UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
(Rule14a-101)
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Cabot Corporation
(Name of Registrant as Specified In Its Charter)
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Cabot Corporation
20172020 Proxy Statement
The Annual Meeting of Stockholders
of Cabot Corporation will be held:
Thursday,March 9, 201712, 2020 at 4:00 p.m. ET
Cabot Corporation
Two Seaport Lane, Suite 1300
Boston, MA 02210-2019 USA
January 27, 201724, 2020
Dear Fellow Cabot Corporation Stockholders,
You are cordially invited to attend the Annual Meeting of Stockholders of Cabot Corporation, which will be held on Thursday, March 9, 2017,12, 2020, at 4:00 pm, Eastern Time, at the Corporate Headquarters of Cabot Corporation, Two Seaport Lane, Suite 1300, Boston, Massachusetts.
At the Annual Meeting, we will ask you to elect fourthree members of our Board of Directors, provide your advisory approval of our executive compensation, provide your advisory vote on the frequency of future executive compensation advisory approvals, approve our 2017 long-term incentive plan, and ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm.firm for our fiscal year ending September 30, 2020. We will also discuss any other business matters properly brought before the meeting. The attached Proxy Statement explains our voting procedures, describes the business we will conduct, and provides information about the Company that you should consider when you vote your shares.
We are using the “Notice and Access” method of providing proxy materials to you via the Internet. We are mailing to you a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of the proxy materials and 2019 Annual Report. Notice and Access provides a convenient and environmentally friendly way for you to access Cabot’s proxy materials. The Notice includes instructions on how to access our proxy statement and our 2019 Annual Report and how to vote your shares. The Notice also contains instructions on how to receive a paper copy of the proxy materials and our 2019 Annual Report, if you prefer.
Your vote is very important to us. Whether or not you plan to attend the Annual Meeting in person, we encourage you to vote promptly. You may vote by mailing a completed proxy card, or, if your proxy card or broker voting instruction form so indicates, by phone or the Internet.
Thank you for your continued support of Cabot Corporation.
Sincerely,
SEAN D. KEOHANE
President and
Chief Executive Officer
Notice of Annual Meeting of Stockholders
Date: | March |
Time: | 4:00 p.m., Eastern Time |
Place: | Corporate Headquarters of Cabot Corporation |
Two Seaport Lane, Suite 1300 |
Boston, Massachusetts 02210-2019 |
Record Date: | You may vote if you were a stockholder of record at the close of business on January |
Voting by Proxy: | To ensure that your vote is properly recorded, please vote as soon as possible, even if you plan to attend the annual meeting. |
If your shares are held in “street name” in a stock brokerage account or by a bank or other nominee, you must provide your broker, bank or other nominee with instructions on how to vote your shares in order for your shares to be voted on |
Items of Business | • | To elect |
To approve, in an advisory vote, our executive compensation;
To transact such other business as may properly come before the annual meeting or any adjournment or postponement thereof.
This notice and proxy statement are first being sentmade available to stockholders on or about February 3, 2017.January 24, 2020. Our 2019 Annual Report on Form10-Kis being sent with this notice and proxy statement.available at http://www.edocumentview.com/cbt.
By order of the Board of Directors,
Jane A. Bell
Secretary
Boston, Massachusetts 02210-2019
January 27, 201724, 2020
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Cabot Corporation
Two Seaport Lane, Suite 1300
Boston, Massachusetts 02210-2019
Proxy Statement
References to “the Company”, “Cabot”, “we”, “us”, and “our” in this proxy statement mean Cabot Corporation.
About the Annual Meeting
Who is soliciting my vote?
The Board of Directors of Cabot Corporation is soliciting your vote at the 20172020 Annual Meeting of Stockholders (“20172020 Annual Meeting” or the “meeting”).
What am I voting on?
You are voting on:
• | Proposal 1: Election of Juan Enriquez, Sean D. Keohane and William C. Kirby |
• | Proposal 2: Advisory approval of our executive compensation (see page |
• | Proposal 3: |
Any other business properly coming before the meeting.
How does the Board recommend that I vote my shares?
The Board’s recommendation can be found with the description of each item in this proxy statement. In summary, the Board recommends that you vote:
FOR each of the fourthree nominees for director;
FOR the advisory approval of our executive compensation (commonly referred to as“say-on-pay”);
FORthe ratification of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2017.2020.
Who is entitled to vote?
Only stockholders of record at the close of business on January 18, 201715, 2020 will be entitled to vote at the 20172020 Annual Meeting. As of that date, there were 62,189,38856,676,158 shares of our common stock outstanding. Each share of common stock is entitled to one vote. There is no cumulative voting.
The Vanguard Fiduciary Trust Company isWhy did I receive a “Notice of Internet Availability of Proxy Materials” but no proxy materials?
We are distributing our proxy materials to stockholders via the trusteeInternet under the “Notice and Access” approach permitted by rules of the Cabot Common Stock FundSecurities and Exchange Commission (“SEC”). This approach benefits the Cabot Common ESOP Fund portionsenvironment, while providing a timely and convenient method of accessing the materials and voting. On January 24, 2020, we will begin mailing a “Notice of Internet Availability of Proxy Materials” (the “Notice”) to stockholders. The Notice includes instructions on how to access our proxy statement and our 2019 Annual Report and how to vote your shares. The Notice also contains instructions on how to receive a paper copy of the Cabot 401(k) Planproxy materials and isour 2019 Annual Report, if you prefer.
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2020 PROXY STATEMENT |
About the record owner of all of those shares. The trustee is authorized to vote such shares in accordance with instructions from participants in, and the terms of, the Cabot 401(k) Plan.Annual Meeting(continued)
How many votes must be present to hold the meeting?
Your shares are counted as present at the 20172020 Annual Meeting if you attend the meeting and vote in person or if you properly return a proxy by Internet, telephone or mail. In order for us to hold our meeting, holders of a majority of our
CABOT CORPORATION 1
About the Annual Meeting(continued)
outstanding shares of common stock as of January 18, 201715, 2020 must be present in person or by proxy at the meeting. This majority is referred to as a quorum. Proxy cards or broker voting instruction forms that reflect abstentions and brokernon-votes will be counted as shares present to determine whether a quorum exists to hold the 20172020 Annual Meeting.
What is a brokernon-vote?
Under the rules that govern brokers who have record ownership of shares that they hold in “street name” for their clients who are the beneficial owners of the shares, brokers normally have discretion to vote such shares on routine matters, such as ratifications of independent registered public accounting firms, but not onnon-routine matters. Brokernon-votes generally occur when the beneficial owner of shares held by a broker does not give the broker voting instructions on anon-routine matter for which the broker lacks discretionary authority to vote the shares. Proposals 1 2, 3 and 42 arenon-routine matters.
Therefore, if your shares are held in “street name” and you do not provide instructions as to how your shares are to be voted on proposals 1 2, 3 and 4,2, your broker will not be able to vote your shares on these proposals. We urge you to provide instructions to your broker so that your votes may be counted on these important matters.
How are votes counted? How many votes are needed to approve each of the proposals?
For each of proposals 1, 2 4 and 5,3, you may vote “FOR”, “AGAINST”, or “ABSTAIN”. For proposal 3, you may vote to hold asay-on-pay vote once every “ONE”, “TWO” or “THREE” years, or you may “ABSTAIN.”
• | Proposal 1 — Election of Directors. |
• | Proposal 2 —Say-on-Pay. Because proposal 2 is an advisory vote, there is no minimum vote requirement that constitutes approval of this proposal. |
• | Proposal 3 |
What if there are more votes “AGAINST” a nominee for director than votes “FOR”?
Each of the nominees is an incumbent director who has tendered a conditional resignation that is effective upon (i) the failure to receive a majority of the votes cast for his or herre-election at the 20172020 Annual Meeting and (ii) the Board’s acceptance of this resignation. The Governance and Nominating Committee of the Board of Directors is(the “Governance Committee”) would be responsible for initially considering the resignation and making a recommendation to the Board of Directors. The director whose resignation is under consideration is expected to abstain from participating in any decision regarding his or her resignation. The Governance and Nominating Committee may consider any factors it deems relevant in deciding whether to accept a director’s resignation. If the resignation is not accepted, the director will continue to serve until his or her successor is elected and qualified.
How do I vote?
You can vote either in person at the meeting or by proxy without attending the meeting. Even if you plan to attend the 2020 Annual Meeting, we encourage you to vote your shares by proxy. If your shares are held in “street name” in a brokerage account or by a bank or other nominee and you wish to vote in person at the meeting, you must request a
2 CABOT CORPORATION
2020 PROXY STATEMENT |
About the Annual Meeting(continued)
legal proxy from your bank, broker or other nominee and bring that proxy to the meeting.
2 CABOT CORPORATION
About the Annual Meeting(continued)
Even if you plan to attend the 2017 Annual Meeting, we encourage you to vote your Stockholders who own shares by proxy. Most stockholdersin their own name (a record owner), have three options for submitting their votes by proxy: (1) by Internet, (2) by phone or (3) by mail. If
1. | by Internet – go to www.envisionreports.com/CBT and follow the instructions on the secure site, |
2. | by phone – call the toll-free number1-800-652-VOTE and follow the instructions on your proxy card and the recorded telephone instructions, or |
3. | by mail – mark, sign and date the proxy card and return it promptly in accordance with the voting instructions on your proxy card. |
In order for your vote to be counted you havemust return your completed and signed proxy card so that it is received your 2017 Annual Meeting materials by mail, please follow the voting instructions on your proxy card. If you have received your 2017 Annual Meeting materials electronically, please follow the voting instructions that weree-mailed to you. Proxies submitted by the InternetCompany’s transfer agent by March 11, 2020 or you must vote by telephone must be receivedor over the Internet by 1:00 p.m.,pm, Eastern Time, on March 9, 2017.12, 2020.
If you hold your Cabot stock is held in a brokerage account or by a bank or other nominee, your ability to vote by telephone or over the Internet depends on your broker’s, bank’s or nominee’s voting process. Please follow the directions on your voting instruction form carefully.
How do I vote if I hold my stock through Cabot’s employee benefit plans?the Cabot 401(k) plan?
The Vanguard Fiduciary Trust Company is the trustee of the Cabot Common Stock Fund and the Cabot Common ESOP Fund portions of the Cabot 401(k) plan and is the record owner of all of those shares. If you hold yourCabot stock through athe Cabot employee benefit401(k) plan, you have the right to instruct the trustees of the plan or plans in which you participateVanguard how to vote your shares. You can vote your shares by following the instructions on the enclosed proxy card. The trustees of each planVanguard will havetabulate the voting instructions of each participant in the plans tabulatedplan and will vote the shares of theall participants by submitting a final proxy card representing eachthe plan’s shares for inclusion in the tally at the 20172020 Annual Meeting.
If you hold shares in the Cabot 401(k) Plan or the Cabot Canada Ltd. Employees’ Stock Purchase Plan, yourYour vote will influence how the trustees of those plans voteVanguard votes those shares for which no instructions are received from other plan participants as those shares will be voted in the same proportion as shares for which instructions are received. If you hold shares in either of those plansthe plan and do not vote, the plan trusteesVanguard will vote your shares (along with all other shares in the plan for which instructions are not provided) in the same proportion as those shares for which instructions are received from other participants in the plan.
In order for your instructions to be followed, you must provide instructions for the shares you hold through athe Cabot employee benefit401(k) plan by returning your completed and signed proxy card toso that it is received by the Company’s transfer agent by March 6, 20179, 2020 or by voting over theby telephone or over the Internet by 9:00 a.m., Eastern Time, on March 7, 2017.10, 2020.
Can I change or revoke my vote?
Yes. You can change or revoke your vote by(1) re-voting by telephone or byover the Internet as instructed above (only your latest telephone or Internet vote will be counted), (2) signing and dating a new proxy card or voting instruction form and submitting it as instructed above (only your latest proxy card or voting instruction form will be counted), or (3) attending the meeting and voting in person. If your shares are registered in your name, you may also revoke your vote by delivering timely notice to the Secretary, Cabot Corporation, Two Seaport Lane, Suite 1300, Boston, Massachusetts 02210. Attending the meeting in person will not in and of itself revoke a previously submitted proxy unless you specifically request it. If you hold shares through a bank or broker, you must follow the instructions on your voting instruction form to revoke or change any prior voting instructions.
Who counts the votes?
We have hired Computershare Trust Company, N.A., our transfer agent, to count the votes represented by proxies cast by ballot, telephone and the Internet. A representative of Computershare and either Cabot’s Secretary or Assistant Secretary will act as Inspectors of Election.
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About the Annual Meeting(continued)
What if I return my proxy card but don’t vote for some of the matters listed?
If you return a signed proxy card without indicating your vote, your shares will be voted in line with the recommendation of the Board of Directors for each of the proposals for which you did not indicate a vote.
Can other matters be decided at the 20172020 Annual Meeting?
We are not aware of any other matters that will be considered at the 20172020 Annual Meeting. If any other matters properly arise that require a vote, the named proxies will vote in accordance with their best judgment.
CABOT CORPORATION 3
About the Annual Meeting(continued)
Who can attend the meeting?
The 20172020 Annual Meeting is open to all Cabot stockholders. If you need directions to the meeting, please call Cabot’s Investor Relations Group at(617) 342-6255. When you arrive at Cabot’s Corporate Headquarters, please go to the 13th13th Floor and signs will direct you to the meeting room. You need not attend the 20172020 Annual Meeting to vote.
Important Notice Regarding the Availability of Proxy Materials for the 20172020 Annual Meeting
This proxy statement and our 20162019 Annual Report on Form10-K are available at the following Internet address: http://www.cabotcorp.com/2017annualmeeting.www.edocumentview.com/CBT.
If you received your 2017 Annual Meeting materials by mail, we encourage you to sign up to receive your stockholder communications bye-mail. Electronic delivery benefits the environment and saves the Company money by reducing printing and mailing costs. With electronic delivery, you will be notified bye-mail as soon as the Annual Report onForm 10-K and proxy statement are available on the Internet, and you can easily submit your stockholder votes online. If you are a registered holder (you hold your Cabot shares in your own name through our transfer agent, Computershare Trust Company, N.A., or you have stock certificates), visit www.computershare.com/investor to create a login and to enroll.
Your electronic delivery enrollment will be effective until you cancel it. If you later change your mind and would like to receive paper copies of our proxy statements and annual reports, please revisit Computershare’s website www.computershare.com/investorto change your delivery preference or call them at(800) 730-4001 in the U.S. or at(781) 575-3170 outside the U.S.
If you hold your Cabot stock through a bank or broker, please refer to the information provided by that entity for instructions on how to elect to view future proxy statements and annual reports over the Internet and how to change your elections.
4 CABOT CORPORATION
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Proposal 1 — Election of Directors
Board of Directors and its Committees
Our Board of Directors currently has twelve members and is divided into three classes serving staggered three-year terms. Directors for each class are elected at the annual meeting of stockholders held five meetings in fiscal 2016the year in which the term for their class expires. Three directors are proposed to be elected at the 2020 Annual Meeting. The terms of Juan Enriquez, Sean D. Keohane and actedWilliam C. Kirby expire at the 2020 Annual Meeting and our Board of Directors has nominated each of them for a three-year term that will expire at the annual meeting in 2023. All of them are current directors and have been elected by written consent once. During fiscal 2016, each director attendedstockholders at least 85%previous annual meetings.
Patrick M. Prevost, whose term of office expires at the 2020 Annual Meeting, and John F. O’Brien, whose term of office expires at the 2021 Annual Meeting, have decided to retire from the Board effective at the 2020 Annual Meeting. Upon the election of the aggregatenominated directors, and with Mr. Prevost’s and Mr. O’Brien’s retirements, Cabot’s Board of the total Board meetings and the total meetings held byDirectors will have ten members. We expect that all of the nominees will be available for election, but if any of the nominees is not available at the time of the 2020 Annual Meeting, proxies received will be voted for substitute nominees to be designated by the Board of Directors or, if no substitute nominees are identified by the Board, proxies will be voted for a lesser number of nominees. In no event will the proxies be voted for more than three nominees.
Vote Required
A nominee will be elected to the Board of Directors if the votes properly cast “for” his election exceed the votes properly cast “against” such nominee’s election.
Recommendation
The Board of Directors recommends that you vote “FOR” the election of its three nominees.
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2020 PROXY STATEMENT |
Proposal 1 — Election of Directors(continued)
Certain Information Regarding Directors
In addition to the information presented below regarding the specific experience, qualifications, attributes and skills that qualify the nominees and the directors whose terms of office will continue after the 2020 Annual Meeting to serve as a director of the Company, all the nominees and directors have a reputation for honesty, integrity, sound judgment and adherence to high ethical standards. Each of the nominees and directors has demonstrated the willingness and ability to make the significant commitment of time and energy to serve on our Board and its Committees, and to engage management and each other openly and constructively. Our Directors are committed to having a Board that reflects a balanced set of skills that is aligned with our strategic goals and reflects our diversity objectives.
Juan Enriquez (Nominee for Election) | Director Since: 2005 Committee Memberships: Audit Term of Office Expires: 2020 Age: 60 Independent Business Experience: • Chairman and CEO, Biotechonomy Ventures, a life sciences research and investment firm, since 2003 • Managing Director, Excel Venture Management, a life sciences investment company, since March 2008 • Director, Life Science Project at Harvard Business School, 2001 to 2003 Other Boards and Positions: • Director, variousstart-up companies • Boston Museum of Science (Trustee) • Harvard Medical School Advisory Council • Trustee, WGBH Mr. Enriquez has significant expertise in technology,start-up companies and international business, and leadership experience from his broad experience in technology ventures. | |||
Sean D. Keohane (Nominee for Election) | Director Since:2016 Committee Memberships: Executive Term of Office Expires: 2020 Age: 52 Business Experience: • President and CEO, Cabot Corporation, since March 2016 • EVP, President, Reinforcement Materials, November 2014 to March 2016; SVP, President, Performance Chemicals, March 2012 to November 2014; General Manager, Performance Chemicals, May 2008 to March 2012; Vice President in March 2005; joined Cabot Corporation August 2002 • General management positions, Pratt & Whitney, a division of United Technologies, prior to 2002 Other Boards and Positions: • Director, The Chemours Company, a global provider of performance chemicals (2018 to present) • Director, American Chemistry Council, a trade association representing the business of chemistry at the global, national and state levels (2016 to present) Mr. Keohane has a deep understanding of Cabot’s businesses, strong knowledge of the chemicals industry and significant experience in management, strategic planning, manufacturing, international business and marketing. |
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2020 PROXY STATEMENT |
Proposal 1 — Election of Directors (continued)
William C. Kirby (Nominee for Election) | Director Since: 2012 Committee Memberships: Compensation Term of Office Expires: 2020 Age: 69 Independent Business Experience: • Spangler Family Professor of Business Administration, Harvard Business School; T.M. Chang Professor of China Studies, Harvard University, since July 2008 • Harvard University Distinguished Service Professor and Chairman of the Harvard China Fund, since July 2006 • Harvard faculty member since 1992, served as Chair of Harvard’s History Department, Director of the Harvard University Asia Center, Dean of the Faculty of Arts and Sciences and Director of the Fairbank Center for Chinese Studies Other Boards and Positions: • Director, The China Fund, Inc., anon-diversified closed-ended management investment company (2007 to 2019) • Director, The Taiwan Fund, Inc., a diversified closed-ended management investment company (2013 to present) • Director, Harvard University Press • Director, Harvard Magazine • Director, JAMM Active Limited, a global producer of innovative performance fabrics for athletic use (2016 to present) Mr. Kirby has extensive business knowledge and particular expertise regarding the business, economic and political environment in China. | |||
Cynthia A. Arnold | Director Since: 2018 Committee Memberships: SHE&S Term of Office Expires: 2021 Age: 62 Independent Business Experience: • Chief Technology Officer, The Valspar Corporation, a global paint and coatings company, January 2011 until retirement in May 2017 • Chief Technology Officer, Sun Chemical Corporation, a producer of inks, coatings and supplies, pigments, polymers, liquid compounds, solid compounds and application materials, 2004 to December 2010 • Vice President of Coatings, Adhesives and Specialty Chemicals Technology, Eastman • Management and technology leadership positions, General Electric Company, a high technology industrial leader, 1994 to 2003 Other Boards and Positions: • Director, Milliken & Company, a global diversified industrial company for specialty chemicals, performance materials and textiles (April 2019 to present) • Director, Citrine Informatics, a globalAI-driven materials data management company (2018 to present) • Member, Advisory Board, University of Minnesota Dept of Chemical Engineering and Materials Science • Member, Materials Advisory Board, Carbon 3D, Inc. • Board Member, Minnesota Zoo(Co-chair, Technology Task Force) Dr. Arnold has a depth of global experience in the specialty chemicals industry, particularly in technology and innovation, with an understanding of the value chains in which Cabot participates. |
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Proposal 1 — Election of Directors(continued)
Mark S. Wrighton | Director Since: 1997 Committee Memberships: Compensation Term of Office Expires: 2021 Age: 70 Independent Business Experience: • Professor and Chancellor Emeritus, Washington University in St. Louis, June 2019 to present • Trustee, Washington University in St. Louis, July 2019 to present • Chancellor, Washington University in St. Louis, 1995 to May 2019 • Faculty member, Massachusetts Institute of Technology, Provost, 1990 to 1995; Head of Chemistry Department, 1987 to 1990 Other Boards and Positions: • Director, Brooks Automation, Inc., a worldwide provider of automation, vacuum and instrumentation solutions to the global semiconductor and related industries (2005 to present) • Director, Corning, Inc., a specialty glass and ceramics company (2009 to present) • Director, A.G. Edwards, Inc., a financial services company (2000 to 2007) • Director, BJC HealthCare • Director, Donald Danforth Plant Science Center • Ex-officio Director, St. Louis Regional Chamber and Growth Association • Trustee, St. Louis Science Center • Director, Concordance Academy Chancellor Wrighton has extensive scientific knowledge and understanding of complex technology, significant management and leadership experience, and a deep understanding of matters relating to public company management and oversight. | |||
Christine Y. Yan | Director Since: 2019 Committee Memberships: SHE&S Term of Office Expires: 2021 Age: 54 Independent Business Experience: • Vice President, Integration, Stanley Black & Decker, a manufacturer of industrial tools and household hardware and a provider of security products and locks, 2018 until her retirement that same year • President, Asia, Stanley Black & Decker, 2014 to 2018 • President, Stanley Storage and Workspace Systems, Stanley Black & Decker, 2013 to 2014 Other Boards and Positions: • Director, Modine Manufacturing Company, a thermal management company (2014 to present) • Director, ON Semiconductor, a supplier of semiconductor-based solutions (2018 to present) • Director, Ansell Limited, a manufacturer of protective industrial and medical gloves (2019 to present) Ms. Yan has years of experience in global manufacturing and engineering and significant experience with international business, particularly in Asia. |
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Proposal 1 — Election of Directors (continued)
Michael M. Morrow | Director Since: 2017 Committee Memberships: Audit (Chair), Governance Term of Office Expires: 2022 Age: 64 Independent Business Experience: • Partner, PricewaterhouseCoopers, a public accounting firm, 1986 until retirement in June 2016, as audit partner and in various leadership and governance roles, including Lead Director of PwC’s U.S. Board of Partners • Consultant, PwC, June 2016 to June 2017 Other Boards and Positions: • Chair, Financial Accounting Standards Advisory Committee (FASAC), an advisory body to the Financial Accounting Standards Board (FASB) (beginning January 2020, and Member from January 2019 to present) • Member, Board of Visitors, Wake Forest University School of Business (2011 to 2017) • Member, Business Advisory Council, University of Rhode Island School of Business (2010 to 2015) Mr. Morrow has substantial expertise in accounting, finance and financial reporting matters, and significant leadership, business and corporate governance experience. | |||
Sue H. Rataj Non-Executive Chair of the Board | Director Since: 2011 Committee Memberships: Executive (Chair), Governance (Chair) Term of Office Expires: 2022 Age: 63 Independent Business Experience: • Chief Executive, Petrochemicals for BP, a global energy company, April 2008 until retirement in April 2011 • Senior management positions with BP, including Group Vice President, Refining and Marketing, July 2007 to April 2008 Other Boards and Positions: • Director, Agilent Technologies, Inc., a global leader providing instruments, software and consumables to laboratories in the life sciences, diagnostics and applied chemical markets (2015 to present) • Supervisory Board Member, Bayer AG, a life science enterprise developing and manufacturing products in the pharmaceuticals, consumer health, animal health and crop science segments (2012 to 2017) Ms. Rataj has substantial management leadership and strategic planning experience, significant expertise in operations, safety, health and environmental matters, risk management, accounting and finance matters, particularly in the context of a chemicals company, as well as corporate governance experience. |
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Proposal 1 — Election of Directors(continued)
Frank A. Wilson | Director Since: 2018 Committee Memberships: Audit Term of Office Expires: 2022 Age: 61 Independent Business Experience: • Senior Vice President and Chief Financial Officer, PerkinElmer, Inc., a life sciences diagnostics, discovery and analytical solutions company, May 2009 until retirement in May 2018 • Finance, business development and investor relations leadership positions, Danaher Corporation, a life sciences and industrial conglomerate, 1999 to May 2009 Other Boards and Positions: • Director, Alkermes, a fully integrated, global biopharmaceutical company (September 2019 to present) • Director, Spartan Corporation, a provider of design, development and manufacturing services for electromechanical devices (2015 to March 2019) Mr. Wilson has significant financial expertise and skills in strategic planning, investor relations and business development within international public companies. | |||
Matthias L. Wolfgruber | Director Since: 2014 Committee Memberships: SHE&S (Chair), Governance Term of Office Expires: 2022 Age: 66 Independent Business Experience: • CEO, Altana AG, a global specialty chemicals company, 2007 until retirement in January 2016 • President and CEO, Altana Chemie AG, member of the management board of Altana AG, 2002 to 2007 • Management positions at Wacker-Chemie in the U.S. and Europe, 1985 to 2002 Other Boards and Positions: • Supervisory Board Member, Lanxess AG, a leading global manufacturer of synthetic rubber and chemical intermediates (2015 to present) • Supervisory Board, Altana AG (2016 to present) • Supervisory Board, Grillo-Werke AG, a manufacturer and supplier of zinc alloy products and chemicals (2014 to present) • Chairman, Ardex Group, a global supplier of high-performance specialty building materials (2015 to present) Dr. Wolfgruber has extensive leadership experience managing specialty chemicals businesses with global operations, with particular expertise in manufacturing, strategic investments and acquisitions. |
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Board Governance and Composition
Corporate Governance Guidelines
Our Board of Directors has adopted Corporate Governance Guidelines that address director qualifications and independence, Board Committees, director compensation, Board performance evaluations, Board and Committee meetings, access to senior management, and Chief Executive Officer (“CEO”) performance evaluation and succession planning, among other matters. Many of the Board’s practices and policies set out in these Guidelines are described in this discussion of Board Governance and Composition. The Corporate Governance Guidelines are posted on our website (www.cabotcorp.com) under the heading “Company — About Cabot — Governance — Resources.”
The Governance Committee is charged with reviewing the composition of the Board and refreshing it as appropriate to ensure the Board as a whole reflects a range of talents, skills, diversity and expertise needed to meet the evolving needs of our businesses and to oversee the execution of our strategy.
Important Factors in Assessing Director Qualifications
Director Qualifications. The Governance Committee strives to maintain an engaged, independent board with broad and diverse experience and judgment that is committed to representing the interests of our stockholders. Board candidates as well as nominees forre-election are evaluated in the context of the current composition of the Board of Directors and in relation to the Board’s current and anticipated requirements. We expect our directors and any candidate or nominee to have integrity and to demonstrate high ethical standards. The Committee also considers a wide range of factors when assessing director qualifications, including:
Ensuring an experienced, qualified Board with expertise in areas relevant to Cabot.The Committee seeks directors who have held significant leadership positions and can bring to the Board specific types of experience relevant to Cabot. It is the Board’s policy that the Board as a whole reflect a range of talents, skills and expertise, particularly in these areas:
Management Leadership and Strategic Planning Experience. We believe that directors who have held significant leadership positions over an extended period of time possess strong leadership qualities and demonstrate a practical understanding of organizations, processes, strategy and risk management andknow-how to drive change and growth. As a publicly traded company, we value experience on the boards of other publicly traded companies and other complex organizations.
Specialty Chemicals Industry and Operations Experience.We have sought directors with leadership and operational experience in the industries and value chains in which hewe operate.
Global Experience. We value directors with global business experience because our continued success depends, in part, on growing our businesses outside the United States. Further, we have significant manufacturing operations outside the U.S., and a majority of our revenues came from outside of the U.S. in fiscal 2019.
Accounting and Finance Experience. We use a broad set of financial metrics to measure our performance, and accurate financial reporting and robust auditing are critical to our success.
Technology and Market Experience. As a science and technology company and an innovator, we value directors with an understanding of technology and material science and the value chains in which we participate. We seek to grow organically by developing new products, and identifying new applications and markets for our existing products. Under our “Advancing the Core” strategy, this is critical as we continue to intensify our focus on application innovation and formulated solutions.
Enhancing the Board’s diversity of background.As a global company, we consider diversity an essential element of our culture. At the Board level and throughout our company we value the benefits we receive from different perspectives and strive for a talented and diverse workforce and a diverse Board that is representative of our global business, customers, employees and stockholders. In evaluating the suitability of individual Board nominees, the Governance
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Board Composition (continued)
Committee takes into account many factors, including general understanding of the disciplines relevant to the success of a publicly traded company with global manufacturing operations in today’s business environment, professional experience, background, education, skill, age, race, gender and national origin. Although the Board does not have a formal written policy that solely addresses diversity, our Corporate Governance Guidelines prioritize diversity of origin, gender, background, experience and thought as important director selection criteria. The Governance Committee reviews its effectiveness in balancing these considerations when assessing the composition of the Board.
Individual Attributes.The Board believes that to function effectively, all directors should demonstrate sound judgment, compassion, a willingness and ability to work with other members of the Board openly and constructively and the ability to communicate clearly and persuasively, and to dedicate the time sufficient to ensure the diligent performance of their duties on our behalf.
Complying with the Board’s independence guidelines.When selecting and recruiting candidates, the Board looks at other positions the candidate has held or she served duringholds, including other board memberships, to determine whether any material relationship with Cabot exists that could impair the periodscandidate’s independence.
Candidate Recommendations.We identify candidates for election to the Board of Directors through the business networks of the directors and management and from recommendations made by third-party search firms upon the request of the Governance Committee. Over the past year, the Governance Committee retained a search firm to help identify potential candidates. We evaluate candidates recommended by our stockholders in the same manner and on the same basis as candidates recommended by our directors, management or third-party search firms. Ms. Yan was initially identified as a candidate for election to the Board by a third-party search firm, and upon the recommendation of the Governance Committee, the Board elected Ms. Yan a director effective May 2019. In considering Ms. Yan’s candidacy, the Board considered Ms. Yan’s years of experience in global manufacturing and engineering as well as her significant experience in international business, particularly in Asia.
Board Refreshment.A number of changes have occurred in our Company’s Board of Directors over the past several years as part of our continuing efforts to ensure that he or she served.our Board has the right skills and tenures to best oversee management and the execution of our strategy and the associated risks. Taking into account the upcoming retirements of Messrs. Prevost and O’Brien, 40% of our directors have joined the Board in the last three years. Our Board does not have a mandatory retirement policy. With respect to director tenure, the Board is of the view that a mix of tenures that takes into consideration appropriate levels of continuity, institutional memory and fresh perspectives is critical in achieving and maintaining a high-performing board. The Board will continue to proactively manage its composition andmake-up to ensure it has the appropriate mix of tenures and the requisite skills to address the Company’s current and future needs.
How we Assess Director Independence
The Board’s Guidelines.It is the Board’s policy that at least the majority of the Board’s members must be independent under our Corporate Governance Guidelines. The Governance Committee annually reviews the independence of all directors and reports its findings to the full Board. All of our directors are “independent” under the Board’s director independence standards, other than Mr. Keohane, our President and CEO, and Mr. Prevost, our former President and CEO. For a director to be considered independent, the Board must determine that he or she does not have any material relationship with Cabot. The Board’s guidelines for director independence are consistent with the independence requirements in the New York Stock Exchange’s listing standards. In addition to applying these guidelines, the Board evaluates all relevant facts and circumstances in making an independence determination. In assessing director independence, the Board considers all known relationships, transactions and arrangements among directors, their family members, and Cabot. The Board concluded that none of thenon-management directors who served as directors during the 2019 fiscal year, other than Mr. Prevost, had a material relationship with Cabot.
The
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Board Composition (continued)
Our Leadership Structure —Non-Executive Chair of the Board; Executive Sessions
Sue H. Rataj has served asNon-Executive Chair of the Board of Directors since March 9, 2018.
Although our Corporate Governance Guidelines do not require that our Chair and Chief Executive Officer positions be separate, our Board believes that this leadership structure is appropriate at this time because it allows our Chief Executive Officer to focus on the strategic and operational aspects of our business, while allowing theNon-Executive Chair of the Board to provide independent leadership for the Board. Our Board recognizes that future circumstances may lead it to change the leadership structure depending on Cabot’s needs at the time and, as such, believes that it is important to retain flexibility. In the future, if the Chief Executive Officer also serves as Chair of the Board, our Corporate Governance Guidelines require that an independent director be appointed annually as lead director to set the agenda for and lead the executive sessions of thenon-management directors at Board meetings and to undertake such other responsibilities as the independent directors designate.
Key Responsibilities.OurNon-Executive Chair of the Board focuses on the Board’s processes and ensuring it is prioritizing the right matters. Specifically, the Chair has the following responsibilities, and may perform other functions at the Board’s request:
presiding over meetings of our Board and stockholders, including executive sessions of thenon-management directors;
serving as anex-officio member of each Board committee of which he or she is not a member and, upon invitation, attending those committee meetings where possible;
establishing an agenda for each Board meeting in collaboration with our CEO and meeting with our CEO following each meeting to discuss any open issues andfollow-up items;
facilitating and coordinating communication among thenon-management directors and our CEO and an open flow of information between management and our Board;
in collaboration with the Governance Committee, leading our Board’s annual performance review;
meeting with eachnon-management director at least annually;
providing assistance to our CEO by attending selected internal business management meetings and meeting with our CEO as necessary;
coordinating the periodic review of management’s strategic plan;
in collaboration with the Compensation Committee, leading our Board’s review of the succession plans for our CEO; and
working with management on effective stockholder communication and engagement.
Our Board of Directors has five standing Committees:six scheduled Board meetings to review and discuss Cabot’s performance and prospects as well as the issues we face, with calls and communications between meetings as appropriate. The Board interacts directly with senior management during its meetings. The Board typically dedicates onemultiple-day meeting a year to a discussion of longer-term strategic issues the Company faces. During this meeting, the Board allocates significant time for a discussion of talent management and management succession planning, as well as the Company’s diversity and inclusion objectives and achievements. During fiscal 2019, the Board met six times and acted by written consent once.
A significant portion of the Board’s oversight responsibility is carried out through its four operating committees.
Committee Composition.All of the members of our Audit Compensation, Executive,Committee, Governance and Nominating (“Governance”),Committee and Safety, HealthCompensation Committee satisfy the NYSE’s definition of an independent director.
Committee Operations. Each Committee meets periodically throughout the year, reports its actions to the Board, receives reports from senior management, annually evaluates its performance and Environmental Affairs (“SH&E”).can retain outside advisors. Each Committee’s meeting materials are available for review by all directors.
Committee Responsibilities. The following table showsprimary responsibilities of each Committee are listed below. For more detail about the membershipresponsibilities and functions of these committees. The each Committee, see the Committee charters on our website (www.cabotcorp.com) under the heading “Company — About Cabot — Governance — Resources.”
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Board Composition (continued)
Audit Compensation, and Governance Committees presently are composed entirely of independent directors.Committee
Members
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8 meetings in fiscal 2019
Audit CommitteeFinancial Acumen.Mr. Morrow and Mr. Wilson are “audit committee financial experts” under SEC rules and each of these directors as well as Mr. Enriquez are “financially literate” under NYSE rules.
Primary Responsibilities
The Audit Committee assists the Board of Directors in its oversight of (i) the integrity of Cabot’s financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent registered public accounting firm’s qualifications and independence, (iv) the performance of our internal audit function and (v) our risk assessment and risk management processes. The Audit Committee, among other functions:
Has the sole authority to appoint, retain, terminate and determine the compensation of our independent registered public accounting firm.
Monitors the qualifications, independence and performance of our independent registered public accounting firm and approves professional services provided by the independent registered public accounting firm.
Reviews with our independent registered public accounting firm the scope and results of the audit engagement.
Reviews the activities and recommendations of our independent registered public accounting firm.
Discusses Cabot’s annual audited financial statements, and quarterly financial statements and earnings releases with management and Cabot’s independent registered public accounting firm, including our disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Reviews Cabot’s accounting policies, risk assessment and risk management processes, control systems, legal matters and compliance activities.
The specific responsibilities and functions of the Audit Committee are identified inDuring fiscal 2019, the Committee’s charter, a copy of which is posted on our website (www.cabotcorp.com) under the heading “Company — About Cabot — Governance —Resources.” The Auditother priorities included treasury matters, including cash and debt management, internal controls practices, tax matters and cyber-security risk.
Compensation Committee met ten times
Members
John F. O’Brien*, Chair | Mark S. Wrighton | |||
William C. Kirby |
* | Mr. O’Brien is retiring from the Board at the 2020 Annual Meeting |
4 meetings and 2 actions by written consent in fiscal 2016.2019
CABOT CORPORATION 5
The Board of Directors and its Committees(continued)
Compensation CommitteePrimary Responsibilities
The primary responsibilities of the Compensation Committee are to:
Approve the corporate goals and objectives relevant to the compensation of our Chief Executive Officer (“CEO”),CEO, evaluate the CEO’s performance and approve the CEO’s salary and incentive compensation.
Establish policies applicable to the compensation, severance or other remuneration of Cabot’s Management Executive Committee, review and approve performance measures and goals under incentive compensation plans applicable to such employees, and approve their salaries, annual short-term and long-term incentive awards, any severance payments and any other remuneration.
Review and approve the aggregate amount of bonuses to be paid to participants in Cabot’s annual short-term incentive program.
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Board Composition(continued)
Administer Cabot’s incentive compensation plans, equity-based plans and supplemental benefits arrangements, which includes approving the aggregate number of shares of stock granted under Cabot’s long-term incentive program.
Appoint the members of the Company’s Benefits and Investment Committees and monitor their activities.
Review on a periodic basis reports prepared by management of gender pay equity at the Company.
The specific responsibilities and functionsImportant items for fiscal 2019 included establishing the compensation arrangements for the newly appointed members of the CompensationCompany’s Management Executive Committee.
Governance Committee are identified
Members
Sue H. Rataj, Chair | Michael M. Morrow | |||
John F. O’Brien* | Matthias L. Wolfgruber |
* | Mr. O’Brien is retiring from the Board at the 2020 Annual Meeting |
4 meetings in fiscal 2019
Primary Responsibilities
The Governance Committee is charged primarily with:
Developing and recommending to the Committee’s charter, a copyBoard corporate governance policies and procedures.
Identifying individuals qualified to become directors of which is postedCabot.
Recommending director candidates to the Board to fill vacancies and to stand for election at the annual meeting of stockholders.
Recommending Committee assignments.
Leading the annual review of the Board’s performance.
Recommending compensation and benefit policies for Cabot’s directors.
Reviewing and making determinations regarding interested transactions under Cabot’s Related Person Transaction Policy and Procedures.
During fiscal 2019, the Governance Committee focused on Board composition and refreshment and reviewed the competitiveness of our website (www.cabotcorp.comdirector compensation program.
Safety, Health, Environment & Sustainability (“SHE&S”) underCommittee
Members
Matthias L. Wolfgruber, Chair | Patrick M. Prevost* | |||
Cynthia A. Arnold | Christine Y. Yan |
* | Mr. Prevost is retiring from the Board at the 2020 Annual Meeting |
3 meetings in fiscal 2019
Primary Responsibilities
The SHE&S Committee reviews aspects of Cabot’s safety, health, environmental and sustainability performance, process safety, security, product stewardship, community engagement and governmental affairs. In particular, the heading “Company — About Cabot —Governance — Resources.” The Compensation Committee met four timesreviews the following:
Cabot’s environmental reserve and acted by written consent five times duringrisk management processes.
Environmental and safety audit programs, performance metrics, risk and opportunity assessments.
Management processes related to our safety, health, environment and sustainability programs.
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Board Composition(continued)
During fiscal 2016.2019, the Committee focused on the Company’s safety improvement plans, chemical risks and hazard assessments program, sustainability program and reporting, product safety and toxicology matters, and environmental remediation activities.
Executive Committee
Members
Sue H. Rataj, Chair | Michael M. Morrow | |||
Sean D. Keohane | John F. O’Brien* |
* | Mr. O’Brien is retiring from the Board at the 2020 Annual Meeting. |
Did not meet or act in fiscal 2019
Primary Responsibilities
The Executive Committee reviews and, where appropriate, approves corporate action with respect to the conduct of our business between Board of Directors’ meetings. Actions taken by the Executive Committee are reported to the Board at its next meeting. The Executive Committee acted by written consent once during fiscal 2016.
Governance Committee
The Governance Committee is charged primarily with:
The specific responsibilities and functions ofEach year, the Governance Committee are identifiedleads our Board’s annual evaluation process. The process focuses on the effectiveness of the Board as a whole, prioritizing issues, and identifying specific issues for future discussion. In 2019, our General Counsel conducted individual interviews with each director. The conversations were guided by a series of questions provided to the directors in its charter, a copy of which is posted on our website (www.cabotcorp.com) underadvance covering Board and Committee membership, operations and responsibilities, as well as open-ended questions so that each director had leeway to discuss the heading “Company — About Cabot — Governance — Resources.”issues he or she believed to be the most pertinent. The key themes, observations and suggestions were summarized and discussed first with the Governance Committee met four times during fiscal 2016.
SH&E Committee
The SH&E Committee reviews all aspects of Cabot’s safety, health and environmental management programslater with the full Board. Based on these discussions, opportunities to further enhance the Board’s effectiveness have been and performance.are being implemented. In particular, the Committee reviews the following:
6 CABOT CORPORATION
also solicited feedback on individual director performance.
The Board of Directors and its Committees(continued)
The specific responsibilities and functions of the SH&E Committee are identified in the Committee’s charter, a copy of which is posted on our website (www.cabotcorp.com) under the heading “Company — About Cabot — Governance — Resources.” The SH&E Committee met four times during fiscal 2016.
Our Board’s Role in Risk Oversight
Our Board oversees our enterprise-wide program of risk management. Cabot management is primarily responsible forday-to-day risk management practices and, together with other personnel, regularly engages in an enterprise-wide risk assessment. This assessment is updated on a continual basis and includes a comprehensive review of a broad range of risks, including financial, operational, business, legal, regulatory, reputational, governance and managerial risks which may potentially affect the Company. From this assessment, the most significant risks in terms of their likelihood and severity are identified, and plans to manage and mitigate these risks are developed. Cabot management regularly reports to either the full Board or the relevant Committee of the Board our major risk exposures, their potential operational or financial impact on Cabot, and the steps we take to manage them.
Our Board has ultimate responsibility for risk oversight and oversees our corporate strategy, business development, capital structure, market exposure and country specific risks. Each Committee also has responsibility for risk oversight. The Audit Committee focuses on financial risk, including internal controls and legal and compliance risks and receives regular reports from our independent registered public accounting firm, our CFO, our Controller, our Director of Internal Audit and our General Counsel. The Audit Committee also oversees the Company’s enterprise risk management processes.processes and cybersecurity program. The SH&ESHE&S Committee assists the Board in fulfilling its oversight responsibility by reviewing the effectiveness of our safety, health, environment and environmentalsustainability programs and initiatives and overseeing matters related to stewardship and sustainability of our products and manufacturing processes. The Compensation Committee considers human resources risks and evaluates and sets compensation programs that encourage decision-making predicated upon a level of risk consistent with our business strategy. The Compensation Committee also oversees senior management succession planning and development. Finally, the Governance Committee considers
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Board Composition(continued)
governance and Board succession risks, and evaluates director skills and qualifications to ensure each Committee has directors with the requisite skills to oversee the applicable risks that are the focus of that Committee. The Company has a robust risk management program, the strength of which is not dependent on the Board’s leadership structure.
Our Compensation Discussion and Analysis (“CD&A”) describes our compensation policies, programs and practices for our named executive officers. Our corporate goal-setting, assessment and compensation decision-making processes described in our CD&A apply to all participants in our corporate short- and long-term incentive programs.
Participants in our long-term incentive program receive awards consisting of time-based restricted stock units and performance-based restricted stock units, and, in the case of members of the Management Executive Committee and a limited number of other participants, stock options. Beyond our corporate short- and long-term incentive programs, a substantial number of our facilities offer an annual cash incentive plan.
OurThe Compensation Committee directed management, working with the assistance of Pearl Meyer, theCommittee’s independent compensation consultant, retained by theMeridian Compensation Committee, evaluatesPartners, to provide an evaluation on the design of all of our incentive plans to assess whether any portion of our incentive compensation programs encourages excessive risk taking. That assessment is presented to and reviewed by the Compensation Committee. Among the program features evaluated are the types of compensation offered, performance metrics, the alignment between performance goals, payout curves and the Company’s business strategy, and the overall mix of incentive awards. The Company’s compensation programs are designed with features that mitigate risk without diminishing the incentive nature of the compensation. Specific features of the programs to mitigate risk include, as applicable, the following: caps limiting the amount that can be paid under the corporate short- and long-term incentive programs and all of the local cash incentive programs; a balanced mix of annual and longer-term incentive opportunities; a mix of cash and equity incentives; multiple performance metrics; management processes to oversee risk associated with each of our incentive programs; stock ownership guidelines for members of the Management Executive Committee; a company compensation recoupment policy; and significant controls for important business decisions. In our CD&A we describe in more detail the features of our executive compensation programs that are designed to mitigate risk, includ-
CABOT CORPORATION 7
The Board of Directors and its Committees(continued)
ingincluding the oversight provided by the Compensation Committee, which reviews and approves the design, goals and payouts under our corporate short- and long-term incentive programs and each executive officer’s compensation. Based on our assessment, we believe our compensation policies, programs and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
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Other Governance Policies and Practices
Transactions with Related Persons
Policy and Procedures for the Review of Related Person Transactions
Our Board has adopted a written policy for the review and approval or ratification of transactions involving related persons. “Related persons” consist of any person who is or was (since the beginning of the fiscal year) a director, nominee for director or executive officer of Cabot, any greater than 5% stockholder of Cabot and the immediate family members of any of those persons. The Governance Committee is responsible for applying the policy with the assistance of our General Counsel.
Transactions covered by the policy consist of any transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements, or relationships in which (1) the aggregate amount involved will or may be expected to exceed $100,000 with respect to any fiscal year, (2) Cabot is a participant and (3) any related person has or will have a direct or indirect interest, other than solely as a result of being a director or a less than 10% beneficial owner of another entity (an “interested transaction”). Under the policy, the following interested transactions have a standingpre-approval from the Governance Committee, even if the aggregate amount is greater than $100,000:
• | Certain sales of stock by executive officers to Cabot. (1) Sales of Cabot stock by an executive officer (including the CEO) to Cabot pursuant to the terms of our long-term incentive program or (2) other sales by executive officers (excluding the CEO) provided that the sale has been approved by our CEO, the per share purchase price is the fair market value of our common stock on the date of sale, the proceeds from the sale to the executive officer do not exceed $500,000, and the sale does not take place during a quarterly blackout period. |
• | Certain transactions with other companies. Any transaction between Cabot and another company if the aggregate amount involved does not exceed the greater of $1,000,000 or 2% of that company’s total revenues, or any transaction where Cabot is indebted to another company if the total amount of Cabot’s indebtedness to the other company does not exceed 1% of that company’s total consolidated assets. In both cases, thepre-approval applies if the related person’s only relationship is as an employee (other than executive officer), director or beneficial owner of less than 10% of the other company’s shares. |
• | Employment of executive officers; director compensation. Any employment by Cabot of an executive officer if the related compensation is required to be reported in our proxy statement or if the compensation was approved by our Compensation Committee. Any compensation paid to a director if the compensation is required to be reported in our proxy statement. |
• | Other transactions. Competitively bid or regulated public utility services transactions; transactions involving trustee-type services; and transactions where the related person’s interest arises solely from the ownership of our common stock and all common stockholders received the same benefit on a pro rata basis. |
Each interested transaction by a related person that does not have standingpre-approval under the policy should be reported to our General Counsel for presentation to the Governance Committee for approval before its consummation or for ratification, if necessary, after its consummation. The Chair of the Governance Committee has the authority topre-approve or ratify (as applicable) any interested transaction with a related person in which the aggregate amount involved is expected to be less than $500,000. In determining whether to approve or ratify an interested transaction, the Governance Committee and the Chair may take into account such factors as they deem appropriate, which may include whether the interested transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.
Transactions with Related Persons
Since the beginning of fiscal 2019, Cabot and its subsidiaries had no transactions, nor are there any currently proposed transactions in which Cabot or its subsidiaries was or is to be a participant and the amount involved exceeds $120,000 and any related person (as defined above) had or will have a direct or indirect material interest reportable under SEC rules.
18 CABOT CORPORATION
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Other Governance Policies and Practices(continued)
The Company welcomes stockholder engagement. Our directors are available to answer questions from stockholders at the 2020 Annual Meeting. In addition, management of the Company conducts stockholder outreach throughout the year to ensure management and the Board understand and consider the issues that matter most to our stockholders. We provide regular updates regarding the Company’s performance and strategic actions to the investor community, and we participate in numerous investor conferences,one-on-one meetings, earnings calls, investor days, and educational investor and analyst conversations. We also communicate with stockholders and other stakeholders through various media, including our annual report, proxy statement and other filings with the SEC, news releases and our website. We believe ongoing stockholder engagement allows us to respond effectively to stockholder concerns.
Procedures for Stockholders to Recommend Director Nominees
The Governance Committee has a policy with respect to the submission of recommendations by stockholders of candidates for director nominees, which is available on our website. A stockholder wishing to recommend a candidate must submit the recommendation by a date not later than the 120th calendar day before the first anniversary of the date that Cabot released its proxy statement to stockholders in connection with the previous year’s annual meeting. Recommendations should be submitted to the Company’s Secretary in writing at Cabot Corporation, Two Seaport Lane, Suite 1400, Boston, Massachusetts 02210. The notice to the Secretary should include all information about the candidate that Cabot would be required to disclose in a proxy statement in accordance with Securities and Exchange Act rules or as required by the Company’sby-laws, consent of the candidate to serve on the Board of Directors, if nominated and elected, and agreement of the candidate to complete, upon request, questionnaires customary for Cabot directors and to comply with applicable Company policies.
Director Attendance at Meetings
During fiscal 2019, each director attended at least 75% of the aggregate of the total Board meetings and the total meetings held by all of the Committees on which he or she served during the periods that he or she served.
We have adopted a code of ethics that applies to all of our employees and directors, including the Chief Executive Officer, the Chief Financial Officer, the Controller and other senior financial officers. In fiscal 2019, each of our directors completed our Code of Business Ethicson-line compliance training program that we require our employees to complete. The Code of Business Ethics is posted on our website (www.cabotcorp.com) under the caption “Company — About Cabot — Code of Business Ethics.”
Stockholders or other interested parties wishing to communicate with the Board, thenon-management directors or any individual director may contact theNon-Executive Chair of the Board by calling1-800-853-7602; by sending an email through our website using the link that is located under the caption “Company — About Cabot — Governance — Contact the Board of Directors”; or by writing to Cabot Corporation Board of Directors, c/o Alertline Anonymous, P.O. Box 3767, 13950 Ballantyne Corporate Place, Suite 300, Charlotte, North Carolina 28277.
Anyone who has a complaint or concern regarding our accounting, internal accounting controls or auditing matters may communicate that concern to the Chair of the Audit Committee by calling1-800-853-7602; by sending an email through our website using the link that is located under the caption “Company — About Cabot — Governance — Contact the Board of Directors”; or by writing to Cabot Corporation Audit Committee, c/o Alertline Anonymous, P.O. Box 3767, 13950 Ballantyne Corporate Place, Suite 300, Charlotte, North Carolina 28277. All such communications to the Board of Directors or the Audit Committee will also be sent to Cabot’s Office of Compliance.
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Annual compensation for ournon-employee directors is comprised of cash compensation and a grant of Cabot common stock. The Governance Committee is responsible for reviewing the form and amount of compensation paid to ournon-employee directors and recommends changes to our Board of Directors as appropriate. TheIn November 2018, the Governance Committee, regularly reviews competitive market data with the assistance of Mercer LLC, a national executive compensation firm, engaged by this Committee, to evaluateevaluated the reasonableness of our director compensation and the appropriate mix of cash and equity compensation. During calendar year 2016, followingThis assessment included a review of competitive marketdirector compensation data including fromprepared for the compensationGovernance Committee by Mercer using the same peer group used to gaugeof companies our Compensation Committee uses for assessing the reasonableness and competitiveness of our executive compensation decisions. Based on this evaluation, and upon the recommendation of the Governance Committee, our Board of Directors approved, effective January 1, 2019, the following changes in our director compensation:
increased the annual equity compensation component of this program and basedfrom a value of $110,000 to a value of $120,000
increased the annual cash retainer from $75,000 to $90,000
eliminated the separate $16,000 annual cash retainer for serving on the adviceAudit Committee and the separate $7,000 annual cash retainer for serving on the Compensation, Governance or SHE&S Committee
reduced the annual retainer paid to the Chair of Mercer, stock compensation for non-employee directors was the Audit Committee from $25,000 to $20,000
increased effective for calendar year 2017,the annual retainer paid to an awardthe Chair of shares having a grant date valuethe Compensation Committee from $10,000 to $15,000
retained the $10,000 cash retainer paid to the Chairs of the Governance and SHE&S Committees
eliminated the separate cash retainer paid to the Chair of the Governance Committee when the Chair of that Committee is also serving as close as possible to $110,000. With this change, total compensationNon-Executive Chair of the Board
retained the $110,000 annual cash retainer paid to our directors will more closely approximate peer median levels, andNon-Executive Chair of the mix between cash and equity compensation will place slightly more emphasis on equity compensation. Prior to this increase, the compensation for our non-employee directors was last increased in January 2012. Board.
Directors who are Cabot employees do not receive compensation for their services as directors.
Cash CompensationBoard of Directors
Cash compensationOur Board of Directors currently has twelve members and is divided into three classes serving staggered three-year terms. Directors for ournon-employeeeach class are elected at the annual meeting of stockholders held in the year in which the term for their class expires. Three directors consistsare proposed to be elected at the 2020 Annual Meeting. The terms of an annual retainerJuan Enriquez, Sean D. Keohane and William C. Kirby expire at the 2020 Annual Meeting and our Board of $75,000, plus the following annual amounts for specific roles:
Mr. O’Brien hasthem are current directors and have been elected to not receive the cash compensation described above for his role as Chair of the Governance Committee in light of his role as ourNon-Executive Chairman of the Board. Cash compensation is paid quarterly and, when changes occur in Board or Committee membership during a quarter, the compensation ispro-rated.by stockholders at previous annual meetings.
Stock Compensation
Under the Cabot Corporation 2015 Directors’ Stock Compensation Plan (the “Directors’ Stock Plan”), eachnon-employee director is eligible to receive each calendar year shares of Cabot common stock as part of his or her compensation for services to be performed in that year. For calendar year 2016, eachnon-employee directorPatrick M. Prevost, whose term of office continued afterexpires at the 20162020 Annual Meeting, and John F. O’Brien, whose term of Stockholders received an award of shares having a grant date value as close as possible to $75,000 (1,987 shares). Henry F. McCance and Ronaldo H. Schmitz, who retiredoffice expires at the 20162021 Annual Meeting, each received apro-rated granthave decided to retire from the Board effective at the 2020 Annual Meeting. Upon the election of 497 shares. The closing pricethe nominated directors, and with Mr. Prevost’s and Mr. O’Brien’s retirements, Cabot’s Board of our common stock on January 8, 2016,Directors will have ten members. We expect that all of the date such shares were granted, was $37.75. On September 9, 2016, Mr. Prevost received apro-rated grant of 760 shares as compensation for his service as anon-employee director following the end of his employment with Cabot on July 15, 2016. The closing price of our common stock on September 9, 2016 was $49.32.
As of January 18, 2017, there were 311,382 sharesnominees will be available for issuance underelection, but if any of the Directors’ Stock Plan.nominees is not available at the time of the 2020 Annual Meeting, proxies received will be voted for substitute nominees to be designated by the Board of Directors or, if no substitute nominees are identified by the Board, proxies will be voted for a lesser number of nominees. In no event will the proxies be voted for more than three nominees.
We believe that it is desirable for directors to have an equity interest in Cabot and we encourage all directors to own a reasonable amount of Cabot stock to align director and stockholder interests and to enhance a director’s long-term perspective. Accordingly, our Corporate Governance Guidelines requirenon-employee directors to have an equity ownership in Cabot of at least 10,000 shares. It is expected that this ownership levelVote Required
A nominee will generally be achieved within a five-year period beginning when a director is first elected to the Board. For purposesBoard of determining a director’s compliance with this ownership requirement, any deferred shares are considered owned byDirectors if the director. votes properly cast “for” his election exceed the votes properly cast “against” such nominee’s election.
Recommendation
The Board of Directors recommends that you vote “FOR” the election of its three nominees.
CABOT CORPORATION 5
2020 PROXY STATEMENT |
Proposal 1 — Election of Directors(continued)
Certain Information Regarding Directors
In addition eachnon-employeeto the information presented below regarding the specific experience, qualifications, attributes and skills that qualify the nominees and the directors whose terms of office will continue after the 2020 Annual Meeting to serve as a director of the Company, all the nominees and directors have a reputation for honesty, integrity, sound judgment and adherence to high ethical standards. Each of the nominees and directors has demonstrated the willingness and ability to make the significant commitment of time and energy to serve on our Board and its Committees, and to engage management and each other openly and constructively. Our Directors are committed to having a Board that reflects a balanced set of skills that is required to retain the shares granted in any given year for a periodaligned with our strategic goals and reflects our diversity objectives.
Juan Enriquez (Nominee for Election) | Director Since: 2005 Committee Memberships: Audit Term of Office Expires: 2020 Age: 60 Independent Business Experience: • Chairman and CEO, Biotechonomy Ventures, a life sciences research and investment firm, since 2003 • Managing Director, Excel Venture Management, a life sciences investment company, since March 2008 • Director, Life Science Project at Harvard Business School, 2001 to 2003 Other Boards and Positions: • Director, variousstart-up companies • Boston Museum of Science (Trustee) • Harvard Medical School Advisory Council • Trustee, WGBH Mr. Enriquez has significant expertise in technology,start-up companies and international business, and leadership experience from his broad experience in technology ventures. | |||
Sean D. Keohane (Nominee for Election) | Director Since:2016 Committee Memberships: Executive Term of Office Expires: 2020 Age: 52 Business Experience: • President and CEO, Cabot Corporation, since March 2016 • EVP, President, Reinforcement Materials, November 2014 to March 2016; SVP, President, Performance Chemicals, March 2012 to November 2014; General Manager, Performance Chemicals, May 2008 to March 2012; Vice President in March 2005; joined Cabot Corporation August 2002 • General management positions, Pratt & Whitney, a division of United Technologies, prior to 2002 Other Boards and Positions: • Director, The Chemours Company, a global provider of performance chemicals (2018 to present) • Director, American Chemistry Council, a trade association representing the business of chemistry at the global, national and state levels (2016 to present) Mr. Keohane has a deep understanding of Cabot’s businesses, strong knowledge of the chemicals industry and significant experience in management, strategic planning, manufacturing, international business and marketing. |
6 CABOT CORPORATION
2020 PROXY STATEMENT |
Proposal 1 — Election of three years from the dateDirectors (continued)
William C. Kirby (Nominee for Election) | Director Since: 2012 Committee Memberships: Compensation Term of Office Expires: 2020 Age: 69 Independent Business Experience: • Spangler Family Professor of Business Administration, Harvard Business School; T.M. Chang Professor of China Studies, Harvard University, since July 2008 • Harvard University Distinguished Service Professor and Chairman of the Harvard China Fund, since July 2006 • Harvard faculty member since 1992, served as Chair of Harvard’s History Department, Director of the Harvard University Asia Center, Dean of the Faculty of Arts and Sciences and Director of the Fairbank Center for Chinese Studies Other Boards and Positions: • Director, The China Fund, Inc., anon-diversified closed-ended management investment company (2007 to 2019) • Director, The Taiwan Fund, Inc., a diversified closed-ended management investment company (2013 to present) • Director, Harvard University Press • Director, Harvard Magazine • Director, JAMM Active Limited, a global producer of innovative performance fabrics for athletic use (2016 to present) Mr. Kirby has extensive business knowledge and particular expertise regarding the business, economic and political environment in China. | |||
Cynthia A. Arnold | Director Since: 2018 Committee Memberships: SHE&S Term of Office Expires: 2021 Age: 62 Independent Business Experience: • Chief Technology Officer, The Valspar Corporation, a global paint and coatings company, January 2011 until retirement in May 2017 • Chief Technology Officer, Sun Chemical Corporation, a producer of inks, coatings and supplies, pigments, polymers, liquid compounds, solid compounds and application materials, 2004 to December 2010 • Vice President of Coatings, Adhesives and Specialty Chemicals Technology, Eastman • Management and technology leadership positions, General Electric Company, a high technology industrial leader, 1994 to 2003 Other Boards and Positions: • Director, Milliken & Company, a global diversified industrial company for specialty chemicals, performance materials and textiles (April 2019 to present) • Director, Citrine Informatics, a globalAI-driven materials data management company (2018 to present) • Member, Advisory Board, University of Minnesota Dept of Chemical Engineering and Materials Science • Member, Materials Advisory Board, Carbon 3D, Inc. • Board Member, Minnesota Zoo(Co-chair, Technology Task Force) Dr. Arnold has a depth of global experience in the specialty chemicals industry, particularly in technology and innovation, with an understanding of the value chains in which Cabot participates. |
CABOT CORPORATION 7
2020 PROXY STATEMENT |
Proposal 1 — Election of issuance or until the director’s earlier retirement.Directors(continued)
Mark S. Wrighton | Director Since: 1997 Committee Memberships: Compensation Term of Office Expires: 2021 Age: 70 Independent Business Experience: • Professor and Chancellor Emeritus, Washington University in St. Louis, June 2019 to present • Trustee, Washington University in St. Louis, July 2019 to present • Chancellor, Washington University in St. Louis, 1995 to May 2019 • Faculty member, Massachusetts Institute of Technology, Provost, 1990 to 1995; Head of Chemistry Department, 1987 to 1990 Other Boards and Positions: • Director, Brooks Automation, Inc., a worldwide provider of automation, vacuum and instrumentation solutions to the global semiconductor and related industries (2005 to present) • Director, Corning, Inc., a specialty glass and ceramics company (2009 to present) • Director, A.G. Edwards, Inc., a financial services company (2000 to 2007) • Director, BJC HealthCare • Director, Donald Danforth Plant Science Center • Ex-officio Director, St. Louis Regional Chamber and Growth Association • Trustee, St. Louis Science Center • Director, Concordance Academy Chancellor Wrighton has extensive scientific knowledge and understanding of complex technology, significant management and leadership experience, and a deep understanding of matters relating to public company management and oversight. | |||
Christine Y. Yan | Director Since: 2019 Committee Memberships: SHE&S Term of Office Expires: 2021 Age: 54 Independent Business Experience: • Vice President, Integration, Stanley Black & Decker, a manufacturer of industrial tools and household hardware and a provider of security products and locks, 2018 until her retirement that same year • President, Asia, Stanley Black & Decker, 2014 to 2018 • President, Stanley Storage and Workspace Systems, Stanley Black & Decker, 2013 to 2014 Other Boards and Positions: • Director, Modine Manufacturing Company, a thermal management company (2014 to present) • Director, ON Semiconductor, a supplier of semiconductor-based solutions (2018 to present) • Director, Ansell Limited, a manufacturer of protective industrial and medical gloves (2019 to present) Ms. Yan has years of experience in global manufacturing and engineering and significant experience with international business, particularly in Asia. |
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2020 PROXY STATEMENT |
Proposal 1 — Election of Directors (continued)
Michael M. Morrow | Director Since: 2017 Committee Memberships: Audit (Chair), Governance Term of Office Expires: 2022 Age: 64 Independent Business Experience: • Partner, PricewaterhouseCoopers, a public accounting firm, 1986 until retirement in June 2016, as audit partner and in various leadership and governance roles, including Lead Director of PwC’s U.S. Board of Partners • Consultant, PwC, June 2016 to June 2017 Other Boards and Positions: • Chair, Financial Accounting Standards Advisory Committee (FASAC), an advisory body to the Financial Accounting Standards Board (FASB) (beginning January 2020, and Member from January 2019 to present) • Member, Board of Visitors, Wake Forest University School of Business (2011 to 2017) • Member, Business Advisory Council, University of Rhode Island School of Business (2010 to 2015) Mr. Morrow has substantial expertise in accounting, finance and financial reporting matters, and significant leadership, business and corporate governance experience. | |||
Sue H. Rataj Non-Executive Chair of the Board | Director Since: 2011 Committee Memberships: Executive (Chair), Governance (Chair) Term of Office Expires: 2022 Age: 63 Independent Business Experience: • Chief Executive, Petrochemicals for BP, a global energy company, April 2008 until retirement in April 2011 • Senior management positions with BP, including Group Vice President, Refining and Marketing, July 2007 to April 2008 Other Boards and Positions: • Director, Agilent Technologies, Inc., a global leader providing instruments, software and consumables to laboratories in the life sciences, diagnostics and applied chemical markets (2015 to present) • Supervisory Board Member, Bayer AG, a life science enterprise developing and manufacturing products in the pharmaceuticals, consumer health, animal health and crop science segments (2012 to 2017) Ms. Rataj has substantial management leadership and strategic planning experience, significant expertise in operations, safety, health and environmental matters, risk management, accounting and finance matters, particularly in the context of a chemicals company, as well as corporate governance experience. |
CABOT CORPORATION 9
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Director CompensationProposal 1 — Election of Directors(continued)
Reimbursement of Certain Expenses; Charitable Giving
Our Corporate Governance Guidelines state that Cabot will not provide retirement or other benefits or perquisites tonon-employee directors. Directors, however, are reimbursed for reasonable travel andout-of-pocket expenses incurred in connection with attending Board and Committee meetings and other Cabot business-related events, and are covered by Cabot’s travel accident insurance policy for such travel. In connection with the retirements of Mr. McCance and Dr. Schmitz from the Board of Directors at the 2016 Annual Meeting of Stockholders and in recognition for their many years of service, we made contributions of $25,000 on each of their behalf to charities that they each selected.
Deferred Compensation
Under the Cabot CorporationNon-Employee Directors’ Deferral Plan (the “Deferred Compensation Plan”), directors can elect to defer receipt of any cash compensation payable in a calendar year for a period of at least three years or until they cease to be members of the Board of Directors. In any year, these deferred amounts are, at the director’s choice, either (i) credited with interest at a rate equal to the Moody’s Corporate Bond Rate for the month of November prior to the beginning of the applicable year or (ii) treated as invested in Cabot phantom stock units, based on the market price of shares of Cabot common stock at the time of deferral (with phantom dividends accrued and treated as if reinvested in Cabot phantom stock units). Messrs. Enriquez and McCance and Dr. Wolfgruber elected to defer receipt of their calendar year 2016 cash compensation and treat the deferred amounts as invested in Cabot phantom stock units. Mr. Kirby elected to defer receipt of his calendar year 2016 cash compensation and have it credited with interest at a rate equal to the Moody’s Corporate Bond Rate. The Moody’s Corporate Bond Rate used to calculate interest during calendar year 2016 was 4.62%.
Under the Deferred Compensation Plan, directors also may defer receipt of the shares of common stock issuable to them under the Directors’ Stock Plan. For each share of stock deferred, a director is credited with one Cabot phantom stock unit to a notional account created in the director’s name. Dividends that would otherwise be payable on the deferred shares accrue in the account and are credited with interest at a rate equal to the Moody’s Corporate Bond Rate for the month of November prior to the beginning of the year. The rate used to calculate interest during calendar year 2016 was 4.62%. At the end of the deferral period, the deferred shares of Cabot common stock are issued to the director, along with the accrued cash dividends and interest earned, either in one issuance or in installments over a period of up to ten years, as selected by the director. Messrs. Enriquez, Kirby, McCance and McGillicuddy, and Drs. Schmitz, Thomas, and Wolfgruber elected to defer their calendar year 2016 stock awards.
Frank A. Wilson | Director Since: 2018 Committee Memberships: Audit Term of Office Expires: 2022 Age: 61 Independent Business Experience: • Senior Vice President and Chief Financial Officer, PerkinElmer, Inc., a life sciences diagnostics, discovery and analytical solutions company, May 2009 until retirement in May 2018 • Finance, business development and investor relations leadership positions, Danaher Corporation, a life sciences and industrial conglomerate, 1999 to May 2009 Other Boards and Positions: • Director, Alkermes, a fully integrated, global biopharmaceutical company (September 2019 to present) • Director, Spartan Corporation, a provider of design, development and manufacturing services for electromechanical devices (2015 to March 2019) Mr. Wilson has significant financial expertise and skills in strategic planning, investor relations and business development within international public companies. | |||
Matthias L. Wolfgruber | Director Since: 2014 Committee Memberships: SHE&S (Chair), Governance Term of Office Expires: 2022 Age: 66 Independent Business Experience: • CEO, Altana AG, a global specialty chemicals company, 2007 until retirement in January 2016 • President and CEO, Altana Chemie AG, member of the management board of Altana AG, 2002 to 2007 • Management positions at Wacker-Chemie in the U.S. and Europe, 1985 to 2002 Other Boards and Positions: • Supervisory Board Member, Lanxess AG, a leading global manufacturer of synthetic rubber and chemical intermediates (2015 to present) • Supervisory Board, Altana AG (2016 to present) • Supervisory Board, Grillo-Werke AG, a manufacturer and supplier of zinc alloy products and chemicals (2014 to present) • Chairman, Ardex Group, a global supplier of high-performance specialty building materials (2015 to present) Dr. Wolfgruber has extensive leadership experience managing specialty chemicals businesses with global operations, with particular expertise in manufacturing, strategic investments and acquisitions. |
10 CABOT CORPORATION
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Director Compensation (continued)
Director Compensation Table
The following table sets forth the compensation earned by ournon-employee directors in fiscal 2016:
Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3) | All Other ($)(4) | Total ($) | |||||||||||||||
Juan Enriquez | 98,000 | 75,009 | 1,677 | — | 174,686 | |||||||||||||||
William C. Kirby | 94,500 | 75,009 | 7,872 | — | 177,381 | |||||||||||||||
Roderick C.G. MacLeod | 98,000 | 75,009 | — | — | 173,009 | |||||||||||||||
Henry F. McCance | 49,500 | 18,762 | 701 | 25,000 | 93,963 | |||||||||||||||
John K. McGillicuddy | 123,000 | 75,009 | 800 | — | 198,809 | |||||||||||||||
John F. O’Brien | 192,000 | 75,009 | — | — | 267,009 | |||||||||||||||
Patrick M. Prevost | 20,500 | 37,483 | — | — | 57,983 | |||||||||||||||
Sue H. Rataj | 94,000 | 75,009 | — | — | 169,009 | |||||||||||||||
Ronaldo H. Schmitz | 44,500 | 18,762 | 845 | 25,000 | 89,107 | |||||||||||||||
Lydia W. Thomas | 108,000 | 75,009 | 42 | — | 183,051 | |||||||||||||||
Matthias L. Wolfgruber | 89,000 | 75,009 | 53 | — | 164,062 | |||||||||||||||
Mark S. Wrighton | 89,000 | 75,009 | 11,667 | — | 175,676 |
CABOT CORPORATION 11
Proposal 1 — Election of DirectorsBoard Governance and Composition
Director QualificationsCorporate Governance Guidelines
Our Board of Directors has adopted Corporate Governance Guidelines that address director qualifications and independence, Board Committees, director compensation, Board performance evaluations, Board and Committee meetings, access to senior management, and Chief Executive Officer (“CEO”) performance evaluation and succession planning, among other matters. Many of the Board’s practices and policies set out in these Guidelines are described in this discussion of Board Governance and Composition. The Corporate Governance Guidelines are posted on our website (www.cabotcorp.com) under the heading “Company — About Cabot — Governance — Resources.”
The Governance Committee identifies candidates for election tois charged with reviewing the composition of the Board of Directors; reviews their skills, qualifications and experience; and recommends nominees for directorrefreshing it as appropriate to ensure the Board for approval.as a whole reflects a range of talents, skills, diversity and expertise needed to meet the evolving needs of our businesses and to oversee the execution of our strategy.
We believeImportant Factors in Assessing Director Qualifications
Director Qualifications. The Governance Committee strives to maintain an engaged, independent board with broad and diverse experience and judgment that potential directors should possess the highest personal and professional ethics, integrity and values, and beis committed to representing the long-term interests of our stockholders. In addition to reviewing a candidate’s background and accomplishments,Board candidates as well as nominees forre-election are evaluated in the context of the current composition of the Board of Directors and in relation to the evolving needsBoard’s current and anticipated requirements. We expect our directors and any candidate or nominee to have integrity and to demonstrate high ethical standards. The Committee also considers a wide range of our businesses.factors when assessing director qualifications, including:
Ensuring an experienced, qualified Board with expertise in areas relevant to Cabot.The Committee seeks directors who have held significant leadership positions and can bring to the Board specific types of experience relevant to Cabot. It is the Board’s policy that at all times at least a majority of the Board’s members must be independent under Cabot’s Corporate Governance Guidelines. It is also the Board’s policy that the Board as a whole reflect a range of talents, skills diversity and expertise, particularly in the areas of (i) management, (ii) strategic planning, (iii) accountingthese areas:
Management Leadership and finance, (iv) domestic and international markets, (v) corporate governance, and (vi) the specialty chemicals and related industries, sufficient to provide sound and prudent guidance about Cabot’s operations and interests.
In addition, the desired attributes of individual directors are (i) integrity and demonstrated high ethical standards; (ii) sound judgment; (iii) demonstrated leadership; (iv) knowledge, experience and skills in at least one specialty area, such as corporate management, accounting or finance, marketing, manufacturing, technology, information systems, international business or the specialty chemicals industry; (v) compassion; (vi) willingness and ability to work with other members of the Board openly and constructively; (vii) the ability to communicate clearly and persuasively; and (viii) diversity of origin, background, experience and thought.Strategic Planning Experience. We believe that itdirectors who have held significant leadership positions over an extended period of time possess strong leadership qualities and demonstrate a practical understanding of organizations, processes, strategy and risk management andknow-how to drive change and growth. As a publicly traded company, we value experience on the boards of other publicly traded companies and other complex organizations.
Specialty Chemicals Industry and Operations Experience.We have sought directors with leadership and operational experience in the industries and value chains in which we operate.
Global Experience. We value directors with global business experience because our continued success depends, in part, on growing our businesses outside the United States. Further, we have significant manufacturing operations outside the U.S., and a majority of our revenues came from outside of the U.S. in fiscal 2019.
Accounting and Finance Experience. We use a broad set of financial metrics to measure our performance, and accurate financial reporting and robust auditing are critical to our success.
Technology and Market Experience. As a science and technology company and an innovator, we value directors with an understanding of technology and material science and the value chains in which we participate. We seek to grow organically by developing new products, and identifying new applications and markets for our existing products. Under our “Advancing the Core” strategy, this is valuablecritical as we continue to haveintensify our focus on application innovation and formulated solutions.
Enhancing the Board’s diversity of background.As a global company, we consider diversity an essential element of our culture. At the Board level and throughout our company we value the benefits we receive from different perspectives and strive for a talented and diverse workforce and a diverse Board that is representative of our global business, customers, employees and stockholders. TheIn evaluating the suitability of individual Board nominees, the Governance
CABOT CORPORATION 11
2020 PROXY STATEMENT |
Board Composition (continued)
Committee implements and assessestakes into account many factors, including general understanding of the effectivenessdisciplines relevant to the success of this practice by considering each Board member’sa publicly traded company with global manufacturing operations in today’s business environment, professional experience, background, education, skill, age, race, gender and national origin. Although the Board does not have a formal written policy that solely addresses diversity, our Corporate Governance Guidelines prioritize diversity of origin, gender, background, experience and thought as important director selection criteria. The Governance Committee reviews its effectiveness in balancing these considerations when selecting nominees for director. We also requireassessing the composition of the Board.
Individual Attributes.The Board believes that ourto function effectively, all directors should demonstrate sound judgment, compassion, a willingness and ability to work with other members of the Board members be ableopenly and constructively and the ability to communicate clearly and persuasively, and to dedicate the time sufficient to ensure the diligent performance of their duties on our behalf.
Complying with the Board’s independence guidelines.When selecting and recruiting candidates, the Board looks at other positions the candidate has held or holds, including other board memberships, to determine whether any material relationship with Cabot exists that could impair the candidate’s independence.
Candidate Recommendations.We identify candidates for election to the Board of Directors through the business networks of the directors and management and from recommendations made by third-party search firms upon the request of the Governance Committee. Over the past year, the Governance Committee retained a search firm to help identify potential candidates. We evaluate candidates recommended by our stockholders in the same manner and on the same basis as candidates recommended by our directors, management or third-party search firms. Ms. Yan was initially identified as a candidate for election to the Board by a third-party search firm, and upon the recommendation of the Governance Committee, the Board elected Ms. Yan a director effective May 2019. In considering Ms. Yan’s candidacy, the Board considered Ms. Yan’s years of experience in global manufacturing and engineering as well as her significant experience in international business, particularly in Asia.
Board Refreshment.A number of changes have occurred in our Company’s Board of Directors over the past several years as part of our continuing efforts to ensure that our Board has the right skills and tenures to best oversee management and the execution of our strategy and the associated risks. Taking into account the upcoming retirements of Messrs. Prevost and O’Brien, 40% of our directors have joined the Board in the last three years. Our Board does not have a mandatory retirement policy. With respect to director tenure, the Board is of the view that a mix of tenures that takes into consideration appropriate levels of continuity, institutional memory and fresh perspectives is critical in achieving and maintaining a high-performing board. The Board will continue to proactively manage its composition andmake-up to ensure it has the appropriate mix of tenures and the requisite skills to address the Company’s current and future needs.
How we Assess Director Independence
The Board’s Guidelines.It is the Board’s policy that at least the majority of the Board’s members must be independent under our Corporate Governance Guidelines. The Governance Committee annually reviews the independence of all directors and reports its findings to the full Board. All our directors are “independent” under the Board’s director independence standards, other than Mr. Keohane, our President and CEO, and Mr. Prevost, our former President and CEO. For a director to be considered independent, the Board must determine that he or she does not have any material relationship with Cabot. The Board’s guidelines for director independence are consistent with the independence requirements in the New York Stock Exchange’s listing standards. In addition to applying these guidelines, the Board evaluates all relevant facts and circumstances in making an independence determination. In assessing director independence, the Board considers all known relationships, transactions and arrangements among directors, their family members, and Cabot. The Board concluded that none of thenon-management directors who served as directors during the 2019 fiscal year, other than Mr. Prevost, had a material relationship with Cabot.
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2020 PROXY STATEMENT |
Board Composition (continued)
Our Leadership Structure —Non-Executive Chair of the Board; Executive Sessions
Sue H. Rataj has served asNon-Executive Chair of the Board of Directors since March 9, 2018.
Although our Corporate Governance Guidelines do not require that our Chair and Chief Executive Officer positions be separate, our Board believes that this leadership structure is appropriate at this time because it allows our Chief Executive Officer to focus on the strategic and operational aspects of our business, while allowing theNon-Executive Chair of the Board to provide independent leadership for the Board. Our Board recognizes that future circumstances may lead it to change the leadership structure depending on Cabot’s needs at the time and, as such, believes that it is important to retain flexibility. In the future, if the Chief Executive Officer also serves as Chair of the Board, our Corporate Governance Guidelines require that an independent director be appointed annually as lead director to set the agenda for and lead the executive sessions of thenon-management directors at Board meetings and to undertake such other responsibilities as the independent directors designate.
Key Responsibilities.OurNon-Executive Chair of the Board focuses on the Board’s processes and ensuring it is prioritizing the right matters. Specifically, the Chair has the following responsibilities, and may perform other functions at the Board’s request:
presiding over meetings of our Board and stockholders, including executive sessions of thenon-management directors;
serving as anex-officio member of each Board committee of which he or she is not a member and, upon invitation, attending those committee meetings where possible;
establishing an agenda for each Board meeting in collaboration with our CEO and meeting with our CEO following each meeting to discuss any open issues andfollow-up items;
facilitating and coordinating communication among thenon-management directors and our CEO and an open flow of information between management and our Board;
in collaboration with the Governance Committee, leading our Board’s annual performance review;
meeting with eachnon-management director at least annually;
providing assistance to our CEO by attending selected internal business management meetings and meeting with our CEO as necessary;
coordinating the periodic review of management’s strategic plan;
in collaboration with the Compensation Committee, leading our Board’s review of the succession plans for our CEO; and
working with management on effective stockholder communication and engagement.
Our Board of Directors has six scheduled Board meetings to review and discuss Cabot’s performance and prospects as well as the issues we face, with calls and communications between meetings as appropriate. The Board interacts directly with senior management during its meetings. The Board typically dedicates onemultiple-day meeting a year to a discussion of longer-term strategic issues the Company faces. During this meeting, the Board allocates significant time for a discussion of talent management and management succession planning, as well as the Company’s diversity and inclusion objectives and achievements. During fiscal 2019, the Board met six times and acted by written consent once.
A significant portion of the Board’s oversight responsibility is carried out through its four operating committees.
Committee Composition.All of the members of our Audit Committee, Governance and Nominating Committee and Compensation Committee satisfy the NYSE’s definition of an independent director.
Committee Operations. Each Committee meets periodically throughout the year, reports its actions to the Board, receives reports from senior management, annually evaluates its performance and can retain outside advisors. Each Committee’s meeting materials are available for review by all directors.
Committee Responsibilities. The primary responsibilities of each Committee are listed below. For more detail about the responsibilities and functions of each Committee, see the Committee charters on our website (www.cabotcorp.com) under the heading “Company — About Cabot — Governance — Resources.”
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2020 PROXY STATEMENT |
Board Composition (continued)
Audit Committee
Members
Michael M. Morrow, Chair | Frank A. Wilson | |||
Juan Enriquez |
8 meetings in fiscal 2019
Financial Acumen.Mr. Morrow and Mr. Wilson are “audit committee financial experts” under SEC rules and each of these directors as well as Mr. Enriquez are “financially literate” under NYSE rules.
Primary Responsibilities
The Audit Committee assists the Board of Directors in its oversight of (i) the integrity of Cabot’s financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent registered public accounting firm’s qualifications and independence, (iv) the performance of our internal audit function and (v) our risk assessment and risk management processes. The Audit Committee, among other functions:
Has the sole authority to appoint, retain, terminate and determine the compensation of our independent registered public accounting firm.
Monitors the qualifications, independence and performance of our independent registered public accounting firm and approves professional services provided by the independent registered public accounting firm.
Reviews with our independent registered public accounting firm the scope and results of the audit engagement.
Reviews the activities and recommendations of our independent registered public accounting firm.
Discusses Cabot’s annual audited financial statements, quarterly financial statements and earnings releases with management and Cabot’s independent registered public accounting firm, including our disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Reviews Cabot’s accounting policies, risk assessment and risk management processes, control systems, legal matters and compliance activities.
During fiscal 2019, the Committee’s other priorities included treasury matters, including cash and debt management, internal controls practices, tax matters and cyber-security risk.
Compensation Committee
Members
John F. O’Brien*, Chair | Mark S. Wrighton | |||
William C. Kirby |
* | Mr. O’Brien is retiring from the Board at the 2020 Annual Meeting |
4 meetings and 2 actions by written consent in fiscal 2019
Primary Responsibilities
The primary responsibilities of the Compensation Committee are to:
Approve the corporate goals and objectives relevant to the compensation of our CEO, evaluate the CEO’s performance and approve the CEO’s salary and incentive compensation.
Establish policies applicable to the compensation, severance or other remuneration of Cabot’s Management Executive Committee, review and approve performance measures and goals under incentive compensation plans applicable to such employees, and approve their salaries, annual short-term and long-term incentive awards, any severance payments and any other remuneration.
Review and approve the aggregate amount of bonuses to be paid to participants in Cabot’s annual short-term incentive program.
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2020 PROXY STATEMENT |
Board Composition(continued)
Administer Cabot’s incentive compensation plans, equity-based plans and supplemental benefits arrangements, which includes approving the aggregate number of shares of stock granted under Cabot’s long-term incentive program.
Appoint the members of the Company’s Benefits and Investment Committees and monitor their activities.
Review on a periodic basis reports prepared by management of gender pay equity at the Company.
Important items for fiscal 2019 included establishing the compensation arrangements for the newly appointed members of the Company’s Management Executive Committee.
Governance Committee
Members
Sue H. Rataj, Chair | Michael M. Morrow | |||
John F. O’Brien* | Matthias L. Wolfgruber |
* | Mr. O’Brien is retiring from the Board at the 2020 Annual Meeting |
4 meetings in fiscal 2019
Primary Responsibilities
The Governance Committee is charged primarily with:
Developing and recommending to the Board corporate governance policies and procedures.
Identifying individuals qualified to become directors of Cabot.
Recommending director candidates to the Board to fill vacancies and to stand for election at the annual meeting of stockholders.
Recommending Committee assignments.
Leading the annual review of the Board’s performance.
Recommending compensation and benefit policies for Cabot’s directors.
Reviewing and making determinations regarding interested transactions under Cabot’s Related Person Transaction Policy and Procedures.
During fiscal 2019, the Governance Committee focused on Board composition and refreshment and reviewed the competitiveness of our director compensation program.
Safety, Health, Environment & Sustainability (“SHE&S”) Committee
Members
Matthias L. Wolfgruber, Chair | Patrick M. Prevost* | |||
Cynthia A. Arnold | Christine Y. Yan |
* | Mr. Prevost is retiring from the Board at the 2020 Annual Meeting |
3 meetings in fiscal 2019
Primary Responsibilities
The SHE&S Committee reviews aspects of Cabot’s safety, health, environmental and sustainability performance, process safety, security, product stewardship, community engagement and governmental affairs. In particular, the Committee reviews the following:
Cabot’s environmental reserve and risk management processes.
Environmental and safety audit programs, performance metrics, risk and opportunity assessments.
Management processes related to our safety, health, environment and sustainability programs.
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2020 PROXY STATEMENT |
Board Composition(continued)
During fiscal 2019, the Committee focused on the Company’s safety improvement plans, chemical risks and hazard assessments program, sustainability program and reporting, product safety and toxicology matters, and environmental remediation activities.
Executive Committee
Members
Sue H. Rataj, Chair | Michael M. Morrow | |||
Sean D. Keohane | John F. O’Brien* |
* | Mr. O’Brien is retiring from the Board at the 2020 Annual Meeting. |
Did not meet or act in fiscal 2019
Primary Responsibilities
The Executive Committee reviews and, where appropriate, approves corporate action with respect to the conduct of our business between Board of Directors’ meetings. Actions taken by the Executive Committee are reported to the Board at its next meeting.
How We Evaluate the Board’s Effectiveness
Each year, the Governance Committee leads our Board’s annual evaluation process. The process focuses on the effectiveness of the Board as a whole, prioritizing issues, and identifying specific issues for future discussion. In 2019, our General Counsel conducted individual interviews with each director. The conversations were guided by a series of questions provided to the directors in advance covering Board and Committee membership, operations and responsibilities, as well as open-ended questions so that each director had leeway to discuss the issues he or she believed to be the most pertinent. The key themes, observations and suggestions were summarized and discussed first with the Governance Committee and later with the full Board. Based on these discussions, opportunities to further enhance the Board’s effectiveness have been and are being implemented. In addition, ourNon-Executive Chair conductedone-on-one discussions with each director and also solicited feedback on individual director performance.
Our Board’s Role in Risk Oversight
Our Board oversees our enterprise-wide program of risk management. Cabot management is primarily responsible forday-to-day risk management practices and, together with other personnel, regularly engages in an enterprise-wide risk assessment. This assessment is updated on a continual basis and includes a comprehensive review of a broad range of risks, including financial, operational, business, legal, regulatory, reputational, governance and managerial risks which may potentially affect the Company. From this assessment, the most significant risks in terms of their likelihood and severity are identified, and plans to manage and mitigate these risks are developed. Cabot management regularly reports to either the full Board or the relevant Committee of the Board our major risk exposures, their potential operational or financial impact on Cabot, and the steps we take to manage them.
Our Board has ultimate responsibility for risk oversight and oversees our corporate strategy, business development, capital structure, market exposure and country specific risks. Each Committee also has responsibility for risk oversight. The Audit Committee focuses on financial risk, including internal controls and legal and compliance risks and receives regular reports from our independent registered public accounting firm, our CFO, our Controller, our Director of Internal Audit and our General Counsel. The Audit Committee also oversees the Company’s enterprise risk management processes and cybersecurity program. The SHE&S Committee assists the Board in fulfilling its oversight responsibility by reviewing the effectiveness of our safety, health, environment and sustainability programs and initiatives and overseeing matters related to stewardship and sustainability of our products and manufacturing processes. The Compensation Committee considers human resources risks and evaluates and sets compensation programs that encourage decision-making predicated upon a level of risk consistent with our business strategy. The Compensation Committee also oversees senior management succession planning and development. Finally, the Governance Committee considers
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Board Composition(continued)
governance and Board succession risks, and evaluates director skills and qualifications to ensure each Committee has directors with the requisite skills to oversee the applicable risks that are the focus of that Committee. The Company has a robust risk management program, the strength of which is not dependent on the Board’s leadership structure.
Our Compensation Discussion and Analysis (“CD&A”) describes our compensation policies, programs and practices for our named executive officers. Our corporate goal-setting, assessment and compensation decision-making processes described in our CD&A apply to all participants in our corporate short- and long-term incentive programs.
Participants in our long-term incentive program receive awards consisting of time-based restricted stock units and performance-based restricted stock units, and, in the case of members of the Management Executive Committee and a limited number of other participants, stock options. Beyond our corporate short- and long-term incentive programs, a substantial number of our facilities offer an annual cash incentive plan.
The Compensation Committee directed management, working with the Committee’s independent consultant, Meridian Compensation Partners, to provide an evaluation on the design of all of our incentive plans to assess whether any portion of our incentive compensation programs encourages excessive risk taking. That assessment is presented to and reviewed by the Compensation Committee. Among the program features evaluated are the types of compensation offered, performance metrics, the alignment between performance goals, payout curves and the Company’s business strategy, and the overall mix of incentive awards. The Company’s compensation programs are designed with features that mitigate risk without diminishing the incentive nature of the compensation. Specific features of the programs to mitigate risk include, as applicable, the following: caps limiting the amount that can be paid under the corporate short- and long-term incentive programs and all of the local cash incentive programs; a balanced mix of annual and longer-term incentive opportunities; a mix of cash and equity incentives; multiple performance metrics; management processes to oversee risk associated with each of our incentive programs; stock ownership guidelines for members of the Management Executive Committee; a company compensation recoupment policy; and significant controls for important business decisions. In our CD&A we describe in more detail the features of our executive compensation programs that are designed to mitigate risk, including the oversight provided by the Compensation Committee, which reviews and approves the design, goals and payouts under our corporate short- and long-term incentive programs and each executive officer’s compensation. Based on our assessment, we believe our compensation policies, programs and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
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Other Governance Policies and Practices
Transactions with Related Persons
Policy and Procedures for the Review of Related Person Transactions
Our Board has adopted a written policy for the review and approval or ratification of transactions involving related persons. “Related persons” consist of any person who is or was (since the beginning of the fiscal year) a director, nominee for director or executive officer of Cabot, any greater than 5% stockholder of Cabot and the immediate family members of any of those persons. The Governance Committee is responsible for applying the policy with the assistance of our General Counsel.
Transactions covered by the policy consist of any transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements, or relationships in which (1) the aggregate amount involved will or may be expected to exceed $100,000 with respect to any fiscal year, (2) Cabot is a participant and (3) any related person has or will have a direct or indirect interest, other than solely as a result of being a director or a less than 10% beneficial owner of another entity (an “interested transaction”). Under the policy, the following interested transactions have a standingpre-approval from the Governance Committee, even if the aggregate amount is greater than $100,000:
• | Certain sales of stock by executive officers to Cabot. (1) Sales of Cabot stock by an executive officer (including the CEO) to Cabot pursuant to the terms of our long-term incentive program or (2) other sales by executive officers (excluding the CEO) provided that the sale has been approved by our CEO, the per share purchase price is the fair market value of our common stock on the date of sale, the proceeds from the sale to the executive officer do not exceed $500,000, and the sale does not take place during a quarterly blackout period. |
• | Certain transactions with other companies. Any transaction between Cabot and another company if the aggregate amount involved does not exceed the greater of $1,000,000 or 2% of that company’s total revenues, or any transaction where Cabot is indebted to another company if the total amount of Cabot’s indebtedness to the other company does not exceed 1% of that company’s total consolidated assets. In both cases, thepre-approval applies if the related person’s only relationship is as an employee (other than executive officer), director or beneficial owner of less than 10% of the other company’s shares. |
• | Employment of executive officers; director compensation. Any employment by Cabot of an executive officer if the related compensation is required to be reported in our proxy statement or if the compensation was approved by our Compensation Committee. Any compensation paid to a director if the compensation is required to be reported in our proxy statement. |
• | Other transactions. Competitively bid or regulated public utility services transactions; transactions involving trustee-type services; and transactions where the related person’s interest arises solely from the ownership of our common stock and all common stockholders received the same benefit on a pro rata basis. |
Each interested transaction by a related person that does not have standingpre-approval under the policy should be reported to our General Counsel for presentation to the Governance Committee for approval before its consummation or for ratification, if necessary, after its consummation. The Chair of the Governance Committee has the authority topre-approve or ratify (as applicable) any interested transaction with a related person in which the aggregate amount involved is expected to be less than $500,000. In determining whether to approve or ratify an interested transaction, the Governance Committee and the Chair may take into account such factors as they deem appropriate, which may include whether the interested transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.
Transactions with Related Persons
Since the beginning of fiscal 2019, Cabot and its subsidiaries had no transactions, nor are there any currently proposed transactions in which Cabot or its subsidiaries was or is to be a participant and the amount involved exceeds $120,000 and any related person (as defined above) had or will have a direct or indirect material interest reportable under SEC rules.
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Other Governance Policies and Practices(continued)
The Company welcomes stockholder engagement. Our directors are available to answer questions from stockholders at the 2020 Annual Meeting. In addition, management of the Company conducts stockholder outreach throughout the year to ensure management and the Board understand and consider the issues that matter most to our stockholders. We provide regular updates regarding the Company’s performance and strategic actions to the investor community, and we participate in numerous investor conferences,one-on-one meetings, earnings calls, investor days, and educational investor and analyst conversations. We also communicate with stockholders and other stakeholders through various media, including our annual report, proxy statement and other filings with the SEC, news releases and our website. We believe ongoing stockholder engagement allows us to respond effectively to stockholder concerns.
Procedures for Stockholders to Recommend Director Nominees
The Governance Committee has a policy with respect to the submission of recommendations by stockholders of candidates for director nominees, which is available on our website. A stockholder wishing to recommend a candidate must submit the recommendation by a date not later than the 120th calendar day before the first anniversary of the date that Cabot released its proxy statement to stockholders in connection with the previous year’s annual meeting. Recommendations should be submitted to the Company’s Secretary in writing at Cabot Corporation, Two Seaport Lane, Suite 1400, Boston, Massachusetts 02210. The notice to the Secretary should include all information about the candidate that Cabot would be required to disclose in a proxy statement in accordance with Securities and Exchange Act rules or as required by the Company’sby-laws, consent of the candidate to serve on the Board of Directors, if nominated and elected, and agreement of the candidate to complete, upon request, questionnaires customary for Cabot directors and to comply with applicable Company policies.
Director Attendance at Meetings
During fiscal 2019, each director attended at least 75% of the aggregate of the total Board meetings and the total meetings held by all of the Committees on which he or she served during the periods that he or she served.
We have adopted a code of ethics that applies to all of our employees and directors, including the Chief Executive Officer, the Chief Financial Officer, the Controller and other senior financial officers. In fiscal 2019, each of our directors completed our Code of Business Ethicson-line compliance training program that we require our employees to complete. The Code of Business Ethics is posted on our website (www.cabotcorp.com) under the caption “Company — About Cabot — Code of Business Ethics.”
Stockholders or other interested parties wishing to communicate with the Board, thenon-management directors or any individual director may contact theNon-Executive Chair of the Board by calling1-800-853-7602; by sending an email through our website using the link that is located under the caption “Company — About Cabot — Governance — Contact the Board of Directors”; or by writing to Cabot Corporation Board of Directors, c/o Alertline Anonymous, P.O. Box 3767, 13950 Ballantyne Corporate Place, Suite 300, Charlotte, North Carolina 28277.
Anyone who has a complaint or concern regarding our accounting, internal accounting controls or auditing matters may communicate that concern to the Chair of the Audit Committee by calling1-800-853-7602; by sending an email through our website using the link that is located under the caption “Company — About Cabot — Governance — Contact the Board of Directors”; or by writing to Cabot Corporation Audit Committee, c/o Alertline Anonymous, P.O. Box 3767, 13950 Ballantyne Corporate Place, Suite 300, Charlotte, North Carolina 28277. All such communications to the Board of Directors or the Audit Committee will also be sent to Cabot’s Office of Compliance.
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Annual compensation for ournon-employee directors is comprised of cash compensation and a grant of Cabot common stock. The Governance Committee is responsible for reviewing the form and amount of compensation paid to ournon-employee directors and recommends changes to our Board of Directors as appropriate. In November 2018, the Governance Committee, with the assistance of Mercer LLC, a national executive compensation firm, evaluated the reasonableness of our director compensation and the appropriate mix of cash and equity compensation. This assessment included a review of director compensation data prepared for the Governance Committee by Mercer using the same peer group of companies our Compensation Committee uses for assessing the reasonableness of our executive compensation decisions. Based on this evaluation, and upon the recommendation of the Governance Committee, our Board of Directors approved, effective January 1, 2019, the following changes in our director compensation:
increased the annual equity compensation component of this program from a value of $110,000 to a value of $120,000
increased the annual cash retainer from $75,000 to $90,000
eliminated the separate $16,000 annual cash retainer for serving on the Audit Committee and the separate $7,000 annual cash retainer for serving on the Compensation, Governance or SHE&S Committee
reduced the annual retainer paid to the Chair of the Audit Committee from $25,000 to $20,000
increased the annual retainer paid to the Chair of the Compensation Committee from $10,000 to $15,000
retained the $10,000 cash retainer paid to the Chairs of the Governance and SHE&S Committees
eliminated the separate cash retainer paid to the Chair of the Governance Committee when the Chair of that Committee is also serving as Non-Executive Chair of the Board
retained the $110,000 annual cash retainer paid to our Non-Executive Chair of the Board.
Directors who are Cabot employees do not receive compensation for their services as directors.
Board of Directors
Our Board of Directors currently has eleventwelve members and is divided into three classes serving staggered three-year terms. Directors for each class are elected at the annual meeting of stockholders held in the year in which the term for their class expires.
Four Three directors are proposed to be elected at the 20172020 Annual Meeting. The terms of Juan Enriquez, Sean D. Keohane and William C. Kirby Patrick M. Prevost and Sean D. Keohane expire this yearat the 2020 Annual Meeting and our Board of Directors has nominated each of them for a three-year term that will expire at the annual meeting in 2020.2023. All of them are current directors and with the exception of Mr. Keohane, have been elected by stockholders at previous annual meetings. The Board elected Mr. Keohane President
Patrick M. Prevost, whose term of office expires at the 2020 Annual Meeting, and Chief Executive OfficerJohn F. O’Brien, whose term of office expires at the Company and a member of the Board of Directors effective March 11, 2016.
Dr. Thomas is retiring2021 Annual Meeting, have decided to retire from the Board effective at the 20172020 Annual Meeting in accordance with the Board’s retirement policy fornon-employee directors.Meeting. Upon the election of the nominated directors, and with this retirement,Mr. Prevost’s and Mr. O’Brien’s retirements, Cabot’s Board of Directors will have ten members. We expect that all of the nominees will be available for election, but if any of the nominees is not available at the time of the 20172020 Annual Meeting, proxies received will be voted for substitute nominees to be designated by the Board of Directors or, if no substitute nominees are identified by the Board, proxies will be voted for a lesser number of nominees. In no event will the proxies be voted for more than fourthree nominees.
Vote Required
A nominee will be elected to the Board of Directors if the votes properly cast “for” his election exceed the votes properly cast “against” such nominee’s election.
Recommendation
The Board of Directors recommends that you vote “FOR” the election of its fourthree nominees.
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Proposal 1 — Election of Directors(continued)
Certain Information Regarding Directors
In addition to the information presented below regarding the specific experience, qualifications, attributes and skills that qualify the nominees and the directors whose terms of office will continue after the 20172020 Annual Meeting to serve as a director of the Company, all of the nominees and directors have a reputation for honesty, integrity, sound judgment and adherence to high ethical standards. Each of the nominees and directors has demonstrated the willingness and ability to make the significant commitment of time and energy to serve on our Board and its Committees, and to engage management and each other openly and constructively. Our Directors are committed to having a Board that reflects a balanced set of skills that is aligned with our strategic goals and reflects our diversity objectives.
Juan Enriquez (Nominee for Election) |
Committee Memberships: Audit
Term of Office Expires: Age: 60 Independent Business Experience: • Chairman • Managing Director, • Director, Other Boards and Positions: • Director, variousstart-up • Boston Museum of Science (Trustee) • Harvard Medical School Advisory Council • Trustee, WGBH Mr. | |||
Sean D. Keohane (Nominee for Election) |
Committee Memberships: Executive
Term of Office Expires: Age: 52 Business Experience: • President and • EVP, President, Reinforcement Materials, November 2014 to March 2016; SVP, President, Performance Chemicals, March 2012 to November 2014; General Manager, Performance Chemicals, May 2008 to March 2012; Vice President in March 2005; joined Cabot • General management Other Boards and Positions: • Director, The Chemours Company, a • Director, American Chemistry Council, a trade association representing the business of chemistry at the global, national and state Mr. Keohane has a deep understanding of Cabot’s |
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Proposal 1 — Election of Directors(continued)
William C. Kirby (Nominee for Election) |
Committee Memberships:
Term of Office Expires: Age: 69 Independent Business Experience: • Spangler Family Professor of Business Administration, • Harvard University Distinguished Service Professor and Chairman of the Harvard China • Harvard faculty member since 1992, Other Boards and Positions: • Director, The China Fund, Inc., anon-diversified closed-ended management investment company • Director, The Taiwan Fund, Inc., a diversified closed-ended management investment • Director, Harvard University Press • Director, Harvard Magazine • Director, JAMM Active Limited, a global producer of innovative performance fabrics for athletic use (2016 to present) Mr. Kirby | |||
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Committee Memberships:
Term of Office Expires: Age: 62 Independent Business Experience: • Chief Technology Officer, The Valspar Corporation, a • Chief Technology Officer, Sun Chemical Corporation, a producer of • Vice President of Coatings, Adhesives and Specialty Chemicals Technology, Eastman • Management and technology leadership positions, General Electric Company, a Other Boards and Positions: • Director, Milliken & Company, a global diversified industrial company for specialty chemicals, performance materials and textiles (April 2019 to present) • Director, Citrine Informatics, a globalAI-driven materials data management company (2018 to present) • Member, Advisory Board, University of Minnesota Dept of Chemical Engineering and Materials Science • Member, Materials Advisory Board, Carbon 3D, Inc. • Board Member, Minnesota Zoo(Co-chair, Technology Task Force) Dr. Arnold has |
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Proposal 1 — Election of Directors(continued)
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Committee Memberships:
Term of Office Expires: Age: 70 Independent Business Experience: • Professor and Chancellor Emeritus, Washington University in • Trustee, Washington University in St. Louis, July 2019 to present • Chancellor, Washington University in St. Louis, 1995 to May 2019 • Faculty member, Massachusetts Institute of Technology, Provost, 1990 to 1995; Head of Chemistry Department, 1987 to 1990 Other Boards and • Director, Brooks Automation, Inc., a worldwide provider of automation, vacuum and instrumentation solutions to the global semiconductor and related • Director, Corning, Inc., a • Director, A.G. Edwards, Inc., a financial services company (2000 to 2007) • Director, BJC HealthCare • Director, Donald Danforth Plant Science Center • Ex-officio Director, St. Louis Regional Chamber and Growth Association • Trustee, St. Louis Science Center • Director, Concordance Academy Chancellor Wrighton has extensive scientific knowledge and understanding of | |||
Christine Y. Yan | Director Since: 2019 Committee Memberships: SHE&S Term of Age: 54 Independent Business Experience: • Vice President, Integration, Stanley Black & Decker, a manufacturer of • President, Asia, Stanley Black & Decker, 2014 to 2018 • President, Stanley Storage and Workspace Systems, Stanley Black & Decker, 2013 to 2014 Other Boards and Positions: • Director, Modine Manufacturing Company, a thermal management company (2014 to present) • Director, ON Semiconductor, a supplier of semiconductor-based solutions (2018 to present) • Director, Ansell Limited, a manufacturer of protective industrial and medical gloves (2019 to present) Ms. Yan has years of experience in global manufacturing and engineering and significant experience with international business, particularly in Asia. |
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Proposal 1 — Election of Directors (continued)
Michael M. Morrow | Director Since: 2017 Committee Memberships: Audit (Chair), Governance Term of Office Expires: 2022 Age: 64 Independent Business • Partner, PricewaterhouseCoopers, a public accounting firm, 1986 until retirement in June 2016, as audit partner and in various leadership and governance roles, including Lead Director of • Consultant, PwC, June 2016 to June 2017 Other Boards and Positions: • Chair, Financial Accounting Standards Advisory Committee (FASAC), an advisory body to the Financial Accounting Standards Board • Member, Board of Visitors, Wake Forest University School of Business (2011 to 2017) • Member, Business Advisory Council, University of Rhode Island School of Business (2010 to 2015) Mr. Morrow has substantial expertise in accounting, finance and | |||
Non-Executive
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Committee Memberships: Executive (Chair), Governance (Chair)
Term of Office Expires:
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Proposal 1 — Election of Directors(continued)
| Age:
Business Experience: | |||
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• Senior management positions with BP, Other Boards and • Director, Agilent Technologies, Inc., a global leader providing instruments, software and consumables to laboratories in the life sciences, diagnostics and applied chemical • Supervisory Board Member, Bayer AG, a life science enterprise developing and manufacturing products in the pharmaceuticals, consumer health, animal health and crop science segments (2012 to 2017) Ms. Rataj |
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Proposal 1 — Election of Directors(continued)
Frank A. Wilson | Director Since: 2018 Committee Memberships: Audit Term of Office Expires: 2022 Age: 61 Independent Business Experience: • Senior Vice President and Chief Financial Officer, PerkinElmer, Inc., a life sciences diagnostics, discovery and analytical solutions company, May 2009 until retirement in May 2018 • Finance, business development and investor relations leadership positions, Danaher Corporation, a life sciences and industrial conglomerate, 1999 to May 2009 Other Boards and Positions: • Director, Alkermes, a fully integrated, global biopharmaceutical company (September 2019 to present) • Director, Spartan Corporation, a provider of design, development and manufacturing services for electromechanical devices (2015 to March 2019) Mr. Wilson has significant financial expertise and skills in strategic planning, investor relations and business development within international public companies. | |||
Matthias L. Wolfgruber |
Committee
Term of Office Age: 66 Independent Business • CEO, Altana AG, a global specialty chemicals company, • President and CEO, • Management positions at Wacker-Chemie in the U.S. and Europe, Other Boards and Positions: • Supervisory Board Member, Lanxess AG, a leading global manufacturer of synthetic rubber and chemical intermediates (2015 to present) • Supervisory Board, Altana AG • Supervisory Board, • Chairman, Ardex Group, a Dr. Wolfgruber |
10 CABOT CORPORATION
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CABOT CORPORATION 17
CorporateBoard Governance and Composition
Corporate Governance Guidelines
Our Board of Directors has adopted Corporate Governance Guidelines that address the following matters, among others: director qualifications and independence, Board Committees, director retirement, director compensation, Board performance evaluations, Board and Committee meetings, access to senior management, CEOand Chief Executive Officer (“CEO”) performance evaluation and succession planning.planning, among other matters. Many of the Board’s practices and policies set out in these Guidelines are described in this discussion of Board Governance and Composition. The Corporate Governance Guidelines are posted on our website (www.cabotcorp.com) under the heading “Company — About Cabot — Governance — Resources.”
Director IndependenceBoard Composition
OurThe Governance Committee is charged with reviewing the composition of the Board and refreshing it as appropriate to ensure the Board as a whole reflects a range of talents, skills, diversity and expertise needed to meet the evolving needs of our businesses and to oversee the execution of our strategy.
Important Factors in Assessing Director Qualifications
Director Qualifications. The Governance Committee strives to maintain an engaged, independent board with broad and diverse experience and judgment that is committed to representing the interests of our stockholders. Board candidates as well as nominees forre-election are evaluated in the context of the current composition of the Board of Directors and in relation to the Board’s current and anticipated requirements. We expect our directors and any candidate or nominee to have integrity and to demonstrate high ethical standards. The Committee also considers a wide range of factors when assessing director qualifications, including:
Ensuring an experienced, qualified Board with expertise in areas relevant to Cabot.The Committee seeks directors who have held significant leadership positions and can bring to the Board specific types of experience relevant to Cabot. It is the Board’s policy that the Board as a whole reflect a range of talents, skills and expertise, particularly in these areas:
Management Leadership and Strategic Planning Experience. We believe that directors who have held significant leadership positions over an extended period of time possess strong leadership qualities and demonstrate a practical understanding of organizations, processes, strategy and risk management andknow-how to drive change and growth. As a publicly traded company, we value experience on the boards of other publicly traded companies and other complex organizations.
Specialty Chemicals Industry and Operations Experience.We have sought directors with leadership and operational experience in the industries and value chains in which we operate.
Global Experience. We value directors with global business experience because our continued success depends, in part, on growing our businesses outside the United States. Further, we have significant manufacturing operations outside the U.S., and a majority of our revenues came from outside of the U.S. in fiscal 2019.
Accounting and Finance Experience. We use a broad set of financial metrics to measure our performance, and accurate financial reporting and robust auditing are critical to our success.
Technology and Market Experience. As a science and technology company and an innovator, we value directors with an understanding of technology and material science and the value chains in which we participate. We seek to grow organically by developing new products, and identifying new applications and markets for our existing products. Under our “Advancing the Core” strategy, this is critical as we continue to intensify our focus on application innovation and formulated solutions.
Enhancing the Board’s diversity of background.As a global company, we consider diversity an essential element of our culture. At the Board level and throughout our company we value the benefits we receive from different perspectives and strive for a talented and diverse workforce and a diverse Board that is representative of our global business, customers, employees and stockholders. In evaluating the suitability of individual Board nominees, the Governance
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Board Composition (continued)
Committee takes into account many factors, including general understanding of the disciplines relevant to the success of a publicly traded company with global manufacturing operations in today’s business environment, professional experience, background, education, skill, age, race, gender and national origin. Although the Board does not have a formal written policy that solely addresses diversity, our Corporate Governance Guidelines prioritize diversity of origin, gender, background, experience and thought as important director selection criteria. The Governance Committee reviews its effectiveness in balancing these considerations when assessing the composition of the Board.
Individual Attributes.The Board believes that to function effectively, all directors should demonstrate sound judgment, compassion, a willingness and ability to work with other members of the Board openly and constructively and the ability to communicate clearly and persuasively, and to dedicate the time sufficient to ensure the diligent performance of their duties on our behalf.
Complying with the Board’s independence guidelines.When selecting and recruiting candidates, the Board looks at other positions the candidate has held or holds, including other board memberships, to determine whether any material relationship with Cabot exists that could impair the candidate’s independence.
Candidate Recommendations.We identify candidates for election to the Board of Directors through the business networks of the directors and management and from recommendations made by third-party search firms upon the request of the Governance Committee. Over the past year, the Governance Committee retained a search firm to help identify potential candidates. We evaluate candidates recommended by our stockholders in the same manner and on the same basis as candidates recommended by our directors, management or third-party search firms. Ms. Yan was initially identified as a candidate for election to the Board by a third-party search firm, and upon the recommendation of itsthe Governance Committee, has determined that each of Cabot’snon-management directors who served asthe Board elected Ms. Yan a director duringeffective May 2019. In considering Ms. Yan’s candidacy, the fiscal year, other than Mr.Board considered Ms. Yan’s years of experience in global manufacturing and engineering as well as her significant experience in international business, particularly in Asia.
Board Refreshment.A number of changes have occurred in our Company’s Board of Directors over the past several years as part of our continuing efforts to ensure that our Board has the right skills and tenures to best oversee management and the execution of our strategy and the associated risks. Taking into account the upcoming retirements of Messrs. Prevost who served as Cabot’s President and Chief Executive Officer until March 2016,O’Brien, 40% of our directors have joined the Board in the last three years. Our Board does not have a mandatory retirement policy. With respect to director tenure, the Board is “independent” underof the view that a mix of tenures that takes into consideration appropriate levels of continuity, institutional memory and fresh perspectives is critical in achieving and maintaining a high-performing board. The Board will continue to proactively manage its composition andmake-up to ensure it has the appropriate mix of tenures and the requisite skills to address the Company’s current and future needs.
How we Assess Director Independence
The Board’s Guidelines.It is the Board’s director independence standards as detailed inpolicy that at least the majority of the Board’s members must be independent under our Corporate Governance Guidelines. The Governance Committee annually reviews the independence of all directors and reports its findingfindings to the full Board. To assist in this review,All our directors are “independent” under the Board’s director independence standards, other than Mr. Keohane, our President and CEO, and Mr. Prevost, our former President and CEO. For a director to be considered independent, the Board has adoptedmust determine that he or she does not have any material relationship with Cabot. The Board’s guidelines for director independence guidelines. In the event a director has a relationship that is not addressed byare consistent with the independence requirements in the New York Stock Exchange’s listing standards. In addition to applying these guidelines, the Governance CommitteeBoard evaluates theall relevant facts and circumstances ofin making an independence determination. In assessing director independence, the relationship and makes a recommendation to the full Board of Directors about whether the relationship constitutes a material relationship with Cabot. After examiningconsiders all known relationships, between thetransactions and arrangements among directors, their family members, and Cabot, theCabot. The Board concluded that none of thenon-management directors who served as directors during the 2019 fiscal year, other than Mr. Prevost, had a material relationship with Cabot.
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Board Composition (continued)
Our Leadership Structure —Non-Executive Chair of the Board; Executive Sessions
Sue H. Rataj has served asNon-Executive Chair of the Board of Directors since March 9, 2018.
Although our Corporate Governance Guidelines do not require that our Chair and Chief Executive Officer positions be separate, our Board believes that this leadership structure is appropriate at this time because it allows our Chief Executive Officer to focus on the strategic and operational aspects of our business, while allowing theNon-Executive Chair of the Board to provide independent leadership for the Board. Our Board recognizes that future circumstances may lead it to change the leadership structure depending on Cabot’s needs at the time and, as such, believes that it is important to retain flexibility. In the future, if the Chief Executive Officer also serves as Chair of the Board, our Corporate Governance Guidelines require that an independent director be appointed annually as lead director to set the agenda for and lead the executive sessions of thenon-management directors at Board meetings and to undertake such other responsibilities as the independent directors designate.
Key Responsibilities.OurNon-Executive Chair of the Board focuses on the Board’s processes and ensuring it is prioritizing the right matters. Specifically, the Chair has the following responsibilities, and may perform other functions at the Board’s request:
presiding over meetings of our Board and stockholders, including executive sessions of thenon-management directors;
serving as anex-officio member of each Board committee of which he or she is not a member and, upon invitation, attending those committee meetings where possible;
establishing an agenda for each Board meeting in collaboration with our CEO and meeting with our CEO following each meeting to discuss any open issues andfollow-up items;
facilitating and coordinating communication among thenon-management directors and our CEO and an open flow of information between management and our Board;
in collaboration with the Governance Committee, leading our Board’s annual performance review;
meeting with eachnon-management director at least annually;
providing assistance to our CEO by attending selected internal business management meetings and meeting with our CEO as necessary;
coordinating the periodic review of management’s strategic plan;
in collaboration with the Compensation Committee, leading our Board’s review of the succession plans for our CEO; and
working with management on effective stockholder communication and engagement.
Our Board of Directors has six scheduled Board meetings to review and discuss Cabot’s performance and prospects as well as the issues we face, with calls and communications between meetings as appropriate. The Board interacts directly with senior management during its meetings. The Board typically dedicates onemultiple-day meeting a year to a discussion of longer-term strategic issues the Company faces. During this meeting, the Board allocates significant time for a discussion of talent management and management succession planning, as well as the Company’s diversity and inclusion objectives and achievements. During fiscal 2019, the Board met six times and acted by written consent once.
A significant portion of the Board’s oversight responsibility is carried out through its four operating committees.
Committee Composition.All of the members of our Audit Committee, Governance and Nominating Committee and Compensation Committee satisfy the NYSE’s definition of an independent director.
Committee Operations. Each Committee meets periodically throughout the year, reports its actions to the Board, receives reports from senior management, annually evaluates its performance and can retain outside advisors. Each Committee’s meeting materials are available for review by all directors.
Committee Responsibilities. The primary responsibilities of each Committee are listed below. For more detail about the responsibilities and functions of each Committee, see the Committee charters on our website (www.cabotcorp.com) under the heading “Company — About Cabot — Governance — Resources.”
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2020 PROXY STATEMENT |
Board Composition (continued)
Audit Committee
Members
Michael M. Morrow, Chair | Frank A. Wilson | |||
Juan Enriquez |
8 meetings in fiscal 2019
Financial Acumen.Mr. Morrow and Mr. Wilson are “audit committee financial experts” under SEC rules and each of these directors as well as Mr. Enriquez are “financially literate” under NYSE rules.
Primary Responsibilities
The Audit Committee assists the Board of Directors in its oversight of (i) the integrity of Cabot’s financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent registered public accounting firm’s qualifications and independence, (iv) the performance of our internal audit function and (v) our risk assessment and risk management processes. The Audit Committee, among other than functions:
Has the sole authority to appoint, retain, terminate and determine the compensation of our independent registered public accounting firm.
Monitors the qualifications, independence and performance of our independent registered public accounting firm and approves professional services provided by the independent registered public accounting firm.
Reviews with our independent registered public accounting firm the scope and results of the audit engagement.
Reviews the activities and recommendations of our independent registered public accounting firm.
Discusses Cabot’s annual audited financial statements, quarterly financial statements and earnings releases with management and Cabot’s independent registered public accounting firm, including our disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Reviews Cabot’s accounting policies, risk assessment and risk management processes, control systems, legal matters and compliance activities.
During fiscal 2019, the Committee’s other priorities included treasury matters, including cash and debt management, internal controls practices, tax matters and cyber-security risk.
Compensation Committee
Members
John F. O’Brien*, Chair | Mark S. Wrighton | |||
William C. Kirby |
* | Mr. O’Brien is retiring from the Board at the 2020 Annual Meeting |
4 meetings and 2 actions by written consent in fiscal 2019
Primary Responsibilities
The primary responsibilities of the Compensation Committee are to:
Approve the corporate goals and objectives relevant to the compensation of our CEO, evaluate the CEO’s performance and approve the CEO’s salary and incentive compensation.
Establish policies applicable to the compensation, severance or other remuneration of Cabot’s Management Executive Committee, review and approve performance measures and goals under incentive compensation plans applicable to such employees, and approve their salaries, annual short-term and long-term incentive awards, any severance payments and any other remuneration.
Review and approve the aggregate amount of bonuses to be paid to participants in Cabot’s annual short-term incentive program.
14 CABOT CORPORATION
2020 PROXY STATEMENT |
Board Composition(continued)
Administer Cabot’s incentive compensation plans, equity-based plans and supplemental benefits arrangements, which includes approving the aggregate number of shares of stock granted under Cabot’s long-term incentive program.
Appoint the members of the Company’s Benefits and Investment Committees and monitor their activities.
Review on a periodic basis reports prepared by management of gender pay equity at the Company.
Important items for fiscal 2019 included establishing the compensation arrangements for the newly appointed members of the Company’s Management Executive Committee.
Governance Committee
Members
Sue H. Rataj, Chair | Michael M. Morrow | |||
John F. O’Brien* | Matthias L. Wolfgruber |
* | Mr. O’Brien is retiring from the Board at the 2020 Annual Meeting |
4 meetings in fiscal 2019
Primary Responsibilities
The Governance Committee is charged primarily with:
Developing and recommending to the Board corporate governance policies and procedures.
Identifying individuals qualified to become directors of Cabot.
Recommending director candidates to the Board to fill vacancies and to stand for election at the annual meeting of stockholders.
Recommending Committee assignments.
Leading the annual review of the Board’s performance.
Recommending compensation and benefit policies for Cabot’s directors.
Reviewing and making determinations regarding interested transactions under Cabot’s Related Person Transaction Policy and Procedures.
During fiscal 2019, the Governance Committee focused on Board composition and refreshment and reviewed the competitiveness of our director compensation program.
Safety, Health, Environment & Sustainability (“SHE&S”) Committee
Members
Matthias L. Wolfgruber, Chair | Patrick M. Prevost* | |||
Cynthia A. Arnold | Christine Y. Yan |
* | Mr. Prevost is retiring from the Board at the 2020 Annual Meeting |
3 meetings in fiscal 2019
Primary Responsibilities
The SHE&S Committee reviews aspects of Cabot’s safety, health, environmental and sustainability performance, process safety, security, product stewardship, community engagement and governmental affairs. In particular, the Committee reviews the following:
Cabot’s environmental reserve and risk management processes.
Environmental and safety audit programs, performance metrics, risk and opportunity assessments.
Management processes related to our safety, health, environment and sustainability programs.
CABOT CORPORATION 15
2020 PROXY STATEMENT |
Board Composition(continued)
During fiscal 2019, the Committee focused on the Company’s safety improvement plans, chemical risks and hazard assessments program, sustainability program and reporting, product safety and toxicology matters, and environmental remediation activities.
Executive Committee
Members
Sue H. Rataj, Chair | Michael M. Morrow | |||
Sean D. Keohane | John F. O’Brien* |
* | Mr. O’Brien is retiring from the Board at the 2020 Annual Meeting. |
Did not meet or act in fiscal 2019
Primary Responsibilities
The Executive Committee reviews and, where appropriate, approves corporate action with respect to the conduct of our business between Board of Directors’ meetings. Actions taken by the Executive Committee are reported to the Board at its next meeting.
How We Evaluate the Board’s Effectiveness
Each year, the Governance Committee leads our Board’s annual evaluation process. The process focuses on the effectiveness of the Board as a whole, prioritizing issues, and identifying specific issues for future discussion. In 2019, our General Counsel conducted individual interviews with each director. The conversations were guided by a series of questions provided to the directors in advance covering Board and Committee membership, operations and responsibilities, as well as open-ended questions so that each director had leeway to discuss the issues he or she believed to be the most pertinent. The key themes, observations and suggestions were summarized and discussed above.first with the Governance Committee and later with the full Board. Based on these discussions, opportunities to further enhance the Board’s effectiveness have been and are being implemented. In addition, ourNon-Executive Chair conductedone-on-one discussions with each director and also solicited feedback on individual director performance.
Our Board’s Role in Risk Oversight
Our Board oversees our enterprise-wide program of risk management. Cabot management is primarily responsible forday-to-day risk management practices and, together with other personnel, regularly engages in an enterprise-wide risk assessment. This assessment is updated on a continual basis and includes a comprehensive review of a broad range of risks, including financial, operational, business, legal, regulatory, reputational, governance and managerial risks which may potentially affect the Company. From this assessment, the most significant risks in terms of their likelihood and severity are identified, and plans to manage and mitigate these risks are developed. Cabot management regularly reports to either the full Board or the relevant Committee of the Board our major risk exposures, their potential operational or financial impact on Cabot, and the steps we take to manage them.
Our Board has ultimate responsibility for risk oversight and oversees our corporate strategy, business development, capital structure, market exposure and country specific risks. Each Committee also has responsibility for risk oversight. The Audit Committee focuses on financial risk, including internal controls and legal and compliance risks and receives regular reports from our independent registered public accounting firm, our CFO, our Controller, our Director of Internal Audit and our General Counsel. The Audit Committee also oversees the Company’s enterprise risk management processes and cybersecurity program. The SHE&S Committee assists the Board in fulfilling its oversight responsibility by reviewing the effectiveness of our safety, health, environment and sustainability programs and initiatives and overseeing matters related to stewardship and sustainability of our products and manufacturing processes. The Compensation Committee considers human resources risks and evaluates and sets compensation programs that encourage decision-making predicated upon a level of risk consistent with our business strategy. The Compensation Committee also oversees senior management succession planning and development. Finally, the Governance Committee considers
16 CABOT CORPORATION
2020 PROXY STATEMENT |
Board Composition(continued)
governance and Board succession risks, and evaluates director skills and qualifications to ensure each Committee has directors with the requisite skills to oversee the applicable risks that are the focus of that Committee. The Company has a robust risk management program, the strength of which is not dependent on the Board’s leadership structure.
Our Compensation Discussion and Analysis (“CD&A”) describes our compensation policies, programs and practices for our named executive officers. Our corporate goal-setting, assessment and compensation decision-making processes described in our CD&A apply to all participants in our corporate short- and long-term incentive programs.
Participants in our long-term incentive program receive awards consisting of time-based restricted stock units and performance-based restricted stock units, and, in the case of members of the Management Executive Committee and a limited number of other participants, stock options. Beyond our corporate short- and long-term incentive programs, a substantial number of our facilities offer an annual cash incentive plan.
The Compensation Committee directed management, working with the Committee’s independent consultant, Meridian Compensation Partners, to provide an evaluation on the design of all of our incentive plans to assess whether any portion of our incentive compensation programs encourages excessive risk taking. That assessment is presented to and reviewed by the Compensation Committee. Among the program features evaluated are the types of compensation offered, performance metrics, the alignment between performance goals, payout curves and the Company’s business strategy, and the overall mix of incentive awards. The Company’s compensation programs are designed with features that mitigate risk without diminishing the incentive nature of the compensation. Specific features of the programs to mitigate risk include, as applicable, the following: caps limiting the amount that can be paid under the corporate short- and long-term incentive programs and all of the local cash incentive programs; a balanced mix of annual and longer-term incentive opportunities; a mix of cash and equity incentives; multiple performance metrics; management processes to oversee risk associated with each of our incentive programs; stock ownership guidelines for members of the Management Executive Committee; a company compensation recoupment policy; and significant controls for important business decisions. In our CD&A we describe in more detail the features of our executive compensation programs that are designed to mitigate risk, including the oversight provided by the Compensation Committee, which reviews and approves the design, goals and payouts under our corporate short- and long-term incentive programs and each executive officer’s compensation. Based on our assessment, we believe our compensation policies, programs and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
CABOT CORPORATION 17
2020 PROXY STATEMENT |
Other Governance Policies and Practices
Transactions with Related Persons
Policy and Procedures for the Review of Related Person Transactions
Our Board has adopted a written policy for the review and approval or ratification of transactions involving related persons. “Related persons” consist of any person who is or was (since the beginning of the fiscal year) a director, nominee for director or executive officer of Cabot, any greater than 5% stockholder of Cabot and the immediate family members of any of those persons. The Governance Committee is responsible for applying the policy with the assistance of our General Counsel.
Transactions covered by the policy consist of any transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements, or relationships in which (1) the aggregate amount involved will or may be expected to exceed $100,000 with respect to any fiscal year, (2) Cabot is a participant and (3) any related person has or will have a direct or indirect interest, other than solely as a result of being a director or a less than 10% beneficial owner of another entity (an “interested transaction”). Under the policy, the following interested transactions have a standingpre-approval from the Governance Committee, even if the aggregate amount is greater than $100,000:
• | Certain sales of stock by executive officers to Cabot. (1) Sales of Cabot stock by an executive officer (including the CEO) to Cabot pursuant to the terms of our long-term incentive program or (2) other sales by executive officers (excluding the CEO) provided that the sale has been approved by our CEO, the per share purchase price is the fair market value of our common stock on the date of sale, the proceeds from the sale to the executive officer do not exceed $500,000, and the sale does not take place during a quarterly blackout period. |
• | Certain transactions with other companies. Any transaction between Cabot and another company if the aggregate amount involved does not exceed the greater of $1,000,000 or 2% of that company’s total revenues, or any transaction where Cabot is indebted to another company if the total amount of Cabot’s indebtedness to the other company does not exceed 1% of that company’s total consolidated assets. In both cases, thepre-approval applies if the related person’s only relationship is as an employee (other than executive officer), director or beneficial owner of less than 10% of the other company’s shares. |
18 CABOT CORPORATION
Corporate Governance(continued)
• | Employment of executive officers; director compensation. Any employment by Cabot of an executive officer if the related compensation is required to be reported in our proxy statement or if the compensation was approved by our Compensation Committee. Any compensation paid to a director if the compensation is required to be reported in our proxy statement. |
• | Other transactions. Competitively bid or regulated public utility services transactions; transactions involving trustee-type services; and transactions where the related person’s interest arises solely from the ownership of our common stock and all common stockholders received the same benefit on a pro rata basis. |
Each interested transaction by a related person that does not have standingpre-approval under the policy should be reported to our General Counsel for presentation to the Governance Committee for approval before its consummation or for ratification, if necessary, after its consummation. The Chair of the Governance Committee has the authority topre-approve or ratify (as applicable) any interested transaction with a related person in which the aggregate amount involved is expected to be less than $500,000. In determining whether to approve or ratify an interested transaction, the Governance Committee and the Chair may take into account such factors as they deem appropriate, which may include whether the interested transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.
Transactions with Related Persons
Since the beginning of fiscal 2016,2019, Cabot and its subsidiaries had no transactions, nor are there any currently proposed transactions in which Cabot or its subsidiaries was or is to be a participant in whichand the amount involved exceeds $120,000 and any related person (as defined above) had or will have a direct or indirect material interest reportable under SEC rules.
Non-Executive Chairman of the Board; Executive Sessions; Interim Office of the CEO
John F. O’Brien serves as18Non-Executive Chairman of the Board. Although our Corporate Governance Guidelines do not require that our Chairman and Chief Executive Officer positions be separate, our Board believes that this leadership structure is appropriate at this time because it allows our Chief Executive Officer to focus on the strategic and operational aspects of our business, while allowing theNon-Executive Chairman of the Board to provide independent leadership of the Board. Our Board recognizes that future circumstances may lead it to change the leadership structure depending on Cabot’s needs at the time, and as such, believes that it is important to retain flexibility. In the future, if the Chief Executive Officer also serves as Chairman of the Board, our Corporate Governance Guidelines require that an independent director be appointed annually as lead director to lead the executive sessions of thenon-management directors at Board meetings.
TheNon-Executive Chairman of the Board is charged primarily with:
CABOT CORPORATION 19
|
CorporateOther Governance Policies and Practices(continued)
The Company welcomes stockholder engagement. Our directors are available to answer questions from stockholders at the 2020 Annual Meeting. In addition, management on effectiveof the Company conducts stockholder communication; and
In December 2015, Cabot’s then-President and Chief Executive Officer, Mr. Prevost, began a medical leave of absenceoutreach throughout the year to ensure management and the Board established an Interim Officeunderstand and consider the issues that matter most to our stockholders. We provide regular updates regarding the Company’s performance and strategic actions to the investor community, and we participate in numerous investor conferences,one-on-one meetings, earnings calls, investor days, and educational investor and analyst conversations. We also communicate with stockholders and other stakeholders through various media, including our annual report, proxy statement and other filings with the SEC, news releases and our website. We believe ongoing stockholder engagement allows us to respond effectively to stockholder concerns.
Procedures for Stockholders to Recommend Director Nominees
The Governance Committee has a policy with respect to the submission of recommendations by stockholders of candidates for director nominees, which is available on our website. A stockholder wishing to recommend a candidate must submit the recommendation by a date not later than the 120th calendar day before the first anniversary of the Chief Executive Officer (the “CEO Office”) and temporarily transferred Mr. Prevost’s responsibilitiesdate that Cabot released its proxy statement to stockholders in connection with the previous year’s annual meeting. Recommendations should be submitted to the CEO Office.Company’s Secretary in writing at Cabot Corporation, Two Seaport Lane, Suite 1400, Boston, Massachusetts 02210. The CEO Office remainednotice to the Secretary should include all information about the candidate that Cabot would be required to disclose in place until March 11, 2016, at which time Mr. Prevost stepped down from his positiona proxy statement in accordance with Securities and Exchange Act rules or as President and CEOrequired by the Company’sby-laws, consent of the Company andcandidate to serve on the Board of Directors, if nominated and elected, Mr. Keohane President and CEO. During this time, Mr. O’Brien worked closelyagreement of the candidate to complete, upon request, questionnaires customary for Cabot directors and to comply with and provided oversight to the CEO Office.applicable Company policies.
Director Attendance at Annual MeetingMeetings
Recognizing thatDuring fiscal 2019, each director attendanceattended at least 75% of the annual meeting can provide our stockholders with an opportunity to communicate withaggregate of the total Board members about issues affecting Cabot, we actively encourage our directors to attendmeetings and the annual meeting. In 2016,total meetings held by all of our directors whose term of office continued after the annual meeting attendedCommittees on which he or she served during the annual meeting.periods that he or she served.
We have adopted a code of ethics that applies to all of our employees and directors, including the Chief Executive Officer, the Chief Financial Officer, the Controller and other senior financial officers. In fiscal 2019, each of our directors completed our Code of Business Ethicson-line compliance training program that we require our employees to complete. The Code of Business Ethics is posted on our website (www.cabotcorp.com) under the caption “Company — About Cabot — Code of Business Ethics.”
Stockholders or other interested parties wishing to communicate with the Board, thenon-management directors or any individual director may contact theNon-Executive ChairmanChair of the Board by calling1-800-853-7602; by sending an email through our website using the link that is located under the caption “Company — About Cabot — Governance — Contact the Board of Directors”; or by writing to Cabot Corporation Board of Directors, c/o Alertline Anonymous, P.O. Box 3767, 13950 Ballantyne Corporate Place, Suite 300, Charlotte, North Carolina 28277.
Anyone who has a complaint or concern regarding our accounting, internal accounting controls or auditing matters may communicate that concern to the Chair of the Audit Committee by calling1-800-853-7602; by sending an email through our website using the link that is located under the caption “Company — About Cabot — Governance — Contact the Board of Directors”; or by writing to Cabot Corporation Audit Committee, c/o Alertline Anonymous, P.O. Box 3767, 13950 Ballantyne Corporate Place, Suite 300, Charlotte, North Carolina 28277. All such communications to the Board of Directors or the Audit Committee will also be sent to Cabot’s Office of Compliance.
CABOT CORPORATION 19
2020 PROXY STATEMENT |
Annual compensation for ournon-employee directors is comprised of cash compensation and a grant of Cabot common stock. The Governance Committee Processesis responsible for Director Nominations
Process for Identifyingreviewing the form and Evaluating Director Nominees
Generally,amount of compensation paid to ournon-employee directors and recommends changes to our Board of Directors as appropriate. In November 2018, the Governance Committee, identifies candidateswith the assistance of Mercer LLC, a national executive compensation firm, evaluated the reasonableness of our director compensation and the appropriate mix of cash and equity compensation. This assessment included a review of director compensation data prepared for the Governance Committee by Mercer using the same peer group of companies our Compensation Committee uses for assessing the reasonableness of our executive compensation decisions. Based on this evaluation, and upon the recommendation of the Governance Committee, our Board of Directors approved, effective January 1, 2019, the following changes in our director compensation:
increased the annual equity compensation component of this program from a value of $110,000 to a value of $120,000
increased the annual cash retainer from $75,000 to $90,000
eliminated the separate $16,000 annual cash retainer for serving on the Audit Committee and the separate $7,000 annual cash retainer for serving on the Compensation, Governance or SHE&S Committee
reduced the annual retainer paid to the Chair of the Audit Committee from $25,000 to $20,000
increased the annual retainer paid to the Chair of the Compensation Committee from $10,000 to $15,000
retained the $10,000 cash retainer paid to the Chairs of the Governance and SHE&S Committees
eliminated the separate cash retainer paid to the Chair of the Governance Committee when the Chair of that Committee is also serving as Non-Executive Chair of the Board
retained the $110,000 annual cash retainer paid to our Non-Executive Chair of the Board.
Directors who are Cabot employees do not receive compensation for their services as directors.
Cash Compensation
Effective January 1, 2019, the annual cash compensation for ournon-employee directors consists of the following components:
retainer of $90,000
$20,000 for serving as Chair of the Audit Committee
$15,000 for serving as Chair of the Compensation Committee
$10,000 for serving as Chair of the SHE&S Committee
$10,000 for serving as Chair of the Governance Committee, except when the Chair of the Governance Committee is also serving as Non-Executive Chair of the Board of Directors, in which case this retainer is waived
$110,000 for serving as Non-Executive Chair of the Board of Directors
Cash compensation is paid quarterly and, when changes occur in Board or Committee membership during a quarter, the compensation ispro-rated.
Stock Compensation
Under the Cabot Corporation 2015 Directors’ Stock Compensation Plan (the “Directors’ Stock Plan”), eachnon-employee director is eligible to receive each calendar year shares of Cabot common stock as part of his or her compensation for services to be performed in that year. For calendar year 2019, eachnon-employee director whose term of office continued after the 2019 Annual Meeting of Stockholders received an award of shares having a grant date value as close as possible to $120,000 (2,613 shares). John K. McGillicuddy, who retired at the 2019 Annual Meeting, received apro-rated grant of 653 shares. The closing price of our common stock on January 10, 2019, the date such shares were granted, was $45.92. Upon her election to the Board effective May 13, 2019, Ms. Yan received a grant of Directors through1,818 shares as compensation for her services as anon-employee director to be performed in calendar 2019. The closing price of our common stock on May 13, 2019 was $44.01.
As of January 10, 2020, there were 239,675 shares available for issuance under the business and other networks of the directors and management. The Committee may also solicit recommendations for director nominees from third-party search firms or any other source it deems appropriate. The Governance Committee’s review and evaluation of a candidate generally includes inquiries as to the candidate’s reputation and background, examination of the candidate’s experience and skills in relation to the Board’s requirements at the time, consideration of the candidate’s independence as measured by the Board’s independence standards, and any other considerations that the Governance Committee deems appropriate. Candidates recommended by our stockholders are evaluated on the same basis as candidates recommended by our directors, management, third-party search firms or other sources.
Procedures for Stockholders to Recommend Director Nominees
The Governance Committee has a policy with respect to the submission of recommendations by shareholders of candidates for director nominees, which is available on our website. A stockholder wishing to recommend a candidate must submit the recommendation by a date not later than the 120th calendar day before the first anniversary of the date that Cabot released its proxy statement to stockholders in connection with the previous year’s annual meeting. Recom-Directors’ Stock Plan.
20 CABOT CORPORATION
|
Corporate GovernanceDirector Compensation(continued)
mendations should
We believe that it is desirable for directors to have an equity interest in Cabot and we encourage all directors to own a reasonable amount of Cabot stock to align director and stockholder interests and to enhance a director’s long-term perspective. Accordingly, our Corporate Governance Guidelines requirenon-employee directors to have an equity ownership in Cabot of at least 10,000 shares. It is expected that this ownership level will generally be submittedachieved within a five-year period beginning when a director is first elected to the Company’s SecretaryBoard. For purposes of determining a director’s compliance with this ownership requirement, any deferred shares held by a director are considered owned by the director. In addition, eachnon-employee director is required to retain the shares granted in writingany given year for a period of at Cabot Corporation, Two Seaport Lane, Suite 1300, Boston, Massachusetts 02210. The notice toleast three years from the Secretary should include all information aboutdate of issuance or until the candidatedirector’s earlier retirement.
Reimbursement of Certain Expenses; Charitable Giving
Our Corporate Governance Guidelines state that Cabot would be requiredwill not provide retirement or other benefits or perquisites to disclosenon-employee directors. Directors, however, are reimbursed for reasonable travel andout-of-pocket expenses incurred in a proxy statement in accordanceconnection with Securitiesattending Board and Exchange Act rules or as requiredCommittee meetings and other Cabot business-related events and are covered by Cabot’s travel accident insurance policy for such travel. In connection with the Company’sby-laws, consentretirement of the candidate to serve onMr. McGillicuddy from the Board of Directors if nominated and elected, and agreement of the candidate to complete, upon request, questionnaires customary for Cabot directors and to comply with applicable Company policies.
The Board of Directors’ retirement policy fornon-employee directors requires each director who is not a Cabot employee to submit his or her resignation to the Board prior to, and effective at the annual meeting2019 Annual Meeting and in recognition for his many years of stockholders next followingservice, we made an aggregate contribution on his behalf of $25,000 to charities he selected.
Deferred Compensation
Under the Cabot CorporationNon-Employee Directors’ Deferral Plan (the “Deferred Compensation Plan”), directors can elect to defer receipt of any cash compensation payable in a calendar year for a period of such director’s seventy-second birthday. Dr. Thomas is retiring under this policy. The Board is authorized to make exceptions to this retirement policy for special circumstances involving the Company.
The Board of Directors also has a retirement policy for employee directors that requires each employee director to submit hisat least three years or her resignation to the Board (i) prior to and, if accepted, effective at the annual meeting of stockholders following the calendar year of such director’s sixty-fifth birthday, or (ii) if the director ceasesuntil they cease to be an employeemembers of Cabot prior to such annual meeting, no later than the date of and, if accepted, effective upon the termination of such director’s employment with Cabot. Each resignation submitted pursuant to this policy is required to specifically state that the resignation is to be effective only upon acceptance by the Board of Directors. In each case,any year, these deferred amounts are, at the Governance Committee will consider the resignation and makedirector’s choice, either (i) credited with interest at a recommendationrate equal to the Board. IfMoody’s Corporate Bond Rate for the month of November prior to the beginning of the applicable year or (ii) treated as invested in Cabot phantom stock units, based on the market price of shares of Cabot common stock at the time of deferral (with dividends paid on shares credited and treated as if reinvested in Cabot phantom stock units). Mr. Enriquez and Dr. Wolfgruber elected to defer receipt of their calendar year 2019 cash compensation and treat the deferred amounts as invested in Cabot phantom stock units. Messrs. Kirby and Prevost elected to defer receipt of their calendar year 2019 cash compensation and have it credited with interest at a resignation submitted pursuantrate equal to this policy is not accepted, the employeeMoody’s Corporate Bond Rate. The Moody’s Corporate Bond Rate used to calculate interest during calendar year 2019 was 4.64%.
Under the Deferred Compensation Plan, directors also may defer receipt of the shares of common stock issuable to them under the Directors’ Stock Plan. For each share of stock deferred, a director is thereafter requiredcredited with one Cabot phantom stock unit to submit his or her resignation annuallya notional account created in the director’s name. Dividends that would otherwise be payable on the deferred shares accrue in the account and are credited with interest at a rate equal to the BoardMoody’s Corporate Bond Rate for the month of Directors for consideration.November prior to the beginning of the year. The rate used to calculate interest during calendar year 2019 was 4.64%. At the end of the deferral period, the deferred shares of Cabot common stock are issued to the director, along with the accrued cash dividends and interest earned, either in one issuance or in installments over a period of up to ten years, as selected by the director. Messrs. Enriquez, Kirby, McGillicuddy, Morrow, Prevost and Wilson, Ms. Yan and Dr. Wolfgruber elected to defer their calendar year 2019 stock awards.
CABOT CORPORATION 21
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Director Compensation(continued)
The following table sets forth the compensation earned by ournon-employee directors in fiscal 2019:
Name
| Fees Earned or Paid in Cash ($)(1)
| Stock Awards ($)(2)
| Change in Pension Value and Earnings($)(3)
| All Other ($)(4)
| Total($)
| ||||||||||||||||||||
Cynthia A. Arnold
|
88,000
|
|
119,989
|
| — |
|
—
|
|
|
207,989
|
| ||||||||||||||
Juan Enriquez
|
90,250
|
|
119,989
|
|
|
1,805
|
|
|
—
|
|
|
212,044
|
| ||||||||||||
William C. Kirby
|
88,000
|
|
119,989
|
|
|
9,218
|
|
|
—
|
|
|
217,207
|
| ||||||||||||
John K. McGillicuddy
|
49,250
|
|
29,986
|
|
|
1,022
|
|
|
25,000
|
|
|
105,258
|
| ||||||||||||
Michael M. Morrow
|
109,250
|
|
119,989
|
|
|
36
|
|
|
—
|
|
|
229,275
|
| ||||||||||||
John F. O’Brien
|
103,500
|
|
119,989
|
|
|
—
|
|
|
—
|
|
|
223,489
|
| ||||||||||||
Patrick M. Prevost
|
88,000
|
|
119,989
|
|
|
3,208
|
|
|
—
|
|
|
211,197
|
| ||||||||||||
Sue H. Rataj
|
200,500
|
|
119,989
|
|
|
—
|
|
|
—
|
|
|
320,489
|
| ||||||||||||
Frank A. Wilson
|
90,250
|
|
119,989
|
|
|
9
|
|
|
—
|
|
|
210,248
|
| ||||||||||||
Matthias L. Wolfgruber
|
99,750
|
|
119,989
|
|
|
219
|
|
|
—
|
|
|
219,958
|
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Mark S. Wrighton
|
88,000
|
|
119,986
|
|
|
7,518
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|
—
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215,507
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Christine Y. Yan
|
34,620
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|
80,010
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|
|
2
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—
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114,632
|
|
1. | Cash compensation earned reflects changes in Board and Committee service that occurred during the fiscal year. The amounts reported in this column for Messrs. Enriquez, Kirby, Prevost and Dr. Wolfgruber were deferred under the Deferred Compensation Plan described above. |
2. | Reflects the grant date fair value of shares of stock granted to eachnon-employee director computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. The grant date fair value was calculated by multiplying the number of shares granted to the director by the closing price of our common stock on the date of grant, which, for all directors other than Ms. Yan, was January 10, 2019 ($45.92). The grant date for Ms. Yan was May 13, 2019 ($44.01). The stock awards reported in this column for Messrs. Enriquez, Kirby, McGillicuddy, Morrow, Prevost and Wilson, Ms. Yan and Dr. Wolfgruber were deferred under the Deferred Compensation Plan described above. |
3. | Represents above-market interest (the portion exceeding 120% of the applicable long-term rate) on compensation deferred under the Deferred Compensation Plan by Messrs. Enriquez, Kirby, McGillicuddy, Morrow, Prevost, Wilson, Wrighton, Ms. Yan and Dr. Wolfgruber. |
4. | Consists of a charitable contribution made on behalf of Mr. McGillicuddy in connection with his retirement from the Board of Directors at the 2019 Annual Meeting. |
22 CABOT CORPORATION
2020 PROXY STATEMENT |
Beneficial Stock Ownership of Directors, ExecutiveOfficersExecutive Officers and Persons Owning More Than Five Percent of Common Stock
The following table shows the amount of Cabot common stock beneficially owned as of January 18, 201715, 2020 (unless otherwise indicated) by each person known by Cabot to beneficially own more than 5% of our outstanding common stock, by each director of Cabot, by each of our named executive officers and by all directors, nominees for director and executive officers of Cabot as a group. Unless otherwise indicated, each person has sole investment and voting power over the securities listed in the table.
Name
| Total Number of Shares(1) | Percent of Class(2) | ||||||
Holders of More than Five Percent of Common Stock | ||||||||
BlackRock, Inc. | 5,839,996 | (3) | 9.70 | % | ||||
55 East 52nd Street | ||||||||
New York, NY 10055 | ||||||||
The Vanguard Group | 5,103,090 | (4) | 8.50 | % | ||||
100 Vanguard Blvd. | ||||||||
Malvern, PA 19355 | ||||||||
Wellington Management Group LLP | 2,938,778 | (5) | 5.16 | % | ||||
Wellington Group Holdings LLP | ||||||||
Wellington Investment Advisors Holdings LLP | ||||||||
c/o Wellington Management Company LLP | ||||||||
280 Congress Street | ||||||||
Boston, MA 02210 | ||||||||
Directors and Executive Officers | ||||||||
Cynthia A. Arnold | 6,902 | * | ||||||
Brian A. Berube | 99,831 | (6) | * | |||||
John R. Doubman | 54,859 | (7) | * | |||||
Juan Enriquez | 34,468 | (8) | * | |||||
Karen A. Kalita | 6,336 | (9) | * | |||||
Hobart C. Kalkstein | 95,677 | (10) | * | |||||
Sean D. Keohane | 365,593 | (11) | * | |||||
William C. Kirby | 16,782 | (12) | * | |||||
Erica McLaughlin | 31,250 | (13) | * | |||||
Michael M. Morrow | 9,584 | (14) | * | |||||
John F. O’Brien | 53,992 | * | ||||||
Patrick M. Prevost | 220,219 | (15) | * | |||||
Sue H. Rataj | 18,828 | * |
CABOT CORPORATION 23
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Beneficial Stock Ownership of Directors, Executive Officers and Persons Owning More Than Five Percent of Common Stock(continued)
Name
| Total Number of Shares(1) | Percent of Class(2) | ||||||
Frank A. Wilson | 5,834 | (16) | * | |||||
Matthias L. Wolfgruber | 13,123 | (17) | * | |||||
Mark S. Wrighton | 47,068 | (18) | * | |||||
Christine Y. Yan | 4,453 | (19) | * | |||||
Directors and executive officers as a group (18 persons) | 1,192,950 | (20) | 2.08 | % |
* | Less than one percent. |
1. | For Cabot’s executive officers the number includes shares of Cabot common stock held for their benefit by the trustee of Cabot’s 401(k) Plan. The shares of common stock allocated to the accounts of Cabot’s executive officers in the 401(k) Plan constitute less than 1% of our common stock. |
2. | The calculation of percentage of ownership of each listed beneficial owner is based on |
22 CABOT CORPORATION
Beneficial Stock Ownership of Directors, Executive Officers and Persons Owning More Than Five Percent of Common Stock(continued)
3. | Based on an amendment to a Schedule 13G filed with the SEC on |
4. | Based on an amendment to a Schedule 13G filed with the SEC on February |
5. | Based on an amendment to a Schedule 13G filed with the SEC on January 8, 2020 by Wellington Management Group LLP (“WMG”) and Wellington Group Holdings LLP (“WGH”) and Wellington Investment Advisors Holdings LLP (“WIAH”, WMG, WGH and WIAH referred to collectively as “Wellington”). The Schedule 13G reports that Wellington has shared voting power with respect to 2,728,721 shares and shared dispositive power with respect to 2,938,778 shares. |
6. | Includes |
Includes |
8. | Includes |
9. | Includes |
10. | Includes 50,271 shares of common stock that Mr. Kalkstein has the right to acquire within 60 days of January |
Includes |
Mr. Kirby has deferred receipt of these shares under applicable Cabot deferred compensation plans. |
13. |
Includes |
14. | Includes 7,584 shares the receipt of which Mr. Morrow has deferred under applicable Cabot deferred compensation plans. |
15. | Includes 6,301 shares the receipt of which Mr. Prevost has deferred under applicable Cabot deferred compensation plans, and |
Mr. Wilson has deferred receipt of |
17. | Dr. Wolfgruber has deferred receipt of these shares under applicable Cabot deferred compensation plans. |
18. | Includes 100 shares held by Dr. Wrighton’s wife, who retains sole voting control over the shares. Dr. Wrighton disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. |
19. | Ms. Yan has deferred receipt of these shares under applicable Cabot deferred compensation plans. |
20. | Shares of our common stock shown as being beneficially owned by directors and executive officers as a group includes |
24CABOT CORPORATION 23
|
The Compensation Committee of the Board of Directors (referred to as the “Compensation Committee” or the “Committee”) has reviewed the Compensation Discussion and Analysis (“CD&A”) section included in this Proxy Statement. The Compensation Committee has also reviewed and discussed the CD&A with the members of management who are involved in the compensation process.
Based on these reviews and discussions, the Compensation Committee recommended to the Board of Directors that the CD&A be included in this Proxy Statement and incorporated by reference into our Annual Report on Form10-K for the fiscal year ended September 30, 2016.2019.
Sue H. Rataj,John F. O’Brien, Chair
Matthias L. WolfgruberWilliam C. Kirby
Mark S. Wrighton
Compensation Discussion and Analysis
As context for our executives’ 2016named executive officers’ fiscal year2019 compensation, below we summarize Cabot’s performance for our 2016 fiscal year2019 performance and provide a brief overview of the decisions made with respect to executive compensation in fiscal 20162019 and our executive compensation programprograms for thisthat fiscal year. We then describe our compensation philosophy and objectives, our compensation setting process and other compensation-compensation and governance-relatedgovernance related policies, and compensation awarded, earned and paid for fiscal 2016.2019. For fiscal 2016,2019, our named executive officers (“NEO”s) and their current positions are:
Sean D. Keohane, President and Chief Executive Officer;
Erica McLaughlin, Senior Vice President and Chief Financial Officer, and President, Americas region;Officer;
Karen A. Berube,Kalita, Senior Vice President and General Counsel, and Interim Chief Human Resources Officer;Counsel;
Hobart C. Kalkstein, Senior Vice President and President, Reinforcement Materials segment;
• | Brian A. Berube, former Senior Vice President and General Counsel(1); and |
• | John R. Doubman, former Senior Vice President and President, Performance Additives business(2). |
(1) | Mr. |
In fiscal 2016, each of Messrs. Keohane, Cordeiro, Cross and Berube also served as members of the Interim Office of the Chief Executive Officer (the “CEO Office”), which was established when Mr. Prevost began a medical leave of absence, as described below. During the term of the CEO Office, Mr. Berube served as our principal executive officer for reporting purposes.
(2) | Mr. Doubman stepped down from this position effective October 2, 2019 and his employment with Cabot terminated effective November 15, 2019. |
Executive Summary
Our Performance in Fiscal 20162019
Fiscal 2016 was a year of change, transition and growth for the Company. We returned to profitability growth and accomplished a number of key strategic initiatives. Specifically, we:
24 CABOT CORPORATION
Executive Compensation(continued)
In 2016, we launched a new vision, strategy, financial goals and capital allocation framework, which we refer to as ourOur “Advancing the Core” strategy. We believe this new strategic framework supports the changing needs ofstrategy is designed to extend our leadership in performance materials by (i) investing for growth in our core businesses, (ii) driving application innovation with our customers, the global nature of our industry and our ability to adapt(iii) generating strong cash flows through efficiency and grow our Company.optimization. The aim of our Advancing the Corethis strategy is to deliver sustained and attractive total shareholder return (TSR)(“TSR”), built on earnings growth and oura balanced capital allocation framework. This strategy is intended to ensure that we invest sufficiently in our core businesses to capture opportunities and drive long-term earnings growth while also providing our shareholders with a meaningful cash return.
During fiscal 2016,2019, we accomplished a number of key milestones that are critical for the execution ofdelivered solid results despite challenging end markets. With respect to our Advancing the Core strategy. Specifically,financial performance, we:
generated diluted earnings per share (“EPS”) of $2.63 and adjusted EPS of $3.91*, which we believe was solid in light of weakening macroeconomic and key sector indicators we experienced during the fiscal year, including, most notably, a joint venturedecline in industrial activity in China and declines globally in automotive production;
CABOT CORPORATION 25
2020 PROXY STATEMENT |
Executive Compensation(continued)
• | generated cash flow from operating activities of $363 million and free cash flow* of $139 million, which allowed us to increase our quarterly cash dividend in 2019 by 6%; and |
maintained a strong balance sheet and liquidity position by improving our net working capital days performance and through the issuance of10-year bonds, which we believe improves our financial and operational flexibility.
While fiscal 2019 market fundamentals were weaker than we anticipated, we remained focused on our long-term strategy and capital allocation framework and executed important initiatives to buildextend our leadership positions and to drive sustained growth of earnings and free cash flow. During the year, we:
completed the divestiture of our Specialty Fluids business, the majority of the proceeds from which we used to repurchase shares above our stated capital allocation framework;
managed our investments to strengthen our core manufacturing asset footprint;
executed the successfulstart-up of a new fumed silica plant in China;
commenced work to upgrade the carbon black plant we purchased in China in 2018 for the production of specialty carbons;
improved the performance of the Purification Solutions segment through strong execution of the transformation plan we implemented early in the year intended to focus the segment’s portfolio, optimize its assets, and streamline its organizational structure; and
returned $253 million of cash to our shareholders, consisting of $173 million through share repurchases and $80 million in dividend payments.
We also continued to make progress driving application innovation in new markets. For example, with Hengyecheng Silicone Company, whichrespect to our energy materials product line, we have achieved customer technical qualification with most of the top global battery manufacturers and launched a suite of conductive carbon additives that will ensure that we continueform the base for long-term growth. We believe our continued efforts to growbroaden our global positionrange of conductive carbon additives and build formulation capability will differentiate our product offerings in this high-value strategic product line;
To improve our Specialty Compounds business for conductiveefficiency and specialty formulations;
A number of management changes also took place atcost reduction initiatives across the Company during the year. These included organizational structural changes and asset decisions that reduced headcount, and achieved, inclusive of savings derived from the Purification Solutions transformation plan, an approximately $30 million reduction in our costs.
In addition, during fiscal 2016.2019 we advanced our sustainability agenda. Notably, all of our operating manufacturing sites in China have achieved certification under the Responsible Care® 14001 standard, the global standard for safety & health, environmental and security management systems established by the American Chemistry Council’s Responsible Care program, by auditors from the international registrar, BSI. In December 2015,addition, we received a Gold rating from EcoVadis, an independent sustainability monitoring organization, for our Sustainability Report, which is the fourth consecutive year that we have received a Gold rating, and in 2019 we were named among the 100 Best Corporate Citizens by Corporate Responsibility Magazine for the second consecutive year. Further, we continued to make progress toward creating a more inclusive and diverse organization. Mr. Prevost began a medical leave of absence and the Board establishedKeohane signed the CEO Office, comprisedAction for Diversity and Inclusion™ during the year, and we made further progress in increasing gender diversity representation on our Management Executive Committee. Currently, three of Messrs. Keohane, Cordeiro, Crossthe ten members of our Management Executive Committee are women.
Executive Transitions
In June 2019, Mr. Berube, the Company’s former Senior Vice President and Berube. Effective March 11, 2016,General Counsel, voluntarily resigned from Cabot. Ms. Kalita assumed responsibility as the Company’s chief legal officer, and was appointed Senior Vice President and General Counsel at that time. In addition, Mr. PrevostDoubman stepped down from his position as Senior Vice President and CEO of the Company,President, Performance Additives business, effective October 2, 2019, and the Board electedhis responsibilities were transitioned to other senior leaders within Cabot. Mr. Keohane President and CEO of the Company.Doubman’s employment with Cabot terminated effective November 15, 2019. The compensation decisions made in connection with these events are described below under the heading “Compensation Decisions Relating to Our CEO Transition”. Other decisions made by the Committee in respect of fiscal 2016 compensationchanges are described later in this CD&A.
Compensation Decisions Relating to Our CEO Transition
Mr. Keohane.In connection with his election as President and CEO of the Company on March 11, 2016, and following a review of compensation benchmarking data from our compensation peer group as well as certain surveys, as described below under “Use of Benchmarking Comparison Data”, and taking into account advice provided by Pearl Meyer, the Committee’s independent compensation consultant, Mr. Keohane’s annual base salary was increased to $850,000, effective March 11, 2016. In addition, his target short-term incentive (STI) award was increased from 60% of his annual base salary to 100% of his annual base salary, with his target fiscal 2016 STI award based on a blend of his previous and current annual base salaries. He also was granted an equity award under our long-term incentive (LTI) program with a grant date value of $1 million, consisting of 7,105 performance-based restricted stock units (PSUs) (assuming target level achievement of applicable performance metrics), 6,090 time-based restricted stock units (TSUs) and 26,455 stock options. These awards have the same vesting dates as the LTI awards granted to our executive officers in November 2015, described below under “How Did our LTI Plan Work”.
Messrs. Cordeiro and Berube. In recognition of the increased job responsibilities that Messrs. Cordeiro and Berube assumed during the period of Mr. Prevost’s medical leave of absence and in connection with the transition of CEO responsibilities to Mr. Keohane during the fiscal year, the Compensation Committee believed it was appropriate to provide each executive with additional compensation. As a result, Mr. Cordeiro received an award of 16,425 TSUs and Mr. Berube received an award of 10,000 TSUs, which the Committee believed fairly compensated them for the additional responsibilities they assumed, encouraged their retention, and further aligned their interests with those of our shareholders. The TSUs awarded to Mr. Cordeiro will vest in their entirety on March 11, 2018 and the TSUs awarded to Mr. Berube will vest in their entirety on March 11, 2019, in each case subject to their continued employment with Cabot through the applicable vesting date.
Mr. Prevost. Effective March 11, 2016, Mr. Prevost stepped down from his position as President and CEO of the Company. Mr. Prevost’s employment with Cabot terminated effective July 15, 2016, but he remains a member of our Board. Under the terms of his transition and separation agreement with Cabot, upon his termination of employment Mr. Prevost received cash payments totaling $1,412,653, which included a payment of $1,166,000, representing Mr. Prevost’s target STI award for fiscal 2016. Mr. Prevost also received a $116,600 contribution to the Company’s
* | Adjusted EPS and free cash flow are not measures of performance under U.S. generally accepted accounting principles (“GAAP”). Please see Appendix A for reconciliations to the most comparable GAAP financial measures. |
26CABOT CORPORATION 25
|
Executive Compensation(continued)
Deferred Compensation Plan in respect of the portion of his separation payments that represented his target STI award for fiscal 2016. In addition to these payments, the Committee accelerated the vesting of Mr. Prevost’s outstanding equity awards, consisting of an aggregate of 77,536 TSUs, 78,163 PSUs (assuming target level of achievement of applicable performance metrics for awards for which the performance period had not been completed) and 210,034 stock options, and extended the exercise period of his stock options to the earlier of (i) October 15, 2019 and (ii) the original expiration date of the stock options. The Company also agreed to pay a portion of Mr. Prevost’s COBRA premiums for up to 18 months following the termination of his employment and reimbursed his legal expenses in the amount of $15,000. When considering the level of separation payments and benefits to be provided to Mr. Prevost, the Committee considered the length and level of his service with the Company, his significant contributions to the Company and the Company’s achievements under his leadership, as well as advice provided by Pearl Meyer.
Highlights of our Fiscal Year 2016 NEO2019 Named Executive Officer Compensation Decisions and the Impact of Company Performance on Compensation.
We believe fiscal 20162019 compensation appropriately aligned named executive officers’ pay with our corporate performance, with a significant portion of the total direct compensation paid to our named executive officers (other than Mr. Prevost) based on our performance againstpre-established corporate financial goals. The principal financial performance metrics we historically have used under ourSpecifically, 65% of the total direct compensation opportunity (base salary, target STI award and LTI programs are adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted earnings per share (EPS) because we believe they reflected our important near-term and longer-term business and financial goals of improving operating profitability andafter-tax profitability. In addition, our STI metrics have included net working capital (NWC) measured in days, which reflects how efficiently we manage theday-to-day cash used to run our operations. Because our business is asset intensive, we have also included a return metric, adjusted return on net assets (adjusted RONA),awards (with PSUs valued at target)) for our PSUs. Adjusted RONA measures how effectivelyCEO was performance-based and efficiently we usenot guaranteed, and, on average, the total direct compensation opportunities for our operating assetsother named executive officers that was performance-based was 53%. The charts below show the total direct compensation opportunities provided to generate earnings.our named executive officers for fiscal 2019, as well as the mix between short- and long-term compensation, and the performance-based compensation.
Base Salary.In calendar 2016, noneAll of the members of our Management Executive Committee (consisting of our CEO and the officers who report directly to the CEO), including our named executive officers received a base salary increase for calendar 2019 during our annual salary review process that took place in November 2015,2018, with the exception of Mr. Kalkstein,Doubman, who becamereceived a member10% increase in his base salary effective October 1, 2018, at the time of his promotion to President, Performance Additives business. The increases in the Management Executive Committee in April 2016. This decision wasbase salaries of our named executive officers other than Mr. Doubman made during the annual review process ranged from 3% to 15% and were made in recognition of our mixed financialthe officers’ strong individual performance in fiscal 2015 and our commitment to improving our performance in fiscal 2016. Messrs. Keohaneleadership, and, Kalkstein received base salary increases during the year in connection with their promotions and the associated increased job responsibilities each assumed in the year,case of Ms. McLaughlin and Mr. Kalkstein, to bring their base salaries closer to the market median of the benchmark compensation data used by the Committee, as further described below. In addition, Ms. Kalita received a 29% increase in this CD&A.her base salary effective at the time of her promotion in June 2019, after a review of benchmark compensation data and in recognition of the associated expanded job responsibilities she assumed. With these increases, we believe the base salaries of our named executive officers for fiscal 2019 were aligned and consistent with our compensation philosophy, which considers individual performance and leadership, scope of responsibilities, the number of years the executive has held the position, and benchmark compensation data to arrive at a market competitive base level of compensation appropriate for the individual. (See pages 37 and 4039-42 for further details).
STI Awards and Payouts. The Company achieved performance betweenbelow the threshold and target levelslevel of the adjusted EBITDA metricsearnings before interest and abovetaxes (“EBIT”) goal and within the maximumtarget range level of the NWCnet working capital (“NWC”) days metricgoal established by the Committee under our STIshort-term incentive (“STI”) program for fiscal 2019, resulting in a payout of the portion of the award that is based on our financial performance of 99.5%74.1% of target awards.target. The balance of the amounts paid in respect of STI awards to members of our Management Executive Committee, including our named executive officers, reflected their strong individual performance and leadership, with theand ranged from 75% to 110% of target. The total STI awards rangingmade to the members of our Management Executive Committee, including our named executive officers, ranged from 103%74% to 110%85% of the named executive officer’s target award. (Seepages 37-4039-42 for further details)details about awards and payouts made to our named executive officers).
CABOT CORPORATION 27
2020 PROXY STATEMENT |
Executive Compensation(continued)
LTI Awards and Payouts. Our LTI awards consistlong-term incentive (“LTI”) program is 70% performance-based and 30% time-based, consisting of a combination of PSUsperformance-based restricted stock units (“PSUs”) (35%), TSUs (30%) and stock options (35%) and time-based restricted stock units (“TSUs”) (30%) (with percentages measured based on the awards’ grant date values)values, assuming target level achievement of applicable performance goals in the case of PSUs). The grant date value of the awards granted in fiscal 20162019 to each named executive officer was based on an assessment of the named executive officer’s position, role and responsibilities within the Company, the overall competitiveness of his or her total direct compensation, and internal equity (the relationship of pay among the executive officers in the context of their responsibilities) considerations. In addition, as described herein, Mr. Keohanebelow, Ms. Kalita received a supplemental LTI award in connection with hisher promotion to the role of President and CEO, Mr. Kalkstein received a supplemental LTI award in connection with his promotion to Senior Vice President and President, Reinforcement Materials segment, and Messrs. Cordeiro and Berube each received supplemental awards of TSUs in recognition of their increased roles as part of the CEO Office and in connection with the transition of CEO responsibilities to Mr. Keohane during the year, and for retention purposes.General Counsel. (See pages 25 and 4039-42 for further details).details.)
26 CABOT CORPORATION
Executive Compensation(continued)
With respectAs described below, each PSU award is allocated evenly into three tranches, with each tranche having a separate fiscal year performance period and the entire award having a three-year vesting period. All performance goals for each performance period are established at the time of grant to outstanding PSUs,cover the three-year period. Our financial performance in each fiscal year determines the percentage of the target award earned for that fiscal 2016year performance period in three outstanding PSU awards. The percentage of the target awards earned for fiscal 2019 performance with respect to outstanding PSUs is set forth below. For each performance metric, adjusted EPS and adjusted return on net assets (“RONA”), achieving the target level of performance results in a payout of 100% of the portion of the award that is payable with respectrelates to that metric.metric being earned. We believe that the PSUs earned based on our fiscal 2019 financial results properly aligned our LTI compensation with our solid fiscal 2019 financial performance, consistent with the role of these awards in advancing ourpay-for-performance philosophy.
| Performance Metrics and % of Target Earned based on Fiscal | Total % of Target PSU | ||
Fiscal | Adjusted EPS | |||
| 133.2% | |||
Fiscal 2018 Grant covering fiscal 2018-2020, with all targets established November 2018 | Adjusted EPS | |||
| 134.3% | |||
Fiscal 2019 Grant covering fiscal 2019-2021, with all targets established November 2019 | Adjusted EPS | 76.0% |
28 CABOT CORPORATION
2020 PROXY STATEMENT |
Executive Compensation(continued)
Characteristics of our Executive Compensation ProgramPrograms
Our executive compensation program includesprograms include a number of practices intended to align the interests of management and our shareholders.
What We Do | What We Don’t Do | |
✓ Link pay to performance; significant portion of executive pay is not guaranteed
✓ Tie performance-based awards to achievement of
✓ Use our STI awards to recognize individual performance and leadership and achievement of
✓ Balance the mix of pay components, including cash, stock options, and restricted stock units (both performance- and time-based)
✓ Cap incentive awards under our STI and LTI programs
✓ Provide
✓ Maintain stock ownership guidelines
✓ Subject STI and LTI program compensation to our recoupment policy
✓ Provide modest perquisites consisting primarily of financial planning and an executive physical examination |
|
Consideration of Results of Shareholder Advisory Votes on Executive Compensation and What’s New for 2017 Compensation
At our 20162019 Annual Meeting, we conducted an advisory(non-binding) shareholder vote on executive compensation, as required by the Dodd-Frank Act. Over 96%Approximately 94% of the shares votingvoted approved the executive compensation discussed and disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and other related tabular and narrative disclosures contained in the fiscal 2015our 2019 proxy statement. In considering the results of this most recent favorable advisory vote on executive compensation, among other things, the Compensation Committee noteddetermined that the Company’s current executive compensation program hasprograms have been effective in implementing the Company’s stated compensation philosophy and objectives, and directly aligning compensation paid or earned with Company performance. Therefore, the Committee did not make any changes in the program in response to shareholder concerns.
In connection with the adoption of our new Advancing the Core strategy, our management team recommended to the Compensation Committee adjustments to our STI and LTIstructure of these programs to better reflect this new strategy. As a result, the Compensation Committee changed the principal financial performance metric under the STI program from adjusted EBITDA to adjusted earnings before interest and taxes (EBIT) forduring fiscal 2017 awards. EBIT is closely correlated to, and a
CABOT CORPORATION 27
Executive Compensation(continued)
key factor in, a company’s TSR and also includes depreciation. Accordingly, this financial measure will better tie short-term incentive compensation to the achievement of our earnings growth and capital efficiency goals. In addition, the NWC days metric under our STI program will now include NWC days used in our Purification Solutions and Aerogel businesses, which we have not included in past years. The Committee also reviewed the financial goals under our LTI Program and determined that they were still appropriate in light of the Company’s new strategy. To reinforce the capital allocation goal of returning a substantial portion of discretionary free cash flow to shareholders under our new Advancing the Core strategy, however, beginning with PSU awards made in November 2016, the Committee approved a change in the awards to provide that PSUs that are earned on the basis of our corporate performance will receive dividend equivalent payments prior to their time-based vesting on the same terms as our time-based restricted stock units.2019.
The Compensation Committee recognizes that executive pay practices and notions of sound corporate governance principles continue to evolve. Accordingly, it will continue to monitor executive compensation practices and make adjustments as necessary to ensure that our executive compensation continuesprograms continue to support our corporate goals and objectives and reflectsreflect good corporate governance principles.
The Compensation Committee continues to paypays close attention to the advice of its compensation advisors and continues to provideprovides access for our shareholders who would like to communicate on executive paycompensation directly with the Compensation Committee or the Board. You may contact the Board of Directors through our website at “Company — About Cabot — Governance — Contact the Board of Directors”.
Compensation Philosophy, Objectives and Process
Continuing to position Cabot for future success requires the talent to support our business and Advancing the Core strategy. Our executive compensation program isprograms are designed to provide a competitive and internally equitable compensation and benefits package that rewards individual and Company performance and reflects job complexity and the strategic value of the individual’s position while ensuringpromoting long-term retention and motivation. We seek to accomplish these goals in a way that is aligned with the long-term interests of our shareholders.
CABOT CORPORATION 29
2020 PROXY STATEMENT |
Executive Compensation(continued)
To achieve these goals, our executive compensation program followsprograms follow these principles:
Offer a total compensation opportunity and a benefits package that are competitive in our industry;
Reward executives based on our business performance by closely aligning a meaningful portion of their compensation with the performance of the Company on both a short- and long-term basis;
Set challenging but achievable performance goals that support the Company’s short- and long-term financial goals;
Motivate individual performance by rewarding the specific performance and achievements of individual executives and their demonstrated leadership; and
Align the interests of our executives and our shareholders through performance-based compensation, equity grants and share retentionstock ownership guidelines.
Our Compensation Setting Process
The Compensation Committee
As discussed under “The“Board Composition — How our Board of Directors and its CommitteesOperates — Compensation Committee”, on page 6,14, the Compensation Committee is responsible for all compensation decisions related to members of the Company’s Management Executive Committee.Committee, which includes all our named executive officers.
The annual compensation process for the preceding fiscal year concludes at the Committee’s meeting in November, when the Committee evaluates the Company’s performance against the corporate performance goals set for the just-concluded fiscal year and also evaluates each executive officer’s individual performance and, on this basis, determines the amounts payable or earned, as applicable, in respect of the fiscal year under our STI and LTI programs. Each November, the Compensation Committee also (i) determines any adjustments to base salaries, with any adjustment typically effective the following January, (ii) sets corporate performance metrics applicable to our STI and LTI programs for the newcurrent fiscal year, (iii) grants LTI awards, and (iv) establishes compensationperformance goals and maximum payment levels under our STI programand LTI programs for the newcurrent fiscal year, in each case, for each named executive officer. The annual compensation process also concludes at the Committee’s meeting in November, when the Committee evaluates the Company’s performance against the performance metrics set for the just-concluded fiscal year and also evaluates each executive officer’s performance and, on this basis, determines amounts payable or earned, as applicable, in respect of the fiscal year under our STI and LTI programs.
28 CABOT CORPORATION
Executive Compensation(continued)
A description of the Compensation Committee’s roles and responsibilities is set forth in its written charter adopted by the Board of Directors, which can be found atwww.cabotcorp.com under “Company — About Cabot — Governance — Resources.”
Role of the Compensation Consultant
The Compensation Committee has retained Pearl MeyerMeridian Compensation Partners (“Meridian”) as its independent compensation consultant. Pearl Meyer providesconsultant for purposes of advising on executive compensation matters since March 2018. During fiscal 2019, Meridian provided the Committee with advice on a broad range of executive compensation matters. The scope of their services includesmatters, including the following:
Apprising the Committee of compensation-related trends and developments in the marketplace;
Informing the Committee of regulatory developments relating to executive compensation practices;
Reviewing and assessing the composition of the group of peer companies used for comparativebenchmarking purposes;
Providing the Committee with an assessment of the market competitiveness of the Company’sour executive compensation opportunities and programs;
Assessing the relationship between executive compensation actually paid and corporate performance; and
Identifying potential changes to theour executive compensation programprograms to maintain market competitiveness and ensure consistency with business strategies, good governance practices and alignment with shareholder interests.interests;
During fiscal 2016, Pearl Meyer also advisedProviding the Committee onwith an assessment of the proposed compensation matters related to our CEO transition, potential changes inarrangements for newly appointed members of the Company’s Management Executive Committee; and
Reviewing the disclosure of our executive compensation program to reflect our new strategy, andprograms in the terms of our 2017 Long-Term Incentive Plan.proxy statement.
During fiscal 2016, Pearl MeyerMeridian attended all regularly scheduled meetings of the Compensation Committee.Committee during fiscal 2019.
The Compensation Committee has assessed the independence of Pearl MeyerMeridian pursuant to SEC rules and concluded that no conflict of interest exists that would prevent Pearl Meyerprevents Meridian from independently advising the Compensation Committee.
Role of the Chief Executive Officer and Other Officers
OurEach year, our CEO and our Chief Human Resources Officer (“CHRO”), working with internal resources as well as Pearl Meyer, propose to the Compensation CommitteeMeridian, review the design of our executive compensation programs and recommend modifications to existing, and/or the adoption of new, plans and programs.programs to the Compensation Committee. In addition, our CEO recommends to the
30 CABOT CORPORATION
2020 PROXY STATEMENT |
Executive Compensation(continued)
Committee the performance metrics and goals to be used to determine payouts under our STI and LTI programs, and each named executive officer’s individual performance goals (other than the CEO’s) are jointly developed by the executive and the CEO.
Before the Compensation Committee makes compensation decisions regarding the compensation of our named executive officers, the CEO provides his assessment of each named executive officer’s performance, other than his own, addressingtaking into consideration such factors as the officer’s achievement of individual goals, leadership accomplishments, contribution to Cabot’s performance and the achievement of Company goals, and areas of strength and areas for development. He then makes specific award recommendations. In preparing compensation recommendations for the Committee, our CEO, our Chief Human Resources OfficerCHRO and other members of management involved in the process review compensation and survey data compiled by Pearl Meyerthe Committee’s independent compensation consultant for similarly-situated executives at our peer group of companies and specific external competitive market data provided by Pearl Meyer,such consultant, as described below. Our CEO attends Compensation Committee meetings but is not present for, and does not participate in, any discussions concerning his own compensation. All decisions relating to the compensation of our named executive officers are made solely by the Committee and are reported to the full Board of Directors.
Use of Benchmarking Comparison Data
The companies we have included in our compensation peer group consist of companies in the diversified chemicals or specialty chemicals industries with similar products and services and with revenues and a market capitalization generally betweenone-third and three times the Company’s revenue and market capitalization. The Compensation Committee reviews executive compensation data for executives with comparable positions at these peer group companies to gauge the reasonableness and competitiveness of its executive compensation decisions.decisions and the competitiveness of our executive compensation programs. The Compensation Committee believes thismaintaining market-competitive executive compensation programs allows us to successfully attract and retain experienced executive talent who are critical to our long-term success.
CABOT CORPORATION 29
Executive Compensation(continued)
The Compensation Committee annually reviews the companies included in our compensation peer group and may add or eliminate companies as it determines to be appropriate. For purposes of fiscal 20162019 compensation matters our compensation peer group consisted of the following 1520 companies:
• • Ashland Inc. • Axalta Coating Systems • Celanese Corporation • The Chemours Company • FMC Corporation • Ferro Corporation • H.B. Fuller Company • Huntsman Corporation • Innospec Inc. | • | |
• • NewMarket Corporation | • Element Solutions, Inc. (formerly Platform Specialty Products Corporation) • PolyOne Corporation | |
| • RPM International Inc. | |
• | • | |
• |
| |
|
| |
| • W.R. Grace & Co. | |
| ||
In preparation for the 2017fiscal 2020 executive compensation review season and the decisions that the Compensation Committee has made and will make with respect to 2017fiscal 2020 compensation, the Compensation Committee reviewed, with Meridian, the peer group companies listed above and added Minerals Technologies and Stepan Company and removed Cytec Industries, Inc. which was acquired by Solvayconfirmed the continued appropriateness of the peer group for benchmarking the Company’s executive compensation programs. As a result, the Compensation Committee did not make any changes in December 2015, and Sigma-Aldrich Corp., which was acquired by Merck in November 2015.our compensation peer group for fiscal 2020 compensation decisions.
The Compensation Committee and management also consider executive compensation survey data. The survey data used is based on information reported in the Willis Towers Watson and Mercer Executive Compensation surveys.survey. For positions where compensation peer group and survey data are available, the peer group and survey data are averaged to provide a market composite perspective for compensation, other than long-term incentive compensation for which only compensation peer group data is used.compensation.
At least annually the Compensation Committee reviews tally sheets that detail all elements of each named executive officer’s compensation and benefits for the current and prior fiscal years, as well as a projection of theirhis or her compensation for the upcoming fiscal year. These are provided to the Committee as a means to review the total compensation and benefits package for each named executive officer and the impact of any compensation decisions.decisions on such compensation
CABOT CORPORATION 31
2020 PROXY STATEMENT |
Executive Compensation(continued)
and benefits levels. The Compensation Committee made no changes to our current executive compensation programprograms or any individual named executive officer’s proposed compensation for fiscal 20162019 based on the information set forth in the tally sheets.
Factors Considered in Determining Amounts of Compensation
The Compensation Committee considers the following factors in determining each named executive officer’s total annual and long-term compensation opportunity:opportunities:
the officer’s role, level of responsibility, performance, leadership, and experience;
the number of years the officer has held the position;
the current target total compensation for each officer;
employee retention and internal equity considerations; and
external competitiveness.
The Compensation Committee has targeted our namedadopted a targeting strategy for executive officers’ base salaries andcompensation decisions that defines competitiveness as a “range around the market 50thpercentile” for all elements of total direct compensation (base salary, target STI opportunities generallyawards and LTI awards (with PSUs valued at target)). The Committee believes that themid-market use of a range provides the Committee with the framework to target the market median of the benchmarking data used by the Committee, as further described under “Use of Benchmarking Comparison Data”, above, but to vary compensation opportunities as it deems appropriate based on individual and target LTI award values generally at the 65th percentile of this benchmarking data. The actual compensation for each named executive officer may be above or below the officer’s target compensation opportunity and above or below the intended market level depending largely on their experience and time in the position, as well as the degree to which Company and individual performance objectives are achieved.circumstances.
Developing Company Performance Metrics
The performance metrics we setuse for our STI and LTI programs are intended to support our short- and long-term business plans and strategies. In fiscal 2016,2019, we used four financial metrics to promote well-rounded Company and management performance, as described below.
For our STI awards in fiscal 2016, we used adjusted EBITDAEBIT as the principal financial performance metric asbecause it reflects an important near-term goal of improving our operating profitability.profitability and is a key driver of TSR. To increase the focus on efficiently managing theday-to-day cash we useour working capital, and to runmeasure our operations,short-term financial health, we also used a NWC days metric in our STI awards. The NWC metric included NWC used in our Reinforcement Materials, Performance Chemicals and Specialty Fluids segments because managing cash
30 CABOT CORPORATION
Executive Compensation(continued)
efficiently has been an important short-term objective of the businesses in these segments. It did not include NWC used in our Purification Solutions segment or our Aerogel business as this had not been a primary focus of these businesses in recent years.
For our PSU awards, in fiscal 2016, we used adjusted EPS as the principal financial performance metric because it reflects an important longer-term financial goal of improving ourafter-tax profitability. Because our business is capital intensive, we believedbelieve it was also appropriate to include a return metric under our LTI program and, as a result, used Adjustedadjusted RONA, which measures how effectively and efficiently we use our operating assets to generate earnings.
InOur philosophy in setting goals for each of the metrics is to establish goals that will drive the achievement of our short- and long-term financial performance metrics,objectives under our Advancing the Core strategy. Accordingly, in setting our adjusted EBIT and adjusted EPS goals we beganbegin with our annualperformance in the just completed fiscal year and long-term business plansset a growth target from that base. In setting our NWC days goals we consider the prior fiscal year’s performance to establish goals that are intended to incentivize a reduction in our net working capital days and consider other factors, includingcontinued improvement in our past varianceNWC management. Finally, in setting adjusted RONA goals, we seek to targeted performance, economic and industry conditions and industry sector performance. Wedrive earnings growth at return levels greater than our weighted average cost of capital. Overall, we intend to set challenging, but realizable, goals, including those that are realizable only as a result of exceptional performance, for the Companystrong execution and our executives in order to drive the achievement of our short- and long-term objectives.performance. We recognize that from time to time we may need to change the metrics we use to reflect new priorities and business circumstances and we did so for fiscal 2017, as described above.circumstances. We expect to continue to reassess theour performance metrics and goal setting process annually.
Our Performance-based Compensation Philosophy
In fiscal 2016, 62% of total direct compensation (base salary, target STI award and LTI awards (with PSUs valued at target)) awarded to our CEO was performance-based and not guaranteed. The chart below shows the compensation opportunity provided to Mr. Keohane for fiscal 2016, as well as the mix between short- and long-term compensation and at-risk and not at-risk compensation. Our executive compensation program isprograms are designed to provide more than 50% of aneach named executive officer’s total direct compensation opportunity in the form of performance-based compensation. Becausecompensation (STI awards, stock options and PSUs). For fiscal 2019, 65% of the management changes that occurred in fiscal 2016total direct compensation opportunity for our CEO was performance-based and the related compensation decisions, as described above, thenot guaranteed. The performance-based portion of the total direct compensation paid to theopportunities for our other named executive officers (other than Mr. Keohane and Mr. Prevost),our CEO) for fiscal 2019 on average, was slightly less than 50%53%.
32 CABOT CORPORATION
2020 PROXY STATEMENT |
Executive Compensation(continued)
How Did our 2016Fiscal 2019 STI Program WorkOperate?
We provide annual STI awards to drive the achievement of key short-term business results and to recognize individuals based on their contributions to those results and Cabot’s overall performance. Each named executive officer has an annual target incentive opportunity under our STI program, which is expressed as a percentage of his or her base salary. Ms. Kalita’s target incentive opportunity was increased from 28% of her base salary to 55% of her base salary at the time of her promotion to the role of Senior Vice President and General Counsel. This increase was intended to bring her total direct compensation closer to the market median of the benchmark compensation data used by the Committee and in recognition of the expanded job responsibilities she assumed as a result of her promotion. Prior to her promotion, Ms. Kalita participated in our fiscal 2019 STI program on the same basis as non-executive employees, which is weighted 50/50 as between pre-established corporate financial goals and individual goals and achievements. Ms. Kalita’s fiscal 2019 STI payout was based on her blended base salary and target bonus opportunities for fiscal 2019 and a blended weighting between corporate financial goals and individual goals and achievements.
The actual amounts payable in respect of STI awards range from 0% to 200% of the target award opportunity, with 70% of each award based on the achievement ofpre-established corporate financial goals and the remaining 30% of each award based on individual performance and achievements. We used two financial metrics to measure corporate performance for determining payouts under our STI program for fiscal 2016:2019: adjusted EBITDA,EBIT, which had an 80% weighting, and NWC measured in days, which had a 20% weighting. The Committee established a threshold, target, stretch and maximum performance level goals for each financial metric, and for adjusted EBIT, also a stretch performance level goal, with payout for performance between twoperformance levels determined on a straight-line basis. For NWC days, the target level was a narrow “dead band” of days so that small variations around demonstrated performance levels would not be rewarded or penalized. If the threshold adjusted EBITDAEBIT goal was not achieved, no payouts in respect of corporate performance under our STI program would be made. Even if theIf threshold levels of performance
CABOT CORPORATION 31
Executive Compensation(continued)
are achieved, the Committee nonetheless retainedretains the discretion to decreaseadjust the amount of the awards earned under our STI program based on our level of achievement of other corporate goals in the areas of safety, environmental performance, customers, innovation and people.people or such other factors as it determines appropriate, but did not exercise such discretion with respect to fiscal 2019 awards.
At the beginning of each fiscal year, thenon-Executive Chairman,Chair, with input from the other independent directors, develops the personal objectivesindividual performance goals for our CEO, which are then approved by the Committee. Each of theour other executive officers develops with the CEO his personal objectivesor her individual performance goals for the year. In assessing each executive officer’s individual performance, the Committee considers the officer’s personal achievements, including his or her achievements against his established personal objectives,individual performance goals, as well as his individual contributions to the management team hisand to the Company, and leadership and his management of histhe executive officer’s business, region or function.function, as applicable. The Committee does not assign specific numerical weightings or ratings to the individual performance goals and the performance of each officer is evaluated as a whole. Furthermore, there are no formal threshold levels of achievement applicable to the individual performance component of our STI program. Ultimately, the determination of the payout of the portion of the STI awards based on individual performance is based on the judgment of the CEOCommittee (with respect to his direct reports)our CEO) and our CEO and the Committee (with respect to our CEO’s direct reports), in each case, after reviewing all relevant factors, with the final determination made by the Committee.
We believe that the fiscal 2016 STI payout aligned annual executive pay with the Company’s fiscal 2016 financial performance, consistent with the plan’s role in our overall compensation mix. The adjusted EBITDA and NWC days targets for the fiscal 2016 STI awards and our actual fiscal 2016 performance were as follows:
Fiscal 2016 STI Program Targets and Results
Threshold (50% | Target Level (100% | Stretch Level (150% | Maximum (200% | Fiscal 2016 Results | Percent Payout | |||||||||||||||||||
Adjusted EBITDA (80%) | $ | 450 million | $ | 530 million | $ | 558 million | $ | 615 million | $ | 489 million | 74.4 | % | ||||||||||||
NWC Days¹ (20%) | 84 | 79 | 76 | 73 | 70 | 200.0 | % | |||||||||||||||||
Weighted average payout | 99.5 | % |
The balance of the amounts paid in respect of STI awards to our named executive officers reflected their strong individual performance and leadership, with the total STI awards ranging from 103% to 110% of the named executive officer’s target award.
32CABOT CORPORATION 33
|
Executive Compensation(continued)
We believe that the fiscal 2019 STI payouts properly aligned annual incentive compensation with the Company’s fiscal 2019 financial performance, consistent with the STI program’s role in our overall compensation program. The adjusted EBIT and NWC days targets for the fiscal 2019 STI awards and our actual fiscal 2019 performance were as follows:
Fiscal 2019 STI Program Targets and Results
Threshold
|
Target
|
Stretch
|
Maximum
|
Fiscal 2019
|
Percent
| |||||||||||||||||||||||||
Adjusted EBIT (80%)
|
|
$369 million
|
|
|
$440 million
|
|
|
$461 million
|
|
|
$503 million
|
|
|
$394 million
|
|
|
67.6
|
%
| ||||||||||||
NWC Days (20%)
|
|
85
|
|
|
80-78
|
|
|
—
|
|
|
73
|
|
|
80
|
|
|
100.0
|
%
| ||||||||||||
Weighted average payout
|
|
74.1
|
%
|
The portion of the STI award that was earned by each named executive officer based on individual performance reflected his or her individual performance and leadership in fiscal 2019 (ranging from 75% to 110% of target), with the total STI awards earned ranging from 74% to 85% of the named executive officer’s target award. Detailed information about each named executive officer’s fiscal 2019 STI payout is set forth in the discussion below under the heading “Fiscal 2019 Compensation Decisions”.
How Did our Fiscal 2019 LTI Program Work in Fiscal 2016?Operate?
We provide our named executive officers with LTI awards to promote retention, to incentivize sustainable growth and long-term value creation, and to further align the interests of our executives with those of our shareholders by tying the executives’ realized compensation withto stock price changes during the performance andand/or vesting periods. The grant date value of LTI awards granted to each named executive officer for a given year is based on an assessment of the individual’s position, role and responsibilities within the Company, the overall competitiveness of his or her total direct compensation opportunity, and internal equity considerations. The Committee also considers compensation peer group and other market data for a general understanding of competitive equity compensation practices as well asand considers the impact of the grants on equity incentive plan usage and share dilution, as well as the Company’s compensation expense and employee retention concerns.
70% of the target value of our executives’ LTI awards is performance-based, consisting of a combination of PSUs and stock options, which only provide value when the share price increases above the share price on the date of grant. When making LTI awards for fiscal 2019, the Compensation Committee first determinesdetermined the total grant date value of the award,awards to be granted to each executive, and then deliversdelivered that value in three components: PSUs representing 35%, stock options representing 35%, and TSUs representing 30%, respectively, of the total grant date value of the award.award, assuming target level achievement of applicable performance goals for PSUs. The terms of each type of LTI award are described in further detail below, which terms are generally applicable to LTI awards granted in fiscal 2019 and in previous fiscal years.
PSUs reward performance and the execution of our goal to deliver year-over-year and long-term growth in earnings and to increase the operating profit we generate relative to the capital we invest in our businesses. Stock options are performance-based because no value is created unless the value of our common stock appreciates after grant and they encourage employee retention through the use of a time-based vesting schedule. TSUs encourage employee retention by providing some level of value to executives who remain employed for three years. PSUs, stock options and TSUs also support an ownership culture and thereby encourage our executives to take actions that are best for Cabot’s long-term success. Importantly, although each of these equity awards provides a competitive economic value on the date of grant, their ultimate value to an executive will depend upon the degree to which we achieve objectively measurable performance metrics and/or the market value of our common stock after the end of the relevant vesting period. That value will be largely dependent upon our performance and the performance of our stock price appreciation and market dynamics.stock.
34 CABOT CORPORATION
2020 PROXY STATEMENT |
Executive Compensation(continued)
PSUs
EachTo reinforce the long-term nature of the PSU awards and to reward performance and the execution of our long-term growth goals, at the time of grant the performance metrics and goals for each of the threeone-year performance periods of the award are established. Specifically, each award of PSUs is allocated evenly into three tranches, with each tranche having aone-year performance period and the entire award having a three-year vesting period. When the award vests at the end of the applicable three-year period, the number of shares of stock issuable, if any, will depend on the degree of achievement of corporate performance metricsgoals for each year within the three-year performance period. Based on the degree to which we achieve the performance metrics,goals, an executive may earn between 0% to 200% (0% to 150% for awards granted before November 2015), of the number of stock unitsPSUs allocated to each tranche of his or her award.
CABOT CORPORATION 33
Executive Compensation(continued)
Threshold,To drive long-term performance, threshold, target, stretch and maximum goals are established for the corporate performance metrics for each tranche in the three-year performance period at or before the time of grant of the PSUs. In November 2018, at the time it approved the grant of PSU awards, the Committee established the specific performance metrics and goals for the fiscal 2019, fiscal 2020 and fiscal 2021 performance periods of these awards, based on the Company’s prior fiscal year performance and management’s expectations for incremental earnings growth and performance over that three-year period and taking into account our Advancing the Core strategy. Setting metrics and goals in this way serves to both reinforce the long-term nature of these awards and to incentivize our leaders to achieve incrementally more challenging goals for each fiscal year included in the three-yearaward. Our actual performance cycle, and are used to calculateagainst those goals determines the number of shares that will be issuable for a particular yearin respect of the PSUs when the award vests. The payout onawards vest, with the number of shares issuable for performance between two performance levels is interpolated on a straight-line basis. In valuing PSUs for purposes of determining the amount to be granted in any given year, the Committee assumes that the Company will achieve target performance.
The financial metrics used to measure corporate performance are adjusted EPS, with an 80% weighting, and adjusted RONA, with a 20% weighting. Dividend equivalents are not paid on
CABOT CORPORATION 35
2020 PROXY STATEMENT |
Executive Compensation(continued)
To reinforce the capital allocation goal of returning a substantial portion of free cash flow to shareholders under our Advancing the Core strategy, for PSUs granted in fiscal 2016.
Stock options
Stock optionsor after November 2016, dividend equivalent payments are granted with an exercise price equal to 100%made in cash in respect of the closing price of Cabot’s common stockPSUs that are earned based on the dateachievement of grant. They generally vest over a three-year period (30%applicable performance metrics, but that have not vested based on each of the first and second anniversaries of the date of grant and 40% on the third anniversary of the date of grant) and have aten-year term.
TSUs
TSUs generally vest in their entirety at the end of three years. When the TSUs vest, they are converted to shares of Cabot common stock. During the vesting period, dividend equivalents are paid in cash on each restricted stock unittime, when and if dividends are declared and paid on the Company’s common stock. The objective of providing such dividend equivalent payments is to help focus our executives on, and to reward them for, managing the business so as to produce cash that is capable of being distributed to shareholders in the form of a dividend. Dividend equivalents also mirror the income generation associated with stock ownership.
Stock options
34Stock options are granted with an exercise price equal to 100% of the closing price of Cabot’s common stock on the date of grant. They generally vest, subject to continued employment, over a three-year period (30% on each of the first and second anniversaries of the date of grant and 40% on the third anniversary of the date of grant) and have aten-year term.
TSUs
TSUs generally vest, subject to continued employment, in their entirety at the end of three years. When the TSUs vest, they are settled in shares of Cabot common stock. During the vesting period, dividend equivalents are paid in cash on each TSU when and if dividends are declared and paid on the Company’s common stock.
Practices Regarding the Grant of Equity Awards
Annual equity grants are made at the Compensation Committee’s regularly scheduled meeting in November to align the timing of grants with our fiscal year, most importantly for PSUs, which are earned based on a fiscal year performance period. The November meeting usually occurs approximately one week following our release of earnings for our fourth fiscal quarter. The exercise price of stock options is the closing price of Cabot stock on the NYSE on the date the options are granted. From time to time, equity awards outside of the annual grant program are made for recruiting or retention purposes or in connection with promotions or to recognize specific achievements or performance. In fiscal 2019, we granted Ms. Kalita an LTI award in connection with her promotion to SVP and General Counsel, as described in further detail below. We do not have a program, plan, or practice to time“off-cycle” awards in coordination with the release of materialnon-public information.
36 CABOT CORPORATION
|
Executive Compensation(continued)
PSUs RealizedEarned under PSU Award that Vested in 20162019
The chartschart below showshows the overall percentage of performance-based restricted stock units earnedcomposite 2017 PSU achievement under the PSU awards granted in November 20132016 that vested in November 2016.2019. The performance periods of these awards were our 2014, 20152017, 2018, and 20162019 fiscal years. As described above, the Committee established the performance metrics and goals for each of these performance periods based on the Company’s expectations for the Company’s earnings growth and performance over that three-year period at the time of grant. We believe setting metrics in this way reinforces the long-term nature of these awards and incentivizes our leaders to achieve incrementally more challenging goals for each year in the award. The adjusted EPS and adjusted RONA targets set in November 2016 for each of the performance periods of the fiscal 2017 awards were higher than our actual adjusted EPS and adjusted RONA performance in fiscal 2016. In addition, in setting the performance goals for the 2017 PSU awards, we simplified the award structure by establishing a fixed range between the threshold and maximum goals. Overall, the number of stock units earnedcomposite PSU achievement under these awards was 41.5%153% of the target awards.
Results for PSUs granted in Fiscal 2017 that Vested 2019
Performance Year
| Adjusted EPS
| Adjusted
| % Achieved
| Adjusted RONA
| Adjusted
| % Achieved
| Overall
| ||||||||||||||||||||||||||||
2017 (Y1) |
| $3.30 |
|
| $3.43 | * |
| 151.4% |
|
| 12.0% |
|
| 12.9% |
|
| 159.6% |
|
| 153% |
| ||||||||||||||
2018 (Y2) |
| $3.46 |
|
| $4.03 | * |
| 170.6% |
|
| 12.2% |
|
| 14.3% |
|
| 183.3% |
|
| 173% |
| ||||||||||||||
2019 (Y3) |
| $3.63 |
|
| $3.91 |
|
| 137.8% |
|
| 12.4% |
|
| 12.7% |
|
| 115.0% |
|
| 133% |
| ||||||||||||||
Composite |
| 153% |
|
PSUs Earned on Outstanding Awards on the Basis of Fiscal 2016 Performance
The Committee believes that the number of stock units earned under our outstanding PSUs on the basis of our fiscal 2016 performance properly aligned executive pay with that performance, consistent with the role of these awards in our overall compensation mix, with the percentage of stock units earned under outstanding PSU awards ranging from 17.6% to 124.5% of the target award.
* | Adjusted EPS results for fiscal 2017 in this table do not reflect the change we adopted in fiscal 2018 in our inventory valuation method of accounting for our U.S. carbon black inventories from the LIFO method to the FIFO method. |
CABOT CORPORATION 3537
|
Executive Compensation(continued)
PSUs Earned under Outstanding PSU Awards on the Basis of Fiscal 2019 Performance
The following tables show the performance metrics and goals and the relative weighting of each metric that the Committee set for the fiscal 20162019 performance period of PSUs granted in fiscal 2014, 20152017, 2018, and 2016,2019, our degree of attainment of these metricsgoals and the percentage of the awards earned, measured against the target award. As the performance metrics and goals for the fiscal 20162019 performance period of these awards were established at different times based on when they were granted, they each reflect the long-term goals and target-setting philosophy in place when the awardsthey were granted.awarded.
Company TargetsPerformance Goals (set in November 2016) and Results for
Performance Year 3 of the PSUs granted in Fiscal 2014 (Performance Period 2014-2016) that Vested in November 20162019
Threshold Level (50% payout) | Target Level (100% payout) | Maximum Level (150% payout) | Fiscal 2016 Results | Percent Earned |
Threshold
|
Target
|
Stretch
|
Maximum
|
Fiscal
|
Percent
| ||||||||||||||||||||||||||||||||||||||
Adjusted EPS (80%) | $ | 3.50 | $ | 4.50 | $ | 6.00 | $ | 3.14 | 0.0% |
|
$2.70
|
|
|
$3.63
|
|
|
$4.00
|
|
|
$4.50
|
|
|
$3.91
|
|
137.8%
| |||||||||||||||||||||||
Adjusted RONA (20%) | 9.5 | % | 12.0 | % | 15.5 | % | 11.4 | % | 88.0% |
|
9.00
|
%
|
|
12.4
|
%
|
|
13.40
|
%
|
|
15.00
|
%
|
|
12.7
|
%
|
115.0%
| |||||||||||||||||||||||
Composite | 17.6% |
133.2%
|
Company TargetsPerformance Goals (set in November 2017) and Results for
Performance Year 2 of the PSUs granted in Fiscal 2015 (Performance Period 2015-2017) that Vest in November 20172020
Threshold Level (50% payout) | Target Level (100% payout) | Maximum payout) | Fiscal 2016 Results | Percent Earned |
Threshold
|
Target
|
Stretch
|
Maximum
|
Fiscal
|
Percent
| ||||||||||||||||||||||||||||||||||||||
Adjusted EPS (80%) | $ | 3.00 | $4.00 | $ | 5.50 | $ | 3.14 | 57.0% |
|
$2.70
|
|
|
$3.71
|
|
|
$4.00
|
|
|
$4.50
|
|
|
$3.91
|
|
134.5%
| ||||||||||||||||||||||||
Adjusted RONA (20%) | 8.5 | % | 10.75 | % | 14.0 | % | 11.4 | % | 110.0% |
|
9.00
|
%
|
|
12.10
|
%
|
|
13.0
|
%
|
|
15.00
|
%
|
|
12.7
|
%
|
133.3%
| |||||||||||||||||||||||
Composite | 67.6% |
134.3%
|
Company TargetsPerformance Goals (set in November 2018) and Results for
Performance Year 1 of the PSUs granted in Fiscal 2016 (Performance Period 2016-2018) that Vest in November 20182021
Threshold Level (50% payout) | Target Level (100% payout) | Stretch Level (150% payout) | Maximum Level (200% payout) | Fiscal 2016 Results | Percent Earned |
Threshold
|
Target
|
Stretch
|
Maximum
|
Fiscal
|
Percent
| |||||||||||||||||||||||||||||||||||||||||
Adjusted EPS (80%) | $ | 2.70 | $ | 3.00 | $ | 3.40 | $ | 4.50 | $ | 3.14 | 117.5% |
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$3.43
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|
$4.31
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$4.51
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$5.04
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$3.91
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77.3%
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Adjusted RONA (20%) | 8.0 | % | 9.5 | % | 11.25 | % | 14.0 | % | 11.4 | % | 152.7% |
|
11.5
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%
|
|
14.40
|
%
|
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15.1
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%
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16.8
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%
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12.7
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%
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70.7%
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Composite | 124.5% |
76.0%
|
3638 CABOT CORPORATION
|
Executive Compensation(continued)
Fiscal 20162019 Compensation Decisions
The compensation decisions the Committee made in the ordinary coursewith respect to our named executive officers for 2016fiscal 2019 are described below. Earlier in the CD&A, we described compensation decisions the Committee made in connection with our executive transitions and management changes in fiscal 2016.
In considering each executive’sofficer’s individual performance in fiscal 20162019 and determining his or her STI award payout for fiscal 20162019 and making the other compensation decisions discussed herein,above, the Committee specifically considered the following:
Sean D. Keohane, President and CEO (since March 2016), previously EVP and President, Reinforcement Materials segment.CEO.
Fiscal 20162019 Performance Summary
The Committee believes that Mr. Keohane performed extremely well in 2016 and that his transition to the role of President and CEO was effective and seamless.fiscal 2019. The Committee also specifically recognized:
In addition, in connection with his previous role of President of the Reinforcement Materials segment, the Committee recognized Mr. Keohane’s role in:
our solid financial results despite the weakening of macroeconomic and key sector indicators we experienced throughout the year;
our execution of important strategic initiatives, including the divestiture of our Specialty Fluids business and the improved performance of the Purification Solutions segment following the implementation of the transformation plan;
the investments we made to strengthen our manufacturing asset footprint, reflected most notably in the successfulstart-up of our additional fumed silica capacity in China and the commencement of work to upgrade the carbon black plant we purchased in China in 2018 for the production of specialty carbons, which we expect to be completed in 2021;
implementing cost reduction initiatives across the Company that we view as important to our long-term sustainable growth, including organizational structural changes and asset decisions that reduced headcount;
our progress integrating sustainability throughout Cabot and in developing a more inclusive and diverse organization;
the strengthening of tire customer relationships, whichour investor outreach that resulted in, among other things, an increase in analyst coverage of the Company;
our efforts to build strong performance during calendar year 2016 under arrangements with those customers;
• | our recognition for the second consecutive year as one of the 100 Best Corporate Citizens byCorporate Responsibility Magazine,and, for the fourth consecutive year, our achieving a Gold rating from EcoVadis for our performance in sustainability. |
Compensation Decisions for Fiscal 20162019
Base Salary — Mr. Keohane’s annual base salary for calendar 2019 was $1,000,000, an increase of approximately 5% compared to his 2018 annual base salary.
STI Award —Prior to his election as President and CEO,Mr. Keohane’s target STI award was $282,000 (60% of his annual base salary). At the time of his election as President and CEO, Mr. Keohane’s target STI award as a percentage of his annual base salary was increased to 100% of base salary (which was also increased, as described above). His blended target STI award for fiscal 20162019 was $692,000 and his actual STI award payout for fiscal 2016 was $710,000, or 103% of his blended target, based on achievement at 99.5% of target in respect of corporate performance and 110% of target in respect of individual performance.
CABOT CORPORATION 37
Executive Compensation(continued)
Eduardo E. Cordeiro, EVP and Chief Financial Officer, and President, Americas and EMEA regions.Mr. Cordeiro’s responsibilities as President of the EMEA region were assumed by Mr. Cross effective January 1, 2017, when Mr. Cross relocated back to Switzerland.
Fiscal 2016 Performance Summary
Among Mr. Cordeiro’s key achievements that the Committee considered were the following:
Compensation Decisions for Fiscal 2016
Nicholas S. Cross, EVPLTI Award — Mr. Keohane was granted an LTI award with a grant date value of $4,500,000, consisting of 31,500 PSUs, 27,000 TSUs and President, Performance Chemicals137,674 stock options, with the number and Specialty Fluids segments.Effective January 1, 2017, Mr. Cross assumed responsibility as Presidentgrant date value of the EMEA region.PSUs assuming target level of achievement of applicable performance goals.
Erica McLaughlin, SVP and CFO.
Fiscal 20162019 Performance Summary
Among Mr. Cross’sMs. McLaughlin’s key achievements that the Committee considered were the following:
her integral role in managing the Company’s operating cash flow, which resulted in our generating $363 million of the Performance Chemicals segment, which achieved its third straight year of record EBIT performance;cash flow from operations, including a $25 million decrease in net working capital, and enabled us to increase our quarterly cash dividend by 6%;
her role in the progress in our application development activities for important new, differentiated products for specialty applications in batteries, inkjet and fibers that enhance the performanceexecution of our customers’ products;capital allocation strategy, which included returning $253 million to our shareholders through share repurchases and dividends;
her commitment to disciplined financial policies and the organic revenue growth inmaintenance of a strong balance sheet and liquidity position, including with the issuance of10-year bonds to support our specialty compounds business;
38CABOT CORPORATION 39
|
Executive Compensation(continued)
her strong leadership of our M&A and other strategic activities, including the divestiture of our Specialty Fluids business and oversight of our transformation plan for our Purification Solutions segment; and
her role leading our investor communications program, including successful outreach efforts that resulted in an increase in analyst coverage of the Company.
Compensation Decisions for Fiscal 20162019
Base Salary — Mr. Cross’sMs. McLaughlin’s annual base salary remained at $437,711 for calendar 2016, consistent with the decision2019 was $460,000, an increase of approximately 15% compared to not increaseher 2018 base salaries for the Management Executive Committee.salary.
STI Award —Mr. Cross’sMs. McLaughlin’s target STI award for fiscal 20162019 was $262,626 (60%$322,000 (70% of hisher annual base salary). His and her actual STI award payout for fiscal 20162019 was$277,895, 106% of target, composed of 99.5%263,576, 82% of target, based on achievement of 74.1% of target in respect of corporate performance and 120%100% of target based onin respect of individual performance.
LTI Award —— Mr. Cross wasgranted Ms. McLaughlin was granted an LTI award with a grant date value of $800,000,$775,000, consisting of 7,0815,425 PSUs, (assuming4,650 TSUs and 23,710 stock options, with the number and grant date value of PSUs assuming target level of achievement of applicable performance metrics), 6,069 TSUs and 25,617 stock options.goals.
BrianKaren A. Berube,Kalita, SVP and General Counsel (since June 3, 2019), previously Chief Counsel, Reinforcement Materials Segment and since July 2016, Interim Chief Human Resources Officer.Purification Solutions Segment and Assistant Corporate Secretary
Fiscal 20162019 Performance Summary
Prior to her appointment as SVP and General Counsel, Ms. Kalita served as Chief Counsel for our Reinforcement Materials and Purification Solutions segments, Assistant Corporate Secretary and a member of the Company’s Office of Compliance. Ms. Kalita remains a member of the Office of Compliance. Among Mr. Berube’sher key achievements that the Committee considered in her prior and current roles were the following:
in her position as a trusted advisor to the BoardChief Counsel for our Reinforcement Materials and particular assistance to the Board on governanceour Purification Solutions segments, her strong legal guidance and compensation matters during Mr. Prevost’s medical leave of absence and in connection with CEO transition matters;
her strong leadership within the Company’s Office of Compliance and to the Company on ethics and compliance matters, and her role in managing our regulatory compliance programs.programs;
the smooth transition of leadership when she assumed responsibility as the Company’s chief legal officer;
her assistance to the Board on governance matters;
her role in overseeing the negotiation of key commercial agreements and providing risk management counsel; and
her effective oversight of complex litigation and environmental matters toward positive outcomes for the Company. .
Compensation Decisions for Fiscal 20162019
Base Salary — Mr. Berube’sMs. Kalita received an annual base salary remained at $405,000, consistentincrease of 3% during the annual salary review in November 2018, resulting in an annual salary for calendar 2019 of $259,284. Her annual base salary was increased by 29% to $335,000, effective June 3, 2019, in connection with the decisionher promotion to not increase base salaries for the Management Executive Committee.SVP and General Counsel.
STI Award — Mr. Berube’sMs. Kalita’s target STI award for fiscal 20162019 was $243,000 (60% of his$109,813 (based on her blended annual base salary)salary and target opportunities in 2019). HisHer actual STI award payout for fiscal 20162019 was$253,000, 104% of target, composed of 99.5%90,263, 82% of target, based on achievement of 74.1% of target in respect of corporate performance and 115%95% of target based onin respect of individual performance.performance (with the blended weighting of such components described under “How Did our Fiscal 2019 STI Program Operate” above).
LTI Award — Ms. Kalita was granted an LTI award with a grant date value of $325,000, including an LTI award with a $250,000 grant date value granted in connection with her promotion to SVP and General Counsel, consisting of 2,738 PSUs in the aggregate, 2,733 TSUs in the aggregate and 11,437 stock options in the aggregate, with the number and grant date value of PSUs assuming target level of achievement of applicable performance goals.
40 CABOT CORPORATION
2020 PROXY STATEMENT |
Executive Compensation(continued)
Hobart C. Kalkstein, SVP and President, Reinforcement Materials segment (since April 2016), previously VP, Corporate DevelopmentSegment, and Strategy, and VP, Global Business Operations, Purification Solutions segment.President, Americas Region.
Fiscal 20162019 Performance Summary
Among Mr. Kalkstein’s key achievements that the Committee considered were the following:
his position as VP of Corporate Development and Strategy, leadership to the Management Executive Committeerole in the development and launchingstrong business results of our AdvancingReinforcement Materials Segment, despite a challenging competitive environment in China and weak automotive fundamentals globally;
his role in effectively managing the Core strategy, including the development ofnew International Marine Organization regulations and their impact on our communication strategy and Investor Day program;feedstock costs;
his leadership in strengthening strategic customer relationships within the Reinforcement Materials segment;Segment and the successful negotiation of supply agreements with certain of our major tire customers;
CABOT CORPORATION 39
Executive Compensation(continued)
his role in advancing the effective managementCabot Elastomer Composites business and the achievement of costs across the carbon black asset network.key customer qualification milestones; and
his role in leading our Americas Region.
Compensation Decisions for Fiscal 20162019
Base Salary — Mr. Kalkstein received an annual base salary increase of 3% during the annual salary review in November 2015, making hisKalkstein’s annual base salary for calendar 2016 $324,450. His2019 was $464,200, an increase of 10% compared to his 2018 annual base salary was later increased by 16% to $375,000 effective April 7, 2016, in connection with his election as SVP and President, Reinforcement Materialssegment.salary.
STI Award — Mr. Kalkstein’s target STI award for fiscal 20162019 was $210,000 (60% of his blended annual base salary in 2016). His actual STI award payout for fiscal 2016 was $226,000, 108% of target, composed of 99.5% of target based on corporate performance and 120% of target based on individual performance.
Friedrich von Gottberg, SVP and President, Purification Solutions segment.
Fiscal 2016 Performance Summary
Among Mr. von Gottberg’s key achievements that the Committee considered were the following:
Compensation Decisions for Fiscal 2016
LTI Award —Mr. von GottbergKalkstein was granted an LTI award with a grant date value of $700,000,$800,000, consisting of 6,1965,600 PSUs, (assuming target level achievement of applicable performance metrics), 5,3114,800 TSUs and 22,41524,475 stock options,
Patrick M. Prevost, former President and CEO.Mr. Prevost’s annual base salary remained at $1,060,000 for calendar 2016, consistent with the decision to not increase base salaries for the Management Executive Committee. His target STI award for fiscal 2016 was $1,166,000number and his fiscal 2016 LTI award had a grant date value of $3,800,000, and consisted of 33,636 PSUs (assumingassuming target level of achievement of applicable performance metrics), 28,831goals.
Brian A. Berube, former SVP and General Counsel (until June 3, 2019).
Compensation Decisions for Fiscal 2019
Base Salary — Mr. Berube’s annual base salary for calendar 2019 was $461,440, an increase of 3% compared to his 2018 annual base salary.
STI Award — Mr. Berube voluntarily resigned from Cabot during fiscal 2019 and, accordingly, he did not receive an STI award payout for fiscal 2019.
LTI Award —Mr. Berube was granted an LTI award with a grant date value of $750,000, which he forfeited upon his resignation from the Company.
At the time of Mr. Berube’s resignation, the Company extended the exercise period for Mr. Berube’s vested stock options to the earlier of (i) October 14, 2020 and (ii) the original expiration date of the stock options in light of his many contributions during his long and successful career at Cabot.
John R. Doubman, former SVP, and President, Performance Additives business (until October 2, 2019).
Fiscal 2019 Performance Summary
Among Mr. Doubman’s key achievements that the Committee considered were the following:
his role in the successfulstart-up of our additional fumed silica capacity in China and in continuing to advance our capacity expansion project with DowDuPont, which secures access to long-term feedstock and will allow us to meet growing demand for our high-performance fumed silica;
his role in enabling the Company to upgrade the carbon black plant we purchased in China in 2018 for the production of specialty carbons, which we expect to be completed in 2021; and
his leadership of the business’s application development activities, particularly in energy materials and the successful program qualifications it has obtained with most of the major global battery manufacturers.
CABOT CORPORATION 41
2020 PROXY STATEMENT |
Executive Compensation(continued)
In determining Mr. Doubman’s STI award, the Committee also considered the results in the Performance Additives business, which were below management expectations.
Compensation Decisions for Fiscal 2019
Base Salary — Mr. Doubman’s annual base salary for calendar 2019 was $395,000, which reflects the 10% increase he received in his annual base salary effective as of October 1, 2018 at the time of his promotion.
STI Award —Mr. Doubman’s target STI award for fiscal 2019 was $237,000 (60% of his annual base salary) and his actual STI award payout for fiscal 2019 was$176,224, 74% of target, based on achievement of 74.1% of target in respect of corporate performance and 75% of target in respect of individual performance.
LTI Award — Mr. Doubman was granted an LTI award with a grant date value of $600,000, consisting of 4,200 PSUs, 3,600 TSUs and 121,68318,356 stock options. A descriptionoptions, with the number and grant date value of PSUs assuming target level of achievement of applicable performance goals. Of this award, 5,506 stock options vested in November 2019 in accordance with the terms of the award and Mr. Prevost’s arrangements in connectionDoubman forfeited the balance of the LTI award upon the termination of his employment on November 15, 2019.
Effective October 2, 2019, Mr. Doubman stepped down from his position as SVP and President, Performance Additives business of the Company. Mr. Doubman’s employment with the Company terminated effective November 15, 2019. Under the terms of his transition and separation agreement with Cabot, commencing on his termination of employment, are described abovethe Company will pay to Mr. Doubman a total of $592,500, payable over an18-month period. In addition, the Company extended the exercise period for Mr. Doubman’s vested stock options to the earlier of (i) November 15, 2021 and (ii) the original expiration date of the stock options. The Company also agreed to pay a portion of Mr. Doubman’s COBRA premiums for up to 18 months following the termination of his employment, to provide financial planning benefits on the same basis as if he had remained employed for a period of eighteen months following termination in an amount not to exceed $30,000, and to provide Mr. Doubman with outplacement services in an amount not to exceed $40,000. In exchange for the payments and benefits provided in the transition and separation agreement, the Company received a release of claims from Mr. Doubman, and Mr. Doubman agreed to covenants as tonon-competition andnon-solicitation for a period of twelve months following the termination of his employment. When considering the level of separation payments and benefits to be provided to Mr. Doubman, the Committee considered the length and level of his service with the Company, his significant contributions to the Company and the Company’s achievements under “Compensation Decisions Relating to Our CEO Transition”.his leadership, as well as the advice provided by Meridian.
Risk Assessment
We monitor the risks associated with our executive compensation programs and policies on anon-going basis. In May 2016,2019, management presented the Committee with the results of a study it conducted of our compensation programs to assess the potential risks arising from our compensation policies and practices.these programs. We believe the following policies and
40 CABOT CORPORATION
Executive Compensation(continued)
practices reflect sound risk management practices within our compensation programs and mitigate excessive risk-taking that could harm our value or reward poor judgment by our executives:executives and other employees:
Use of variousshort- and long-term performance periods (one and three years)in our LTI program and multiple levels of tiered performance (threshold, target, stretch and maximum) in both our STI and LTI programs;
Use of maximum payout caps in both the STI and LTI programs;
Use of different financial performance metrics across the STI and LTI programs;
Ability of the Committee to use discretion to reducemodify STI awards;
Annual Committee review and approval of the STI and LTI program design, performance metrics and goals and earned payouts;
Mix of equity instrumentsawards and multi-year vesting used in the LTI program;
Availability of a Company recoupment policy; and
Use of our share ownership guidelines.
Based on these mitigating factors, the Committee agreed with the study’s findings that our compensation programs and policies do not encourage inappropriate or unacceptable risk to the Company, and that any risks are within our ability to effectively monitor and manage and are not reasonably likely to have a material adverse effect on the Company.
42 CABOT CORPORATION
2020 PROXY STATEMENT |
Executive Compensation(continued)
Share Ownership Guidelines
To further align the interests of our executives and our shareholders, in November 2008 we adopted share ownership guidelines for members of our Management Executive Committee. Under our guidelines, we expect our CEO to own equity in the Company in an amount equal to five times his or her annual base salary, and each other officer who reports directly to the CEO to own equity in an amount equal to three times his or her annual base salary. Each executive has five years from the date he or she becomes subject to the share ownership guidelines to meet his or her target. The Committee reviews compliance with these guidelines annually. At the time of this filing, all of the members of the Management Executive Committee who have been subject to these guidelines for five years or longer had satisfied such share ownership guidelines.
Recoupment of Compensation
The Company adopted a recoupment (clawback) policy in 2012. The policy applies to performance-based compensation, such as our STI and LTI compensation, paid to participants in our LTI program (which includes our named executive officers), and covers awards made for fiscal 2013 and thereafter. Under the policy, if the Company is required to restate its financial statements due to materialnon-compliance with financial reporting requirements under theapplicable securities laws, and the amount of performance-based compensation awarded or paid would have been lower had the achievement of applicable financial performance been calculated based on the restated financial results, the amount of the excess compensation awarded or paid during the three-year period preceding the date on which the Company is required to prepare the restatement is subject to recoupment, in the discretion of the Compensation Committee. In addition, if a participant knowingly engagesengaged in misconduct that is a material factor in the Company’s obligation to restate its financial statements, the Company will have the right to seek recoupment of the proceeds from the sale of shares issued upon the exercise of stock options or upon the vesting of restricted stock units (including TSUs and PSUs) occurring during the twelve-month period following the filing with the SEC of the financial statements required to be restated, in an amount deemed appropriate by the Compensation Committee under the circumstances.
Other Information
Retirement and Other Benefit Programs
Except as described below, ourOur named executive officers participate in the full range of benefit programs and are covered by the same retirement plans on the same terms as are generally provided to our full-time U.S. salaried employees, are eligible to participate in and/or receive benefits under our Deferred Compensation Plan and our Death Benefit Protection Plan, and participate in our Senior Management Severance Protection Plan. As a result of the termination of his employment with the Company, Mr. Prevost no longer participates in these benefit programs, although he is entitled to receive payment of compensation he deferred under our Deferred Compensation Plan and his accrued benefits under our retirement plans. Mr. Cross is a participant in our Senior Management Severance Protection Plan, but as a Swiss-based employee, does not participate in these retirement and benefit programs. These plans are described in the footnotes and text that accompany the compensation tables that follow this CD&A.
CABOT CORPORATION 41
Executive Compensation(continued)
Mr. Cross participates in the same pension plan that is provided to full-time Cabot employees in Switzerland and in the insurance and other benefit programs provided to other employees under our international assignment program. These benefits or their costs to Cabot are described in the footnotes and text that accompany the compensation tables that follow this Compensation Discussion and Analysis.
Health and Welfare Plans
The health and welfare plans offered to our named executive officers are the same as those offered to all other employees working in the same country. While on international assignment, Mr. Cross is also covered by the health and welfare plans and life and disability benefits offered to our employees on an international assignment.
Perquisites
We provide our named executive officers a modest level of perquisites, consisting principally of financial planning and tax assistance services and an executive physical examination. We provide these benefits to help our executives maintain their health and manage their finances, in each case, so that they are able to focus their attention on Cabot’s business. Mr. Cross receives certain benefits as a result of his international assignment consistent with Cabot’s International Assignment Policy, as described below.
Employment Arrangements
Our named executive officers other than Mr. Cross, each serve without an employment agreement and theiragreements. The compensation of our named executive officers is set by the Compensation Committee as described above.
Mr. Cross entered into a standard form of employment agreement with Cabot Switzerland when his employment with the Company was transferred to that entity. That agreement was amended in May 2015 to set forth the compensation and relocation benefits related to his international assignment. Consistent with Cabot’s International Assignment Policy, while he was on an international assignment, the Company provided Mr. Cross with, or paid the cost of: furnished housing, including utilities; cost of living adjustments (positive or negative); a taxable annual car allowance of $15,000; one home leave per year; and a payment in the amount of $25,000 annually for the cost of travel necessitated by his assignment. Mr. Cross is also covered by the tax equalization provisions of Cabot’s International Assignment Policy under which Mr. Cross’s tax obligations are equal to the taxes he would have paid had he remained resident in Switzerland and the Company pays all other United States and Swiss taxes associated with the income Mr. Cross earns while on assignment. Mr. Cross relocated back to Switzerland effective January 1, 2017.
CABOT CORPORATION 43
2020 PROXY STATEMENT |
Practices Regarding the Grant of Equity AwardsExecutive Compensation(continued)
Annual equity grants are made at the Compensation Committee’s regularly scheduled meeting in November to align the timing of grants with our fiscal year, most importantly for PSUs, which are earned based on a fiscal year performance period. The November meeting usually occurs two weeks following our release of earnings for our fourth fiscal quarter. The Compensation Committee determines the exercise price of stock options, which is the closing price of Cabot stock on the NYSE on the date the options are granted. From time to time, equity awards outside of the annual grant program are made for recruiting or retention purposes or in connection with promotions or to recognize specific achievements or performance. These awards are effective on the later of the approval of the grant or the date the employee’s employment commences. We do not have a program, plan, or practice to time“off-cycle” awards in coordination with the release of materialnon-public information.
Hedging Policy
The Company has aCompany’s insider trading policy that prohibits executives, directors, their family members who share the same address or are financially dependent upon them, and directorsentities owned or controlled by any such persons, from, among other things, engaging in any transaction in which they may profit from short-term speculative swings in“short sales”, including short sales “against the valuebox”, or purchases, sales, or other arrangements involving, puts, calls or other derivative securities on the Company’s common stock, and issuing any standing or limit orders for the sale of the Company’s securities. This includes “short sales” (selling
42 CABOT CORPORATION
Executive Compensation(continued)
borrowed securitiescommon stock that the seller hopes can be purchased atremain outstanding for more than five days, other than in connection with a lower priceRule 10b5-1 trading plan adopted in the future) or “short sales against the box” (selling owned, but not delivered securities), and “put” and “call” options. In addition, this policy is designed to ensure compliance with all insider trading rules.the policy. No categories of hedging transactions are specifically permitted and, other than the transactions described above, no other categories of hedging transactions are specifically disallowed.
Tax and Accounting Information
We consider the tax and accounting rules associated with various forms of compensation when designing our compensation programs. However, to maintain flexibility to compensate our executive officers in a manner designed to promote short- and long-term corporate goals and objectives, the Compensation Committee has not adopted a policy that all compensation must be deductible or have the most favorable accounting treatment to the Company.
Section 162(m) of the Internal Revenue Code limits to $1 million the amount a company may deduct for compensation paid to its Chief Executive Officer and any of its other three named executive officers (excluding the Chief Financial Officer). This limitation does not, however, apply to compensation meeting the definition of “qualifying performance-based compensation.” The Compensation Committee believes that its primary responsibility is to provide a compensation program that attracts, retains and rewards the executive talent necessary for our success. Consequently, the Compensation Committee may pay or provide,Company and has paid, or provided,and will continue to pay, compensation in excess of $1 million that is not exempt from the deduction limitations under Section 162(m). For fiscal 2016, our stock options and STI payments to those officers covered by Section 162(m) were intended to betax-deductible compensation under Section 162(m). Our PSUs, as currently structured, are not considered performance-based for purposes of Section 162(m) of the Internal Revenue Code. Therefore, the value of those equity awards at the time they vest or are settled, in combination with the amount of salary and certain other elements of compensation, in excess of $1,000,000 paid to our Chief Executive Officer and the three highest paid executive officers, other than the Chief Executive Officer and the Chief Financial Officer, is not tax deductible by us.deductible.
44CABOT CORPORATION 43
|
Executive Compensation(continued)
The following table and footnotes describe the compensation for our named executive officers for the three most recently completed fiscal years. A description of eachyears (or such shorter period as described in the footnotes below). Each component of our executive compensation packageprogram is described under the heading “Compensation Discussion and Analysis,” which begins on page 24.25.
Name and Principal Position | Year | Salary ($)(4) | Stock Awards ($)(5) | Option Awards ($)(6) | Non-Equity Incentive Plan Compensation ($) | Change in Value and | All Other Compensation ($)(8) | Total ($) | ||||||||||||||||||||||||
Sean D. Keohane | 2016 | 681,161 | 1,133,052 | 630,096 | 710,000 | 20,143 | 159,278 | 3,333,730 | ||||||||||||||||||||||||
President and CEO |
| 2015 2014 |
|
| 460,900 395,000 |
|
| 503,974 474,265 |
|
| 279,909 262,579 |
|
| 85,000 295,000 |
|
| 4,334 26,013 |
|
| 68,846 89,386 |
|
| 1,402,963 1,542,243 |
| ||||||||
Eduardo E. Cordeiro | 2016 | 550,000 | 1,376,912 | 350,182 | 424,000 | 43,613 | 116,970 | 2,861,677 | ||||||||||||||||||||||||
Executive Vice | 2015 | 544,800 | 630,024 | 349,883 | — | 14,574 | 72,240 | 1,611,521 | ||||||||||||||||||||||||
President and CFO, and President, Americas Region | 2014 | 502,500 | 632,353 | 350,111 | 388,000 | 47,143 | 108,736 | 2,028,843 | ||||||||||||||||||||||||
Nicholas S. Cross(1) | 2016 | 437,711 | 501,540 | 280,148 | 277,895 | 95,800 | 498,768 | 2,091,862 | ||||||||||||||||||||||||
Executive Vice President and President, Performance Chemicals and Specialty Fluids Segments and EMEA Region | 2015 | 442,691 | 503,974 | 279,909 | 85,821 | 131,400 | 347,699 | 1,791,494 | ||||||||||||||||||||||||
Brian A. Berube | 2016 | 405,000 | 895,477 | 245,132 | 253,000 | 33,358 | 82,340 | 1,914,307 | ||||||||||||||||||||||||
Senior Vice President and | 2015 | 398,750 | 441,017 | 244,924 | 75,000 | 10,051 | 61,693 | 1,231,435 | ||||||||||||||||||||||||
General Counsel, and Interim Chief Human Resources Officer | 2014 | 377,500 | 442,620 | 245,076 | 246,000 | 36,997 | 80,522 | 1,428,715 | ||||||||||||||||||||||||
Hobart C. Kalkstein(2) | 2016 | 346,091 | 297,602 | 115,513 | 226,000 | 13,389 | 58,709 | 1,057,304 | ||||||||||||||||||||||||
Senior Vice President and President, Reinforcement Materials Segment | ||||||||||||||||||||||||||||||||
Friedrich von Gottberg(2) | 2016 | 390,000 | 438,877 | 245,132 | 240,000 | 34,843 | 79,324 | 1,428,176 | ||||||||||||||||||||||||
Senior Vice President and President, Purification Solutions Segment | ||||||||||||||||||||||||||||||||
Patrick M. Prevost(3) | 2016 | 835,546 | 7,059,331 | 2,739,358 | — | 77,432 | 1,700,874 | 12,412,541 | ||||||||||||||||||||||||
Former President | 2015 | 1,050,000 | 2,394,268 | 1,329,571 | — | 46,107 | 130,771 | 4,950,717 | ||||||||||||||||||||||||
and CEO | 2014 | 1,012,500 | 2,403,204 | 1,330,433 | 1,224,000 | 79,951 | 259,317 | 6,309,405 |
Name and Principal Position
| Year
| Salary
| Stock
| Option
| Non-Equity
| Change in Value and
| All Other
| Total ($)
| ||||||||||||||||||||||||
Sean D. Keohane President and CEO |
|
2019
|
|
|
987,500
|
|
|
2,925,000
|
|
|
1,574,578
|
|
|
964,272
|
|
|
15,469
|
|
|
212,560
|
|
|
6,679,379
|
| ||||||||
| 2018
|
|
| 937,500
|
|
| 2,599,951
|
|
| 1,399,898
|
|
| 1,567,500
|
|
| —
|
|
| 270,593
|
|
| 6,775,442
|
| |||||||||
2017 | 887,500 | 2,079,911 | 1,119,647 | 1,252,000 | — | 232,734 | 5,571,792 | |||||||||||||||||||||||||
Erica McLaughlin(1) Senior Vice President and CFO |
|
2019
|
|
|
445,000
|
|
|
503,750
|
|
|
271,171
|
|
|
263,576
|
|
|
—
|
|
|
84,775
|
|
|
1,568,272
|
| ||||||||
2018 | 323,779 | 403,659 | 179,277 | 273,839 | — | 57,770 | 1,238,324 | |||||||||||||||||||||||||
Karen A. Kalita(1) Senior Vice President and General Counsel |
|
2019 |
|
|
281,756 |
|
|
237,454 |
|
|
87,516 |
|
|
90,263 |
|
|
819 |
|
|
39,818 |
|
|
737,626 |
| ||||||||
Hobart C. Kalkstein Senior Vice President, President, Reinforcement Materials Segment, and President, Americas Region |
|
2019
|
|
|
453,650
|
|
|
520,000
|
|
|
279,921
|
|
|
236,341
|
|
|
2,629
|
|
|
88,466
|
|
|
1,581,007
|
| ||||||||
| 2018
|
|
| 416,000
|
|
| 487,464
|
|
| 262,474
|
|
| 440,568
|
|
| 2,675
|
|
| 102,224
|
|
| 1,711,405
|
| |||||||||
| 2017
|
|
| 392,250
|
|
| 438,699
|
|
| 236,170
|
|
| 350,000
|
|
| 3,604
|
|
| 85,875
|
|
| 1,506,598
|
| |||||||||
Brian A. Berube(2) Former Senior Vice President and General Counsel |
|
2019
|
|
|
320,596
|
|
|
487,500
|
|
|
422,805
|
|
|
—
|
|
|
24,020
|
|
|
44,794
|
|
|
1,299,715
|
| ||||||||
| 2018
|
|
| 444,750
|
|
| 487,464
|
|
| 262,474
|
|
| 427,392
|
|
| 7,650
|
|
| 103,059
|
|
| 1,732,789
|
| |||||||||
2017 | 427,500 | 487,444 | 262,410 | 367,000 | 11,639 | 95,101 | 1,651,094 | |||||||||||||||||||||||||
John R. Doubman(1)(2) Former Senior Vice President and President, Performance Additives |
|
2019 |
|
|
395,000 |
|
|
390,000 |
|
|
323,158 |
|
|
176,224 |
|
|
1,102 |
|
|
57,429 |
|
|
1,342,913 |
|
1. | For Ms. Kalita and |
Mr. |
We review base salaries annually in November and any changes are generally effective on January 1 of the following calendar year. |
44 CABOT CORPORATION
Executive Compensation(continued)
The amounts reported in this column |
CABOT CORPORATION 45
2020 PROXY STATEMENT |
Executive Compensation(continued)
5. a. | The amounts reported in this column reflect the aggregate grant date fair value |
b. | As further described in the Compensation Discussion and Analysis section above, in connection with Mr. Berube’s resignation from the Company, the Compensation Committee extended the exercise period of Mr. Berube’s vested stock options to the earlier of (i) October 14, 2020 and (ii) the original expiration date of the stock options. The amount reported in this column for Mr. Berube in fiscal 2019 consists of (i) $262,423, the grant date fair value of the stock options granted to Mr. Berube in fiscal 2019, and (ii) $160,382, the incremental fair value associated with extending the exercise period of his vested stock options, computed in accordance with FASB ASC Topic 718. Mr. Berube forfeited his unvested stock options upon his termination of employment. |
c. | As further described in the Compensation Discussion and Analysis section above, in connection with Mr. Doubman’s termination of employment, the Compensation Committee extended the exercise period of Mr. Doubman’s vested stock options to the earlier of (i) November 15, 2021 and (ii) the original expiration date of the stock options. The amount reported in this column for Mr. Doubman in fiscal 2019 consists of (i) $209,938, the grant date fair value of the stock options granted to Mr. Doubman in fiscal 2019, and (ii) $113,220, the incremental fair value associated with extending the exercise period of his vested stock options, computed in accordance with FASB ASC Topic 718. Mr. Doubman forfeited his unvested stock options upon termination. |
6. | The amounts reported in this column consist of: |
a. | The aggregate change in the actuarial present value of each named executive officer’s |
b. |
CABOT CORPORATION 45
Executive Compensation(continued)
Above-market interest (the portion exceeding 120% of the applicable federal long-term rate) credited to deferrals under Cabot’s deferred compensation plan as follows: for Ms. Kalita: $819 in 2019; for Mr. |
The table below identifies the amounts shown for fiscal |
Company Contributions to 401(k) Plan ($)(a) | Company Contributions to Supplemental 401(k) Plan ($)(a) | Company ($)(a) | Financial ($) | Severance Related Benefits ($)(b) | International ($)(c) | Other ($)(d) | Total ($) | |||||||||||||||||||||||||
S.D. Keohane | 26,500 | 114,646 | — | 13,662 | — | — | 4,470 | 159,278 | ||||||||||||||||||||||||
E.E. Cordeiro | 26,500 | 41,215 | 31,800 | 13,819 | — | — | 3,636 | 116,970 | ||||||||||||||||||||||||
N.S. Cross | — | — | — | 10,550 | — | 482,737 | 5,481 | 498,768 | ||||||||||||||||||||||||
B.A. Berube | 26,500 | 34,533 | 6,325 | 13,961 | — | — | 1,021 | 82,340 | ||||||||||||||||||||||||
H.C. Kalkstein | 31,346 | 21,372 | 5,115 | — | — | — | 876 | 58,709 | ||||||||||||||||||||||||
F. von Gottberg | 26,500 | 37,685 | 315 | 13,841 | — | — | 983 | 79,324 | ||||||||||||||||||||||||
P.M. Prevost | 26,500 | 61,154 | 116,600 | 15,624 | 1,478,896 | — | 2,100 | 1,700,874 |
Company Contributions to 401(k) Plan ($)(a) | Company Contributions to Supplemental 401(k) Plan ($)(a) | Company Contributions to Deferred Compensation Plan ($)(a) | Financial Planning and Tax Assistance ($)(b) | Other ($)(c) | Total ($) | |||||||||||||||||||
Sean D. Keohane |
|
28,000 |
|
|
167,158 |
|
|
— |
|
|
14,771 |
|
|
2,631 |
|
|
212,560 |
| ||||||
Erica McLaughlin |
|
28,546 |
|
|
41,471 |
|
|
— |
|
|
13,652 |
|
|
1,106 |
|
|
84,775 |
| ||||||
Karen A. Kalita |
|
29,023 |
|
|
9,181 |
|
|
— |
|
|
1,385 |
|
|
229 |
|
|
39,818 |
| ||||||
Hobart C. Kalkstein |
|
28,000 |
|
|
33,983 |
|
|
7,000 |
|
|
14,974 |
|
|
4,509 |
|
|
88,466 |
| ||||||
Brian A. Berube |
|
22,154 |
|
|
10,338 |
|
|
— |
|
|
11,389 |
|
|
913 |
|
|
44,794 |
| ||||||
John R. Doubman |
|
28,000 |
|
|
11,487 |
|
|
— |
|
|
14,962 |
|
|
2,980 |
|
|
57,429 |
|
a. | The 401(k) Plan, Supplemental 401(k) Plan, and Deferred Compensation Plan are described under the heading “Deferred Compensation” beginning on page |
b. | Consists of |
c. |
Consists of the amount paid by Cabot for an annual physical exam for Messrs. |
The table does not include any amounts |
46 CABOT CORPORATION
|
Executive Compensation(continued)
Grant of Plan-Based Awards Table
The following table reports plan-based awards granted to the named executive officers during fiscal 2016.2019. The material terms of our short-STI and long-term incentive compensationLTI awards are described in “Compensation Discussion and Analysis — Our Performance-based Compensation Philosophy” beginning on page 31.32.
Name | Grant Date | Estimated Future Payouts UnderNon-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh)(4) | Grant Date Fair Value of ($)(5) | |||||||||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||
S.D. Keohane | ||||||||||||||||||||||||||||||||||||||||||||
Time-Based Restricted Stock Unit (“RSU”) | 11/12/15 | — | — | — | — | — | — | 6,069 | — | — | 239,968 | |||||||||||||||||||||||||||||||||
Performance-Based RSU | 11/12/15 | — | — | — | 3,541 | 7,081 | 14,162 | — | — | — | 261,572 | |||||||||||||||||||||||||||||||||
Options | 11/12/15 | — | — | — | — | — | — | — | 25,617 | 39.54 | 280,148 | |||||||||||||||||||||||||||||||||
Time-Based RSU | 3/21/16 | — | — | — | — | — | — | 6,090 | — | — | 299,993 | |||||||||||||||||||||||||||||||||
Performance-Based RSU | 3/21/16 | — | — | — | 3,553 | 7,105 | 14,210 | — | — | — | 331,519 | |||||||||||||||||||||||||||||||||
Options | 3/21/16 | — | — | — | — | — | — | — | 26,455 | 49.26 | 349,948 | |||||||||||||||||||||||||||||||||
Short-Term Incentive Compensation (“STI”) | — | 242,200 | 692,000 | 1,020,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
E.E. Cordeiro | ||||||||||||||||||||||||||||||||||||||||||||
Time-Based RSU | 11/12/15 | — | — | — | — | — | — | 7,587 | — | — | 299,990 | |||||||||||||||||||||||||||||||||
Performance-Based RSU | 11/12/15 | — | — | — | 4,426 | 8,851 | 17,702 | — | — | — | 326,956 | |||||||||||||||||||||||||||||||||
Options | 11/12/15 | — | — | — | — | — | — | — | 32,021 | 39.54 | 350,182 | |||||||||||||||||||||||||||||||||
Time-Based RSU | 6/30/16 | — | — | — | — | — | — | 16,425 | — | — | 749,966 | |||||||||||||||||||||||||||||||||
STI | — | 134,750 | 385,000 | 770,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
N.S. Cross | ||||||||||||||||||||||||||||||||||||||||||||
Time-Based RSU | 11/12/15 | — | — | — | — | — | — | 6,069 | — | — | 239,968 | |||||||||||||||||||||||||||||||||
Performance-Based RSU | 11/12/15 | — | — | — | 3,541 | 7,081 | 14,162 | — | — | — | 261,572 | |||||||||||||||||||||||||||||||||
Options | 11/12/15 | — | — | — | — | — | — | — | 25,617 | 39.54 | 280,148 | |||||||||||||||||||||||||||||||||
STI | — | 91,919 | 262,626 | 525,253 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
B.A. Berube | ||||||||||||||||||||||||||||||||||||||||||||
Time-Based RSU | 11/12/15 | — | — | — | — | — | — | 5,311 | — | — | 209,997 | |||||||||||||||||||||||||||||||||
Performance-Based RSU | 11/12/15 | — | — | — | 3,098 | 6,196 | 12,392 | — | — | — | 228,880 | |||||||||||||||||||||||||||||||||
Options | 11/12/15 | — | — | — | — | — | — | — | 22,415 | 39.54 | 245,132 | |||||||||||||||||||||||||||||||||
Time-Based RSU | 6/30/16 | — | — | — | — | — | — | 10,000 | — | — | 456,600 | |||||||||||||||||||||||||||||||||
STI | — | 85,050 | 243,000 | 486,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
H.C. Kalkstein | ||||||||||||||||||||||||||||||||||||||||||||
Time-Based RSU | 11/12/15 | — | — | — | — | — | — | 2,655 | — | — | 104,979 | |||||||||||||||||||||||||||||||||
Performance-Based RSU | 11/12/15 | — | — | — | 1,328 | 2,655 | 5,310 | — | — | — | 98,076 | |||||||||||||||||||||||||||||||||
Options | 11/12/15 | — | — | — | — | — | — | — | 5,763 | 39.54 | 63,025 | |||||||||||||||||||||||||||||||||
Time-Based RSU | 4/7/16 | — | — | — | — | — | — | 952 | — | — | 44,963 | |||||||||||||||||||||||||||||||||
Performance-Based RSU | 4/7/16 | — | — | — | 556 | 1,111 | 2,222 | — | — | — | 49,584 | |||||||||||||||||||||||||||||||||
Options | 4/7/16 | — | — | — | — | — | — | — | 4,251 | 47.23 | 52,488 | |||||||||||||||||||||||||||||||||
STI | — | 73,500 | 210,000 | 420,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
F. Von Gottberg | ||||||||||||||||||||||||||||||||||||||||||||
Time-Based RSU | 11/12/15 | — | — | — | 5,311 | — | — | 209,997 | ||||||||||||||||||||||||||||||||||||
Performance-Based RSU | 11/12/15 | 3,098 | 6,196 | 12,392 | — | — | — | 228,880 | ||||||||||||||||||||||||||||||||||||
Options | 11/12/15 | — | — | — | — | 22,415 | 39.54 | 245,132 | ||||||||||||||||||||||||||||||||||||
STI | — | 81,900 | 234,000 | 468,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
P.M. Prevost | ||||||||||||||||||||||||||||||||||||||||||||
Time-Based RSU | 11/12/15 | — | — | — | — | — | — | 28,831 | — | — | 3,523,236 | |||||||||||||||||||||||||||||||||
Performance-Based RSU | 11/12/15 | — | — | — | 16,818 | 33,636 | 67,272 | — | — | — | 3,536,095 | |||||||||||||||||||||||||||||||||
Options | 11/12/15 | — | — | — | — | — | — | — | 121,683 | 39.54 | 2,739,358 | |||||||||||||||||||||||||||||||||
STI | — | 408,100 | 1,166,000 | 2,332,000 | — | — | — | — | — | — | — |
CABOT CORPORATION 47
Executive Compensation(continued)
Name | Grant Date |
Estimated Future Payouts UnderNon-Equity Incentive |
Estimated Future Payouts Under Equity Incentive | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh)(4) | Grant Date Fair Value of Stock and Option Awards ($)(5) | |||||||||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||
Sean D. Keohane | ||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 27,000 |
|
| — |
|
| — |
|
| 1,350,000 |
| |||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 15,750 |
|
| 31,500 |
|
| 63,000 |
|
| — |
|
| — |
|
| — |
|
| 1,575,000 |
| |||||||||||
Options |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 137,674 |
|
| 50.00 |
|
| 1,574,578 |
| |||||||||||
Short-Term Incentive Compensation (“STI”) |
| — |
|
| 420,000 |
|
| 1,200,000 |
|
| 2,400,000 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||
Erica McLaughlin | ||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,650 |
|
| — |
|
| — |
|
| 232,500 |
| |||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 2,713 |
|
| 5,425 |
|
| 10,850 |
|
| — |
|
| — |
|
| — |
|
| 271,250 |
| |||||||||||
Options |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 23,710 |
|
| 50.00 |
|
| 271,171 |
| |||||||||||
STI |
| — |
|
| 112,700 |
|
| 322,000 |
|
| 644,000 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||
Karen A. Kalita | ||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 900 |
|
| — |
|
| — |
|
| 45,000 |
| |||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 300 |
|
| 600 |
|
| 1,200 |
|
| — |
|
| — |
|
| — |
|
| 30,000 |
| |||||||||||
TSU |
| 6/3/2019 |
|
| — |
|
| — |
|
| — |
|
| 1,833 |
|
| 74,988 |
| ||||||||||||||||||||||||||
PSU |
| 6/3/2019 |
|
| — |
|
| — |
|
| — |
|
| 1,069 |
|
| 2,138 |
|
| 4,276 |
|
| 87,466 |
| ||||||||||||||||||||
Options |
| 6/3/2019 |
|
| — |
|
| — |
|
| — |
|
| 11,437 |
|
| 40.91 |
|
| 87,516 |
| |||||||||||||||||||||||
STI |
| — |
|
| 33,603 |
|
| 109,813 |
|
| 219,626 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||
Hobart C. Kalkstein | ||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,800 |
|
| — |
|
| — |
|
| 240,000 |
| |||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 2,800 |
|
| 5,600 |
|
| 11,200 |
|
| — |
|
| — |
|
| — |
|
| 280,000 |
| |||||||||||
Options |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 24,475 |
|
| 50.00 |
|
| 279,921 |
| |||||||||||
STI |
| — |
|
| 97,482 |
|
| 278,520 |
|
| 557,040 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||
Brian A. Berube | ||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,500 |
|
| — |
|
| — |
|
| 225,000 |
| |||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 2,625 |
|
| 5,250 |
|
| 10,500 |
|
| — |
|
| — |
|
| — |
|
| 262,500 |
| |||||||||||
Options |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 22,945 |
|
| 50.00 |
|
| 422,805 |
| |||||||||||
STI |
| — |
|
| 96,902 |
|
| 276,864 |
|
| 553,728 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||
John R. Doubman | ||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 3,600 |
|
| — |
|
| — |
|
| 180,000 |
| |||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 2,100 |
|
| 4,200 |
|
| 8,400 |
|
| — |
|
| — |
|
| — |
|
| 210,000 |
| |||||||||||
Options |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 18,356 |
|
| 50.00 |
|
| 323,158 |
| |||||||||||
STI |
| — |
|
| 82,950 |
|
| 237,000 |
|
| 474,000 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
1. | The amounts in these columns represent |
CABOT CORPORATION 47
2020 PROXY STATEMENT |
Executive Compensation(continued)
2. a. | The amounts in these columns represent |
b. | The PSUs granted to Mr. Berube and Mr. Doubman in fiscal 2019 were forfeited effective on their respective separation dates with the Company. |
3. | The amounts in |
4. | All stock options were granted with an exercise price equal to the closing price of our common stock on the date of |
5. a. | Reflects the grant date fair value of |
b. | In connection with |
c. | In connection with the |
d. | The grant date fair value per unit |
48 CABOT CORPORATION
|
Executive Compensation(continued)
Outstanding Equity Awards at FiscalYear-End Table
The following table shows information regarding outstanding equity awards held by our named executive officers as of September 30, 2016.2019.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#)(1) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(5) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5) | ||||||||||||||||||||||||||||
S.D. Keohane | 15,909 | — | 34.64 | 11/11/2020 | 4,724 | 247,585 | — | — | ||||||||||||||||||||||||||||
22,561 | — | 32.95 | 11/10/2021 | 5,213 | 273,213 | — | — | |||||||||||||||||||||||||||||
21,067 | — | 35.25 | 11/8/2022 | 6,069 | 318,076 | — | — | |||||||||||||||||||||||||||||
8,578 | 5,719 | 47.62 | 11/7/2023 | 6,090 | 319,177 | — | — | |||||||||||||||||||||||||||||
5,357 | 12,500 | 46.03 | 11/13/2024 | 2,285 | (2) | 119,757 | — | — | ||||||||||||||||||||||||||||
— | 25,617 | 39.54 | 11/11/2025 | 2,636 | (3) | 138,153 | 2,230 | (6) | 116,874 | |||||||||||||||||||||||||||
— | 26,455 | 49.26 | 3/20/2026 | 2,938 | (4) | 153,981 | 9,442 | (7) | 494,855 | |||||||||||||||||||||||||||
2,948 | (4) | 154,505 | 9,474 | (7) | 496,532 | |||||||||||||||||||||||||||||||
E.E. Cordeiro | 28,089 | — | 35.25 | 11/8/2022 | 6,299 | 330,131 | — | — | ||||||||||||||||||||||||||||
11,438 | 7,625 | 47.62 | 11/7/2023 | 6,517 | 341,556 | — | — | |||||||||||||||||||||||||||||
6,696 | 15,625 | 46.03 | 11/13/2024 | 7,587 | 397,635 | — | — | |||||||||||||||||||||||||||||
— | 32,021 | 39.54 | 11/11/2025 | 16,425 | 860,834 | — | — | |||||||||||||||||||||||||||||
3,048 | (2) | 159,746 | — | — | ||||||||||||||||||||||||||||||||
3,295 | (3) | 172,691 | 2,788 | (6) | 146,119 | |||||||||||||||||||||||||||||||
3,673 | (4) | 195,502 | 11,802 | (7) | 618,543 | |||||||||||||||||||||||||||||||
N.S. Cross | 8,006 | 5,338 | 47.62 | 11/7/2023 | 4,409 | 231,076 | — | — | ||||||||||||||||||||||||||||
5,357 | 12,500 | 46.03 | 11/13/2024 | 5,213 | 273,213 | — | — | |||||||||||||||||||||||||||||
— | 25,617 | 39.54 | 11/11/2025 | 6,069 | 318,076 | — | — | |||||||||||||||||||||||||||||
2,133 | (2) | 111,791 | — | — | ||||||||||||||||||||||||||||||||
2,636 | (3) | 138,153 | 2,230 | (6) | 116,874 | |||||||||||||||||||||||||||||||
2,938 | (4) | 153,981 | 9,442 | (7) | 494,855 | |||||||||||||||||||||||||||||||
B. A. Berube | 19,553 | — | 32.95 | 11/10/2021 | 4,409 | 231,076 | — | — | ||||||||||||||||||||||||||||
19,662 | — | 35.25 | 11/8/2022 | 4,562 | 239,094 | — | — | |||||||||||||||||||||||||||||
8,006 | 5,338 | 47.62 | 11/7/2023 | 5,311 | 278,350 | — | — | |||||||||||||||||||||||||||||
4,687 | 10,938 | 46.03 | 11/13/2024 | 10,000 | 524,100 | — | — | |||||||||||||||||||||||||||||
— | 22,415 | 39.54 | 11/11/2025 | 2,133 | (2) | 111,791 | — | — | ||||||||||||||||||||||||||||
2,306 | (3) | 120,857 | 1,952 | (6) | 102,304 | |||||||||||||||||||||||||||||||
2,571 | (4) | 134,746 | 8,262 | (7) | 433,011 | |||||||||||||||||||||||||||||||
H.C. Kalkstein | 16,300 | — | 16.90 | 5/6/2019 | 2,204 | 115,512 | — | — | ||||||||||||||||||||||||||||
1,205 | 2,812 | 46.03 | 11/13/2024 | 2,281 | 119,547 | — | — | |||||||||||||||||||||||||||||
— | 5,763 | 39.54 | 11/11/2025 | 2,655 | 139,149 | — | — | |||||||||||||||||||||||||||||
— | 4,251 | 47.23 | 4/6/2026 | 952 | 49,894 | — | — | |||||||||||||||||||||||||||||
914 | (2) | 47,903 | — | — | ||||||||||||||||||||||||||||||||
988 | (3) | 51,781 | 836 | (6) | 43,815 | |||||||||||||||||||||||||||||||
1,102 | (4) | 57,756 | 3,540 | (7) | 185,531 | |||||||||||||||||||||||||||||||
461 | (4) | 24,161 | 1,482 | (7) | 77,672 |
Option Awards |
Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#)(1) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(5) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5) | ||||||||||||||||||||||||||||||||
Sean D. Keohane | 14,297 | — | 47.62 | 11/7/2023 | 19,024 | 862,168 | — | — | ||||||||||||||||||||||||||||||||
17,857 | — | 46.03 | 11/13/2024 | 19,280 | 873,770 | — | — | |||||||||||||||||||||||||||||||||
25,617 | — | 39.54 | 11/11/2025 | 27,000 | 1,223,640 | — | — | |||||||||||||||||||||||||||||||||
26,455 | — | 49.26 | 3/20/2026 | 33,980 | (2) | 1,539,974 | — | — | ||||||||||||||||||||||||||||||||
52,788 | 35,193 | 50.46 | 11/10/2026 | 22,882 | (3) | 1,037,012 | 11,247 | (6) | 509,714 | |||||||||||||||||||||||||||||||
27,576 | 64,347 | 62.24 | 11/9/2027 | 7,980 | (4) | 361,654 | 21,000 | (7) | 951,720 | |||||||||||||||||||||||||||||||
— | 137,674 | 50.00 | 11/8/2028 | |||||||||||||||||||||||||||||||||||||
Erica McLaughlin | 2,295 | — | 46.03 | 11/13/2024 | 1,783 | 80,806 | — | — | ||||||||||||||||||||||||||||||||
3,293 | — | 39.54 | 11/11/2025 | 1,542 | 69,883 | — | — | |||||||||||||||||||||||||||||||||
2,120 | 1,414 | 50.46 | 11/10/2026 | 1,839 | 83,343 | — | — | |||||||||||||||||||||||||||||||||
945 | 2,206 | 62.24 | 11/9/2027 | 4,650 | 210,738 | — | — | |||||||||||||||||||||||||||||||||
2,673 | 6,237 | 61.17 | 5/14/2028 | 1,820 | (2) | 82,482 | — | — | ||||||||||||||||||||||||||||||||
— | 23,710 | 50.00 | 11/8/2028 | 1,045 | (3) | 47,359 | 515 | (6) | 23,340 | |||||||||||||||||||||||||||||||
2,182 | (3) | 98,888 | 1,073 | (6) | 48,628 | |||||||||||||||||||||||||||||||||||
1,374 | (4) | 62,270 | 3,617 | (7) | 163,922 | |||||||||||||||||||||||||||||||||||
Karen A. Kalita | — | 11,437 | 40.91 | 6/2/2029 | 772 | 34,987 | — | — | ||||||||||||||||||||||||||||||||
723 | 32,766 | — | — | |||||||||||||||||||||||||||||||||||||
900 | 40,788 | — | — | |||||||||||||||||||||||||||||||||||||
1,833 | 83,072 | — | — | |||||||||||||||||||||||||||||||||||||
789 | (2) | 35,757 | — | — | ||||||||||||||||||||||||||||||||||||
489 | (3) | 22,161 | 242 | (6) | 10,967 | |||||||||||||||||||||||||||||||||||
152 | (4) | 6,889 | 400 | (7) | 18,128 | |||||||||||||||||||||||||||||||||||
541 | (4) | 24,518 | 1,426 | (7) | 64,626 | |||||||||||||||||||||||||||||||||||
Hobart C. Kalkstein | 4,017 | — | 46.03 | 11/13/2024 | 4,013 | 181,869 | — | — | ||||||||||||||||||||||||||||||||
5,763 | — | 39.54 | 11/11/2025 | 3,615 | 163,832 | — | — | |||||||||||||||||||||||||||||||||
4,251 | — | 47.23 | 4/6/2026 | 4,800 | 217,536 | — | — | |||||||||||||||||||||||||||||||||
11,134 | 7,424 | 50.46 | 11/10/2026 | 7,166 | (2) | 324,763 | — | — | ||||||||||||||||||||||||||||||||
5,170 | 12,065 | 62.24 | 11/9/2027 | 4,289 | (3) | 194,377 | 2,109 | (6) | 95,580 | |||||||||||||||||||||||||||||||
— | 24,475 | 50.00 | 11/8/2028 | 1,418 | (4) | 64,264 | 3,734 | (7) | 169,225 | |||||||||||||||||||||||||||||||
Brian A. Berube | 13,344 | — | 47.62 | 10/14/2020 | — | — | — | — | ||||||||||||||||||||||||||||||||
15,625 | — | 46.03 | 10/14/2020 | — | — | — | — | |||||||||||||||||||||||||||||||||
8,967 | — | 39.54 | 10/14/2020 | — | — | — | — | |||||||||||||||||||||||||||||||||
12,372 | — | 50.46 | 10/14/2020 | — | — | — | — | |||||||||||||||||||||||||||||||||
5,170 | — | 62.24 | 10/14/2020 | — | — | — | — | |||||||||||||||||||||||||||||||||
John R. Doubman | 4,017 | — | 46.03 | 11/13/2024 | 2,972 | 134,691 | — | — | ||||||||||||||||||||||||||||||||
2,306 | — | 39.54 | 11/11/2025 | 2,651 | (8) | 120,143 | — | — | ||||||||||||||||||||||||||||||||
2,834 | — | 47.23 | 4/6/2026 | 3,600 | (8) | 163,152 | — | — | ||||||||||||||||||||||||||||||||
8,248 | 5,499 | 50.46 | 11/10/2026 | 5,310 | (2) | 240,649 | — | — | ||||||||||||||||||||||||||||||||
3,791 | 8,848 | 62.24 | 11/9/2027 | 3,145 | (3)(8) | 142,531 | 1,547 | (6)(8) | 70,110 | |||||||||||||||||||||||||||||||
— | 18,356 | 50.00 | 11/8/2028 | 1,064 | (4)(8) | 48,220 | 2,800 | (7)(8) | 126,896 |
CABOT CORPORATION 49
|
Executive Compensation(continued)
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#)(1) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(5) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5) | ||||||||||||||||||||||||||||
F. Von Gottberg | 15,909 | — | 34.64 | 11/11/2020 | 4,409 | 231,076 | — | — | ||||||||||||||||||||||||||||
19,553 | — | 32.95 | 11/10/2021 | 4,562 | 239,094 | — | — | |||||||||||||||||||||||||||||
19,662 | — | 35.25 | 11/8/2022 | 5,311 | 278,350 | — | — | |||||||||||||||||||||||||||||
8,006 | 5,338 | 47.62 | 11/7/2023 | 2,133 | (2) | 111,791 | — | — | ||||||||||||||||||||||||||||
4,687 | 10,938 | 46.03 | 11/13/2024 | 2,306 | (3) | 120,857 | 1,952 | (6) | 102,304 | |||||||||||||||||||||||||||
— | 22,415 | 39.54 | 11/11/2025 | 2,571 | (4) | 134,746 | 8,262 | (7) | 433,011 | |||||||||||||||||||||||||||
P. M. Prevost | 101,000 | — | 23.15 | 10/15/2019 | — | — | — | — | ||||||||||||||||||||||||||||
92,562 | — | 34.64 | 10/15/2019 | — | — | — | — | |||||||||||||||||||||||||||||
111,302 | — | 32.95 | 10/15/2019 | — | — | — | — | |||||||||||||||||||||||||||||
106,741 | — | 35.25 | 10/15/2019 | — | — | — | — | |||||||||||||||||||||||||||||
72,440 | — | 47.62 | 10/15/2019 | — | — | — | — | |||||||||||||||||||||||||||||
84,821 | — | 46.03 | 10/15/2019 | — | — | — | — | |||||||||||||||||||||||||||||
121,683 | — | 39.54 | 10/15/2019 | — | — | — | — |
1. | Under our |
2. | Reflects the portion of the fiscal |
3. | Reflects the portion of the fiscal |
4. | Reflects the portion of the fiscal |
5. | The value |
6. | Reflects the portion of the fiscal 2018 PSUs that may be earned based on the degree of achievement of the annual financial performance goals (adjusted EPS and adjusted RONA goals) for the third year within the three-year performance period of the award. These units, to the extent earned, will vest on November 10, 2020, generally subject to the named executive officer’s continued employment through the vesting date. The number of shares shown for each named executive officer’s |
7. | Reflects the portion of the fiscal 2019 PSUs that may be earned based on the degree of achievement of the annual financial performance goals (adjusted EPS and adjusted RONA goals) for the second and third year within the three-year performance period of the award. These units, to the extent earned, will vest on November 9, 2021, generally subject to the named executive officer’s continued employment through the vesting date. The number of shares shown for each named executive officer’s PSU award assumes the Company will achieve the target adjusted EPS |
Mr. Doubman forfeited these TSUs and PSUs upon the termination of |
50 CABOT CORPORATION
Executive Compensation(continued)
Option Exercises and Stock Vested Table
The following table shows the options exercisedTSUs and PSUs that vested for each named executive officer during fiscal 2019. There were no option exercises by our named executive officers and the restricted stock units that vested for each officer during fiscal 2016. The value of options realized on exercise is the difference between the market price of the shares at exercise and the exercise price, multiplied by the number of shares acquired on exercise.2019. The value of stock realized on the vesting of time-based restricted stock unitsTSUs is the product of the number of shares vested and the closing price of our common stock on the vesting date. The value of stock realized on the vesting of performance-based restricted stock unitsPSUs is the product of the number of shares vested and the closing price of our common stock on the settlement date.
Option Awards | Stock Awards(1) | |||||||||||||||
Name | Number of Shares Acquired On Exercise (#) | Value Realized on Exercise ($) | Number of Settlement | Value Realized on Vesting/ Settlement ($) | ||||||||||||
S.D. Keohane | — | — | 6,639 | 273,228 | ||||||||||||
E.E. Cordeiro | 27,073 | 461,107 | 8,852 | 364,305 | ||||||||||||
N.S. Cross | 21,584 | 348,461 | 6,197 | 255,037 | ||||||||||||
B.A. Berube | 8,489 | 129,406 | 6,197 | 255,037 | ||||||||||||
H.C. Kalkstein | — | — | 3,080 | 126,786 | ||||||||||||
F. Von Gottberg | — | — | 6,197 | 255,037 | ||||||||||||
P.M. Prevost | 170,000 | 4,772,004 | 189,340 | 9,044,887 |
Stock Awards | ||||||||
Name | Number of Shares Acquired On Vesting (#) | Value Realized on Vesting ($) | ||||||
Sean D. Keohane
|
|
32,019
|
|
|
1,542,384
|
| ||
Erica McLaughlin
|
|
3,641
|
|
|
175,451
|
| ||
Karen A. Kalita
|
|
1,820
|
|
|
87,701
|
| ||
Hobart C. Kalkstein
|
|
8,880
|
|
|
427,863
|
| ||
Brian A. Berube
|
|
23,986
|
|
|
1,122,618
|
| ||
John R. Doubman
|
|
8,045
|
|
|
387,641
|
|
50 CABOT CORPORATION
2020 PROXY STATEMENT |
Executive Compensation(continued)
Cabot’s salaried employees in the U.S. who were employees prior to January 1, 2014 (including each of our named executive officers other than Mr. Cross)officers) participate in Cabot’s Cash Balance Plan and, in certain cases, our Supplemental Cash Balance Plan. The Cash Balance Plan and the Supplemental Cash Balance Plan were each frozen on December 31, 2013, and no further benefits will accrue under those plans.
Cabot’s salaried employees in Switzerland (including Mr. Cross) participate in the AXA Foundation for Occupational BenefitsAXA-Winterthur (the Swiss Pension Plan).
The benefits provided under these plans are described below.
Cash Balance Plan
The Cash Balance Plan is a funded,tax-qualified defined benefit plan. Prior to January 1, 2014, participants in the Cash Balance Plan accrued benefits from defined notional contributions(“pay-based credits”) in an amount equal to 3% of eligible compensation during their first five years of service, 3.5% during their next five years of service and 4% for years after ten years of service. Additional credits of 2% of earnings were provided on eligible compensation in excess of the Social Security wage base. Eligible compensation included base salary and short-term incentive bonus payments. Participants also received a guaranteed rate of return (“interest-based credits”) on their account balances.
The Cash Balance Plan was terminated effective July 31, 2019 and following the regulatory process, including application for a Determination Letter from the IRS, the plan is expected to be fully settled during fiscal 2020 through the payment of lump sums and purchase of annuities.
While the plan is frozen, interest-based credits are earned on account balances during a calendar year at theone-year U.S. Treasury bill rate determined as of November of the previous year until the participant begins receiving benefit payments.payments or until July 31, 2019, if earlier. For calendar year 2016,2019, through July 31, 2019, the interest credit rate was 0.48%2.70%. Effective July 31, 2019, as a result of the plan termination, the annual interest credit rate was fixed to 0.86%, which is the average of annual interest credit rates for the five-year period ending on July 31, 2019. At retirement at any age or other termination of employment, a participant eligible for benefits may receive his or her vested account balance in a lump sum payment or in a monthly pension having an equivalent actuarial value.
CABOT CORPORATION 51
Executive Compensation(continued)
Participants are 100% vested in Cabot’s contributions to their accounts after three years of employment with Cabot. As of September 30, 2016,2019, all of our named executive officers were fully vested in their account balances under the Cash Balance Plan.
Supplemental Cash Balance Plan
The Supplemental Cash Balance Plan is an unfunded,non-qualified defined benefit plan created to provide benefits in circumstances where maximum limits established under the Internal Revenue Code prevent participants from receiving some of the benefits that would otherwise be provided under the Cash Balance Plan. The Internal Revenue Code limits the amount of compensation that can be taken into account annually to determine benefits under thetax-qualified Cash Balance Plan. The Supplemental Cash Balance Plan was intended to provide eligible employees the same benefits they would have earned under the Cash Balance Plan if this compensation limit did not apply.
The material terms and conditions of the Supplemental Cash Balance Plan are the same as those of the Cash Balance Plan except that benefits otherwise payable from the Supplemental Cash Balance Plan will be forfeited if a participant’s employment is terminated for cause.
Swiss Pension Plan
The Swiss Pension Plan is a cash balance pension plan that provides benefits upon retirement and upon death or disability. Employees and the Company both make contributions to the plan according to anage-related contribution scale. Since the time Mr. Cross became an employee of Cabot’s subsidiary in Switzerland, he has been required to make an annual contribution of a percentage of his base salary depending on his age during the year (equal to 6% in 2015 and 7.6% in 2016) to fund retirement benefits plus an amount equal to 1% of his base salary to fund approximately 50% of the cost of his death and disability benefits and administrative expenses. In addition, the Company has made an annual contribution to Mr. Cross’s account in an amount equal to a percentage of his base salary based on his age (9% in 2015 and 11.4% in 2016) to fund his retirement benefits plus an amount equal to approximately 1% of his base salary to fund the balance of the costs for his death and disability benefits and administrative expenses. Employees, including Mr. Cross, may elect to contribute additional amounts in excess of their minimum required contribution without affecting the Company contributions. Interest is credited to the total retirement account balance annually at a rate determined by the Board of Trustees of AXA Foundation for Occupational BenefitsAXA-Winterthur, the administrator of the Swiss Pension Plan. The interest rate for calendar year 2016 was 1.25%. The amount of the annual retirement pension is based on the accrued retirement account balance on the retirement date and is calculated using the applicable pension conversion rate. At retirement, the employee may choose to draw part or all of the retirement benefit in a lump sum with any balance paid in an annual pension. The death and disability benefits, which are funded by insurance in the plan purchased with the employee and Company contributions described above, are paid as an annual pension as described under the heading “Potential Payments Under Termination or Change in Control”.
The plan also provides for monthly disability and death benefits as described below under the heading “Potential Payments Under Termination or Change in Control”.
52CABOT CORPORATION 51
|
Executive Compensation(continued)
Pension Benefits Table
The following table shows the actuarial present value of each named executive officer’s accumulated benefits under the pension plan(s) in which he or she participated as of September 30, 2016,2019, the last day of our most recent fiscal year, and the pension plan measurement date used for financial statement reporting purposes for our fiscal 20162019 financial statements. None of the named executive officers received a payment under these plans during fiscal 2016.2019.
Name | Plan Name | Number of Years of Credited Service (#)(1) | Present Value of Accumulated Benefit ($)(2), (3) | |||||||
S.D. Keohane | Cash Balance Plan Supplemental Cash Balance Plan |
| 11 11 |
|
| 121,733 132,051 |
| |||
E.E. Cordeiro | Cash Balance Plan Supplemental Cash Balance Plan |
| 15 15 |
|
| 166,287 242,398 |
| |||
N.S. Cross | Swiss Pension Plan | 7 | 507,700 | |||||||
B.A. Berube | Cash Balance Plan Supplemental Cash Balance Plan |
| 19 19 |
|
| 216,463 205,140 |
| |||
H.C. Kalkstein | Cash Balance Plan Supplemental Cash Balance Plan |
| 9 9 |
|
| 92,290 25,075 |
| |||
F. Von Gottberg | Cash Balance Plan Supplemental Cash Balance Plan |
| 16 16 |
|
| 157,628 141,021 |
| |||
P.M. Prevost | Cash Balance Plan Supplemental Cash Balance Plan |
| 6 6 |
|
| 62,785 500,013 |
|
Name | Plan Name | Number of Years | Present Value of Accumulated Benefit ($)(2)(3) | |||||||||
Sean D. Keohane | Cash Balance Plan Supplemental Cash Balance Plan | 11 11 | 103,292 138,850 | |||||||||
Erica McLaughlin | Cash Balance Plan Supplemental Cash Balance Plan | 11 11 | 67,938 6,376 | |||||||||
Karen A. Kalita | Cash Balance Plan Supplemental Cash Balance Plan | 5 5 | 29,147 — | |||||||||
Hobart C. Kalkstein | Cash Balance Plan Supplemental Cash Balance Plan | 9 9 | 74,746 26,474 | |||||||||
Brian A. Berube | Cash Balance Plan Supplemental Cash Balance Plan | 19 19 | 199,989 214,082 | |||||||||
John R. Doubman | Cash Balance Plan Supplemental Cash Balance Plan | 7 7 | 61,040 22,762 |
1. | Credited service for the Cash Balance Plan and Supplemental Cash Balance Plan represents years of service with Cabot as of December 31, 2013, the date the plans were frozen, rounded to the nearest whole year. |
2. |
The following assumptions were used in the calculations: |
Cash Balance Plan | Supplemental Cash Balance Plan | Swiss Pension Plan |
Cash Balance Plan
|
Supplemental Cash Balance Plan
| ||||||||||||||||||
Measurement Date | 9/30/2016 | 9/30/2016 | 9/30/2016 |
|
9/30/2019
|
|
|
9/30/2019
|
| |||||||||||||
Discount Rate (for present value calculation) | 3.38 | % | 2.96 | % | 0.25 | % |
|
2.63
|
%
|
|
2.81
|
%
| ||||||||||
Form of benefit | Lump sum | Lump sum |
| 80% pension 20% lump sum |
|
|
Lump sum
|
|
|
Lump sum
|
| |||||||||||
Retirement Date | Age 65 | Age 65 | Age 65 |
|
Age 65
|
|
|
Age 65
|
|
3. | For the Cash Balance Plan the account balances as of September 30, 2019 for Mr. Keohane, Ms. McLaughlin, Ms. Kalita, Mr. Kalkstein, Mr. Berube, and Mr. Doubman were $128,653, $99,330, $44,371, $97,778, $227,747, and $81,951, respectively. As of July 31, 2019 the interest crediting rate for the plan was fixed at 0.86%. For the Supplemental Cash Balance Plan the account balances as of September 30, 2019 for Mr. Keohane, Ms. McLaughlin, Mr. Kalkstein, Mr. Berube, and Mr. Doubman were $130,895, $5,757, $24,630, $206,735, and $21,030 respectively. Ms. Kalita does not have a benefit under the Supplemental Cash Balance Plan. As of September 30, 2019 the assumed interest crediting rate for the plan was 3.25%. The actual interest crediting rate will be determined annually for the Supplemental Cash Balance Plan. The differences between the actual account balances and the present values reported above are a result of how the assumed interest crediting rates for each plan relates to the discount rate and the methodology used to determine present values under US GAAP accounting and SEC rules. |
52CABOT CORPORATION 53
|
Executive Compensation(continued)
The following narrative and table describedescribes benefits provided under Cabot’s Deferred Compensation Plan, 401(k) Plan and Supplemental 401(k) Plan.
Deferred Compensation Plan
Our Deferred Compensation Plan is a nonqualified plan that permits certain employees in the U.S. to voluntarily defer in any year up to 50% of their base salary and up to 100% of any short-term incentive and sales incentive bonus awarded. Under this plan, participants receive a credit equal to 10% of the amount they defer, which is intended to account for the fact that any compensation that is deferred is not eligible compensation for purposes of Company contributions under the 401(k) Plan or the Supplemental 401(k) Plan. All of our named executive officers are eligible to participate in the Deferred Compensation Plan, except forbut only Mr. Cross, who is not a U.S.-based employee. Messrs. Cordeiro, Berube, Kalkstein von Gottberg, and Prevost made contributions to the plan for fiscal year 2016.2019.
All deferred amounts are credited with interest at a rate equal to the Moody’s Corporate Bond Rate for the month of November prior to the beginning of the applicable calendar year. Amounts that are deferred in a particular year are credited to a participant’s account as if they were invested in the account on the first day of the applicable calendar year and notional interest is applied as if the participant had earned the deferred amount on the first day of the calendar year. Earnings are compounded daily. The Moody’s rate used to calculate interest payable for calendar year 20162019 was 4.62%4.64%. Participants in the Deferred Compensation Plan can elect to defer receipt of their eligible compensation until a specified date (“in service(an“in-service election”) or until they cease to be employees of Cabot (“termination/(a “termination/retirement election”). Participants may elect to receive deferred amounts in a lump sum payment, in installments over a period of up to five years in the case of anin-service election or, if the participant’s account balance is at least $50,000, in installments over a period of up to ten years for a termination/retirement election.
401(k) Plan and Supplemental 401(k) Plan
Under the 401(k) Plan, atax-qualified defined contribution plan in which Cabot’s U.S.-based named executive officers and other employees in the U.S. participate, (with variations for employees covered by collective bargaining agreements), Cabot makes a retirement contribution equal to 4% of a participant’s eligible compensation (consisting of base salary and cash bonuses) and a matching contribution of 100% of a participant’s contribution, up to 6% of the participant’s eligible compensation. These Company contributions are allocated to the participant’s account in accordance with his or her investment elections.
The Supplemental 401(k) Plan is an unfunded,non-qualified defined contribution plan under which we provide credits to executive officers and certain other employees in the U.S. that cannot be made under the 401(k) Plan due to limitations imposed by the Internal Revenue Code. Credits to the Supplemental 401(k) Plan are made at the same percentage of pay that Company contributions would have been made under the 401(k) Plan were it not for the limitations imposed by the Internal Revenue Code. Amounts credited to the Supplemental 401(k) Plan are treated as if invested in Cabot common stock. Participants may elect to receive distributions in a lump sum payment after separation from service or, if a participant’s account balance is at least $50,000, in installments over a period of three, five or ten years beginning after separation from service. All distributions are made in shares of Cabot common stock, with the exception of thoseexcept that for certain grandfathered accounts whichdistributions are made in cash. None of our named executive officers have grandfathered accounts.
Under both the 401(k) Plan and Supplemental 401(k) Plan, participants are immediately vested in the matching contributions and vested in theother Cabot retirement contributions after two years of employment with Cabot. All of our named executive officers are fully vested in their account balances under these plans.
54CABOT CORPORATION 53
|
Executive Compensation(continued)
Nonqualified Deferred Compensation Table
The following table provides information with respect to the Supplemental 401(k) Plan and the Deferred Compensation Plan for fiscal 2016.2019.
Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate ($)(3) | Aggregate Distributions ($) | Aggregate ($)(4) | |||||||||||||||
S.D. Keohane Supplemental 401(k) Plan | — | 114,646 | 235,533 | — | 685,111 | |||||||||||||||
E.E. Cordeiro Deferred Compensation Plan Supplemental 401(k) Plan |
| 318,000 — |
|
| 31,800 41,215 |
|
| 38,663 349,219 |
|
| 123,936 — |
|
| 945,080 884,078 |
| |||||
N.S. Cross | — | — | — | — | — | |||||||||||||||
B.A. Berube Deferred Compensation Plan Supplemental 401(k) Plan |
| 63,250 — |
|
| 6,325 34,533 |
|
| 31,678 321,746 |
|
| — — |
|
| 746,680 816,721 |
| |||||
H.C. Kalkstein Deferred Compensation Plan Supplemental 401(k) Plan |
| 51,154 — |
|
| 5,115 21,372 |
|
| 7,100 41,731 |
|
| — — |
|
| 170,478 125,691 |
| |||||
F. von Gottberg Deferred Compensation Plan Supplemental 401(k) Plan |
| 3,150 — |
|
| 315 37,685 |
|
| 30,213 218,463 |
|
| — — |
|
| 694,188 568,296 |
| |||||
P.M. Prevost Deferred Compensation Plan Supplemental 401(k) Plan |
| 1,166,000 — |
|
| 116,600 61,154 |
|
| 214,035 846,462 |
|
| 848,222 — |
|
| 5,037,185 2,103,247 |
|
Name
|
Executive
|
Registrant
|
Aggregate ($)(3)
|
Aggregate Distributions ($)
|
Aggregate Balance ($)(4)
| ||||||||||||||||||||
Sean D. Keohane Supplemental 401(k) Plan |
|
—
|
|
|
167,158
|
|
|
(275,414
|
)
|
|
—
|
|
|
1,178,988
|
| ||||||||||
Erica McLaughlin Supplemental 401(k) Plan |
|
—
|
|
|
41,471
|
|
|
(10,309
|
)
|
|
—
|
|
|
109,893
|
| ||||||||||
Karen A. Kalita Deferred Compensation Plan Supplemental 401(k) Plan
|
|
— —
|
|
|
— 9,181
|
|
|
4,751 (155
|
)
|
|
— —
|
|
|
111,574 24,015
|
| ||||||||||
Hobart C. Kalkstein Deferred Compensation Plan Supplemental 401(k) Plan
|
|
70,000 —
|
|
|
7,000 33,983
|
|
|
15,345 (51,189
|
)
|
|
— —
|
|
|
377,724 237,507
|
| ||||||||||
Brian A. Berube Deferred Compensation Plan Supplemental 401(k) Plan
|
|
— —
|
|
|
— 10,338
|
|
|
32,448 (267,503
|
)
|
|
291,621 155,350
|
|
|
582,781 710,164
|
| ||||||||||
John R. Doubman Deferred Compensation Plan Supplemental 401(k) Plan
|
|
— —
|
|
|
— 11,487
|
|
|
6,390 (45,370
|
)
|
|
— —
|
|
|
150,194 182,448
|
|
1. | The amounts contributed by |
2. | These amounts represent credits by Cabot accrued under the Deferred Compensation Plan and the Supplemental 401(k) Plan and are reported in the Summary Compensation Table on page |
3. | For the Deferred Compensation Plan, earnings represent the amount credited based on the Moody’s interest rate for the year. For the Supplemental 401(k) Plan, earnings represent the value of dividends earned and investment gains or losses as if the account balance had been invested in Cabot common stock. The portion of the earnings that represents above-market interest (the portion exceeding 120% of the applicable federal long-term rate) under Cabot’s Deferred Compensation Plan is reported in the Summary Compensation Table on page 45 under the heading “Change in Pension Value and Nonqualified Deferred Compensation Earnings”. |
4. | The aggregate balance amounts under the Deferred Compensation Plan include deferrals made for prior fiscal years. For individuals who were named executive officers in the fiscal years in which the deferrals were made, the amount of the deferred compensation was included in such individuals’ compensation as reported in the Summary Compensation Table included in the proxy statement for each such fiscal year. |
Potential Payments Upon Termination or Change in Control
Our named executive officers are eligible to receive certain benefits upon a change in control or if their employment is terminated, including following a change in control. This section describes various change in control and termination of employment scenarios and the payments and benefits payable under those scenarios. A table quantifying the estimated payments and benefits assuming a termination of employment and/or a change in control, as applicable, occurred on September 30, 20162019 follows this narrative description. For Mr. Prevost, the table reflects the amounts payable to him upon his termination of employment on July 15, 2016.
CABOT CORPORATION 55
Executive Compensation(continued)
Potential Payments Following a Change in Control
Severance Plan
Participants in our Senior Management Severance Protection Plan (the “Severance Plan”) are determined by our Compensation Committee and as of September 30, 20162019 consisted of twelvethirteen of our senior managers, including all of our currently employed named executive officers.
54 CABOT CORPORATION
2020 PROXY STATEMENT |
Executive Compensation(continued)
Under the Severance Plan, participants are entitled to severance payments if their employment with Cabot terminates within two years following a change in control (for any reason other than cause, disability, death, or a termination initiated by the participant without good reason). Under the Severance Plan, Mr. Keohane is entitled to a lump sum payment equal to three times the sum of his base salary and bonus (each, as determined below) and continued health and welfare benefits for a period of three years (i.e., medical and dental and prescription drug benefits;benefits, long-term disability coverage;coverage, and life insurance) and the other named executive officersMses. McLaughlin and Kalita and Mr. Kalkstein are each entitled to a lump sum payment equal to two times the sum of their base salary and bonus (each, as determined below) and continued health and welfare benefits for a period of two years. Prior to their terminations of employment, Messrs. Berube and Doubman were each entitled to these same severance benefits. In addition, under the Severance Plan, each participant is entitled to receive apro-rated bonus with respect to the fiscal year in which the termination occurs and outplacement services in an amount up to 15% of his or her base salary.
Base salary under the Severance Plan is calculated at the greater of the rate in effect (i) immediately before the change in control or (ii) as of the participant’s employment termination date. The bonus is calculated at the greater of (i) the participant’s target annual incentive bonus for the fiscal year in which the change in control occurs or the fiscal year in which the participant’s employment is terminated, whichever was greater or (ii) the highest annual incentive bonus amount paid or payable to the participant for any of the three fiscal years preceding the fiscal year in which the change in control occurs.
The Severance Plan also includes a “better of” provision. Under this provision, a participant will be entitled to receive either the full amount of payments (and pay any applicable excise tax imposed by Section 4999 of the Internal Revenue Code) or such lesser amount that is not subject to the excise tax, whichever results in the greaterafter-tax benefit to him or her.
The provision of benefits under any other plan or program provided by Cabot or its affiliates, or pursuant to any agreement with Cabot or its affiliates, or by law, counts toward our obligation to provide the benefits under the Severance Plan so that the benefits are not duplicative.
Retirement and Equity Incentive Plans
The accrued account balances under the Cash Balance Plan, Supplemental Cash Balance Plan, 401(k) Plan and Supplemental 401(k) Plan immediately vest and become payable upon a change in control of Cabot. All of our named executive officers are vested in their account balances under these plans.
Upon a change in control of Cabot, the Compensation Committee, as administrator of our 2017 Long-Term Incentive Plan and our 2009 Long-Term Incentive Plan, will have discretion to provide for the assumption or continuation of some or all outstanding awards or any portion of an award, the grant of new awards in substitution by the acquirer or survivor, or thecash-out of some or all awards. Further, the Compensation Committee retains authority to accelerate the vesting of awards. The Compensation Committee has provided, and intends to continue to provide, for “double trigger” vesting upon a change in control. This means that if an award remains outstanding following a change in control, such as if the acquiring company assumes the award, vesting would be accelerated only if the participant’s employment was involuntarily terminated without cause or by the participant for good reason within two years following the change in control.
Termination of Employment Upon Disability or Death
For Cabot’s full-time employees based in the U.S., including Messrs. Keohane, Cordeiro, Berube, Kalkstein and von Gottberg,our currently employed named executive officers, a termination of employment upon disability is determined under the terms of Cabot’s long-term disability plan and occursis deemed to occur one year following the date of disability. A U.S.-based employee who becomes disabled would receive (i) benefits under our long-term disability plan, and (ii) continued participation in our medical, dental, and life insurance plans in accordance with the terms of those plans if the employee has completed ten years of service with Cabot. We have not included a value for these benefits in the table on page 58pages 57-58 because the plans do not discriminate in scope, terms or
56 CABOT CORPORATION
Executive Compensation(continued)
operation in favor of our named executive officers compared to the benefits offered to all salaried U.S. employees. In addition, the accrued account balances under the Cash Balance Plan, Supplemental Cash Balance Plan, 401(k) Plan and Supplemental 401(k) Plan immediately vest and become payable upon termination of employment by reason of death or disability. Messrs. Keohane, Cordeiro, Berube, Kalkstein and von Gottberg are vested in their account balances under these plans. Mr. Cross would receive disability and death benefits under the Swiss Pension Plan. 50% of these benefits are funded by employee contributions and 50% are funded by employer contributions. In the event of disability due to sickness, after 24 months the Swiss Pension Plan provides benefits to the employee equal to 50% of his pensionable salary and to the employee’s eligible children equal to 5% of the disabled parent’s pensionable salary. Children are eligible to receive this benefit up to age 18, or up to age 25 if still in education. The pension is paid to the employee until death. In the event of death the Swiss Pension Plan provides an annuity benefit to surviving spouses or partners equal to 30% of pensionable salary and to such employee’s children on the same eligibility criteria described above equal to 5% of the pensionable salary. This benefit is payable for the lifetime of the surviving spouse or partner and, in the case of children, while they meet the eligibility criteria.
CABOT CORPORATION 55
2020 PROXY STATEMENT |
Executive Compensation(continued)
Under the terms of Cabot’s 2017 Long-Term Incentive Plan and 2009 Long-Term Incentive Plan, if any participant (including a named executive officer) ceases to be an employee because of disability or death, his or her unvested stock options and unvested restricted stock unitsTSUs would immediately vest. In the case of performance-based restricted stock units,PSUs, the total number of units that vests is the sum of the units that have been earned or “banked” based upon performance as of the date of the termination of employment.
We provide the U.S.-basedeach of our currently employed named executive officers with a death benefit under our Death Benefit Protection Plan equal to three times their base salary up to a maximum benefit of $3,000,000, which is payable to their beneficiary at the time of their death. Mr. Cross is provided with life insurance coverage under the life insurance plan for international assignees that provides a benefit equalPrior to two times base salary uptheir terminations of employment, Messrs. Berube and Doubman were each entitled to a maximum benefit of $300,000, which is payable to his designated beneficiary in a lump sum in the event of his death.these same death and disability benefits.
Termination of Employment Upon Retirement
Upon retirement, participants in the Cash Balance Plan and Supplemental Cash Balance Plan are entitled to receive benefit payments, and participants in the 401(k) Plan and the Supplemental 401(k) Plan may receive a distribution of their account balances. Participants in the Swiss Pension PlanU.S. retirement plans are entitled to receive benefits under that planeligible for early retirement upon retirement.attaining age 55 and completing at least 10 years of service. As of September 30, 2016,2019, none of our currently employed named executive officers met the eligibility criteria for early retirement under these plans. Prior to his termination of employment, Mr. Berube was eligible for early retirement under these plans.
Under our current arrangements, a named executive officer may also be eligible to receive retiree welfare benefits provided to comparably-situated employees.benefits. These retiree welfare benefits are not included in the table on page 58pages 57-58 because these benefit plans do not discriminate in scope, terms or operation in favor of our named executive officers compared to the benefits offered to all U.S. salaried employees.
Termination for Cause or Voluntarily Without Good Reason
As described above, a named executive officer would not receiveno severance payments under the terms of the Severance Plan are payable if hisa participant’s employment is terminated for cause or if he or she terminates his employment without good reason. He also would not receiveIn addition, no benefits are payable under the terms of our Supplemental 401(k) Plan or Supplemental Cash Balance Plan if hisa participant’s employment is terminated for cause.
56CABOT CORPORATION 57
|
Executive Compensation(continued)
Potential Payments Upon Termination or Change in Control Table
The following table and footnotes present potential payments to each of our currently employed named executive officer other than Mr. Prevost under various circumstances as if the named executive officer’s employment had been terminated on September 30, 2016,2019, the last business day of fiscal 2016 2019 and/or if a change in control had occurred on such date. For Mr. Prevost,Doubman, the disclosure in the table below shows only the payments made or to be made to him under the terms of his transition and separation agreement. Mr. Berube did not receive any severance payments or benefits in connection with his termination of employment, on July 15, 2016.other than the extended exercise period for his vested stock options as described in the Compensation Discussion and Analysis section above. The incremental fair value associated with such extension for accounting purposes is included in the Summary Compensation Table above.
Severance Pay(1)($) | Accelerated Unvested Equity(2)($) | Incremental Value of Modified Vested Stock Options(2) ($) | Pension Plan Benefits not reported in Pension Plan Table(3)($) | Benefits and Perquisites(4)($) | Total($)(5) | Severance Pay(1)($)
| Accelerated Unvested Equity(2)($)
| Pension Plan Benefits not reported in Pension Plan Table(3)($)
| Benefits and Perquisites(4)($)
| Total($)(5)
| |||||||||||||||||||||||||||||||||||||||
S.D. Keohane | |||||||||||||||||||||||||||||||||||||||||||||||||
Sean D. Keohane
| |||||||||||||||||||||||||||||||||||||||||||||||||
Death | — | 2,244,614 | — | 1,677 | 2,550,000 | 4,796,291 |
|
—
|
|
|
5,898,217
|
|
|
25,361
|
|
|
3,000,000
|
|
|
8,923,578
|
| ||||||||||||||||||||||||||||
Disability | — | 2,244,614 | — | 1,677 | — | 2,246,291 |
|
—
|
|
|
5,898,217
|
|
|
25,361
|
|
|
—
|
|
|
5,923,578
|
| ||||||||||||||||||||||||||||
Voluntary Termination/Involuntary | — | — | — | 1,677 | — | 1,677 |
|
—
|
|
|
—
|
|
|
25,361
|
|
|
—
|
|
|
25,361
|
| ||||||||||||||||||||||||||||
Involuntary Termination (for cause) | — | — | — | 1,677 | — | 1,677 |
|
—
|
|
|
—
|
|
|
25,361
|
|
|
—
|
|
|
25,361
|
| ||||||||||||||||||||||||||||
Termination if Change in Control | 4,626,000 | 2,846,543 | — | 1,677 | 191,841 | 7,666,061 | |||||||||||||||||||||||||||||||||||||||||||
Involuntary Termination within 2 years following a Change in Control (without cause or for good reason)
|
|
7,701,000
|
|
|
7,189,746
|
|
|
25,361
|
|
|
227,229
|
|
|
15,143,336
|
| ||||||||||||||||||||||||||||||||||
Change in Control | — | — | — | 1,677 | — | 1,677 |
|
—
|
|
|
—
|
|
|
25,361
|
|
|
—
|
|
|
25,361
|
| ||||||||||||||||||||||||||||
E.E. Cordeiro | |||||||||||||||||||||||||||||||||||||||||||||||||
Erica McLaughlin
| |||||||||||||||||||||||||||||||||||||||||||||||||
Death | — | 3,003,416 | — | 2,264 | 1,650,000 | 4,655,680 |
|
—
|
|
|
735,770
|
|
|
31,392
|
|
|
1,380,000
|
|
|
2,147,162
|
| ||||||||||||||||||||||||||||
Disability | — | 3,003,416 | — | 2,264 | — | 3,005,680 |
|
—
|
|
|
735,770
|
|
|
31,392
|
|
|
—
|
|
|
767,162
|
| ||||||||||||||||||||||||||||
Voluntary Termination/Involuntary | — | — | — | 2,264 | — | 2,264 |
|
—
|
|
|
—
|
|
|
31,392
|
|
|
—
|
|
|
31,392
|
| ||||||||||||||||||||||||||||
Involuntary Termination (for cause) | — | — | — | 2,264 | — | 2,264 |
|
—
|
|
|
—
|
|
|
31,392
|
|
|
—
|
|
|
31,392
|
| ||||||||||||||||||||||||||||
Termination if Change in Control | 1,876,000 | 3,445,494 | — | 2,264 | 125,066 | 5,448,824 | |||||||||||||||||||||||||||||||||||||||||||
Involuntary Termination within 2 years following a Change in Control (without cause or for good reason)
|
|
1,564,000
|
|
|
947,641
|
|
|
31,392
|
|
|
117,654
|
|
|
2,660,687
|
| ||||||||||||||||||||||||||||||||||
Change in Control | — | — | — | 2,264 | — | 2,264 |
|
—
|
|
|
—
|
|
|
31,392
|
|
|
—
|
|
|
31,392
|
| ||||||||||||||||||||||||||||
N.S. Cross | |||||||||||||||||||||||||||||||||||||||||||||||||
Karen A. Kalita
| |||||||||||||||||||||||||||||||||||||||||||||||||
Death
|
|
—
|
|
|
331,376
|
|
|
15,224
|
|
|
1,005,000
|
|
|
1,351,600
|
| ||||||||||||||||||||||||||||||||||
Disability
|
|
—
|
|
|
331,376
|
|
|
15,224
|
|
|
—
|
|
|
346,600
|
| ||||||||||||||||||||||||||||||||||
Voluntary Termination/Involuntary
|
|
—
|
|
|
—
|
|
|
15,224
|
|
|
—
|
|
|
15,224
|
| ||||||||||||||||||||||||||||||||||
Involuntary Termination (for cause)
|
|
—
|
|
|
—
|
|
|
15,224
|
|
|
—
|
|
|
15,224
|
| ||||||||||||||||||||||||||||||||||
Involuntary Termination within 2 years following a Change in Control (without cause or for good reason)
|
|
889,626
|
|
|
421,427
|
|
|
15,224
|
|
|
52,699
|
|
|
1,378,976
|
| ||||||||||||||||||||||||||||||||||
Change in Control
|
|
—
|
|
|
—
|
|
|
15,224
|
|
|
—
|
|
|
15,224
|
| ||||||||||||||||||||||||||||||||||
Hobart C. Kalkstein
| |||||||||||||||||||||||||||||||||||||||||||||||||
Death | — | 1,661,299 | — | 428,500 | 300,000 | 2,389,799 |
|
—
|
|
|
1,146,641
|
|
|
23,032
|
|
|
1,392,600
|
|
|
2,562,273
|
| ||||||||||||||||||||||||||||
Disability | — | 1,661,299 | — | 81,000 | — | 1,742,299 |
|
—
|
|
|
1,146,641
|
|
|
23,032
|
|
|
—
|
|
|
1,169,673
|
| ||||||||||||||||||||||||||||
Voluntary Termination/Involuntary | — | — | — | — | — | — |
|
—
|
|
|
—
|
|
|
23,032
|
|
|
—
|
|
|
23,032
|
| ||||||||||||||||||||||||||||
Involuntary Termination (for cause) | — | — | — | — | — | — |
|
—
|
|
|
—
|
|
|
23,032
|
|
|
—
|
|
|
23,032
|
| ||||||||||||||||||||||||||||
Termination if Change in Control | 1,400,674 | 2,014,962 | — | — | 141,395 | 3,557,031 | |||||||||||||||||||||||||||||||||||||||||||
Involuntary Termination within 2 years following a Change in Control (without cause or for good reason)
|
|
1,809,536
|
|
|
1,379,586
|
|
|
23,032
|
|
|
118,733
|
|
|
3,330,887
|
| ||||||||||||||||||||||||||||||||||
Change in Control | — | — | — | — | — | — |
|
—
|
|
|
—
|
|
|
23,032
|
|
|
—
|
|
|
23,032
|
| ||||||||||||||||||||||||||||
B.A. Berube | |||||||||||||||||||||||||||||||||||||||||||||||||
Death | — | 2,023,848 | — | 1,992 | 1,215,000 | 3,240,840 | |||||||||||||||||||||||||||||||||||||||||||
Disability | — | 2,023,848 | — | 1,992 | — | 2,025,840 | |||||||||||||||||||||||||||||||||||||||||||
Voluntary Termination/Involuntary | — | — | — | 1,992 | — | 1,992 | |||||||||||||||||||||||||||||||||||||||||||
Involuntary Termination (for cause) | — | — | — | 1,992 | — | 1,992 | |||||||||||||||||||||||||||||||||||||||||||
Termination if Change in Control | 1,302,000 | 2,333,329 | — | 1,992 | 102,585 | 3,739,906 | |||||||||||||||||||||||||||||||||||||||||||
Change in Control | — | — | — | 1,992 | — | 1,992 | |||||||||||||||||||||||||||||||||||||||||||
John R. Doubman
|
|
592,500
|
|
|
—
|
|
|
20,911
|
|
|
108,009
|
|
|
721,420
|
|
58CABOT CORPORATION 57
|
Executive Compensation(continued)
Severance Pay(1)($) | Accelerated Unvested Equity(2)($) | Incremental Value of Modified Vested Stock Options(2) ($) | Pension Plan Benefits not reported in Pension Plan Table(3)($) | Benefits and Perquisites(4)($) | Total($)(5) | |||||||||||||||||||
H.C. Kalkstein | ||||||||||||||||||||||||
Death | — | 719,833 | — | 1,502 | 1,125,000 | 1,846,335 | ||||||||||||||||||
Disability | — | 719,833 | — | 1,502 | — | 721,335 | ||||||||||||||||||
Voluntary Termination/Involuntary | — | — | — | 1,502 | — | 1,502 | ||||||||||||||||||
Involuntary Termination (for cause) | — | — | — | 1,502 | — | 1,502 | ||||||||||||||||||
Termination if Change in Control | 1,170,000 | 891,266 | — | 1,502 | 97,163 | 2,159,931 | ||||||||||||||||||
Change in Control | — | — | — | 1,502 | — | 1,502 | ||||||||||||||||||
F. von Gottberg | ||||||||||||||||||||||||
Death | — | 1,499,748 | — | 2,379 | 1,170,000 | 2,672,127 | ||||||||||||||||||
Disability | — | 1,499,748 | — | 2,379 | — | 1,502,127 | ||||||||||||||||||
Voluntary Termination/Involuntary | — | — | — | 2,379 | — | 2,379 | ||||||||||||||||||
Involuntary Termination (for cause) | — | — | — | 2,379 | — | 2,379 | ||||||||||||||||||
Termination if Change in Control | 1,260,000 | 1,809,229 | — | 2,379 | 99,627 | 3,171,235 | ||||||||||||||||||
Change in Control | — | — | — | 2,379 | — | 2,379 | ||||||||||||||||||
P.M. Prevost | 1,529,253 | 9,019,987 | 778,702 | — | 66,243 | 11,394,185 |
1. | For Mr. |
For Mr. Keohane, severance pay is equal to three times the sum of (x) base salary and (y) the greater of (i) his highest bonus in the three fiscal years preceding fiscal |
2. |
The amounts for accelerated unvested equity include the following: (i) in the case of death or disability, the value of unvested |
3. | The pension plan benefit amounts in this column |
CABOT CORPORATION 59
Executive Compensation(continued)
4. | Continued perquisites and benefits include only those benefits provided to a named executive officer that are not provided to all employees generally. The |
The amount reported in the event of death represents an amount equal to three times base salary up to a maximum benefit of $3,000,000, which is payable in a lump sum to the named executive officer’s designated beneficiary under our Death Benefit Protection Plan, which is an insured benefit applicable to all currently employed named executive |
5. | Payments do not take into account the “better of” provision in the Severance Plan described above on page |
6058 CABOT CORPORATION
|
Executive Compensation(continued)
As required by the Item 402(u) of RegulationS-K, we are required to report on the relationship between the annual total compensation of our CEO, Mr. Keohane, and the median of the annual total compensation of our employees. For fiscal 2019, our CEO’s annual total compensation was $6,679,379 and the median of the annual total compensation of all employees of Cabot (excluding our CEO) was $68,660. Based on this information, our pay ratio is approximately 97 to 1. This ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of RegulationS-K.
In calculating the pay ratio, the SEC allows companies to adopt a variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions reflecting their unique employee populations. Therefore, our reported pay ratio may not be comparable to that reported by other companies due to differences in industries and geographical dispersion, as well as the different estimates, assumptions, and methodologies applied by other companies in calculating their pay ratios.
To identify the median of the annual compensation of all our employees as well as to determine the annual total compensation of our median employee we took the following steps:
We determined that, as of September 30, 2019, the last day of our most recent fiscal year, our employee population consisted of 4,552 full-time and part-time employees in the U.S. and foreign jurisdictions. We did not exclude anynon-U.S. employees from our worldwide employee population under any of the permitted exclusions.
To identify the median employee, we used annual base salary or base wages as our consistently applied compensation measure. We first determined each employee’s annual base salary or base wages reported in our global system of record for the twelve-month period ending on September 30, 2019. For any employees who were employed on September 30, 2019 but not for this full twelve-month period, we annualized their base salary or base wages. We converted all salaries and wages paid in a foreign currency to U.S. dollars using the currency conversion rate in effect on September 30, 2019.
After identifying our median employee, we calculated the annual total compensation of the median employee and our CEO in the following manner:
The median employee’s annual total compensation represents the amount of such employee’s compensation for fiscal 2019 that would have been reported in the Summary Compensation Table in accordance with the requirements of Item 402(c)(2)(x) of RegulationS-K if the employee was a named executive officer for fiscal 2019.
The annual total compensation of the CEO represents the amount reported in the “Total” column of our 2019 Summary Compensation Table included on page 45 of this proxy statement.
CABOT CORPORATION 59
2020 PROXY STATEMENT |
Proposal 2 — Advisory Approval of Executive Compensation
In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, we are providing stockholders the opportunity to vote on anon-binding, advisory resolution to approve the compensation of our named executive officers as disclosed on pages 24 - 6025-59 of this proxy statement (commonly referred to as“say-on-pay”).
ForWe believe that the compensation received by our named executive officers other than Mr. Prevost, the compensation they received in respect of fiscal year 20162019 appropriately aligned executive pay with our corporate performance. The portion of the short-term incentiveSTI awards paidearned on the basis of our corporate performance paid out at 99.5%74.1% of target awards.awards, reflecting solid results despite weakening macroeconomic and key sector indicators we experienced during fiscal 2019. The performance-based restricted stock unitPSU awards issuedgranted under our long-term incentiveLTI program are designed to produce the greatest rewards when strong results are sustained over time. Specifically, the number of shares issuable upon their vesting depends on the degree of achievement of financial performance metrics for each year within a three-year performance cycle. On the basis of our level of achievement in fiscal 2019 against the adjusted EPS and adjusted RONA goals applicable to the performance-based restricted stock unitPSU awards that were granted in 2014fiscal 2017 and vested in 2016,2019, our named executive officers received shareswho remained employees through the vesting date of stock equal to 41.5%these awards earned 134% of their target awards. Our fiscal 20162019 performance is summarized in the Executive Summary of our Compensation Discussion and Analysis.
The types of performance goals that we use for establishing the metrics for our executive compensation programs are the same as the ones we use when setting our business plan and the strategic objectives of the Company. The use of these metrics is intended to motivate behavior and executive decisions that will lead to the successful execution of our strategy. Our executive compensation programs also align the interests of our shareholdersstockholders and executives by tying compensation to the Company’s short- and long-term financial and strategic growth objectives. We believe this will create value for our shareholdersstockholders over time.
For these reasons, the Board is asking stockholders to support this proposal.approve, on an advisory basis, the compensation of our named executive officers.
The text of the resolution is as follows:
“VOTED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and the narrative discussion, is hereby APPROVED.”
Vote Required
Because the vote we are asking you to cast isnon-binding, there is no minimum vote required for approval. Our Board and the Compensation Committee value the views of our shareholdersstockholders and will consider the outcome of the vote when making future compensation decisions for our named executive officers. We believe that Cabot benefits from constructive dialog with our shareholders.stockholders. We will continue to reach out to our shareholdersstockholders on these and other important issues and we encourage our shareholdersstockholders to contact us. ShareholdersStockholders who wish to communicate with our Board should refer to “Communications with the Board” in this proxy statement for additional information on how to do so.
Recommendation
The Board of Directors believes that the compensation of our named executive officers is appropriate and recommends a vote “FOR” the approval of the compensation of our named executive officers.
60CABOT CORPORATION 61
|
Proposal 3 — Advisory Vote on Frequency ofSay-on-Pay Vote
In Proposal 2, we are asking shareholders to cast an advisory vote for the compensation of our named executive officers as disclosed in this proxy statement (commonly referred to as a“say-on-pay” vote). In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, in this Proposal, we are providing stockholders the opportunity to cast an advisory vote on whether a“say-on-pay” vote should occur once every one, two or three years. This vote, like thesay-on-pay vote, is not binding on the Board.
Our Board of Directors recommends that futuresay-on-pay votes be conducted every year to provide stockholders with an opportunity to regularly evaluate the Company’s overall executive compensation program. As described in detail in the Compensation Discussion and Analysis section above, our executive compensation program is designed to provide a competitive level of total compensation necessary to attract and retain executives qualified to execute our business strategy and to motivate them to contribute to our short- and long-term success. An annual vote will provide us with regular stockholder input on our executive compensation program, and allow us to engage with stockholders to understand and respond to prior voting results and implement any appropriate changes to our program.
Vote Required
Because this proposal seeks the input of our stockholders and provides our stockholders with the option to vote to hold asay-on-pay vote once every one, two or three years, there is no minimum vote requirement for this proposal. Although our Board recommends holding asay-on-pay vote every year, you have the option to specify one of four choices for this proposal on the proxy card: one year, two years, three years or abstain. You are not voting to approve or disapprove of the Board’s recommendation.
The text of the resolution is as follows:
“VOTED, that the option of once every one, two or three years that receives the highest number of votes properly cast for this resolution will be determined to be the preferred frequency recommended by the stockholders of the Company with which the Company is to hold anon-binding, advisory stockholder vote to approve the compensation of the Company’s named executive officers in accordance with Section 14A of the Securities Exchange Act of 1934.”
Recommendation
The Board of Directors recommends that you vote to conduct anon-binding, advisory vote on executive compensation “EVERYYEAR.”
Although this advisory vote isnon-binding on our Board, our Board and the Compensation Committee will review the voting results and take them into consideration when determining the frequency of futuresay-on-pay votes.
62 CABOT CORPORATION
Proposal 4 — Approval of 2017 Long-Term Incentive Plan
We are asking stockholders to approve the Cabot Corporation 2017 Long-Term Incentive Plan (the “2017 Plan”). The Board, upon the recommendation of the Compensation Committee (the “Committee”), approved the 2017 Plan, subject to stockholder approval, to replace the Cabot Corporation 2009 Long-Term Incentive Compensation Plan (the “2009 Plan”). The 2009 Plan was approved by our stockholders on March 12, 2009 and amended on March 8, 2012. The 2017 Plan will not become effective unless it is approved by our stockholders. If the 2017 Plan is approved by our stockholders, we will no longer make grants under the 2009 Plan. The material features of the 2017 Plan are described under “Summary of the 2017 Plan” below.
The Board believes that the 2017 Plan will promote the interests of our stockholders and is consistent with principles of good corporate governance, including the following:
Reasons for Seeking Stockholder Approval
The Board believes that equity awards are a critical part of our overall compensation program and allow us to attract and retain key talent, incentivize sustainable growth and long-term value creation, and align the interests of our employees with those of our stockholders. The Board approved the 2017 Plan because it believes, based in part on input from Pearl Meyer, the independent compensation consultant to the Committee, that we will not have a sufficient number of shares available under the 2009 Plan following our annual grant of equity awards in November 2017 to continue to provide equity incentives at our current levels. As of September 30, 2016, there were 2,036,109 shares available for grant under the 2009 Plan. In setting the size of the share pool under the 2017 Plan, the Board considered the historical amounts of equity awards granted by Cabot in the last three years. In fiscal 2014, 2015 and 2016, we made equity awards under the 2009 Plan totalling 525,240 shares, 590,032 shares, and 827,660 shares, respectively (with performance-based awards measured at target). Our three-year average burn rate — the number of shares granted in each fiscal year divided by the weighted shares of our common stock outstanding at fiscal year end — is 1.02%. The 2009 Plan has a fungible share design under which each stock option and SAR granted under the 2009 Plan counts against the share pool as one share and each other equity award counts against the share pool as 2.1 shares. Applying the 2.1 fungible ratio contained in the 2009 Plan, these equity awards over the last three years, on average, have counted each year as 1,304,326 shares against the share pool available for issuance under the 2009 Plan (with performance-based awards measured at maximum). In setting the size of the share pool under the 2017 Plan, the Board also considered the total amount of
CABOT CORPORATION 63
Proposal 4 — Approval of 2017 Long-Term Incentive Plan(continued)
equity awards outstanding under existing grants as of September 30, 2016, as further shown in the chart below. In November 2016, we made equity awards under the 2009 Plan totalling 548,422 shares (with performance-based awards measured at target), which counted as 1,113,837 shares against the share pool available for issuance under the 2009 Plan (with performance-based awards measured at maximum). Based on an analysis by Pearl Meyer of the remaining shares available for grant under the 2009 Plan, the number of equity awards outstanding under the 2009 Plan, our historic burn rate, current and proposed plan features and the equity plan guidelines established by proxy advisory firms, the Board approved the 2017 Plan and the share pool authorized under it to ensure that we continue to have the ability to provide industry competitive long-term incentive compensation. Based on these same factors, we estimate that the availability of 5,375,000 shares, plus certain shares that would otherwise have become available again for grant under the 2009 Plan under its terms, will provide a sufficient additional number of shares to enable us to continue to make equity awards at our historical average annual rates for the next five years.
In addition, stockholder approval of the 2017 Plan will allow us to grant, if desired, performance-based compensation that is exempt from the deduction limitations under Section 162(m). Section 162(m) generally provides that compensation paid by a publicly-held corporation to its “covered employees” (the corporation’s chief executive officer and its three most highly-paid named executive officers (other than its chief executive officer or chief financial officer)) is not deductible by the corporation for U.S. federal income tax purposes for any taxable year to the extent it exceeds $1 million. This limitation does not apply to compensation that qualifies as exempt performance-based compensation by meeting certain requirements under Section 162(m), including the requirement that the material terms of the related performance goals be disclosed to and approved by the corporation’s stockholders not less frequently than every five years. Under Section 162(m), the material terms include the class of eligible employees, a description of the business criteria on which the performance goals may be based and the maximum amount that can be paid to any participant for a specified period. For the 2017 Plan, these terms are described below under “Eligibility,” “Performance Criteria,” and “Individual Limits,” respectively. Although stockholder approval is one of the requirements for exemption under Section 162(m), even with stockholder approval, there can be no guarantee that compensation will be treated as exempt performance-based compensation. Furthermore, the Committee will continue to have the authority under the 2017 Plan to provide compensation that is not exempt from the limits on deductibility under Section 162(m).
If the 2017 Plan is not approved by our stockholders, the 2017 Plan will not become effective and we will continue to make awards under the 2009 Plan, but the shares that remain available would be insufficient following our annual grant of equity awards in November 2017 to continue to provide equity incentives at our current levels, and will materially affect our ability to attract and retain key talent. We believe that the terms of the 2017 Plan, including its share pool, are reasonable, appropriate, and in the best interests of our stockholders.
Existing Equity Plan Information
The 2009 Plan is the only current long-term incentive plan of the Company under which equity awards may be granted to our employees and other service providers (not includingnon-employee directors). As of September 30, 2016, 2,036,109 shares were available for grant under the 2009 Plan. If the 2017 Plan is approved by our stockholders, we will cease granting awards under the 2009 Plan and the 2017 Plan will be our only equity plan under which we may grant future equity awards to our employees. Awards tonon-employee directors will continue to be made under the Company’s 2015 Directors’ Stock Compensation Plan.
64 CABOT CORPORATION
Proposal 4 — Approval of 2017 Long-Term Incentive Plan(continued)
The table below includes aggregated information regarding awards outstanding under the 2009 Plan as of September 30, 2016, the number of shares available for future awards under each of our 2009 Plan and the 2015 Directors’ Stock Compensation Plan as of September 30, 2016, and the proposed number of shares issuable under the 2017 Plan.
Number of shares (as of September 30, 2016) | As a of stock | |||||||
Outstanding stock options | 1,522,269 | 2.4 | % | |||||
Outstanding restricted stock units (with performance-based restricted stock units measured at target performance) | 731,646 | 1.2 | % | |||||
Total shares subject to outstanding awards | 2,253,915 | 3.6 | % | |||||
Total shares available for future awards under 2009 Plan(1) | 2,036,109 | 3.3 | % | |||||
Total shares available for future awards under the 2015 Directors’ Stock Compensation Plan | 330,363 | 0.5 | % | |||||
Total overhang (total shares outstanding under existing equity awards and total shares available under existing plans) | 4,620,387 | 7.4 | % | |||||
Proposed shares available for future awards under 2017 Plan(2) | 5,375,000 | 8.6 | % | |||||
Total shares outstanding under existing equity awards and proposed to be reserved for issuance under 2017 Plan | 7,959,278 | 12.8 | % |
Summary of the 2017 Plan
The following is a brief summary of the material features of the 2017 Plan. A copy of the 2017 Plan is attached as Appendix A to this Proxy Statement, and we urge stockholders to read it in its entirety. The following summary is qualified in its entirety by reference to the full text of the 2017 Plan.
Administration.The 2017 Plan is administered by the Committee, which has the discretionary authority to, among other things, interpret the 2017 Plan, determine eligibility for and grant awards, determine, modify or waive the terms and conditions of any award, determine the form of settlement of awards, prescribe forms, rules and procedures for awards and otherwise do all things necessary to carry out the purposes of the 2017 Plan. Determinations of the Committee under the 2017 Plan will be conclusive and bind all parties. The Committee may delegate certain of its powers under the 2017 Plan to one or more of its members or members of the Board, officers of the Company or other employees or persons. As used in this summary, the term “Committee” refers to the Committee or its authorized delegates, as applicable.
Eligibility.Key employees, consultants and advisors of the Company or its affiliates, and certain other individuals who are reasonably anticipated to begin providing direct services to the Company or its affiliates within twelve (12) months after the date of grant of an award, are eligible to participate in the 2017 Plan. Eligibility for stock options intended to be incentive stock options (“ISOs”) is limited to employees of the Company or certain affiliates.Non-employee directors are not eligible to participate in the 2017 Plan for so long as the Company’s 2015 Directors’ Stock Compensation Plan is in effect. As of January 18, 2017, we estimate that approximately 140 employees and no consultants or advisors would be eligible to participate in the 2017 Plan.
CABOT CORPORATION 65
Proposal 4 — Approval of 2017 Long-Term Incentive Plan(continued)
Authorized Shares.Subject to adjustment as described below, the maximum number of shares of our common stock that may be delivered in satisfaction of awards under the 2017 Plan is 5,375,000, plus the number of shares that are subject to awards under the 2009 Plan (which shall not exceed 2,769,538 shares) and expire or are terminated, surrendered or cancelled without the delivery of shares, or are forfeited or reacquired by the Company under the terms of the 2009 Plan (the “Share Pool”). The following rules apply in respect of the Share Pool:
Shares that may be delivered under the 2017 Plan may be authorized but unissued shares or previously issued shares acquired by the Company. The closing price of our common stock as reported on the New York Stock Exchange on January 18, 2017 was $53.82 per share.
Individual Limits.With respect to any person in any fiscal year, the maximum number of shares for which stock options may be granted, the maximum number of shares subject to SARs that may be granted, and the maximum number of shares subject to awards other than stock options, SARs and cash awards that may be granted is, in each case, 500,000 shares. The maximum amount that may be paid to any person in any fiscal year in respect of cash awards is $10 million.
Types of Awards.The 2017 Plan provides for the grant of stock options, SARs, restricted and unrestricted stock and stock units, performance awards, cash awards and other awards that are convertible into or otherwise based on our common stock. Dividend equivalents may also be provided in connection with awards under the 2017 Plan.
66 CABOT CORPORATION
Proposal 4 — Approval of 2017 Long-Term Incentive Plan(continued)
Vesting; Terms of Awards.The Committee determines the terms of all awards granted under the 2017 Plan, including the time or times an award will vest or become exercisable, the terms on which awards will remain exercisable and the effect of termination of a participant’s employment or service on awards. The Committee may at any time accelerate the vesting or exercisability of an award.
Transferability of Awards.Except as the Committee may otherwise determine, awards may not be transferred other than by will or by the laws of descent and distribution.
Performance Criteria. The 2017 Plan provides for grants of performance awards subject to “performance criteria.” Performance criteria with respect to those awards that are intended to qualify as “performance-based compensation” for purposes of Section 162(m) are limited to objectively determinable measure(s) of performance relating to any or any combination of the following (measured either absolutely or by reference to an index or indices or a peer group of select group of companies): sales; revenues; assets; costs; earnings before or after deduction for all or any portion of interest, taxes, depreciation or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; one or more operating ratios or metrics; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; productivity measures; one or more working capital measures; stock price; or stockholder return or shareholder value; sales of particular products or services; customer acquisition or retention; collection of outstanding accounts or debts; safety, health or environmental affairs performance; compliance; acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs,split-ups and the like; reorganizations; recapitalizations, restructurings, financings (issuance of debt or equity); or refinancings.
Performance criteria and any related targets need not be based on an increase, a positive or improved result or avoidance of loss. To the extent consistent with the requirements of Section 162(m), the Committee may establish, by the deadline that otherwise applies to the establishment of the terms of an award, that one or more of the applicable performance criteria will be adjusted in an objectively determinable manner to reflect events (for example, the impact of charges for restructurings, discontinued operations, mergers, acquisitions, other unusual or infrequently occurring items, and the cumulative effects of tax or accounting changes, each as defined by U.S. generally accepted accounting principles) occurring during the applicable performance period that affect the applicable performance criteria.
Effect of Certain Transactions.In the event of a consolidation, merger or similar transaction in which the Company is not the surviving corporation, the sale of all or substantially all of the Company’s assets or common stock, or a dissolution or liquidation of the Company, the Committee may, with respect to outstanding awards, provide for:
Adjustment Provisions.In the event of a stock dividend, stock split or combination of shares (including a reverse stock split), recapitalization or other change in our capital structure, the Committee shall make appropriate adjustments to the maximum number of shares that may be delivered under the 2017 Plan; the individual award limits; the number and kind of securities subject to, and, if applicable, the exercise price of, outstanding awards; and any other provisions affected by such event.
Clawback.The Committee may cancel, rescind or otherwise limit or restrict awards if a participant is not in compliance with the provisions of the 2017 Plan or the applicable award agreement or if the participant breaches any restrictive covenant agreement with the Company, and may recover any awards or payments or shares received in respect of awards or gain in respect of any award in accordance with any applicable Company clawback or recoupment policy or as otherwise required by applicable law or stock exchange listing standards.
Effective Date, Amendments and Termination.If the 2017 Plan is approved by our stockholders, the 2017 Plan will become effective as of the date of such approval. No awards will be granted after the tenth anniversary of such approval. The Committee may at any time amend the 2017 Plan or any outstanding award and may at any time termi-
CABOT CORPORATION 67
Proposal 4 — Approval of 2017 Long-Term Incentive Plan(continued)
nate the 2017 Plan as to future grants. However, except as expressly provided in the 2017 Plan, the Committee may not alter the terms of an award so as to materially and adversely affect a participant’s rights without the participant’s consent (unless the Committee expressly reserved the right to do so at the time of the award). Any amendments to the 2017 Plan will be conditioned on stockholder approval to the extent required by law or applicable stock exchange requirements.
Certain Federal Income Tax Consequences
The following is a summary of certain U.S. federal income tax consequences associated with certain awards granted under the 2017 Plan. The summary does not purport to cover federal employment tax or other U.S. federal tax consequences that may be associated with the 2017 Plan, nor does it cover state, local ornon-U.S. taxes, except as may be specifically noted.
Stock Options (other than ISOs).In general, a participant has no taxable income upon the grant of a stock option that is not intended to be an ISO (an “NSO”) but realizes income in connection with the exercise of the NSO in an amount equal to the excess (at the time of exercise) of the fair market value of the shares acquired upon exercise over the exercise price. A corresponding deduction is generally available to the Company. Upon a subsequent sale or exchange of the shares, any recognized gain or loss is treated as a capital gain or loss for which the Company is not entitled to a deduction.
ISOs.In general, a participant realizes no taxable income upon the grant or exercise of an ISO. However, the exercise of an ISO may result in an alternative minimum tax liability to the participant. Generally, a disposition of shares purchased pursuant to an ISO within two years from the date of grant or within one year after exercise produces ordinary income to the participant (and generally a deduction to the Company) equal to the value of the shares at the time of exercise less the exercise price. Any additional gain recognized in the disposition is treated as a capital gain for which the Company is not entitled to a deduction. If the participant does not dispose of the shares until after the expiration of theseone- andtwo-year holding periods, any gain or loss recognized upon a subsequent sale of shares purchased pursuant to an ISO is treated as a long-term capital gain or loss for which the Company is not entitled to a deduction.
SARs.The grant of a SAR does not itself result in taxable income, nor does taxable income result merely because a SAR becomes exercisable. In general, a participant who exercises a SAR for shares of stock or receives payment in cancellation of a SAR will have ordinary income equal to the amount of any cash and the fair market value of any stock received. A corresponding deduction is generally available to the Company.
Unrestricted Stock Awards.A participant who purchases or is awarded unrestricted stock generally has ordinary income equal to the excess of the fair market value of the shares at that time over the purchase price, if any, and a corresponding deduction is generally available to the Company.
Restricted Stock Awards.A participant who is awarded or purchases shares subject to a substantial risk of forfeiture generally does not have income until the risk of forfeiture lapses. When the risk of forfeiture lapses, the participant has ordinary income equal to the excess of the fair market value of the shares at that time over the purchase price, if any, and a corresponding deduction is generally available to the Company. However, a participant may make an election under Section 83(b) of the Code to be taxed on restricted stock when it is acquired rather than later, when the substantial risk of forfeiture lapses. A participant who makes an effective 83(b) election will realize ordinary income equal to the fair market value of the shares as of the time of acquisition less any price paid for the shares. A corresponding deduction will generally be available to the Company. If a participant makes an effective 83(b) election, no additional income results by reason of the lapsing of the restrictions.
For purposes of determining capital gain or loss on a sale of shares awarded under the 2017 Plan, the holding period in the shares begins when the participant recognizes taxable income with respect to the transfer. The participant’s tax basis in the shares equals the amount paid for the shares plus any income realized with respect to the transfer. However, if a participant makes an effective 83(b) election and later forfeits the shares, the tax loss realized as a result of the forfeiture is limited to the excess of what the participant paid for the shares (if anything) over the amount (if any) realized in connection with the forfeiture.
68 CABOT CORPORATION
Proposal 4 — Approval of 2017 Long-Term Incentive Plan(continued)
Restricted Stock Units.The grant of a restricted stock unit does not itself generally result in taxable income. Instead, the participant is generally taxed upon vesting (and a corresponding deduction is generally available to the Company), unless he or she has made a proper election to defer receipt of the shares (or cash if the award is cash settled) under Section 409A of the Code. If the shares delivered are restricted for tax purposes, the participant will instead be subject to the rules described above for restricted stock.
Section 162(m). Stock options, SARs, and certain performance awards under the 2017 Plan may be eligible for exemption from the deductibility limits of Section 162(m). However, the Compensation Committee will have discretionary authority to provide compensation that is not exempt from the limits on deductibility under Section 162(m).
Certain Change in Control Payments.Under Section 280G of the Code, the vesting or accelerated exercisability of options or the vesting and payments of other awards in connection with a change in control of a corporation may be required to be valued and taken into account in determining whether participants have received compensatory payments, contingent on the change in control, in excess of certain limits. If these limits are exceeded, a substantial portion of amounts payable to the participant, including income recognized by reason of the grant, vesting or exercise of awards may be subject to an additional 20% federal tax and may benon-deductible to the Company.
New Plan Benefits
Because awards under the 2017 Plan will be granted in the discretion of the Committee, the type, number, recipients and other terms of such awards cannot be determined at this time.
Vote Required
The 2017 Plan will be approved upon the affirmative vote of a majority of the votes cast on the proposal.
Recommendation
The Board recommends that you vote “FOR” the approval of the Cabot Corporation 2017 Long-Term Incentive Plan.
CABOT CORPORATION 69
The Audit Committee of the Board of Directors is comprised of fivethreenon-employee directors. The Board has determined that all of the members of the Audit Committee satisfy the requirements of the New York Stock Exchange (“NYSE”) as to independence and financial literacy. In addition, the Board has determined that Mr. MacLeod,Morrow and Mr. McGillicuddy and Dr. ThomasWilson are audit committee financial experts as defined by SEC rules. Our responsibilities are set forth in our written charter and are described above under the heading “The“Board Composition — How our Board of Directors and its CommitteesOperates — Audit Committee” on page 5.14.
We have sole authority to appoint, retain, terminate and determine the compensation of our independent registered public accounting firm. We have appointedAt least annually, we review the performance and qualifications of our independent registered public accounting firm to determine whether to retain such firm on behalf of the Company. Deloitte & Touche LLP (“D&T”) has been Cabot’s independent registered public accounting firm annually since 2007. During its tenure as Cabot’s independent registered public accounting firm, D&T has gained significant depth of understanding of Cabot’s global businesses, operations and systems, accounting policies and practices, and internal control over financial reporting. In accordance with SEC rules and D&T’s policies, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide services to us. For lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five years. In fiscal 2016, the Audit Committee, after consultation with management, approved the appointment of a new lead audit partner pursuant to this policy.
One of our primary responsibilities is to assist the Board in its oversight of the quality and integrity of Cabot’s financial statements. We met tennine times during fiscal 2016.2019. A number of those meetings included individual meetings in executive sessionsessions with D&T and with Cabot’s Chief Financial Officer, Corporate Controller, DirectorVice President of Internal Audit, and General Counsel. We took numerous actions to discharge our oversight responsibility with respect to the audit process, which are summarized below.in this report.
As described in more detail under the heading “Board Composition — Our Board’s Role in Risk Oversight” on page 16, we focus on Cabot’s financial risk exposures and the actions management has taken to monitor and mitigate such risks, and oversee Cabot’s enterprise risk management processes.
Review of Audited Financial Statements with Management
We reviewed and discussed with management Cabot’s audited consolidated financial statements for the fiscal year ended September 30, 2016.2019.
Review of Financial Statements and Other Matters with Independent Registered Public Accounting Firm
We discussed with D&T Cabot’s audited consolidated financial statements for the fiscal year ended September 30, 2016,2019, including the matters required to be communicated by the standards of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. This included a discussion of accounting policies and practices critical to our financial statements. We also received the written disclosures and the letter from D&T required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, which requires auditors to annually disclose in writing all relationships that in the auditor’s professional opinion may reasonably be thought to bear on independence and to confirm their independence, and discussed with D&T its independence from Cabot. In addition, we discussed Cabot’s internal controls over financial reporting and management’s assessment of the effectiveness of those controls with management, Cabot’s internal auditors and D&T. We reviewed with both D&T and Cabot’s internal auditors their audit plans, audit scope and identification of audit risks. We also discussed the results of the internal audit examinations with and without management present. In addition, any reports or concerns the Company receives relating to financial matters are communicated directly to the Chair of the Audit Committee.
CABOT CORPORATION 61
2020 PROXY STATEMENT |
Audit Committee Matters(continued)
Recommendation that Financial Statements be Included in Annual Report
Based on the reviews and discussions referred to above, we recommended to the Board of Directors that the audited financial statements be included in Cabot’s Annual Report on Form10-K for the fiscal year ended September 30, 20162019 for filing with the SEC, and appointed D&T as ourthe Company’s independent registered public accounting firm for fiscal 2017.2020.
John K. McGillicuddyMichael M. Morrow (Chair)
Juan Enriquez
William C. Kirby
Roderick C.G. MacLeod
Lydia W. Thomas
70 CABOT CORPORATION
Audit Committee Matters(continued)
Frank A. Wilson
Fees for professional services rendered by D&T for fiscal 20162019 and 20152018 were as follows:
Fiscal 2016 | Fiscal 2015 | Fiscal 2019
| Fiscal 2018
| |||||||||||||
Audit Fees | $ | 4,619,000 | $ | 5,304,000 | $
| 4,861,000
|
| $
| 5,469,000
|
| ||||||
Audit-Related Fees | $ | 118,000 | $ | 40,000 | $
| 110,000
|
| $
| 460,000
|
| ||||||
Tax Fees | $ | 10,000 | $ | 12,000 | $
| 0
|
| $
| 8,000
|
| ||||||
All Other Fees | $ | 0 | $ | 0 | $
| 0
|
| $
| 0
|
|
The audit services for each of fiscal 20162019 and 20152018 include professional services for the audit of Cabot’s consolidated financial statements included in the Annual Report on Form10-K (including audit of internal control over financial reporting) and review of financial statements included in Cabot’s Quarterly Reports on Form10-Q, consultations regardingon-going financial accounting matters, and services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements. The decrease in audit fees in fiscal 2019 is primarily attributable to additional services in fiscal 2018 in connection with the asset impairment charge in the Purification Solutions segment the Company recorded, the impact of U.S. tax reform in fiscal year 2018 that did not recur in fiscal 2019, and certain statutory audit engagements that were not required in fiscal 2019. Statutory audit fees in foreign jurisdictions are billed in local currency.
The audit-related services for fiscal 20162019 consisted primarily of fees for: (i) certain agreed upon procedures performed and related to regulatory compliance matters; (ii) comfort letter procedures; and (iii) other attest services. During fiscal 2015,2018, audit-related services consisted of fees forfor: (i) certain agreed upon procedures performed and related to regulatory compliance matters; (ii) diligence and (ii)other strategic activities; and (iii) other attest servicesservices.
For fiscal 2016 and 2015,The tax services for fiscal 2018 consisted primarily of fees for tax advisory services. During fiscal 2015, tax services also included fees for tax compliance and preparation services and tax advisory services.
Audit CommitteePre-Approval Policy
The Audit Committee has adopted a policy requiring thepre-approval of audit andnon-audit services to be provided by Cabot’s independent registered public accounting firm. The policy identifies the guiding principles that must be considered by the Audit Committee in approving services to ensure that the auditor’s independence is not impaired; describes the audit, audit-related, tax and other services that may be provided and thenon-audit services that are prohibited; and sets forthpre-approval requirements for all permitted services. In some cases,pre-approval is provided by the full Audit Committee for the applicable fiscal year for a particular category or group of services, subject to an authorized amount. In other cases, the Audit Committee specificallypre-approves services. To ensure compliance with the policy, the Audit Committee requires the independent registered public accounting firm to report on actual fees charged for each category of services at least quarterly. The Audit Committee has delegated authority to the Chair of the Committee topre-approve additional services that need to be approved between scheduled Audit Committee meetings, provided that the estimated fee for any such services does not exceed $100,000, and any suchpre-approvals must then be communicated to the full Audit Committee.
All of the services described above for fiscal 20162019 and 20152018 werepre-approved by the Audit Committee or Committee Chair.
62CABOT CORPORATION 71
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Proposal 53 — Ratification of Appointment of Independent Registered Public Accounting Firm
Introduction
The Audit Committee has appointed Deloitte & Touche LLP (“D&T”) to serve as Cabot’s independent registered public accounting firm for its fiscal year ending September 30, 2017.2020. The Sarbanes-Oxley Act of 2002 requires the Audit Committee to be directly responsible for the appointment, compensation and oversight of the audit work of the independent registered public accounting firm. However, the Board of Directors is submitting the appointment of D&T to the stockholders for ratification as a matter of good corporate practice. Should the stockholders fail to ratify the appointment of D&T, the Audit Committee may reconsider the appointment and may retain D&T or another accounting firm without resubmitting the matter to stockholders. Even if the stockholders ratify the appointment of D&T, the Audit Committee may select another firm if it determines such selection to be in the best interest of Cabot and its stockholders.
Representatives from D&T are expected to be present at the 20172020 Annual Meeting. The representatives will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from Cabot’s stockholders.
Vote Required
Approval of this proposal requires the affirmative vote of a majority of the votes properly cast on the proposal.
Recommendation
The Board of Directors recommends that you vote “FOR” the ratification of the Audit Committee’s appointment of Deloitte & Touche LLP as Cabot’s independent registered public accounting firm for fiscal 2017.2020.
72CABOT CORPORATION 63
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Equity Compensation Plan Information
The following table provides information as of September 30, 2016 about: (i) the number of shares of common stock that may be issued upon exercise of outstanding options and vesting of restricted stock units; (ii) the weighted-average exercise price of outstanding options; and (iii) the number of shares of common stock available for future issuance under our active plans: the 2009 Long-Term Incentive Plan and the 2015 Directors’ Stock Compensation Plan. All of our equity compensation plans have been approved by our stockholders.
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)(1) | �� | Weighted- exercise outstanding warrants (b)(2) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)(3) | ||||||||
Equity compensation plans approved by security holders | 2,373,042 | $ | 37.72 | 2,366,472 | ||||||||
Equity compensation plans not approved by security holders | N/A | N/A | N/A |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC and to furnish us with copies of the forms they file. Based on our review of filings made with the SEC and representations made by our directors and executive officers, we believe that all of our directors and executive officers timely filed all reports that were required to be filed under Section 16(a) during the fiscal year ended September 30, 2016, other than a report by Mr. Prevost reporting his diversification out of the Cabot stock fund under our 401(k) Plan.
Future Stockholder Proposals and Director Nominations
A stockholder who intends to present a proposal at the 20182021 Annual Meeting of Stockholders and who wishes the proposal to be included in our proxy materials for that meeting must submit the proposal in writing to us so that we receive it no later than October 2, 2017.September 26, 2020. A stockholder who intends to present a proposal at the 20182021 Annual Meeting of Stockholders but does not wish the proposal to be included in our proxy materials for that meeting must provide written notice of the proposal to us no earlier than December 9, 201712, 2020 and no later than January 8, 2018.11, 2021. We reserve the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements. Ourby-laws, which are available on our website, describe the requirements for submitting proposals at the Annual Meeting. A stockholder who wishes to nominate a director at the 20182021 Annual Meet-
CABOT CORPORATION 73
Other Information(continued)
ingMeeting of Stockholders must notify us in writing no earlier than December 9, 201712, 2020 and no later than January 8, 2018.11, 2021. The notice must be given in the manner and must include the information and representations required by ourby-by-laws. laws.
We are providing without charge, to each person from whom a proxy is solicited, aA copy of our 2019 Annual Report, on Form10-K, including the financial statements and schedules, for fiscal 2016.is available at http://www.edocumentview.com/cbt. To request an additional copy of the Form10-K,2019 Annual Report without charge, please write to Secretary, Cabot Corporation, Two Seaport Lane, Suite 1300,1400, Boston, MA 02210-2019.
The cost of soliciting proxies in the enclosed form will be borne by Cabot. In addition to solicitation by mail, officersOfficers and other employees of Cabot may solicit proxies personally, by mail, by telephone and by facsimile. Cabot may request banks and brokers or other similar agents or fiduciaries to transmit the proxy material to the beneficial owners for their voting instructions and will reimburse them for their expenses in so doing. D.F. King & Co., Inc., New York, New York, has been retained to assist Cabot in the solicitation of proxies for a fee of $13,500.
Management does not know of any matters to be presented at the 20172020 Annual Meeting other than those set forth in the Notice of Annual Meeting of Stockholders. However, if any other matters properly come before the 20172020 Annual Meeting that require a vote, the persons named in the enclosed form of proxy delivered to stockholders intend to vote the shares to which the proxy relates on such matters in accordance with their best judgment unless otherwise specified in the proxy.
By order of the Board of Directors,
Jane A. Bell
Secretary
Boston, Massachusetts
January 27, 201724, 2020
7464 CABOT CORPORATION
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2017 Long-Term Incentive PlanNON-GAAP MEASURES
Cabot CorporationAdjusted EPS, adjusted RONA, adjusted EBIT and free cash flow are not measures of financial performance under U.S. generally accepted accounting principles (GAAP) and should not be considered substitutes for measures of performance reported under GAAP.
2017 LONG-TERM INCENTIVE PLANAdjusted EPS. Adjusted EPS excludes “certain items”, which are items of expense or income that management does not consider representative of our fundamental ongoing performance. These certain items are described in detail in Note U of our consolidated financial statements included in our Annual Report on Form10-K for the fiscal year ended September 30, 2019.
(effective March , 2017)The following table reconciles adjusted EPS to earnings per share from continuing operations.
Fiscal Year | 2019 | |||
Net income (loss) per share attributable to Cabot Corporation | $ | 2.63 | ||
Less: Certain items per share and dilutive impact of shares | $ | (1.28 | ) | |
Adjusted earnings per share | $ | 3.91 |
Exhibit A, which is incorporatedFree Cash Flow. We calculate free cash flow by reference, defines the terms used in the Planexcluding from our cash flow from operating activities additions to property, plant and sets forth certain operational rules related to those terms.equipment.
The following table reconciles free cash flow with cash flow from operating activities.
Fiscal Year | 2019 (Dollars in millions) | ||||
Cash flow from operating activities | $ | 363 | |||
Less: Additions to property, plant and equipment | $ | 224 | |||
Free cash flow | $ | 139 |
Adjusted EBIT. We calculate adjusted EBIT by excluding from our income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies, certain items, interest expense, general unallocated income (expense) and equity in earnings of affiliated companies
The Plan has been establishedfollowing table reconciles adjusted EBIT to advance the interests of the Company and its stockholders by providing for the grant to Participants of Stock-based and other incentive Awards to (i) enhance the Company’s ability to attract and retain employees, consultants, advisors and others who are in a position to make significant contributions to the success of the Company and its subsidiaries and (ii) encourage Participants to take into account the long-term interests of the Company and its stockholders through ownership of shares of Stock.income from continuing operations.
The Administrator has discretionary authority, subject only to the express provisions of the Plan, to interpret the Plan; determine eligibility for and grant Awards; determine, modify or waive the terms and conditions of any Award; determine the form of settlement of Awards (whether in cash, shares of Stock or other property); prescribe forms, rules and procedures under the Plan and for Awards; and otherwise do all things necessary to carry out the purposes of the Plan. Determinations of the Administrator made under the Plan will be conclusive and will bind all parties.
Fiscal Year
2019 (Dollars in millions) | |||||
Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies | $ | 255 | |||
Interest expense | $ | 59 | |||
Certain items | $ | 87 | |||
General unallocated expense | $ | (8 | ) | ||
Equity in earnings of affiliated companies | $ | 1 | |||
Adjusted EBIT | $ | 394 |
(a)Adjusted RONA. Number of Shares.Subject toWe calculate adjusted RONA by dividing the provisions of Section 7(b),most recent twelve months’ adjusted net income (loss) (anon-GAAP numerator) by adjusted net assets (anon-GAAP denominator). In the maximum number of shares of Stock that may be delivered in satisfaction of Awards under the Plan shall be 5,375,000, plus the number of shares of Stock that as of the effective date of the Plan are subject to awards under the Company’s 2009 Long-Term Incentive Plan (the “2009 Plan”) (which shall not exceed 2,769,538 shares) and that on or after the effective date of the Plan expire or are terminated, surrendered or canceled without the delivery of any shares of Stock, or are forfeited or reacquired by the Company, in accordance with the terms of such plan. Up to 5,375,000 shares of Stock set forth in the preceding sentence may be issued in satisfaction of ISOs, but nothing in this Section 4(a) will be construed as requiring that any, or any fixed number of, ISOs be awarded under the Plan. For purposes of this Section 4(a), the number of shares of Stock delivered in satisfaction of Equity Awards will be determined (i) by including shares of Stock withheld by the Company in payment of the exercise price or purchase price of the Award or an award granted under the 2009 Plan or in satisfactionnumerator, we exclude certain items, net of tax, withholding requirements with respectfrom income (loss) from continuing operations as calculated under GAAP. The denominator consists of our operating assets, which are: net property, plant and equipment; adjusted net working capital; assets held for rent; and investments in equity affiliates. We calculate the items in adjusted net assets using the most recent five quarters’ average to normalize the Award or an award granted under the 2009 Plan, (ii) by including the full numberimpact of shares covered by a SAR any portion of which is settled in Stock (and not only the number of shares of Stock delivered in settlement of such Award), and (iii) by excluding any shares of Stock underlying Awards settled in cash or that otherwise expire or become unexercisable without having been exercised or that terminate or are forfeited to or repurchased by the Company due to failure to vest. For the avoidance of doubt, the number of shares of Stock available for delivery under the Plan will not be increased by any shares of Stock subject to Equity Awards that are withheld by the Company in payment of the exercise price or purchase price of the Award or in satisfaction of tax withholding requirements with respect to the Award, any shares of Stock covered by a SAR any portion of which is settled in stock, or any shares of Stock that have been delivered under the Plan and that are subsequently repurchased using proceeds directly attributable to Stock Option exercises. The limits set forth in this Section 4(a) shall be construed to comply with Section 422. To the extent consistent with the requirements of Section 422 and the regulations thereunder, and otherlarge intra-period movements.
CABOT CORPORATION A-1
2017 Long-Term Incentive Plan(continued)
applicable legal requirements (including applicable stock exchange requirements), Stock issued under Substitute Awards will not reduce the number of shares available for Awards under the Plan. The number of shares of Stock that may be delivered under Substitute Awards will be in addition to the limitations set forth in this Section 4(a) on the number of shares available for issuance under the Plan, and such Substitute Awards will not be subject to theper-Participant Award limits described in Section 4(c) below.
(b)Fungible Share Plan. Each share of Stock subject to an Award consisting of Stock Options and/or SARs shall be counted against the limits set forth in Section 4(a) as one share. Each share of Stock subject to any other Award to be settled in Stock shall be counted against the limits set forth in Section 4(a) as 2.4 shares.
(c)Type of Shares.Stock delivered by the Company under the Plan may be authorized but unissued Stock or previously issued Stock acquired by the Company. No fractional shares of Stock will be delivered under the Plan.
(d)Individual Limits. The following additional limits will apply to Awards of the specified type granted or, in the case of Cash Awards, payable to any person in any fiscal year:
(1) Stock Options: 500,000 shares of Stock.
(2) SARS: 500,000 shares of Stock.
(3) Awards other than Stock Options, SARS or Cash Awards: 500,000 shares of Stock.
(4) Cash Awards: $10 million.
In applying the foregoing limits, (i) all Awards of the specified type granted to the same person in the same fiscal year will be aggregated and made subject to one limit; (ii) the limits applicable to Stock Options and SARs refer to the number of shares of Stock underlying such Awards; (iii) the share limit under clause (3) refers to the maximum number of shares of Stock (determined without regard to Section 4(b)) that may be delivered, or the value of which could be paid in cash or other property, under an Equity Award or Awards of the type specified in clause (3) assuming a maximum payout; (iv) Awards other than Cash Awards that are settled in cash will count against the applicable share limit under clause (1), (2) or (3) and not against the dollar limit under clause (4); and (v) the dollar limit under clause (4) refers to the maximum dollar amount payable under an Award or Awards of the type specified in clause (4) assuming a maximum payout. The foregoing provisions will be construed in a manner consistent with Section 162(m), including, without limitation, where applicable, the rules under Section 162(m) pertaining to permissible deferrals of exempt awards.
The Administrator will select Participants from among those key Employees, consultants and advisors to the Company or its Affiliates who, in the opinion of the Administrator, are in a position to make a significant contribution to the success of the Company and its Affiliates, or to other individuals who would otherwise meet the eligibility conditions set forth above in this Section 5 but for the fact that they are not yet an Employee, consultant or advisor if the Company reasonably anticipates that such individuals will begin providing direct services to the Company or its Affiliates within twelve (12) months after the date of grant of the Award to such individual (and such individuals do in fact begin providing such services within that time period);provided, that for so long as the Company’s 2015 Directors’ Stock Compensation Plan (or any successor plan) (the “Directors’ Plan”) is in effect,non-employee members of the Board shall not be eligible to participate in this Plan and instead shall participate in the Directors’ Plan. Eligibility for ISOs is limited to employees of the Company or of a “parent corporation” or “subsidiary corporation” of the Company as those terms are defined in Section 424 of the Code.
(a)All Awards
(1)Award Provisions. The Administrator will determine the terms of all Awards, subject to the limitations provided herein. By accepting (or, under such rules as the Administrator may prescribe, being deemed to have accepted) an Award, the Participant agrees to the terms of the Award and the Plan. Notwithstanding any provision of this Plan to the contrary, Substitute Awards may contain terms and conditions that are inconsistent with the terms and conditions specified herein, as determined by the Administrator.
A-2 CABOT CORPORATION
2017 Long-Term Incentive Plan(continued)
(2)Term of Plan.No Awards may be made after the tenth anniversary of the date the Plan is approved by the Company’s stockholders, but previously granted Awards may continue beyond that date in accordance with their terms.
(3)Transferability. Neither ISOs nor, except as the Administrator otherwise expressly provides in accordance with the second sentence of this Section 6(a)(3), other Awards may be transferred other than by will or by the laws of descent and distribution, and during a Participant’s lifetime ISOs (and, except as the Administrator otherwise expressly provides in accordance with the second sentence of this Section 6(a)(3), other Awards requiring exercise) may be exercised only by the Participant. The Administrator may permit Awards other than ISOs to be transferred by gift, subject to applicable securities and other laws and such limitations as the Administrator may impose.
(4)Vesting; Termination of Employment. The Administrator may determine the time or times at which an Award will vest or become exercisable, the terms on which an Award requiring exercise will remain exercisable and the effect of a termination of a Participant’s Employment on Awards then held by the Participant. Without limiting the foregoing, the Administrator may at any time accelerate the vesting or exercisability of an Award, regardless of any adverse or potentially adverse tax consequences resulting from such acceleration. Unless the Administrator expressly provides otherwise, however, the following rules will apply: immediately upon the cessation of the Participant’s Employment, each Award requiring exercise that is then held by the Participant or by the Participant’s permitted transferees, if any, that is then not vested and/or exercisable will terminate, and all other Awards that are then held by the Participant or by the Participant’s permitted transferees, if any, to the extent not already vested will be forfeited.
(5)Taxes. The Administrator will make such provision for the withholding of taxes as it deems necessary. The Administrator may, but need not, hold back shares of Stock from an Award (but not in excess of the maximum withholding amount consistent with the Award being subject to equity accounting treatment under applicable accounting rules (including FASB ASC Topic 718 (or any successor provision))) or permit a Participant to tender previously owned shares of Stock in satisfaction of tax withholding requirements, in each case, to the extent and in such amounts as determined by the Administrator.
(6)Dividend Equivalents, Etc. The Administrator may provide for the payment of amounts (on terms and subject to conditions established by the Administrator) in lieu of cash dividends or other cash distributions with respect to Stock subject to an Award whether or not the holder of such Award is otherwise entitled to share in the actual dividend or distribution in respect of such Award. Any entitlement to dividend equivalents or similar entitlements will be established and administered either consistent with an exemption from, or in compliance with, the requirements of Section 409A. Dividends or dividend equivalent amounts payable in respect of Awards that are subject to restrictions may be subject to such limits or restrictions as the Administrator may impose.
(7)Rights Limited. Nothing in the Plan will be construed as giving any person the right to continued employment or service with the Company or its Affiliates, or any rights as a stockholder except as to shares of Stock actually issued under the Plan. The loss of existing or potential profit in Awards will not constitute an element of damages in the event of termination of Employment for any reason, even if the termination is in violation of an obligation of the Company or any Affiliate to the Participant.
(8)Section 162(m).This Section 6(a)(8) applies to any Performance Award intended to qualify as performance-based for the purposes of Section 162(m) other than a Stock Option or SAR. In the case of any Performance Award to which this Section 6(a)(8) applies, the Plan and such Award shall be construed and administered in a manner consistent with the exemption of such Award as performance-based compensation under Section 162(m). With respect to such Performance Awards, the Administrator will establish, in writing, one or more specific Performance Criteria no later than 90 days after the commencement of the period of service to which the performance relates (or at such earlier time as is required to qualify the Award as performance-based under Section 162(m)). Prior to grant, vesting or payment of the Performance Award, as the case may be, the Administrator shall take such steps as are sufficient to satisfy the certification requirement of the regulations under Section 162(m) as to whether and to what extent, if at all, the Performance Criterion or Criteria applicable to such Performance Award have been satisfied. The Administrator shall then determine the actual payment, if any, under each Performance Award. Notwithstanding the foregoing, the
CABOT CORPORATION A-3
2017 Long-Term Incentive Plan(continued)
Administrator may, subject to the other terms of the Plan, amend a previously granted Performance Award or take any other action that disqualifies such Award from the performance-based compensation exception under Section 162(m).
(9)Coordination with Other Plans. Awards under the Plan may be granted in tandem with, or in satisfaction of or substitution for, other Awards under the Plan or awards made under other compensatory plans or programs of the Company or its Affiliates. For example, but without limiting the generality of the foregoing, awards under other compensatory plans or programs of the Company or its Affiliates may be settled in Stock (including, without limitation, Unrestricted Stock) if the Administrator so determines, in which case the shares delivered shall be treated as awarded under the Plan (and shall reduce the number of shares thereafter available under the Plan in accordance with the rules set forth in Section 4). In any case where an award is made under another plan or program of the Company or its Affiliates and such award is intended to qualify for the performance-based compensation exception under Section 162(m), and such award is settled by the delivery of Stock or another Award under the Plan, the applicable Section 162(m) limitations under both the other plan or program and under the Plan shall be applied to the Plan as necessary (as determined by the Administrator) to preserve the availability of the Section 162(m) performance-based compensation exception with respect thereto.
(10)Additional Restrictions. The Administrator may cancel, rescind, withhold or otherwise limit or restrict any Award at any time if the Participant is not in compliance with all applicable provisions of the Award agreement and the Plan, or if the Participant breaches any agreement with the Company or its Affiliates with respect tonon-competition,non-solicitation, confidentiality or other restrictive covenants. Without limiting the generality of the foregoing, the Administrator may recover Awards made under the Plan and payments or shares of Stock delivered under or gain in respect of any Award in accordance with any applicable Company clawback or recoupment policy, as such policy may be amended and in effect from time to time, or as otherwise required by applicable law or applicable stock exchange listing standards, including, without limitation, Section 10D of the Securities Exchange Act of 1934, as amended.
(b) Awards Requiring Exercise
(1)Time and Manner of Exercise. Unless the Administrator expressly provides otherwise, an Award requiring exercise by the holder will not be deemed to have been exercised until the Administrator receives a notice of exercise (in form acceptable to the Administrator), which may be an electronic notice, signed (including electronic signature in a form acceptable to the Administrator) by the appropriate person and accompanied by any payment required under the Award. Any attempt to exercise a Stock Option or SAR by any person other than the Participant will not be given effect unless the Administrator has received such evidence as it may require that the person exercising the Stock Option or SAR has the right to do so.
(2)Exercise Price. The exercise price (or the base value from which appreciation is to be measured) of each Award requiring exercise shall be 100% (in the case of an ISO granted to aten-percent shareholder within the meaning of subsection (b)(6) of Section 422, 110%) of the Fair Market Value of the Stock subject to the Award, determined as of the date of grant, or such higher amount as the Administrator may determine in connection with the grant. Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation,split-up,spin-off, combination, or exchange of shares) or as otherwise contemplated by Section 7 below, the Company may not, without obtaining stockholder approval, (A) amend the terms of outstanding Stock Options or SARs to reduce the exercise price or base value of such Stock Options or SARs, (B) cancel outstanding Stock Options or SARs in exchange for Stock Options or SARs with an exercise price or base value that is less than the exercise price or base value of the original Stock Options or SARs, or (C) cancel outstanding Stock Options or SARs that have aper-share exercise price or base value greater than the Fair Market Value of a share of Stock on the date of such cancellation in exchange for cash or other consideration.
(3)Payment of Exercise Price.Where the exercise of an Award is to be accompanied by payment, payment of the exercise price shall be by cash or check acceptable to the Administrator, or, if so permitted by the Administrator and if legally permissible, (i) through the delivery of shares of Stock that have a Fair Market Value equal to the exercise price, (ii) through a broker-assisted exercise program acceptable to the Administrator, (iii) by other means acceptable to the Administrator, or (iv) by any combination of the foregoing permissible forms of payment. The delivery of shares
A-4 CABOT CORPORATION
2017 Long-Term Incentive Plan(continued)
in payment of the exercise price under clause (i) above may be accomplished either by actual delivery or by constructive delivery through attestation of ownership, subject to such rules as the Administrator may prescribe.
(4)Maximum Term. Awards requiring exercise will have a maximum term not to exceed ten (10) years from the date of grant (or five years from the date of grant in the case of an ISO granted to a10-percent stockholder described in Section 6(b)(2) above).
(a)Mergers, Etc.Except as otherwise provided in an Award or by the Administrator, the following provisions shall apply in the event of a Covered Transaction and Awards may be treated as set forth in subsections (1), (2) and/or (3) below, in the discretion of the Administrator:
(1)Assumption or Substitution. If the Covered Transaction is one in which there is an acquiring or surviving entity, the Administrator may provide (A) for the assumption or continuation of some or all outstanding Awards or any portion thereof or (B) for the grant of new awards in substitution therefor by the acquiror or survivor or an affiliate of the acquiror or survivor.
(2)Cash-Out of Awards. Subject to Section 7(a)(5), the Administrator may provide for payment (a “cash-out”), with respect to some or all Awards or any portion thereof, equal in the case of each affected Award or portion thereof to the excess, if any, of (A) the Fair Market Value of one share of Stock times the number of shares of Stock subject to the Award or such portion, over (B) the aggregate exercise or purchase price, if any, under the Award or such portion (in the case of an SAR, the aggregate base value above which appreciation is measured), in each case on such payment terms (which need not be the same as the terms of payment to holders of Stock) and other terms, and subject to such conditions, as the Administrator determines; it being understood that if the exercise or purchase price (or base value) of an Award is equal to or greater than the Fair Market Value of one share of Stock, the Award may be cancelled with no payment due hereunder in respect of such Award.
(3)Acceleration of Certain Awards.Subject to Section 7(a)(5), the Administrator may provide that some or all Awards requiring exercise will become fully exercisable and/or that the delivery of any shares of Stock remaining deliverable under some or all outstanding Awards of Stock Units (including Restricted Stock Units and Performance Awards to the extent consisting of Stock Units) will be accelerated in full and such shares will be delivered, prior to the Covered Transaction, in each case on a basis that gives the holder of the Award a reasonable opportunity, as determined by the Administrator, following exercise of such Award or the delivery of the shares underlying such Award, as the case may be, to participate as a stockholder in the Covered Transaction.
(4)Termination of Awards Upon Consummation of Covered Transaction.Each Award will terminate upon consummation of the Covered Transaction, other than the following: (i) Awards assumed pursuant to Section 7(a)(1) above; (ii) outstanding shares of Restricted Stock (which shall be treated in the same manner as other shares of Stock, subject to Section 7(a)(5) below) and (iii) Cash Awards that by their terms, or as a result of action taken by the Administrator, continue following such Covered Transaction.
(5)Additional Limitations.Any share of Stock and any cash or other property delivered pursuant to Section 7(a)(2) or Section 7(a) (3) above with respect to an Award may, in the discretion of the Administrator, contain such restrictions, if any, as the Administrator deems appropriate to reflect any performance or other vesting conditions to which the Award was subject and that did not lapse (and were not satisfied) in connection with the Covered Transaction. For purposes of the immediately preceding sentence, acash-out under Section 7(a)(2) or Section 7(a)(3) will not, in and of itself, be treated as the lapsing (or satisfaction) of a performance or other vesting condition. In the case of Restricted Stock that does not vest in connection with the Covered Transaction, the Administrator may require that any amounts delivered, exchanged or otherwise paid in respect of such Stock in connection with the Covered Transaction be placed in escrow or otherwise made subject to such restrictions as the Administrator deems appropriate to carry out the intent of the Plan.
(b)Changes in and Distributions With Respect to Stock
(1)Basic Adjustment Provisions.In the event of a stock dividend, stock split or combination of shares (including a reverse stock split), recapitalization or other change in the Company’s capital structure that constitutes an equity
CABOT CORPORATION A-5
2017 Long-Term Incentive Plan(continued)
restructuring within the meaning of FASB ASC Topic 718 (or any successor provision), the Administrator shall make appropriate adjustments to the maximum number of shares specified in Section 4(a) that may be delivered under the Plan and to the maximum share limits described in Section 4(d), and shall also make appropriate adjustments to the number and kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provision of Awards affected by such change.
(2) Certain Other Adjustments.The Administrator may also make adjustments of the type described in Section 7(b)(1) above to take into account distributions to stockholders other than those provided for in Section 7(a) and 7(b)(1), or any other event, if the Administrator determines that adjustments are appropriate to avoid distortion in the operation of the Plan and to preserve the value of Awards made hereunder.
(3) Continuing Application of Plan Terms.References in the Plan to shares of Stock will be construed to include any stock or securities resulting from an adjustment pursuant to this Section 7.
The Company will not be obligated to deliver any shares of Stock pursuant to the Plan or to remove any restriction from shares of Stock previously delivered under the Plan until: (i) the Company is satisfied that all legal matters in connection with the issuance and delivery of such shares have been addressed and resolved; (ii) if the outstanding Stock is at the time of delivery listed on any stock exchange or national market system, the shares to be delivered have been listed or authorized to be listed on such exchange or system upon official notice of issuance; and (iii) all conditions of the Award have been satisfied or waived. If the sale of Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to the exercise or settlement of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such Act. The Company may require that certificates evidencing Stock issued under the Plan bear an appropriate legend reflecting any restriction on transfer applicable to such Stock, and the Company may hold the certificates pending lapse of the applicable restrictions.
The Administrator may at any time or times amend the Plan or any outstanding Award for any purpose which may at the time be permitted by law, and may at any time terminate the Plan as to any future grants of Awards;provided, that except as otherwise expressly provided in the Plan the Administrator may not, without the Participant’s consent, alter the terms of an Award so as to affect materially and adversely the Participant’s rights under the Award, unless the Administrator expressly reserved the right to do so at the time of the Award. Any amendments to the Plan shall be conditioned upon stockholder approval only to the extent, if any, such approval is required by law (including the Code and applicable stock exchange requirements), as determined by the Administrator.
The existence of the Plan or the grant of any Award will not in any way affect the Company’s right to award a person bonuses or other compensation in addition to Awards under the Plan.
(a)Waiver of Jury Trial.By accepting an Award under the Plan, each Participant waives any right to a trial by jury in any action, proceeding or counterclaim concerning any rights under the Plan and any Award, or under any amendment, waiver, consent, instrument, document or other agreement delivered or which in the future may be delivered in connection therewith, and agrees that any such action, proceedings or counterclaim shall be tried before a court and not before a jury. By accepting an Award under the Plan, each Participant certifies that no officer, representative, or attorney of the Company has represented, expressly or otherwise, that the Company would not, in the event of any action, proceeding or counterclaim, seek to enforce the foregoing waivers.
(b)Limitation of Liability.Notwithstanding anything to the contrary in the Plan, neither the Company, nor any Affiliate, nor the Administrator, nor any person acting on behalf of the Company, any Affiliate, or the Administrator, shall be liable to any Participant or to the estate or beneficiary of any Participant or to any other holder of an Award by reason of any acceleration of income, or any additional tax, asserted by reason of the failure of an Award to satisfy the requirements of Section 422 or Section 409A or by reason of Section 4999 of the Code.
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2017 Long-Term Incentive Plan(continued)
(c)Section 409A of the Code.The Plan as well as payments and benefits under the Plan are intended either to be exempt from or, to the extent subject thereto, to comply with, the requirements under Section 409A, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted in accordance therewith. Notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A, the Participant shall not be considered to have terminated employment or service with the Company or any Affiliate for purposes of the Plan until the Participant would be considered to have incurred a “separation from service” from the Company and its Affiliates within the meaning of Section 409A (after giving effect to the presumptions contained therein). Notwithstanding anything to the contrary in the Plan, to the extent that any Awards (or any other amounts payable under any plan, program or arrangement of the Company or any of its Affiliates) are payable upon a separation from service and such payment would result in the imposition of any individual tax and penalty interest charges imposed under Section 409A, the settlement and payment of such Awards (or other amounts) shall instead be made on the first business day after the date that is six (6) months following such separation from service (or death, if earlier). Each amount to be paid or benefit to be provided under the Plan shall be construed as a separate identified payment for purposes of Section 409A and the right to a series of installment payments under the Plan is to be treated as a right to a series of separate payments. The Company makes no representation that any or all of the payments or benefits described in the Plan will be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to any such payment. The Participant shall be solely responsible for the payment of any taxes and penalties incurred under Section 409A or any corresponding state or local law.
The Administrator may from time to time establish one or moresub-plans under the Plan for purposes of satisfying applicable blue sky, securities or tax laws of various jurisdictions. The Administrator will establish suchsub-plans by adopting supplements to the Plan setting forth (i) such limitations on the Administrator’s discretion under the Plan as it deems necessary or desirable and (ii) such additional terms and conditions not otherwise inconsistent with the Plan as it deems necessary or desirable. All supplements so established will be deemed to be part of the Plan, but each supplement will apply only to Participants within the affected jurisdiction (as determined by the Administrator).
(a)Certain Requirements of Corporate Law.Equity Awards shall be granted and administered consistent with the requirements of applicable Delaware law relating to the issuance of stock and the consideration to be received therefor, and with the applicable requirements of the stock exchanges or other trading systems on which the Stock is listed or entered for trading, in each case as determined by the Administrator.
(d)Other Matters.Except as otherwise provided by the express terms of an Award agreement, under asub-plan described in Section 12 or as provided in Section 13(a) above, the provisions of the Plan and of Awards under the Plan and all claims or disputes arising out of our based upon the Plan or any Award under the Plan or relating to the subject matter hereof or thereof will be governed by and construed in accordance with the domestic substantive laws of the Commonwealth of Massachusetts without giving effect to any choice or conflict of laws provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.
(e)Jurisdiction.By accepting an Award, each Participant will be deemed to (a) have submitted irrevocably and unconditionally to the jurisdiction of the federal and state courts located within the geographic boundaries of the United States District Court for the District of Massachusetts for the purpose of any suit, action or other proceeding arising out of or based upon the Plan or any Award; (b) agree not to commence any suit, action or other proceeding arising out of or based upon the Plan or an Award, except in the federal and state courts located within the geographic boundaries of the United States District Court for the District of Massachusetts; and (c) waive, and agree not to assert, by way of motion as a defense or otherwise, in any such suit, action or proceeding, any claim that he or she is not subject personally to the jurisdiction of the above-named courts, that his or her property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that the Plan or an Award or the subject matter thereof may not be enforced in or by such court.
CABOT CORPORATION A-7
2017 Long-Term Incentive Plan(continued)
EXHIBIT A
Definition of Terms
The following terms, when used in the Plan, will have the meanings and be subject to the provisions set forth below:
“Administrator”: The Compensation Committee;provided, that the Compensation Committee may delegate (i) to one or more of its members or to one or more members of the Board such of its duties, powers and responsibilities as it may determine; (ii) to one or more officers of the Company the power to grant rights or options to the extent permitted by Section 157(c) of the Delaware General Corporation Law; (iii) to one or more officers of the Company the authority to allocate other Awards among such persons eligible to receive Awards under the Plan as such delegated officer or officers determine consistent with such delegation;provided, that with respect to any delegation described in this clause (iii) the Compensation Committee (or a properly delegated member or members of such Committee) shall have specified the class of persons eligible under the Plan to receive such Awards, the number of shares of Stock under such Awards and the consideration, if any, to be paid therefor; and (iv) to such Employees or other persons as it determines such ministerial tasks as it deems appropriate. In the event of any delegation described in the preceding sentence, the term “Administrator” shall include the person or persons so delegated to the extent of such delegation.
“Affiliate”:Any corporation or other entity that stands in a relationship to the Company that would result in the Company and such corporation or other entity being treated as a single employer under Sections 414(b) or 414(c) of the Code, except that such Sections shall be applied by substituting “at least 50%” for “at least 80%” wherever applicable;provided,however, that in determining eligibility for the grant of a Stock Option or SAR by reason of service for an Affiliate, “Affiliate” shall mean any corporation or other entity in a chain of corporations all of which have a controlling interest in another corporation or other entity in the chain, beginning with the parent entity and ending with the entity for which the Award recipient was providing (or was expected to provide, in accordance with Section 5 of the Plan) services on the grant date of the Award (defining the term “controlling interest” based on “at least 50 percent” rather than “at least 80 percent”). The Company may at any time by amendment provide that different ownership thresholds apply (consistent with Section 409A, where applicable).
“Award”: Any or a combination of the following:
“Board”: The Board of Directors of the Company.
“Cash Award”: An Award denominated in cash.
“Change in Control”:Upon the following event or events:
(A) an event in which any “person” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “1934 Act”) (other than (i) the Company, (ii) any subsidiary of the Company, (iii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company, or (iv) any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the “beneficial owner” (as defined in Section 13(d) of the 1934 Act), together with all affiliates and Associates (as such terms are used in Rule12b-2 of the General Rules and Regulations under the 1934 Act) of such person, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company’s then outstanding securities;
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2017 Long-Term Incentive Plan(continued)
(B) the consummation of the merger or consolidation of the Company with any other company, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) after which no “person” (with the method of determining “beneficial ownership” used in clause (A) of this definition) owns more than 25% of the combined voting power of the securities of the Company or the surviving entity of such merger or consolidation;
(C) if during any period of two consecutive years (not including any period prior to the execution of the Plan), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has conducted or threatened a proxy contest, or has entered into an agreement with the Company to effect a transaction described in clause (A), (B) or (D) of this definition) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at leasttwo-thirds (2/3) of the directors then still in office, who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or
(D) the complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the Company’s assets.
Notwithstanding the foregoing, in any case where the occurrence of a Change in Control could affect the vesting of or payment under an Award subject to the requirements of Section 409A, to the extent required to comply with Section 409A, the term “Change of Control” shall mean an occurrence that both (i) satisfies the requirements set forth above in this definition and (ii) is a “change in control event” as that term is defined in the regulations under Section 409A. If all or a portion of any Award constitutes deferred compensation under Section 409A and such Award (or portion thereof) is to be settled, distributed or paid on an accelerated basis due to a Change in Control that is not a “change in control event” under Section 409A, if such settlement, distribution or payment would result in additional tax under Section 409A, such Award (or portion thereof) shall vest at the time of the Change of Control (provided such accelerated vesting will not result in additional tax under Section 409A), but settlement, distribution or payment, as the case may be, shall only be accelerated to the maximum extent possible without resulting in a violation of Section 409A.
“Code”: The U.S. Internal Revenue Code of 1986 as from time to time amended and in effect, or any successor statute as from time to time in effect.
“Compensation Committee”: The Compensation Committee of the Board.
“Company”: Cabot Corporation.
“Covered Transaction”:Any of (i) a consolidation, merger, or similar transaction or series of related transactions, including a sale or other disposition of stock, in which the Company is not the surviving corporation or which results in the acquisition of all or substantially all of the Company’s then outstanding common stock by a single person or entity or by a group of persons and/or entities acting in concert, (ii) a sale or transfer of all or substantially all the Company’s assets, or (iii) a dissolution or liquidation of the Company. Where a Covered Transaction involves a tender offer that is reasonably expected to be followed by a merger described in clause (i) (as determined by the Administrator), the Covered Transaction shall be deemed to have occurred upon consummation of the tender offer.
Notwithstanding the foregoing, in any case where the occurrence of a Covered Transaction could affect the vesting of or payment under an Award subject to the requirements of Section 409A, to the extent required to comply with Section 409A, the term “Covered Transaction” shall mean an occurrence that both (i) satisfies the requirements set forth above in this definition and (ii) is a “change in control event” as that term is defined in the regulations under Section 409A. If all or a portion of any Award constitutes deferred compensation under Section 409A and such Award (or portion thereof) is to be settled, distributed or paid on an accelerated basis due to a Covered Transaction that is not a “change in control
CABOT CORPORATION A-9
2017 Long-Term Incentive Plan(continued)
event” under Section 409A, if such settlement, distribution or payment would result in additional tax under Section 409A, such Award (or portion thereof) shall vest at the time of the Covered Transaction (provided such accelerated vesting will not result in additional tax under Section 409A), but settlement, distribution or payment, as the case may be, shall only be accelerated to the maximum extent possible without resulting in a violation of Section 409A.
“Disability”: means the Participant meets one of the following requirements: (1) the Award recipient is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, (2) the Award recipient is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits under a disability plan of the Company, or (3) the Award recipient has been determined by the Social Security Administration to be totally disabled.
“Employee”: Any person who is employed by the Company or an Affiliate.
“Employment”:A Participant’s employment or other service relationship with the Company and its Affiliates. Employment will be deemed to continue, unless the Administrator expressly provides otherwise, so long as the Participant is employed by, or otherwise is providing services in a capacity described in Section 5 to, the Company or an Affiliate. If a Participant’s employment or other service relationship is with an Affiliate and that entity ceases to be an Affiliate, the Participant’s Employment will be deemed to have terminated when the entity ceases to be an Affiliate unless the Participant transfers Employment to the Company or its remaining Affiliates or the Administrator expressly determines otherwise.
“Equity Award”:An Award other than a Cash Award.
“Fair Market Value”:As of a particular date, (i) the closing price for a share of Stock as reported on the New York Stock Exchange (or on any other national securities exchange on which the Stock is then listed) for that date or, if no closing price is reported for that date, the closing price on the next preceding date for which a closing price was reported or (ii) in the event that the Stock is not traded on a national securities exchange or as otherwise determined by the Administrator, the fair market value of a share of Stock determined by the Administrator consistent with the rules of Section 422 and Section 409A to the extent applicable.
“ISO”: A Stock Option intended to be an “incentive stock option” within the meaning of Section 422. Each option granted pursuant to the Plan will be treated as providing by its terms that it is to be anon-incentive stock option unless, as of the date of grant, it is expressly designated as an ISO.
“Participant”: A person who is granted an Award under the Plan.
“Performance Award”: An Award subject to Performance Criteria. The Committee in its discretion may grant Performance Awards that are intended to qualify for the performance-based compensation exception under Section 162(m) and Performance Awards that are not intended so to qualify.
“Performance Criteria”: Specified criteria, other than the mere continuation of Employment or the mere passage of time, the satisfaction of which is a condition for the grant, exercisability, vesting or full enjoyment of an Award. For purposes of Awards that are intended to qualify for the performance-based compensation exception under Section 162(m), a Performance Criterion will mean an objectively determinable measure of performance relating to any or any combination of the following (measured either absolutely or by reference to an index or indices or a peer group or select group of companies and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof and subject to such adjustments, if any, as the Administrator specifies, consistent with the requirements of 162(m)): sales; revenues; assets; costs; earnings before or after deduction for all or any portion of interest, taxes, depreciation or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; one or more operating ratios or metrics; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; productivity measures; one or more working capital measures; stock price; or stockholder return or shareholder value; sales of particular products or services; customer acquisition or retention; collection of outstanding accounts or debts; safety,
A-10 CABOT CORPORATION
2017 Long-Term Incentive Plan(continued)
health or environmental affairs performance; compliance; acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs,split-ups and the like; reorganizations; recapitalizations, restructurings, financings (issuance of debt or equity); or refinancings. A Performance Criterion and any targets with respect thereto need not be based on an increase, a positive or improved result or avoidance of loss. An Award may specify more than one Performance Goal and, with respect to any Performance Goal, may specify levels of achievement at which different levels of payment may be earned. To the extent consistent with the requirements of Section 162(m), the Administrator may establish, by the deadline that otherwise applies to the establishment of the terms of an Award, that one or more of the Performance Criteria applicable to such Award will be adjusted in an objectively determinable manner to reflect events (for example, the impact of charges for restructurings, discontinued operations, mergers, acquisitions, other unusual or infrequently occurring items, and the cumulative effects of tax or accounting changes, each as defined by U.S. generally accepted accounting principles) occurring during the applicable performance period that affect the applicable Performance Criterion or Criteria.
“Plan”: The Cabot Corporation 2017 Long-Term Incentive Plan as from time to time amended and in effect.
“Restricted Stock”: Stock subject to restrictions requiring that it be redelivered or offered for sale to the Company if specified conditions are not satisfied.
“Restricted Stock Unit”: A Stock Unit that is, or as to which the delivery of Stock or cash in lieu of Stock is, subject to the satisfaction of specified performance or other vesting conditions.
“SAR”:A right entitling the holder upon exercise to receive an amount (payable in cash or in shares of Stock of equivalent value) equal to the excess of the Fair Market Value of the shares of Stock subject to the right over the base value from which appreciation under the SAR is to be measured.
“Section 409A”: Section 409A of the Code.
“Section 422”: Section 422 of the Code.
“Section 162(m)”: Section 162(m) of the Code.
“Stock”: Common Stock of the Company, par value $1.00 per share.
“Stock Option”: An option entitling the holder to acquire shares of Stock upon payment of the exercise price.
“Stock Unit”: An unfunded and unsecured promise, denominated in shares of Stock, to deliver Stock or cash measured by the value of Stock in the future.
“Substitute Awards”:EquityAwards issued under the Plan in substitution for equity awards of an acquired company that are converted, replaced or adjusted in connection with the acquisition.
“Unrestricted Stock”: Stock not subject to any restrictions under the terms of the Award.
CABOT CORPORATION A-11
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A | Proposals |
1. | Election of Directors: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | ||||||||||||||||||||||||||||||||||||||||||||||
01 - Juan Enriquez* | ☐ | ☐ | ☐ | 02 - Sean D. Keohane* | ☐ | ☐ | ☐ | 03 - William C. Kirby* | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||||||||||||||||||
* Each to be elected to the class of Directors whose term expires in |
For | Against | Abstain | 1 Year | 2 Years | 3 Years | Abstain | For | Against | Abstain | For | Against | Abstain | ||||||||||||||||||||||||||||
2. | To approve, in an advisory vote, Cabot’s executive compensation. | ☐ | ☐ | ☐ | 3. | To recommend, on anon-binding advisory basis, the frequency of shareholder votes on executive compensation. | ☐ | ☐ | ☐ | ☐ | To approve, in an advisory vote, Cabot’s executive compensation. | ☐ | ☐ | ☐ | 3. | To ratify the appointment of Deloitte & Touche LLP as Cabot’s independent registered public accounting firm for the fiscal year ending September 30, 2020. | ☐ | ☐ | ☐ | |||||||||||||||||||||
For | Against | Abstain | ||||||||||||||||||||||||||||||||||||||
4. | To approve the Cabot Corporation 2017 Long-Term Incentive Plan. | ☐ | ☐ | ☐ | 5. | To ratify the appointment of Deloitte & Touche LLP as Cabot’s independent registered public accounting firm for the fiscal year ending September 30, 2017. | ☐ | ☐ | ☐ | To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. | . | |||||||||||||||||||||||||||||
6. | To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. |
While we encourage voting using the electronic voting instructions above to ensure immediate receipt of your vote, registered shareholders wishing to vote by mail must complete, sign and date this proxy card and return it for receipt by no later than Wednesday, March 11, 2020. Participants in the Cabot employee benefit plans voting by mail must complete, sign and date this proxy card and return it for receipt by no later than Monday, March 9, 2020.
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Proxy —
Proxy – Cabot Corporation
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Annual Meeting of Stockholders —– March 9, 201712, 2020
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints BrianKaren A. Berube,Kalita, Jane A. Bell and KarenJacqueline A. Kalita,Zane, and each of them, proxies, with power of substitution, to vote the shares of stock of Cabot Corporation that the undersigned is entitled to vote, as specified on the reverse side of this card, and, if applicable, hereby directs the trustees of the employee benefit plans to vote the shares of stock of Cabot Corporation allocated to the account(s) of the undersigned or otherwise that the undersigned is entitled to vote pursuant to such employee benefit plans, at the Annual Meeting of Stockholders of Cabot Corporation to be held on March 9, 201712, 2020 at 4:00 p.m., Eastern Time, at the Corporate Headquarters of Cabot Corporation, Two Seaport Lane, Suite 1300, Boston, Massachusetts, and at any adjournment or postponement thereof.
WHEN THIS PROXY IS PROPERLY EXECUTED THE SHARES TO WHICH THIS PROXY RELATES WILL BE VOTED AS SPECIFIEDWhen this proxy is properly executed the shares to which this proxy relates will be voted as specified and, if no specification is made, will be voted “for” all nominees in proposal 1 AND IF NO SPECIFICATION IS MADE, WILL BE VOTED “FOR” ALL NOMINEES IN PROPOSAL 1, “FOR” PROPOSALS“for” proposals 2 4 AND 5 AND “FOR” “1 YR” ON PROPOSALand 3 AND IT AUTHORIZES THE ABOVE DESIGNATED PROXIESit authorizes the above designated proxies to vote in accordance with their judgment on such other business as may properly come before the meeting.
CONTINUED AND TO VOTE IN ACCORDANCE WITH THEIR JUDGMENTBE SIGNED ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.REVERSE SIDE
C | Non-Voting Items |
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