UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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DowDuPont Inc.
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May 1, 2019
Dear Stockholders of DowDuPont Inc.:
On behalf of the Board of Directors (the “Board”) of DowDuPont Inc. (“DowDuPont” or the “Company”), you are cordially invited to attend a Special Meeting of Stockholders (the “Special Meeting”) to be held at 9:00 a.m., local time, on May 23, 2019, at 974 Centre Road, Chestnut Run Plaza, Building 730, Wilmington, DE 19805.
At the Special Meeting, stockholders will consider and vote on a proposal to adopt and approve an amendment to our Amended and Restated Certificate of Incorporation that effects (a) a reverse stock split of our outstanding shares of common stock, at a reverse stock split ratio of not less than2-for-5 and not greater than1-for-3, with an exact ratio as may be determined by our Board at a later date, and (b) a reduction in the number of authorized shares of our common stock by a corresponding ratio.
The proxy statement attached to this letter provides you with information about the proposed reverse stock split amendment. Please read the entire proxy statement carefully. You may obtain additional information about the Company from documents we file with the Securities and Exchange Commission.
It is important that your shares be represented and voted at the meeting. Please vote as soon as possible even if you plan to attend the Special Meeting. We appreciate your continued ownership of DowDuPont shares and your support regarding this matter.
Sincerely,
2018 PROXY STATEMENT NOTICE OF ANNUAL MEETING OF STOCKHOLDERS WEDNESDAY, APRIL 25, 2018 UNLOCKING VALUE CREATING THREE WORLD-LEADING COMPANIES AGRICULTURE MATERIALS SCIENCE SPECIALTY PRODUCTS
Edward D. Breen
Chairman of the Board and Chief Executive Officer
DOWDUPONT INC.
974 CENTRE ROAD
WILMINGTON, DELAWARE 19805
NOTICE OF THE ANNUALSPECIAL MEETING OF STOCKHOLDERS
Dear StockholderTo Be Held on May 23, 2019
To Our Stockholders:
What: | Special Meeting of Stockholders |
When: | May 23, 2019 at 9:00 a.m., local time |
Where: | 974 Centre Road, Chestnut Run Plaza, Building 730, Wilmington, DE 19805 |
Why: | At this Special Meeting, or any adjournment or postponement of the Special Meeting, we plan to consider and vote upon the proposals listed below. |
Proposal No. 1: | A proposal, which we refer to as the “reverse stock split proposal,” to adopt and approve an amendment to our Amended and Restated Certificate of Incorporation to effect (a) a reverse stock split of our outstanding shares of common stock, at a reverse stock split ratio of not less than2-for-5 and not greater than1-for-3, with an exact ratio as may be determined by our Board at a later date, (the “Reverse Stock Split”) and (b) a reduction in the number of authorized shares of our common stock by a corresponding ratio (the “Authorized Share Reduction”). | |
Proposal No. 2 | A proposal, which we refer to as the “adjournment proposal,” to approve, if necessary, the adjournment of the Special Meeting to solicit additional proxies in favor of the reverse stock split proposal. |
Notwithstanding approval of the reverse stock split proposal by our stockholders, the Board of Directors reserves its right to elect not to proceed with implementing the reverse stock split proposal at any time prior to the date on which the amendment to our Amended and Restated Certificate of Incorporation becomes effective pursuant the General Corporation Law of the State of Delaware, if it determines, in its sole discretion, that the reverse stock split proposal is no longer in the best interests of the Company or its stockholders. Subject to the receipt of stockholder approval, the Board currently expects and intends to implement the Reverse Stock Split and Authorized Share Reduction such that they become effective immediately following the intended distribution of all of the shares of common stock of our wholly-owned subsidiary, Corteva, Inc., which will hold our Agriculture Business, to the holders of our common stock on a pro rata basis.
The close of business on May 1, 2019 has been fixed as the record date for determining those DowDuPont stockholders entitled to vote at the Special Meeting. Accordingly, only stockholders of record at the close of business on that date will receive this notice of, and be eligible to vote at, the Special Meeting and any adjournment or postponement of the Special Meeting. The above items of business for the Special Meeting are more fully described in the proxy statement that accompanies this notice.
Your vote is important. Please read the proxy statement and the instructions on the enclosed proxy card and then, whether or not you plan to attend the Special Meeting in person, and no matter how many shares you own, please submit your proxy promptly by telephone or via the Internet in accordance with the instructions on the enclosed proxy card, or by completing, dating and returning your proxy card in the envelope provided. This will not prevent you from voting in person at the Special Meeting. It will, however, help to assure a quorum and to avoid added proxy solicitation costs.
You may revoke your proxy at any time before the vote is taken by delivering to the Office of the Corporate Secretary of DowDuPont Inc.:a written revocation or a proxy with a later date (including a proxy by telephone or via the Internet) or by voting your shares in person at the Special Meeting, in which case your prior proxy would be disregarded.
AtBy order of the 2018 Annual MeetingBoard of Stockholders (the “2018 Meeting”), stockholders will vote on the following matters either by proxy or in person:Directors
Stacy L. Fox
General Counsel and Corporate Secretary
Wilmington, Delaware
May 1, 2019
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How to Vote
Your vote is important. Whether or not you plan on attending the 2018 Meeting, please vote your shares as soon as possible by internet, telephone or mail.
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The Board of Directors of DowDuPont Inc. (the “Board”) has set the close of business on February 26, 2018, as the record date for determining stockholders who are entitled to receive notice of the 2018 Meeting and to vote.
As permitted by U. S. Securities and Exchange Commission (the “SEC”) rules, proxy materials were made available via the internet. Notice regarding availability of proxy materials and instructions on how to access those materials were mailed to certain stockholders of record on or about March 16, 2018 (the “Notice”). The instructions included how to vote online and how to request a paper copy of the proxy materials. This method of notice and access gives the Company a lower-cost way to furnish stockholders with their proxy materials.
Proof of stock ownership is necessary to attend the 2018 Meeting. Since seating is limited, the Board has established the rule that only stockholders or one person holding a proxy for any stockholder or account (in addition to those named as Board proxies on the proxy forms) may attend. Please see page 2 of the Proxy Statement for information on attending the 2018 Meeting.
If you are unable to attend the 2018 Meeting in person, please listen to the live audio webcast or the replay after the event, atwww.dow-dupont.com/investors.
Thank you for your continued support and your interest in DowDuPont Inc.
Stacy Fox
General Counsel and Secretary
March 16, 2018
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON APRIL 25, 2018
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
ABOUT THE DOWDUPONT MERGER TRANSACTION AND INTENDED BUSINESS SEPARATIONS
Effective August 31, 2017, The Dow Chemical Company (“Dow”) and E. I. du Pont de Nemours and Company (“DuPont”) completed the previously announced merger of equals transaction contemplated by the Agreement and Plan of Merger dated as of December 11, 2015, as amended on March 31, 2017 (the “Merger Transaction”). The Merger Transaction resulted in each of Dow and DuPont surviving as subsidiaries of DowDuPont Inc. (“DowDuPont”). For purposes of this Proxy Statement, references to “the Company” refer to DowDuPont.
Each share of common stock of Dow was converted into the right to receive one fully paid andnon-assessable share of common stock of the Company. Each share of common stock of DuPont was converted into the right to receive 1.2820 fully paid andnon-assessable shares of common stock of the Company. Any shares of common stock of Dow and DuPont which were held in treasury immediately prior to the Merger Transaction were automatically cancelled and retired for no consideration.
DowDuPont is now pursuing the intended separation of the Company’s Agriculture, Materials Science and Specialty Products divisions into three independent, publicly traded companies (the “Intended Business Separations”). The Intended Business Separations, which are subject to Board approval, are expected to be in the form ofpro-rataspin-off transactions, under which DowDuPont stockholders will receive shares of capital stock in the resulting companies. DowDuPont recently announced dates for the Intended Business Separations: Materials Science is expected to separate from DowDuPont by the end of the first quarter of 2019, and Agriculture and Specialty Products are each expected to separate from one another by June 1, 2019.
DowDuPont recently announced brand names for the Intended Business Separations reflecting its ongoing progress toward the separations.
Dow was determined to be the accounting acquirer in the Merger Transaction and, as a result, certain historical information of Dow is presented in this Proxy Statement for the periods prior to the Merger Transaction. A further description of the Merger Transaction can be found in the current report on Form8-K filed by DowDuPont on September 1, 2017.
Anticipated Timeline to Expected Spins 1Q18 3Q18 1Q19 MatCo Spin AgCo Spin Finalize assets and liabilities by spin Complete IT design and test File initial Forms 10 Begin to deploy IT systems and stand up legal entities Forms 10 become effective Complete equity roadshows Complete IT systems and legal entity transitions 3Q19 SpecCo Formed
THREE INDUSTRY-LEADING COMPETITORS WITH STRONG FOUNDATIONS
FOR INDEPENDENT, SUSTAINABLE GROWTH
We expect to complete the separation of the Materials Science division from DowDuPont by the end of first quarter of 2019, and the separation of the Agriculture and Specialty Products divisions from one another by June 1, 2019.
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The intended Agriculture company will become Corteva Agriscience™ and will bring together the strengths of DuPont Pioneer, DuPont Crop Protection and Dow AgroSciences to form a pure-play Agriculture company with the industry’s most comprehensive and balanced portfolio, focused resources, and the scale needed to deliver the innovative solutions its customers need. The highly productive innovation engine and combined robust pipeline of solutions across seed, crop protection, seed-applied technologies, and digital agriculture will enable the intended Agriculture company to bring a broader suite of products to the market faster and be an even better partner to farmers around the world, helping them to increase their productivity and profitability.
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The intended Materials Science company will be called Dow and will be the premier materials science solution provider, focused on three, high-growth market verticals: packaging, infrastructure and consumer care. Built on a foundation of the strongest and deepest chemistry and polymers toolkit, the intended Materials Science company will have robust technology and asset integration, scale and cost-competitive capabilities to enable truly differentiated and sustainable solutions for customers.
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The intended Specialty Products company will be the new DuPont and will be a premier innovation leader composed of technology-based differentiated materials, ingredients and solutions that transform multiple industries and everyday life. It will apply its market knowledge and deep expertise in science and application development to solve customer needs in attractive markets and accelerate the adoption of electronic functionality and biotechnology into consumer and industrial applications. Bringing together science and market insights, Specialty Products will be well positioned for growth opportunities where customer collaboration and innovation are central to value creation.
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AGRICULTURE MATERIALS SCIENCE SPECIALTY PRODUCTS 2017 Pro Forma Sales1 2017 Pro Forma Sales1 2017 Pro Forma Sales1 Crop Protection Seed Packaging & Specialty Plastics Industrial Intermediates & Infrastructure Performance Materials & Coatings Electronics & Imaging Transportation & Advanced Polymers Nutrition & Biosciences Safety & Construction
Cautionary Statement About Forward-Looking Statements
This communication contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” and similar expressions and variations or negatives of these words.
Forward-looking statements by their nature address matters that are, to varying degrees, uncertain, including the intended separation, subject to approval of the Company’s Board of Directors, of DowDuPont’s Agriculture, Materials Science and Specialty Products businesses in one or more tax efficient transactions on anticipated terms (the “Intended Business Separations”). Forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events which may not be realized. Forward-looking statements also involve risks and uncertainties, many of which are beyond the Company’s control. Some of the important factors that could cause DowDuPont’s, Dow’s or DuPont’s actual results to differ materially from those projected in any such forward-looking statements include, but are not limited to: (i) costs to achieve and achieving the successful integration of the respective Agriculture, Materials Science and Specialty Products businesses of Dow and DuPont, anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, productivity actions, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the combined operations; (ii) costs to achieve and achievement of the anticipated synergies by the combined Agriculture, Materials Science and Specialty Products businesses; (iii) risks associated with the Intended Business Separations, including conditions which could delay, prevent or otherwise adversely affect the proposed transactions, including possible issues or delays in obtaining required regulatory approvals or clearances related to the Intended Business Separations, associated costs, disruptions in the financial markets or other potential barriers; (iv) disruptions or business uncertainty, including from the Intended Business Separations, could adversely impact DowDuPont’s business (either directly or as conducted by and through Dow or DuPont), or financial performance and its ability to retain and hire key personnel; (v) uncertainty as to the long-term value of DowDuPont common stock; and (vi) risks to DowDuPont’s, Dow’s and DuPont’s business, operations and results of operations from: the availability of and fluctuations in the cost of energy and feedstocks; balance of supply and demand and the impact of balance on prices; failure to develop and market new products and optimally manage product life cycles; ability, cost and impact on business operations, including the supply chain, of responding to changes in market acceptance, rules, regulations and policies and failure to respond to such changes; outcome of significant litigation, environmental matters and other commitments and contingencies; failure to appropriately manage process safety and product stewardship issues; global economic and capital market conditions, including the continued availability of capital and financing, as well as inflation, interest and currency exchange rates; changes in political conditions, business or supply disruptions; security threats, such as acts of sabotage, terrorism or war, natural disasters and weather events and patterns which could result in a significant operational event for the Company, adversely impact demand or production; ability to discover, develop and protect new technologies and to protect and enforce the Company’s intellectual property rights; failure to effectively manage acquisitions, divestitures, alliances, joint ventures and other portfolio changes; unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as management’s response to any of the aforementioned factors. These risks are and will be more fully discussed in the current, quarterly and annual reports filed with the U.S. Securities and Exchange Commission by DowDuPont. While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on DowDuPont’s, Dow’s or DuPont’s consolidated financial condition, results of operations, credit rating or liquidity. None of DowDuPont, Dow or DuPont assumes any obligation to publicly provide revisions or updates to any forward-looking statements whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws. A detailed discussion of some of the significant risks and uncertainties which may cause results and events to differ materially from such forward-looking statements is included in the section titled “Risk Factors” (Part I, Item 1A of DowDuPont’s 2017 Annual Report on Form10-K).
Annual Meeting of Stockholders
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This summary highlights information contained elsewhere in this Proxy Statement. It does not contain all information that you should consider, and you should read the entire Proxy Statement carefully before voting.
PROXY STATEMENT SUMMARY (continued)
Board Nominees
Each Director nominee is elected annually by a majority of votes cast to serve for a one-year term that expires at the Annual Meeting in 2019 or until their successors are elected and qualified. While nominated for re-election, the Company has announced that Mr. Liveris will serve as a Director of DowDuPont only through July 1, 2018, at which time he will retire from the Company and the Board of Directors. As set forth in the Bylaws, the Continuing Dow Directors will identify a replacement to fill the vacancy at that time. The following table provides summary information about each Director nominee. The information is current as of the date of this Proxy Statement and the age listed is as of the 2018 Meeting.
Overview of Business
DowDuPont Merger Transaction
Effective August 31, 2017, The Dow Chemical Company (“Dow”) and E. I. du Pont de Nemours and Company (“DuPont”) completed the previously announced merger of equals transaction contemplated by the Agreement and Plan of Merger dated as of December 11, 2015, as amended on March 31, 2017 (the “Merger Transaction”). The Merger Transaction resulted in each of Dow and DuPont surviving as subsidiaries of DowDuPont Inc. (“DowDuPont”). For purposes of this Proxy Statement, references to “the Company” refer to DowDuPont.
Dow was determined to be the accounting acquirer in the Merger Transaction and, as a result, certain historical information of Dow is presented in this Proxy Statement for the periods prior to the Merger Transaction. A further description of the Merger Transaction can be found on page i of the Proxy Statement and in the current report onForm 8-K filed by DowDuPont on September 1, 2017.
DowDuPont is now pursuing the intended separation of the Company’s Agriculture, Materials Science and Specialty Products divisions into three independent, publicly traded companies (the “Intended Business Separations”). The Intended Business Separations, which are subject to Board approval, are expected to be in the form ofpro-rataspin-off transactions, under which DowDuPont stockholders will receive shares of capital stock in the resulting companies. DowDuPont recently announced dates for the Intended Business Separations: Materials Science which will be called Dow, is expected to separate from DowDuPont by the end of the first quarter of 2019, and Agriculture, which will become Corteva Agriscience™, and Specialty Products, which will be the new DuPont, are each expected to separate from one another by June 1, 2019.
DowDuPont is led by a management team that reflects the strengths and capabilities of both Dow and DuPont. Each of the three divisions leads its respective industry through productive, science-based innovation to meet the needs of customers and help solve global challenges.
Lamberto Andreotti Age: 67 Independent Director Since: 2012 Legacy: DuPont James A. Bell Age: 69 Independent Director Since: 2005 Legacy: Dow Edward D. Breen Age: 62 Director Since: 2015 Legacy: DuPont Robert A. Brown Age: 66 Independent Director Since: 2007 Legacy: DuPont Alexander M. Cutler Age: 66 Independent Director Since: 2008 Legacy: DuPont Jeff M. Fettig Age: 61 Independent Director Since: 2003 Legacy: Dow Marillyn A. Hewson Age: 64 Independent Director Since: 2007 Legacy: DuPont Lois D. Juliber Age: 69 Independent Director Since: 1995 Legacy: DuPont Andrew N. Liveris Age: 63 Director Since: 2004 Legacy: Dow Raymond J. Milchovich Age: 68 Independent Director Since: 2015 Legacy: Dow Paul Polman Age: 61 Independent Director Since: 2010 Legacy: Dow Dennis H. Reilley Age: 65 Independent Director Since: 2007 Legacy: Dow James M. Ringler Age: 72 Independent Director Since: 2001 Legacy: Dow Ruth G. Shaw Age: 70 Independent Director Since: 2005 Legacy: Dow Lee M. Thomas Age: 73 Independent Director Since: 2011 Legacy: DuPont Patrick J. Ward Age: 54 Independent Director Since: 2013 Legacy: DuPont
PROXY STATEMENT SUMMARY (continued)
The management team seeks to deliver value at DowDuPont through:
Performance Highlights
See Appendix A for a reconciliation to the most directly comparable U.S. GAAP financial measures.
Agriculture Materials Science Specialty Products Crop Protection Seed Packaging & Specialty Plastics Industrial Intermediates & Infrastructure Performance Materials & Coatings Electronics & Imaging Transportation & Advanced Polymers Nutrition & Biosciences Safety & Construction
PROXY STATEMENT SUMMARY (continued)
Corporate Governance Best Practices
As part of DowDuPont’s commitment to high ethical standards, the Board follows sound governance practices. These practices are described in more detail beginning on page 3 of the Proxy Statement and on the Company’s website atwww.dow-dupont.com/investors/corporate-governance.
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Company Leadership and Board Composition
Company Leadership
In order to ensure that DowDuPont benefited from the experience and expertise of both Dow’s and DuPont’s leadership teams and Directors, it was determined prior to the Merger Transaction that Andrew N. Liveris, Chairman and CEO of Dow, would serve as the Executive Chairman of DowDuPont and Edward D. Breen, Chairman and CEO of DuPont, would serve as the Chief Executive Officer of DowDuPont.
Board Composition and Director Experience
Additionally, in order to ensure effective oversight of DowDuPont, the Board consists of sixteen Directors; eight of whom were Directors at Dow prior to the closing of the Merger Transaction (including Andrew N. Liveris and Jeff M. Fettig, former Lead Independent Director) and eight of whom were Directors at DuPont prior to the closing of the Merger Transaction (including Edward D. Breen and Alexander M. Cutler, former Lead Independent Director). The Directors collectively possess a variety of skills, professional experience, and diversity of backgrounds that allow them to
PROXY STATEMENT SUMMARY (continued)
effectively oversee DowDuPont’s business including: leadership experience, international experience, operational experience in a variety of relevant fields and industries, public company board experience, board or other significant experience with academic research and philanthropic institutions and trade and industry organizations, and prior government or public policy experience. Each Director’s relevant experiences and attributes collectively provide the Board with a balance of perspectives that contribute to its effectiveness in overseeing the business, preparing for the Intended Business Separations, and advising the Company on navigating the regulatory environment for the Intended Business Separations.
Board Committees
The Board maintains an Audit Committee; Compensation Committee; Corporate Governance Committee and Environment, Health, Safety and Technology Committee (the “Standing Committees”). In addition to the Standing Committees, three Advisory Committees were established to oversee the business and affairs of each of DowDuPont’s Agriculture, Materials Science and Specialty Products divisions in preparation for the Intended Business Separations. Each Advisory Committee is responsible for overseeing their respective divisions. The responsibilities of each Standing Committee and Advisory Committee are stated in the Bylaws as well as in their respective charters. The Committees are described in more detail beginning on page 4 of the Proxy Statement.
A list of the Directors and their respective Committee memberships is below:
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* = Independent CH = Chairman or, as applicable,Co-Chairman A = Additional Ex Officio Attendee
In addition, Advisory Committee members may participate in other Advisory Committee meetings as an attendee. Such attendees may not vote or be counted for quorum purposes. Advisory Committees also include ex officio members from the legacy Dow and legacy DuPont Boards who are not serving on the Board, as well as additional members who participate in an ex officio capacity as appointed by the Board to provide the Advisory Committees with the business context and knowledge needed to ensure an efficient and timely transition for the Intended Business Separations. Such ex officio members may not vote or be counted for quorum purposes.
PROXY STATEMENT SUMMARY (continued)
ExecutiveCompensation
Program Structure and Alignment with Core Principles
Both Dow and DuPont have a history of designing executive compensation programs to attract, motivate, reward and retain the high-quality executives necessary for Company leadership and strategy execution. This legacy continues at DowDuPont and positions the Company well in order to deliver on the commitment to create three independent, industry-leading companies.
The legacy Dow and DuPont compensation programs are designed and administered to follow these core principles:
DowDuPont is focused on implementing pay practices to ensure continued alignment with the Company’s core principles. The following summarizes DowDuPont’s key executive compensation governance practices:
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As implementation of the Intended Business Separations continues, the Compensation Committee will continue to review best practices in governance and executive compensation to ensure that the compensation programs align with the Company’s core principles.
Executive Compensation Program Summary
2017 was a unique year, as both Dow and DuPont operated as standalone companies prior to the Merger Transaction, each with its own executive compensation and benefit programs and practices. Given the Intended Business Separations within a relatively short period of time after the closing of the Merger Transaction, a decision was made to not develop separate executive compensation programs at the DowDuPont level for 2017. Rather, the executive officers of DowDuPont continue to be employees of, and participants in, the compensation and benefit programs of Dow and DuPont, respectively. The only exception to this structure is related to a post-merger grant of Performance Share Units (“PSUs”) which were awarded to certain senior executives and which is discussed more fully in the section entitled “DowDuPont – Post Merger Grant” which can be found on page 45 of the Proxy Statement.
PROXY STATEMENT SUMMARY (continued)
Each of the Dow and DuPont executive compensation programs delivers value through three primary forms of compensation: base salary, annual incentives, and long-term incentives. The compensation outcomes under the programs’ annual and long-term incentives are determined by respective company performance (and, in the case of the post-merger PSUs awarded, by the overall performance of DowDuPont).
The following table summarizes the two companies’ respective 2017 legacy executive compensation programs.
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The following merger-related compensation actions were taken in 2017:
2018 Annual Meeting of Stockholders
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i
ii
DOWDUPONT INC.
974 CENTRE ROAD
WILMINGTON, DELAWARE 19805
IMPORTANT NOTICE REGARDING
PROXY STATEMENT
FOR THE AVAILABILITY OF PROXY MATERIALS FOR THESPECIAL MEETING
STOCKHOLDER MEETING TO BE HELD ON APRIL 25, 2018To Be Held on May 23, 2019
Important Notice Regarding the Availability of Proxy Materials for the
Special Meeting to be Held on May 23, 2019
The Noticeproxy statement and Proxy Statement and Annual Reportthe Company’s proxy card are available at www.proxyvote.com.
Stockholders may request theirwww.proxyvote.com.
This proxy materials be deliveredstatement is being furnished to them electronically in 2019you by visiting
https://enroll.icsdelivery.com/dwdp.
VOTING AND ATTENDANCE PROCEDURES
In this Proxy Statement, you will find information on the Board of Directors (the “Board”) of DowDuPont Inc. (the “Board”“Company” or “DowDuPont”), the candidates for election to the Board, and eight other itemssolicit your proxy to be voted uponvote your shares at the 2018 Annualour Special Meeting of Stockholders (the “2018“Special Meeting”). The Special Meeting will be held on May 23, 2019 at 9:00 a.m., local time, at 974 Centre Road, Chestnut Run Plaza, Building 730, Wilmington, DE 19805.
This proxy statement, the foregoing notice and the accompanying proxy card are first being made available on or about May 1, 2019 to all holders of our common stock, par value $0.01 per share, entitled to vote at the Special Meeting.
Purpose of the Special Meeting
The purpose of the Special Meeting is to consider and vote on the following proposals:
Proposal No. 1: | A proposal, which we refer to as the “reverse stock split proposal,” to adopt and approve an amendment to our Amended and Restated Certificate of Incorporation to effect (a) a reverse stock split of our outstanding shares of common stock, at a reverse stock split ratio of not less than2-for-5 and not greater than1-for-3, with an exact ratio as may be determined by our Board at a later date (the “Reverse Stock Split”), and (b) a reduction in the number of authorized shares of our common stock by a corresponding ratio (the “Authorized Share Reduction”). |
Proposal No. 2: | A proposal, which we refer to as the “adjournment proposal,” to approve, if necessary, the adjournment of the Special Meeting to solicit additional proxies in favor of the reverse stock split proposal. |
Notwithstanding approval of the reverse stock split proposal by our stockholders, the Board reserves its right to elect not to proceed with the Reverse Stock Split and Authorized Share Reduction at any time prior to the date on which the amendment to our Amended and Restated Certificate of Incorporation becomes effective pursuant the General Corporation Law of the State of Delaware (the “DGCL”), if it determines, in its sole discretion, that the Reverse Stock Split and Authorized Share Reduction are no longer in the best interests of the Company or its stockholders. Subject to the receipt of stockholder approval, the Board currently expects and intends to implement the Reverse Stock Split and Authorized Share Reduction such that they become effective immediately following the intended Corteva Distribution (as defined herein).
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING
Who is entitled to vote at the Special Meeting?
Holders of DowDuPont common stock as of the close of business on the record date, May 1, 2019, will receive notice of, and be eligible to vote at, the Special Meeting and any adjournment or postponement of the 2018Special Meeting. The background information in this Proxy Statement has been suppliedAt the close of business on April 26, 2019, the last practicable day before the printing of these proxy materials, DowDuPont had outstanding and entitled to youvote 2,246,370,461 shares of common stock. No other shares of DowDuPont capital stock are entitled to notice of and to vote at the requestSpecial Meeting. For each share of common stock held as of the record date, the holder is entitled to one vote on each proposal to be voted on.
What matters will be voted on at the Special Meeting?
The two proposals that are scheduled to be considered and voted on at the Special Meeting are the reverse stock split proposal and the adjournment proposal.
What are the Board’s voting recommendations?
The Board to helprecommends that you decide how to vote “FOR” the reverse stock split proposal and to provide information on“FOR” the Company’s corporate governance and compensation practices. References in this document to “the Company” and “DowDuPont” mean DowDuPont Inc., to “Dow” meansadjournment proposal.
What is the purpose of the Reverse Stock Split?
As a result of the merger of equals of The Dow Chemical Company and to “DuPont” means E. I. du Pont de Nemours and Company. This Proxy StatementCompany on August 31, 2017, the number of our outstanding shares of common stock is first beingsignificantly higher than the number of outstanding shares of either The Dow Chemical Company or E. I. du Pont de Nemours and Company prior to such merger. Moreover, as a result of ourspin-off of Dow Inc. (“Dow”), which was completed on April 1, 2019, and which previously held the Company’s materials science business, the value of our common stock no longer includes the value of the materials science business.
If the previously announced intended separation of Corteva, Inc. (“Corteva”), which will hold the Company’s agriculture business, from DowDuPont is completed, then the market price and trading ranges for our common stock may be lower than the current market price and trading ranges due to the fact that we will have distributed all of the shares of Corteva’s common stock on a pro rata basis to holders of our common stock (the “Corteva Distribution”) and the market price and trading ranges will no longer reflect the value of our agriculture business.
The Board believes that implementing the Reverse Stock Split is likely to increase the market price for our common stock as fewer shares will be outstanding. The Board further believes that the increased market price of our common stock expected as a result of implementing the Reverse Stock Split may improve marketability and liquidity of our common stock and may encourage interest and trading in our common stock.
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
If your shares are registered directly in your name with our transfer agent, Computershare Inc., you are considered the “stockholder of record” with respect to those shares.
If your shares are held in a stock brokerage account or by a bank or other nominee, those shares are held in “street name” and you are considered the “beneficial owner” of the shares. As the beneficial owner of those shares, you have the right to direct your broker, bank or nominee how to vote your shares, and you will receive separate instructions from your broker, bank or other holder of record describing how to vote your shares.
How can I vote my shares before the Special Meeting?
If you hold your shares in your own name, you may submit a proxy by telephone, via the Internet or by mail.
• | Submitting a Proxy by Telephone: You can submit a proxy for your shares by telephone until 11:59 p.m. Eastern Daylight Time on May 22, 2019, by calling the toll-free telephone number on the enclosed proxy card, 1-800-690-6903. Telephone proxy submission is available 24 hours a day.Easy-to-follow voice prompts allow you to submit a proxy for your shares and confirm that your instructions have been properly recorded. Our telephone proxy submission procedures are designed to authenticate stockholders by using individual control numbers. |
• | Submitting a Proxy via the Internet:You can submit a proxy for your shares via the Internet until 11:59 p.m. Eastern Daylight Time on May 22, 2019, by accessing the website listed on the enclosed proxy card,www.proxyvote.com, and following the instructions you will find on the website. Internet proxy submission is available 24 hours a day. As with telephone proxy submission, you will be given the opportunity to confirm that your instructions have been properly recorded. |
• | Submitting a Proxy by Mail:If you choose to submit a proxy or other voting instruction form for your shares by mail, simply mark the enclosed proxy card or other voting instruction form, date and sign it, and return it in the postage paid envelope provided. |
By casting your vote in any of the three ways listed above, you are authorizing the individuals listed on the proxy to vote your shares in accordance with your instructions. You may also attend the Special Meeting and vote in person.
If your shares are held in the name of a bank, broker or about March 16, 2018.other nominee, you will receive instructions from the holder of record that you must follow for your shares to be voted.
Vote Your Shares
The availability of telephonic or Internet voting will depend on the bank’s or broker’s voting process. Please check with your bank or broker and follow the voting procedures your bank or broker provides to vote your shares. Also, please note that if the holder of record of your shares is a bank, broker or other nominee and you wish to vote in Advanceperson at the Special Meeting, you must request a legal proxy from your bank, broker or other nominee that holds your shares and present that proxy and proof of identification at the Special Meeting; otherwise, you will not be able to vote in person at the Special Meeting.
YouIf I am the beneficial owner of shares held in “street name” by my broker, will my broker automatically vote my shares for me?
Under New York Stock Exchange (“NYSE”) rules, the reverse stock split proposal and the adjournment proposal are considered “discretionary” items. Consequently, for both proposals, a broker will have discretion to vote your shares and, therefore, may vote your shares by internet, telephone or signing and returning the enclosed proxy or other voting instruction form.Your shares will be voted only if the proxy or voting instruction form is properly executed and received by the independent Inspectors of Election prior to the 2018 Meeting. Except as provided below with respect to both proposals if you do not provide your broker with instructions on such proposal.
How will my shares held in employee savings plans,be voted if noI give my proxy but do not specify how my shares should be voted?
If you provide specific instructions are given by you when you execute your voting instruction form, as explained on the form,instructions, your shares will be voted as recommendedat the Special Meeting in accordance with your instructions. If you hold shares in your name and sign and return a proxy card without giving specific voting instructions, your shares will be voted “FOR” the reverse stock split proposal and “FOR” the adjournment proposal.
Who may attend the Special Meeting?
All stockholders are invited to attend the Special Meeting. Persons who are not stockholders may attend only if invited by the Board. If you are the beneficial owner of shares held in the name of your broker, bank or other nominee, you must bring proof of ownership (e.g., a current broker’s statement) in order to be admitted to the meeting. You can obtain directions to the Special Meeting by contacting us at(302) 774-1000.
Can I vote in person at the Special Meeting?
Yes. If you hold shares in your own name as a stockholder of record, you may come to the Special Meeting and cast your vote at the meeting by properly completing and submitting a ballot. If you are the beneficial owner of shares held in the name of your broker, bank or other nominee, you must first obtain a legal proxy from your broker, bank or other nominee giving you the right to vote those shares and submit that proxy along with a properly completed ballot at the meeting; otherwise, you will not be able to vote in person at the Special Meeting.
How can I change my vote?
You may revoke your proxy or voting instructions at any time before their useit is exercised by:
Delivering to the Office of the Corporate Secretary a written notice of revocation, dated later than the proxy, before the vote is taken at the 2018 Meeting by sendingSpecial Meeting;
Delivering to the Office of the Corporate Secretary an executed proxy bearing a written revocation, by submitting anotherlater date, before the vote is taken at the Special Meeting;
Submitting a proxy or voting form on a later date by telephone or by attendingvia the 2018Internet (only your last telephone or Internet proxy will be counted), before 11:59 p.m. Eastern Daylight Time on May 22, 2019; or
Attending the Special Meeting and voting in person. No matter which voting methodperson (your attendance at the Special Meeting, in and of itself, will not revoke the proxy).
Any written notice of revocation, or later dated proxy, should be delivered to:
DowDuPont Inc.
974 Centre Road
Wilmington, Delaware 19805
Attention: Stacy L. Fox, General Counsel and Corporate Secretary
Alternatively, you choose, however,may hand deliver a written revocation notice, or a later dated proxy, to the Office of the Corporate Secretary at the Special Meeting before we begin voting.
If your shares of DowDuPont common stock are held by a bank, broker or other nominee, you should not vote any single account more than once unlessmust follow the instructions provided by the bank, broker or other nominee if you wish to change your vote. Be sure to submit votes
What are the voting procedures for each separate accountparticipants in which you hold DowDuPont common stock.
Confidential Voting
The Company maintains vote confidentiality. Proxies and ballots of all stockholders are kept confidential from the Company’s management and Board unless disclosure is required by law and in other limited circumstances. The policy further provides that employees may confidentially vote their shares of Company stock held by employee savings plans, and requires the appointment of an independent tabulator and Inspectors of Election for the 2018 Meeting.
Dividend Reinvestment Plan Shares and Employee Savings Plan Shares
If you are enrolled in the direct stock purchase and dividend reinvestment plan administered by Computershare Trust Company, N.A. (the “Computershare CIP”), the DowDuPont common stock owned on the record date by you directly in registered form, plus all shares of common stock held for you in the Computershare CIP, will appear together on a single proxy voting form. If no instructions are provided by you on an executed proxy voting form, your Computershare CIP shares will be voted as recommended by the Board.plans?
Participants in various employee savings plans including The Dow Chemical Company Employees’ Savings Plan and the DuPont Retirement Savings Plan (each a “Plan” or collectively the “Plans”), will receive a voting instruction form. Your executed form will provide voting instructions to the respective Plan Trustee (Fidelity Management Trust Company for the Dow Plan and Merrill Lynch, Pierce, Fenner & Smith, Incorporated for the DuPont Plan).plan trustee. If no instructions are provided, the Trusteesplan trustees and/or administrators offor the Plansrelevant employee savings plan will vote the respective Plan shares according to the provisions of each Plan.the relevant employee savings plan. To allow sufficient time for voting, your voting instructions must be received by 11:59 P.M. Eastern Time on AprilMay 20, 2018, or, if you are voting via the Internet or by phone, by 11:59 P.M. Eastern Time on April 22, 2018. Accordingly, you2019. You may not vote your Plan shares held in an employee savings plan in person at the AnnualSpecial Meeting.
VOTING AND ATTENDANCE PROCEDURES (continued)
DowDuPont Shares Outstanding and Quorum
At the close of businessIn order to take action on the record date, February 26, 2018, there were 2,325,945,219proposals, a quorum, consisting of the holders of a majority of the aggregate number of shares of DowDuPont common stock issued and outstanding and entitled to vote. Each sharevote as of common stockthe record date for the Special Meeting, must be present
in person or by proxy. This is entitledreferred to one vote. as a “quorum.” Proxies marked “Abstain” and brokernon-votes (as further discussed below) will be treated as shares that are present for purposes of determining the presence of a quorum.
The affirmative vote of the holders of at least 50%a majority of the issued and outstanding shares of common stock entitled to vote that areat the Special Meeting is required to adopt and approve the reverse stock split proposal.
The affirmative vote of a majority of the votes cast at the Special Meeting is required to approve the adjournment proposal.
What happens if a quorum is not present at the Special Meeting?
If the shares present in person or represented by proxy at the Special Meeting are not sufficient to constitute a quorum, for the transaction of business at the 2018 Meeting. For Agenda Item 1: Election of Directors, each nominee must receive more FOR votes than AGAINST votes in order to be elected. For Agenda Item 3: Advisory Resolutions on the Frequency of Future Advisory Votes to Approve Executive Compensation, the frequency (every one year, every two years or every three years) that receives the most FOR votes will be approved. For all other Agenda Items to be presented forstockholders by a vote atof the 2018 Meeting (2 and 4 through 9), each such item must receive more FOR votes than AGAINST votes in order to be approved. Abstentions and brokernon-votes will be included in determining the presenceholders of a quorum atmajority of votes present in person or represented by proxy (which may be voted by the 2018 Meeting, butproxyholders) may, without further notice to any stockholder (unless a new record date is set), adjourn the meeting to a different time and place to permit further solicitations of proxies sufficient to constitute a quorum.
What is an “abstention” and how would it affect the vote?
An “abstention” occurs when a stockholder sends in a proxy with explicit instructions to decline to vote regarding a particular matter. Abstentions are counted as present for purposes of determining a quorum. Abstentions with respect to the reverse stock split proposal will have the same effect as a vote “Against” the proposal. Abstentions with respect to the adjournment proposal are not be counted orconsidered votes cast and will have anno effect on the outcome of any matter except as specified below with respect to Agenda Item 4. Brokerthe proposal.
What is a brokernon-votes“non-vote” occurand how would it affect the vote?
A brokernon-vote occurs when a broker or other nominee who holds shares for another person holding shares through a bank or broker, meaning that their shares are held in a nominee name or beneficially through such bank or broker, does not provide instructions as to how to vote their shares and the bank or broker is not permitted to exercise voting discretion. Under New York Stock Exchange (“NYSE”) rules, your bank or broker may vote shares held in beneficial name only on Agenda Item 4: Ratification of the Appointment of the Independent Registered Public Accounting Firm, without instruction from you, but may not vote on a particular proposal because that holder does not have discretionary voting power for the proposal and has not received voting instructions from the beneficial owner of the shares so the broker is unable to vote those uninstructed shares. Brokers will have discretionary voting power to vote on both proposals so we do not anticipate any other matter to be voted on atbrokernon-votes.
Because adoption and approval of the 2018 Meeting. A listreverse stock split proposal requires the affirmative vote of stockholdersa majority of recordthe shares entitled to vote shall be open to any stockholder for any purpose relevantat the Special Meeting, a brokernon-vote will have the same effect as a vote “Against” the reverse stock split proposal.
Because approval of the adjournment proposal requires an affirmative vote of a majority of the votes cast at the Special Meeting, a brokernon-vote will have no effect on the outcome of the vote with regards to the 2018 Meeting for ten days before the 2018 Meeting, during normal business hours,adjournment proposal.
Could other matters be decided at the OfficeSpecial Meeting?
Other than the reverse stock split proposal and the adjournment proposal, no matters will be presented for action by the stockholders at the Special Meeting.
Who will count the votes?
Representatives of Broadridge Financial Solutions, Inc. will tabulate the Corporate Secretary.votes and act as inspectors of election.
Proxy Solicitation on Behalf ofWho will conduct the Boardproxy solicitation and how much will it cost?
The Board isWe are soliciting proxies to provide an opportunityfrom stockholders on behalf of our Board and will pay for all stockholderscosts incurred by it in connection with the solicitation. In addition to vote, whether or notsolicitation by mail, the stockholders are able to attend the 2018 Meeting or an adjournment or postponement thereof. Directors,directors, officers and employeesassociates of DowDuPont and its subsidiaries may solicit proxies on behalffrom stockholders of the BoardDowDuPont in person by mail,or by telephone, facsimile or by electronic communication. The proxy representatives of the Board will not be specially compensatedemail without additional compensation other than reimbursement for their services in this regard.actual expenses.
DowDuPont hasWe have retained Innisfree M&A Incorporated, a proxy solicitation firm, to aidassist us in the solicitation of stockholders (primarily brokers, banks and other institutional investors)proxies for an estimatedthe Special Meeting. DowDuPont will pay Innisfree M&A Incorporated a fee of $25,000,approximately $25,000.00, plus reasonableout-of-pocket expenses.
Arrangements have beenalso will be made with brokerage houses, nomineesfirms and other custodians, nominees and fiduciaries for the forwarding of solicitation material to sendthe beneficial owners of stock held of record by such persons, and we will reimburse such custodians, nominees and fiduciaries for their reasonableout-of-pocket expenses in connection with the forwarding of solicitation materials to their principals, and their reasonable expenses will be reimbursed by DowDuPont on request. The costthe beneficial owners of solicitation will be borne by the Company.our stock.
Attending the 2018 Meeting
An approved form of proof of stock ownership is necessary to attend the 2018 Meeting. If you holdhave any questions or need assistance voting your shares through a bank or broker, you will need proof of record date ownership for admission to the 2018 Meeting, such as a letter from the bank or broker. In addition, such holders who wish to vote in person at the 2018 Meeting must obtain a “legal proxy” from the bank, broker or other holder of record that holds their shares in order to be entitled to vote at the 2018 Meeting.
Since seating is limited, the Board has established the rule that only stockholders or one person holding aDowDuPont common stock, please contact Innisfree M&A Incorporated, DowDuPont’s proxy for any stockholder or account (in addition to those named as Board proxies on the proxy forms) may attend.solicitor, by calling1-877-750-9501 toll-free.
All stockholders and proxy holders wishing to attend the 2018 Meeting should bring and present valid government issued photo identification for admittance. Proxy holders will also be asked to present credentials for admittance.
Please note that cameras, sound or video recording equipment, or other similar equipment, electronic devices, large bags or packages will not be permitted in the Annual Meeting.
If you are unable to attend the 2018 Meeting in person, please listen to the live audio webcast or the replay after the event, atwww.dow-dupont.com/investors.
Other Matters
The Board does not intend to present any business at the 2018 Meeting that is not described in this Proxy Statement. The enclosed proxy or other voting instruction form confers upon the designated persons the discretion to vote the shares represented in accordance with their best judgment. Such discretionary authority extends to any other properly presented matter. The Board is not aware of any other matter that may properly be presented for action at the 2018 Meeting.
CORPORATE GOVERNANCEPROPOSAL NO. 1
Strong corporate governance is an integral part of both Dow’s and DuPont’s historic core values, and, as a result, THE REVERSE STOCK SPLIT PROPOSAL
DowDuPont is committedasking stockholders to applying the same sound corporate governanceadopt and leadership principles and practices. Within this section, you will find information about the Board and its governance structure and processes.
DowDuPont Board Corporate Governance Guidelines
The Corporate Governance Guidelines form an important framework for the Board’s corporate governance practices and assist the Board in carrying out its responsibilities. The Board reviews these guidelines periodicallyapprove a proposed amendment to consider the need for amendments or enhancements. Among other things, these guidelines delineate the Board’s responsibilities, leadership structure, independence, qualifications, election, annual self-evaluation, and access to management and advisors.
We invite you to visit the Company’s website atwww.dow-dupont.com/investors/corporate-governance to review the following governance documents:
Director Independence
Thethe Authorized Share Reduction. Our Board has assessedunanimously approved and declared advisable the independence of eachnon-employee Director in accordance withproposed amendment, and recommends that our stockholders adopt and approve the standards of independenceproposed amendment. The foregoing description of the NYSE, SEC rulesproposed amendment is a summary and as described inis subject to the Corporate Governance Guidelines. Based upon these standards, the Board has determined that the following fourteen membersfull text of the Board are independent Directors: Lamberto Andreotti, Jamesproposed amendment, which is attached to this proxy statement as Annex A. Bell, Robert A. Brown, Alexander M. Cutler, Jeff M. Fettig, Marillyn A. Hewson, Lois D. Juliber, Raymond J. Milchovich, Paul Polman, Dennis H. Reilley, James M. Ringler, Ruth G. Shaw, Lee M. Thomas and Patrick J. Ward. These independent Directors constitute a “substantial majority” of the Board, consistent with Board policy. The Corporate Governance Committee, as well as
If stockholders approve this proposal, the Board will annually review relationships that Directors may havecause the Certificate of Amendment to be filed with the CompanyDelaware Secretary of State and members of management to make a determination as to whether there are any material relationships that would preclude a Director from being independent.
All members ofeffect the Audit, Compensation,Reverse Stock Split and Corporate Governance Committees are independent Directors under the Corporate Governance Guidelines and applicable regulatory and listing standards.
TheAuthorized Share Reduction only if the Board had previously determineddetermines that the following individuals who served as Directors onReverse Stock Split and the Dow Board until the effective date of the Merger Transaction were also independent Directors: Ajay Banga, Jacqueline K. Barton, Richard K. Davis, Mark Loughridge, and Robert S. (Steve) Miller.
Board Leadership Structure
The Board is responsible for broad corporate policy and overall performance of the Company through oversight of management and stewardship of the Company. Among other duties, the Board appoints the Company’s officers, assigns to them responsibility for management of the Company’s operations, and reviews their performance.
As describedAuthorized Share Reduction would be in the Company’s Amended and Restated Bylaws effective as of September 11, 2017 (“Bylaws”), Andrew N. Liveris currently serves as the Executive Chairmanbest interests of DowDuPont and Edward D. Breen serves asits stockholders. The Board also may determine in its discretion not to effect the Chief Executive OfficerReverse Stock Split and the Authorized Share Reduction and not to file the Certificate of DowDuPont. As announced byAmendment. DowDuPont will not effect the CompanyReverse Stock Split without also effecting the Authorized Share Reduction, and vice versa; subject to stockholder approval, the Board currently expects and intends to implement the Reverse Stock Split and Authorized Share Reduction such that they become effective immediately following the intended Corteva Distribution. No further action on March 12, 2018, asthe part of April 1, 2018, Mr. Liverisstockholders will no longer serve as Executive Chairman. Effective April 1, 2018, Jeff M. Fettigbe required to either implement or abandon the Reverse Stock Split or the Authorized Share Reduction.
The proposed amendment, if effected, will serve aseffect a non-employee Executive Chairman. Following this transition, Mr. Liveris will continue as a Director of DowDuPont through his previously announced retirement from the Company on July 1, 2018. The previous Lead Independent Directors of each of Dow and DuPont serve asCo-Lead Independent DirectorsReverse Stock Split of the Boardoutstanding shares of DowDuPont’s common stock at a reverse stock split ratio of not less than2-for-5 and not greater than1-for-3, with responsibilities set forth in the Corporate Governance Guidelines. Further detail on the responsibilities of those roles follows.
CORPORATE GOVERNANCE (continued)
Executive Chairman
The Executive Chairman has the lead responsibility for chairing the Board. The Executive Chairman has the following corporate-wide responsibilities:
The Executive Chairman has all such other powers and may perform such other dutiesan exact ratio as may be assigneddetermined by our Board at a later date. As of April 26, 2019, the Board from time to time.
Chief Executive Officer
The Chief Executive Officerlast practicable day before the printing of DowDuPont reportsthese proxy materials, 2,246,370,461 shares of our common stock were issued and outstanding. Based on such number of shares of our common stock issued and outstanding, immediately following the effectiveness of the Reverse Stock Split (and without giving any effect to the Board and has the following corporate-wide responsibilities:
The Chief Executive Officer has such other powers and may perform such other duties as may be assigned by the Board from time to time.
Co-Lead Independent Director Roles
The Board hasCo-Lead Independent Directors, designatedpayment of cash in accordance with the Bylaws, whose shared responsibilities are to:
Committees
Committees perform many important functions. The responsibilitieslieu of each Committee are stated in the Bylaws and in their respective Committee charters. The Board, upon the recommendation of the Corporate Governance Committee, elects members to each Committee and has the authority to change Committee chairs, memberships and the responsibilities of any Committee as set forth in the Bylaws.
The Board currently has four Standing Committees and three Advisory Committees (individually a “Committee” and collectively the “Committees”):
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CORPORATE GOVERNANCE (continued)
A brief description of the responsibilities of the Committees are as follows:
Standing Committees
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CORPORATE GOVERNANCE (continued)
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Advisory Committees
The Advisory Committees were established to oversee the business and affairs of each of DowDuPont’s Agriculture, Materials Science and Specialty Products divisions in preparation for the Intended Business Separations. Each Advisory Committee is responsible for overseeing the business and affairs of its respective division including:
CORPORATE GOVERNANCE (continued)
Committee Membership
The following chart shows the current Committee membership and the number of meetings that each Committee held in 2017. The total number of Standing Committee meetings is noted for Dow from January 1, 2017 until the closing of the Merger Transaction on August 31, 2017, and for DowDuPont from September 1, 2017 until December 31, 2017.
Standing Committees | Advisory Committees | |||||||||||||||
Director | Audit | Compensation | Corporate Governance | Environment, Health, Safety and Technology | Agriculture | Materials Science | Specialty Products | |||||||||
Lamberto Andreotti*
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X |
X | ||||||||||||||
James A. Bell*
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CH |
X | ||||||||||||||
Edward D. Breen – Chief Executive Officer
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CH |
CH |
X |
CH | ||||||||||||
Robert A. Brown*
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X |
X | ||||||||||||||
Alexander M. Cutler*
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CH |
X |
A |
A | ||||||||||||
Jeff M. Fettig*
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CH |
X | ||||||||||||||
Marillyn A. Hewson*
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X |
X |
A | |||||||||||||
Lois D. Juliber*
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CH |
X | ||||||||||||||
Andrew N. Liveris – Executive Chairman
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CH |
X |
CH |
X | ||||||||||||
Raymond J. Milchovich*
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X |
X |
A | |||||||||||||
Paul Polman*
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Dennis H. Reilley*
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James M. Ringler*
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Ruth G. Shaw*
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X | ||||||||||||||
Lee M. Thomas*
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X |
X | ||||||||||||||
Patrick J. Ward*
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CH |
X | ||||||||||||||
Number of Meetings in 2017
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Dow (17 total)
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6 |
4 |
4 |
3 |
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n/a |
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DowDuPont (14 total)
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3 |
2 |
2 |
1 |
2 |
2 |
2 |
* = Independent CH = Chairman or, as applicable,Co-Chairman A = Additional Ex Officio Attendee
In addition, Advisory Committee members may participate in other Advisory Committee meetings as an attendee. Such attendees may not vote or be counted for quorum purposes. Advisory Committees also include ex officio members from the legacy Dow and legacy DuPont Boards who are not servingfractional shares), we will have, depending on the Board, as well as additional members who participate in an ex officio capacity as appointedreverse stock split ratio selected by the Board to provide the Advisory Committees with the business context and knowledge needed to ensure an efficient and timely transition for the Intended Business Separations. Such ex officio members may not vote or be counted for quorum purposes.
Additional Information about the Advisory Committees
Agriculture Advisory Committee
The Agriculture Advisory Committee is comprised of (i) members of the Board who were designated by the DuPont board, (ii) the Executive Chairman of DowDuPont, (iii) the Chief Executive Officer of DowDuPont, and (iv) former members of the DuPont board who are not members of the DowDuPont Board and who serve in an ex officio capacity by virtue of their prior service on the DuPont board.
Materials Science Advisory Committee
The Materials Science Advisory Committee is comprised of (i) members of the Board who were designated by the Dow board, (ii) the Executive Chairman of DowDuPont, (iii) the Chief Executive Officer of DowDuPont, and (iv) former members of the Dow board who are not members of the DowDuPont Board and who serve in an ex officio capacity by virtue of their prior service on the Dow board.
CORPORATE GOVERNANCE (continued)
Specialty Products Advisory Committee
The Specialty Products Advisory Committee is comprised of (i) the Executive Chairman of DowDuPont, (ii) the Chief Executive Officer of DowDuPont, (iii) members of the Board as may be agreed on by the Executive Chairman and the Chief Executive Officer of DowDuPont, (iv) former members of the Dow or DuPont boards who are not members of the DowDuPont Board and who serve in an ex officio capacity by virtue of their prior service on the Dow or DuPont board, and (v) any additional members who participate in an ex officio capacity as appointed by the Executive Chairman and the Chief Executive Officer.
Decision Making and Administration
To the extent there are any disagreements between or among the Advisory Committees regarding the determinations about the capital structure of the three divisions, the matter shall be submitted to a reconciliation committee, consisting of the Chief Executive Officer, the Executive Chairman, and theCo-Lead Independent Directors, for resolution. To the extent the reconciliation committee is unable to come to a determination, a majority of the Board shall make the determination.
Pursuant to the Bylaws, the Board will have the authority to approve the Intended Business Separations or may determine to abandon, by a majority vote, the exploration or pursuit of a separation of the Agriculture division, Materials Science division or Specialty Products division, respectively. In the event that the separation of any division is consummated, the Advisory Committee with respect to such division shall be dissolved, with it being anticipated that its members would continue as members of theour Board of Directors, of the separated entity,issued and the provisions in the Bylaws with respect thereto shall be of no further force and effect. To the extent the Board determines to abandon one or more of the anticipated separations, the Advisory Committees may be dissolved at any time following thetwo-year anniversary of the consummation of the merger.
Provisions of the Bylaws regarding the Executive Chairman and Chief Executive Officer, the DowDuPont Board and the Advisory Committees described above may only be modified, amended or repealed, and Bylaw provisions inconsistent with such matters may only be adopted, by an affirmative vote of at least 66 2/3% of: (i) the Board or (ii) the holders of all shares of capital stock of DowDuPont then entitled to vote on such matters.
Board’s Role in the Oversight of Risk Management
The Board is responsible for overseeing the overall risk management process for the Company. Risk management is considered a strategic activity within the Company and responsibility for managing risk rests with executive management while the Standing Committees and the Board as a whole participate in the oversight of the process. Specifically, the Board has responsibility for overseeing the strategic planning process and reviewing and monitoring management’s execution of the corporate and business plan, and each Standing Committee is responsible for oversight of specific risk areas relevant to their respective charters. This process includes an assessment of potential cyber-attacks and the ongoing review of the Company’s comprehensive cyber security program.
The oversight responsibility of the Board and Standing Committees is enabled by an enterprise risk management model and process implemented by management that is designed to identify, assess, manage and mitigate risks. The Audit Committee is responsible for overseeing that management implements and follows this risk management process and for coordinating the outcome of reviews by the other Standing Committees in their respective risk areas.
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Although each Standing Committee is responsible for overseeing the management of certain risks as described above, the full Board is regularly informed by the Standing Committees about these risks. This enables the Board and the Standing Committees to coordinate risk oversight and the relationships among the various risks faced by the Company.
CORPORATE GOVERNANCE (continued)
Stockholder Engagement
Throughout the year, the independent Directors and members of the management teams at Dow, DuPont, and DowDuPont continued extensive outreach to stockholders, engaging with investors who collectively held over 50% of outstanding shares of each company. Through this outreach,stock as illustrated in the management teams updated investors on a range of topics such astable under the Merger Transaction and Intended Business Separations, the overall business strategy, current business conditions, corporate citizenship and sustainability, corporate governance practices and executive compensation, as well as gained an understandingcaption “—Effects of the perspectivesReverse Stock Split and concernsthe Authorized Share Reduction—Effect on Shares of each investor. Common Stock”.
The Boards and management teams carefully consider the feedback from these meetings, as well as stockholder support, when reviewing the business, corporate governance and executive compensation profiles.
Communications with the Board and Directors
Stockholders and other parties interestedproposed amendment will result in communicating directly with the Board, Executive Chairman,Co-Lead Independent Directors or other independent Directors, may do so by writing in care of the Office of the Corporate Secretary, 974 Centre Road, Wilmington, DE 19805.
The Board’s independent Directors have approved procedures for handling correspondence received by the Company and addressed to the Board, Executive Chairman,Co-Lead Independent Directors or other outside Directors. Communications will be distributed to any or all Directors as appropriate depending upon the individual communication. However, the Directors have requested that communications that do not directly relate to their duties and responsibilities as Directors of the Company be excluded from distribution and deleted from email that they access directly. Such excluded items include “spam”; advertisements; mass mailings; form letters and email campaigns that involve unduly large numbers of similar communications; solicitations for goods, services, employment or contributions; surveys; and individual product inquiries or complaints. Additionally, communications that appear to be unduly hostile, intimidating, threatening, illegal or similarly inappropriate will also be screened for omission by the Office of the Corporate Secretary. Any omitted or deleted communication will be made available to any Director upon such Director’s request. Concerns relating to accounting, internal controls, auditing or ethical matters are brought to the attention of the internal audit function and handled in accordance with procedures established by the Audit Committee with respect to such matters.
Board, Standing Committees and Annual Meeting Attendance
From January 1, 2017 until the closing of the Merger Transaction on August 31, 2017, Dow held eight Board meetings and seventeen Standing Committee meetings. From September 1, 2017 through December 31, 2017, DowDuPont held three Board meetings and eight Standing Committee meetings. All of the Directors attended more than 75% of the suma reduction of the total number of Board meetingsshares of DowDuPont’s common stock that DowDuPont is authorized to issue by a corresponding ratio. See “—Effects of the Reverse Stock Split and the totalAuthorized Share Reduction—Effect on Shares of Common Stock” for the number of meetingsshares of common stock authorized but not outstanding or reserved that will remain available for issuance immediately following the effectiveness of the Standing Committees on whichReverse Stock Split and the Director served duringAuthorized Share Reduction.
All holders of DowDuPont’s common stock will be affected proportionately by the past year.Reverse Stock Split and the Authorized Share Reduction.
No fractional shares of common stock will be issued as a result of the Reverse Stock Split. Instead, any stockholder who would have been entitled to receive a fractional share as a result of the Reverse Stock Split will receive cash payments in lieu of such fractional shares. Each common stockholder will hold the same percentage of the outstanding common stock immediately following the Reverse Stock Split as that stockholder did immediately prior to the Reverse Stock Split, except to the extent that the Reverse Stock Split results in stockholders receiving cash in lieu of fractional shares. The Directors are encouragedpar value of our common stock will continue to attend all Annual Meetingsbe $0.01 per share (see “—Effects of Stockholders,the Reverse Stock Split and the Authorized Share Reduction—Reduction in Stated Capital”).
On August 31, 2017, all thirteen Directors then serving on the Dow Board attended the Dow Annual Meeting of Stockholders held on May 11, 2017.
Executive Sessions of Directors
Thenon-employee Directors meet in executive sessionDowDuPont became a publicly traded company in connection with each regularly scheduled meetingthe merger of equals of The Dow Chemical Company and E. I. du Pont de Nemours and Company. As a result of that merger, the Board, and at other times as they may determine appropriate. From January 1, 2017 through closingnumber of the Merger Transaction on August 31, 2017, there were five executive sessions of the Dow Board chaired by Mr. Fettig, Lead Independent Director. From September 1, 2017 through December 31, 2017, there were three executive sessions of the Board chaired by Messrs. Cutler and Fettig,Co-Lead Independent Directors for the Board. The Standing Committees typically meet in executive session in connection with every Committee meeting.
Director Qualifications and Diversity
There are certain minimum qualifications for Board membership that Director candidates should possess, including strong values and discipline, high ethical standards, a commitment to full participation on the Board and its Committees, relevant career experience, and a commitment to ethnic, racial and gender diversity. The Corporate Governance Committee has adopted guidelines to be used in evaluating candidates for Board membership in order to ensure a diverse and highly qualified Board of Directors. In addition to the characteristics mentioned above, the guidelines provide that candidates should possess
CORPORATE GOVERNANCE (continued)
individual skills, experience and demonstrated abilities that help meet the current needs of the Board and provide for diversity of membership, such as experience or expertise in some of the following areas: the chemical industry, global business, science and technology, finance and/or economics, corporate governance, public affairs, government affairs, and experience as chief executive officer, chief operating officer or chief financial officer of a major company. Other factors that are considered include independence of thought, willingness to comply with Director stock ownership guidelines, meeting applicable Director independence standards (where independence is desired) and absence of conflicts of interest. The Corporate Governance Committee may modify the minimum qualifications and evaluation guidelines from time to time as it deems appropriate.
Guidelines for Director qualifications are included in the Corporate Governance Guidelines. The guidelines for Director qualifications provide that a commitment to diversity is a consideration in the identification and nomination of Director candidates, and that candidates are evaluated to provide for a diverse and highly qualified Board. The Corporate Governance Committee and the full Board implement and assess the effectiveness of these guidelines and the commitment to diversity by referring to these guidelines in the review and discussion of Board candidates when assessing the composition of the Board and by including questions regarding the diversity of the Board membership in the Board’s annual self-evaluations.
Identifying Director Candidates
Among the Corporate Governance Committee’s most important functions is the selection of Directors who are recommended to the Board as candidates for election. The Corporate Governance Committee has adopted a process for identifying new Director candidates. Recommendations may be received by the Corporate Governance Committee from various sources, including current or former Directors, a search firm retained by the Corporate Governance Committee to assist in identifying and evaluating potential candidates, stockholders, Company executives, and by self-nomination. The Corporate Governance Committee is open to accepting stockholders’ suggestions of candidates to consider as potential Board members as part of the Corporate Governance Committee’s periodic review of the size and composition of the Board and its Committees. Such recommendations should be sent to the Corporate Governance Committee through the Office of the Corporate Secretary. The Corporate Governance Committee uses the same process to evaluate Director nominees recommended by stockholders as it does to evaluate nominees identified by other sources.
Director Candidate Nominations through Proxy Access
The Bylaws set forth procedural and content requirements for director candidate nominations through proxy access. As more specifically provided in the Bylaws, a stockholder or group of up to twenty stockholders owning 3% or more of the Company’sour outstanding shares of common stock continuously for at least three years, may nominateis significantly higher than the number of outstanding shares of either The Dow Chemical Company or E. I. du Pont de Nemours and include in the Company’s proxyCompany prior to such merger.
DowDuPont entered into a Separation and Distribution Agreement, effective as of April 1, 2019 (the “Separation Agreement”), with two of its wholly owned subsidiaries: (1) Corteva, which will hold DowDuPont’s agriculture business, and (2) Dow, which held DowDuPont’s materials director nominees constituting upscience business. On April 1, 2019, pursuant to the greater of two individuals or 20%Separation Agreement, DowDuPont distributed all of the Board, providedshares of common stock of Dow on a pro rata basis to the holders of DowDuPont common stock. Pursuant to the Separation Agreement, DowDuPont expects to complete the Corteva Distribution on June 1, 2019. DowDuPont cannot provide any assurance that the stockholder(s)Corteva Distribution will be completed, as it is subject to certain conditions precedent. Following the Corteva Distribution, DowDuPont will continue to hold its specialty products business, expects to change its corporate name to “DuPont de Nemours, Inc.” and will become known as “DuPont.” For additional details on the intended Corteva Distribution, please see the preliminary Form 10 Registration Statements that Corteva filed with the U.S. Securities and Exchange Commission (the “SEC”), as may be amended from time to time in future filings.
As a result of ourspin-off of Dow, the value of our common stock no longer includes the value of the materials science business. In addition, after completing the intended Corteva Distribution, the market price and trading ranges for our common stock may be significantly lower than the current market price and trading ranges due to the fact that we will have distributed all of our shares in Corteva to holders of our common stock and the nominee(s) satisfymarket price and trading ranges will no longer reflect the requirements detailed invalue of our agriculture business.
As of April 26, 2019, the Bylaws. Nominations should be sentCompany had 2,246,370,461 shares of common stock issued and outstanding. The closing price of our common stock on the NYSE on April 26, 2019 was $38.00 per share and over the prior 52 weeks the closing price of our common stock has ranged from $36.49 to $71.44 per share. As discussed above, the Officevalue of our common stock starting April 2, 2019 no longer includes the value of the Corporate Secretary in accordance withmaterials science business.
Reasons for the proceduralReverse Stock Split and content requirements set forth in the Bylaws, the full text of which is available atwww.dow-dupont.com/investors/corporate-governance.Authorized Share Reduction
Board TermReverse Stock Split.
The CertificateBoard of Incorporation provides that all Directors stand for election at each Annual Meeting of Stockholders.
The Corporate Governance Guidelines provide that Directors should not be nominated for election to the Board after reaching age 72, unless it is determinedbelieves that it is in the best interests of the Company and its stockholders to extendreduce the retirement date. Messrs. Ringlernumber of issued and Thomas are current Directors who are nominated foroutstanding shares by a ratio within the proposed range of not less thanre-election2-for-5 to theand not greater than1-for-3, with an exact ratio as may be determined by our Board at a later date, through the 2018 Meeting, although they have already reached age 72. The Corporate Governance Committee andReverse Stock Split implemented in connection with the Board have determined that, due topreviously announced intended Corteva Distribution. Immediately following the current needscompletion of the Reverse Stock Split, the number of shares of our common stock issued and outstanding or held in treasury will be reduced proportionately based on the reverse stock split ratio of not less than2-for-5 and not greater than1-for-3, with an exact ratio as may be determined by our Board at a later date.
The Board believes implementing the Reverse Stock Split is likely to increase the market price for our common stock as fewer shares will be outstanding. The Board further believes that the increased market price of our common stock expected as a result of implementing the Reverse Stock Split may improve marketability and the unique circumstancesliquidity of our common stock and may encourage interest and trading in our common stock.
Further, brokerage commissions, as a percentage of the Intended Business Separations,total transaction, tend to be higher for lower-priced stocks. As a result, certain investors may also be dissuaded from purchasing lower-priced stocks. A higher stock price after the nominationReverse Stock Split may reduce this concern.
Authorized Share Reduction. As a matter of Messrs. RinglerDelaware law, the implementation of the Reverse Stock Split does not require a reduction in the total number of authorized shares of our common stock. However, if stockholders adopt and Thomas to stand forre-election as Directors is warranted.
Code of Conduct
The Board has adopted a Code of Conduct for Directors and Officers and a Code of Financial Ethics applicable toapprove the Chief Executive Officer, Chief Financial Officer andCo-Controllers. In addition, the operating subsidiaries of DowDuPont have codes of conduct applicable to their respective employees. The full text of DowDuPont’s Code of Conduct as well as the codes of conduct for Dow and DuPont are available atwww.dow-dupont.com/investors/corporate-governance. In addition, DowDuPont discloses on its website any waiver of or amendment to the CodeAmended and Restated Certificate of Conduct requiring disclosure under applicable rules.Incorporation to effect the Reverse Stock Split and the Authorized Share Reduction and the Reverse Stock Split is implemented, the authorized number of shares of our common stock also would be reduced by a corresponding ratio.
CORPORATE GOVERNANCE (continued)
The ratio of the Reverse Stock Split, if approved and implemented, will be a ratio of not less thanRelated Person Transactions2-for-5
and not greater than1-for-3, with an exact ratio as may be determined by our Board at a later date. The Board adopted written policies and procedures relating to the approval or ratification of each “Related Person Transaction.” Under the policies and procedures, the Corporate Governance Committee (or itsCo-Chairs, under some circumstances) reviews the relevant facts of all proposed Related Person Transactions and either approves or disapproves of the entry into a particular Related Person Transaction, by taking into account, among other factors it deems appropriate:
No Director may participate in any discussion or approvalbelieves that stockholder adoption of a Related Person Transaction for which he/sherange of Reverse Stock Split ratios (as opposed to adoption of a single Reverse Stock Split ratio or anya set of his/her immediate family membersfixed ratios) provides maximum flexibility to achieve the purposes of a Reverse Stock Split and, therefore, is the Related Person. Related Person Transactions are approved or ratified only if they are determined to be in the best interests of the Company. In determining a ratio following the receipt of stockholder adoption, the Board (or any authorized committee of the Board) may consider, among other things, factors such as:
the historical trading price and trading volume of our common stock;
the number of shares of our common stock outstanding;
the then-prevailing market price and trading volume of our common stock and the anticipated impact of the Reverse Stock Split on the trading market for our common stock;
the anticipated impact of the Reverse Stock Split on our ability to raise additional financing;
the anticipated impact of a particular ratio on our ability to reduce administrative and transactional costs; and
prevailing general market and economic conditions.
Certain Risks and Potential Disadvantages Associated with the Reverse Stock Split and the Authorized Share Reduction
We cannot assure you that the proposed Reverse Stock Split will increase our stock price. We expect that the Reverse Stock Split will increase the per share trading price of our common stock. However, the effect of the Reverse Stock Split on the per share trading price of our common stock cannot be predicted with any certainty, and the history of reverse stock splits for other companies is varied, particularly since some investors may view a reverse stock split negatively. It is possible that the per share trading price of our common stock after the Reverse Stock Split will not increase in the same proportion as the reduction in the number of our outstanding shares of common stock following the Reverse Stock Split, and the Reverse Stock Split may not result in a per share trading price that would attract investors who do not trade in lower priced stocks. In addition, although we believe the Reverse Stock Split may enhance the marketability of our common stock to certain potential investors, we cannot assure you that, if implemented, our common stock will be more attractive to investors. Even if we implement the Reverse Stock Split, the per share trading price of our common stock may decrease due to factors unrelated to the Reverse Stock Split, including our future performance. If the Reverse Stock Split is consummated and the per share trading price of the common stock declines, the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than would occur in the absence of the Reverse Stock Split.
The proposed Reverse Stock Split may decrease the liquidity of our common stock and result in higher transaction costs. The liquidity of our common stock may be negatively impacted by the Reverse Stock Split, given the reduced number of shares that would be outstanding after the Reverse Stock Split, particularly if the per share trading price does not increase as a result of the Reverse Stock Split. In addition, if the Reverse Stock Split is implemented, it will increase the number of our stockholders who own “odd lots” of fewer than 100 shares of common stock. Brokerage commission and other costs of transactions in odd lots are generally higher than the costs of transactions of more than 100 shares of common stock. Accordingly, the Reverse Stock Split may not achieve the desired results of increasing marketability of our common stock as described above.
The effective time of the Reverse Stock Split and the Authorized Share Reduction (the “Effective Time”), if approved by stockholders and implemented by DowDuPont, will be the date and time set forth in the Certificate of Amendment that is filed with the Delaware Secretary of State. It is expected that such filing will take place effective as of immediately after the completion of the intended Corteva Distribution. However, the exact timing of the filing of the amendment will be determined by our Board based on its evaluation as to when such action will be the most advantageous to the Company and our stockholders.
If, a Related Person Transaction that has not been previously approved or previously ratified is discovered, the Related Person Transaction will be presented to the Corporate Governance Committee for ratification. If the Corporate Governance Committee does not ratify the Related Person Transaction, then the Company either ensures all appropriate disclosures regarding the transaction are made or, if appropriate, takes all reasonable actions to attempt to terminate the Company’s participation in the transaction.
Under DowDuPont’s policies and procedures, a “Related Person Transaction” is generally any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships in which:
A “Related Person” is generally any person who is, or at any time sinceprior to the beginningfiling of the Certificate of Amendment with the Delaware Secretary of State, notwithstanding stockholder approval and without further action by the stockholders, the Board, in its sole discretion, determines that it is in DowDuPont’s best interests and the best interests of DowDuPont’s last fiscal year was:stockholders to delay the filing of the Certificate of Amendment or abandon the Reverse Stock Split and the Authorized Share Reduction, the Reverse Stock Split and the Authorized Share Reduction may be delayed or abandoned.
Stockholders will not receive fractional shares of common stock in connection with the Reverse Stock Split. Instead, the transfer agent will aggregate all fractional shares and sell them as soon as practicable after the Effective Time at the then-prevailing prices on the open market, on behalf of those stockholders who would otherwise be entitled to receive a fractional share as a result of the Reverse Stock Split. We expect that the transfer agent will conduct the sale in an orderly fashion at a reasonable pace and that it may take several days to sell all of the aggregated fractional shares of our common stock. After the transfer agent’s completion of such sale, stockholders who would have been entitled to a fractional share will instead receive a cash payment from the transfer agent in an amount equal to their respective pro rata shares of the total proceeds of that sale net of any brokerage costs incurred by the transfer agent to sell such stock.
Stockholders will not be entitled to receive interest for the period of time between the Effective Time and the date payment is made for their fractional share interest. You should also be aware that, under the escheat laws of certain jurisdictions, sums due for fractional interests that are not timely claimed after the funds are made available may be required to be paid to the designated agent for each such jurisdiction. Thereafter, stockholders otherwise entitled to receive such funds may have to obtain the funds directly from the state to which they were paid.
If you believe that you may not hold sufficient shares of our common stock at the Effective Time to receive at least one share in the Reverse Stock Split and you want to continue to hold DowDuPont’s common stock after the Reverse Stock Split, you may do so by either:
purchasing a sufficient number of shares of DowDuPont’s common stock; or
if you have shares of DowDuPont’s common stock in more than one account, consolidating your accounts;
Certain Relationshipsin each case, so that you hold a number of shares of our common stock in your account prior to the Reverse Stock Split that would entitle you to receive at least one share of common stock in the Reverse Stock Split. Shares of our common stock held in registered form and Related Transactionsshares of our common stock held in “street name” (that is, through a broker, bank or other holder of record) for the same stockholder will be considered held in separate accounts and will not be aggregated when effecting the Reverse Stock Split.
DowDuPont and its subsidiaries purchase products and services from and/or sell products and services to companies of which certainEffects of the Directors and executive officers of DowDuPont, or their immediate family members, are employees. The Corporate Governance CommitteeReverse Stock Split and the Board have reviewed such transactionsAuthorized Share Reduction
After the Effective Time, each stockholder will own a reduced number of shares of common stock. The principal effect of the Reverse Stock Split and relationships and dothe Authorized Share Reduction will be to proportionately decrease the number of outstanding shares of our common stock based on the reverse stock split ratio of not consider the amounts involved in such transactions material. Such purchases from and sales to each company involve less than either $1,000,000 or2-for-5 and not greater than1-for-3, with an exact ratio as may be determined by our Board at a later date.
Voting rights and other rights of the holders of our common stock will not be affected by the Reverse Stock Split, other than as a result of the treatment of fractional shares as described above. For example, a holder of 2% of the consolidated gross revenues of eachvoting power of the purchaseroutstanding shares of our common stock immediately prior to the effectiveness of the Reverse Stock Split will generally continue to hold 2% (assuming there is no impact as a result of the payment of cash in lieu of issuing fractional shares) of the voting power of the outstanding shares of our common stock after the Reverse Stock Split. The number of stockholders of record will not be affected by the Reverse Stock Split (except to the extent any are cashed out as a result of holding fractional shares). If approved and implemented, the Reverse Stock Split may result in some stockholders owning “odd lots” of less than 100 shares of our common stock. Odd lot shares may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots are generally somewhat higher than the costs of transactions in “round lots” of even multiples of 100 shares. Our Board believes, however, that these potential effects are outweighed by the benefits of the Reverse Stock Split.
Effect on Shares of Common Stock
The following table contains approximate information, based on share information as of April 26, 2019, relating to our outstanding common stock based on the proposed reverse stock split ratios and information regarding our authorized shares assuming that the proposal is approved and the seller,Reverse Stock Split and all such transactionsthe Authorized Share Reduction are in the ordinary course of business. Some such transactions are continuing and it is anticipated that similar transactions will occur from time to time. From time to time, the Company may have employees who are related to DowDuPont executive officers and Directors. An adult child of Mr. Charles J. Kalil is employed by Dow in anon-executive position. In 2017, she received compensation in the approximate amount of $180,000, which amount and other terms of her employment, including equity awards, are commensurate with that of her peers and determined on a basis consistent with Dow’s human resources policies.implemented:
Status | Number of Shares of Common Stock Authorized | Number of Shares of Common Stock Issued and Outstanding | Number of Shares of Common Stock Reserved for Future Issuance | Number of Shares of Common Stock Authorized but Not Outstanding or Reserved | ||||||||||||
Pre-Reverse Stock Split | 5,000,000,000 | 2,246,370,461 | 77,544,189 | 2,676,085,350 | ||||||||||||
Post-Reverse Stock Split 2:5 | 2,000,000,000 | 898,548,184 | 31,017,675 | 1,070,434,141 | ||||||||||||
Post-Reverse Stock Split 1:3 | 1,666,666,667 | 748,790,153 | 25,848,063 | 892,028,451 |
After the Effective Time, our common stock would have a new committee on uniform securities identification procedures, or CUSIP number, a number used to identify our common stock.
CORPORATE GOVERNANCE (continued)
Our common stock is currently registered under Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a)12(b) of the Securities Exchange Act of 1934, as amended, requiresor the Company’s DirectorsExchange Act, and executive officerswe are subject to the periodic reporting and persons who own more than 10% of a registered classother requirements of the Company’s equity securities (“Reporting Persons”)Exchange Act. The Reverse Stock Split will not affect the registration of our common stock under the Exchange Act or the listing of our common stock on the NYSE. Following the Reverse Stock Split, we expect our common stock will trade on the NYSE under the symbol “DD” and will be considered a new listing with a new CUSIP number.
Pursuant to file withour Amended and Restated Certificate of Incorporation, our authorized capital stock consists of 250,000,000 shares of Preferred Stock, par value $0.01 per share, and 5,000,000,000 shares of common stock, par value $0.01 per share. The proposed amendment to our Amended and Restated Certificate of Incorporation to effect the SEC reports on Forms 3, 4Reverse Stock Split and 5 concerning their ownershipthe Authorized Share Reduction would not impact the total authorized number of and transactions inshares of preferred stock or the par value of the preferred stock.
The Reverse Stock Split will not affect the common stock capital account on our balance sheet and other equity securitiesthe par value of our common stock will remain unchanged. The stated capital component, which consists of the par value per share of our common stock multiplied by the aggregate number of shares of our common stock issued and outstanding, will be reduced in proportion to the size of the Reverse Stock Split, subject to a minor adjustment in
respect of the treatment of fractional shares, and the additionalpaid-in capital account will be increased by the amount by which the stated capital is reduced. Our stockholders’ equity, in the aggregate, will remain unchanged. Immediately after the Reverse Stock Split, the per share net income or loss and net book value of our common stock will be increased, as compared to the per share amounts absent the Reverse Stock Split, because there will be fewer shares of common stock outstanding. All historic and per share amounts in our financial statements and related footnotes (for periods after the Reverse Stock Split and, on a pro forma basis, for periods prior to the Reverse Stock Split) will be restated to reflect the Reverse Stock Split.
Effect on DowDuPont’s Stock Plans
As of April 26, 2019, the last practicable day before the printing of these proxy materials, we had approximately 23,845,544 shares subject to stock options, 0 shares of unvested restricted stock and 7,274,529 shares subject to unvested restricted stock units (including performance-based units) outstanding under our stock incentive plans, the E. I. du Pont de Nemours and Company generally within two business daysEquity and Incentive Plan, the E. I. du Pont de Nemours and Company Stock Performance Plan and The Dow Chemical Company 2012 Stock Incentive Plan (each as amended and otherwise adjusted to cover DowDuPont common stock, the “Stock Plans”).
Under each of the Stock Plans, the People and Compensation Committee of our Board of Directors (the “People and Compensation Committee”) is authorized to determine the appropriate adjustment to the awards outstanding under our Stock Plans in the event of a reportable transaction. As a practical matter,reverse stock split. Accordingly, the People and Compensation Committee has provided that, if the Reverse Stock Split is effected, the number of shares available for issuance under the Stock Plans, as well as the number of shares subject to any outstanding award under the Stock Plans, and the exercise price, grant price or purchase price relating to any such award under the Stock Plans, will be equitably adjusted to reflect the Reverse Stock Split. In addition, pursuant to the authority provided under the Stock Plans, the People and Compensation Committee has authorized the Company seeks to assist its Directors and executives by monitoring transactions and completing and filing reports on their behalf.
Based solely upon a review of SEC filings furnishedeffect any other changes necessary, desirable or appropriate to give effect to the CompanyReverse Stock Split, including any applicable technical or conforming changes to our Stock Plans.
For illustrative purposes only, if a2-for-5 reverse stock split is effected, the 46,424,116 shares that remain available for issuance under the Stock Plans as of April 26, 2019, the last practicable date before the printing of these proxy materials, are expected to be adjusted to 18,569,646 shares, subject to increase as and written representationswhen outstanding awards made under the Stock Plans expire or are forfeited or are otherwise again made available for issuance pursuant to the terms of the Stock Plans. Further, for illustrative purposes only, if a2-for-5 reverse stock split is effected, we expect that noan outstanding stock option for 10,000 shares of common stock, exercisable at $30.00 per share, would be adjusted as a result of the2-for-5 split ratio into an option exercisable for 4,000 shares of common stock at an exercise price of $12.00 per share.
For illustrative purposes only, if a1-for-3 reverse stock split is effected, the 46,424,116 shares that remain available for issuance under the Stock Plans as of April 26,
2019, the last practicable date before the printing of these proxy materials, are expected to be adjusted to 15,474,705 shares, subject to increase as and when outstanding awards made under the Stock Plans expire or are forfeited or are otherwise again made available for issuance pursuant to the terms of the Stock Plans. Further, for illustrative purposes only, if a1-for-3 reverse stock split is effected, we expect that an outstanding stock option for 10,000 shares of common stock, exercisable at $30.00 per share, would be adjusted as a result of the1-for-3 split ratio into an option exercisable for 3,333 shares of common stock at an exercise price of $10.00 per share.
Notwithstanding the decrease in the number of outstanding shares following the proposed Reverse Stock Split, our Board does not intend for this transaction to be the first step in a “going private transaction” within the meaning of Rule13e-3 of the Exchange Act.
Shares Held in Book-Entry and Through a Broker, Bank or Other Holder of Record
If you hold registered shares of our common stock in a book-entry form, you do not need to take any action to receive your post-Reverse Stock Split shares of our common stock in registered book-entry form or your cash payment in lieu of fractional shares, if applicable. If you are entitled to post-Reverse Stock Split shares of our common stock, a transaction statement will automatically be sent to your address of record as soon as practicable after the Effective Time indicating the number of shares of our common stock you hold. In addition, if you are entitled to a payment of cash in lieu of fractional shares, a check will be mailed to you at your registered address as soon as practicable after the Effective Time. By signing and cashing this check, you will warrant that you owned the shares of DowDuPont’s common stock for which you received a cash payment.
At the Effective Time, we intend to treat stockholders holding shares of our common stock in “street name” (that is, through a broker, bank or other reports wereholder of record) in the same manner as registered stockholders whose shares of our common stock are registered in their names. Brokers, banks or other holders of record will be instructed to effect the Reverse Stock Split for their beneficial holders holding shares of our common stock in “street name”; however, these brokers, banks or other holders of record may apply their own specific procedures for processing the Reverse Stock Split. If you hold your shares of our common stock with a broker, bank or other holder of record, and you have any questions in this regard, we encourage you to contact your holder of record.
Under Delaware law, the affirmative vote of the holders of a majority of the shares entitled to vote at the Special Meeting is required to adopt and approve the amendment to our Amended and Restated Certificate of Incorporation to effect the Reverse Stock Split and the Authorized Share Reduction. Because adoption and approval of the amendment to our Amended and Restated Certificate of Incorporation to effect the Reverse Stock Split and the Authorized Share Reduction requires a majority of the outstanding shares, an abstention with
respect to the reverse stock split proposal will have the same effect as a vote “Against” the proposal.
Our Board recommends that you vote “FOR” the reverse stock split proposal.
Under the DGCL, our stockholders are not entitled to dissenter’s rights or appraisal rights with respect to the Reverse Stock Split described in this proposal and we will not independently provide our stockholders with any such rights.
Interest of Certain Persons in Matters to be Acted Upon
No officer or director has any substantial interest, direct or indirect, by security holdings or otherwise, in the Reverse Stock Split or the Authorized Share Reduction that is not shared by all Reporting Persons complied with these reporting requirements during fiscal year 2017, except for Forms 3 for Messrs. Reilleyof our other stockholders.
Certain U.S. Federal Income Tax Consequences of the Reverse Stock Split
The following is a summary of certain U.S. federal income tax consequences of the Reverse Stock Split to holders of our common stock. This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury regulations promulgated thereunder, and Thomas,judicial and Ms. Fox which were amended to properly state holding informationadministrative interpretations thereof, as in effect as of the Merger Transaction closing.date hereof and all of which are subject to differing interpretations and may change at any time, possibly with retroactive effect. Any such change could affect the tax consequences described below.
Sustainability InitiativesExcept as specifically described below, this summary is limited to holders of our common stock that are “U.S. Holders” as defined immediately below. For purposes of this summary, a U.S. Holder is a beneficial owner of our common stock that is, for U.S. federal income tax purposes:
Since
an individual who is a citizen or a resident of the 1980s, both DowU.S.;
a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the U.S. or any state thereof or the District of Columbia;
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
a trust if (1) a court within the U.S. is able to exercise primary jurisdiction over its administration and DuPontone or more U.S. persons have demonstrated industry leadershipthe authority to control all its substantial decisions, or (2) in sustainability. That commitment resultedthe case of a trust that was treated as a domestic trust under the law in DowDuPont being namedeffect before 1997, a valid election is in place under applicable Treasury regulations.
This summary also does not discuss all tax considerations that may be relevant to holders of our common stock in light of their particular circumstances, nor does it address the consequences to holders of our common stock subject to special treatment under the U.S. federal income tax laws, such as:
dealers or traders in securities or currencies;
tax-exempt entities;
cooperatives;
banks, trusts, financial institutions, or insurance companies;
persons who acquired our common stock pursuant to the 2017 Dow Jones Sustainability World Index, recognizing DowDuPont’s continuing sustainability performanceexercise of employee stock options or otherwise as compensation;
stockholders who own, or are deemed to own, at least 10 percent or more, by voting power or value, of our equity;
holders owning our common stock as part of a position in a straddle or as part of a hedging, conversion, constructive sale, synthetic security, integrated investment, or other risk reduction transaction for U.S. federal income tax purposes;
certain former citizens or former long-term residents of the U.S.;
holders who are subject to the alternative minimum tax; or
persons that own our common stock through partnerships or other pass-through entities.
This summary does not address the U.S. federal income tax consequences to holders of our common stock who do not hold our common stock as a capital asset. Moreover, this summary does not address any state, local, or foreign tax consequences or any estate, gift or othernon-income tax consequences.
If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of the partner in that partnership generally will depend on the status of the partner and the activities of the partnership. Such a partner or partnership should consult its own tax advisor as to the tax consequences of the Reverse Stock Split.
We have not sought, and will not seek, an opinion of counsel or a ruling from the Internal Revenue Service (“IRS”) regarding the U.S. federal income tax consequences of the Reverse Stock Split and there can be no assurance that the IRS will not challenge the statements and conclusions set forth below or a court would not sustain any such challenge.
EACH HOLDER OF COMMON STOCK SHOULD CONSULT SUCH HOLDER’S OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC U.S. FEDERAL, STATE AND LOCAL, ANDNON-U.S. TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT TO SUCH HOLDER IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND THE EFFECT OF POSSIBLE CHANGES IN LAW THAT MIGHT AFFECT THE TAX CONSEQUENCES DESCRIBED HEREIN.
The Reverse Stock Split is intended to be treated as a “recapitalization” for U.S. federal income tax purposes, and the remainder of this discussion assumes the Reverse Stock Split so qualifies. A U.S. Holder generally will not recognize gain or loss upon the Reverse Stock Split, except with respect to cash received in lieu of a fractional share of our common stock, as discussed below. A U.S. Holder’s aggregate tax basis in the top 10%shares of our common stock received pursuant to the Reverse Stock Split will equal the aggregate tax basis of the industry.
Both Dowshares of our common stock surrendered (excluding any portion of such basis that is allocated to any fractional share of our common stock), and DuPont have displayed a proven, decades-long track record of consistently integrating industry-leading sustainability, environmental, and social metrics into the company strategy and using those metrics to drive company performance.
In 2015, Dow launched its third set of industry-leading, aspirational 2025 Sustainability Goals, which link sustainability metrics directly to company strategy in every business unit, function and geography. Dow’s emphasis on integrating sustainability metrics into the everyday plans of the company has been key to its economic, environmental, and social metric successes over the past two decades.
In 2015, DuPont continued its sustainability leadership effort by announcing a set of 2020 Sustainability Goals that integrate sustainability with its innovation process, further improve its operational footprint and continue its efforts to enhance global food security.
Both Dow and DuPont have notable accomplishments toward fulfillment of these sustainability goals:
A U.S. Holder that receives cash in lieu of a curriculum focused on chemistry innovation, safety,fractional share of our common stock pursuant to the Reverse Stock Split will recognize capital gain or loss in an amount equal to the difference between the amount of cash received and sustainability.
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE REVERSE STOCK SPLIT PROPOSAL.
CORPORATE GOVERNANCE (continued)PROPOSAL NO. 2
THE ADJOURNMENT PROPOSAL
DowDuPont continuesis asking stockholders to drive a new era of sustainable growth as it pursues the Intended Business Separations. Dow and DuPont will continue to work toward achievement of their respective sustainability goals that create value for all stakeholders, and through product innovation, business strategy and operations, the Company will meet those goals.
More information about Dow’s and DuPont’s legacy sustainability programs, goals, and reports can be found online atwww.dow-dupont.com/about-dow-dupont/sustainability.
Political Engagement and Disclosure
Government policy is oneapprove, if necessary, adjournment of the most powerful external forces affecting DowDuPont today. New laws and changesSpecial Meeting to existing laws can fundamentally impactsolicit additional proxies in favor of the Company’s operations andreverse stock split proposal. Any adjournment of the markets where it does business – andSpecial Meeting for the purpose of soliciting additional proxies will allow stockholders who have already sent in turn, the Company’s bottom line, thereby affecting DowDuPont and its subsidiaries, employees, retirees, suppliers, customers, communities and stockholders.
Because the impact of government policy is so criticaltheir proxies to revoke them at any time prior to the Company’s survival and success, DowDuPont subsidiaries actively participate in both policymaking and political processes, through legally allowed advocacy efforts and by making political contributions to candidates, parties and causes. DowDuPont subsidiaries are committed to the highest standard of ethical conduct in their involvement in policymaking and political process. As part of DowDuPont’s commitment to transparency, materials on political policy and engagement are available atwww.dow-dupont.com/investors/corporate-governance.
AGENDA ITEM 1: ELECTION OF DIRECTORS
Board Composition
The Board consists of sixteen members – eight Directors from the legacy Dow Board and eight Directors from the legacy DuPont Board. There are twoCo-Lead Independent Directors: Mr. Jeff M. Fettig, who previously served as the Lead Independent Director for Dow; and Mr. Alexander M. Cutler, who previously served as the Lead Independent Director for DuPont. Mr. Andrew N. Liveris serves as the Executive Chairman of the Board and Mr. Edward D. Breen, Chief Executive Officer, also serves on the Board.
Recommendations and Nominations for Director
In accordance with the recommendation of the Corporate Governance Committee, the Board has nominated the following individuals for election as Directors, to serve for aone-year term that expires at the Annual Meeting in 2019 or until their successors are elected and qualified: Lamberto Andreotti, James A. Bell, Edward D. Breen, Robert A. Brown, Alexander M. Cutler, Jeff M. Fettig, Marillyn A. Hewson, Lois D. Juliber, Andrew N. Liveris, Raymond J. Milchovich, Paul Polman, Dennis H. Reilley, James M. Ringler, Ruth G. Shaw, Lee M. Thomas and Patrick J. Ward. A biography is included for each nominee beginning on page 17 of the Proxy Statement. While nominated for re-election, the Company has announced that Mr. Liveris will serve as a Director of DowDuPont only through July 1, 2018, at which time he will retire from the Company and the Board of Directors. As set forth in the Bylaws, the Continuing Dow Directors will identify a replacement to fill the vacancy at that time.
The Board of Directors unanimously recommends a vote FOR the election of ALL of these nominees as Directors.
AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)
Overview of Board Composition
Qualifications
The Corporate Governance Committee and the Board believe that the qualifications, skills, experience and attributes set forth in this Proxy Statement for all Directors nominated for election supportproxies are used.
Under Delaware law, the conclusion that these individuals are qualified to serve as Directorsaffirmative vote of the Company and collectively possess a variety of skills, professional experience, and diversity of backgrounds allowing them to effectively oversee the Company’s business. The Directors have a diverse combination of the following backgrounds and qualifications:
Leadership Experience
Directors who have held leadership positions in a public company possess an understanding of the regulations and considerations that are unique to a public company.
International / Global Experience
Directors who have experience and knowledge of international business operations are particularly important given the global presence and financial aspects of the Company.
Science / Technology Expertise
Directors who have expertise in the science or technology field are particularly important given the Company’s focus on research and innovation.
Finance and Accounting Expertise
Numerous financial metrics are used to measure performance. An advanced understanding of finance and accounting is an important qualification for Directors in the preparation of financial statements and risk management.
Public Company Board Experience
Directors with previous public company board experience provide additional corporate governance, compensation experience and financial expertise.
Industries and Markets Expertise
Directors who have experience in the industry and markets served by the Company offer valuable perspective.
Each of these experiences provides the Board with a balance of perspectives that contribute to its effectiveness in overseeing the business, preparing for the Intended Business Separations, and advising the Company on navigating the regulatory environment for the Intended Business Separations. The Corporate Governance Committee and Board have determined that the Directors nominated for election are qualified to serve as Directors of the Company. As the business evolves and preparation for the Intended Business Separations continues, the Corporate Governance Committee and Board will continue to evaluate the membership of the Board to ensure that the skills and experiences on the Board are aligned with the needs of the Company.
AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)
The Board unanimously recommends a vote FOR the election of ALL of these nominees as Directors.
The Company’s Bylaws prescribe the voting standard for election of Directors as a majority of the votes cast in an uncontested election, such as this one, whereat the number of nominees does not exceed the number of Directors to be elected. Under the Corporate Governance Guidelines, if a nominee who already serves as a DirectorSpecial Meeting is not elected, that nominee shall offer to tender his or her resignation to the Board. The Corporate Governance Committee will then recommend to the Board whether to accept or reject the resignation, or whether other action should be taken. Within ninety days of the certification of election results, the Board will publicly disclose its decision regarding whether to accept or reject the resignation. As explained on the accompanying proxy card or voting information, it is the intention of the persons named as proxies to vote executed proxies FOR the candidates nominated by the Board unless contrary voting instructions are provided. If something unanticipated should occur prior to the 2018 Meeting making it impossible for one or more of the candidates to serve as a Director, votes will be cast in the best judgment of the persons authorized as proxies.
The NYSE rules do not permit brokers with discretionary authority to vote in the election of Directors. Therefore, if you hold your shares beneficially and do not provide voting instructions to your bank or broker, your bank or broker will abstain from voting on your behalf and your shares will not be voted in the election of Directors. We urge you to promptly provide voting instructions to your broker to ensure that your shares are voted on this matter. Please follow the instructions set forth in the voting information provided by your bank or broker.
AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)
Information in the biographies summarizes key qualifications and diversity attributes as they apply to the individual Directors to support the conclusion that these individuals are highly qualified to serve on the Board. The information is current as of the date of this Proxy Statement and the age listed is as of the 2018 Meeting. Each nominee is currently serving as a Director and each has consented to serve if elected for the new term.
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DowDuPont compares itsnon-employee Director compensation programs, designs and compensation elements to the same peer group used for executive compensation, as described in the “Peer Group and Benchmarking” section of the Compensation Discussion and Analysis. DowDuPont targets the median compensation of the peer group for all Director compensation elements. The following tables provide information concerning the compensation provided to DowDuPont’snon-employee Directors in 2017.
For the period from January 1, 2017 through August 31, 2017, Dow providednon-employee director fees as described below. These fees were adjusted in April 2017 as part of regular review of peer group benchmarking. Since the Merger Transaction, fees were adjusted to provide equitable treatment of legacy Dow and legacy DuPont Directors also as described below. These factors and others noted account for differences among the compensation of thenon-employee Directors in the tables below.
Non-Employee Directors’ Fees
2017 Directors’ fees as stated below are paid only to Directors who are not employees of the Company. An overview of the 2017 Compensation Elements for Dow, DuPont and DowDuPont respectively is below.
Compensation Element | Dow Pre-Merger ($) | DuPont Pre-Merger ($) | DowDuPont ($) | |||||||||||
Cash Retainer | 115,000 | 115,000 | 115,000 | |||||||||||
Equity Retainer | 170,000 | 150,000 | 170,000 | |||||||||||
Total Retainer | 285,000 | 265,000 | 285,000 | |||||||||||
Audit | 35,000 | 25,000 | 35,000 | |||||||||||
Annual Committee Chair Fees | Compensation | 20,000 | 25,000 | 25,000 | ||||||||||
All Other | 20,000 | 20,000 | 20,000 | |||||||||||
Lead Independent Director Fees | 50,000 | 30,000 | 50,000 |
DIRECTOR COMPENSATION (continued)
Director Compensation for 2017
Name | Fees Earned or Paid in Cash ($)(a) | Stock Awards ($)(b) | Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)(c) | All Other Compensation ($)(d) | Total ($) | |||||||||||||||
Lamberto Andreotti | 38,333 | 13,346 | 300 | 51,979 | ||||||||||||||||
Ajay Banga | 76,667 | 170,610 | 247,277 | |||||||||||||||||
Jacqueline K. Barton | 88,750 | 170,610 | 259,360 | |||||||||||||||||
James A. Bell | 150,000 | 170,610 | 320,610 | |||||||||||||||||
Robert A. Brown | 39,444 | 13,346 | 57,822 | 110,612 | ||||||||||||||||
Alexander M. Cutler | 60,556 | 13,346 | 57,648 | 131,550 | ||||||||||||||||
Richard K. Davis | 86,667 | 170,610 | 257,277 | |||||||||||||||||
Jeff M. Fettig | 178,750 | 170,610 | 349,360 | |||||||||||||||||
Marillyn A. Hewson | 38,333 | 13,346 | 58,713 | 110,392 | ||||||||||||||||
Lois D. Juliber | 35,000 | 13,346 | 5,973 | 58,679 | 112,998 | |||||||||||||||
Mark Loughridge | 86,667 | 170,610 | 257,277 | |||||||||||||||||
Raymond J. Milchovich | 115,000 | 170,610 | 285,610 | |||||||||||||||||
Robert S. (Steve) Miller | 76,667 | 170,610 | 247,277 | |||||||||||||||||
Paul Polman | 115,000 | 170,610 | 285,610 | |||||||||||||||||
Dennis H. Reilley | 136,250 | 170,610 | 306,860 | |||||||||||||||||
James M. Ringler | 126,250 | 170,610 | 296,860 | |||||||||||||||||
Ruth G. Shaw | 115,000 | 170,610 | 285,610 | |||||||||||||||||
Lee M. Thomas | 39,444 | 13,346 | 300 | 53,090 | ||||||||||||||||
Patrick J. Ward | 37,083 | 13,346 | 300 | 50,729 |
Non-Employee Directors Stock Grant
In May 2017, eachnon-employee legacy Dow Director received a grant of 2,750 shares of Restricted Stock, with provisions limiting transfer until retirement or termination of service to the Company or two years from the date of grant, whichever is longer.
In November 2017, eachnon-employee legacy DuPont Director serving on the Board received a grant of 190 Restricted Stock Units (“RSUs”), with provisions limiting transfer until retirement or termination of service to the Company. This transition grant was intended to create parity among the DowDuPont Directors for calendar year 2017.
Non-Employee Directors’ Stock Ownership Guidelines
Equity, in the form of Restricted Stock, RSUs or Deferred Stock, is a key component of director compensation. Directors are subject to stock ownership guidelines as previously set by Dow and DuPont. Legacy Dow Directors have a guideline of owning at least five times the amount of the annual Board retainer fee, with a five year time period after first election to achieve this level, and are also required to retain all equity awards until retirement or termination of service toapprove the Company. Legacy DuPont Directors are required to hold until retirement all equity awards granted since 2011.
As of December 31, 2017, all Directors were in compliance with the stock ownership guidelines.
DIRECTOR COMPENSATION (continued)
Non-Employee Directors Deferred Compensation Plan
Non-employee Directors may choose, prior to the beginning of each year, to have all or part of their fees credited to deferred compensation accounts in either legacy Dow or legacy DuPont programs, as applicable.
For legacy Dow Directors, at the election of the Director, fees are deferred into one of several hypothetical investment accounts that accrue investment returns according to the account selected. Investment choices include a fund with an interest rate equal to the sum of the60-month rolling average often-year U.S. Treasury Note yield plus the current five-year Dow credit spread, a phantom Dow stock account tracking the market value of DowDuPont common stock with market dividends paid and reinvested, as well as funds tracking the performance of several mutual funds. These funds are identical to funds offered as part of the Elective Deferral Plan for management level employees. Such deferred amounts will be paid in installments as elected by the Director at the time of deferral commencing in July following the Director’s retirement or termination of service to the Company, in the following July or in July of the calendar year following the Director’s 72nd birthday. If the Director elects to receive payment in July following his or her 72nd birthday and if he or she remains on the Board beyond his or her 72nd birthday, payments shall start in the July following retirement or termination of service to the Company.
Under the legacy DuPont Stock Accumulation and Deferred Compensation Plan for Directors, a Director may defer all or part of the Board retainer and Committee Chair fees in cash or stock units until retirement as a Director or until a specified year after retirement. Interest accrues on deferred cash payments and dividend equivalents accrue on deferred stock units. As part of the retention requirements, equity grants will be held until retirement. However, a Director may defer payments beyond retirement.
Business Travel Accident Insurance forNon-Employee Directors
Dow and DuPont maintain a rider on their Business Travel Accident insurance policies covering each legacynon-employee Director, which will cover accidental death and dismemberment if the Director is traveling on DowDuPont business.
DuPont Directors’ Retirement Income Plan
In 1998, DuPont discontinued its legacy DuPont retirement income plan for non-employee Directors. Non-employee Directors who began their service on the DuPont Board prior to the plan’s discontinuation continue to be eligible to receive benefits under the plan. Upon retirement, annual benefits payable under the plan equal one-half of the annual Board retainer (up to $85,000 and exclusive of any Committee compensation and stock, RSU or stock option grants) in effect at the Director’s retirement. Benefits are payable for the lesser of life or ten years.
DuPont Directors’ Charitable Gift Plan
In October 2008, DuPont discontinued its legacy DuPont charitable gift plan with respect to future Directors. After the death of a Director, DuPont will donate five consecutive annual installments of up to $200,000 each totax-exempt educational institutions or charitable organizations recommended by the Director and approved by DuPont.
A Director was fully vested in the plan after five years of service as a Director or upon death or disability. The plan is unfunded. DuPont does not purchase insurance policies to satisfy its obligations under the plan. The Directors do not receive any personal financial or tax benefit from this program because any charitable,tax-deductible donations accrue solely to the benefit of DuPont. Employee Directors were able to participate in the plan if they made a required annual contribution.
Additional Compensation from Third Point LLC
In addition to thenon-employee director compensation described above to be paid by DowDuPont, Mr. Milchovich received additional compensation from a third party in connection with his election to the Board of Directors of Dow. Specifically, Mr. Milchovich was appointed to the Dow Board and/or nominated for election for the 2015 Annual Meeting of Stockholders (“2015 Meeting”) pursuant to an agreement dated as of November 20, 2014, between the Company and certain investment funds (Third Point LLC, Third Point Partners Qualified L.P., Third Point Partners L.P., Third Point Offshore Master Fund L.P., Third Point Ultra Master Fund L.P. and Third Point Reinsurance Co. Ltd. (collectively “Third Point”)).
DIRECTOR COMPENSATION (continued)
In connection with his agreement to serve as a Third Point designee, Mr. Milchovich entered into an agreement with Third Point LLC (the “TP Agreement”). Pursuant to the TP Agreement, Mr. Milchovich received from Third Point LLC:
The 2018 SARs vested as follows: 50% on January 1, 2017 and 50% on January 1, 2018 and were settled in cash by Third Point LLC in January 2018. The 2020 SARs vest as follows: 50% on January 1, 2019 and 50% on January 1, 2020 and will be settled in cash by Third Point LLC within 30 days following January 1, 2020. The receipt by Mr. Milchovich of each of the payments pursuant to the 2018 SARs and the 2020 SARs is contingent upon him agreeing to stand for election to the Board (whether or notre-nominated) and not resigning from the Board, regardless of whether Third Point LLC remains a stockholder. The payment obligationsadjournment proposal. Abstentions with respect to the SARsadjournment proposal are not considered votes cast and will have no effect on the subjectoutcome of the TP agreement. Neither Dow nor the Company is a party to the TP agreement nor is the Company responsible for any such payments.proposal.
Equity Compensation Plan InformationTHE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ADJOURNMENT PROPOSAL.
The tables below shows the Equity Compensation Plan Information as of December 31, 2017 for Dow and DuPont respectively.
Dow | (1) | (2) | (3) | |||||||||
Plan Category | # of securities to be issued upon exercise of outstanding options, warrants, rights | Weighted-average exercise price of outstanding options, warrants, rights ($) | # of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1)) | |||||||||
Equity Compensation Plans Approved by Security Holders | 40,560,311 | 43.61 | (a) | 29,183,052(b) |
As of December 31, 2017
DuPont | (1) | (2) | (3) | |||||||||
Plan Category | # of securities to be issued upon exercise of outstanding options, warrants, rights | Weighted-average exercise price of outstanding options, warrants, rights ($) | # of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1)) | |||||||||
Equity Compensation Plans Approved by Security Holders | 20,086,584 | 48.43 | 33,820,428 |
As of December 31, 2017
BENEFICIALSECURITY OWNERSHIP OF COMPANY STOCKCERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF DOWDUPONT
The following table presentssets forth the beneficial ownership of DowDuPont’s Common Stockour common stock as of February 20, 2018, exceptMarch 31, 2019 (except as noted,noted) for (i) each Directordirector of the Company, (ii) each executive officer of our “Named Executive Officers” (as such term is defined in Item 402(a)(3) ofRegulation S-K under the Company listed in the Summary Compensation Table,Exchange Act), (iii) all Directorsdirectors and executive officers as a group and (iv) each person known to us to beneficially owningown more than 5% of the outstanding shares of DowDuPont’s Common Stock.our common stock.
Name | Current Shares Beneficially Owned(a) | Rights to Acquire Beneficial Ownership of Shares(b) | Total | Percent of Shares Beneficially Owned(c) | ||||||||||||
Lamberto Andreotti | 0.0 | 18,632.0 | 18,632.0 | * | ||||||||||||
James A. Bell | 35,656.0 | 0.0 | 35,656.0 | * | ||||||||||||
Edward D. Breen | 67,512.0 | 460,680.0 | 528,192.0 | * | ||||||||||||
Robert A. Brown | 146.0 | 42,465.0 | 42,611.0 | * | ||||||||||||
James C. Collins | 161,194.0 | 67,425.0 | 228,619.0 | * | ||||||||||||
Alexander M. Cutler | 6,410.0 | 78,139.0 | 84,549.0 | * | ||||||||||||
Jeff M. Fettig | 43,330.0 | 0.0 | 43,330.0 | * | ||||||||||||
James R. Fitterling | 225,961.8 | 618,284.0 | 844,245.8 | * | ||||||||||||
Joe E. Harlan | 174,393.3 | 274,938.0 | 449,331.3 | * | ||||||||||||
Marillyn A. Hewson | 3,712.0 | 55,107.0 | 58,819.0 | * | ||||||||||||
Lois D. Juliber | 2,051.0 | 97,555.0 | 99,606.0 | * | ||||||||||||
Charles J. Kalil | 274,803.7 | 509,459.0 | 784,262.7 | * | ||||||||||||
Andrew N. Liveris | 804,690.0 | 4,088,499.0 | 4,893,189.0 | * | ||||||||||||
Raymond J. Milchovich | 13,891.3 | 0.0 | 13,891.3 | * | ||||||||||||
Paul Polman | 48,780.0 | 0.0 | 48,780.0 | * | ||||||||||||
Dennis H. Reilley | 38,646.0 | 0.0 | 38,646.0 | * | ||||||||||||
James M. Ringler | 51,850.0 | 0.0 | 51,850.0 | * | ||||||||||||
Ruth G. Shaw | 42,389.0 | 0.0 | 42,389.0 | * | ||||||||||||
Lee M. Thomas | 15,544.0 | 19,171.0 | 34,715.0 | * | ||||||||||||
Howard I. Ungerleider | 129,967.2 | 637,389.0 | 767,356.2 | * | ||||||||||||
Patrick J. Ward | 0.0 | 13,094.0 | 13,094.0 | * | ||||||||||||
Group Total | 2,140,927.3 | 6,949,111.0 | 9,090,038.3 | 0.39% | ||||||||||||
All Directors and Executive Officers as a Group (25 persons) | 2,361,342.8 | 7,364,760.0 | 9,726,102.8 | 0.42% | ||||||||||||
Certain Other Owners: | ||||||||||||||||
BlackRock, Inc. | 156,235,635.0 | (d) | 6.72% | |||||||||||||
The Vanguard Group | 173,041,983.0 | (e) | 7.44% | |||||||||||||
Capital World Investors | 125,863,167.0 | (f) | 5.41% |
COMPENSATION DISCUSSION & ANALYSIS (continued)
Defined Terms
CEO – Chief Executive Officer
CD&A – Compensation Discussion & Analysis
EPS – Earnings Per Share
GAAP – Generally Accepted Accounting Principles
IRC – U.S. Internal Revenue Code, as amended
LTI – Long-Term Incentive
NEO – Named Executive Officer
PSU – Performance Share Unit
ROC – Return on Capital
RSU – Restricted Stock Unit
SEC – U.S. Securities & Exchange Commission
STIP – Short-Term Incentive Program
TSR – Total Shareholder Return
EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization and Foreign Exchange Gains (Losses)
Management Operating Cash Flow – Operating Net Income, plus Depreciation and Amortization, minus Capital Spending, and plus the Change in Adjusted Trade Working Capital
Operating Earnings – Income from Continuing Operations Before Taxes, excluding Significant Items
Operating EBITDA – EBITDA excluding the impact of Significant Items
Operating EPS – Net Income Available for Common Stockholders excluding the impact of Significant Items divided by Common Share from Continuing Operations – diluted.
Operating Net Income – Net Income Available for Common Stockholders excluding the impact of Significant Items
Operating ROC – Net Operating Profit after Tax (excluding Significant Items) divided by Total Average Capital
Pro Forma – Prepared in accordance with Article 11 of Regulation S-X
Pro Forma Adjusted EPS – “pro forma earnings per common share from continuing operations – diluted” excluding the after-tax impact of pro forma significant items and the after-tax impact of pro forma amortization expense associated with DuPont’s intangible assets
Pro Forma Operating EBITDA – earnings (i.e., “pro forma income from continuing operations before income taxes”) before interest, depreciation, amortization and foreign exchange gains (losses), excluding the impact of significant items
COMPENSATION DISCUSSION & ANALYSIS (continued)
Effective August 31, 2017, The Dow Chemical Company (“Dow”) and E. I. du Pont de Nemours and Company (“DuPont”) completed the previously announced merger of equals transaction contemplated by the Agreement and Plan of Merger dated as of December 11, 2015, as amended on March 31, 2017 (the “Merger Transaction”). The Merger Transaction resulted in each of Dow and DuPont surviving as subsidiaries of DowDuPont Inc. (“DowDuPont”). For purposes of this CD&A, references to “the Company” refer to DowDuPont.
Dow was determined to be the accounting acquirer in the Merger Transaction and, as a result, certain historical information of Dow is presented in this Proxy Statement for the periods prior to the Merger Transaction. A further description of the Merger Transaction can be found on page i of the Proxy Statement and in the current report on Form8-K filed by DowDuPont on September 1, 2017.
DowDuPont is now pursuing the intended separation of the Company’s Agriculture, Materials Science and Specialty Products divisions into three independent, publicly traded companies (the “Intended Business Separations”). The Intended Business Separations, which are subject to Board approval, are expected to be in the form ofpro-rataspin-off transactions, under which DowDuPont stockholders will receive shares of capital stock in the resulting companies. DowDuPont recently announced dates for the Intended Business Separations: Materials Science, which will be called Dow, is expected to separate from DowDuPont by the end of the first quarter of 2019, and Agriculture, which will become Corteva Agriscience™, and Specialty Products, which will be the new DuPont, are each expected to separate from one another by June 1, 2019.
DowDuPont is led by a management team that reflects the strengths and capabilities of both Dow and DuPont. Each of the three divisions leads its respective industry through productive, science-based innovation to meet the needs of customers and help solve global challenges.
The management team seeks to deliver value at DowDuPont through:
COMPENSATION DISCUSSION & ANALYSIS (continued)
See Appendix A for a reconciliation to the most directly comparable U.S. GAAP financial measures.
This CD&A discusses the compensation of the following NEOs. Following the accounting treatment of the Merger Transaction, Dow was determined to be the accounting acquirer. As a result, the NEOs includes Mr. Liveris, as CEO of the accounting acquirer, Dow, and the tables include only compensation earned as executives of DowDuPont since September 1, 2017 for Messrs. Breen and Collins.
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Merger Transaction Considerations for CD&A
With Dow having been determined to be the accounting acquirer in the Merger Transaction, the compensation presented in the “Compensation Tables and Narratives” section of this Proxy Statement with respect to NEOs who are legacy Dow executives includes compensation related to their service with both Dow and DowDuPont during 2017. For those NEOs who are legacy DuPont executives, the compensation presented in the “Compensation Tables and Narratives” section of this Proxy Statement includes only compensation earned relative to their service as executives of DowDuPont (i.e., from September 1, 2017 through December 31, 2017). In other sections of this Proxy Statement, however, reference may be made to full-year, annual compensation for all NEOs. All references are clearly identified as to the basis on which they are presented.
Program Structure and Alignment with Core Principles
Both Dow and DuPont have a history of designing executive compensation programs to attract, motivate, reward and retain the high-quality executives necessary for Company leadership and strategy execution. This legacy continues at DowDuPont and well positions the Company to deliver on the intention of creating three independent, industry-leading companies.
2017 was a unique year, as both Dow and DuPont operated as standalone companies prior to the Merger Transaction, each with its own executive compensation and benefit programs and practices. Given the Intended Business Separations within a relatively short period of time after the closing of the Merger Transaction, a decision was made to not develop separate executive compensation programs at the DowDuPont level for 2017. Rather, the executive officers of DowDuPont continue to be employees of, and participants in, the compensation and benefit programs of Dow and DuPont, respectively. The only exception to this structure is related to a post-merger grant of PSUs which were awarded to certain senior executives and which is discussed more fully in the section entitled “DowDuPont –Post Merger Grant” which can be found on page 45 of the Proxy Statement.
COMPENSATION DISCUSSION & ANALYSIS (continued)
The legacy Dow and DuPont compensation programs are designed and administered to follow these core principles:
Each of the Dow and DuPont executive compensation programs delivers value through three primary forms of compensation: base salary, annual incentives, and long-term incentives. The compensation outcomes under the programs’ annual and long-term incentives are determined by respective company performance (and, in the case of the post-merger PSUs awarded, by the overall performance of DowDuPont).
The following table summarizes the two companies’ respective 2017 legacy executive compensation programs:
| ||||
| ||||
|
| |||
|
|
The following merger-related compensation actions were taken in 2017:
COMPENSATION DISCUSSION & ANALYSIS (continued)
Executive Compensation Governance Practices
Following the Merger Transaction, compensation of the executive officers of DowDuPont, including that of the NEOs, is overseen by the Compensation Committee (or, in the case of both the Executive Chairman and the CEO, by the Compensation Committee and the independent members of the Board). The Compensation Committee established the Dow Compensation Subcommittee and the DuPont Compensation Subcommittee and delegated certain responsibilities relating to the compensation and benefits provided to executive officers and employees of Dow and DuPont, respectively. The Board, the Compensation Committee and the respective Subcommittees are assisted in performance of their oversight duties by independent compensation consultants and management.
The following summarizes key governance characteristics related to the executive compensation programs in which the NEOs participate:
|
|
As implementation of the Intended Business Separations continues, the Compensation Committee will continue to review best practices in governance and executive compensation to ensure that the compensation programs align with the Company’s core principles.
[THIS PAGE INTENTIONALLY LEFT BLANK]
COMPENSATION DISCUSSION & ANALYSIS (continued)
COMPONENTS OF EXECUTIVE COMPENSATION AND BENEFITS
Executives receive a mix of variable and fixed components of compensation which are aligned with the compensation philosophy as highlighted in the chart below:
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| |
|
| |
|
| |
|
| |
|
2017 NEO Targeted Total Direct Compensation Summary
In addition to and separate from the Summary Compensation Table, the following table is provided to aid with understanding the annual compensation of the NEOs, not including certain merger related items. The following table lists the targeted annual total direct compensation for each NEO for the full calendar year ending December 31, 2017, including compensation from (i) legacy companies prior to the Merger Transaction, and (ii) DowDuPont following the Merger Transaction.
Name | 2017 Base Salary ($) | 2017 Target Annual Incentive ($) | 2017 LTI ($) | Targeted Total Direct Compensation ($) | ||||||||||||
Edward D. Breen | 1,930,800 | 3,185,820 | 12,700,000 | 17,816,620 | ||||||||||||
Andrew N. Liveris | 1,930,800 | 3,185,820 | 12,700,000 | 17,816,620 | ||||||||||||
Howard I. Ungerleider | 1,067,559 | 1,281,071 | 4,150,000 | 6,498,630 | ||||||||||||
James R. Fitterling | 1,140,112 | 1,425,140 | 4,750,000 | 7,315,253 | ||||||||||||
Charles J. Kalil | 1,050,252 | 1,102,765 | 3,450,000 | 5,603,017 | ||||||||||||
James C. Collins | 775,000 | 775,000 | 2,500,000 | 4,050,000 | ||||||||||||
Joe E. Harlan | 1,057,194 | 1,268,633 | 3,400,000 | 5,725,828 |
Totals in the above table might not equal the summation of the columns due to rounding amounts to the nearest dollar.
Executive compensation is linked strongly to the financial and operational performance of the business. On average, approximately 90% of the Executive Chairman’s and the CEO’s target annual total compensation is at risk, while over 80% of the other NEOs’ compensation, on average, is at risk.
Variable (89%) 71% 11% 18% Variable (83%) 17% 20% 63%
COMPENSATION DISCUSSION & ANALYSIS (continued)
NEO incentive compensation is based on clearly disclosed and measurable goals linked to company performance. Each of the Dow and DuPont compensation programs is targeted to deliver compensation at approximately the median of a core group of companies with whom each company respectively competed globally for business and executive talent. To the extent that an individual NEO’s compensation exceeds the median, it is attributable to factors including executive tenure, experience and stockholder value-enhancing achievement of measurable goals.
Base salary is a fixed portion of compensation based primarily on an individual’s skills, job responsibilities and experience, as well as more subjective factors such as the assessment by the Compensation Committee of individual NEO performance. Base salaries for executives are benchmarked against similar jobs at other companies and are targeted at the median of the respective peer group, after adjusting for each company’s revenue size.
Base salaries for the NEOs as of December 31, 2017 and December 31, 2016, respectively, are shown in the table below. As previously noted, the increase in base salary for Mr. Breen was in reflection of his experience and performance and to align his salary with that of Mr. Liveris. The increases for Messrs. Ungerleider, Fitterling, Kalil and Harlan generally represent merit increases aligned to general increases in base salaries for comparably situated positions. The increase for Mr. Collins was related to his promotion to the position of Chief Operating Officer for the Agricultural division.
Name | 2016 Base Salary ($) | 2017 Base Salary ($) | Percent/ Change in Base Salary | |||||||||
Edward D. Breen | 1,500,000 | 1,930,800 | 29 | % | ||||||||
Andrew N. Liveris | 1,930,800 | 1,930,800 | 0 | % | ||||||||
Howard I. Ungerleider | 1,036,465 | 1,067,559 | 3 | % | ||||||||
James R. Fitterling | 1,106,905 | 1,140,112 | 3 | % | ||||||||
Charles J. Kalil | 1,029,659 | 1,050,252 | 2 | % | ||||||||
James C. Collins | 700,000 | 775,000 | 11 | % | ||||||||
Joe E. Harlan | 1,036,465 | 1,057,194 | 2 | % |
During 2017, the DuPont Human Resources and Compensation Committee (the “legacy DuPont Compensation Committee”), the Dow Compensation and Leadership Development Committee (the “legacy Dow Compensation Committee”) and each of the respective company’s Boards, determined that, as a result of the timing of the Merger Transaction, a new DowDuPont annual short-term incentive program would not be adopted for 2017. Rather, participants in each company’s annual short-term incentive program would remain eligible for, and subject to the terms of, their respective company’s program for 2017. The following sections summarize Dow’s and DuPont’s respective 2017 annual incentive programs. There will be a common set of metrics and overall design for all participants under the 2018 annual incentive programs.
Dow Annual Performance Award
The Performance Award is an annual cash incentive program. Dow uses this component of compensation to reward employees for achieving critical annual company goals measured by Operating Net Income and Management Operating Cash Flow. Meeting or exceeding annual business and financial goals is important to executing long-term business strategy and delivering long-term value to stockholders. The rationale for utilizing these metrics is:
Actual award payouts are determined each February following completion of the plan year by measuring the performance against each award component.
COMPENSATION DISCUSSION & ANALYSIS (continued)
2017 Dow Performance Award Metrics and Design
The amount earned is equal to a participant’s target award times Dow performance results, and adjusted by the individual performance factor assessment, which includes safety performance. The actual results for each financial performance measure can range from 0% to 200% of target, and are weighted as indicated in the graphic below. Even when including the impact of the individual performance factor the Performance Award is capped at a maximum payout of 200%.
The metrics used in the Performance Award arenon-GAAP measures and defined as follows:
The 2017 Performance Award corporate target goals and 2017 results are shown below.
Metric | Threshold – ($ in millions) | Target ($ in millions) | Max – 200% ($ in millions) | Actual ($ in millions) | Payout % | Weighting | Actual Factor % | |||||||||||||||||||||
Operating Net Income*
|
|
4,350
|
|
|
5,178
|
|
|
6,006
|
|
|
5,296
|
|
|
114
|
%
|
|
60
|
%
|
|
68
|
%
| |||||||
Management Operating Cash Flow*
|
|
4,174
|
|
|
5,174
|
|
|
6,174
|
|
|
5,197
|
|
|
102
|
%
|
|
40
|
%
|
|
41
|
%
| |||||||
TOTAL
|
|
109
|
%
|
As detailed in the table above, the 2017 Performance Award resulted in an earned base award equal to 109% of the target award opportunity for employees. As allowed by the Dow plan, the Dow Compensation Subcommittee determined the individual component payout level for each NEO subject to the Dow plan to reflect their personal contributions (shown in the table below).
Name | Year End Base Salary ($)(a) | PA Target Percent (b) | PA Target Amount ($)(c) | Company Component (d) | Individual Committee Assessment (e) | Total PA Payment Percent (f) | Total PA Payout Amount ($) | |||||||||||||||||||||
(a * b) | (d * e) | (c * f) | ||||||||||||||||||||||||||
Andrew N. Liveris
|
|
1,930,800
|
|
|
165
|
%
|
|
3,185,820
|
|
|
109
|
%
|
|
120
|
%
|
|
131
|
%
|
|
4,167,053
|
| |||||||
Howard I. Ungerleider
|
|
1,067,559
|
|
|
120
|
%
|
|
1,281,071
|
|
|
109
|
%
|
|
120
|
%
|
|
131
|
%
|
|
1,675,641
|
| |||||||
James R. Fitterling
|
|
1,140,112
|
|
|
125
|
%
|
|
1,425,140
|
|
|
109
|
%
|
|
120
|
%
|
|
131
|
%
|
|
1,864,083
|
| |||||||
Charles J. Kalil
|
|
1,050,252
|
|
|
105
|
%
|
|
1,102,765
|
|
|
109
|
%
|
|
110
|
%
|
|
120
|
%
|
|
1,322,215
|
| |||||||
Joe E. Harlan
|
|
1,057,194
|
|
|
120
|
%
|
|
1,268,633
|
|
|
109
|
%
|
|
100
|
%
|
|
109
|
%
|
|
1,382,810
|
|
Performance Award Operating Net Income 60% Management Operating Cash Flow 40% Individual Factor 0% - 125% Payout Range Max: 200% Target: 100% Threshold: 0%
COMPENSATION DISCUSSION & ANALYSIS (continued)
DuPont Short-Term Incentive Program
DuPont’s STIP is designed to ensure that DuPont executives maintain a strong focus on financial metrics (e.g., revenue growth and earnings growth) that have been shown to be closely linked to stockholder value creation over time. In addition, DuPont’s STIP is linked to both corporate and business unit performance. The legacy DuPont Compensation Committee has historically approved the STIP design, including measures and weightings, at the beginning of each fiscal year. The chart below represents the STIP structure approved by the legacy DuPont Compensation Committee at the beginning of 2017.
In connection with, and as a result of certain impacts of, the Merger Transaction, the legacy DuPont Compensation Committee determined that the metrics utilized in the plan as approved at the beginning of the fiscal year would either not be applicable after the merger, or would have significant impediments on their continued use after the merger. As a result, the legacy DuPont Compensation Committee determined that the fiscal year would be split into apre-merger period and post-merger period. For thepre-merger period, the metrics and weightings established by the legacy DuPont Compensation Committee at the beginning of the fiscal year remained in effect. For the post-merger period, two metrics were replaced, as noted in the table below. All metrics, both pre- and post-merger, were calculated solely based upon the results of DuPont and its Business Units.
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|
The rationale for the utilization of thepre-merger measures was as follows:
The rationale for changing the measures post-merger was as follows:
Thenon-GAAP measures utilized in the 2017 STIP are defined as follows:
Short Term Incentive Plan (STIP) Individual STIP Target X Corporate Performance Payout Factor 50% + Total Business Unit Performance Payout Factor 50% X Individual Factor(1) = Individual STIP Payout Max (200%) Target (100%) Threshold (60%) Below Threshold (0%)
COMPENSATION DISCUSSION & ANALYSIS (continued)
In addition to the adjustment to the measures being utilized, prior to the Merger Transaction the legacy DuPont Compensation Committee made additional changes to the STIP for 2017. Due to the likelymid-quarter closing of the Merger Transaction, coupled with the fact that certain accounting and budgeting processes are aligned only to full quarters the legacy DuPont Compensation Committee determined that the measurement of business performance for the 2017 STIP would be based on full quarters only. More specifically,pre-merger results would be based only upon the full quarters completed as of the date of closing of the Merger Transaction, while post-merger results would be based only upon full quarters completed post-merger. Given that the Merger Transaction closed on August 31, 2017, this ultimately resulted in thepre-merger measurement period being based upon performance through June 30, 2017. Conversely, the post-merger measurement period is based upon performance from October 1, 2017 through December 31, 2017. These decisions were made by the legacy DuPont Compensation Committee in order to recognize a number of accounting impacts driven by the Merger Transaction that would not reflect the ongoing operations of the business. The performance through June 30, 2017 includes results related to the DuPont Divested Ag Business.
As provided for in the plan, the DuPont Compensation Subcommittee, as a successor to the legacy DuPont Compensation Committee, maintained the ability to exercise discretion in determining the final payouts for 2017 under the plan. The DuPont Compensation Subcommittee discussed at length with management the impact this full-quarter approach likely had on the overall payout factor and determined, based on a number of quantitative and qualitative criteria, including management’s estimate of the likely impact from the third quarter, to exercise negative discretion. The DuPont Compensation Subcommittee elected to make two downward adjustments, the first of which was to negate the unexpected benefits of purchase accounting associated with the Merger Transaction, and the second of which smoothed the upward impact of the full quarter approach.
Each element in the calculation of the 2017 payouts for those NEOs participating in the DuPont STIP is discussed in greater detail below.
STIP Target
DuPont’s STIP targets were set as a percentage of base salary, consistent with market practice. The target STIP percentage for each individual executive is reviewed regularly against the market and has historically been approved annually by the legacy DuPont Compensation Committee (or in the case of the CEO, by the independent members of the DuPont Board). As previously noted, in conjunction with the closing of the Merger Transaction, Mr. Breen’s STIP target as a percentage of base salary increased from 160% to 165%. Per DuPont company practice, the new base salary and STIP target percentage are utilized on a full year basis, rather than a prorated one, to calculate the STIP target for the fiscal year. The actual calculation of the 2017 STIP target amount for those NEOs participating in the plan is detailed in the table below.
Name | 2017 Base Salary ($) | 2017 X Target STIP % | 2017 = Target STIP ($) | |||||||||
Edward D. Breen
|
|
1,930,800
|
|
|
165%
|
|
|
3,185,820
|
| |||
James C. Collins
| �� |
|
775,000
|
|
|
100%
|
|
|
775,000
|
|
STIP Payout Factor
Corporate and business unit performances are converted to a corresponding payout factor based on the concept of “leverage,” i.e., the relationship between performance for a given metric and its payout factor. Leverage for each metric is 2:1 below target and 5:1 above target, meaning that participants have two percentage points in payout deducted for each one percent change in performance below target, and receive five percentage points in payout for each one percent change in performance above target. This leverage is consistent with competitive practice. All metrics are capped at a maximum 200% payout. The weighted average payout factor for the STIP is based on actual performance on each measure and the weighting of that performance measure.
The payout factors were equally aligned to corporate and business performance. Because Messrs. Breen and Collins worked across all businesses, their Business Unit payout factors were based on the total business performance compared to aggregate targets in the earnings and revenue measures.
COMPENSATION DISCUSSION & ANALYSIS (continued)
2017 STIP Results
The following tables highlight each of the performance measures, their weightings, targets, the actual results and payout results.
(1)Pre-Merger Performance1:
Metric | Target ($ in millions, other than for EPS) | Actual ($ in millions, other than for EPS) | % of Target | Weighting | Actual Factor % | |||||||||||||||
Corporate: Operating EPS*
|
|
2.58
|
|
|
3.02
|
|
|
117%
|
|
|
50%
|
|
|
93%
|
| |||||
Business Unit Operating Earnings*
|
|
3,544
|
|
|
3,796
|
|
|
107%
|
|
|
25%
|
|
|
34%
|
| |||||
Business Unit Revenue
|
|
14,599
|
|
|
15,098
|
|
|
103%
|
|
|
25%
|
|
|
29%
|
| |||||
TOTAL
|
|
156%
|
|
(2) Post-Merger Performance:
Metric | Target ($ in millions, other than for EPS) | Actual ($ in millions, other than for EPS) | % of Target | Weighting | Actual Factor % | |||||||||||||||
Corporate: Operating Net Income*
|
|
411
|
|
|
472
|
|
|
115%
|
|
|
50%
|
|
|
87%
|
| |||||
Business Unit Operating EBITDA*
|
|
1,037
|
|
|
1,103
|
|
|
106%
|
|
|
25%
|
|
|
33%
|
| |||||
Business Unit Revenue
|
|
5,125
|
|
|
5,258
|
|
|
103%
|
|
|
25%
|
|
|
28%
|
| |||||
TOTAL
|
|
148%
|
|
A downward adjustment of 10% was made by the DuPont Compensation Subcommittee and applied to the post-merger factor to smooth the impact of the full-quarter measurement approach described above, yielding a final post-merger factor of 138%. When taken together with thepre-merger factor of 156% and weighted for the number of days applicable to each of thepre- and post-merger periods, the full year factor applicable to those NEOs participating in the plan is 150%.
(3) Individual Performance:
As previously noted, the Compensation Committee elected not to make any individual performance adjustments for those NEOs participating in the plan.
(4) Final STIP Payout
As illustrated in the table below, the final 2017 STIP payout for NEOs participating in the plan was determined by multiplying the individual STIP target amount by the final total payout factor of 150%:
Name | 2017 Target STIP ($) | TOTAL Payout X Factor % | 2017 = Final STIP ($) | |||||||||
Edward D. Breen
|
|
3,185,820
|
|
|
150%
|
|
|
4,778,730
|
| |||
James C. Collins
|
|
775,000
|
|
|
150%
|
|
|
1,162,500
|
|
The 2017 STIP awards for legacy DuPont Section 16 officers were limited to 0.25% of adjusted net income of DuPont for the CEO and 0.15% for other legacy DuPont executive officers.
COMPENSATION DISCUSSION & ANALYSIS (continued)
Long-Term Incentive Compensation
In 2017, Dow’s and DuPont’s respective LTI programs for NEOs consisted of multiple types of equity, all based on fair value on the grant date.
The following table summarizes the performance drivers, mix, and objectives for the long-term compensation as they relate to NEOs:
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|
| ||
|
|
Performance Share Units
Performance Share Units (“PSUs”) are a form of equity compensation whose value upon vesting is determined by attainment against specific performance goals. PSUs align executives to the Company’s financial and stock performance over a multi-year period. The following describes thepre-merger PSU programs at Dow and DuPont.
Dow – Pre-Merger Performance Shares
Prior to 2017, Dow Performance Shares were earned based on equal weighting of Operating Return on Capital (“Operating ROC”) and Relative TSR. Operating ROC was removed as a metric in the 2017 performance share program due to the potential timing of the Merger Transaction and the need to determine performance to date prior to the Merger Transaction. The rationale for utilizing thesenon-GAAP metrics was:
Operating Return on Capital: Measures how effectively a company has utilized the money invested in its operations. Dow defined Operating ROC as Net Operating Profit after Tax (excluding significant items) divided by total average capital (“Operating ROC”). Net Operating Profit after Tax (excluding significant items) is a net income measure that excludes preferred stock dividends, net income attributable to noncontrolling interests, and interest expense. To achieve a target payout on the Operating ROC portion, Dow’s Operating ROC must equal or exceedpre-established Operating ROC goals for the same period.
The target goal represents Dow’s expected level of Operating ROC over the three-year performance period. The threshold goal represents the minimum level of performance that would warrant any payout. The maximum goal represents stretch performance that would warrant a maximum payout. Dow’s Operating ROC target is 10% across the industry cycle and the target for this metric in the Performance Share ranges from 12% to 13% on current outstanding grants.
Relative Total Shareholder Return: Reflects how Dow has performed as measured by stock price appreciation relative to a benchmark index. For performance shares awarded in 2015-2017, Dow utilized the companies comprising the Standard & Poor’s 500 Composite Index (the “S&P 500”) as the benchmark to determine Relative TSR as defined below.
Total shareholder return is defined as stock price appreciation plus dividends paid. For Dow and each company in the S&P 500, a beginning price using a30-trading day averaging period at the beginning of the performance period and an ending price using a30-trading day averaging period at the end of the performance period are calculated and used to create a percentile ranking to develop a relative performance metric for purposes of compensation (“Relative TSR”).
DuPont – Pre-Merger PSUs
DuPont PSUs granted in 2015 were based on equal weighting of After-Tax Operating Earnings relative to target (“Operating Earnings”) and Relative TSR. Operating Earnings was removed as a metric in the 2016 and 2017 PSU programs due to the potential timing of the Merger Transaction and the need to determine performance to date prior to the Merger Transaction. The rationale for utilizing these non-GAAP metrics was:
Operating Earnings: is a profitability metric that measures Net Income less significant Items and Non-Operating Pension/OPEBs costs. DuPont’s Operating Earnings target was 6% annual growth over the prior year, calculated on an annual basis,
COMPENSATION DISCUSSION & ANALYSIS (continued)
for the three-year Performance Period. The base period for measurement was the fiscal year preceding the Performance Period (ending 12/31/2014) and measured annually through 12/31/2017. The resulting three-year payout factor is the average of the payout percentage earned each year. The threshold performance level for any payment to be achieved was 3%, and the maximum performance level was 10%. Threshold would have resulted In a 50% payout and maximum a 200% payout, with Interim points between threshold and target, and between target and maximum, interpolated on a straight-line basis.
Relative Total Shareholder Return: Reflects how DuPont performed as measured by stock price appreciation relative to its defined peer group, as disclosed in proxy statements from 2015, 2016 and 2017, respectively.
For DuPont and each company in its defined peer group, a beginning price using a 20-trading day averaging period at the beginning of the performance period and an ending price using a 20-trading day averaging period at the end of the performance period were calculated and used to create a percentile ranking to develop a Relative TSR ranking. Threshold Relative TSR performance would be achieved at the 25th percentile (with a payout at 25% of target), target at the median, and maximum performance at the 75th percentile (with a 200% payout). Interim points between threshold and target, and between target and maximum, would be interpolated on a straight-line basis.
Impact of Merger Transaction on Outstanding Performance Share Awards
As provided in the Merger Agreement, upon the closing of the Merger Transaction all outstanding performance shares/PSUs at both Dow and DuPont were automatically converted into deferred shares/RSUs. The number of deferred shares/RSUs into which outstanding performance shares/PSUs were converted was based on the greater of target or actual performance. Based on performance against targets, outstanding awards at Dow and DuPont, respectively, were converted as noted in the tables below. Final delivery of all converted awards will follow the original vesting periods.
Dow Performance Share Update Using 2Q17 result for Operating ROC and 08/30/17 for TSR | ||||||||||||
Grant | Metric | Min/Threshold (35%) | Target (100%) | Max (200%) | YTD Operating ROC TSR Percentile | Payout Based on Performance To-Date | ||||||
2015 – 2017 |
50% Operating ROC
|
10.0%
|
12.2%
|
13.7%
|
12.1%
|
97%
| ||||||
50% Rel. TSR
|
26th Pctl
|
51st Pctl
|
76th Pctl
|
83%
|
200%
| |||||||
Weighted Total |
149%
| |||||||||||
2016 – 2018 |
50% Operating ROC
|
10.7%
|
13.0%
|
14.6%
|
12.1%
|
74%
| ||||||
50% Rel. TSR
|
26th Pctl
|
51st Pctl
|
76th Pctl
|
67%
|
166%
| |||||||
Weighted Total |
120%
| |||||||||||
2017 – 2019 |
100% Rel. TSR
|
26th Pctl
|
51st Pctl
|
76th Pctl
|
60%
|
137%
| ||||||
Weighted Total |
137%
|
DuPont PSU Update | ||||||||||||
Grant | Metric | Min/Threshold (50%/25%) | Target (100%) | Max (200%) | OE metric/ TSR Percentile | Payout Based on Performance To-Date | ||||||
2015 – 2017 |
50% Oper. Earnings
|
3%
|
6%
|
10%
|
*
|
100%
| ||||||
50% Rel. TSR
|
25th Pctl
|
50th Pctl
|
75th Pctl
|
47th Pctl
|
91%
| |||||||
Weighted Total |
96%
| |||||||||||
2016 – 2018 |
100% Rel. TSR
|
25th Pctl
|
50th Pctl
|
75th Pctl
|
41st Pctl
|
74%
| ||||||
Weighted Total |
74%
| |||||||||||
2017 – 2019 |
100% Rel. TSR
|
25th Pctl
|
50th Pctl
|
75th Pctl
|
35th Pctl
|
56%
| ||||||
Weighted Total |
56%
|
COMPENSATION DISCUSSION & ANALYSIS (continued)
DowDuPont – Post Merger Grant
In December 2017, a grant of PSUs was made to certain key executives in order to incentivize:
The parameters of these awards are outlined below:
|
|
|
| |||||||||||||
|
|
|
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Given that DowDuPont intends to separate into three separate entities in the near-term, the Compensation Committee developed this post-merger grant to further incentivize key executives to meet these Merger Transaction-related objectives. However, regardless of when completion of the specified performance measures occurs, no payouts will be made until, at the earliest, twenty-four months after the close of the Merger Transaction, in order to ensure continued alignment with the strategic objectives.
The table below details the awards granted to NEOs in 2017:
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Benefits
Dow and DuPont each provide benefits (including retirement benefits) to eligible employees, including the eligible NEOs, through a combination of qualified andnon-qualified plans. These plans remain in place in 2018 with eligible NEOs continuing to participate in the plans of their respective legacy entity. For details on each of the following retirement plans, see “Benefits” in the “Compensation Tables and Narratives” section on page 58 of the Proxy Statement.
COMPENSATION DISCUSSION & ANALYSIS (continued)
Perquisites
Dow and DuPont have historically offered perquisites that each of the respective legacy Compensation Committees believe are reasonable yet competitive in attracting and retaining the executive team.
The legacy Compensation Committees have regularly reviewed the perquisites provided to the respective NEOs as part of their overall review of executive compensation. We have provided additional information on perquisites in footnote (d) to the All Other Compensation column of the Summary Compensation Table on page 52 of this Proxy Statement. The following outlines the limited perquisites provided to executives:
The Compensation Committee, with the support of independent compensation consultants and Company management, develops and executes the executive compensation program. The Compensation Committee is responsible for recommending for approval by the independent Directors the compensation of the CEO and Executive Chairman, and for approving the compensation of all other NEOs and executive officers. The Compensation Committee annually reviews and evaluates the executive compensation program to ensure that the program is aligned with the Company’s compensation philosophy and with performance.
The Compensation Committee reviews the following factors to determine executive compensation:
Role of Company Management
The CEO and Executive Chairman make recommendations to the Compensation Committee regarding compensation for senior executives after reviewing the Company’s overall performance, each executive’s personal contributions and relevant compensation market data from the peer group for similar jobs and job levels.
Role of the Compensation Committee
The Compensation Committee is responsible for establishing DowDuPont’s executive compensation philosophy. The Compensation Committee is responsible for approving NEO compensation and has broad discretion when setting compensation types and amounts. As part of the review, Company management and the Compensation Committee also review summary total compensation scenarios for the NEOs. Additionally, the Compensation Committee annually reviews the corporate goals and objectives relevant to the compensation of the CEO and the Executive Chairman. The Compensation Committee evaluates the Executive Chairman’s and the CEO’s performance against their respective objectives and makes recommendations to the independent Directors regarding each of their compensation levels based on that evaluation. The Compensation Committee considers compensation market data from the peer group when setting compensation types and amounts for the CEO and the Executive Chairman.
COMPENSATION DISCUSSION & ANALYSIS (continued)
Role of Independent Board Members
The independent members of the Board of Directors are responsible for assessing the performance of the CEO and the Executive Chairman. They are also responsible for approving the compensation types and amounts for the CEO and the Executive Chairman.
Role of the Independent Compensation Consultants
The Compensation Committee has retained both Mercer and Frederic W. Cook & Co., Inc. (“FW Cook”) as independent compensation consultants on executive compensation matters including the legacy programs maintained by each of Dow and DuPont. Both consultants report directly to the Compensation Committee and provide no services to DowDuPont other than those for the Compensation Committee. Until the effective date of the Merger Transaction, Mercer was retained by Dow and FW Cook was retained by DuPont. Post-merger as it relates to the legacy executive compensation matters and programs, Mercer is aligned to the Dow Compensation Subcommittee; FW Cook is aligned to the DuPont Compensation Subcommittee.
Mercer’s and FW Cook’s responsibilities include:
Mercer and FW Cook have multiple safeguards and procedures in place to maintain the independence of the consultants in their executive compensation consulting practice, and the Compensation Committee has determined that the compensation consultants’ work has not raised any conflicts of interest. These safeguards include a rigidly enforced code of conduct, a policy against investing in client organizations and separation between Mercer and FW Cook’s executive compensation consulting and their other administrative and consulting business units from a leadership, performance measurement and compensation perspective. In 2017, Mercer and its affiliates provided approximately $2.2 million in human resources consulting services to DowDuPont unrelated to the executive and director compensation consulting services. The decision to engage Mercer to provide these other services was made by management and was reported to the Compensation Committee. In 2017, Mercer’s aggregate fees for executive and director compensation consulting services were approximately $394,700. The Compensation Committee has considered factors relevant to Mercer’s and FW Cook’s independence from management under SEC rules and has determined that both are independent from management.
DowDuPont – Post-Merger Peer Group
Prior to the Merger Transaction, Dow and DuPont maintained separate executive compensation peer groups and utilized similar selection criteria to develop their respective peer groups:
The Compensation Committee, with the support of the management team and independent compensation consultants, reviewed the two legacy groups and eliminated companies with revenues less thanone-third or more than three times that of DowDuPont.
Then the Compensation Committee selected the sixteen companies named below from Dow’s and DuPont’s collective peer groups that meet the designated revenue range. A total of nine companies with revenue below $25 billion were excluded.
COMPENSATION DISCUSSION & ANALYSIS (continued)
The selected peer group was used for market comparisons, benchmarking and setting executive compensation:
2017 Revenues
Dow – Pre-Merger Peer Groups
Prior to the Merger Transaction, Dow competed with a wide variety of both industry andnon-industry specific companies for executive talent and investor assets. In order to ensure the executive pay program was competitive and had a strong link to stock price performance, Dow maintained two peer groups to evaluate and determine executive compensation: the TSR Peer Group and the Survey Peer Group. The TSR Peer Group was the S&P 500 and was used for relative TSR performance within the Performance Share programs. The Survey Peer Group was based on technology-based and manufacturing-based global companies and was used to maintain the competitiveness of the Company’s compensation programs.
The Compensation Committee considered relevant market pay practices as one of several factors when establishing executive compensation levels and evaluating compensation programs including base salary, annual incentives and long-term incentives. In order to maintain the competitiveness of the compensation programs, Dow compared its executive compensation programs against a Survey Peer Group of nineteen technology-based and manufacturing-based global companies (“Survey Peer Group”). These companies provided a relevant comparison based on their similarity to Dow in size and complexity taking into account factors such as revenues, market capitalization, global scope of operations and diversified product portfolios. The legacy Dow Compensation Committee believed that a mix of both industry andnon-industry peers provides a balanced and realistic perspective on the competition for the pool of potential executive talent. Market pay data for the Survey Peer Group was gathered through compensation surveys conducted by Willis Towers Watson and Mercer. Dow targeted the median of the Survey Peer Group for all compensation elements in order to attract, motivate, develop and retain top level executive talent. Annual Performance Award targets and long-term incentive grants reflected market median values while actual payouts were dependent on performance.
1 Compare Peer Groups 2 Apply Criteria 3 Final Selection 3M Company Honeywell International Inc. PepsiCo, Inc. Archer-Daniels-Midland Company Johnson Controls International plc Pfizer Inc. Caterpillar Inc. Johnson & Johnson The Boeing Company Deere & Company Lockheed Martin Corporation The Coca-Cola Company DowDupont Inc. Merck & Co., Inc. The Procter & Gamble Company General Electric Company United Technologies Corporation 2017 Revenues $20M Median $120M
COMPENSATION DISCUSSION & ANALYSIS (continued)
The Survey Peer Group was periodically evaluated and updated to ensure the companies in the group remained relevant.
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DuPont – Pre-Merger Peer Group
Prior to the Merger Transaction, DuPont assessed compensation primarily against published compensation surveys. These surveys represented large companies with median revenue comparable to DuPont’s “market,” such as those published by Willis Towers Watson. DuPont then used peer group data as a secondary data point.
To ensure a complete and robust picture of the overall compensation environment and consistent comparisons for the CEO and other NEOs the peer group was selected and utilized as described below.
To help guide the selection process in an objective manner, the legacy DuPont Compensation Committee established the following criteria for peer group companies:
The peer group was utilized to:
Because of the smaller number of companies in the peer group, DuPont used market survey information as the primary source of competitive data, to provide a larger set of relevant data.
COMPENSATION DISCUSSION & ANALYSIS (continued)
The peer group reflected the diverse industries in which DuPont operated, and the multiple markets in which it competed –including markets for executive talent, customers and capital – by including large companies with a strong scientific focus and/or research intensity and a significant international presence.
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The Company requires that NEOs accumulate and hold shares of DowDuPont Common Stock with a value equal to a specified multiple of base pay.
Stock ownership guidelines include a retention ratio requirement. Under the policy, until the required ownership is reached, executives are required to retain 75% of net shares acquired upon any future vesting of stock units or exercise of stock options, after deducting shares used to pay applicable taxes and/or exercise price.
The multiples for specific executive levels are shown below. As of December 31, 2017, each NEO exceeded their ownership goal.
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For purposes of the stock ownership guidelines, direct ownership of shares and stock units held in employee plans is included. Stock options and PSUs are not included in determining whether an executive has achieved the ownership levels.
Anti-Hedging and Anti-Pledging Policies
It is against Company policy for executive officers to engage in speculative transactions in Company securities. As such, it is against Company policy for executive officers to trade in puts or calls in Company securities, or sell Company securities short. In addition, it is against Company policy for executive officers to pledge Company securities, or hold Company securities in margin accounts.
Executive Compensation Recovery (Clawback) Policy
As part of their overall Corporate Governance structures, both Dow and DuPont maintained Executive Compensation Recovery Policies for their executive officers. These policies allowed the respective companies to recover incentive income if an executive officer either knowingly engaged in or was grossly negligent in the event of circumstances that resulted in a financial restatement or other materialnon-compliance.
Under the DowDuPont Executive Compensation Recovery Policy, the Company may recover incentive income that was based on achievement of quantitative performance targets if an executive officer engaged in grossly negligent conduct or intentional misconduct that resulted in a financial restatement or in any increase in his or her incentive income. Incentive income includes income related to annual bonuses and long term incentives.
COMPENSATION DISCUSSION & ANALYSIS (continued)
Compensation and Risk Management
The Compensation Committee periodically reviews the Company’s compensation policies and practices and has determined that the incentive compensation programs do not create risks that are reasonably likely to have a material adverse effect on DowDuPont. In conducting the review in 2017, Dow and DuPont each completed an inventory of its incentive compensation plans and policies. The evaluation covered a wide range of practices and policies including: the balanced mix between pay elements, the balanced mix between short and long-term programs, caps on incentive payouts, governance controls in place to establish, review and approve goals, use of multiple performance measures, discretion on individual awards, use of stock ownership guidelines, provisions in severance/change in control policies, use of a compensation recovery policy, and Compensation Committee oversight of compensation programs.
Section 162(m) of the IRC generally places a $1 million limit on the amount of compensation a public company, like DowDuPont, can deduct in any one year for certain executive officers subject to an exemption for certain performance-based awards granted by a committee of outside directors. While the Compensation Committee considers the deductibility of awards as one factor in determining executive compensation, it also looks at other factors in making its decisions and retains the flexibility to award compensation that it determines to be consistent with the goals of the executive compensation program and in the interests of DowDuPont stockholders, even if the awards are not deductible by DowDuPont for tax purposes.
The exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017. As a result, executive compensation in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.
The Compensation Committee has and will continue to consider the impact of this rule when making compensation decisions and, where possible, to award responsible but adequate executive compensation while taking advantage of Section 162(m) whenever feasible. Amounts paid under the compensation program, including base salary, Performance Awards and grants of Deferred Stock (Restricted Stock and Restricted Stock Units) may not qualify as performance-based compensation excluded from the limitation on deductibility.
COMPENSATION TABLES AND NARRATIVES
The following table summarizes the compensation of the Executive Chairman, Chief Executive Officer, Chief Financial Officer, the three most highly compensated executive officers and a former Dow officer for the fiscal year ended December 31, 2017. Following the accounting treatment of the Merger Transaction, Dow was determined to be the accounting acquirer. As a result, the compensation for Messrs. Breen and Collins in all of the following tables includes only compensation earned as executives of DowDuPont since September 1, 2017, while the compensation for Messrs. Liveris, Ungerleider, Fitterling, Kalil and Harlan includes full year amounts earned as executives of both Dow and DowDuPont, as applicable.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(a) | Option Awards ($)(b) | Non-Equity Incentive Plan Compensation ($)(c) | Change in Pension Deferred Compensation Earnings ($)(d) | All Other Compensation ($)(e) | Total ($) | Total ($)(e)(2) | ||||||||||||||||||||||||||||||
Edward D. Breen Chief Executive Officer | 2017 | 643,600 | (f) | — | 10,000,044 | 1,600,006 | 1,472,686 | — | 75,666 | 13,792,002 | 13,792,002 | |||||||||||||||||||||||||||||
Andrew N. Liveris Executive Chairman, DowDuPont and Chief Executive Officer, The Dow Chemical Company | 2017 | 1,930,800 | — | 12,173,674 | 3,810,138 | 4,167,053 | — | 43,607,476 | 65,689,140 | 22,643,475 | ||||||||||||||||||||||||||||||
2016 | 1,930,800 | — | 9,259,836 | 3,630,035 | 3,959,974 | 3,552,037 | 630,377 | 22,963,059 | 22,963,059 | |||||||||||||||||||||||||||||||
2015 | 1,930,800 | — | 9,532,305 | 3,630,099 | 5,712,175 | 724,735 | 623,496 | 22,153,611 | 22,153,611 | |||||||||||||||||||||||||||||||
Howard I. Ungerleider Chief Financial Officer | 2017 | 1,062,377 | — | 6,964,140 | 1,245,017 | 1,675,641 | — | 18,842,394 | 29,789,568 | 11,005,580 | ||||||||||||||||||||||||||||||
2016 | 1,031,434 | — | 2,985,154 | 1,170,008 | 1,686,536 | 1,751,240 | 99,440 | 8,723,812 | 8,723,812 | |||||||||||||||||||||||||||||||
2015 | 1,001,392 | — | 2,914,837 | 1,110,032 | 2,165,106 | 499,678 | 86,907 | 7,777,952 | 7,777,952 | |||||||||||||||||||||||||||||||
James R. Fitterling Chief Operating Officer, Materials Science Division | 2017 | 1,134,578 | — | 7,533,628 | 1,425,084 | 1,864,083 | — | 20,347,917 | 32,305,290 | 12,078,682 | ||||||||||||||||||||||||||||||
2016 | 1,090,134 | — | 3,635,031 | 1,425,033 | 1,719,854 | 2,160,423 | 64,360 | 10,094,834 | 10,094,834 | |||||||||||||||||||||||||||||||
2015 | 1,001,392 | — | 2,914,837 | 1,110,032 | 2,165,106 | 506,570 | 71,399 | 7,769,336 | 7,769,336 | |||||||||||||||||||||||||||||||
Charles J. Kalil Special Counsellor to the Executive Chairman and General Counsel, Materials Science Division | 2017 | 1,046,820 | — | 3,314,630 | 1,035,059 | 1,322,215 | — | 26,916,804 | 33,635,528 | 6,857,078 | ||||||||||||||||||||||||||||||
2016 | 1,029,659 | — | 2,564,166 | 1,005,101 | 1,282,775 | 1,084,218 | 66,505 | 7,032,424 | 7,032,424 | |||||||||||||||||||||||||||||||
2015 | 1,029,659 | — | 2,639,454 | 1,005,078 | 1,850,374 | 413,424 | 72,580 | 7,010,570 | 7,010,570 | |||||||||||||||||||||||||||||||
James C. Collins Chief Operating Officer, Agriculture Division | 2017 | 258,333 | (f) | — | 3,000,034 | — | 358,254 | 2,245,409 | 26,417 | 5,888,447 | 5,888,447 | |||||||||||||||||||||||||||||
Joe E. Harlan(g) Former Chief Commercial Officer, The Dow Chemical Company | 2017 | 1,053,739 | — | 8,414,492 | 1,020,042 | 1,382,810 | — | 12,467,046 | 24,338,129 | 23,691,445 | ||||||||||||||||||||||||||||||
2016 | 1,031,434 | — | 2,678,873 | 1,050,105 | 1,475,719 | 161,878 | 319,839 | 6,717,847 | 6,717,847 | |||||||||||||||||||||||||||||||
2015 | 1,001,392 | — | 2,914,837 | 1,110,032 | 1,968,278 | 118,174 | 116,612 | 7,229,324 | 7,229,324 | |||||||||||||||||||||||||||||||
Totals in the above table might not equal the summation of the columns due to rounding amounts to the nearest dollar.
COMPENSATION DISCUSSION & ANALYSIS (continued)
Name | Perquisites and Other Personal Benefits ($) (1) | Contributions to Defined Contribution Plans ($) | Certain Merger Related Items ($) (2) | |||||||||
Edward D. Breen
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| 18,819
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| 56,847
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| —
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Andrew N. Liveris
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| 474,018
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| 87,793
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| 43,045,665
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Howard I. Ungerleider
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| 35,678
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| 22,727
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| 18,783,989
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James R. Fitterling
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| 66,153
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| 55,156
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| 20,226,608
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Charles J. Kalil
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| 85,760
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| 52,594
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| 26,778,450
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James C. Collins
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| 3,167
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| 23,250
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| —
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Joe E. Harlan
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| 11,797,435
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| 22,927
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| 646,684
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COMPENSATION DISCUSSION & ANALYSIS (continued)
The following table provides additional information about plan-based compensation disclosed in the Summary Compensation Table. This table includes both equity andnon-equity awards.
GRANTS OF PLAN-BASED AWARDS FOR 2017
Name | Grant Date | Date of Action by the Compensation Committee |
Estimated Future Payouts UnderNon-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards(a) | All Other Stock Awards: Number Shares of Stock or Units (#)(b) | All Other Option Awards: Number of Securities Underlying Options (#)(c) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(d) | ||||||||||||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||
Edward D. Breen | 8/31/2017 | (e) | 0 | 1,064,701 | 2,129,402 | |||||||||||||||||||||||||||||||||||||||||||
11/6/2017 | 10/12/2017 | 107,672 | 70.24 | 1,600,006 | ||||||||||||||||||||||||||||||||||||||||||||
| 11/26/2017
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| 11/26/2017
|
|
| 0
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| 140,529
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| 281,058
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| 10,000,044
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Andrew N. Liveris | 2/8/2017 | 2/8/2017 | 0 | 3,185,820 | 6,371,640 | |||||||||||||||||||||||||||||||||||||||||||
2/10/2017 | 2/8/2017 | 0 | 93,400 | 186,800 | 7,713,308 | |||||||||||||||||||||||||||||||||||||||||||
2/10/2017 | 2/8/2017 | 51,890 | 3,175,149 | |||||||||||||||||||||||||||||||||||||||||||||
| 2/10/2017
|
|
| 2/8/2017
|
|
| 263,860
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|
| 61.19
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| 3,810,138
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Howard I. Ungerleider | 2/8/2017 | 2/8/2017 | 0 | 1,281,071 | 2,562,142 | |||||||||||||||||||||||||||||||||||||||||||
2/10/2017 | 2/8/2017 | 0 | 30,520 | 61,040 | 5,520,486 | |||||||||||||||||||||||||||||||||||||||||||
2/10/2017 | 2/8/2017 | 16,960 | 1,037,782 | |||||||||||||||||||||||||||||||||||||||||||||
2/10/2017 | 2/8/2017 | 86,220 | 61.19 | 1,245,017 | ||||||||||||||||||||||||||||||||||||||||||||
| 11/26/2017
|
|
| 11/26/2017
|
|
| 0
|
|
| 42,159
|
|
| 84,318
|
|
| 3,000,034
|
| |||||||||||||||||||||||||||||||
James R. Fitterling | 2/8/2017 | 2/8/2017 | 0 | 1,425,140 | 2,850,280 | |||||||||||||||||||||||||||||||||||||||||||
2/10/2017 | 2/8/2017 | 0 | 34,940 | 69,880 | 5,885,505 | |||||||||||||||||||||||||||||||||||||||||||
2/10/2017 | 2/8/2017 | 19,410 | 1,187,698 | |||||||||||||||||||||||||||||||||||||||||||||
2/10/2017 | 2/8/2017 | 98,690 | 61.19 | 1,425,084 | ||||||||||||||||||||||||||||||||||||||||||||
| 11/26/2017
|
|
| 11/26/2017
|
|
| 0
|
|
| 42,159
|
|
| 84,318
|
|
| 3,000,034
|
| |||||||||||||||||||||||||||||||
Charles J. Kalil | 2/8/2017 | 2/8/2017 | 0 | 1,102,765 | 2,205,529 | |||||||||||||||||||||||||||||||||||||||||||
2/10/2017 | 2/8/2017 | 0 | 25,380 | 50,760 | 2,095,972 | |||||||||||||||||||||||||||||||||||||||||||
2/10/2017 | 2/8/2017 | 14,100 | 862,779 | |||||||||||||||||||||||||||||||||||||||||||||
| 2/10/2017
|
|
| 2/8/2017
|
|
| 71,680
|
|
| 61.19
|
|
| 1,035,059
|
| ||||||||||||||||||||||||||||||||||
James C. Collins | 8/31/2017 | (e) | 0 | 259,005 | 518,010 | |||||||||||||||||||||||||||||||||||||||||||
| 11/26/2017
|
|
| 11/26/2017
|
|
| 0
|
|
| 42,159
|
|
| 84,318
|
|
| 3,000,034
|
| |||||||||||||||||||||||||||||||
Joe E. Harlan | 2/8/2017 | 2/8/2017 | 0 | 1,268,633 | 2,537,266 | |||||||||||||||||||||||||||||||||||||||||||
2/10/2017 | 2/8/2017 | 0 | 25,010 | 50,020 | 2,065,416 | |||||||||||||||||||||||||||||||||||||||||||
2/10/2017 | 2/8/2017 | 13,900 | 850,541 | |||||||||||||||||||||||||||||||||||||||||||||
| 2/10/2017
|
|
| 2/8/2017
|
|
| 70,640
|
|
| 61.19
|
|
| 1,020,042
|
|
COMPENSATION DISCUSSION & ANALYSIS (continued)
The following table lists outstanding equity grants for each NEO as of December 31, 2017. The table includes outstanding equity grants from past years as well as the current year.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable(a) | Number of Securities Underlying Unexercised Options (#) Unexercisable(a) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That (#)(b) | Market Value of Shares or Units of Stock That Have Not Vested ($)(b)(c) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(d) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(c)(d) | |||||||||||||||||||||||||||
Edward D. Breen |
| 05/13/2015
|
| 2,662 | 189,563 | |||||||||||||||||||||||||||||||
| 06/05/2015
|
| 408 | 29,053 | ||||||||||||||||||||||||||||||||
| 11/06/2015
|
| 341,867 | 170,933 | 51.57 | 11/05/2022 | ||||||||||||||||||||||||||||||
| 02/03/2016
|
| 151,435 | 10,785,182 | ||||||||||||||||||||||||||||||||
| 02/02/2017
|
| — | 341,867 | 59.42 | 02/01/2027 | 114,245 | 8,136,547 | ||||||||||||||||||||||||||||
| 11/06/2017
|
| — | 107,672 | 70.24 | 11/05/2027 | ||||||||||||||||||||||||||||||
| 11/26/2017
|
| 140,529 | 10,008,475 | ||||||||||||||||||||||||||||||||
Andrew N. Liveris |
| 02/15/2008
|
| 163,999 | — | 38.62 | 02/18/2018 | |||||||||||||||||||||||||||||
| 02/13/2009
|
| 909,100 | — | 9.53 | 02/13/2019 | ||||||||||||||||||||||||||||||
| 02/12/2010
|
| 551,800 | — | 27.79 | 02/12/2020 | ||||||||||||||||||||||||||||||
| 02/11/2011
|
| 412,380 | — | 38.38 | 02/11/2021 | ||||||||||||||||||||||||||||||
| 02/10/2012
|
| 516,000 | — | 34.00 | 02/10/2022 | ||||||||||||||||||||||||||||||
| 02/15/2013
|
| 761,660 | — | 32.16 | 02/15/2023 | ||||||||||||||||||||||||||||||
| 02/14/2014
|
| 315,930 | — | 46.71 | 02/14/2024 | ||||||||||||||||||||||||||||||
| 02/13/2015
|
| 208,446 | 104,224 | 49.44 | 02/13/2025 | 225,299 | 16,045,795 | ||||||||||||||||||||||||||||
| 02/12/2016
|
| 110,503 | 221,007 | 46.01 | 02/12/2026 | 207,770 | 14,797,379 | ||||||||||||||||||||||||||||
| 02/10/2017
|
| — | 263,860 | 61.19 | 02/10/2027 | 179,848 | 12,808,775 | ||||||||||||||||||||||||||||
Howard I. Ungerleider |
| 02/15/2008
|
| 30,750 | — | 38.62 | 02/18/2018 | |||||||||||||||||||||||||||||
| 02/13/2009
|
| 11,288 | — | 9.53 | 02/13/2019 | ||||||||||||||||||||||||||||||
| 02/12/2010
|
| 22,400 | — | 27.79 | 02/12/2020 | ||||||||||||||||||||||||||||||
| 02/11/2011
|
| 18,600 | — | 38.38 | 02/11/2021 | ||||||||||||||||||||||||||||||
| 02/10/2012
|
| 82,420 | — | 34.00 | 02/10/2022 | ||||||||||||||||||||||||||||||
| 02/15/2013
|
| 210,880 | — | 32.16 | 02/15/2023 | ||||||||||||||||||||||||||||||
| 02/14/2014
|
| 96,220 | — | 46.71 | 02/14/2024 | ||||||||||||||||||||||||||||||
| 02/13/2015
|
| 63,738 | 31,872 | 49.44 | 02/13/2025 | 68,893 | 4,906,559 | ||||||||||||||||||||||||||||
| 02/12/2016
|
| 35,616 | 71,234 | 46.01 | 02/12/2026 | 66,980 | 4,770,316 | ||||||||||||||||||||||||||||
| 02/10/2017
|
| — | 86,220 | 61.19 | 02/10/2027 | 58,772 | 4,185,742 | ||||||||||||||||||||||||||||
| 11/26/2017
|
| 42,159 | 3,002,564 | ||||||||||||||||||||||||||||||||
James R. Fitterling |
| 02/11/2011
|
| 118,090 | — | 38.38 | 02/11/2021 | |||||||||||||||||||||||||||||
| 02/15/2013
|
| 188,710 | — | 32.16 | 02/15/2023 | ||||||||||||||||||||||||||||||
| 02/14/2014
|
| 96,220 | — | 46.71 | 02/14/2024 | ||||||||||||||||||||||||||||||
| 02/13/2015
|
| 63,738 | 31,872 | 49.44 | 02/13/2025 | 68,893 | 4,906,559 | ||||||||||||||||||||||||||||
| 02/12/2016
|
| 43,379 | 86,761 | 46.01 | 02/12/2026 | 81,562 | 5,808,846 | ||||||||||||||||||||||||||||
| 02/10/2017
|
| — | 98,690 | 61.19 | 02/10/2027 | 67,278 | 4,791,539 | ||||||||||||||||||||||||||||
| 11/26/2017
|
| 42,159 | 3,002,564 |
COMPENSATION DISCUSSION & ANALYSIS (continued)
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable(a) | Number of Securities Underlying Unexercised Options (#) Unexercisable(a) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(b) | Market Value of Shares or Units of Stock That Have Not Vested ($)(b)(c) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(d) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(c)(d) | |||||||||||||||||||||||||||
Charles J. Kalil |
| 03/01/2000
|
| 108 | 5,560 | |||||||||||||||||||||||||||||||
| 02/23/2001
|
| 55 | 3,147 | ||||||||||||||||||||||||||||||||
| 02/10/2012
|
| 49,044 | — | 34.00 | 02/10/2022 | ||||||||||||||||||||||||||||||
| 02/15/2013
|
| 201,290 | — | 32.16 | 02/15/2023 | ||||||||||||||||||||||||||||||
| 02/14/2014
|
| 87,470 | — | 46.71 | 02/14/2024 | ||||||||||||||||||||||||||||||
| 02/13/2015
|
| 57,712 | 28,858 | 49.44 | 02/13/2025 | 62,385 | 4,443,060 | ||||||||||||||||||||||||||||
| 02/12/2016
|
| 30,596 | 61,194 | 46.01 | 02/12/2026 | 57,534 | 4,097,571 | ||||||||||||||||||||||||||||
| 02/10/2017
|
| — | 71,680 | 61.19 | 02/10/2027 | 48,871 | 3,480,593 | ||||||||||||||||||||||||||||
James C. Collins |
| 02/04/2015
|
| — | 16,245 | 55.44 | 02/03/2022 | 2,736 | 194,885 | |||||||||||||||||||||||||||
| 07/29/2015
|
| 73,249 | 5,216,799 | ||||||||||||||||||||||||||||||||
| 02/03/2016
|
| — | 51,024 | 45.84 | 02/02/2026 | 26,101 | 1,858,887 | ||||||||||||||||||||||||||||
| 02/02/2017
|
| — | 76,998 | 59.42 | 02/01/2027 | 24,612 | 1,752,866 | ||||||||||||||||||||||||||||
| 11/26/2017
|
| 42,159 | 3,002,564 | ||||||||||||||||||||||||||||||||
Joe E. Harlan |
| 02/14/2014
|
| 91,850 | — | 46.71 | 02/14/2024 | |||||||||||||||||||||||||||||
| 02/13/2015
|
| 63,738 | 31,872 | 49.44 | 02/13/2025 | 68,893 | 4,906,559 | ||||||||||||||||||||||||||||
| 02/12/2016
|
| 31,966 | 63,934 | 46.01 | 02/12/2026 | 60,108 | 4,280,892 | ||||||||||||||||||||||||||||
| 02/10/2017
|
| — | 70,640 | 61.19 | 02/10/2027 | 48,164 | 3,430,240 |
COMPENSATION DISCUSSION & ANALYSIS (continued)
Option Exercises and Stock Vested
The following table summarizes the value received from stock option exercises and stock grants vested during 2017.
OPTION EXERCISES AND STOCK VESTED FOR 2017
Option Awards | Stock Awards | |||||||||||||||
Name
|
Number of Shares Acquired on Exercise (#)
|
Value Realized on Exercise ($)
|
Number of Shares Acquired on Vesting (#)(a)
|
Value Realized on Vesting ($)
| ||||||||||||
Edward D. Breen
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
| ||||
Andrew N. Liveris
|
|
915,371
|
|
|
23,294,750
|
|
|
231,479
|
|
|
14,203,529
|
| ||||
Howard I. Ungerleider
|
|
23,510
|
|
|
394,380
|
|
|
70,509
|
|
|
4,326,426
|
| ||||
James R. Fitterling
|
|
177,000
|
|
|
5,617,385
|
|
|
70,509
|
|
|
4,326,426
|
| ||||
Charles J. Kalil
|
|
70,000
|
|
|
1,174,250
|
|
|
64,090
|
|
|
3,932,555
|
| ||||
James C. Collins(b)
|
|
—
|
|
|
—
|
|
|
18,951
|
|
|
5,960,077
|
| ||||
Joe E. Harlan
|
|
473,910
|
|
|
15,211,887
|
|
|
67,293
|
|
|
4,129,092
|
|
In August 2015, the SEC adopted a rule under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requiring annual disclosure of the ratio of the median annual total compensation for all employees other than the CEO to the annual total compensation of the CEO. The rule (Item 402(u) of RegulationS-K) requires disclosure of this information starting with the first fiscal year beginning on or after January 1, 2017.
To determine the median annual total compensation for all employees other than the CEO, a median employee was identified from the population of all employees worldwide as of October 31, 2017. As is permitted under SEC rules, the Company utilized base pay and annual incentive at target – rather than Summary Compensation Table compensation – to determine the median employee. The Company calculated annual base pay based on a reasonable estimate of hours worked during 2017 for hourly workers, and upon salary levels for the remaining employees. The Company used a valid statistical sampling methodology to identify employees who the Company expected to be paid within a .05% range of the median. The Company selected an employee from that group as the median employee for purposes of preparing the ratio of CEO pay to median employee pay. The Company then calculated the compensation for the median employee based upon the same components of compensation used to determine the CEO’s pay for purposes of Summary Compensation Table disclosure. For 2017, the annual total compensation for the median employee was $78,835, and the annual total compensation of the CEO as reported in the Summary Compensation Table was $13,792,002. Based upon the calculation of compensation for both the CEO and the median employee, the ratio of CEO pay to median employee pay is 175:1.
However, as previously noted, the compensation of the CEO disclosed in the Summary Compensation Table is reflective of only that compensation earned as CEO of DowDuPont, and does not reflect the value of all compensation earned by the CEO during 2017. If the compensation in the Summary Compensation Table were to include the value of all such compensation earned during 2017, the ratio of CEO pay to median employee pay would have been 387:1.
The pay ratio presented above is a reasonable estimate. Because the SEC rules for identifying the median employee and calculating the pay ratio allow companies to use different methodologies, exemptions, estimates and assumptions, the pay ratio may not be comparable to the pay ratio reported by other companies.
COMPENSATION DISCUSSION & ANALYSIS (continued)
The following table lists the pension program participation and actuarial present value of each NEOs defined benefit pension as of December 31, 2017.
PENSION BENEFITS AS OF DECEMBER 31, 2017
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit | Payments During Last Fiscal Year(b) | ||||||||||
Edward D. Breen(c) | DuPont Pension Plan
| — | — | — | ||||||||||
DuPont Pension Restoration Plan | — | — | — | |||||||||||
Andrew N. Liveris(d) | Dow Employees’ Pension Plan
| 22.1 | 2,024,134 | — | ||||||||||
Dow Executives’ Supplemental Retirement Plan | 42.0 | — | 41,742,161 | |||||||||||
Howard I. Ungerleider | Dow Employees’ Pension Plan
| 27.5 | 1,026,057 | — | ||||||||||
Dow Executives’ Supplemental Retirement Plan | 27.5 | 139,771 | 11,913,302 | |||||||||||
James R. Fitterling | Dow Employees’ Pension Plan
| 34.0 | 1,712,671 | — | ||||||||||
Dow Executives’ Supplemental Retirement Plan | 34.0 | 335,811 | 17,752,711 | |||||||||||
Charles J. Kalil | Dow Employees’ Pension Plan
| 37.9 | 2,019,636 | — | ||||||||||
Dow Executives’ Supplemental Retirement Plan | 37.9 | 886,637 | 14,019,580 | |||||||||||
James C. Collins | DuPont Pension Plan
| 32.7 | 1,476,396 | — | ||||||||||
DuPont Pension Restoration Plan | 32.7 | 6,056,314 | — | |||||||||||
Joe E. Harlan | Dow Employees’ Pension Plan
| 6.4 | 95,077 | — | ||||||||||
Dow Executives’ Supplemental Retirement Plan | 6.4 | 38,763 | 646,684 |
Defined-Benefit Retirement Plans
Given the anticipated limited duration of the combined Company, DowDuPont has no employees. The executive officers of DowDuPont continue to be employees of, and participants in the benefit programs of Dow and DuPont, respectively.
The Dow Employees’ Pension Plan
For employees hired prior to January 1, 2008: Dow provides the Dow Employees’ Pension Plan (“DEPP”) for its U.S. employees and for employees of some of its wholly owned U.S. subsidiaries. Upon retirement, employees receive an annual pension under the DEPP formula subject to statutory limitations. The benefit is paid in the form of a monthly annuity and is calculated based on the sum of the employee’s yearly basic and supplemental accruals up to a maximum of 425% for basic accruals and 120% for supplemental accruals.
COMPENSATION DISCUSSION & ANALYSIS (continued)
The sum of the basic and supplemental accruals is divided by a conversion factor to calculate an immediate monthly benefit. If the employee terminates employment before age 65 and defers payment of the benefit, the account balance calculated under this formula will be credited with interest. Messrs. Liveris, Ungerleider, Fitterling, and Kalil participate in DEPP.
For employees hired on or after January 1, 2008: The Personal Pension Account (“PPA”) grows annually based on Pay Credits and Interest Credits. At the end of each year, 5% of an employee’s base salary and actual variable pay is credited to the account (“Pay Credit”). Additionally, the PPA is credited with an annual Interest Credit equal to the Interest Credit Rate multiplied by the PPA balance as of December 31 of the previous year. The Interest Credit Rate is determined annually by Dow, and is based on the closing rate on thesix-month U.S. Treasury bill on the last business day of September immediately preceding the Plan Year plus 1.5%.
When a vested employee leaves Dow, the PPA can be taken as an immediate annuity, as a deferred annuity or as a lump sum. Vesting is three years. Mr. Harlan participates in the PPA.
The DuPont Pension Plan
DuPont provides the DuPont Pension Plan, atax-qualified defined benefit pension plan that covers a majority of U.S. employees, except those hired or rehired after December 31, 2006. The DuPont Pension Plan currently provides employees with a lifetime retirement income based on years of service and the employees’ final average pay near retirement. In November 2016, DuPont announced changes to the U.S. pension plans. DuPont will freeze the pay and service amounts used to calculate pension benefits for active employees who participate in the U.S. pension plans on November 30, 2018 (the “Effective Date”).
The normal form of benefit for married individuals is a 50% qualified joint and survivor annuity. The normal form of benefit for unmarried individuals is a single life annuity, which is actuarially equivalent to the normal form for married individuals. Normal retirement age under the DuPont Pension Plan is generally age 65, and benefits are vested after five years of service. Under the provisions of the DuPont Pension Plan, employees are eligible for unreduced pensions when they meet one of the following conditions:
An employee who is not eligible for retirement with an unreduced pension is eligible for retirement with a reduced pension if he is at least age 50 with at least 15 years of service. His pension is reduced by the greater of 5% for every year that his age plus service is less than 85 or 5% for every year that his age is less than 58. In no event will the reduction exceed 50%. As of December 31, 2017, Mr. Collins is eligible for a reduced pension. Mr. Breen was hired after December 31, 2006, and is not eligible to participate in the DuPont’s Pension or Pension Restoration Plans.
The primary pension formula that applies to the NEOs provides a monthly retirement benefit equal to:
Average monthly compensation is based on the employee’s three highest-paid years or, if greater, the 36 consecutive highest-paid months. Compensation for a given month includes regular compensation plusone-twelfth of an individual’s STIP award for the relevant year. Other bonuses are not included in the calculation of average monthly compensation. Compensation for service after the Effective Date is disregarded in determining the average monthly compensation.
1.5% of Average Monthly Compensation Years of Service through 12/31/07 50% of Monthly Primary Social Security Benefit Years of Service through 12/31/07 Total Years of Service through the Effective Date 0.5% of Average Monthly Compensation Years of Service from 1/1/2008 through the Effective Date 16.67% of Monthly Primary Social Security Benefit Years of Service from 1/1/2008 through the Effective Date Total Years of Service through the Effective Date
COMPENSATION DISCUSSION & ANALYSIS (continued)
The Dow Executives’ Supplemental Retirement Plan
Because the IRC limits the benefits otherwise provided by DEPP, the Dow Board of Directors adopted the Executives’ Supplemental Retirement Plan (“ESRP”) to provide employees who participate in DEPP withnon-qualified benefits calculated under the same formulas described above. Some parts of the supplemental benefit may be taken in the form of a lump sum depending upon date of hire and plan participation. All Dow NEOs participate in the ESRP.
Upon close of the Merger Transaction, the change of control triggered a distribution ofnon-qualified benefits to certain participants under the ESRP. Participants could elect to receive alump-sum payment or direct Dow to purchase an annuity on their behalf using theafter-tax proceeds of the lump sum (the “ESRP Choice Annuity”). The ESRP Choice Annuity option was designed and offered to allow participants to select an annuity option identical to what they would have received in the absence of a change in control and accelerated lump sum payment. The ESRP Choice Annuity was not intended to confer any additional benefit beyond the original annuity option. Structuring requirements resulted in a distribution and tax reimbursement in order to provide this equitable option. Detailed information regarding the obligation to make distributions due to change in control provisions under the terms of thesenon-qualified plans was provided in the joint proxy statement/prospectus, included in the registration statement on FormS-4 filed by DowDuPont with the SEC on March 1, 2016 (FileNo. 333-209869), as last amended on June 7, 2016, and declared effective by the SEC on June 9, 2016 (the “Registration Statement”). In addition to the Registration Statement, such change in control distributions were also described on the Form8K-12B filed by DowDuPont with the SEC on September 1, 2017, as well as the Company’s latest annual and quarterly reports on Forms10-K and10-Q. Post-merger, active employees continue to accrue thesenon-qualified benefits. The ESRP distributions triggered by the Merger Transaction are separate and distinct from the change in control and severance arrangements described on page 64 of the Proxy Statement.
In addition, Mr. Kalil elected to have a portion of his ESRP benefit secured by enrolling in the Key Employee Insurance Program (“KEIP”) in 1997. KEIP is a life insurance program that secured benefits otherwise available under ESRP, which was offered to certain employees as an alternative to the ESRP. Dow has not offered KEIP to employees since 1999 and has no plans to reinstate this program for new participants.
The DuPont Pension Restoration Plan
If benefits provided under the DuPont Pension Plan exceed the applicable IRC compensation or benefit limits, the excess benefit is paid under the DuPont Pension Restoration Plan, an unfundednon-qualified plan. Effective January 1, 2007, the form of benefit under the DuPont Pension Restoration Plan for participants not already in pay status is a lump sum. The mortality tables and interest rates used to determine lump sum payments are the Applicable Mortality Table and the Applicable Interest Rate prescribed by the Secretary of the Treasury in IRC Section 417(e)(3).
DuPont does not grant any extra years of credited service for pension benefit purposes. Key actuarial assumptions for the present value of accumulated benefit calculation can be found in Note 17 (“Long-Term Employee Benefits”) to the Consolidated Financial Statements in DuPont’s Annual Report on Form10-K for the year ended December 31, 2017. All other assumptions are consistent with those used in the Long-Term Employee Benefits Note, except that the present value of accumulated benefit uses a retirement age at which the NEO may retire with an unreduced benefit under the DuPont Pension Plan. The valuation method used for determining the present value of the accumulated benefit is the traditional unit credit cost method.
Mr. Breen was hired after December 31, 2006, and is not eligible to participate in the DuPont Pension Restoration Plan.
Dow Employees’ Savings Plan
Dow provides all U.S. salaried employees the opportunity to participate in a 401(k) plan (The Dow Chemical Company Employees’ Savings Plan). In 2017, for salaried employees who contributed 2% of annual salary, Dow provided a matching contribution of 100% of the employee’s contribution. For salaried employees who contributed up to an additional 4%, Dow provided a 50% match. All NEOs participate in the 401(k) plan on the same terms as other eligible employees.
COMPENSATION DISCUSSION & ANALYSIS (continued)
DuPont Retirement Savings Plan
DuPont provides all U.S. full-service employees the opportunity to participate in a 401(k) plan, the DuPont Retirement Savings Plan (“RSP”). DuPont contributes 100% of the first 6% of the employee’s contribution election and also contributes 3% of each employee’s eligible compensation regardless of the employee’s contribution. All NEOs participate in the 401(k) plan on the same terms as other eligible employees.
Non-Qualified Deferred Compensation
The following table provides information on compensation the NEOs have elected to defer as described in the narrative that follows.
NON-QUALIFIED DEFERRED COMPENSATION FOR 2017
Name | Executive Contributions in Last Fiscal Year ($)(a) | Company Contributions in Last Fiscal Year ($)(b) | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Withdrawals/ Distributions ($)(c) | Aggregate Balance at Last Fiscal Year-End ($)(d) | |||||||||||||||
Edward D. Breen(e) | 38,616 | 56,847 | 5,337 | — | 100,800 | |||||||||||||||
Andrew N. Liveris | 115,848 | 65,066 | 423,696 | 1,303,504 | 1,012,890 | |||||||||||||||
Howard I. Ungerleider | 53,118 | 29,936 | 171,045 | 1,141,502 | 18,340 | |||||||||||||||
James R. Fitterling | 56,728 | 32,229 | 598,006 | 2,473,897 | 1,607,825 | |||||||||||||||
Charles J. Kalil | 52,341 | 29,867 | 79,222 | 484,135 | 1,208,654 | |||||||||||||||
James C. Collins(e) | 15,500 | 23,250 | 2,417 | — | 41,167 | |||||||||||||||
Joe E. Harlan | 63,224 | — | 16,468 | — | 646,062 |
Dow Elective Deferral Plan
Because the IRC limits contributions to The Dow Chemical Company Employees’ Savings Plan, the Board of Directors adopted the Elective Deferral Plan (the “EDP”) in order to further assist employees in saving for retirement. The EDP allows participants to voluntarily defer the receipt of base salary (maximum deferral of 75%) and Performance Award (maximum deferral of 100%).
Each participant enrolled in the EDP receives a matching contribution using the same formula authorized for salaried participants under the 401(k) plan for employer matching contributions. The current formula provides for a matching contribution on the first 6% of base salary deferred. For purposes of calculating the match under the EDP, Dow will assume each participant is contributing the maximum allowable amount to the 401(k) plan and receiving a match thereon. The assumed match from the 401(k) plan will be offset from the matching contribution calculated under the EDP. The NEOs’ balances consist primarily of voluntary deferrals (and related earnings), not contributions made by Dow.
Investment choices include a fund with an interest rate equal to the sum of the60-month rolling average often-year U.S. Treasury Note yield plus the current five-year Dow credit spread, as well as theline-up of funds available under The Dow Chemical Company Employees’ Savings Plan.
COMPENSATION DISCUSSION & ANALYSIS (continued)
The EDP allows for distributions to commence on January 31 after separation or after a specific future year that can be later or earlier than the separation date. Distributions may be paid either in a lump sum or in equal monthly, quarterly or annual installments up to fifteen years based on the employee’s initial election as to the time and form of payment. If installments were elected, the unpaid balance will continue to accumulate gains and losses based on the employee’s investment selections. If payout upon change in control was elected, then when a change in control is triggered the employees are paid those balances per the terms of the plan document; as was the case with the Merger Transaction. Detailed information regarding the obligation to make distributions due to change in control provisions under the terms of thesenon-qualified plans was provided in the joint proxy statement/prospectus, included in the registration statement on FormS-4 filed by DowDuPont with the SEC on March 1, 2016 (FileNo. 333-209869), as last amended on June 7, 2016, and declared effective by the SEC on June 9, 2016 (the “Registration Statement”). In addition to the Registration Statement, such change in control distributions were also described on the Form8K-12B filed by DowDuPont with the SEC on September 1, 2017, as well as the Company’s latest annual and quarterly reports on Forms10-K and10-Q. The EDP distributions triggered by the Merger Transaction are separate and distinct from the change in control and severance arrangements described on page 64 of the Proxy Statement.
DuPontNon-Qualified Deferred Compensation Programs
DuPont offersnon-qualified deferred compensation programs under which eligible participants may voluntarily elect to defer some portion of base salary, STIP, or LTI awards until a future date. Deferrals are credited to an account and earnings are calculated thereon in accordance with the applicable investment option or interest rate. With the exception of the Retirement Savings Restoration Plan (“RSRP”), there are no company contributions or matches. The RSRP was adopted to restore company contributions that would be lost due to IRC limits on compensation that can be contributed under DuPont’stax-qualified savings plan.
The following provides an overview of the various deferral options as of December 31, 2017.
RSRP:
Under the RSRP, an NEO can elect to defer his/her eligible compensation (generally, base salary plus STIP) that exceeds the regulatory limits ($270,000 in 2017) in increments of 1% up to 6%. DuPont matches participant contributions on adollar-for-dollar basis up to 6% of eligible pay. DuPont also makes an additional contribution of 3% of eligible compensation. Participant investment options under the RSRP mirror the options available under thetax-qualified retirement savings plan. Distributions may be made in the form of a lump sum or annual installments after separation from service.
Management Deferred Compensation Plan (“MDCP”):
Under the MDCP, an NEO can elect to defer the receipt of up to 60% of his/her base salary and/or STIP award. DuPont does not match deferrals under the MDCP. Participants may select from among seven core investment options under the MDCP for amounts deferred, including DowDuPont Common Stock units with dividend equivalents credited as additional stock units. In general, distributions may be made in the form of a lump sum at a specified future date if prior to separation from service, or a lump sum or annual installments after separation from service.
In addition, under the MDCP, an NEO can elect to defer the receipt of 100% of his/her LTI awards (RSUs and/or PSUs). DuPont does not match LTI deferrals under the MDCP. LTI deferrals under the MDCP are in the form of DowDuPont Common Stock units with dividend equivalents credited as additional stock units.
Except for Mr. Ungerleider, all of the NEOs are currently retirement eligible and entitled to benefits similar to most other salaried employees upon separation from the Company. All of the NEOs are also entitled to additional benefits in the case of an involuntary termination without cause or a change in control event. The summary below shows the impact of various types of separation events on the different compensation elements the NEOs receive.
Base Salary, Annual Incentive and Other Benefits – Retirement, Death, or Disability
COMPENSATION DISCUSSION & ANALYSIS (continued)
Outstanding LTI Awards
The treatment of LTI awards upon the different forms of separation are driven by Dow and DuPont’s respective plan documents.
Dow’s Treatment of LTI – excluding Change in Control
The following LTI treatment applies if the executive meets the age 55 and 10 years of service requirement
Voluntary Separation
If the executive separates before meeting the age and service requirements of a particular grant, such grant is forfeited.
Involuntary Termination with Cause
Outstanding grants are forfeited and incentive income (including LTI) may be recovered by the company as described in the Executive Compensation Recovery Policy.
Disability, Death or Involuntary Termination without Cause
Executives not meeting the age and years of service requirements referenced above will receive the following for outstanding LTI grants:
In addition to the benefits described above for any retirement-eligible officers, all NEOs aligned to Dow’s benefit plans will otherwise receive the following benefits if involuntarily terminated without cause.
DuPont’s Treatment of LTI – excluding Change in Control
The following LTI treatment applies if the executive meets the age 55 and 10 years of service requirement
COMPENSATION DISCUSSION & ANALYSIS (continued)
Voluntary Separation or Termination for Cause
DuPont’s various plans and programs provide for forfeiture of all unvested stock options, RSUs and PSUs when associated with voluntary separation or termination for cause.
Death
Involuntary Termination without Cause
Potential Payments upon Termination or Change in Control
Dow and DuPont respectively had change in control severance arrangements with certain NEOs or programs in place to ensure continuity of management in a potential change in control environment. These are legacy arrangements from each of Dow and DuPont, and are structured to protect the interests of stockholders by including a “double-trigger” mechanism that results in a severance payout only when:
Equity awards granted pursuant to each of Dow’s and DuPont’s equity plans that were outstanding as of the date of the Merger Transaction have a double trigger change in control provision whereby the awards will become fully vested upon the holder’s involuntary termination of employment without cause within 24 months following a change in control.
The following arrangements are separate and distinct from the ESRP and EDP distributions triggered by the Merger Transaction as further described on pages 60 and 61 of the Proxy Statement.
Dow – Pre-Merger Arrangements
Pursuant to agreements entered into in 2007, Messrs. Liveris and Kalil will receive the following benefits if separated within two years of a change in control event as referenced in the CD&A. An executive must be involuntarily terminated within two years of a change in control or resign for good reason following a change in control in order to receive benefits (“double trigger”).
COMPENSATION DISCUSSION & ANALYSIS (continued)
DuPont – Pre-Merger Arrangements
To ensure that executives remain focused on company business during a period of uncertainty, in 2013, DuPont adopted the Senior Executive Severance Plan. Messrs. Breen and Collins are participants in the plan. For any benefits to be earned under the plan, a change in control must occur and the executive’s employment must be terminated within two years following the change in control, either by the Company without cause or the executive for good reason (a “double trigger”). Benefits provided under the plan include:
Covered executives are also entitled to reimbursement of any expenses incurred in enforcing their rights under the plan and, effective in December 2015, if any payments or benefits payable to the executive (whether under the plan or otherwise) are subject to the excise tax imposed under Section 4999 of the Code, an additional reimbursement payment will be made such that, on a netafter-tax basis, the executive would be in the same position as if no such excise tax had been imposed. The Company determined, particularly in light of the merger of equals with Dow and Intended Business Separations, that such a reimbursement payment is appropriate for participants in the Senior Executive Severance Plan: (i) to provide reasonable assurance that the participants, especially those with a short tenure or a newly enhanced role at the Company, realize the benefit the Company intended to provide under the plan and (ii) during this time of uncertainty, to incentivize those executives to remain objective, avoid conflicts of interest and stay focused on executing the merger and Intended Business Separations to maximize stockholder value.
The plan requires a release of claims as a condition to the payment of benefits and includestwelve-monthnon-competition andnon-solicitation provisions (eighteen months for the CEO) and additionalnon-disparagement and confidentiality provisions.
COMPENSATION DISCUSSION & ANALYSIS (continued)
The following table summarizes the value of the incremental benefits to be received due to an Involuntary Termination without cause or a change in control event as of December 31, 2017.
INVOLUNTARY TERMINATION OR CHANGE IN CONTROL VALUES
Name | Type of Benefit | Involuntary Without Cause ($)(a) | Change-in- Control ($)(b) | |||
Edward D. Breen | Severance
| 18,535,680
| 18,535,680
| |||
LTI Acceleration(c)
| n/a
| 26,420,112
| ||||
Increase in Present Value of Pension
| n/a
| n/a
| ||||
Health & Welfare Benefits
| 38,915
| 38,915
| ||||
Outplacement & Financial Planning
| 9,900
| 9,900
| ||||
Tax Reimbursement
| —
| 22,258,116
| ||||
Andrew N. Liveris | Severance
| 3,861,600
| 15,298,694
| |||
LTI Acceleration
| n/a
| 54,140,050
| ||||
Increase in Present Value of Pension
| n/a
| 475,666
| ||||
Health & Welfare Benefits
| 19,035
| 19,035
| ||||
Outplacement & Financial Planning
| 30,000
| 50,000
| ||||
Howard I. Ungerleider | Severance
| 1,662,929
| 1,662,929
| |||
LTI Acceleration
| n/a
| 17,217,385
| ||||
Increase in Present Value of Pension
| n/a
| 15,816
| ||||
Health & Welfare Benefits
| n/a
| n/a
| ||||
Outplacement & Financial Planning
| 30,000
| 30,000
| ||||
James R. Fitterling | Severance
| 2,060,972
| 2,060,972
| |||
LTI Acceleration
| n/a
| 19,378,222
| ||||
Increase in Present Value of Pension
| n/a
| 20,665
| ||||
Health & Welfare Benefits
| 18,207
| 18,207
| ||||
Outplacement & Financial Planning
| 30,000
| 30,000
| ||||
Charles J. Kalil | Severance
| 2,056,070
| 4,306,033
| |||
LTI Acceleration
| n/a
| 14,911,402
| ||||
Increase in Present Value of Pension
| n/a
| —
| ||||
Health & Welfare Benefits
| 6,345
| 6,345
| ||||
Outplacement & Financial Planning
| 30,000
| 50,000
| ||||
James C. Collins | Severance
| 1,639,000
| 3,875,000
| |||
LTI Acceleration
| n/a
| 11,483,349
| ||||
Increase in Present Value of Pension
| ||||||
Health & Welfare Benefits
| 10,368
| 10,368
| ||||
Outplacement & Financial Planning
| 10,204
| 23,500
| ||||
Tax Reimbursement
| —
| 5,053,976
| ||||
Joe E. Harlan(d) | Severance
| 1,219,839
| n/a
| |||
LTI Acceleration
| n/a
| 15,632,159
| ||||
Increase in Present Value of Pension
| n/a
| n/a
| ||||
Health & Welfare Benefits
| n/a
| n/a
| ||||
Outplacement & Financial Planning
| 30,000
| n/a
|
COMPENSATION DISCUSSION & ANALYSIS (continued)
Compensation Committee Interlocks and Insider Participation
During 2017, the members of the Company’s Compensation Committee were Lamberto Andreotti, Lois D. Juliber(Co-Chair), Raymond J. Milchovich and Dennis H. Reilley(Co-Chair). None of the members of the Compensation Committee were at any time during 2017 an officer or employee of the Company. None of the executive officers serves as a member of the board of directors or a compensation committee of any entity that has one or more executive officers serving as a member of the Board or compensation committee.
The Compensation Committee of the Board reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) with Company management. Based on this review and discussion, the Compensation Committee recommended to the Board that the CD&A be included in the Company’s Annual Report on Form10-K for the year ended December 31, 2017 (“2017 Annual Report”), as incorporated by reference from this Proxy Statement.
The Compensation Committee operates pursuant to a charter that is available atwww.dow-dupont.com/investors/corporate-governance.
This report is submitted by the Compensation Committee.