing the same benefit formula, compensation recognition, retirement eligibility and vesting provisions as the tax-qualified UTC Employee Retirement Plan. It provides pension benefits not provided by the qualified pension plan because of Internal Revenue Code limits. | |
UTC 401(k) Savings Plan | Employees may contribute to this plan and receive a matching contribution in the form of UTC Common Stock. Employees hired on or after January 1, 2010 are not eligible to participate in the UTC Employee Retirement Plan and instead receive an additional age-based Company automatic contribution to their UTC 401(k) Savings Plan. | |
UTC Savings Restoration Plan | An unfunded program that credits employee and Company matching contributions at the same rate as the UTC 401(k) Savings Plan to the extent such contributions would exceed Internal Revenue Code limits. | |
UTC Deferred Compensation Plan | A non-qualified, unfunded deferred compensation arrangement that offers participants the opportunity to defer up to 50% of base salary and up to 70% of annual bonus. Executives may also defer receipt of their PSU awards. |
* | Detailed descriptions of each of these plans and the benefits they provide appear on pages 55 to 57. |
![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners | 37 |
EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
Perquisites and Other Benefits
We provide insurance coverage and other benefits to our senior executives. The Committee believes these benefits are consistent with market practice and contribute to recruitment and retention.
Perquisite/Benefits | Description | |
ELG Life Insurance | Current and former ELG members receive life insurance coverage equal to three times their base salary at age 62 (projected or actual). | |
ELG Long-Term Disability | The ELG long-term disability program provides an annual benefit equal to 80% of base salary plus target annual bonus following disability. | |
Healthcare | ELG members are covered under the same health benefit program we offer to our other employees. | |
Executive Physical | ELG members are eligible for a comprehensive annual executive physical. | |
Executive Leased-Vehicle | UTC provides executives with an annual allowance that may be applied towards the use of a leased-vehicle. The value of the allowance varies with grade level. Leased-vehicle costs above the annual allowance are paid directly by the executive. | |
Aircraft Usage | As of January 2015, the Committee modified its policy on personal use of the Corporate aircraft. Mr. Hayes may now use the Corporate aircraft for up to 50 hours per year with reimbursement of expenses to the Company for personal utilization above this limit. Personal use of the Corporate aircraft by our President and CEO aligns with our security policy, and the Committee believes that it optimizes the most efficient use of Mr. Hayes’ time. Under this policy, Mr. Hayes may also fly commercially, subject to review by UTC security personnel. |
Severance and Retention Arrangements
ELG members participate in the severance and retention arrangements described below. Because mostconsistent with practices in effect at the majority of our CPG companies provide similar programs,companies. We believe such arrangements help UTC maintain a competitive compensation program. In addition to the market competitive nature of our severance arrangements, separated ELG members must adhere to restrictive covenants designed to protect UTC’s interests, including non-compete, non-solicitation and non-disclosure obligations.
Severance Program
Over the years, the Committee believes that these arrangements helphas made a number of modifications to maintain the competitiveness of UTC’s compensation package. Severance benefits provide financial assistance that aids in the transition period from UTC employment to the commencement of new employment, which can be a lengthy process for senior executives. The ELG severance program provides securityto both align with market best practices and minimizes potential distraction associated withto serve the riskevolving needs of employment termination.the Company. The following chart outlines these modifications.
ELG Appointment Date | |||
Prior to January 2006 | Between January 2006 and April 2013 | On or after May 2013 | |
Separation Cash Benefit | 2.5x base salary | 2.5x base salary | No cash benefit |
Conditions to Receive Cash Benefit | - Mutually agreeable separation - 3+ years as ELG member | - Mutually agreeable separationprior to age 62 - 3+ years as ELG member | N/A |
ELG RSU Award | No award granted | Grant equal to 2x base salaryat time of grant | Grant equal to 2x base salaryat time of grant |
Conditions to vest in the ELG RSU Award | N/A | - Mutually agreeable separationon or after age 62 - 3+ years as ELG member | - Mutually agreeable separation - 3+ years as ELG member |
NEO Participation | Gregory Hayes Geraud Darnis Alain Bellemare | Charles Gill, Jr. | Peter Longo |
38 | ![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners |
Severance Protection.EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
ELG RSU awards are granted upon appointment to the ELG. The ELG program provides a cash severance payment of upawards are eligible to 2.5 times base salary in the event of involuntary termination (other than for misconduct)vest after three years of service as an ELG member. Paymentmember following mutually agreeable separation, which is discussed in footnote 2 of ELG severance benefits requires acceptance of,the Potential Payments on Termination or Change-in-Control table on page 59. Dividend equivalents are earned on unvested RSUs and adherence to, restrictive covenants protective of UTC’s interests, including non-compete and non-disclosure obligations. For individuals appointedare reinvested as additional RSUs.
The Committee’s most recent change to the ELG after December 2005, thisseverance program eliminated the cash separation benefit is not available ifentirely, further aligning the terminationlong-term interests of employment occurs after the individual reaches age 62. For these individuals, this benefit has been replaced by an ELG RSU retention award, as described in the following paragraph.both our executives and shareowners.
Retention.ELG members appointed after December 2005 receive an ELG RSU retention award equal in value to two times the executive’s base salary on the grant date. Mr. Michaud-Daniel is the only NEO to
Change-in-Control Benefits
We have received this award. Each restricted stock unit corresponds to one share of Common Stock and accrues dividend equivalents. These restricted stock units may not be sold, pledged, or assigned prior to vesting on retirement at age 62 or later. The restricted stock units are forfeited if the executive terminates or retires before age 62 for any reason. Recipients of this award are not eligible for the ELG severance benefit if retirement occurs on or after age 62.
Executives appointed to the ELG before December 2005 do not receive the ELG RSU retention grant, but remain eligible for the ELG severance benefit following retirement after age 62. The Committee believes that the restricted stock unit grant has significant retention value and, as with the severance arrangement, imposes restrictive covenants. This restricted stock unit grant is consistent with the Committee’s retention strategy, while enhancing shareowner alignment by linking long-term value to share price.
Change-in-Control Benefits.UTC has maintained a senior executive change-in-control severance protection planprogram since 1981. The Committee has modified this plan from timeThis program is designed to timehelp ensure continuity of management in a potential change-in-control situation. However, in response to shifts in practice andchanging market norms. Changes have involved either benefit reductions or the adoption of less favorable terms and conditions.
Effective June 2009, the Committeepractices, we closed the change-in-controlthis program to new participants. Executives appointed toparticipants effective June 2009, and eliminated the ELG after that date do not participate in a change-in-control severance program.
Because existing agreements cannot be unilaterally amended, program changes have historically been adopted prospectively, resulting in multiple versions of the agreement. To address those differences, UTC recently entered into agreements with each ELG member covered by the change-in-control severance plan to establish, with each person’s consent, uniform terms that conform to a market competitive standard. The amended agreements provide reduced change-in-controlfollowing benefits for all
• | Excise tax gross-ups |
• | Three-year continuation of healthcare and other benefits |
• | Crediting of three additional years of service under our qualified and supplemental pension plans |
• | Unilateral right to voluntarily resign with benefits |
existing participants. The revised terms and conditions have been designed to provide senior executives with a reasonable level of protection in the event of change-in-control related terminations, as well as helping to assure continuity of management under circumstances that reduce or eliminate job security and might otherwise lead to accelerated departures.
The revised agreements provideprogram currently in effect for legacy participants includes the following:
• | A cash severance benefit of 2.99 times the sum of base salary |
• | Accelerated vesting of long-term incentive awards, including PSUs at target |
• | Benefits under the program are subject to a “double trigger,” meaning they are provided only |
The agreements also eliminate
Executives who receive benefits under this program are not eligible for the following change-in-control benefits:ELG cash separation benefit.
Role of Severance and Retention Benefits in Compensation Program |
|
The |
With these changes, the Committee believes that with the aggregate value of benefits, covenants and othermodifications described above, the terms and conditions under itsof our severance arrangements coveringand change-in-control agreements for ELG members are market competitive formarket-competitive relative to our CPG and provide participating executives with a companyreasonable level of UTC’s size. In the Committee’s view,financial security. Because severance and change-in-control benefits including in the event of a change-in-control, are event contingent andon future events, they operate as a form of insurance rather than as a principal component of compensation strategy. The Committee, therefore, does not therefore, take severancethese benefits into account when setting the other elements of compensation or measuring total direct compensation.
The Potential Payments on Termination or Change-in-Control table on page 4458 sets forth the estimated values and details of the termination benefits each NEO would receive under various scenarioshypothetical scenarios.
![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners | 39 |
EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
How We View Executive Compensation
The Summary Compensation Table on page 49 provides annual compensation data in accordance with SEC requirements. This uniform format is helpful for cross-company comparisons. However, the Committee feels that the SEC-mandated format does not fully represent all of its annual compensation decisions and, in particular, does not provide the basis for a valid CEO pay-for-performance assessment. Therefore, when reviewing annual compensation, the Committee uses several alternative calculation methodologies, as described in this section and summarized in the chart below:
Summary Compensation Table | Total Direct Compensation | Realizable Compensation | Realized Compensation | |
Purpose | SEC-mandated compensation disclosure | Reflects the Committee’s compensation decisions based on 2014 performance | Used to evaluate pay-for- performance alignment | Used to evaluate pay-for-performance alignment |
Pay Elements | Actual pay received •Base salary paid in 2014 •Annual bonus for 2014 performance •Dividend equivalents •All other compensation Future pay opportunities that may or may not be realized such as: •Accounting value of equity awards (SARs and PSUs) granted in 2014 •Change in actuarial value of pension benefit | •Base salary set in 2014 •Annual bonus for 2014 performance •Accounting value of equity awards (SARs and PSUs) granted in January 2015, reflecting 2014 performance Excludes: Pay elements outside the scope of the Committee’s annual compensation decisions such as: •Change in actuarial value of pension benefit •Dividend equivalents •All other compensation | Three-year average of: •Base salary •Annual bonus •Dividend equivalents •In-the-money value of equity awards (SARs and PSUs) granted during the prior three fiscal years (calculated based on the stock price at the end of the third year) •Other direct(1) compensation Excludes: •Change in actuarial value of pension benefit •Other indirect(2) compensation | Single-year measure of compensation earned: •Base salary paid in 2014 •Annual bonus for 2014 performance •Dividend equivalents •Gains on options / SARs exercised and vested PSUs •Other direct(1)compensation Excludes: •Change in actuarial value of pension benefit •Other indirect(2) compensation |
(1) | Other direct compensation includes personal use of the Corporate aircraft, leased-vehicle payments and other miscellaneous compensation elements. |
(2) | Other indirect compensation includes insurance premiums and Company contributions to non-qualified deferred compensation plans and the UTC 401(k) Savings Plan. |
TOTAL DIRECT COMPENSATION
Unlike the amounts reported in the Summary Compensation Table, total direct compensation includes only pay elements that directly reflect the Committee’s assessment of Company and individual performance for the current year. For example, the Summary Compensation Table shows the grant date fair value of long-term incentive awards granted in January 2014, reflecting the Committee’s assessment of 2013 performance. In contrast, total direct compensation reflects 2014 performance by instead including the grant date fair value of awards granted in January 2015. Other elements included in the Summary Compensation Table—changes in pension values, dividend equivalent payments and other formulaic compensation elements—are outside the scope of the Committee’s annual pay decisions. Therefore, excluding these elements from total direct compensation renders a more accurate and current assessment of executive compensation at UTC.
40 | ![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners |
EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
MR. HAYES: 2014 SUMMARY COMPENSATION TABLE VS. TOTAL DIRECT COMPENSATION
Compensation Element | 2014 Summary Compensation Table (in thousands) | 2014 Total Direct Compensation (in thousands) | |||
Base Salary | $950 | $1,300 | |||
Annual Bonus | $1,600 | $1,600 | |||
Stock Awards | $2,333 | $4,752 | |||
(1/2/14 grant date) | (1/2/15 grant date) | ||||
Option Awards | $2,030 | $3,280 | |||
(1/2/14 grant date) | (1/2/15 grant date) | ||||
Non-Equity Incentive Compensation* | $54 | ||||
Change in Pension Value | $1,825 | N/A | |||
All Other Compensation | $194 | ||||
Total | $8,986 | $10,932 |
* | Reflects dividend equivalents paid in cash under the legacy Continuous Improvement Incentive Program. |
REALIZABLE COMPENSATION
The Committee does not believe that the Summary Compensation Table or total direct compensation values adequately measure CEO compensation for the purpose of assessing the alignment of pay with performance. Both methods utilize estimated values of long-term incentive awards at the time of grant. As might be expected, however, an estimated value can differ significantly from the actual value paid.
Therefore, the Committee also considers “realizable compensation,” which measures compensation based on the average annual amount of salary, annual bonus, long-term incentive awards, non-equity incentive compensation and other direct compensation elements over the preceding three years. Realizable compensation plays an important role in helping the Committee assess our compensation program’s alignment with shareowners’ long-term interests. It captures the impact of UTC’s current share price performance on previously granted long-term incentive awards by using the “in-the-money” value for these awards, rather than a grant date fair value. The “in-the-money” value is defined as the difference between the closing price of our Common Stock at the end of the three-year measurement period and the closing price of our Common Stock on the grant date. By using this end-of-year stock price, realizable compensation directly correlates the executive’s benefit with the return our shareowners received from investing in our Common Stock over the same period. An example of this alignment is shown in the decrease in Mr. Hayes’ realizable compensation from 2013 to 2014.
Unlike the values reported in the Summary Compensation Table, the calculation of realizable compensation excludes any change in the value of the executive’s pension benefits during the year. The change in pension value shown in the Summary Compensation Table does not represent actual payments to be received upon retirement. It is merely an actuarial estimate of the change in benefit from the preceding year’s estimate that is heavily influenced by actuarial assumptions and external economic factors like fluctuating interest rates. In addition, Mr. Hayes and the other NEOs participate in a broad-based pension plan with the same benefit formula that applies to all U.S. salaried employees. This pension plan does not measure individual or Company performance as assessed by the Committee and is therefore, in the Committee’s view, irrelevant to the pay-for-performance assessment.
Realizable compensation also excludes other indirect compensation elements, such as Company contributions to the UTC 401(k) Savings Plan and our non-qualified deferred compensation plans, as well as life insurance premiums. Since these elements are also not based on performance, the Committee does not consider them relevant to the assessment of the CEO’s pay relative to his performance.
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EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
MR. HAYES: THREE-YEAR HISTORY OF REALIZABLE COMPENSATION
Pay Elements | Calculation Methodology | 2012* | 2013* | 2014* |
Base Salary | Average annual base salary for the year shown and the preceding two years. | $718 | $805 | $883 |
Annual Bonus | Average annual bonus for the year shown and the preceding two years. | $1,157 | $1,173 | $1,300 |
Stock Awards | Average annual value of vested and unvested PSU awards granted in the year shown and the preceding two years, calculated based on the share price at the end of the year shown. For the completed three-year performance cycles, the calculation is based on the actual number of shares vested. For the two uncompleted three-year performance cycles, the calculation assumes that the target number of shares is earned. | $2,445 | $3,474 | $2,832 |
Option Awards | Average annual in-the-money value of SAR awards (vested and unvested) granted in the year shown and the preceding two years, calculated based on the share price at the end of the year shown. | $700 | $3,850 | $2,806 |
Non-Equity Incentive Compensation | Average annual value of dividend equivalents paid in cash for the year shown and the preceding two years for awards granted prior to 2006 under the Continuous Improvement Incentive Program. This legacy program expired at the end of 2014. | $317 | $324 | $236 |
Other Direct Compensation | Average annual value of other direct compensation for the year shown and the preceding two years. Excludes other indirect compensation elements such as life insurance premiums and Company contributions to the UTC 401(k) Savings Plan and to our non-qualified deferred compensation plans. | $41 | $48 | $46 |
Total Realizable Compensation | $5,378 | $9,674 | $8,103 |
* | Compensation values shown in thousands. Mr. Hayes served as SVP & CFO until November 23, 2014, when he was elected President and CEO. |
The following table shows the actual or assumed vesting levels used for Mr. Hayes’ PSUs in the preceding table:
Grant Date | Actual Shares Vested | Vesting (as % of target) | ||
1/4/2010 | 24,056 | 97% | ||
1/3/2011 | 36,312 | 136% | ||
1/3/2012 | 29,070 | 90% | ||
1/3/2013 | Awards not yet vested; target number of shares reflected | |||
1/2/2014 |
REALIZED COMPENSATION
When assessing CEO pay-for-performance alignment, the Committee also reviews “realized compensation” which represents the amount of compensation actually paid during the year, as opposed to amounts that may or may not be paid in the future. Realized compensation incorporates the gainsactually received during the year upon the vesting of PSUs and the exercise of stock options or SARs. Evaluating realized compensation provides the Committee with an additional relevant measure to assess the robustness of our pay-for-performance relationship. Realized compensation demonstrates the strength of the correlation between high cash and equity payouts in years of strong performance and low cash and equity payouts in years of weak performance. Although the decision to exercise stock options and SARs resides with the executive and therefore may not always correlate with Company performance, the timing of exercises often does align with stock price appreciation. Changes in pension values and other indirect compensation elements are excluded from realized compensation for the same reasons noted in the discussion of realizable compensation on page 41.
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EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
MR. HAYES: THREE-YEAR HISTORY OF REALIZED COMPENSATION
Pay Elements | Calculation Methodology | 2012* | 2013* | 2014* | |||||||
Base Salary | Base salary paid during the year shown. | $830 | $870 | $950 | |||||||
Annual Bonus | Annual bonus paid for performance during the year shown. | $1,200 | $1,100 | $1,600 | |||||||
Stock Awards | Realized gains on PSUs that vested during the year shown. | $1,327 | $2,156 | $4,052 | |||||||
Option Awards | Realized gains on stock options and SARs exercised during the year shown. | $0 | $15,387 | $2,990 | |||||||
Non-Equity Incentive Compensation | Value of dividend equivalents paid in cash during the year shown on awards granted prior to 2006 under the Continuous Improvement Incentive Program. This legacy program expired at the end of 2014. | $345 | $308 | $54 | |||||||
Other Direct Compensation | Value of other direct compensation for the year shown. Excludes other indirect compensation elements such as life insurance premiums, Company contributions to the UTC 401(k) Savings Plan and our non-qualified deferred compensation plans. | $47 | $56 | $34 | |||||||
Total Realized Compensation | $3,749 | $19,877 | $9,680 |
* Compensation values shown in thousands. Mr. Hayes served as SVP & CFO until November 23, 2014, when he was elected President and CEO.
SUMMARY COMPENSATION TABLE VS. REALIZABLE AND REALIZED COMPENSATION
The following chart compares the Summary Compensation Table values reported for Mr. Hayes for the past three years to his realizable and realized compensation for the same time period. As the chart shows, the correlation between TSR and realizable and realized compensation is stronger than the correlation between TSR and Summary Compensation Table values.
* Refer to page 42 to see how we calculate realizable compensation and to the table above for the calculation of realized compensation.
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EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
Pay Decisions For Named Executive Officers (NEOs)
In this section, we review and explain the Committee’s 2014 compensation decisions for each of our NEOs.
GREGORY HAYES, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Driven by the Committee’s favorable evaluation of Mr. Hayes’ performance during 2014, coupled with his election as President and Chief Executive Officer of the Company, Mr. Hayes’ total direct compensation increased to $10.9 million in 2014.
MR. HAYES: THREE-YEAR HISTORY OF TOTAL DIRECT COMPENSATION
Committee Pay Decisions* | |||||||||
Compensation Element | 2012 | 2013 | 2014 | ||||||
Base Salary Increased to $920,000 effective April 1, 2014, and subsequently increased to $1.3 million effective November 23, 2014 | $840 | $880 | $1,300 | ||||||
Annual Bonus Award 2014 annual bonus aligns with the financial performance factor for the Company which equaled to 112% of target | $1,200 | $1,100 | $1,600 | ||||||
Long-Term Incentive Award | Reflects 1/2/13 Grant | Reflects 1/2/14 Grant | Reflects 1/2/15 Grant | ||||||
Stock Appreciation Rights and Performance Share Units | |||||||||
$2,030 SARs | $2,030 SARs | $3,280 SARs | |||||||
+ $2,402 PSUs | + $2,333 PSUs | + $4,752 PSUs | |||||||
$4,432 | $4,363 | $8,032 | |||||||
Total | $6,472 | $6,343 | $10,932 |
* Compensation values shown in thousands. Mr. Hayes served as SVP & CFO until November 23, 2014, when he was elected President and CEO.
The Board’s favorable assessment of Mr. Hayes included a review of UTC’s performance relative to pre-established financial goals, as well as Mr. Hayes’ individual performance and leadership, both as SVP & CFO and as President and CEO.
With respect to annual bonus performance metrics, UTC achieved net income of $6.220 billion in 2014, a 9.4% increase from 2013 and above the $6.145 billion target. The ratio of free cash flow to net income equaled 90%, compared to the 92% target. In combination, these results generated a financial performance factor for the Corporate Office bonus pool of 112% of target.
The Committee considered these results, along with the individual performance considerations listed below and awarded Mr. Hayes a $1.6 million annual bonus, an amount that closely aligns with the Corporate financial performance factor.
Individual Performance Highlights
• | Outstanding leadership during the CEO transition period | |
• | As CFO through November 22, 2014, he was instrumental in delivering 10% EPS growth | |
• | Key involvement in multiple strategic wins across UTC’s aerospace businesses | |
• | Leadership in positioning UTC to maximize revenue growth through research and development investments | |
• | Recognition byInstitutional Investor Magazine as the best CFO in the Aerospace and Defense sector | |
• | Strategic leadership in identifying growth opportunities in emerging markets |
44 | ![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners |
EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
OTHER NAMED EXECUTIVE OFFICERS
The Committee bases compensation decisions for NEOs on their individual performance, the overall performance of the Company and business unit performance, where applicable. After reviewing these factors, the Committee determines compensation for the year for each of the NEOs.
Named Executive Officer Compensationkey elements of compensation.
Base Salary.Salary increases in 2011 were consistent with annual market trends, job scope and performance.Mr. Chênevert’s salary increased from $1.625 million to $1.7 million. This increased salary reflectsThe following table summarizes the Committee’s decisions for the 2014 performance year. Unlike the Summary Compensation Table, which includes the long-term incentive awards granted in calendar year 2014, total direct compensation shown in the following table instead includes long-term incentive awards granted in January 2015, reflecting a more direct tie to 2014 performance.
2014 NEO TOTAL DIRECT COMPENSATION
Compensation Element (in thousands) | Longo | Darnis | Bellemare | Gill | ||||||||
Base Salary | $420 | $1,050 | $900 | $685 | ||||||||
Annual Incentive Award | $500 | $1,200 | $1,000 | $750 | ||||||||
Stock Appreciation Rights | $367 | $1,823 | $1,278 | $1,278 | ||||||||
Performance Share Units | $529 | $2,647 | $1,853 | $1,853 | ||||||||
Total Direct Compensation | $1,816 | $6,720 | $5,031 | $4,566 |
Peter Longo, Acting Chief Financial Officer
Until November 23, 2014, Mr. Longo served as Vice President, Finance & Chief Financial Officer of UTC Propulsion & Aerospace Systems (“UTC PAS”). Effective from November 23, 2014 through the end of the year, he served as Acting Chief Financial Officer of UTC. For purposes of annual bonus determination, the weighted performance of the Company and UTC PAS generated a financial performance factor of 103% of target. The Committee considered these results, along with Mr. Longo’s individual performance, and awarded Mr. Longo a $500,000 annual bonus. This amount was above the financial performance factor and reflected a favorable overall assessment of his performance. Consistentperformance as Acting Chief Financial Officer during the CEO transition period.
In 2014, Mr. Longo also received a salary increase from $400,000 to $420,000 to better align with competitive market practice.
Geraud Darnis, President & Chief Executive Officer, UTC Building & Industrial Systems
For purposes of annual bonus determination, the weighted performance of the Company and UTC Building & Industrial Systems (“UTC BIS”) generated a financial performance factor of 100% of target. Based on these results, along with the Committee’s intention to increaseindividual performance considerations listed below, the Committee awarded Mr. Chênevert’s salary over a multi-year time frame commensurate with his tenure as CEO, his salary is nowDarnis an annual bonus of $1.2 million, an amount slightly above the medianfinancial performance factor.
Individual Performance Highlights
• | Effective leadership in driving organic sales growth of 6% for Otis and 3% for UTC Climate, Controls & Security (“UTC CCS”), both of which are double that of 2013 | |
• | The continued successful integration of UTC CCS and Otis | |
• | Financial performance leading to an operating profit of $2.6 billion for Otis and $2.8 billion for UTC CCS | |
• | BIS’ growth in emerging markets through effectively leveraging key partners and instituting best-in-class customer support | |
• | Successful geographic realignment of the BIS businesses to serve customers more efficiently | |
• | His oversight of several significant new product launches within the BIS portfolio |
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EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
Mr. Darnis received a salary increase in 2014 from $1,000,000 to $1,050,000 in recognition of his expanded responsibilities under the BIS organization.
The Committee also granted Mr. Darnis a special performance-based SAR award at the beginning of 2014 for purposes of linking long-term incentives with the successful integration of UTC CCS and Otis (refer to the Grants of Plan-Based Awards table on page 51 for more detail on this award).
Alain Bellemare, President & Chief Executive Officer, UTC Propulsion & Aerospace Systems
For purposes of annual bonus determination, the weighted performance of the CPG.Company and UTC PAS generated a financial performance factor of 103% of target. Based on these results, along with the individual performance considerations related to several strategic aerospace accomplishments listed below, the Committee awarded Mr. Bellemare an annual bonus of $1 million, an amount which aligns with the financial performance factor calculation.
Individual Performance Highlights
• | First successful flight of the A320neo aircraft | |
• | 6,200 firm and option orders for the PurePower®Geared TurbofanTMengine, a revolutionary technology that substantially improves fuel burn and reduces noise and emissions | |
• | Pratt & Whitney’s expanded market share in the fast-growing single-aisle and regional aircraft segments | |
• | His efforts in driving progress to bring 50 new engine and aerospace systems into service over the next few years, collectively representing more than $900 billion of potential future sales over the life of these programs | |
• | Successful roll-outs of multiple aerospace systems to be provided by UTAS for Sikorsky’s S-97 Raider, Mitsubishi’s MRJ aircraft and Embraer’s KC 390, with the latter two powered by Pratt & Whitney engines |
In 2014, Mr. Hayes’Bellemare also received a salary increasedincrease from $665,000$825,000 to $800,000$900,000 to align his salary more closely with market peers.
Charles Gill, Jr., Senior Vice President & General Counsel
For purposes of annual bonus determination, the Company’s financial performance factor was 112% of target. The Committee considered this result, along with the individual performance considerations listed below, and awarded Mr. Gill a $750,000 annual bonus, an amount slightly above the financial performance factor.
Individual Performance Highlights
• | Effective leadership of UTC’s global legal and regulatory affairs, corporate governance, ethics and compliance functions, as well as UTC’s environmental, health and safety programs | |
• | Management of the Company’s most significant intellectual property, litigation and transactional matters | |
• | Oversight of the Company’s ongoing and successful efforts to enhance international trade compliance programs | |
• | Effective counsel and guidance on a wide range of material business matters, including senior executive leadership transitions | |
• | Recognition by theInternational Institute for Conflict Prevention & Resolution’s 2014 Corporate Leadership Award, for his efforts towards efficient and effective methods of conflict resolution |
Mr. Gill also received a salary increase in 2014 from $650,000 to $685,000 to better align his salary with competitivethe market practice. With this increase, his salary approximates the 50th percentile of the CPG for chief financial officers, reflecting his increased time in the role and the Committee’s favorable assessment of his performance.median.
Base salaries for Messrs. Darnis, Bellemare and Michaud-Daniel reflect the complexities and global span of their business entities. Their competitors vary widely by size and consist of stand-alone companies as well as subsidiaries of larger companies. Mr. Darnis’ salary increased from $840,000 to $900,000, driven by both his exceptional performance as President, Carrier and his expanded responsibilities following his appointment as President
Louis Chênevert, Former Chairman & Chief Executive Officer UTC Climate, Controls & Security. His
The Committee increased Mr. Chênevert’s base salary approximates the 70th percentile relativefrom $1,775,000 to internal CPG business segment leaders.$1,900,000 in April 2014. Mr. Bellemare’s salary increased from $560,000 to $675,000 driven by his strong performanceChênevert resigned as President, Hamilton Sundstrand and increased responsibility following his appointment as PresidentChairman & Chief OperatingExecutive Officer UTC Propulsion & Aerospace Systems. With this increase, his
salary approximates the 30th percentile of the CPG, indicative of his recent appointmentCompany prior to his expanded role. Mr. Michaud-Daniel received a salary increase of $50,000 to $610,000, which approximates the 40th percentile relative to his CPG peers.
Annual Bonus.Bonuses paid for 2011 to eachend of the NEOs are shown in the Summary Compensation Table on page 36. The Committee determines individual bonuses based on a combination of businessyear and individual performance factors. Corporate Office performance metrics applicable to Messrs. Chênevert and Hayes were EPS growth and free cash flow. Performance metrics applicable to Messrs. Darnis, Bellemare and Michaud-Daniel were earnings growth and free cash flow targets establishedwas therefore not eligible for their respective business units. Each NEO also had performance objectives relating to ethics and compliance, employee engagement, workforce diversity, risk management, resource conservation, product efficiency and workplace safety. As discussed on page 26,an annual bonuses are determined through a multiple step process involving the measurement of pre-established business performance metrics noted above and the assessment of individual performance. The Committee may make discretionary adjustments to the business performance score used to determine award pools (i.e. earnings growth and free cash flow). Actual bonuses reflect individual performance scores as well as the business performance score. Individual performance scores reflect accomplishments relative to pre-established objectives and other factors the Committee, in its discretion, determined to be relevant to 2011 performance. A discussion of the Committee’s determination of each NEO’s bonus follows.payment for 2014.
46 | ![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners |
EXECUTIVE COMPENSATIONCompensation Discussion and Analysis
PERFORMANCE MEASURES USED IN DETERMINING INCENTIVE COMPENSATION(1)
Plan | Metric | Corporate Office | Business Units | |||||||||||
ANNUAL INCENTIVE | Earnings | Net income, as defined below. | Earnings before interest and taxes less:
• Restructuring costs; • Non-recurring items; and • Impact of significant acquisitions/divestitures | |||||||||||
Free Cash Flow | Consolidated net cash flow provided by operatingactivities, less capital expenditures (as reported in the2014 Annual Report on Form 10-K). The reconciliationof cash flow to free cash flow is as follows: | Internal measure based on:
• Net cash; less • Capital expenditures; • Adjusted for the net cash flow impact of restructuring and other costs and non-recurring items | ||||||||||||
(in millions) | 2005(2) | 2012 | 2013 | 2014 | ||||||||||
Cash flow from operating activities | $4,334 | $6,605 | $7,505 | $7,336 | ||||||||||
Less: capital expenditures | $929 | $1,389 | $1,688 | $1,711 | ||||||||||
Free cash flow | $3,405 | $5,216 | $5,817 | $5,625 | ||||||||||
Net Income | UTC net income attributable to common shareowners,as reported in the 2014 Annual Report on Form 10-K. | Internal measure consisting of each business unit’srespective share of UTC net income attributable tocommon shareowners, with adjustments for the netincome impact of restructuring and other costs andnon-recurring items. |
LONG-TERMINCENTIVE |
| Diluted earnings per share, subject to | ||
Total ShareownerReturn | Total investment return on Common Stock between two points in time, using a trailing 60-day average, calculated to account for changes in share price and |
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Mr. Hayes displayed effective leadership in 2011. As previously discussed, EPS growth of 16% with free cash flow equal to 113% of net income was well above target levels. This level of performance was consistent throughout 2011, with reported earnings exceeding analyst consensus estimates each quarter. Performance at this level in a challenging year requires strong leadership of the Corporation’s finance function. UTC’s outstanding cash flow performance enabled the Corporation to increase its dividend by 12.9% in 2011. These accomplishments resulted in an above target individual performance assessment by the Committee resulting in a bonus at 169% of target compared with the 150% adjusted Corporate pool factor.
The Committee favorably assessed Mr. Darnis’ individual performance based on Carrier’s outstanding 2011 results of 28% earnings growth, coupled with organic sales growth of 9%, both measures well above 2011 target levels. In addition, under Mr. Darnis’ leadership, Carrier neared completion of its portfolio transformation agenda to concentrate on businesses where its technologies and manufacturing expertise add value and generate attractive margins. The Committee also noted Mr. Darnis’ strong leadership in driving the integration of Carrier and UTC Fire & Security into the Corporation’s new UTC Climate, Controls & Security business entity. Based on these 2011 business results and longer-term initiatives, the Committee assessed Mr. Darnis’ performance to be above target. However, Carrier’s performance factor was already at the 200% program maximum. The Committee, therefore, focused on the dollar amount of the award as well as the applicable factor and set Mr. Darnis’ bonus at $1.5 million or 185% of target. This is the largest annual bonus ever awarded to a business unit president and an amount that appropriately recognizes Mr. Darnis’ outstanding 2011 performance.
Mr. Bellemare’s above target individual performance resulted in a bonus slightly above Hamilton Sundstrand’s 128% factor. Hamilton Sundstrand’s 2011 financial performance included 12% earnings growth with free cash flow in excess of earnings. In addition, key strategic accomplishments in 2011 included Hamilton Sundstrand’s performance contributing to the certification of the Boeing 787, with aircraft revenue service commencing in October and nine major Hamilton Sundstrand systems on board. The Committee also noted Mr. Bellemare’s contributions to the planned acquisition of Goodrich Corporation and his leadership in the development of the UTC Propulsion & Aerospace Systems entity through the integration of Pratt & Whitney and Hamilton Sundstrand.
Mr. Michaud-Daniel’s 2011 performance resulted in a bonus award equal to 129% of his established annual bonus target. Otis’ ability in 2011 to increase its industry-leading operating margin in a challenging market environment was an outstanding achievement. Otis sustained its strong new equipment order growth in the strategically important BRIC countries (i.e., Brazil, Russia, India and China), notwithstanding slowing emerging market growth trends. Mr. Michaud-Daniel met the challenge of maintaining Otis’ momentum with its industry-leading products and financial performance. These factors resulted in an above target individual performance assessment and a bonus award above Otis’ 104% performance score.
Long-Term Awards.The value of long-term incentive awards for most ELG members, including Messrs. Chênevert, Hayes and Michaud-Daniel, aligned with the program target of the 65th percentile of the CPG. For Messrs. Darnis and Bellemare, in recognition of exceptional performance in leading their businesses in 2010, the value of 2011 LTIP awards approximated the 75th percentile.
The three-year performance cycle for PSUs granted in 2009 ended on December 31, 2011. The Committee reviewed performance against target and approved vesting results for the 2009 PSUs at its February 2012 meeting. Vesting of 2009 PSUs was contingent on two equally weighted targets: (i) UTC attainment of the predefined cumulative EPS growth target; and (ii) UTC’s TSR relative to the S&P 500. UTC’s cumulative annual EPS growth rate over the period equaled 3.86%, falling below the minimum threshold for vesting half of the award. TSR ranked at the 50.7th percentile relative to the S&P 500, resulting in vesting at 103% of target on the other half. Overall, the 2009 PSUs vested at 51% of target.
Dilution and Deductibility
DILUTION AND DEDUCTIBILITY
Under the 2005United Technologies Long-Term Incentive Plan (“LTIP”), as amended,approved by our shareowners, the total number of shares of UTC Common Stock prospectively issuable under PSU and SARequity-based awards madeissued in 20112014 was approximately 1% of shares outstanding and within applicable LTIP share limitations. TheAs of the end of 2014, the total number of shares potentially issuablethat could be issued under the LTIP, and all predecessor plans, as of the end of 2011, was approximately 11%10% of shares outstanding (calculated on a fully diluted basis) and, which is at approximately the CPG median. DilutedUTC’s diluted earnings per share reflect all such shares.
Annual bonuses and long-term incentive awards are provided pursuant
The Committee considers tax deductibility among many other factors when making compensation decisions. To the extent consistent with other compensation objectives, the Committee attempts to shareowner approved plans and performance targets. Annual bonusesmaximize UTC’s tax deduction relative to the NEOs may not exceed 0.75% of net income. Amounts paid under these programs are intended to qualify for the performance-based compensation exception underpaid. Internal Revenue Code Section 162(m) limits UTC’s deduction to $1 million for annual compensation paid to the CEO and each of the three other most highly compensated NEOs (excluding the CFO). However, this limitation does not apply to compensation that qualifies as “performance-based compensation” within the meaning of Section 162(m). Annual bonuses, SARs and performance-based long-term incentive awards are therefore, notgenerally intended to qualify as performance-based compensation exempt from the $1 million deduction limit. Other compensation elements are subject to the Section 162(m) $1 million deductibility limitation.
Program Administrationdeduction limit.
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The Committee oversees the design and operation of UTC’s executive compensation program as outlined here, specifically including determination of benchmark targets, performance metrics, and the composition and variability of pay by executive level.
The Committee conducts an overall review annually to ensure that the compensation program meets its intended goals. The Committee’s review for 2011 indicated that, as intended, variable and performance-based compensation comprised the substantial majority of actual senior executive compensation. Values realized above the CPG medians are substantially attributable to UTC’s Common Stock price and performance relative to pre-established targets or benchmarks. The Committee does not believe it is appropriate to adjust, either negatively or positively, current or future compensation opportunities on the basis of accrued or realized gains attributable to prior service. UTC’s executives do not have employment agreements that guarantee fixed compensation amounts or length of employment.
The Committee does not, and has not, permitted backdating or re-pricing of stock options or SARs. Grant dates are set by the Committee and occur on or shortly after the date the Committee approves awards. Exercise prices equal the closing price for UTC Common Stock on the grant date. UTC’s regular cycle awards account for the great majority of total awards and are made on a consistent basis within the first week of each calendar year, coincident with the beginning of the calendar year-based measurement periods for performance-based awards. Attraction, retention and promotion needs occasionally result in out-of-cycle awards. In those cases, the event triggering the award drives the timing. In no circumstances are awards made in anticipation of the disclosure of material non-public information.
Report of the Committee on Compensation and Executive Development
The Committee on Compensation and Executive Development establishes and oversees the design and functioningfunction of UTC’s executive compensation program. We have reviewed and discussed the foregoing Compensation Discussion and Analysis with the management of the Company and recommended to the Board of Directors that the Compensation Discussion and Analysis be included in UTC’s Proxy Statement for the 20122015 Annual Meeting.
Committee on Compensation and Executive Development
Committee on Compensation and Executive Development | |||
Jean-Pierre Garnier, Chair | Richard B. Myers | ||
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Harold McGraw III | |||
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As outlined in the CD&A, the Committee believes that executive compensation should be contingent on performance relative to pre-established targets and objectives. Measured success must, however, comport with applicable legal standards as well as UTC’s ethical standards and internal policies. Compensation arrangements if not properly designed and administered, can encourage inappropriate and excessive assumption of risk and jeopardize long-term performance and shareowner value. While risk is intrinsic to business, it should be analyzed, monitored and calibrated to opportunity. Compensation incentives should reflect the appropriate balance between opportunity and risk. Compensation should not be realized for accomplishments, however impressive, that compromise UTC’s standards and values. UTC mitigates compensation-related risks to its long-term performance, ethical standards and reputation in the following ways:
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Summary Compensation TableTables
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Plan sation ($)(4) | Change in Nonqualified sation Earnings | All Other sation ($)(6) | Total ($) | |||||||||||||||||||||||||||
Louis Chênevert | 2011 | $1,681,250 | $4,500,000 | $7,932,325 | $7,063,760 | $1,153,571 | $4,793,025 | $547,400 | $27,671,331 | |||||||||||||||||||||||||||
Chairman & Chief | 2010 | $1,589,583 | $4,000,000 | $6,852,990 | $5,327,280 | $1,321,680 | $2,586,652 | $407,976 | $22,086,161 | |||||||||||||||||||||||||||
Executive Officer | 2009 | $1,435,000 | $1,700,000 | $6,217,560 | $7,008,000 | $1,280,447 | $2,604,046 | $256,659 | $20,501,712 | |||||||||||||||||||||||||||
Gregory Hayes | 2011 | $716,250 | $1,220,000 | $2,340,255 | $2,084,720 | $317,404 | $1,060,249 | $171,103 | $7,909,981 | |||||||||||||||||||||||||||
Senior Vice President & | 2010 | $608,750 | $1,050,000 | $1,953,496 | $1,517,040 | $289,323 | $493,547 | $135,173 | $6,047,329 | |||||||||||||||||||||||||||
Chief Financial Officer | 2009 | $575,000 | $395,000 | $1,988,388 | $2,248,000 | $262,093 | $387,847 | $100,419 | $5,956,747 | |||||||||||||||||||||||||||
Geraud Darnis | 2011 | $872,784 | $1,500,000 | $2,007,185 | $1,791,240 | $732,945 | $1,421,615 | $153,567 | $8,479,336 | |||||||||||||||||||||||||||
President & Chief | 2010 | $840,000 | $1,150,000 | $1,937,742 | $1,508,220 | $849,150 | $1,666,441 | $145,570 | $8,097,123 | |||||||||||||||||||||||||||
Executive Officer, UTC Climate, Controls & Security | 2009 | $804,872 | $345,000 | $2,019,168 | $2,280,000 | $815,430 | $504,695 | $110,810 | $6,879,975 | |||||||||||||||||||||||||||
Alain Bellemare | 2011 | $606,425 | $800,000 | $1,726,705 | $1,538,240 | $142,260 | $774,577 | $119,256 | $5,707,463 | |||||||||||||||||||||||||||
President & Chief Operating Officer, UTC Propulsion & Aerospace Systems | ||||||||||||||||||||||||||||||||||||
Didier Michaud-Daniel | 2011 | $597,500 | $710,000 | $1,814,355 | $1,619,200 | $111,452 | $186,915 | $156,588 | $5,196,010 | |||||||||||||||||||||||||||
President, Otis Elevator(7) | 2010 | $535,000 | $705,000 | $1,937,742 | $1,508,220 | $144,623 | $211,534 | $173,829 | $5,215,948 |
SUMMARY COMPENSATION TABLE
Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | All Other Compensation ($)(6) | Total ($) | Total Without Change in Pension Value ($) |
Gregory Hayes(7)President and Chief Executive Officer | |||||||||
2014 | $949,583 | $1,600,000 | $2,332,626 | $2,029,885 | $54,280 | $1,825,890 | $193,910 | $8,986,174 | $7,169,083 |
2013 | $870,000 | $1,100,000 | $2,401,885 | $2,029,790 | $307,972 | $714,459 | $206,967 | $7,631,073 | $6,924,841 |
2012 | $830,000 | $1,200,000 | $2,667,496 | $2,415,600 | $345,486 | $1,581,208 | $192,701 | $9,232,491 | $7,660,266 |
Peter Longo(8)Acting Chief Financial Officer | |||||||||
2014 | $415,000 | $500,000 | $501,375 | $425,850 | $88,618 | $858,268 | $128,137 | $2,917,248 | $2,058,980 |
Geraud DarnisPresident & Chief Executive Officer, UTC Building & Industrial Systems | |||||||||
2014 | $1,037,500 | $1,200,000 | $2,257,380 | $5,897,475 | $177,000 | $2,340,071 | $200,843 | $13,110,269 | $10,770,198 |
2013 | $982,500 | $1,100,000 | $2,374,383 | $2,001,335 | $548,140 | $670,607 | $253,504 | $7,930,469 | $7,259,862 |
2012 | $922,500 | $1,250,000 | $2,502,326 | $2,267,100 | $797,790 | $2,371,977 | $163,239 | $10,274,932 | $7,902,955 |
Alain Bellemare(9)President & Chief Executive Officer, UTC Propulsion & Aerospace Systems | |||||||||
2014 | $881,250 | $1,000,000 | $2,257,380 | $1,958,910 | $0 | $1,663,495 | $220,646 | $7,981,681 | $6,318,186 |
2013 | $816,667 | $1,050,000 | $2,264,373 | $1,906,485 | $68,480 | $408,341 | $228,691 | $6,743,037 | $6,334,696 |
2012 | $712,500 | $1,150,000 | $2,502,326 | $5,996,918 | $150,220 | $877,856 | $127,261 | $11,517,081 | $10,639,225 |
Charles Gill, Jr.Senior Vice President & General Counsel | |||||||||
2014 | $676,250 | $750,000 | $1,655,412 | $1,433,695 | $0 | $1,833,339 | $146,588 | $6,495,284 | $4,661,945 |
Louis Chênevert(10)Former Chairman & Chief Executive Officer | |||||||||
2014 | $1,869,583 | $0 | $7,110,747 | $6,174,825 | $188,800 | $11,227,997(11) | $536,030 | $27,107,982 | $15,879,985 |
2013 | $1,756,250 | $3,400,000 | $6,380,580 | $5,387,480 | $697,376 | $2,077,574 | $575,056 | $20,274,316 | $18,196,742 |
2012 | $1,700,000 | $3,500,000 | $7,804,283 | $7,029,000 | $1,185,637 | $5,772,241 | $571,164 | $27,562,325 | $21,790,084 |
(1) |
(2) | Stock Awards.Amounts in this column reflect the grant date fair value of |
(3) | Option Awards. Amounts in this column reflect the grant date fair value of SARs and performance-based SARs granted under the LTIP, calculated in accordance with the Compensation-Stock Compensation Topic |
![]() | 49 |
COMPENSATION TABLES
(4) | Non-Equity Incentive Plan Compensation.Under the Continuous Improvement Incentive Program, |
(5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings.Amounts in this column reflect the increase during |
(6) | All Other |
Name | Year | Personal Use of Corporate Aircraft(a) | Leased Vehicle Payments(b) | Cash Flexible Perquisite Allowances(c) | Insurance Premiums(d) | 401(k) Company Match | UTC SRP Match(e) | Miscellaneous(f) | Total | Personal Use of Corporate Aircraft(a) | Leased-Vehicle Expenses(b) | Insurance Premiums(c) | 401(k) Company Match | Nonqualified Deferred Compensation Plan Match(d) | Miscellaneous(e) | Total ($) | |||||||||||||||||||||||||||
L. Chênevert | 2011 | $118,188 | $36,007 | $48,056 | $135,452 | $8,820 | $195,705 | $5,172 | $547,400 | ||||||||||||||||||||||||||||||||||
G. Hayes | 2011 | $0 | $22,597 | $13,216 | $65,893 | $8,820 | $54,765 | $5,812 | $171,103 | $13,865 | $20,618 | $85,642 | $9,360 | $64,425 | $0 | $193,910 | |||||||||||||||||||||||||||
P. Longo | $0 | $30,489 | $68,308 | $9,360 | $19,980 | $0 | $128,137 | ||||||||||||||||||||||||||||||||||||
G. Darnis | 2011 | $0 | $37,330 | $6,295 | $57,963 | $8,820 | $40,158 | $3,001 | $153,567 | $0 | $56,005 | $68,068 | $9,360 | $63,015 | $4,395 | $200,843 | |||||||||||||||||||||||||||
A. Bellemare | 2011 | $0 | $23,524 | $7,164 | $34,700 | $8,820 | $32,785 | $12,263 | $119,256 | $0 | $37,846 | $113,275 | $9,360 | $60,165 | $0 | $220,646 | |||||||||||||||||||||||||||
D. Michaud-Daniel | 2011 | $0 | $20,827 | $9,048 | $33,139 | $8,820 | $38,070 | $46,684 | $156,588 | ||||||||||||||||||||||||||||||||||
C. Gill, Jr. | $0 | $35,091 | $57,557 | $9,360 | $40,185 | $4,395 | $146,588 | ||||||||||||||||||||||||||||||||||||
L. Chênevert | $115,476 | $34,242 | $195,000 | $9,360 | $177,465 | $4,487 | $536,030 |
(a) |
(b) | Consists of the annual |
(c) |
Reflects the premium paid on behalf of the executive under the ELG life insurance program. Under this program, UTC pays the premiums on a permanent cash value life insurance contract owned by the |
Reflects |
Consists of |
(7) | Mr. |
(8) | Mr. Longo served as Vice President, Finance & Chief Financial Officer of UTC Propulsion & Aerospace Systems until November 23, 2014, when he assumed the role of Acting Chief Financial Officer upon Mr. Hayes’ appointment to the position of President and Chief Executive Officer. He served in this position through December 31, 2014. |
(9) | Mr. Bellemare left the Company effective January 31, 2015. |
(10) | Mr. Chênevert resigned as Chairman & Chief Executive Officer of the Company effective November 23, 2014, and retired from the Company effective January 3, 2015. No cash severance benefits were paid to Mr. Chênevert in connection with his |
(11) | The estimated present value of the accrued benefit earned under the non-qualified UTC Pension Preservation Plan increased as a result of |
50 | ![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners |
Grants of Plan-Based AwardsCOMPENSATION TABLES
Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#)(3) | Exercise or Base Price of Option Awards ($/Sh)(3) | Grant Date Fair Value of Stock and Option Awards($)(4) | |||||||||||||||||||||||||||||||||||||||||
Approval Date(1) | Thre- shold ($) | Target ($) | Maxi- mum | Thre- shold (#) | Target (#) | Maxi- mum | ||||||||||||||||||||||||||||||||||||||||||
L. Chênevert | 1/3/2011 | 12/8/2010 | — | — | — | 0 | 90,500 | 181,000 | — | — | — | $ | 7,932,325 | |||||||||||||||||||||||||||||||||||
1/3/2011 | 12/8/2010 | — | — | — | — | — | — | — | 349,000 | $ | 78.99 | $ | 7,063,760 | |||||||||||||||||||||||||||||||||||
G. Hayes | 1/3/2011 | 12/8/2010 | — | — | — | 0 | 26,700 | 53,400 | — | — | — | $ | 2,340,255 | |||||||||||||||||||||||||||||||||||
1/3/2011 | 12/8/2010 | — | — | — | — | — | — | — | 103,000 | $ | 78.99 | $ | 2,084,720 | |||||||||||||||||||||||||||||||||||
G. Darnis | 1/3/2011 | 12/8/2010 | — | — | — | 0 | 22,900 | 45,800 | — | — | — | $ | 2,007,185 | |||||||||||||||||||||||||||||||||||
1/3/2011 | 12/8/2010 | — | — | — | — | — | — | — | 88,500 | $ | 78.99 | $ | 1,791,240 | |||||||||||||||||||||||||||||||||||
A. Bellemare | 1/3/2011 | 12/8/2010 | — | — | — | 0 | 19,700 | 39,400 | — | — | — | $ | 1,726,705 | |||||||||||||||||||||||||||||||||||
1/3/2011 | 12/8/2010 | — | — | — | — | — | — | — | 76,000 | $ | 78.99 | $ | 1,538,240 | |||||||||||||||||||||||||||||||||||
D. Michaud-Daniel | 1/3/2011 | 12/8/2010 | — | — | — | 0 | 20,700 | 41,400 | — | — | — | $ | 1,814,355 | |||||||||||||||||||||||||||||||||||
1/3/2011 | 12/8/2010 | — | — | — | — | — | — | — | 80,000 | $ | 78.99 | $ | 1,619,200 |
GRANTS OF PLAN-BASED AWARDS
All Other Stock Awards: | All Other Option Awards: | Exercise or | Grant Date | ||||
Estimated Future Payouts under Equity Incentive Plan Awards(2) | Number of Shares of | Number of Securities | Base Price of Option | Fair Value of Stock | |||
Grant Date(1) | Threshold (#) | Target (#) | Maximum (#) | Stock or Units (#) | Underlying Options (#)(3) | Awards ($/Sh)(4) | and Option Awards ($)(5) |
G. Hayes | |||||||
1/2/2014 | 4,650 | 18,600 | 37,200 | – | – | – | $2,332,626 |
1/2/2014 | – | – | – | – | 71,500 | $112.49 | $2,029,885 |
P. Longo | |||||||
1/2/2014 | 975 | 3,900 | 7,800 | – | – | – | $489,099 |
1/2/2014 | – | – | – | – | 15,000 | $112.49 | $425,850 |
2/10/2014 | – | – | – | 110(6) | – | – | $12,276 |
G. Darnis | |||||||
1/2/2014 | 4,500 | 18,000 | 36,000 | – | – | – | $2,257,380 |
1/2/2014 | – | – | – | – | 69,000 | $112.49 | $1,958,910 |
1/2/2014(7) | 128,575 | 139,000 | – | – | – | $112.49 | $3,938,565 |
A. Bellemare | |||||||
1/2/2014 | 4,500 | 18,000 | 36,000 | – | – | – | $2,257,380 |
1/2/2014 | – | – | – | – | 69,000 | $112.49 | $1,958,910 |
C. Gill, Jr. | |||||||
1/2/2014 | 3,300 | 13,200 | 26,400 | – | – | – | $1,655,412 |
1/2/2014 | – | – | – | – | 50,500 | $112.49 | $1,433,695 |
L. Chênevert | |||||||
1/2/2014 | 14,175 | 56,700 | 113,400 | – | – | – | $7,110,747 |
1/2/2014 | – | – | – | – | 217,500 | $112.49 | $6,174,825 |
(1) | The Committee approves annual long-term incentive awards for the following year at its December meeting. The Committee specifies |
(2) | Consists of the number of PSUs |
(3) | Consists of the number of SARs |
(4) | The exercise price is equal to the NYSE closing price of our Common Stock on the grant date. |
(5) | Reflects the grant date fair value of |
Outstanding Equity Awards at Fiscal Year-End
Option Awards(1) | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option ($)(2) | Option Expiration Date | Number of (#)(3) | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(5) | Equity Incentive of Unearned ($)(6) | |||||||||||||||||||||||||||
L. Chênevert | — | 349,000 | (7) | — | $ | 78.99 | 1/2/2021 | — | — | 105,885 | (7) | $ | 7,739,135 | |||||||||||||||||||||||
— | 302,000 | (8) | — | $ | 71.63 | 1/3/2020 | — | — | 115,710 | (8) | $ | 8,457,244 | ||||||||||||||||||||||||
— | 438,000 | (9) | — | $ | 54.95 | 1/1/2019 | — | — | 51,510 | (9) | $ | 3,764,866 | ||||||||||||||||||||||||
180,000 | (10) | 180,000 | (10) | — | $ | 70.81 | 4/8/2018 | — | — | — | — | |||||||||||||||||||||||||
217,000 | — | — | $ | 75.21 | 1/1/2018 | — | — | — | — | |||||||||||||||||||||||||||
174,500 | — | — | $ | 62.81 | 1/2/2017 | — | — | — | — | |||||||||||||||||||||||||||
400,000 | — | — | $ | 57.84 | 3/7/2016 | — | — | — | — | |||||||||||||||||||||||||||
101,500 | — | — | $ | 56.53 | 1/2/2016 | — | — | — | — | |||||||||||||||||||||||||||
151,000 | — | — | $ | 51.50 | 1/2/2015 | — | — | — | — | |||||||||||||||||||||||||||
140,000 | — | — | $ | 46.76 | 1/8/2014 | — | — | — | — | |||||||||||||||||||||||||||
170,000 | — | — | $ | 31.71 | 1/1/2013 | — | — | — | — | |||||||||||||||||||||||||||
G. Hayes | — | 103,000 | (7) | — | $ | 78.99 | 1/2/2021 | — | — | 31,239 | (7) | $ | 2,283,259 | |||||||||||||||||||||||
— | 86,000 | (8) | — | $ | 71.63 | 1/3/2020 | — | — | 32,984 | (8) | $ | 2,410,801 | ||||||||||||||||||||||||
— | 140,500 | (9) | — | $ | 54.95 | 1/1/2019 | — | — | 16,473 | (9) | $ | 1,204,012 | ||||||||||||||||||||||||
45,000 | (10) | 45,000 | (10) | — | $ | 70.81 | 4/8/2018 | — | — | — | — | |||||||||||||||||||||||||
54,500 | — | — | $ | 75.21 | 1/1/2018 | — | — | — | — | |||||||||||||||||||||||||||
55,500 | — | — | $ | 62.81 | 1/2/2017 | — | — | — | — | |||||||||||||||||||||||||||
50,000 | — | — | $ | 57.84 | 3/7/2016 | — | — | — | — | |||||||||||||||||||||||||||
46,500 | — | — | $ | 56.53 | 1/2/2016 | — | — | — | — | |||||||||||||||||||||||||||
76,000 | — | — | $ | 51.50 | 1/2/2015 | — | — | — | — | |||||||||||||||||||||||||||
21,400 | — | — | $ | 46.76 | 1/8/2014 | — | — | — | — | |||||||||||||||||||||||||||
G. Darnis | — | 88,500 | (7) | — | $ | 78.99 | 1/2/2021 | — | — | 26,793 | (7) | $ | 1,958,300 | |||||||||||||||||||||||
— | 85,500 | (8) | — | $ | 71.63 | 1/3/2020 | — | — | 32,718 | (8) | $ | 2,391,359 | ||||||||||||||||||||||||
— | 142,500 | (9) | — | $ | 54.95 | 1/1/2019 | — | — | 16,728 | (9) | $ | 1,222,650 | ||||||||||||||||||||||||
60,000 | (10) | 60,000 | (10) | — | $ | 70.81 | 4/8/2018 | — | — | — | — | |||||||||||||||||||||||||
95,000 | — | — | $ | 75.21 | 1/1/2018 | — | — | — | — | |||||||||||||||||||||||||||
102,000 | — | — | $ | 62.81 | 1/2/2017 | — | — | — | — | |||||||||||||||||||||||||||
200,000 | — | — | $ | 57.84 | 3/7/2016 | — | — | — | — | |||||||||||||||||||||||||||
101,500 | — | — | $ | 56.53 | 1/2/2016 | — | — | — | — | |||||||||||||||||||||||||||
151,000 | — | — | $ | 51.50 | 1/2/2015 | — | — | — | — | |||||||||||||||||||||||||||
140,000 | — | — | $ | 46.76 | 1/8/2014 | — | — | — | — | |||||||||||||||||||||||||||
30,000 | — | — | $ | 31.71 | 1/1/2013 | — | — | — | — |
Outstanding Equity Awards at Fiscal Year-End (continued)
Name | Option Awards(1) | Stock Awards | ||||||||||||||||||||||||||||||||||
Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option ($)(2) | Option Expiration Date | Number of (#)(3) | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(5) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(6) | ||||||||||||||||||||||||||||
A. Bellemare | — | 76,000 | (7) | — | $ | 78.99 | 1/2/2021 | — | — | 23,049 | (7) | $ | 1,684,651 | |||||||||||||||||||||||
— | 80,500 | (8) | — | $ | 71.63 | 1/3/2020 | — | — | 30,856 | (8) | $ | 2,255,265 | ||||||||||||||||||||||||
— | 79,000 | (9) | — | $ | 54.95 | 1/1/2019 | — | — | 9,282 | (9) | $678,421 | |||||||||||||||||||||||||
38,000 | — | — | $ | 75.21 | 1/1/2018 | — | — | — | — | |||||||||||||||||||||||||||
32,000 | — | — | $ | 62.81 | 1/2/2017 | — | — | — | — | |||||||||||||||||||||||||||
27,500 | — | — | $ | 56.53 | 1/2/2016 | — | — | — | — | |||||||||||||||||||||||||||
32,000 | — | — | $ | 51.50 | 1/2/2015 | — | — | — | — | |||||||||||||||||||||||||||
10,000 | — | — | $ | 46.76 | 1/8/2014 | — | — | — | — | |||||||||||||||||||||||||||
D. Michaud-Daniel | — | 80,000 | (7) | — | $ | 78.99 | 1/2/2021 | — | — | 24,219 | (7) | $ | 1,770,167 | |||||||||||||||||||||||
— | 85,500 | (8) | — | $ | 71.63 | 1/3/2020 | — | — | 32,718 | (8) | $ | 2,391,359 | ||||||||||||||||||||||||
— | 79,000 | (9) | — | $ | 54.95 | 1/1/2019 | — | — | 9,282 | (9) | $678,421 | |||||||||||||||||||||||||
— | — | — | — | — | 13,490 | (11) | $ | 986,005 | — | — | ||||||||||||||||||||||||||
15,600 | — | — | $ | 75.21 | 1/1/2018 | — | — | — | — | |||||||||||||||||||||||||||
15,300 | — | — | $ | 62.81 | 1/2/2017 | — | — | — | — | |||||||||||||||||||||||||||
17,400 | — | — | $ | 56.53 | 1/2/2016 | — | — | — | — | |||||||||||||||||||||||||||
20,700 | — | — | $ | 51.50 | 1/2/2015 | — | — | — | — | |||||||||||||||||||||||||||
21,600 | — | — | $ | 46.76 | 1/8/2014 | — | — | — | — |
(7) | On January 1, 2014, the |
![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners | 51 |
COMPENSATION TABLES
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Option Awards | Stock Awards | ||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($)(1) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(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 ($)(5) | ||||||||||||||||||
G. Hayes | |||||||||||||||||||||||||||
– | 71,500 | (6) | – | $112.49 | 1/1/2024 | – | – | 18,600 | $2,139,000 | (9) | |||||||||||||||||
– | 107,000 | (7) | – | $84.00 | 1/1/2023 | – | – | 26,200 | $3,013,000 | (10) | |||||||||||||||||
– | 122,000 | (8) | – | $74.66 | 1/2/2022 | – | – | 29,070 | $3,343,050 | (11) | |||||||||||||||||
103,000 | – | – | $78.99 | 1/2/2021 | – | – | – | – | |||||||||||||||||||
86,000 | – | – | $71.63 | 1/3/2020 | – | – | – | – | |||||||||||||||||||
90,000 | – | – | $70.81 | 4/8/2018 | – | – | – | – | |||||||||||||||||||
54,500 | – | – | $75.21 | 1/1/2018 | – | – | – | – | |||||||||||||||||||
55,500 | – | – | $62.81 | 1/2/2017 | – | – | – | – | |||||||||||||||||||
P. Longo | |||||||||||||||||||||||||||
– | – | – | – | – | 112 | $12,880 | – | – | |||||||||||||||||||
– | 15,000 | (6) | – | $112.49 | 1/1/2024 | – | – | 3,900 | $448,500 | (9) | |||||||||||||||||
– | – | – | – | – | 10,775 | $1,239,125 | – | – | |||||||||||||||||||
33,288 | (12) | – | 33,626 | (12) | $91.05 | 4/30/2023 | – | – | – | – | |||||||||||||||||
– | 12,600 | (7) | – | $84.00 | 1/1/2023 | – | – | 3,080 | $354,200 | (10) | |||||||||||||||||
– | 12,700 | (8) | – | $74.66 | 1/2/2022 | – | – | 3,033 | $348,795 | (11) | |||||||||||||||||
11,800 | – | – | $78.99 | 1/2/2021 | – | – | – | – | |||||||||||||||||||
10,700 | – | – | $71.63 | 1/3/2020 | – | – | – | – | |||||||||||||||||||
12,900 | – | – | $75.21 | 1/1/2018 | – | – | – | – | |||||||||||||||||||
G. Darnis | |||||||||||||||||||||||||||
– | 69,000 | (6) | – | $112.49 | 1/1/2024 | – | – | 18,000 | $2,070,000 | (9) | |||||||||||||||||
– | – | 139,000 | (13) | $112.49 | 1/1/2024 | – | – | – | – | ||||||||||||||||||
– | 105,500 | (7) | – | $84.00 | 1/1/2023 | – | – | 25,900 | $2,978,500 | (10) | |||||||||||||||||
– | 114,500 | (8) | – | $74.66 | 1/2/2022 | – | – | 27,270 | $3,136,050 | (11) | |||||||||||||||||
88,500 | – | – | $78.99 | 1/2/2021 | – | – | – | – | |||||||||||||||||||
85,500 | – | – | $71.63 | 1/3/2020 | – | – | – | – | |||||||||||||||||||
142,500 | – | – | $54.95 | 1/1/2019 | – | – | – | – | |||||||||||||||||||
120,000 | – | – | $70.81 | 4/8/2018 | – | – | – | – | |||||||||||||||||||
95,000 | – | – | $75.21 | 1/1/2018 | – | – | – | – | |||||||||||||||||||
102,000 | – | – | $62.81 | 1/2/2017 | – | – | – | – | |||||||||||||||||||
200,000 | – | – | $57.84 | 3/7/2016 | – | – | – | – | |||||||||||||||||||
101,500 | – | – | $56.53 | 1/2/2016 | – | – | – | – |
52 | ![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners |
COMPENSATION TABLES
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END (CONTINUED)
Option Awards | Stock Awards | ||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($)(1) | 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 ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5) | ||||||||||||||||||
A. Bellemare | |||||||||||||||||||||||||||
– | 69,000 | (6) | – | $112.49 | 1/1/2024 | – | – | 18,000 | $2,070,000 | (9) | |||||||||||||||||
– | 100,500 | (7) | – | $84.00 | 1/1/2023 | – | – | 24,700 | $2,840,500 | (10) | |||||||||||||||||
99,906 | (12) | – | 100,915 | (12) | $74.79 | 7/31/2022 | – | – | – | – | |||||||||||||||||
– | 114,500 | (8) | – | $74.66 | 1/2/2022 | – | – | 27,270 | $3,136,050 | (11) | |||||||||||||||||
76,000 | – | – | $78.99 | 1/2/2021 | – | – | – | – | |||||||||||||||||||
80,500 | – | – | $71.63 | 1/3/2020 | – | – | – | – | |||||||||||||||||||
79,000 | – | – | $54.95 | 1/1/2019 | – | – | – | – | |||||||||||||||||||
38,000 | – | – | $75.21 | 1/1/2018 | – | – | – | – | |||||||||||||||||||
32,000 | – | – | $62.81 | 1/2/2017 | – | – | – | – | |||||||||||||||||||
C. Gill, Jr. | |||||||||||||||||||||||||||
– | 50,500 | (6) | – | $112.49 | 1/1/2024 | – | – | 13,200 | $1,518,000 | (9) | |||||||||||||||||
– | 73,000 | (7) | – | $84.00 | 1/1/2023 | – | – | 17,900 | $2,058,500 | (10) | |||||||||||||||||
– | 75,500 | (8) | – | $74.66 | 1/2/2022 | – | – | 18,000 | $2,070,000 | (11) | |||||||||||||||||
66,500 | – | – | $78.99 | 1/2/2021 | – | – | – | – | |||||||||||||||||||
60,500 | – | – | $71.63 | 1/3/2020 | – | – | – | – | |||||||||||||||||||
74,500 | – | – | $54.95 | 1/1/2019 | – | – | – | – | |||||||||||||||||||
90,000 | – | – | $70.81 | 4/8/2018 | – | – | – | – | |||||||||||||||||||
43,500 | – | – | $75.21 | 1/1/2018 | – | – | – | – | |||||||||||||||||||
– | – | – | – | – | 10,117 | 1,163,455 | – | – | |||||||||||||||||||
23,300 | – | – | $62.81 | 1/2/2017 | – | – | – | – | |||||||||||||||||||
L. Chênevert | |||||||||||||||||||||||||||
– | 217,500 | (14) | – | $112.49 | 1/1/2024 | – | – | 56,700 | (15) | $6,520,500 | (9) | ||||||||||||||||
– | 284,000 | (14) | – | $84.00 | 1/1/2023 | – | – | 69,600 | (15) | $8,004,000 | (10) | ||||||||||||||||
– | 355,000 | (8) | – | $74.66 | 1/2/2022 | – | – | 85,050 | $9,780,750 | (11) | |||||||||||||||||
349,000 | – | – | $78.99 | 1/2/2021 | – | – | – | – | |||||||||||||||||||
302,000 | – | – | $71.63 | 1/3/2020 | – | – | – | – | |||||||||||||||||||
438,000 | – | – | $54.95 | 1/1/2019 | – | – | – | – | |||||||||||||||||||
360,000 | – | – | $70.81 | 4/8/2018 | – | – | – | – | |||||||||||||||||||
217,000 | – | – | $75.21 | 1/1/2018 | – | – | – | – | |||||||||||||||||||
174,500 | – | – | $62.81 | 1/2/2017 | – | – | – | – | |||||||||||||||||||
200,000 | – | – | $57.84 | 3/7/2016 | – | – | – | – | |||||||||||||||||||
101,500 | – | – | $56.53 | 1/2/2016 | – | – | – | – |
(1) | The exercise price of each |
Amounts in this column are calculated by multiplying the number of unvested RSUs |
Payout levels for PSUs granted in |
Amounts in this column are calculated by multiplying the number of unvested PSUs |
![]() | 53 |
COMPENSATION TABLES
(6) | Consists of SARs |
(9) | Consists of PSUs that are subject to performance-based vesting contingent on performance measured relative to targets over a three-year period ending on December 31, 2016, and the continued employment of the executive, subject to certain exceptions. |
(10) | Consists of PSUs that are subject to performance-based vesting contingent on performance measured relative to targets over a three-year period ending on December 31, 2015, and the continued employment of the executive, subject to certain exceptions. |
(11) | Consists of PSUs for which the service |
(12) | Consists of |
(13) | Consists of SARs, 50% of which are subject to vesting effective December 31, 2015. The remaining 50% will vest effective December 31, 2017, subject to achievement relative to performance targets and the continued employment of the executive. |
(14) | Reflects SARs that vested and became exercisable due to Mr. Chênevert’s retirement on |
(15) | Following Mr. Chênevert’s retirement, non-vested PSUs remain subject to performance-based vesting. |
Option Exercises and Stock VestedOPTION EXERCISES AND STOCK VESTED
Option Awards(1) | Stock Awards(1) | Option Awards(1) | Stock Awards(2) | |||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(2) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(3) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(3) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(4) | ||||
L. Chênevert | 70,000 | $3,698,800 | 44,806 | $3,748,470 | ||||||||
G. Hayes | — | — | 11,266 | $942,514 | 46,000 | $2,990,354 | 36,312 | $4,052,419 | ||||
P. Longo | 21,700 | $1,257,137 | 4,148 | $462,917(5) | ||||||||
G. Darnis | 90,000 | $4,297,050 | 19,608 | $1,640,405 | 100,000 | $6,128,303 | 31,144 | $3,475,670(5) | ||||
A. Bellemare | 22,000 | $867,492 | 7,912 | $661,918 | 27,500 | $1,631,027 | 26,792 | $2,989,987 | ||||
D. Michaud-Daniel | 26,600 | $1,345,372 | 3,225 | $269,804 | ||||||||
C. Gill, Jr. | – | 23,392 | $2,610,547 | |||||||||
L. Chênevert | 251,000 | $15,983,780 | 123,080 | $13,735,728 |
(1) | ||
(2) | Consists of vested PSUs that converted to shares of | on a one-for-one basis upon vesting. |
Calculated by multiplying the number of shares | exercise date. |
Calculated by multiplying the number of | ||
(5) | Mr. Longo and Mr. Darnis elected to defer a portion of their 2011 PSU vesting equal to $115,618 and $1,737,835, respectively. For details on the PSU Deferral Plan, refer to page 57. |
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($)(1) | Payments During 2011 ($) | ||||||||
L. Chênevert | UTC Employee Retirement Plan | 15 | $621,720 | — | ||||||||
UTC Pension Preservation Plan(2) | 19 | $13,904,059 | — | |||||||||
Total | $14,525,779 | — | ||||||||||
G. Hayes | UTC Employee Retirement Plan | 22 | $597,802 | — | ||||||||
UTC Pension Preservation Plan | 22 | $2,499,185 | — | |||||||||
Total | $3,096,987 | — | ||||||||||
G. Darnis | UTC Employee Retirement Plan | 28 | $911,789 | — | ||||||||
UTC Pension Preservation Plan | 28 | $5,324,230 | — | |||||||||
Total | $6,236,019 | — | ||||||||||
A. Bellemare | UTC Employee Retirement Plan | 5 | $166,690 | — | ||||||||
UTC Pension Preservation Plan | 5 | $519,149 | — | |||||||||
Pratt & Whitney Canada Pension Plan(3) | 10 | $1,354,132 | — | |||||||||
Total | $2,039,971 | — | ||||||||||
D. Michaud-Daniel | UTC Employee Retirement Plan | 4 | $76,704 | — | ||||||||
UTC Pension Preservation Plan | 4 | $198,001 | — | |||||||||
Otis France Chapeau Pension Plan(4) | 15 | $1,624,978 | — | |||||||||
Total | $1,899,683 | — |
54 | ![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners |
COMPENSATION TABLES
PENSION BENEFITS
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($)(1) | Payments During Last Fiscal Year ($) |
G. Hayes | UTC Employee Retirement Plan | 25 | $1,008,462 | – |
UTC Pension Preservation Plan | 25 | $6,183,744 | – | |
Total | $7,192,206 | – | ||
P. Longo | UTC Employee Retirement Plan | 26 | $1,204,561 | – |
UTC Pension Preservation Plan | 26 | $1,830,183 | – | |
Total | $3,034,744 | – | ||
G. Darnis | UTC Employee Retirement Plan | 31 | $1,378,216 | – |
UTC Pension Preservation Plan | 31 | $10,240,458 | – | |
Total | $11,618,674 | – | ||
A. Bellemare | UTC Employee Retirement Plan | 8 | $394,741 | – |
UTC Pension Preservation Plan | 8 | $1,982,937 | – | |
Pratt & Whitney Canada Salaried and Executive Employee Pension Plans(2) | 11 | $2,611,985 | – | |
Total | $4,989,663 | – | ||
C. Gill, Jr. | UTC Employee Retirement Plan | 20 | $878,748 | – |
UTC Pension Preservation Plan | 20 | $3,696,581 | – | |
Total | $4,575,329 | – | ||
L. Chênevert | UTC Employee Retirement Plan | 18 | $1,010,007 | – |
UTC Pension Preservation Plan(3) | 22 | $32,460,401 | – | |
Pratt & Whitney Canada Salaried Employee Pension Plan(2) | 3 | $122,057 | – | |
Total | $33,592,465 | – |
(1) |
(2) | Consists of amounts accrued under the Pratt & Whitney Canada Salaried and Executive Employee Pension Plans. The benefit formula for these plans is substantially similar to the final average earnings formula in the UTC Employee Retirement Plan. Benefits are payable as an annuity. |
(3) | Mr. Chênevert’s benefits are determined under the formula applicable to U.S. salaried employees, based on his UTC service from the date of hire, offset by benefits payable separately under the Pratt & Whitney Canada Salaried Employee Pension |
UTC Employee Retirement Plan and UTC Pension Preservation Plan
Retirement benefits for UTC executives are provided through the UTC Employee Retirement Plan and the UTC Pension Preservation Plan (“PPP”), each.
Changes from Final Average Earnings Formula to Cash Balance Formula.Through the end of which is2014, both of these plans used a traditional defined benefit retirement plan with both a traditional final average earnings (“FAE”) formula and, for newer participants, a cash balance formula. In combination, the plans’ FAE formula providesplans provide an annual benefit payment equal to 2% of the executive’s earnings (defined below) for each year of service up to a maximum of 20twenty years, plus 1% of earnings for each year of service thereafter, minus 1.5% of the executive’s Social Security benefits for each year of service up(up to a maximum of 50% of the annual Social Security benefit). Earnings recognized under this formula consist of the highest average combined annual base salary and bonus calculatedreceived over anya consecutive five-year period of the executive’s employment.ending on or before December 31, 2014. The FAE formula does not includerecognize long-term incentive compensation earnings.
The FAE defined benefit formula ended effective December 31, 2014. As a result, the NEOs no longer accrue retirement benefits under the FAE formula and now accrue benefits under a cash balance formula. The cash balance portion of each NEO’s pension will be expressed as a cash balance account with a value that grows each month with two types of credits — pay credits and interest credits. Pay credits are based on the participant’s age and range from 3% to 8% of pay. Interest credits are based on 30-year U.S. Treasury Bond yields and are subject to annual adjustments, but cannot fall below 3.8% under the Plan.
![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners | 55 |
COMPENSATION TABLES
Other Formulas Used.Benefits for Messrs. Darnis and Hayes include amounts accrued under different formulas used in earnings.the Carrier and Sundstrand predecessor plans, respectively, that were merged into UTC retirement plans. The Pratt & Whitney Canada Salaried and Executive Employee Pension Plans utilize a FAE formula substantially similar to that used by the UTC Employee Retirement Plan and the PPP. Increases to Mr. Bellemare’s compensation correspond to additional accrued benefits under the Pratt & Whitney Canada Salaried and Executive Employee Pension Plans.
Plan Description.The UTC Employee Retirement Plan is a tax-qualified plan subject to Internal Revenue Code provisions that, as of December 31, 2014, limit recognized annual compensation to $260,000 and an annual retirement benefit to $210,000. A lump-sum distribution is available for benefits accrued under the cash balance formula, but not for benefits accrued under the FAE formula.
The PPP is an unfunded, non-qualified retirement plan utilizing the same benefit formula, compensation recognition, retirement eligibility and vesting provisions as the tax-qualified UTC Employee Retirement Plan. The PPP provides benefits not accrued under the qualified plan due to Internal Revenue Code limitations on annual compensation recognition and retirement benefit amounts. Because amounts payable under the PPP are unfunded and unsecured, a lump-sum distribution option is available as an alternative to a life annuity. Unlike distributions under the UTC Employee Retirement Plan, a PPP lump-sum distribution is immediately and fully taxable as ordinary income. To address the tax impact, the PPP lump-sum calculation of the FAE portion of the benefit uses a discount rate equal to the Barclay’s Capital Municipal Bond Index averaged over five years (currently 2.986%). The lump-sum value of the cash balance portion of the benefit will be equal to the accumulated cash balance account described above.
Vesting and Retirement.Vesting under the respective plans requires three years of service. Normal retirement age is 65; unreduced65. The FAE formula provides full retirement benefits are available at age 62 for retirementsa participant who retires with at least ten years of service. None of the NEOs qualify for unreduced retirement benefits as of fiscal year-end. Early retirement benefits are also available under the FAE formula at age 55 with at least ten years of service, reduced by 0.2% for each month by which the early retirement date precedes age 62. Vesting requires three yearsThe value of service. Benefits for Messrs. Darnis and Hayes include amounts accrued under different formulas of Carrier and Sundstrand predecessor plans, respectively, that have since been merged into UTC retirement plans. Mr. Chênevert accrued benefits under the Pratt & Whitney Canada Pension plan that have been integrated into his PPP accrued benefit. Mr. Michaud-Daniel accrued benefits under the UTC Employee Retirement Plan and the PPP, in accordance with a cash balance formula that credits an amount equal to 8% of pay (base salary plus annual bonus) and interest credited at 4.19% for 2011. He also participated in the Otis France Chapeau Pension plan. Under this plan, benefits equal 1% of final salary accrued each year up to a maximum of 15 years and vest uponbenefit is not affected by retirement at age 60 or later. The Pratt & Whitney Canada Pension plan utilizes the same benefit formula as the FAE formula under the UTC Employee Retirement Plan and the PPP and recognizes62.
All NEOs, except Mr. Bellemare’s compensation increases, resulting in additional accruedGill, are eligible for early retirement. No NEO was eligible to retire with full retirement benefits under this plan. Changes to UTC’s pension program that will take effect in 2015 are discussed in the CD&A at page 25.
The UTC Employee Retirement Plan is a tax-qualified plan subject to Internal Revenue Code provisions that, as of the 2011 fiscal year-end, limit recognized annual compensation to $245,000 and the annual retirement benefit to $195,000. This Plan does not offer a lump-sum distribution option under the FAE formula. However, a lump-sum distribution is available under the cash balance formula. The PPP is an unfunded, nonqualified retirement plan utilizing the same benefit formula, compensation recognition, retirement eligibility and vesting provisions as the tax-qualified UTC Employee Retirement Plan. The PPP restores the benefits not provided under the qualified plan due to the Internal Revenue Code limitations on annual compensation recognition and the annual retirement benefit. Because amounts payable under the PPP are unfunded and unsecured, a lump-sum distribution option is available. Unlike distributions from qualified plans, a PPP lump-sum distribution is immediately fully taxable as ordinary income. To approximate actuarial equivalence to a pension annuity in light of the disparate tax treatment, the lump-sum calculation uses a discount rate equal to the Barclay’s Capital Municipal Bond Index averaged over five years (currently 4%).
Nonqualified Deferred CompensationDecember 31, 2014.
Name | Plan | Executive contributions in last FY ($)(1) | Registrant contributions in last FY ($)(2) | Aggregate earnings in last FY ($)(3) | Aggregate withdrawals/ distributions ($) | Aggregate balance at last FYE ($)(4) | ||||||||||||||||||
L. Chênevert | UTC DCP | $0 | $0 | -$29,354 | $0 | $1,242,583 | ||||||||||||||||||
UTC SRP | $326,175 | $195,705 | -$12,611 | $0 | $716,316 | |||||||||||||||||||
G. Hayes | UTC DCP | $0 | $0 | $2,635 | $0 | $853,801 | ||||||||||||||||||
UTC SRP | $91,275 | $54,765 | -$5,057 | $0 | $195,582 | |||||||||||||||||||
G. Darnis | UTC DCP | $662,278 | $0 | $23,106 | $0 | $767,465 | ||||||||||||||||||
UTC SRP | $66,930 | $40,158 | -$1,712 | $0 | $179,136 | |||||||||||||||||||
A. Bellemare | UTC DCP | $0 | $0 | $0 | $0 | $0 | ||||||||||||||||||
UTC SRP | $54,641 | $32,785 | -$5,042 | $0 | $125,088 | |||||||||||||||||||
D. Michaud-Daniel | UTC DCP | $0 | $0 | $0 | $0 | $0 | ||||||||||||||||||
UTC SRP | $63,450 | $38,070 | -$5,535 | $0 | $147,736 |
NONQUALIFIED DEFERRED COMPENSATION
Name | Plan | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(4) |
G. Hayes | UTC Deferred Compensation Plan | $0 | $0 | $47,596 | $0 | $1,238,365 |
UTC Savings Restoration Plan | $107,375 | $64,425 | $82,852 | $0 | $1,008,016 | |
P. Longo | UTC Deferred Compensation Plan | $0 | $0 | $14,344 | -$1,734 | $439,899 |
UTC Savings Restoration Plan | $33,300 | $19,980 | $4,894 | $0 | $161,991 | |
PSU Deferral Plan(5) | $112,901 | $0 | $27,963 | $0 | $842,224 | |
G. Darnis | UTC Deferred Compensation Plan | $598,750 | $16,980(6) | $93,250 | $0 | $3,038,627 |
UTC Savings Restoration Plan | $76,725 | $46,035 | $20,201 | $0 | $678,694 | |
PSU Deferral Plan(5) | $1,696,996 | $0 | $130,711 | $0 | $3,182,678 | |
A. Bellemare | UTC Deferred Compensation Plan | $0 | $0 | $0 | $0 | $0 |
UTC Savings Restoration Plan | $100,275 | $60,165 | $45,135 | $0 | $761,857 | |
C. Gill, Jr. | UTC Deferred Compensation Plan | $0 | $0 | $0 | $0 | $0 |
UTC Savings Restoration Plan | $66,975 | $40,185 | $17,868 | $0 | $617,961 | |
L. Chênevert | UTC Deferred Compensation Plan | $0 | $0 | $58,026 | $0 | $1,870,828 |
UTC Savings Restoration Plan | $295,775 | $177,465 | $173,598 | $0 | $2,959,083 |
(1) | Amounts in this column are included in the Salary and Bonus columns of the Summary Compensation Table. |
(2) | Amounts in this column are included in the All Other Compensation column of the Summary Compensation Table. |
56 | ![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners |
COMPENSATION TABLES
(3) | Amounts |
(4) | Amounts in this column include deferrals by the executive and credited earnings in current and prior years, less withdrawals. |
(5) | Under the PSU Deferral Plan, as described below, Mr. Darnis and Mr. Longo elected to defer a portion of their 2011 PSU vesting, as reported in the Option Exercises and Stock Vested table on page 54. |
(6) | Reflects a SRP match make up for |
The
UTC Deferred Compensation Plan (“DCP”)
The Deferred Compensation Plan is a non-qualified, unfunded deferred compensation arrangement that offers a participantparticipants the opportunity to defer up to 50% of annual base salary and up to 70% of annual bonus. The minimum deferral period is five years. Distribution optionsAll distributions are made in cash and, at the election of the participant, in either a lump-sum payment or in annual installments forover a period between two and 15fifteen years. If a participantparticipant’s employment terminates prior to retirement eligibility, all balances are paid as a lump-sum in the April following termination. Amounts deferred canmay be allocated by the participant to one or more of the hypothetical investment accounts describedlisted below.
The
UTC Savings Restoration Plan (“SRP”),
The Savings Restoration Plan is a nonqualified,non-qualified, unfunded deferred compensation arrangement that offers participants the opportunity to defer up to 6% of pay (base salary and annual bonus) above the annual IRCInternal Revenue Code compensation limit ($245,000260,000 in 2011)2014) applicable to the tax-qualified UTC tax-qualified 401(k) plan.Savings Plan. Under the SRP,this plan, UTC will make matching deferralscontributions equal to 60% of the amount deferred by the executive in the form of UTC deferred stock units. Participants are vested in their own deferrals and vest in the UTC match after three years of service. Amounts credited under the SRP may be distributed in a lump-sum payment or in annual installments over a period between two and 15fifteen years. Employee deferrals are distributed in cash and Company matching amounts are distributed in shares of UTC Common Stock.
Investment Options
Amounts deferred by the employee under either of the above plans may be allocated to one or more of the hypothetical investment accounts described below.
The DCP and SRP offer the following hypothetical investment accounts: (i) a fixed rate account credited with interest equal
Hypothetical Investment Accounts* | 2014 Return |
Income Fund | 3.37% |
Equity Fund - S&P 500 Index | 13.64% |
Government / Credit Bond Fund | 5.98% |
Small Company Stock Index Fund | 7.49% |
International Equity Index | (4.70)% |
Emerging Equity Index Fund | (2.77)% |
UTC Common Stock with dividend reinvestment | 3.22% |
* | Additional age-specific retirement date funds are also available. In 2014, the NEOs participated in the Target Retirement Fund 2020, which returned 4.17%, and the Target Retirement Fund 2025, which returned 4.48%. |
PSU Deferral Plan
The PSU Deferral Plan allows executives to defer between 10% and 100% of their vested PSU award. Upon vesting, the average yield on a ten-year Treasury Note during the first ten monthsdeferred portion of the preceding calendarPSU award is converted into deferred stock units that accrue dividend equivalents. Distributions from the PSU Deferral Plan are paid in full or in two to fifteen annual installments either upon retirement or in a future year plus 1%, but not to exceed 120%selected by the executive (no earlier than five years from the year the PSUs are deferred). Distributions are made in whole shares of the IRS Applicable Federal Rate (3.984% for 2011); (ii) Income Fund (3.87% for 2011); (iii) Equity Fund – S&P 500 (1.99% for 2011); (iv) Government / Credit Bond Fund (7.91% for 2011); (v) Small Company Stock Fund (-4.16% for 2011); (vi) International Equity Fund (-12.34% for 2011); (vii) Emerging Markets Equity Fund (-18.85% for 2011); (viii) the return on UTC Common Stock with dividend reinvestment (-4.59% for 2011); and (ix) age-specific target retirement date funds (none of the NEOs participateany fractional unit paid in these funds).
![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners | 57 |
Potential Payments on Termination or Change-in-ControlCOMPENSATION TABLES
As described in the CD&A, the NEOs are eligible for a severance benefit of 2.5 times base salary, and a severance benefit equal to 2.99 times the sum of base salary plus target bonus in the event of a change-in-control.
POTENTIAL PAYMENTS ON TERMINATION OR CHANGE-IN-CONTROL
This table provides information concerningestimates the value of payments and benefits that each of the NEOsNEO would have been entitled to receive had employment terminated on December 31, 2011,2014 under various hypothetical circumstances. Under UTC’s programs, benefit eligibility and the value of benefits an executive is entitled to receive vary depending on the reason for termination and whether the executive is eligible for retirement as of the termination date.at that time.
Payment Type | L. Chênevert | G. Hayes | G. Darnis | A. Bellemare | D. Michaud- Daniel | |||||||||||||||
Termination—Involuntary (For Cause) | ||||||||||||||||||||
Cash Payment(1) | $0 | $0 | $0 | $0 | $0 | |||||||||||||||
Pension Benefit(2) | $19,402,314 | $3,423,752 | $7,429,947 | $2,357,215 | $218,040 | |||||||||||||||
Option/SAR Value(3) | $0 | $0 | $0 | $0 | $0 | |||||||||||||||
PSU Value(4) | $0 | $0 | $0 | $0 | $0 | |||||||||||||||
Dividend Equivalents(5) | $0 | $0 | $0 | $0 | $0 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Sub-Total | $19,402,314 | $3,423,752 | $7,429,947 | $2,357,215 | $218,040 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less: Vested Pension | ($19,402,314 | ) | ($3,423,752 | ) | ($7,429,947 | ) | ($2,357,215 | ) | ($218,040 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Amount Triggered due to Termination | $0 | $0 | $0 | $0 | $0 | |||||||||||||||
Voluntary | ||||||||||||||||||||
Cash Payment(1) | $0 | $0 | $0 | $0 | $0 | |||||||||||||||
Pension Benefit(2) | $19,402,314 | $3,423,752 | $7,429,947 | $2,357,215 | $218,040 | |||||||||||||||
Option/SAR Value(3) | $32,352,230 | $7,084,212 | $16,813,670 | $3,289,130 | $3,018,959 | |||||||||||||||
PSU Value(4) | $12,222,110 | $3,614,812 | $3,614,008 | $2,933,686 | $3,069,780 | |||||||||||||||
Dividend Equivalents(5) | $0 | $0 | $0 | $0 | $0 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Sub-Total | $63,976,654 | $14,122,776 | $27,857,625 | $8,580,031 | $6,306,779 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less: Vested Pension and Equity | ($63,976,654 | ) | ($14,122,776 | ) | ($27,857,625 | ) | ($8,580,031 | ) | ($6,306,779 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Amount Triggered due to Termination | $0 | $0 | $0 | $0 | $0 | |||||||||||||||
Termination—Involuntary (Not For Cause) | ||||||||||||||||||||
Cash Payment(1) | $4,250,000 | $2,000,000 | $2,250,000 | $1,687,500 | $1,525,000 | |||||||||||||||
Pension Benefit(2) | $19,402,314 | $3,423,752 | $7,429,947 | $2,357,215 | $218,040 | |||||||||||||||
Option/SAR Value(3) | $32,352,230 | $7,084,212 | $16,813,670 | $3,289,130 | $3,018,959 | |||||||||||||||
PSU Value(4) | $12,222,110 | $3,614,812 | $3,614,008 | $2,933,686 | $3,069,780 | |||||||||||||||
Dividend Equivalents(5) | $0 | $0 | $0 | $0 | $0 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Sub-Total | $68,226,654 | $16,122,776 | $30,107,625 | $10,267,531 | $7,831,779 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less: Vested Pension and Equity | ($63,976,654 | ) | ($14,122,776 | ) | ($27,857,625 | ) | ($8,580,031 | ) | ($6,306,779 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Amount Triggered due to Termination | $4,250,000 | $2,000,000 | $2,250,000 | $1,687,500 | $1,525,000 | |||||||||||||||
Termination—Change-in-Control(6) | ||||||||||||||||||||
Cash Payment(7) | $13,215,800 | $4,544,800 | $5,112,900 | $3,834,675 | $3,465,410 | |||||||||||||||
Pension Benefit(2) | $19,402,314 | $3,423,752 | $7,429,947 | $2,357,215 | $218,040 | |||||||||||||||
Option/SAR Value(8) | $32,762,630 | $7,186,812 | $16,950,470 | $3,289,130 | $3,018,959 | |||||||||||||||
PSU Value(8) | $19,961,244 | $5,898,071 | $5,572,309 | $4,618,338 | $4,839,947 | |||||||||||||||
Dividend Equivalents(5) | $2,857,134 | $1,019,911 | $2,262,685 | $439,519 | $335,531 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Sub-Total | $88,199,122 | $22,073,346 | $37,328,311 | $14,538,877 | $11,877,887 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less: Vested Pension, Equity and Dividend Equivalents | ($63,976,654 | ) | ($14,122,776 | ) | ($27,857,625 | ) | ($8,580,031 | ) | ($6,306,779 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Amount Triggered due to Termination | $24,222,468 | $7,950,570 | $9,470,686 | $5,958,846 | $5,571,108 |
Payment Type | G. Hayes | P. Longo | G. Darnis | A. Bellemare | C. Gill, Jr. | L. Chênevert(1) |
Termination — Involuntary (For Cause) | ||||||
Cash Payment(2) | $0 | $0 | $0 | $0 | $0 | $0 |
Pension Benefit(3) | $9,139,251 | $2,681,080 | $15,315,094 | $5,522,384 | $5,528,169 | $0 |
Option/SAR Value(4) | $0 | $0 | $0 | $0 | $0 | $0 |
Stock Award Value(5) | $0 | $0 | $0 | $0 | $0 | $0 |
Sub-Total | $9,139,251 | $2,681,080 | $15,315,094 | $5,522,384 | $5,528,169 | $0 |
Less: Vested Pension | -$9,139,251 | -$2,681,080 | -$15,315,094 | -$5,522,384 | -$5,528,169 | $0 |
Amount Triggered due to Termination | $0 | $0 | $0 | $0 | $0 | $0 |
Voluntary | ||||||
Cash Payment(2) | $0 | $0 | $0 | $0 | $0 | $0 |
Pension Benefit(3) | $9,139,251 | $2,681,080 | $15,315,094 | $5,522,384 | $5,528,169 | $33,424,946 |
Option/SAR Value(4) | $24,719,530 | $3,102,428 | $55,114,510 | $25,905,739 | $21,724,937 | $126,654,445 |
Stock Award Value(5) | $6,356,050 | $702,995 | $6,114,550 | $5,976,550 | $4,128,500 | $24,305,250 |
Sub-Total | $40,214,831 | $6,486,503 | $76,544,154 | $37,404,673 | $31,381,606 | $184,384,641 |
Less: Vested Pension and Equity | -$40,214,831 | -$6,486,503 | -$76,544,154 | -$37,404,673 | -$31,381,606 | -$184,384,641 |
Amount Triggered due to Termination | $0 | $0 | $0 | $0 | $0 | $0 |
Termination — Involuntary (Not For Cause) | ||||||
Cash Payment(2) | $3,250,000 | $0 | $2,625,000 | $2,250,000 | $1,712,500 | $0 |
Pension Benefit(3) | $9,139,251 | $2,681,080 | $15,315,094 | $5,522,384 | $5,528,169 | $0 |
Option/SAR Value(4) | $24,719,530 | $3,102,428 | $55,114,510 | $25,905,739 | $21,724,937 | $0 |
Stock Award Value(5) | $6,356,050 | $702,995 | $6,114,550 | $5,976,550 | $4,128,500 | $0 |
Sub-Total | $43,464,831 | $6,486,503 | $79,169,154 | $39,654,673 | $33,094,106 | $0 |
Less: Vested Pension and Equity | -$40,214,831 | -$6,486,503 | -$76,544,154 | -$37,404,673 | -$31,381,606 | $0 |
Amount Triggered due to Termination | $3,250,000 | $0 | $2,625,000 | $2,250,000 | $1,712,500 | $0 |
Termination — Change-in-Control(6) | ||||||
Cash Payment(7) | $10,300,550 | $0 | $6,592,950 | $5,651,100 | $3,789,078 | $0 |
Pension Benefit(3) | $9,139,251 | $2,681,080 | $15,315,094 | $5,522,384 | $5,528,169 | $0 |
Option/SAR Value(8) | $24,898,995 | $3,945,421 | $55,636,590 | $30,136,721 | $21,851,692 | $0 |
Stock Award Value(8) | $8,495,050 | $2,403,500 | $8,184,550 | $8,046,550 | $6,809,955 | $0 |
Sub-Total | $52,833,846 | $9,030,001 | $85,729,184 | $49,356,755 | $37,978,894 | $0 |
Less: Vested Pension and Equity | -$40,214,831 | -$6,486,503 | -$76,544,154 | -$37,404,673 | -$31,381,606 | $0 |
Amount Triggered due to Termination | $12,619,015 | $2,543,498 | $9,185,030 | $11,952,082 | $6,597,288 | $0 |
58 | ![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners |
COMPENSATION TABLES
(1) | Mr. Chênevert resigned as Chairman & Chief Executive Officer on November 23, 2014 and retired as an employee of the Company on January 3, 2015. The values shown reflect the amounts payable to Mr. Chênevert following his retirement. The value of Mr. Chênevert’s outstanding equity awards includes the grant made on January 2, 2014, and is calculated based on the NYSE closing price of Common Stock on December 31, 2014 of $115.00. |
(2) | Amounts shown are payable under the ELG separation |
occurs when: (i) the ELG participant’s position with UTC has been eliminated or diminished by a divestiture, restructuring, shift in priorities or similar event; or (ii) the executive retires at age 62 or |
Receipt of the ELG separation benefit is contingent upon execution of an agreement with UTC containing the following covenants made by the executive for the protection of UTC: (i) three-year non-compete; (ii) three-year employee non-solicitation; (iii) non-disparagement; (iv) protection of confidential, sensitive and proprietary information; and (v) post-termination cooperation obligations. The ELG separation benefit is not treated as compensation for purposes of determining benefits under the UTC’s pension plans or any other benefit program. This benefit is payable as a lump-sum. Distributions are subject to certain restrictions imposed by Internal Revenue Code Section 409A. Benefit plan participation and fringe benefits are not continued following termination under the ELG separation arrangement.
(3) | Pension benefits under the standard retirement benefit formula that exceed Internal Revenue Code limits for tax-qualified plans may be paid as a lump-sum. Amounts in this column reflect the estimated lump-sum payment of the |
(4) | The vesting of outstanding SARs |
(5) | In the event of a voluntary termination or an involuntary |
(6) |
|
(7) | Reflects a lump-sum cash payment under the SESP in an amount equal to 2.99 times the sum of the executive’s base salary and target bonus. ELG members appointed after June 2009, including Mr. Longo, are not eligible for this cash payment. |
(8) | In the event of a qualifying termination following a change-in-control, the SESP provides for the accelerated vesting of all outstanding SARs and PSUs (including SARs and PSUs outstanding for less than one year and |
Name | Fees in cash | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
Louis R. Chênevert | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||
John V. Faraci | $0 | $280,000 | $0 | $0 | $0 | $0 | $280,000 | |||||||||||||||||||||
Jean-Pierre Garnier | $0 | $255,000 | $0 | $0 | $0 | $0 | $255,000 | |||||||||||||||||||||
Jamie S. Gorelick | $96,000 | $144,000 | $0 | $0 | $0 | $0 | $240,000 | |||||||||||||||||||||
Edward A. Kangas | $5,000 | $270,000 | $0 | $0 | $0 | $1,731 | (4) | $276,731 | ||||||||||||||||||||
Ellen J. Kullman | $96,000 | $244,000 | $0 | $0 | $0 | $1,996 | (4) | $341,996 | ||||||||||||||||||||
Charles R. Lee | $107,000 | $153,000 | $0 | $0 | $0 | $0 | $260,000 | |||||||||||||||||||||
Richard D. McCormick | $5,000 | $280,000 | $0 | $0 | $0 | $0 | $285,000 | |||||||||||||||||||||
Harold McGraw III | $0 | $240,000 | $0 | $0 | $0 | $0 | $240,000 | |||||||||||||||||||||
Richard B. Myers | $108,000 | $162,000 | $0 | $0 | $0 | $133 | (4) | $270,133 | ||||||||||||||||||||
H. Patrick Swygert | $0 | $270,000 | $0 | $0 | $0 | $16,747 | (5) | $286,747 | ||||||||||||||||||||
André Villeneuve | $0 | $270,000 | $0 | $0 | $0 | $0 | $270,000 | |||||||||||||||||||||
Christine T. Whitman | $102,000 | $153,000 | $0 | $0 | $0 | $0 | $255,000 |
![]() | 59 |
In 2011, directors’ annual cash retainer and deferred stock unit values were as follows:
Non-Employee Director’s Compensation | ||||||||||||||||||||
Element | Lead Director | Audit Committee Chair | Committee Chair | Audit Committee Member | Base Amount | |||||||||||||||
Cash Retainer | $112,000 | $112,000 | $102,000 | $108,000 | $96,000 | |||||||||||||||
Deferred Stock Units | $168,000 | $168,000 | $153,000 | $162,000 | $144,000 | |||||||||||||||
Total | $280,000 | $280,000 | $255,000 | $270,000 | $240,000 |
UTC’s share ownership requirements for non-employee directors increased in 2011 from $300,000 to five times the base annual cash retainer. Directors may elect to receive the annual cash retainer entirely in deferred stock units that are considered Common Stock equivalents for purposes of this share ownership requirement. The director fees will not be increased in the event a director serves multiple roles. The director’s annual cash retainer and annual deferred stock unit award will be based on the amount that would be paid for the highest applicable fee level. Directors do not receive additional compensation for attending regularly scheduled Board and Committee meetings. However, they do earn $5,000 for each special meeting they attend in person. In 2011, Messrs. Kangas, Lee and McCormick attended in person, a special meeting of the Board.
When UTC pays a dividend on Common Stock, each director’s deferred stock unit balance is credited with additional deferred stock units having a value equal to the dividend paid on the corresponding number of shares of Common Stock. Following termination of a director’s service, the number of deferred stock units are converted into shares of Common Stock and distributed to the director. At the election of the director, this distribution may be made in installments over a ten or fifteen year period. Non-employee directors receive a one-time $100,000 restricted stock unit award when first elected to the Board. This award vests ratably over five years and is distributed to the director in stock upon retirement, termination or death. Restricted stock units receive dividend equivalents in the form of additional restricted stock units.
UTC maintains a charitable gift program for directors elected prior to 2003, funded by life insurance on the lives of the participating directors. Directors elected after February 2003 are not eligible to participate in this program. Under this program, UTC will make charitable contributions totaling up to $1 million following the death of a director, allocated among up to four charities recommended by the director. Beneficiaries must be tax-exempt organizations under Section 501(c)(3) of the IRC. Donations are expected to be deductible by UTC from taxable income for federal and other income tax purposes. Directors derive no financial benefit from the program since all insurance proceeds and tax deductions accrue solely to UTC.
The Audit Committee reviews and makes recommendations to the Board of Directors concerning the reliability and integrity of UTC’s financial statements and the adequacy of its system of internal controls and processes to assure compliance with UTC’s policies and procedures, Code of Ethics and applicable laws and regulations. The Committee annually nominates UTC’s Independent Auditor for appointment by the shareowners, and evaluates the independence, qualifications and performance of UTC’s internal and independent auditors. The Committee also discusses with management UTC’s policies and procedures regarding risk assessment and risk management, the Company’s major financial risk exposures and the steps management has taken to monitor and manage such exposures to be within the Company’s risk tolerance. The Committee establishes procedures for and oversees receipt, retention, and treatment of complaints received by UTC regarding accounting, internal control or auditing matters;matters, and the confidential, anonymous submission by UTC employees of concerns regarding questionable accounting or auditing matters.
The Committee has reviewed and discussed with management and UTC’s Independent Auditor UTC’s audited financial statements as of and for the year ended December 31, 2011,2014, as well as the representations of management and the Independent Auditor’s opinion thereon regarding UTC’s internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act. The Committee discussed with UTC’s internal and Independent Auditors the overall scope and plans for their respective audits. The Committee met with the internal and Independent Auditors, with and without management present, to discuss the results of their examinations, the evaluation of UTC’s internal controls, management’s representations regarding internal control over financial reporting, and
the overall quality of UTC’s financial reporting. The Committee has discussed with UTC’s Independent Auditor the matters required by Statement onthe Public Company Accounting and Oversight Board’s (PCAOB) Auditing Standards,Standard No. 6116,Communications with Audit Committeesas amended (AICPA,Professional Standards, Vol. 1. AU Section 380) as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Committee. It has also discussed with UTC’s Independent Auditor their independence from UTC and its management, including the written disclosures and letter from UTC’s Independent Auditor required by the Public Company Accounting Oversight Board’sPCAOB’s Rule 3526,Communication with Audit Committees Concerning Independence, as approved by the SEC.
UTC’s Independent Auditor represented to the Committee that UTC’s audited financial statements were preparedfairly presented in accordance with generally accepted accounting principles in the United States of America.
Based on the reviews and discussions referred to above, the Committee has recommended to the Board of Directors that the audited financial statements referred to above be included in UTC’s Annual Report on Form 10-K for the year ended December 31, 20112014 for filing with the SEC. The Committee nominates the firm of PricewaterhouseCoopers LLP for appointment by the shareowners as UTC’s Independent Auditor for 2012.
Audit Committee2015.
Audit Committee | |||
Edward A. Kangas, Chair | John V. Faraci | ||
Ellen J. Kullman | Richard B. Myers | ||
| H. Patrick Swygert | ||
| André Villeneuve |
60 | ![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners |
PROPOSALProposal 2: APPOINTMENT OF A FIRM OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS TO SERVE AS INDEPENDENT AUDITOR FOR 2012 Appointment of a Firm of Independent Registered Public Accountants to Serve as Independent Auditor for 2015
As required by UTC’s Bylaws, we are asking shareowners to vote on a proposal to appoint a firm of independent registered public accountants to act as the Company’s Independent Auditor until the next annual meeting. PricewaterhouseCoopers LLP served as UTC’s independent registered public accounting firm in 2011. The2014 and 2013, and the Audit Committee has nominated the firm to serve again as Independent Auditor for UTC.
The Audit Committee is directly responsible for the nomination, compensation, retention and oversight of the Company’s independent registered public accounting firm. To fulfill this responsibility, the Committee engages in a comprehensive annual evaluation of the independent auditor’s qualifications, performance and independence and periodically considers the advisability and potential impact of selecting a different independent registered public accounting firm.
The Audit Committee has nominated, and the Board of Directors has approved the nomination of, PricewaterhouseCoopers LLP to serve as Independent Auditorour independent registered public accounting firm for UTC2015 and until the next Annual Meeting in 2013. 2016. PricewaterhouseCoopers LLP has acquired extensive knowledge of the Company’s operations, performance and development through its previous service as the Company’s Independent Auditor. In accordance with SEC rules and PricewaterhouseCoopers LLP policies, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide service to our Company. For lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five years. The process for selection of the Company’s lead audit partner pursuant to this rotation policy includes a meeting of the Chairman of the Audit Committee with the candidate for the role, as well as consideration of the candidate’s qualifications by the full Committee and with management.
The Audit Committee and the Board of Directors believe that the continued retention of PricewaterhouseCoopers LLP as our independent registered public accounting firm is in the best interest of the Company and our shareowners.
Representatives of PricewaterhouseCoopers LLP will be present at the Annual Meeting, will have an opportunity to make any statements they desire, and will also be available to respond to appropriate questions from shareowners.
UTC paid the following fees to PricewaterhouseCoopers LLP for 20112014 and 2010:2013:
(In thousands) | 2011 | 2010 | ||||||||
(in thousands) | 2014 | 2013 | ||||||||
Audit Fees | $34,425 | $33,802 | $42,054 | $38,326 | ||||||
Audit-Related Fees | $6,208 | $4,746 | $5,535 | $5,722 | ||||||
Tax Fees | $10,017 | $9,148 | $18,712 | $19,058 | ||||||
All Other Fees | $847 | $32 | $757 | $106 | ||||||
Total | $51,497 | $47,728 | $67,058 | $63,212 |
![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners | 61 |
PROPOSAL 2Appointment of a Firm of Independent Registered Public Accountants
to Serve as Independent Auditor for 2015
Audit Fees in both years consisted of fees for the audit of UTC’s consolidated annual financial statements and the effectiveness of its internal control over financial reporting, the review of interim financial statements in UTC’s quarterly reports on Form 10-Q and the performance of audits in accordance with statutory requirements.
Audit-Related Fees in both years consisted of fees for financial and tax due diligence assistance related to mergersacquisition and acquisitiondisposition activity, employee benefit plan audits, advice regarding the application of generally accepted accounting principles to proposed transactions, special reports pursuant to agreed-upon procedures, contractually required audits and compliance assessments. Audit-Related Fees in 2013 also included services related to our discontinued operations, including due diligence and carve-out audits. Total Audit-Related Fees related to services for our discontinued operations in 2014 and 2013 were $0 and $1,734,000, respectively. Under contractual requirements, $0 and $1,486,000 of fees were reimbursed by third parties in 2014 and 2013, respectively.
Tax Fees in 20112014 consisted of approximately $3,020,000$11,429,000 for U.S. and non-U.S. tax compliance, related planning and assistance with tax refund claims, and expatriate tax services, and approximately $7,283,000 for tax consulting and advisory services. In 2013, Tax Fees consisted of approximately $11,067,000 for U.S. and non-U.S. tax compliance and related planning and assistance with tax refund claims and approximately $6,997,000 forexpatriate tax
consulting and advisory services. In 2010, tax fees consisted of approximately $2,827,000 for U.S. and non-U.S. tax compliance and related planning and assistance with tax refund claims, services, and approximately $6,321,000$7,991,000 for tax consulting and advisory services.
All Other Fees in 20112014 and 2013 primarily consisted of accounting research software, benchmarking, government compliance advisory services, international employee benefits and pension plan advice, insurance claim services and other services. In 2010, all other fees consisted of accounting research software, benchmarking and other services.
The Audit Committee has adopted procedures requiring Committee review and approval in advance of all particular engagements for services provided by UTC’s Independent Auditors.Auditor. Consistent with applicable laws, the procedures permit limited amounts of services, other than audit, review or attest services, to be approved by one or more members of the Committee pursuant to authority delegated by the Committee, provided the Committee subsequently is informed of each particular service approved by delegation. All of the engagements and fees for 20112014 and 20102013 were approved by the Committee. The Committee reviews with PricewaterhouseCoopers LLP whether the non-audit services to be provided are compatible with maintaining the auditors’ independence. The Board has also adopted the policy that in any year fees paid to the Independent Auditor for non-audit services in any year shall not exceed the fees paid for audit and audit-related services during the year.services. Non-audit services are limited to the feesconsist of those described above as included in the Tax Fees and All Other ServicesFees categories.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREOWNERS VOTEFOR THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP.
62 | ![]() | Proxy Statement and Notice of 2015 Annual Meeting of Shareowners |
PROPOSALProposal 3: ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION Advisory Vote to Approve Named Executive Officer Compensation
As required byEach year we ask shareowners to approve, on an advisory basis, the compensation disclosureof UTC’s Named Executive Officers. We encourage you, before voting, to read the Compensation Discussion and Analysis (“CD&A”) on pages 22 to 47, along with the compensation tables on pages 49 to 59, and to consider the information the CD&A provides about the alignment between UTC’s performance and our executives’ compensation. The CD&A also describes recent changes to our compensation programs that are designed to enhance corporate governance and align executive and shareowner interests.
Under the rules of the Securities and Exchange Commission, the Board requests your advisory vote to approve the compensation of UTC’s Named Executive Officers based on the Compensation Discussion and Analysis (“CD&A”), the compensation tables and the related information on pages 19 to 47 of this Proxy Statement. In accordance with the SEC’s compensation disclosure rules, your vote is advisory and therefore, will not be binding on the Board or the Company. However, the Board will review the voting results and takegive them intoserious consideration when making future executive compensation decisions.
UTC’s Board Committee on Compensation and Executive Development reviews
As more fully discussed in the designCD&A, the fundamental objective of UTC’s executive compensation programs on an ongoing basis. UTC’s objective, and that of the Board,program is to closely align incentive compensation opportunities with the long-term interests of our shareowners. For senior leadership, performance contingent stock-based compensation comprises the substantial majority of total compensation. Long-termcompensation is both stock-based and contingent on performance. We base long-term incentive compensation is realized on the basisachievement of performance metrics that link directly to sustainable performance and long-term shareowner value. RelevantWe use relevant benchmarking is conducted to assure that overall compensation levels and opportunities align effectively with competitive market practices. Details of performance metrics and benchmarking can be found in the CD&A on pages 19 to 35 and 30 of this Proxy Statement.
The design and operation of an executive compensation program for a large, complex, global enterprise such as UTC necessarily involves multiple objectives and constraints.objectives. The Board believes that UTC’s executive compensation programs have been effective in enabling the attractionattracting and retention ofretaining senior business leaders with the requisite talent and skills to drive UTC’s financial and operational performance. As further described on pages 19 to 35page 28 of this Proxy Statement, UTC’s executive compensation programs are based ondesigned to support the following coreguiding principles:
• | Pay-for-performance: |
• | |
• | Long-term focus:For our most senior executives, long-term stock-based compensation opportunities should significantly outweigh short-term cash-based opportunities. Annual objectives should complement sustainable long-term performance. |
• | Competitiveness:Total compensation should be sufficiently competitive to attract, retain and motivate a leadership team capable of maximizing UTC’s performance. Each element should be benchmarked relative to peers. |
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• |
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![]() | 63 |
|
2011PROPOSAL 3Advisory Vote to Approve Named Executive Officer Compensation
2014 was aanother very successful year for UTC despite challenging economic conditions globally. UTCUTC. We generated record-breakingdiluted earnings per share of $5.49 for 2011,$6.82, a 16%10% increase from 2013. Net sales grew by 4% and we paid 7% more dividends to our shareowners this year than in 2013. During 2014, we also won a number of significant contracts that position UTC for strong financial growth well into the prior year. UTC’snext decade. As in the past, long-term sustainable growth continues to be the driver behind the strategic and financial decisions of our senior executives. This can be seen in our cumulative total return to shareowners over the five- and ten-year periodsperiod ending December 31, 20112014, which equaled 31% and 175%, respectively,176%. These returns are well in excess of results for the S&P 500 and Dow Jones Industrial Average and the S&P 500 indices for the corresponding periods. When compared tosame period. UTC’s 176% cumulative total shareowner return also outperformed the Capital Goods industry sector (98%), of which UTC is a component, UTC’s total shareowner return consistently outperformedfor the sector over the past ten years.ten-year period ending on December 31, 2014. The Board believes that theour executive compensation program plays a key role in driving and sustaining this level of performance. At last year’s Annual Meeting, UTC’s executive compensation program received a 98% approval vote in the annual advisory vote by shareowners.
The Board encourages shareowners to read the CD&A on pages 19 to 35 of this Proxy Statement to review the correlation between compensation and performance. The CD&A also reviews executive compensation program changes designed to enhance corporate governance and shareowner alignment objectives.
The Board remains committed to robust corporate governance practices and strongly shares the interest of shareowners in maintaining effective, performance-based executive compensation programs at UTC. In that regard, as discussed in the CD&A, the Committee has over the years made several changes to our executive compensation programs, in direct response to input from shareowners. The Board believes that UTC’s executive compensation programs have a proven record of effectively drivingaligned pay with performance by incentivizing superior levels of financial performance alignmentwhile encouraging long-term growth objectives. A balanced compensation program is essential for the purpose of pay with performance, high ethical standardsattracting and attraction and retention of highlyretaining talented executives.
Accordingly, the Board recommends that shareowners vote FOR the following resolution:
“RESOLVED,, that the compensation of UTC’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 related information disclosedprovided on pages 1922 to 4759 of this Proxy Statement, is hereby APPROVED on an advisory basis.”
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR THE FOREGOING RESOLUTION TO APPROVE ON AN ADVISORY BASIS THE COMPENSATION OF UTC’S NAMED EXECUTIVE OFFICERS.
ADDITIONAL MEETING INFORMATION
How many shares can vote?As a matter of the record date, 910,162,300 shares of UTC Common Stock were issued and outstanding. Each share of UTC Common Stock outstanding on the record date is entitled to one vote.
What are the quorum requirements for the Annual Meeting? The conduct of business at the Annual Meeting requires the existence of a quorum, which will be satisfied by the presence at the Annual Meeting, in person or by proxy, of the holders of shares representing a majority of the outstanding shares.
How many votes are needed for the election of directors at the meeting? Under Section 2.2 of UTC’s Bylaws, in order for a director to be elected a majority of the votes cast with respect to the director’s election must be cast “for” the director. Because Delaware law, provides that an incumbent director continues in office until his or her successor has been elected and qualified (or until the director’s earlier removal or resignation) even though a majority of the votes cast were not voted for his or her re-election, UTC has adopted as a provision of its Corporate Governance Guidelines a requirement that any nominee who is an incumbent director and who receives in an uncontested election fewer votes “for” than “against” in respect of his or her election must promptly tender his or her resignation to the Chair of the Committee on Nominations and Governance. The Committee on Nominations and Governance will then review the matter and, taking into consideration all factors it deems relevant, recommend to the Board whether the resignation should be accepted and, if so recommended and the Board accepts the resignation, whether the vacancy created should be filled or the size of the Board should be reduced. The Board will act on the Committee’s recommendation within 90 days after the certification of the election results. The Board’s decision will be disclosed in a Current Report on Form 8-K filed with the SEC.
How many votes are needed for the adoption of other matters submitted to a shareowner vote at the meeting? Proposal 2, the appointment of PricewaterhouseCoopers LLP as Independent Auditor, will be approved if it receives the affirmative vote of a majority of the votes constituting the quorum. Proposal 3, the non-binding, advisory vote to approve the compensation of the Named Executive Officers, will be approved if the votes cast “for” the Proposal exceed the votes cast “against” the Proposal. As provided under the federal securities laws, the approval or disapproval of this Proposal 3 may not be construed as overruling any decision by UTC or the Board, to create or implyas imposing any change to the fiduciary duties ofduty or obligation on UTC, or the Board or any individual director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ABOVE RESOLUTION TO APPROVE, ON AN ADVISORY BASIS, THE COMPENSATION OF UTC’S NAMED EXECUTIVE OFFICERS.
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General Information Regarding the Annual Meeting
Your Vote Is Very Important. |
Please vote your shares in advance of the meeting, using one of the voting methods described below.
To conserve natural resources and reduce costs, we are sending many shareowners a brief Notice of Internet Availability of Proxy Materials, as permitted by SEC rules. This Notice explains how you can access UTC’s proxy materials on the Internet and how to createobtain printed copies if you prefer. It also tells you how you can choose either electronic or imply any additional fiduciary dutiesprint delivery of proxy materials for future Annual Meetings.
WHO CAN VOTE
You are entitled to vote at the Annual Meeting if you owned shares of Common Stock at the close of business on March 2, 2015, which is referred to as the “record date.” A list of registered shareowners entitled to vote at the meeting will be available at UTC’s offices, One Financial Plaza, Hartford, CT, 06103 during the ten days prior to the meeting, and also at the meeting.
ATTENDING THE MEETING
You or your authorized proxy can attend the Annual Meeting if you were a registered or beneficial owner of Common Stock at the close of business on March 2, 2015.
We ask that shareowners request tickets in advance to attend.
To request an admission ticket to the Annual Meeting, contact the Corporate Secretary at UTC, One Financial Plaza, Hartford, CT 06103 or by email to:corpsec@corphq.utc.com.
• | If you own shares through an account with a broker, bank, trustee or other intermediary, you must also send a copy of an account statement, or a “legal proxy” from your intermediary, showing the number of shares you owned as of the record date. |
• | If your shares are registered in your name with UTC’s stock registrar and transfer agent, Computershare Trust Company, N.A. (“Computershare”), or if you own shares through a UTC employee savings plan, there is no need to provide evidence of ownership of shares. UTC can verify your ownership of Common Stock. |
If you forget to bring a ticket, you will be admitted to the Board.meeting only if seats are available and you provide proof of identification and satisfactory evidence that you were a registered shareowner or beneficial shareowner of Common Stock as of the record date.
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GENERAL INFORMATION REGARDING THE ANNUAL MEETING
QUORUM FOR THE MEETING
Under the Company’s Bylaws, we can conduct business at the Annual Meeting if the holders of a majority of the outstanding shares on the record date are present either in person or by proxy. The presence of that number of shares constitutes a “quorum”. As of the record date, 908,450,127 shares of Common Stock were issued and outstanding.
HOW TO VOTE
If you own shares directly in your name......
If your shares are registered in your name on the records of Computershare, you may vote in several different ways.
• | Vote on the Internet.You can vote online at:www.proxyvote.com. |
• | Vote by Telephone.In the United States or Canada, you can vote by telephone. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded. |
• | Vote by Mobile Device.You can scan the QR code provided with your proxy materials. |
Internet and telephone voting facilities will be available 24 hours a shareowner submitsday until 11:59 p.m., Eastern Daylight Time, on April 26, 2015 (except for participants in the UTC Employee Savings Plan, who must submit voting instructions earlier, as described below).
To authenticate your Internet or telephone vote, you will need to enter your confidential voter control number as shown on the voting materials you received. If you vote online or by telephone, you do not need to return a proxy card or voting instruction card.
• | Vote by Mail.You can mail the proxy card or voting instruction card enclosed with your printed proxy materials. Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided, or in an envelope addressed to Vote Processing, c/o Broadridge Financial Solutions, 51 Mercedes Way, Edgewood, NY 11717. Please allow sufficient time for delivery of your proxy card if you decide to vote by mail. |
• | Vote at the Annual Meeting.Most shareowners may vote by submitting a ballot in person at the Annual Meeting. If you have already voted online, by telephone or by mail, your vote at the Annual Meeting will supersede your prior vote. |
If you own your shares through an account with a bank, broker, trustee or other intermediary, sometimes referred to as owning in “street name”......
Your intermediary will send you printed copies of the proxy materials or tell you how to access proxy materials electronically. You are entitled to direct the intermediary how to vote your shares by following the voting instructions indicating an abstentionit provides to you.
If you hold shares in the UTC Employee Savings Plan......
You can direct the voting of your proportionate interest in shares of Common Stock held by the ESOP Fund and the Common Stock Fund under the UTC Employee Savings Plan by returning a voting instruction card or by providing voting instructions via the Internet or by telephone. If you do not provide voting instructions (or if your instructions are incomplete or unclear) as to one or more of the matters to be voted on, the trustee will vote your proportionate interest in shares held by the ESOP Fund for the voting choice that receives the greatest number of votes based on voting instructions received from ESOP Fund participants. Similarly, the trustee will vote your uninstructed proportionate interest in shares held by the Common Stock Fund for the voting choice that receives the greatest number of votes based on a particular matter,voting instructions received from Common Stock Fund participants. The trustee will vote all shares of Common Stock held in the shareowner’sESOP Fund not allocated to participant accounts for the voting choice that receives the greatest number of votes from ESOP Fund participants who submit voting instructions with respect to their allocated shares.
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GENERAL INFORMATION REGARDING THE ANNUAL MEETING
SPECIAL VOTING DEADLINE FOR PARTICIPANTS IN THE UTC EMPLOYEE SAVINGS PLAN: Broadridge Financial Solutions must receive your voting instructions by 11:00 a.m., Eastern Daylight Time, on April 23, 2015, so it will have time to tabulate all voting instructions of participants and communicate those instructions to the trustee, who will vote the shares held by the Savings Plan. Because the Savings Plan trustee will vote shares held in the Savings Plan as described above, Savings Plan participants will not be counted asable to vote their shares held in the Savings Plan in person at the meeting.
Revoking a vote for that matter, but theProxy
If you hold shares will be included as part of the shares making up the quorum, and accordingly the abstention will have the same practical effect as a vote against the matter insofar as the vote required is a percentage of the quorum. Shares that are the subject of broker non-votes (as describedregistered in response to the question“How will the proxy holders vote my shares?” on page 3) with respect to a particular matter will not be counted as a vote for or against the matter, but will be included as part of the shares making up the quorum, and accordingly will likewise have the same practical effect as a vote against the matter. In the case of Proposal 3, neither abstentions nor broker non-votes will have an impact on whether the Proposal is adopted.
Can a proxy be revoked? Yes. Youyour name, you may revoke your proxy before it is votedby:
• | Writing to the Corporate Secretary and providing your name and account information |
• | If you submitted your proxy by telephone or via the Internet, by accessing those voting methods and following the instructions given for revoking a proxy |
• | Submitting a new proxy card with a later date (which will override your earlier proxy card) |
• | Voting in person at the Annual Meeting |
If you hold your shares in “street name,” you must follow the directions provided by sending written notice to the Corporate Secretary identifying the proxy being revoked; by following the prompts provided through the telephone and Internet voting facilitiesyour bank, broker, trustee or other intermediary for revoking a proxy previously submitted by telephone or via the Internet; by submittingmodifying your voting instructions.
VOTING PROCEDURES
How Shares Will Be Voted
Each share is entitled to one vote. Your shares will be voted in accordance with your instructions. In addition, if you have returned a new proxy card with a later date; or by voting in person at the Annual Meeting.
How will the proxy holders vote on any other business conducted at the Annual Meeting? Although we do not know of any business to be conducted at the Annual Meeting other than the matters described in this Proxy Statement, the return of a duly signed proxy card or the submission ofsubmitted voting instructions by telephone or via the Internet with respect to your shares will confer ononline, the proxy holders discretionary authoritywill have, and intend to exercise, discretion to vote your shares (other than shares held in the UTC Employee Savings Plan) in accordance with their best judgment on any other such additional matters not identified in this Proxy Statement that may be submittedare brought to a vote of shareowners at the Annual Meeting. At present we do not know of any such additional matters.
When
If your shares are shareowner proposals for inclusionregistered in UTC’s Proxy Statement foryour name and you sign and return a proxy card or vote via the 2013 Annual Meeting due?Internet, by telephone or by mail butdo not A shareowner who wishesgive voting instructions on a particular matter, the proxy holders will be authorized to have a proposal included in UTC’s Proxy Statement for the 2013 Annual Meeting must,vote your shares on that matter in accordance with SECthe Board’s recommendation. If you hold your shares through an account with a broker anddo notgive voting instructions on a matter, under the rules governing shareowner proposals, submitof the proposalNew York Stock Exchange your broker is permitted to vote in writingits discretion only on Proposal 2 (appointment of the Independent Auditor) and is required to withhold its vote on each of the other Proposals, resulting in a so-called “broker non-vote.” The impact of abstentions and broker non-votes on the overall vote is shown in the following table.
Votes Required and Effect of Abstentions and Broker Non-Votes
Matter | Required Vote | Impact of Abstentions | Impact of Broker Non-Votes |
Election of Directors | Votes FOR a nominee must exceedvotes AGAINST that nominee. | Not counted as votes cast; noimpact on outcome. | Not counted as votes cast; noimpact on outcome. |
Appointment ofPricewaterhouseCoopers LLPas Independent Auditor | Approval by a majority of the votesmaking up the quorum. | Counted toward quorum; impactis equivalent to a vote AGAINST. | Not applicable. |
Advisory vote to approve NamedExecutive Officer compensation | Votes FOR the proposal mustexceed votes AGAINST it. | Not counted as votes cast; noimpact on outcome. | Not counted as votes cast; noimpact on outcome. |
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GENERAL INFORMATION REGARDING THE ANNUAL MEETING
Cumulative Voting for Directors
You have the right to “cumulate” your votes in the election of UTC directors. This means you are entitled in the election of directors to a number of votes equal to the Corporate Secretary for receiptnumber of shares of Common Stock you own, multiplied by October 29, 2012, in orderthe number of directors to be considered for inclusion.
What is the advance notice deadlineelected. You may cast all of these votes for a proposalsingle nominee or distribute them among any two or more nominees, in your discretion.
If your shares are registered in your name and you wish to exercise cumulative voting rights, you must submit a proxy card by mail or attend the Annual Meeting and vote in person by ballot. Your proxy card or ballot must specify how you want to allocate your votes among the nominees. The telephone and Internet voting facilities do not accommodate cumulative voting.
If you own your shares in “street name,” contact your broker, bank, trustee or other intermediary for directions on how to exercise cumulative voting rights using the voting instruction card, or to request a legal proxy so you can vote your shares directly.
The Board of Directors is soliciting discretionary authority to cumulate votes with respect to the election of directors. If shareowners (other than UTC Employee Savings Plan participants) return a signed proxy card or submit voting instructions without providing instructions about cumulative voting, or if shareowners (other than UTC Employee Savings Plan participants) vote by telephone or via the Internet, they will confer on the designated proxy holders discretionary authority to exercise cumulative voting. Under this discretionary authority, the designated proxy holders may, if they elect to do so, allocate the aggregate number of votes (other than votes in respect of shares held in the UTC Employee Savings Plan) among the nominees in the manner recommended by the Board of Directors or otherwise determined by the proxy holders. However, the proxy holders will not cast any votes for any nominee for whom you have given instructions to vote against or withhold a vote.
If you do not wish to grant the proxy holders authority to cumulate your votes in the election of directors, you must explicitly state that a shareowner plans to introduce for submission to aobjection on your proxy card or voting instruction card.
VOTE COUNTING
Broadridge Financial Solutions (“Broadridge”), an independent entity, will receive and tabulate the vote in connection with the Annual Meeting. Representatives of Broadridge will act as the independent Inspectors of Election and in this capacity will supervise the voting, decide the validity of proxies and certify the results.
Broadridge has been instructed that the vote of shareowners ateach shareowner must be kept confidential and may not be disclosed (except in legal proceedings or for the 2013 Annual Meeting?Under Section 1.10purpose of UTC’s Bylaws,soliciting shareowner votes in a shareowner who wishes to introduce a proposal to be voted on at UTC’s 2013 Annual Meeting (other than a proposal to be included in the Proxy Statement pursuant to SEC Rule 14a-8) must send advance written notice to the Corporate Secretary for receipt no earlier than December 12, 2012 and no later than January 11, 2013. Such notice must include the information specified by the Bylaws, a copycontested proxy solicitation).
INFORMATION ABOUT PROXY SOLICITATION
Employees of which is available at http://www.utc.com/Governance.
What is the advance notice deadline if a shareowner plans to nominate a person for election as a director at the 2013 Annual Meeting?Under Section 1.10 of UTC’s Bylaws, a shareowner who wishes to nominate a person for election as a director at the 2013 Annual Meeting must send advance written notice to the Corporate Secretary for receipt no earlier than December 12, 2012 and no later than January 11, 2013. Such notice must include the information, documents and agreements specified by the Bylaws, a copy of which is available at http://www.utc.com/Governance.
How areUTC may solicit proxies solicited and how much is this solicitation expected to cost? In addition to the distribution of this Proxy Statement, proxies may be solicited on behalf of the Board of Directors by employees of UTC by mail, email, in person and by telephone. These employees will not receive any additional compensation for these activities. UTC will bear the cost of soliciting proxies and will reimburse banks, brokers, trustees and other intermediaries for their reasonable out-of-pocket expenses for forwarding proxy materials to beneficial shareowners. UTC has retained Georgeson Inc. has been retained by UTC to assist in the distribution ofdistributing proxy materials and the solicitation ofsoliciting proxies for a fee of $16,000, plus out-of-pocket expenses.
How can shareowners obtain electronic access to the proxy materials, instead of receiving mailed copies?Holders of
ELECTRONIC ACCESS TO PROXY MATERIALS
If you hold sharesregistered in theiryour name, on the records of Computershareyou may contact Computershare at http://www.computershare.com/us/ecomms to sign up athttp://www.computershare-na.com/greento receive electronic access to the proxy materials for future meetings, rather than receiving mailed copies. Shareowners electingIf you choose electronic access, you will receive an email notificationnotifying you when the Annual Report and Proxy Statement are available, with electronic links to access the documents (in PDF and HTML formats) on a designated website and instructions on how to vote shares via the Internet. Enrollmentonline. Your enrollment for electronic access will be effective for a future annual meeting if submitted at least two weeks prior to the record date for that meeting, and will remain in effect for subsequent years, unless cancelled no later thanyou cancel it, which you can do up to two weeks prior tobefore the record date for any subsequentfuture annual meeting.Beneficial shareowners also
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GENERAL INFORMATION REGARDING THE ANNUAL MEETING
If you own your shares in “street name,” you may be able to obtain electronic access to proxy materials by contacting theyour broker, bank, trustee or other intermediary, or by contacting Broadridge at at:http://enroll.icsdelivery.com/utc.
How canELIMINATING DUPLICATE MAILINGS
If you share an address with one or more other UTC shareowners, reduce the number of copies of proxy materials sent to a household? Eligiblebeneficial shareowners who shareyou may have received notification that you will receive only a single address may receive a notification that only one copy of the Annual Report, Proxy Statement or Notice of Internet Availability of Proxy Materials will be sent tofor your entire household unless you or another UTC shareowner at that address unlessgives contrary instructions to UTC’s stock registrar and transfer agent or to the bank, broker, trustee or other intermediary that providedprovides the notification receives contrary instructions from any beneficial shareowner at that address.notification. This practice, known as “householding”,“householding,” is designed to reduce printing and mailing costs. However, if
Upon written or oral request, UTC will deliver promptly a beneficialseparate copy of the Annual Report, Proxy Statement or Notice of Internet Availability of Proxy Materials to any shareowner at such ana shared address wishesto which the Company delivered a single copy of any of these documents. If you wish to receive free of charge a separate Annual Report, Proxy Statement or Notice of Internet Availability of Proxy Materials this year or in the future, the shareowner may contact the entity that provided the notification. Eligibleregistered shareownersor if you are receiving multiple copies of the Annual Report, Proxy Statement or Notice of Internet Availability of Proxy Materials can request householding by contactingat your address and would like to enroll in “householding,” please contact UTC’s stock registrar and transfer agent, Computershare Trust Company, at 1-800-488-9281. Persons holdingIf you own your shares through ain “street name,” please contact your broker, bank, trustee or other intermediary can request householding by contacting that entity.
OTHER MATTERSto make your request.
SUBMITTING PROPOSALS AND NOMINATIONS FOR 2016 ANNUAL MEETING
Shareowner Proposals.In order for a shareowner proposal to be considered for inclusion in UTC’s Proxy Statement for the 2016 Annual Meeting, our Corporate Secretary must receive such proposal in writing by November 13, 2015.
In order to introduce a proposal for vote at the 2016 Annual Meeting (other than a shareowner proposal included in the proxy statement in accordance with SEC Rule 14a-8), UTC’s Bylaws require that the shareowner send advance written notice to the Corporate Secretary for receipt no earlier than December 29, 2015 and no later than January 28, 2016. This notice must include the information specified by Section 1.10 of the Bylaws, a copy of which is available at:http://www.utc.com/Our-Company/Corporate-Governance/Pages/Governance-Documents-and-Policies.aspx.
Director Nominations.UTC’s Bylaws require that a shareowner who wishes to nominate a candidate for election as a director at the 2016 Annual Meeting must send advance written notice to the Corporate Secretary for receipt no earlier than December 29, 2015 and no later than January 28, 2016. This notice must include the information, documents and agreements specified by Section 1.10 of the Bylaws, a copy of which is available at:http://www.utc.com/Our-Company/Corporate-Governance/Pages/Governance-Documents-and-Policies.aspx.
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Cautionary Note Concerning Factors That May Affect Future Results.This Proxy Statement contains statements which, to the extent they are not statements of historical or present fact, constitute “forward-looking statements” under the securities laws. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These forward-looking statements are intended to provide management’s current expectations or plans for our future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as “believe,” “expect,” “expectations,” “plans,” “strategy,” “prospects,” “estimate,” “project,” “target,” “anticipate,” “will,” “should,” “see,” “guidance,” “confident” and other words of similar meaning in connection with a discussion of future operating or financial performance. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash and other measures of financial performance. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Such risks, uncertainties and other factors include, without limitation:
• | the effect of economic conditions in the industries and markets in which we operate in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end market demand in construction and in both the commercial and defense segments of the aerospace industry, levels of air travel, financial condition of commercial airlines, the impact of weather conditions and natural disasters and the financial condition of our customers and suppliers; |
• | the scope, nature, impact or timing of acquisition and divestiture activity, including, among other things, integration of acquired businesses into our existing businesses and realization of synergies and opportunities for growth and innovation; |
• | challenges in the development, production, delivery, support, performance and realization of the anticipated benefits of advanced technologies and new products and services; |
• | future levels of indebtedness and capital spending and research and development spending; |
• | future availability of credit and factors that may affect such availability, including credit market conditions and our capital structure; |
• | delays and disruption in delivery of materials and services from suppliers; |
• | customer- and Company-directed cost reduction efforts and restructuring costs and savings and other consequences thereof; |
• | new business opportunities; |
• | our ability to realize the intended benefits of organizational changes; |
• | the anticipated benefits of diversification and balance of operations across product lines, regions and industries; |
• | future repurchases of our Common Stock; |
• | the outcome of legal proceedings, investigations and other contingencies; |
• | pension plan assumptions and future contributions; |
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OTHER INFORMATION
• | the impact of the negotiation of collective bargaining agreements and labor disputes; |
• | the effect of changes in political conditions in the U.S. and other countries in which we operate; and |
• | the effect of changes in tax, environmental, regulatory (including among other things import/export) and other laws and regulations in the U.S. and other countries in which we operate. |
In addition, our 2014 Annual Report on Form 10-K includes important information as to risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. See the “Notes to Consolidated Financial Statements” under the heading “Note 17: Contingent Liabilities,” the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Business Overview,” “Results of Operations,” “Liquidity and Financial Condition,” and “Critical Accounting Estimates,” and the section titled “Risk Factors” in our 2014 Form 10-K. Our Form 10-K also includes important information as to these factors in the “Business” section under the headings “General,” “Description of Business by Segment” and “Other Matters Relating to Our Business as a Whole,” and in the “Legal Proceedings” section. Additional important information as to these factors is included in our 2014 Annual Report in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Restructuring Costs,” “Environmental Matters” and “Governmental Matters.” The forward-looking statements in this Proxy Statement speak only as of the date of this Proxy Statement or, in the case of any document incorporated by reference, the date of that document. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information as to factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements is disclosed from time to time in our other filings with the SEC.
United Technologies Corporation and its subsidiaries’ names, abbreviations thereof, logos, and product and service designators are all either the registered or unregistered trademarks or trade names of United Technologies Corporation and its subsidiaries. Names, abbreviations of names, logos, and product and service designators of other companies are either the registered or unregistered trademarks or trade names of their respective owners.
Annual Report on Form 10-K for 2014.UTC undertakes to provide, without charge, to any shareowner submitting an oral or written request, a copy of the UTC Annual Report on Form 10-K for 2014 filed with the SEC. Requests may be directed to: UTC Corporate Secretary, United Technologies Corporation, One Financial Plaza, Hartford, CT 06103, Telephone 860-728-7870, or by email to: corpsec@corphq.utc.com.
Corporate Governance Information and Code of Ethics.UTC’s Corporate Governance Guidelines and the charters for each Board Committee are available on UTC’s website:http://www.utc.com/Governance/Board+of+Directors.Our-Company/Corporate-Governance/Pages/Governance-Documents-and-Policies.aspx. UTC’s Code of Ethics is available on UTC’s website:http://www.utc.com/Governance.Our-Company/Ethics-And-Compliance/Pages/Code-of-Ethics.aspx. Printed copies will be provided, without charge, to any shareowner upon request addressed to the Corporate Secretary. The Code of Ethics applies to all directors and employees, including the principal executive, financial and accounting officers. Shareowners and other interested persons may send communications to the Board, the Chairman, the Lead Director or one or more non-management directors by using the contact information provided on UTC’s website under the headings “Governance”,“Corporate Governance,” “Board of Directors”,Directors,” “Contact UTC’s Board.” Shareowners and interested persons also may send communications by letter addressed to the Corporate Secretary at UTC, One Financial Plaza, Hartford, CT 0610106103 or by contacting the Business Practices OfficeUTC Ombudsman at 860-728-6485.800-871-9065. These communications will be received and reviewed by UTC’s Business PracticesGlobal Ethics and Compliance Office. The receipt of concerns about UTC’s accounting, internal controls, auditing matters or business practices will be reported to the Audit Committee. The receipt of other concerns will be reported to the appropriate Committee(s) of the Board. UTC employees also can raise questions or concerns confidentially or anonymously using UTC’s Ombudsman/DIALOG program.
Section 16(a) Beneficial Ownership Reporting Compliance. Based upon a review of Forms 3, 4 and 5 and any amendments thereto, filed with the SEC during or with respect to 2011, and written confirmation provided by its directors and officers, UTC is not aware of any failure by any of its directors or any of its officers to file on a timely basis the reports required by Section 16(a) of the Securities Exchange Act of 1934 as amended during and with respect to 2011, except that there were inadvertent delays in reporting (i) an initial balance of 5,428 shares of Common Stock held by Scott Buckhout upon becoming President of UTC Fire and Security, (ii) an initial balance of seven shares of Common Stock held by Peter F. Longo, Vice President, Controller, and (iii) Mr. Longo’s acquisition, through ten periodic payroll deferrals of compensation under the UTC Deferred Compensation Plan, of a total of 59.14 shares of Common Stock. The required reports were subsequently filed in each case. UTC is not aware of any 10% beneficial owner (as such term is defined under SEC Rule 16a-1) of UTC Common Stock.
Transactions with Related Persons.UTC has adopted a written policy for the review of transactions with related persons. The policy requires review, approval or ratification of transactions exceeding $120,000 in which UTC is a participant and in which a UTC director, executive officer, a significant shareownerbeneficial owner of five percent or more of UTC’s outstanding shares, or an immediate
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OTHER INFORMATION
family member of any of the foregoing persons has a direct or indirect material interest. These transactions must be reported for review by the Corporate Secretary and the Vice President, Business Practices,Global Compliance, who will determine whether the transaction may be a transaction
with a related person, as such term is defined under UTC’s policy and the relevant SEC rules. Following review by these officers, the Board’s Committee on Nominations and Governance must determine whether the transaction can be approved or not, based on whether the transaction is determined to be in, or not inconsistent with, the best interests of UTC and its shareowners. In making this determination, the Committee must take into consideration whether the transaction is on terms no less favorable to UTC than those available with other parties and the related person’s interest in the transaction. UTC’s policy permits employment of related persons possessing qualifications consistent with UTC’s requirements for non-related persons in similar circumstances, provided the employment is approved by the Senior Vice President, Human Resources and& Organization and the Vice President, Business Practices.Global Compliance.
A brother-in-law of J. Thomas Bowler, Jr.
State Street Corporation (“State Street”), Senior Vice President, Human Resources and Organization, is employed by Sikorsky Aircraft as Manager, Human Resources. Mr. Bowler’s brother-in-law receives annual compensation and benefits of less than $200,000, which is consistentacting in various fiduciary capacities, filed a Schedule 13G with the compensationSEC reporting that as of December 31, 2014 State Street and benefits provided tocertain of its subsidiaries collectively were the beneficial owners of more than five percent of UTC’s outstanding shares of Common Stock. A subsidiary of State Street is the trustee for the UTC Employee Savings Plan Master Trust. Other State Street subsidiaries provide investment management services. During 2014, the Savings Plan Trust paid State Street and its subsidiaries approximately $2.3 million for services as trustee, as investment managers and for administrative and other employeesservices.
BlackRock, Inc. (“BlackRock”) filed a Schedule 13G with equivalent qualifications, experiencethe SEC reporting that as of December 31, 2014 BlackRock and responsibilities at Sikorsky. This employment relationshipcertain subsidiaries collectively were the beneficial owners of more than five percent of UTC’s outstanding shares of Common Stock. During 2014, BlackRock acted as an investment manager for certain assets within UTC’s pension plans and Employee Savings Plan. BlackRock received approximately $5.7 million for such services.
Each of the relationships described above was reviewed and ratified in accordance with UTC’s policy for review of transactions with related persons.
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Section 16(a) Beneficial Ownership Reporting Compliance.Section 16(a) of the Securities Exchange Act of 1934, as amended, requires certain of our officers and each director and each beneficial owner of more than ten percent of UTC Common Stock to file reports with the SEC regarding their holdings and transactions in UTC’s equity securities. Based upon a review of these reports as filed with the SEC during or with respect to 2014, and upon written confirmation from our directors and officers, we believe that each director and covered officer met these filing requirements.
Incorporation by Reference.In connection with our discussion of director and executive compensation, we have incorporated by reference in this Proxy Statement certain information included in Note 12, Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 2014 Annual Report on Form 10-K filed on February 5, 2015. Only those portions of such filings specified in the preceding sentence are incorporated by reference in this Proxy Statement.
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UNITED TECHNOLOGIES CORPORATION
ONE FINANCIAL PLAZA
HARTFORD, CT 06103
SCAN TO VIEW MATERIALS AND VOTE
VOTE BY INTERNET -www.proxyvote.com or scan the QR barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information until 11:59 p.m. EDT the day before the meeting date or the cut-off date for Savings Plan Participants. Follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via email or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions until 11:59 p.m. EDT the day before the meeting date or the cut-off date for the Savings Plan Participants. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK
AS FOLLOWS:
M28000-P05796-Z54699 | KEEP THIS PORTION FOR YOUR RECORDS | |||
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
UNITED TECHNOLOGIES CORPORATION | |||||||||||||||||||||||||
THE BOARD OF DIRECTORS RECOMMENDS A | |||||||||||||||||||||||||
For | Against | Abstain | |||||||||||||||||||||||
Against | Abstain | ||||||||||||||||||||||||
1. | Election of Directors | ||||||||||||||||||||||||
1a. John V. Faraci | o | o | o | 1i. H. Patrick Swygert | o | o | o | ||||||||||||||||||
1b. Jean-Pierre Garnier | o | o | o | 1j. André Villeneuve | o | o | o | ||||||||||||||||||
1c. Gregory J. Hayes | o | o | o | 1k. Christine Todd Whitman | o | o | o | ||||||||||||||||||
1d. Edward A. Kangas | o | o | o | ||||||||||||||||||||||
2. | Appointment of PricewaterhouseCoopers LLP as Independent Auditor for 2015. | o | o | o | |||||||||||||||||||||
1e. Ellen J. Kullman | o | o | o | ||||||||||||||||||||||
3. | An advisory vote to approve the compensation of our named executive officers. | o | o | o | |||||||||||||||||||||
1f. Marshall O. Larsen | o | o | o | ||||||||||||||||||||||
1g. Harold McGraw III | o | o | o | ||||||||||||||||||||||
1h. Richard B. Myers | o | o | o | ||||||||||||||||||||||
For address changes, please check this box and write them on the back where indicated. | o | ||||||||||||||||||||||||
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | |||||||||||||||||||||||||
Annual Meeting of Shareowners of United Technologies Corporation
Wednesday, April 11, 2012, 2:00 p.m. EDT
Held in the Riviera Theatre, located at 225 King Street in Charleston, South Carolina.
The purposes of the meeting are to consider the following matters:
TICKET REQUESTS:Since seating at the meeting is limited, we ask that shareowners request a ticket in advance to attend. Please email your request tocorpsec@corphq.utc.com or write to the Corporate Secretary at UTC, One Financial Plaza, Hartford, CT 06101.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
M28001-P05796-Z54699
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | |||||||||||
Annual Meeting of Shareowners of United Technologies Corporation
Monday, April 27, 2015, 2:00 p.m. EDT
Held in the British Open Ballroom of the PGA National Resort, 400 Avenue of the Champions, Palm Beach Gardens, Florida 33418
The purposes of the meeting are to consider the following matters:
1. | Election of the eleven director nominees listed in the Proxy Statement; | |||||||
2. | ![]() |
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3. | An advisory vote to approve the compensation of our named executive officers; and | |||||||
4. | Other business, if properly raised. |
TICKET REQUESTS: We ask that shareowners request a ticket in advance to attend. Please email your request to:corpsec@corphq.utc.com or write to: Corporate Secretary, UTC, One Financial Plaza, Hartford, CT 06103.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at: www.proxyvote.com.
M28001-P05796-Z54699 | ||||||||||||||||
![]() | PROXY | |||||||||||||||
This Proxy is Solicited on Behalf of the Board of Directors of United Technologies Corporation.
The undersigned hereby appoints John V. Faraci, Edward A. Kangas and
This Proxy Card also constitutes voting instructions to the Trustee under each of the UTC employee savings plans to vote, in person or by proxy, the proportionate interest of the undersigned in the shares of Common Stock of UTC held by the Trustee under any such plan(s) as described in the Proxy Statement.
You are encouraged to specify your choices by marking the appropriate boxes | ||||||||||||||||
Address Changes: | ||||||||||||||||
(If you noted any Address Changes above, please mark corresponding box on the reverse side.) |