DEF 14A of Johnson Controls International plc
Filed Jan 13, 2017 · FY20160001193125-17-009786
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| 3. | To authorize the Company and/or any subsidiary of the Company to make market purchases of Company shares. |
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| 4. | To determine the price range at which the Company can re-allot shares that it holds as treasury shares. |
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| 5. | To approve, in a non-binding advisory vote, the compensation of the named executive officers. |
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| 6. | To approve, in a non-binding advisory vote, the frequency of the non-binding advisory vote on the compensation of the named executive officers. |
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| 7. | To approve the material terms of the performance goals under the Johnson Controls International plc 2012 Share and Incentive Plan. |
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| 8. | To approve the Directors’ authority to allot shares up to approximately 33% of issued share capital |
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| 9. | To approve the waiver of statutory pre-emption rights with respect to up to 5% of issued share capital |
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| 10. | To act on such other business as may properly come before the meeting or any adjournment thereof. |
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This notice of annual general meeting and proxy statement and the enclosed proxy card are first being sent on or about January 20, 2017 to each holder of record of the Company’s ordinary shares at the close of business on January 4, 2017. The record date for the entitlement to vote at the Annual General Meeting is January 4, 2017 and only registered shareholders of record on such date are entitled to notice of, and to attend and vote at, the Annual General Meeting and any adjournment or postponement thereof. During the meeting, management will also present the Company’s Irish Statutory Accounts for the fiscal year ended September 30, 2016. Whether or not you plan to attend the meeting, please complete, sign, date and return the enclosed proxy card to ensure that your shares are represented at the meeting. Shareholders of record who attend the meeting may vote their shares personally, even though they have sent in proxies. In addition to the above resolutions, the business of the Annual General Meeting shall include prior to the proposal of the above resolutions, the consideration of the Company’s statutory financial statements and the report of the directors and of the statutory auditors and a review by the shareholders of the Company’s affairs. This proxy statement and our Annual Report on Form 10-K for the fiscal year ended September 30, 2016 and our Irish Statutory Accounts are available to shareholders at www.proxyvote.com and are also available in the Investor Relations section of our website at www.johnsoncontrols.com. By Order of the Board of Directors, Judith A. Reinsdorf Executive Vice President and General Counsel January 20, 2017 PLEASE PROMPTLY COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD. THE PROXY IS REVOCABLE AND IT WILL NOT BE USED IF YOU: GIVE WRITTEN NOTICE OF REVOCATION TO THE PROXY PRIOR TO THE VOTE TO BE TAKEN AT THE MEETING; SUBMIT A LATER-DATED PROXY; OR ATTEND AND VOTE PERSONALLY AT THE MEETING. ANY SHAREHOLDER ENTITLED TO ATTEND AND VOTE AT THE MEETING MAY APPOINT ONE OR MORE PROXIES USING THE ENCLOSED PROXY CARD (OR THE FORM IN SECTION 184 OF THE COMPANIES ACT 2014) TO ATTEND, SPEAK AND VOTE ON THAT SHAREHOLDER’S BEHALF. THE PROXY NEED NOT BE A SHAREHOLDER. PROXIES MAY BE APPOINTED VIA THE INTERNET OR PHONE IN THE MANNER SET OUT IN THE ENCLOSED PROXY CARD. ALTERNATIVELY THEY MAY BE APPOINTED BY DEPOSITING THE ENCLOSED PROXY CARD (OR OTHER VALID SIGNED INSTRUMENT OF PROXY) WITH JOHNSON CONTROLS INTERNATIONAL PLC C/O BROADRIDGE, 51 MERCEDES WAY, EDGEWOOD, NY 11717 BY 5:00 P.M., EASTERN STANDARD TIME, ON MARCH 7, 2017 (WHICH WILL THEN BE FORWARDED TO JOHNSON CONTROLS INTERNATIONAL PLC’S REGISTERED ADDRESS ELECTRONICALLY) OR WITH JOHNSON CONTROLS INTERNATIONAL PLC, ONE ALBERT QUAY, CORK, IRELAND BY 5:00 P.M. LOCAL TIME ON MARCH 7, 2017. IF YOU WISH TO APPOINT A PERSON OTHER THAN THE INDIVIDUAL SPECIFIED IN THE ENCLOSED PROXY CARD, PLEASE CONTACT OUR COMPANY SECRETARY AND ALSO NOTE THAT YOUR NOMINATED PROXY MUST ATTEND THE MEETING IN PERSON IN ORDER FOR YOUR VOTES TO BE CAST.
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| Proxy Statement Summary | 1 | | Agenda Items | 3 | | Proposal Number One – Election of Directors | 3 | | Proposal Number Two – Election of Auditors | 11 | | Audit and Non-Audit Fees | 12 | | Audit Committee Report | 14 | | Proposal Number Three – Market Purchases of Own Shares | 15 | | Proposal Number Four – Share Re-allotment Price Range Authorization | 17 | | Proposal Number Five – Advisory Vote on Executive Compensation | 18 | | Proposal Number Six – Advisory Vote on Frequency of Executive Compensation Vote | 19 | | Proposal Number Seven – Approval of Performance Goals in Share Plan | 20 | | Proposal Number Eight – Approval of Share Allotment Authority | 33 | | Proposal Number Nine – Approval of Waiver of Pre-emption Rights | 35 | | Governance of the Company | 37 | | Board of Directors | 38 | | Compensation of Non-Employee Directors | 49 | | Committees of the Board | 51 | | Compensation Discussion & Analysis | 53 | | CD&A Summary | 53 | | CD&A Details | 56 | | Executive Compensation Tables | 78 | | Summary Compensation Table | 78 | | Grants of Plan-Based Awards Table | 81 | | Outstanding Equity Awards Table | 83 | | Option Exercise and Stock Vesting Table | 85 | | Non-Qualified Deferred Compensation Table | 88 | | Potential Payments Table | 89 | | Questions and Answers | 94 | | Non-GAAP Reconciliations | 104 |
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Unless we have indicated otherwise, in this proxy statement references to the “Company,” “Johnson Controls”, “we,” “us,” “our” and similar terms refer to Johnson Controls International plc and its consolidated subsidiaries.
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| 2017 Proxy Statement | i |
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PROXY STATEMENT SUMMARY Annual General Meeting
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| Time and Date: | 3:00 pm, local time, on March 8, 2017 | | Place: | The Merrion Hotel, 24 Upper Merrion Street, Dublin 2, Ireland | | Record Date: | January 4, 2017 | | Voting: | Shareholders on the record date are entitled to one vote per share on each matter to be voted upon at the Annual General Meeting | | Admission: | All shareholders are invited to attend the Annual General Meeting. Registration will commence on the day of the meeting. |
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Proposals to be Voted Upon
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| | Board Recommendation | | 1. Elect, by separate resolution, each nominee to the Board of Directors. | FOR each nominee | | 2. To approve and ratify, by separate resolutions, the appointment of PricewaterhouseCoopers LLP as the independent auditors of the Company and to authorize the Audit Committee of the Board of Directors to set the auditors’ remuneration. | FOR | | 3. To authorize the Company and/or any subsidiary of the Company to make market purchases of Company shares. | FOR | | 4. To determine the price range at which the Company can re-allot shares that it holds as treasury shares. | FOR | | 5. To approve, in a non-binding advisory vote, the compensation of the named executive officers. | FOR | | 6. To approve, in a non-binding advisory vote, the frequency of the advisory vote on named executive officer compensation. | One year | | 7. To approve the material terms of the performance goals under the Johnson Controls International plc 2012 Share and Incentive Plan | FOR | | 8. To approve the Directors’ authority to allot shares up to approximately 33% of issued share capital | FOR | | 9. To approve the waiver of statutory pre-emption rights with respect to up to 5% of issued share capital | FOR |
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The Nominees to our Board of Directors We are asking you to vote FOR all the director nominees listed below. All current directors attended at least 90% of the Board and committee meetings on which he or she sits. Detailed information regarding these individuals, along with all other Board nominees, is set forth under Proposal Number One. Summary information is set forth below.
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| 2017 Proxy Statement | 1 |
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| Nominee and Principal Occupation | Age | Director Since | Independent | Current Committee Membership | | David P. Abney Chief Executive Officer and Director of UPS | 61 | 2016 | ✓ | Audit | | Natalie A. Black Retired Senior Vice President and Chief Legal Officer of Kohler | 66 | 2016 | ✓ | Governance (chair); Executive | | Michael E. Daniels Retired Senior Vice President of Global Technology at IBM | 62 | 2010 | ✓ | Compensation | | Brian Duperreault Chairman and Chief Executive Officer of Hamilton Insurance Group | 69 | 2016 | ✓ | Governance | | Jeffrey A. Joerres Retired Executive Chairman of ManpowerGroup | 57 | 2004 | ✓ | Compensation (chair); Executive | | Alex A. Molinaroli Chairman and Chief Executive Officer of Johnson Controls | 57 | 2016 | | Executive | | George R. Oliver President and Chief Operating Officer of Johnson Controls | 56 | 2012 | | N/A | | Juan Pablo del Valle Perochena Chairman of Mexichem | 44 | 2016 | ✓ | Governance | | Jürgen Tinggren Former Chief Executive Officer and Director of Schindler Group | 58 | 2014 | ✓ | Audit (chair); Executive | | Mark Vergnano President, Chief Executive Officer and Director, The Chemours Company | 58 | 2016 | ✓ | Audit | | R. David Yost Former Chief Executive Officer of AmerisourceBergen | 69 | 2009 | ✓ | Compensation |
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Non-Binding Advisory Vote on Executive Compensation Proposal number five is our annual advisory vote on the Company’s executive compensation philosophy and program. Detailed information regarding these matters is included under the heading “Compensation Discussion & Analysis,” and we urge you to read it in its entirety. Our compensation philosophy and structure for executive officers remains dedicated to the concept of paying for performance and continues to be heavily weighted with performance based awards.
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AGENDA ITEMS PROPOSAL NUMBER ONE – ELECTION OF DIRECTORS Upon the recommendation of the Governance Committee, the Board has nominated for election at the Annual General Meeting a slate of 11 nominees, all of whom currently serve on our Board. Biographical information regarding each of the nominees is set forth below. We are not aware of any reason why any of the nominees will not be able to serve if elected. The term of office for members of the Board of Directors commences upon election and terminates upon completion of the first Annual General Meeting of Shareholders following election.
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| | | | Director Since | Other Public Directorships | | | Age: | 61 | September 2016 | United Parcel Service, Inc. | | | Committee: | Audit | | | | | Independent: | Yes | | | | David P. Abney | | | | |
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Mr. Abney has been the Chief Executive Officer and a director of United Parcel Service, Inc., a package delivery, supply chain and freight services provider, since September 2014. He joined our Board in September 2016 upon the completion of the merger with Johnson Controls, Inc. Mr. Abney was named Chairman of the Board of UPS in March 2016. He served as Senior Vice President and Chief Operating Officer of UPS from 2007 to 2014, also as President of UPS Airlines from 2007 to 2008, and as Senior Vice President and President of UPS International from 2003 to 2007.
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| ∎ | Senior Leadership Experience: Extensive experience as a CEO, executive officer and board member at UPS and other companies |
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| ∎ | Financial: Deep financial acumen as CEO and senior leader at UPS |
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| ∎ | International: Significant experience as CEO and director of UPS |
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| ∎ | Global Logistics: Specialized expertise in global logistics and distribution strategies |
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| ∎ | Talent Management: Experience leading global teams |
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| | | | Director Since | Other Public Directorships | | | Age: | 66 | September 2016 | | | | Committee: | Governance, Executive | | | | | Independent: | Yes | | | | Natalie A. Black | | | | |
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Prior to her retirement, Ms. Black was the Senior Vice President and Chief Legal Officer of Kohler Co., a manufacturer and marketer of plumbing products, power systems and furniture and operator of hospitality facilities. She joined our Board in September 2016 upon the completion of the merger with Johnson Controls, Inc. She served as Chief Legal Officer of Kohler from 2012 to 2014 and as Senior Vice President from 2000 to 2014. She also served as General Counsel from 1983 to 2012, as Secretary from 2000 to 2012, as a Group President for Kohler Co. from 1998 to 2000 and as Group Vice President—Interiors from 1991 to 1998.
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| ∎ | Senior Leadership Experience: Extensive experience as a business leader and the Chief Legal Officer and General Counsel of Kohler |
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| ∎ | Sales, Marketing, Branding and M&A: Specialized expertise in brand management, distribution, sales, and marketing from her executive management experience at Kohler |
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| ∎ | Governance: Deep knowledge of legal and governance matters from her experience as a general counsel and a board and governance committee member |
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| ∎ | Talent Management: Experience leading global teams |
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| | | | Director Since | Other Public Directorships | | | Age: | 62 | March 2010 | Thomson Reuters | | | Committee: | Compensation | | SS&C Technologies, Inc. | | | Independent: | Yes | | | | Michael E. Daniels | | | | |
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Prior to his retirement in March 2013, Mr. Daniels was the Senior Vice President of the Global Technology Services group of International Business Machines Corporation, a business and IT services company with operations in more than 160 countries around the world. In this role, Mr. Daniels had worldwide responsibility for IBM’s Global Services business operations in outsourcing services, integrated technology services, maintenance, and Global Business Services, the consulting and applications management arm of Global Services. Since he joined IBM in 1976, Mr. Daniels held a number of leadership positions in sales, marketing, and services, and was general manager of several sales and services businesses, including IBM’s Sales and Distribution operations in the United States, Canada and Latin America, its Global Services team in the Asia Pacific region, Product Support Services, Availability Services, and Systems Solutions. Mr. Daniels serves as a director of Thomson Reuters, a provider of intelligent information for businesses, and SS&C Technologies, a provider of specialized software, software enabled-services and software as a service solutions to the financial services industry.
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| ∎ | Senior Leadership Experience: Decades of senior leadership experience at IBM |
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| ∎ | Industry Experience: Broad and extensive global business experience in a wide range of global roles as an executive at IBM, including decades of experience in the service space |
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| ∎ | Technology, Cyber Security and IT: Deep understanding of critical areas of enterprise service functions and information technology, including cyber security |
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| ∎ | International: Experience as a senior manager of a global organization as well as international experience living and working in a variety of cultures |
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| ∎ | Talent Management: Experience leading global teams at IBM and in service on the compensation committee of public companies |
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| | | | Director Since | Other Public Directorships | | | Age: | 69 | March 2004 | | | | Committee: | Governance | | | | | Independent: | Yes | | | | Brian Duperreault | | | | |
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Mr. Duperreault is the Chairman and Chief Executive Officer of Hamilton Insurance Group, Ltd., a Bermuda-based holding company of property and casualty insurance and reinsurance operations in Bermuda, the US and the UK. He served as President and Chief Executive Officer of Marsh & McLennan Companies, Inc. from January 2008 until his retirement in December 2012. Before joining Marsh, he served for four years as non-executive Chairman of ACE Limited, an international provider of insurance and reinsurance products, Chief Executive Officer of ACE Limited from October 1994 through May 2004, and as its President from October 1994 through November 1999. Prior to joining ACE, Mr. Duperreault served in various senior executive positions with American Insurance Group and its affiliates from 1978 to 1994. Mr. Duperreault is Vice Chairman of the Board of Blue Marble Microinsurance, a member of the Boards of the International Insurance Society, the IESE Business School, the Insurance Information Institute and the Bermuda Institute of Ocean Sciences, and is a former Member of the Association of The Metropolitan Opera, New York. He is the former Chairman of the Board of Overseers of the School of Risk Management of St. John’s University, New York.
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Skills and Qualifications
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| ∎ | Senior Leadership Experience: Extensive experience as a CEO, executive officer and board member of multiple Fortune 500 companies |
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| ∎ | Corporate Governance: Experience serving as lead director and on the governance committees of multiple public companies |
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| ∎ | Financial: Deep financial acumen as CEO and senior leader in insurance and risk management industries |
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| ∎ | International: Significant experience as CEO and director on multiple global companies |
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| ∎ | Risk Management: Deep understanding of risk management gained over a career in the insurance industry |
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| ∎ | Talent Management: Experience leading global teams at a number of Fortune 500 companies |
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| | | | Director Since | Other Public Directorships | | | Age: | 57 | September 2016 | The Western Union Company | | | Committee: | Compensation, Executive | | | | | Independent: | Yes | | | | Jeffrey A. Joerres | | | | |
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Prior to his retirement in December 2015, Mr. Joerres was the Executive Chairman of the Board of ManpowerGroup Inc., a provider of employment services. He joined our Board in September 2016 upon the completion of the merger with Johnson Controls, Inc. He served as the Chief Executive Officer and President of ManpowerGroup from 1999 to 2014. Mr. Joerres served as Senior Vice President of European Operations from 1998 to 1999 and as Senior Vice President of Major Account Development from 1995 to 1998. From 2009 to 2015 Mr. Joerres was a director of the Federal Reserve Bank of Chicago. He serves on the board of Artisan Partners Asset Management Inc., where he serves as chair of the Compensation Committee and as a member of the Audit Committee. He also is a director of The Western Union Company and is a member of the Corporate Governance and Public Policy Committee and the Compensation and Benefits Committee. From 2001 to 2011, Mr. Joerres also served as a board member of Artisan Funds, Inc.
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| ∎ | Senior Leadership Experience: Extensive experience as a CEO, executive officer and board member of ManpowerGroup |
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| ∎ | Corporate Governance: Experience serving as a public company lead director and on the governance committee |
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| ∎ | International: Significant knowledge of the global marketplace gained from his role as CEO and director |
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| ∎ | Service Sector: Deep understanding of the service sector and its employees gained during the course of his career |
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| ∎ | Talent Management: Experience leading global teams |
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| | | | Director Since | Other Public Directorships | | | Age: | 57 | September 2016 | | | | Committee: | Executive | | | | | Independent: | No | | | | Alex A. Molinaroli | | | | |
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Mr. Molinaroli became our Chairman and Chief Executive Officer upon completion of the merger with Johnson Controls, Inc. in September 2016. He was the Chairman, President and Chief Executive Officer of Johnson Controls, Inc. from October 2013. Previously, he served as Vice Chairman in 2013,
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as a Corporate Vice President from 2004 to 2013, and as President of Johnson Controls’ Power Solutions business from 2007 to 2013. Previously, Mr. Molinaroli served as Vice President and General Manager for North America Systems & the Middle East for Johnson Controls’ Building Efficiency business and has held positions with increasing levels of responsibility for controls systems and services, sales and operations. Mr. Molinaroli joined Johnson Controls in 1983.
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| ∎ | Senior Leadership and Industry Experience: The Board believes that Mr. Molinaroli’s extensive experience and knowledge of Johnson Controls, and its products and services, gained from over 30 years of service in a wide range of Johnson Controls’ leadership positions, enables him to provide meaningful input and guidance to the Board and Johnson Controls. |
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| ∎ | International: Significant experience as CEO and director of a global multi-national company |
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| ∎ | Talent Management: Experience leading the global team at Johnson Controls through a number of business and operational roles |
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| ∎ | Executive Insight: Mr. Molinaroli offers valuable insights and perspective on the day to day management of the Company’s affairs |
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| | | | Director Since | Other Public Directorships | | | Age: | 56 | September 2012 | Raytheon Company | | | Committee: | Executive | | | | | Independent: | No | | | | George R. Oliver | | | | |
Skills and Qualifications
Mr. Oliver became our President and Chief Operating Officer upon completion of the merger with Johnson Controls, Inc. in September 2016. Prior to that, Mr. Oliver was our Chief Executive Officer, a position he held since September 2012. He joined Tyco in July 2006, serving as president of Tyco Safety Products from 2006 to 2010 and as president of Tyco Electrical & Metal Products from 2007 through 2010. He was appointed president of Tyco Fire Protection in 2011. Before joining Tyco, he served in operational leadership roles of increasing responsibility at several General Electric divisions. Mr. Oliver also serves as a director on the board of Raytheon Company, a company specializing in defense, security and civil markets throughout the world, and is a trustee of Worcester Polytechnic Institute, his alma mater.
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Skills and Qualifications
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| ∎ | Senior Leadership Experience: Extensive leadership experience over several decades as an executive at Tyco (now the Company) and GE |
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| ∎ | Industry Experience: Nearly a decade of experience with Tyco, first as president of several of its business units and then as CEO |
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| ∎ | International: Experience as a director, CEO and a senior manager of global organizations |
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| ∎ | Talent Management: Experience leading global teams at Johnson Controls, Tyco and GE |
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| ∎ | Executive Insight: Mr. Oliver offers valuable insights and perspective on the day to day management of the Company’s affairs |
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| | | | Director Since | Other Public Directorships | | | Age: | 44 | September 2016 | Mexichem, S.A.B. | | | Committee: | Governance | | Elementia S.A.B. | | | Independent: | Yes | | Grupo Lala S.A.B. | | | | | | Grupo Pochteca S.A.B. | | Juan Pablo del Valle Perochena | | | | |
Skills and Qualifications
Mr. Perochena has been the Chairman of Mexichem, S.A.B. de C.V., a chemical and petrochemical producer and seller and a subsidiary of Kaluz, S.A. de C.V., since April 2011. He joined our Board in September 2016 upon the completion of the merger with Johnson Controls, Inc. He has been a Board member of Mexichem since 2001, and serves on the boards of Kaluz, S.A. de C.V., Elementia S.A. de C.V., Grupo Lala S.A.B., and Grupo Pochteca, S.A.B. de C.V.
Skills and Qualifications
Skills and Qualifications
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| ∎ | Senior Leadership Experience: Significant experience as an executive officer and board member of several Mexican companies |
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| ∎ | Industry Experience: Deep knowledge of the manufacturing industry from his experiences at Mexichem |
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| ∎ | International: Significant knowledge of the global marketplace gained from his business experience and background |
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| ∎ | Construction and Real Estate Development: Mr. del Valle Perochena’s service with Kaluz, S.A. de C.V. gives him unique insight into the construction industry and real estate development. |
Skills and Qualifications
| ∎ | Talent Management: Experience leading global teams |
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| | | | Director Since | Other Public Directorships | | | Age: | 58 | March 2014 | Sika AG Group | | | Committee: | Audit | | | | | Independent: | Yes | | | | Jürgen Tinggren | | | | |
Skills and Qualifications
Mr. Tinggren, age 58, joined our Board in March 2014. He was the chief executive officer of the Schindler Group, a global provider of elevators, escalators and related services, through December 2013 and was a member of the board of directors of Schindler from March 2014 to 2016. He joined the Group Executive Committee of Schindler in April 1997, initially with responsibility for Europe and
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thereafter for the Asia/Pacific region and the Technology and Strategic Procurement. In 2007, he was appointed Chief Executive Officer and President of the Group Executive Committee of the Schindler Group. Mr. Tinggren also serves on the Board of the Sika AG Group and is a Trustee of The Conference Board. From 2011 to 2014 he was a director of Schenker-Winkler Holding.
Skills and Qualifications
| ∎ | Senior Leadership Experience: Extensive global business experience as the CEO and a senior leader of Schindler |
Skills and Qualifications
| ∎ | International: Experience as senior executive and director of European based organizations, deep understanding of international markets |
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| ∎ | Industry Experience: Deep understanding of building services, industrial products and installation and service businesses |
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| ∎ | Financial: Deep financial understanding as CEO of Schindler |
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| ∎ | Business Development/M&A: Significant experience with mergers and acquisitions |
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| ∎ | Talent Management: Experience leading global teams as CEO of Schindler |
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| | | | Director Since | Other Public Directorships | | | Age: | 58 | September 2016 | The Chemours Company | | | Committee: | Audit | | | | | Independent: | Yes | | | | Mark Vergnano | | | | |
Skills and Qualifications
Mr. Vergnano has been the President, Chief Executive Officer and a director of the Chemours Company, a titanium technologies, fluoroproducts, and chemical solutions producer, since July 2015. He joined our Board in September 2016 upon the completion of the merger with Johnson Controls, Inc. Previously, Mr. Vergnano served as Executive Vice President, E. I. du Pont de Nemours and Company from 2009 to June 2015. While at DuPont, he served as group vice president—Safety & Protection from 2006 to 2009, vice president and general manager—DuPont Surfaces and Building Innovations from 2005 to 2006, and vice president and general manager—DuPont Nonwovens from 2003 to 2005. Mr. Vergnano joined DuPont in 1980 as a process engineer and held a variety of manufacturing, technical and management assignments in DuPont’s global organization.
Skills and Qualifications
Skills and Qualifications
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| ∎ | Senior Leadership Experience: Extensive global business experience as an executive and CEO of Chemours and DuPont |
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| ∎ | International: Experience as senior executive of a multinational company |
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| ∎ | Industry Experience: Deep understanding of the operations, global sales and marketing in the chemical manufacturing industry |
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Skills and Qualifications
| ∎ | Financial: Deep financial understanding as CEO of Chemours |
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| ∎ | Talent Management: Experience leading global teams as CEO of Chemours and in managing a variety of business units at DuPont |
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| | | | Director Since | Other Public Directorships | | | Age: | 69 | March 2009 | Marsh & McLennan Companies, Inc. | | | Committee: | Compensation | | Bank of America | | | Independent: | Yes | | | | R. David Yost | | | | |
Skills and Qualifications
Mr. Yost served as Director and Chief Executive Officer of AmerisourceBergen, a comprehensive pharmaceutical services provider, from August 2001 to June 2011 when he retired. He was Chairman and Chief Executive Officer of AmeriSource Health Corporation from May 1997 to August 2001, and President and Chief Executive Officer of AmeriSource from May 1997 to December 2000. Mr. Yost also held a variety of other positions with AmeriSource Health Corporation and its predecessors from 1974 to 1997. Mr. Yost also serves as a director of Marsh & McLennan Companies, Inc. and Bank of America, and is a Vice Chairman of the Board of the United States Air Force Academy Endowment.
Skills and Qualifications
Skills and Qualifications
Skills and Qualifications
| ∎ | Senior Leadership Experience: Extensive leadership experience gained as the CEO and a director of AmerisourceBergen |
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| ∎ | Corporate Governance: Significant corporate governance experience serving as a director of multiple public companies |
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| ∎ | Risk Management: Exposure to complex risk management concepts gained as a director of Marsh & McLennan and Bank of America |
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| ∎ | Talent Management: Experience leading global teams as CEO of AmerisourceBergen |
Skills and Qualifications
Election of each Director requires the affirmative vote of a majority of the votes properly cast by the holders of ordinary shares represented at the Annual General Meeting in person or by proxy. Each Director’s election is the subject of a separate resolution and shareholders are entitled to one vote per share for each separate Director election resolution. The Board unanimously recommends that shareholders vote FOR the election of each nominee for Director to serve until the completion of the next Annual General Meeting.
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Skills and Qualifications
PROPOSAL NUMBER TWO – APPOINTMENT OF AUDITORS AND AUTHORITY TO SET REMUNERATION PricewaterhouseCoopers LLP (“PwC”) served as our independent auditors for the fiscal year ended September 30, 2016. As discussed below, prior to the merger between Johnson Controls, Inc. and a subsidiary of the Company, PwC was the independent auditor of Johnson Controls, Inc. and Deloitte & Touche LLP (“Deloitte”) was the independent auditor of the Company. The Audit Committee has selected and appointed PwC to audit our financial statements for the fiscal year ending September 30, 2017. The Board, upon the recommendation of the Audit Committee, is asking our shareholders to ratify the appointment of PwC as our independent auditors for the fiscal year ending September 30, 2017 and to authorize the Audit Committee of the Board of Directors to set the independent auditors’ remuneration. Although approval is not required by our Memorandum and Articles of Association or otherwise, the Board is submitting the selection of PwC to our shareholders for ratification because we value our shareholders’ views on the Company’s independent auditors. If the appointment of PwC is not approved by shareholders, it will be considered as notice to the Board and the Audit Committee to consider the selection of a different firm. Even if the appointment is approved, the Audit Committee in its discretion may select a different independent auditor at any time during the year if it determines that such a change would be in the best interests of the Company and our shareholders. Representatives of PwC will attend the Annual General Meeting and will have an opportunity to make a statement if they wish. They will also be available to answer questions at the meeting. For independent auditor fee information, information on our pre-approval policy of audit and non-audit services, and the Audit Committee Report, please see below. On September 8, 2016, following the completion of the merger between Johnson Controls, Inc. and a subsidiary of the Company, the Audit Committee approved the dismissal of Deloitte as the Company’s independent registered public accounting firm and the Company accordingly notified Deloitte of such action effective as of September 2, 2016. The reports of Deloitte on the Company’s financial statements for each of the two fiscal years ended September 25, 2015 and September 26, 2014, did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. In addition, during the fiscal years ended September 25, 2015 and September 26, 2014, as well as during the subsequent interim period preceding September 2, 2016, there were no (i) “disagreements” (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and related instructions) between the Company and Deloitte with respect to any matter relating to accounting principles, financial statement disclosure or auditing scope or procedures which, if not resolved to the satisfaction of Deloitte, would have caused Deloitte to make reference to the subject matter of the disagreement in its reports on the Company’s financial statements with respect to such periods; or (ii) “reportable events” (as that term is defined in Item 304(a)(1)(v) of Regulation S-K and the related instructions). The Company provided Deloitte with a copy of the above disclosure, as set forth in the Company’s Current Report on Form 8-K filed on September 9, 2016 and requested that Deloitte provide the Company with a letter addressed to the SEC stating whether or not Deloitte agrees with the above disclosures. A copy of Deloitte’s letter, dated September 9, 2016, was attached as Exhibit 16.1 to such Form 8-K.
Skills and Qualifications
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Skills and Qualifications
On September 8, 2016, the Company engaged PricewaterhouseCoopers (“PwC”) as its new independent registered public accounting firm, effective as of September 2, 2016. During the years ended September 25, 2015 and September 26, 2014, and through September 2, 2016, the effective date of the Company’s engagement of PwC, the Company did not consult with PwC regarding any of the matters or events set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K. The ratification of the appointment of the independent auditors and the authorization for the Audit Committee to set the remuneration for the independent auditors requires the affirmative vote of a majority of the votes properly cast by the holders of ordinary shares represented at the Annual General Meeting in person or by proxy. The Audit Committee and the Board unanimously recommend a vote FOR these proposals.
Board of Directors
Board of Directors Mission of the Board of Directors: What the Board Intends to Accomplish The mission of Johnson Controls’ Board is to promote the long-term value and health of Johnson Controls in the interests of the shareholders and set an ethical “tone at the top.” To this end, the Board provides management with strategic guidance, and also ensures that management adopts and implements procedures designed to promote both legal compliance and the highest standards of honesty, integrity and ethics throughout the organization.
Board of Directors
| | Focus Areas of Our Board: Strategy and Operations: | | | Ensuring that processes are in place designed to maintain the integrity and ethical conduct of the Company; reviewing and approving strategic plans and profit plans; reviewing corporate performance and staying apprised of relations with shareholders | | | Talent: | | | Overseeing and evaluating management’s systems and senior management performance and compensation; and providing advice and counsel to senior management and plan for effective succession | | | Governance and Risk Management: | | | Overseeing and evaluating management’s systems and processes for the identification, assessment, management, mitigation, and reporting of major risks; establishing corporate governance standards | | | Board Composition and Effectiveness: | | | Recommending candidates to the shareholders for election to the Board; setting standards for Director qualification, orientation and continuing education; reviewing and assessing the Board’s leadership structure; and undertaking an annual performance evaluation regarding the effectiveness of the Board |
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Board of Directors
Board Responsibilities All corporate authority resides with the Board as fiduciaries of the Company’s shareholders, except for those matters reserved to the shareholders. The Board has retained oversight authority—defining and overseeing the implementation of and compliance with standards of accountability and monitoring the effectiveness of management policies and decisions in an effort to ensure that the Company is managed in such a way to achieve its objectives. The board delegates its authority to management for managing the everyday affairs of the company. The board requires that senior management review major actions and initiatives with the board prior to implementation. Management, not the Board, is responsible for managing the Company. Board Leadership The Board’s leadership structure generally includes a combined Chairman and CEO role with a strong, independent non-executive lead director. The Board believes our overall corporate governance measures help ensure that strong, independent directors continue to effectively oversee our management and key issues related to strategy, risk and integrity; executive compensation; CEO evaluation; and succession planning. In choosing generally to combine the roles of Chairman and CEO, the Board takes into consideration the importance of in-depth, industry-specific knowledge and a thorough understanding of our business environment and risk management practices in setting agendas and leading the Board’s discussions. Combining the roles also provides a clear leadership structure for the management team and serves as a vital link between management and the Board. This allows the Board to perform its oversight role with the benefit of management’s perspective on our business strategy and all other aspects of the business. Because our CEO has an in-depth knowledge of the complexity of a large and diversified international company, our businesses and their management structures, and our overall company strategy—all of which are of critical importance to our performance—the Board believes that our CEO generally is best suited to serve as Chairman and help ensure that the independent directors’ attention is devoted to the issues of greatest importance to Johnson Controls and our shareholders. Our Board periodically reviews its determination to have a single individual act both as Chairman and CEO. Johnson Controls continues to have a strong governance structure, which includes:
Board of Directors
| ∎ | a designated lead independent Director with a well-defined role (Mr. Jeff Joerres); |
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| ∎ | a Board entirely composed of independent members, with the exception of Messrs. Molinaroli and Oliver; |
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| ∎ | annual election of Directors by a majority of votes represented at the Annual General Meeting; |
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| ∎ | committees that are entirely composed of independent Directors; and |
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| ∎ | established governance and ethics guidelines. |
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The lead Director acts as an intermediary between the Board and senior management. Among other things, the lead Director’s duties include:
Board of Directors
| ∎ | In collaboration with Mr. Molinaroli, developing Board and committee meeting schedules to assure that there is sufficient time for discussion of all agenda items and to ensure that topics deemed important by the independent directors are included in Board discussions and sufficient executive sessions are scheduled as needed; |
Board of Directors
| ∎ | Calling meetings of the independent directors; |
Board of Directors
| ∎ | Developing the agenda for and chairing executive sessions of independent directors; |
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Board of Directors
| ∎ | Serving as principal liaison between the independent directors and Mr. Molinaroli on sensitive issues; |
Board of Directors
| ∎ | Serving as chairman of meetings of the Board when Mr. Molinaroli is not present; |
Board of Directors
| ∎ | In collaboration with Mr. Molinaroli, consulting with the appropriate members of senior management about what information pertaining to the Company’s finances, operations, strategic alternatives, compliance and members of management is to be sent to the Board in conjunction with meetings and between meetings; and |
Board of Directors
| ∎ | If requested by the Company’s major stockholders, making himself reasonably available for direct communication. |
Board of Directors
Board Oversight of Risk The Board’s role in risk oversight at Johnson Controls is consistent with Johnson Controls’ leadership structure, with management having day-to-day responsibility for assessing and managing Johnson Controls’ risk exposure and the Board and its committees providing oversight in connection with those efforts, with particular focus on the most significant risks facing Johnson Controls. The Board performs its risk oversight role in several ways. Board meetings regularly include strategic overviews by the CEO that describe the most significant issues, including risks, affecting Johnson Controls. In addition, the Board is regularly provided with business updates from the leaders of Johnson Controls’ business units, and updates from the General Counsel and other functional leaders. The Board reviews the risks associated with Johnson Controls’ financial forecasts, business plan and operations. These risks are identified and managed in connection with Johnson Controls’ robust enterprise risk management (“ERM”) process. The Company’s ERM process provides the enterprise with a common framework and terminology to ensure consistency in identification, reporting and management of key risks. It is also directly linked to the strategic planning process, and includes a formal process to identify and document the key risks to Johnson Controls perceived by a variety of stakeholders in the enterprise. The results of the ERM process are presented to the Board at least annually. The Board has delegated to each of its committees responsibility for the oversight of specific risks that fall within the committee’s areas of responsibility. For example:
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| ∎ | The Audit Committee reviews and discusses with management the Company’s major financial reporting, tax, accounting, internal controls, information technology and compliance risk exposures and the steps management has taken to monitor and control such exposures; |
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| ∎ | The Compensation Committee reviews and discusses with management the extent to which the Company’s compensation policies and practices create or mitigate risks for the Company; and |
Board of Directors
| ∎ | The Governance Committee reviews and discusses with management the implementation and effectiveness of the Company’s corporate governance policies and EHS programs, oversees the ERM process and is deeply involved in key management succession planning. |
Board of Directors
Board Capabilities The Johnson Controls Board as a whole is strong in its diversity, vision, strategy and business judgment. It possesses a robust collective knowledge of management and leadership, business operations, crisis management, risk assessment, industry knowledge, accounting and finance, corporate governance and global markets.
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Board of Directors
The culture of the Board is such that it can operate swiftly and effectively in making key decisions and facing major challenges. Board meetings are conducted in an environment of trust, open dialogue and mutual respect that encourages constructive commentary. The Board strives to be informed, proactive and vigilant in its oversight of Johnson Controls and protection of shareholder assets. Board Committees To conduct its business the Board maintains three standing committees: Audit, Compensation and Governance, and each of these NYSE required committees are entirely composed of independent Directors. The Board also maintains an Executive Committee comprised of the Chairman, lead Director and each committee chair that meets at least annually to review the Company’s retirement plans and other matters as delegated to it by the Board. Assignments to, and chairs of, the Audit and Compensation Committees are recommended by the Governance Committee and selected by the Board. The independent Directors as a group elect the members and the chair of the Governance Committee. All committees report on their activities to the Board. The lead Director may also convene “special committees” to review discrete matters that require the consideration of a Board committee, but do not fit within the mandate of any of the standing committees. Special committees report their activities to the Board. To ensure effective discussion and decision making while at the same time having a sufficient number of independent Directors for its three standing committees, the Board is normally constituted of between ten and thirteen Directors. The minimum and maximum number of Directors is set forth in Johnson Controls’ Articles of Association. The Governance Committee reviews the Board’s governance guidelines annually and recommends appropriate changes to the Board. Board Meetings The Board meets at least four times annually, and additional meetings may be called in accordance with our Articles of Association. Frequent board meetings are critical not only for timely decisions but also for Directors to be well informed about Johnson Controls’ operations and issues. One of these meetings will be scheduled in conjunction with the Annual General Meeting of shareholders and Board members are required to be in attendance at such meeting either in person or by telephone. The lead Director and the chair of the Board are responsible for setting meeting agendas with input from the other Directors. Committee meetings are normally held in conjunction with Board meetings. Major committee decisions are reviewed and approved by the Board. The Board chair and committee chairs are responsible for conducting meetings and informal consultations in a fashion that encourages informed, meaningful and probing deliberations. Presentations at Board meetings are concise and focused, and they include adequate time for discussion and decision-making. An executive session of independent Directors, chaired by the lead Director, is held at least annually, and in practice at most Board meetings. Directors receive the agenda and materials for regularly scheduled meetings in advance. Best efforts are made to make materials available as soon as one week in advance, but no later than three days in advance. When practical, the same applies to special meetings of the Board. Directors may ask for additional information from, or meetings with, senior managers at any time. Strategic planning and succession planning sessions are held annually at a regular Board meeting. The succession planning meeting focuses on the development and succession of not only the CEO but also the other senior executives.
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Board of Directors
The Board’s intent is for Directors to attend all regularly scheduled Board and committee meetings. Directors are expected to use their best efforts to attend regularly scheduled Board and committee meetings in person. All independent Board members are welcome to attend any committee meeting. Board and Committee Calendars A calendar of agenda items for the regularly scheduled Board meetings and all regularly scheduled committee meetings is prepared annually by the chair of the Board in consultation with the lead Director, committee chairs, and all interested Directors. Board Communication Management speaks on behalf of Johnson Controls, and the Board normally communicates through management with outside parties, including shareholders, business journalists, analysts, rating agencies and government regulators. In certain circumstances Directors may also meet with shareholders to discuss specific governance topics. The Board has established a process for interested parties to communicate with members of the Board, including the lead Director. If you have any concern, question or complaint regarding our compliance with any policy or law, or would otherwise like to contact the Board, you can reach the Johnson Controls Board of Directors via email at directors@johnsoncontrols.com. Shareholders, customers, vendors, suppliers and employees can also raise concerns at https://www.vitalJohnsonControlsconcerns.com. Inquiries can be submitted anonymously and confidentially. All inquiries are received and reviewed by the Office of the Ombudsman. A report summarizing all items received resulting in cases is prepared for the Audit Committee of the Board. The Office of the Ombudsman directs cases to the applicable department (such as customer service, human resources or in the case of accounting or control issues, forensic audit) and follows up with the assigned case owner to ensure that the cases are responded to in a timely manner. The Board also reviews non-trivial shareholder communications received by management through the Corporate Secretary’s Office or Investor Relations. Board Advisors The Board and its committees (consistent with the provisions of their respective charters) may retain their own advisors, at the expense of Johnson Controls, as they deem necessary in order to carry out their responsibilities. Board Evaluation The Governance Committee coordinates an annual evaluation process by the Directors of the Board’s performance and procedures, as well as that of each committee. This evaluation leads to a full Board discussion of the results. In connection with the evaluation process:
Board of Directors
| ∎ | each Director submits specific written feedback on the Board’s performance and Board governance and processes; |
Board of Directors
| ∎ | the lead Director and chair of the Governance Committee informally consult with each of the Directors; |
Board of Directors
| ∎ | the qualifications and performance of all Board members are reviewed in connection with their re-nomination to the Board; |
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Board of Directors
| ∎ | the Governance Committee, the Audit Committee and the Compensation Committee each conduct an annual self-evaluation of their performance and procedures, including the adequacy of their charters, and report those results to the Board. |
Board of Directors
Board Compensation and Stock Ownership The Governance Committee periodically reviews the Directors’ compensation and recommends changes in the level and mix of compensation to the full Board. See the Compensation Discussion and Analysis for a detailed discussion of the Compensation Committee’s role in determining executive compensation. To help align Board and shareholder interests, Directors are encouraged to own Johnson Controls common stock or its equivalent, with the guideline set at five times the annual cash retainer. Directors are expected to attain this minimum stock ownership guideline within five years of joining the Board. Once a Director satisfies the minimum stock ownership recommendation, the Director will remain qualified, regardless of market fluctuations, under the guideline as long as the Director does not sell any stock. The legacy Tyco directors have met the minimum amount of five times the annual cash retainer. The legacy Johnson Controls directors are each expected to reach the minimum stock ownership level within the recommended time period. Messrs. Molinaroli and Oliver receive no additional compensation for service as a Director. Director Independence To maintain its objective oversight of management, the board consists of a substantial majority of independent directors. Our Board annually determines the independence of each director and nominee for election as a director based on a review of the information provided by the directors and the executive officers, and a survey by our legal and finance departments. The Board makes these determinations under the NYSE Listed Company Manual’s independence standards and our Corporate Governance Guidelines, which are more restrictive than the NYSE independence standards. Independent directors:
Board of Directors
| ∎ | are not former officers or employees of the Johnson Controls or its subsidiaries or affiliates, nor have they served in that capacity within the last five years; |
Board of Directors
| ∎ | have no current or prior material relationships with Johnson Controls aside from their directorship that could affect their judgment; |
Board of Directors
| ∎ | have not worked for, nor have any immediate family members that have worked for, been retained by, or received anything of substantial value from Johnson Controls aside from his or her compensation as a director; |
Board of Directors
| ∎ | have no immediate family member who is an officer of Johnson Controls or its subsidiaries or has any current or past material relationship with Johnson Controls; |
Board of Directors
| ∎ | do not work for, nor does any immediate family member work for, consult with, or otherwise provide services to, another publicly traded company on whose board of directors Johnson Controls’ CEO or other senior executive serves; |
Board of Directors
| ∎ | do not serve as, nor does any immediate family member serve as, an executive officer of any entity with respect to which Johnson Controls’ annual sales to, or purchases from, exceed the greater of two percent of either entity’s annual revenues for the prior fiscal year or $1,000,000. |
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Board of Directors
| ∎ | do not serve, nor does any immediate family member serve, on either the board of directors or the compensation committee of any corporation that employs either a nominee for director or a member of the immediate family of any nominee for director; and |
Board of Directors
| ∎ | do not serve, nor does any immediate family member serve, as a director, trustee, executive officer or similar position of a charitable or non-profit organization with respect to which the company or its subsidiaries made charitable contributions or payments in excess of the greater of $1,000,000 or two percent of such organization’s charitable receipts in the last fiscal year. |
Board of Directors
Directors meet stringent definitions of independence and for those Directors that meet this definition, the Board will make an affirmative determination that a Director is independent. The Board has determined that all of the Director nominees, with the exception of Messrs. Molinaroli and Oliver meet these standards and are therefore independent of the Company. Director Service Directors are elected by an affirmative vote of an absolute majority of the votes represented (in person or by proxy) by shareholders at the Annual General Meeting. They are elected to serve for one-year terms (except in instances where a director is elected during a special meeting), ending after completion of the next succeeding Annual General Meeting. If a Director resigns or otherwise terminates his or her Directorship prior to the next Annual General Meeting, the Board may appoint an interim Director until the next Annual General Meeting. Any nominee for Director who does not receive an affirmative vote of an absolute majority of votes represented (in person or by proxy) by shareholders at the Annual General Meeting is not elected to the Board. Each Director must offer to resign from the Board at the Annual General Meeting following his or her 72nd birthday. The Board may, in its discretion, waive this limit in special circumstances. The rotation of committee chairs and members is considered on an annual basis to ensure diversity of Board member experience and variety of perspectives across the committees, but there is no strict committee chair rotation policy. Any changes in committee chair or member assignments are made based on committee needs, Director interests, experience and availability, and applicable regulatory and legal considerations. Moreover, the value of rotation is weighed carefully against the benefit of committee continuity and experience. Directors are also expected to inform the Governance Committee of any significant change in their employment or professional responsibilities and are required to offer their resignation to the Board in the event of such a change. This allows for discussion with the Governance Committee to determine if it is in the mutual interest of both parties for the Director to continue on the Board. The Governance Committee is responsible for the review of all Directors, and where necessary will take action to recommend to shareholders the removal of a Director for performance, which requires the affirmative vote of a majority of the votes represented (in person or by proxy) at a duly called shareholder meeting. Board Tenure Our directors have served an average of 4 years on our Board, with 7 Directors serving for three years or less and 1 Director serving over ten years. The current short tenure of the majority of our Directors is due to the merger between Johnson Controls, Inc. and a subsidiary of Tyco International plc, with six Directors from Johnson Controls, Inc. joining our board on September 2, 2016. We believe this combination of boards is a positive, with more experienced Directors from each of legacy Johnson Controls and legacy Tyco having a deep knowledge of their respective companies and our newer Directors bringing fresh ideas and perspectives to board discussions. We continually review our board
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Board of Directors
composition to ensure we maintain the right balance of expertise and diverse viewpoints. We also review our board leadership structure and committee memberships each year, taking into account the guidelines outlined in our Corporate Governance Guidelines. Director Orientation and Education A formal orientation program is provided to new Directors by the Corporate Secretary on Johnson Controls’ mission, values, governance, compliance and business operations. In addition, a program of continuing education is annually provided to incumbent Directors, and it includes review of the Company’s Ethics Policy. Directors are also encouraged to take advantage of outside continuing education relating to their duties as a Director and to subscribe to appropriate publications at the Company’s expense. Other Directorships, Conflicts and Related Party Transactions We recognize the importance of having Directors with significant experience in other businesses and activities; however, Directors are expected to ensure that other commitments, including outside board memberships, do not interfere with their duties and responsibilities as members of the Johnson Controls’ Board. In order to provide sufficient time for informed participation in their Board responsibilities non-executive Directors are required to limit their external directorships of other public companies to three and Audit Committee members are required to limit their audit committee membership in other public companies to two. The Board may, in its discretion, waive these limits in special circumstances. When a Director, the CEO or the Chief Operating Officer intend to serve on another board, the Governance Committee is required to be notified. The Governance Committee reviews the possibility of conflicts of interest or time constraints and must approve the officer’s or Director’s appointment to the outside board. Each Director is required to notify the Corporate Secretary of any conflicts. The CEO may serve on no more than one other public company board. Further, except as contemplated by the CEO succession plan described above, the CEO shall resign or retire from the Board upon resigning or retiring from his role as CEO, following a transition period mutually agreed upon between the CEO and the Compensation Committee. The company has a formal, written procedure intended to ensure compliance with the related party provisions in our Ethics Policy and with our corporate governance guidelines. For the purpose of the policy, a “related party transaction” is a transaction in which we participate and in which any related party has a direct or indirect material interest, other than ordinary course, arms-length transactions of less than 1% of the revenue of the counterparty. Transactions exceeding the 1% threshold, and any transaction involving consulting, financial advisory, legal or accounting services that could impair a Director’s independence, must be approved by our Governance Committee. Any related party transaction in which an executive officer or a Director has a personal interest, or which could present a possible conflict under the Ethics Policy, must be approved by a majority of disinterested directors, following appropriate disclosure of all material aspects of the transaction. Under the rules of the Securities and Exchange Commission, public issuers such as Johnson Controls must disclose certain “related person transactions.” These are transactions in which Johnson Controls is a participant where the amount involved exceeds $120,000, and a Director, executive officer or holder of more than 5% of our ordinary shares has a direct or indirect material interest. Although Johnson Controls engaged in commercial transactions in the normal course of business with companies where Johnson Controls’ Directors were employed and served as officers, none of these transactions exceeded 1% of Johnson Controls’ gross revenues and these transactions are not considered to be related party transactions.
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Board of Directors
Ethics Policy We have adopted the Ethics Policy, which applies to all employees, officers, and Directors of Johnson Controls. The Ethics Policy meets the requirements of a “code of ethics” as defined by Item 406 of Regulation S-K and applies to our CEO, Chief Financial Officer and Chief Accounting Officer, as well as all other employees. The Ethics Policy also meets the requirements of a code of business conduct and ethics under the listing standards of the NYSE. The Ethics Policy is posted on our website at www.johnsoncontrols.com under the heading “About—Ethics and Compliance.” We will also provide a copy of the Ethics Policy to shareholders upon request. We disclose any amendments to the Ethics Policy, as well as any waivers for executive officers or Directors on our website at www.johnsoncontrols.com under the heading “About Us —Ethics and Compliance.” The Board of Directors annually certifies their compliance with the Ethics Policy. The Company maintains established procedures by which employees may anonymously report a possible violation of the Ethics Policy. The Audit Committee maintains procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters. The Audit Committee also maintains procedures for employees to report concerns regarding questionable accounting or auditing policies or practices on a confidential, anonymous basis. Nomination of Directors and Board Diversity The Governance Committee, in accordance with the Board’s governance principles, seeks to create a Board that as a whole is strong in its collective knowledge and has a diversity of skills and experience with respect to vision and strategy, management and leadership, business operations, business judgment, crisis management, risk assessment, industry knowledge, accounting and finance, corporate governance and global markets. The Johnson Controls Board does not have a specific policy regarding diversity. Instead, the Governance Committee considers the Board’s overall composition when considering a potential new candidate, including whether the Board has an appropriate combination of professional experience, skills, knowledge and variety of viewpoints and backgrounds in light of Johnson Controls’ current and expected future needs. In addition, the Governance Committee believes that it is desirable for new candidates to contribute to a variety of viewpoints on the Board, which may be enhanced by a mix of different professional and personal backgrounds and experiences. The Governance Committee periodically reviews these criteria and qualifications to determine any need to revise such criteria and qualifications based upon corporate governance best practices and Johnson Controls’ needs at the time of the review. General criteria for the nomination of Director candidates include:
Board of Directors
| ∎ | the highest ethical standards and integrity; |
Board of Directors
| ∎ | a willingness to act on and be accountable for Board decisions; |
Board of Directors
| ∎ | an ability to provide wise, informed and thoughtful counsel to top management on a range of issues; |
Board of Directors
| ∎ | a history of achievement that reflects superior standards for themselves and others; |
Board of Directors
| ∎ | loyalty and commitment to driving the success of the Company; |
Board of Directors
| ∎ | an ability to take tough positions while at the same time working as a team player; and |
Board of Directors
| ∎ | individual backgrounds that provide a portfolio of experience and knowledge commensurate with the Company’s needs. |
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The Company also strives to have all non-employee Directors be independent. In addition to having such Directors meet the NYSE definition of independence, the Board has set its own more rigorous standard of independence. The Governance Committee must also ensure that the members of the Board as a group maintain the requisite qualifications under NYSE listing standards for populating the Audit, Compensation and Governance Committees. In addition, the Governance Committee ensures that each member of the Compensation Committee is a “Non-Employee” Director as defined in the Securities Exchange Act of 1934 and is an “outside director” as defined in section 162(m) of the U.S. Code. As provided in its charter, the Governance Committee will consider Director candidates recommended by shareholders. To recommend a Director candidate, a shareholder should write to Johnson Controls’ Secretary at Johnson Controls’ current registered address: One Albert Quay, Cork, Ireland. Such recommendation must include:
Board of Directors
| ∎ | the name and address of the candidate; |
Board of Directors
| ∎ | a brief biographical description, including his or her occupation for at least the last five years, and a statement of the qualifications of the candidate, taking into account the qualification requirements set forth above; |
Board of Directors
| ∎ | the candidate’s signed consent to serve as a Director if elected and to be named in the proxy statement; |
Board of Directors
| ∎ | evidence of share ownership of the person making the recommendation; and |
Board of Directors
| ∎ | all of the information required by Article 62 of our Memorandum and Articles of Association to be included in notices for any nomination by a shareholder of an individual for election to the Board. |
Board of Directors
The recommendation must also follow the procedures set forth in Articles 54—68 of our Memorandum and Articles of Association to be considered timely and complete in order to be considered for nomination to the Board. To be considered by the Governance Committee for nomination and inclusion in the Company’s proxy statement for the 2017 Annual General Meeting, shareholder recommendations for Director must be received by Tyco’s Corporate Secretary no later than September 22, 2017. Once the Company receives the recommendation, the Company may deliver a questionnaire to the candidate that requests additional information about the candidate’s independence, qualifications and other information that would assist the Governance Committee in evaluating the candidate, as well as certain information that must be disclosed about the candidate in the Company’s proxy statement, if nominated. Candidates must complete and return the questionnaire within the time frame provided to be considered for nomination by the Governance Committee. No candidates were recommended by shareholders in connection with the Annual General Meeting. The Governance Committee employs an unrelated search firm to assist the Committee in identifying candidates for Director when a vacancy occurs. The Committee also receives suggestions for Director candidates from Board members. All of our nominees for Director are current members of the Board. In evaluating candidates for Director, the Committee uses the qualifications described above, and evaluates shareholder candidates in the same manner as candidates from all other sources. Based on the Governance Committee’s evaluation of the current Directors, each nominee was recommended for election.
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Board of Directors
For More Information We believe that it is important that Johnson Controls’ stakeholders and others are able to review its corporate governance practices and procedures. Our corporate governance guidelines are embodied in a formal document that has been approved by Johnson Controls’ Board of Directors. It is available on our website at www.johnsoncontrols.com under the heading “Investors-Corporate Governance.” We will also provide a copy of the corporate governance principles to shareholders upon request. Our corporate governance guidelines and general approach to corporate governance as reflected in our memorandum and articles of association and our internal policies and procedures are guided by U.S. practice and applicable federal securities laws and regulations and NYSE requirements. Although we are an Irish public limited company, we are not subject to, nor have we adopted, the U.K. Corporate Governance Code or any other non-statutory Irish or U.K. governance standards or guidelines. While there are many similarities and overlaps between the U.S. corporate governance standards applied by us and the U.K. Corporate Governance Code and other Irish/U.K. governance standards or guidelines, there are differences, in particular relating to the extent of the authorization to issue share capital and effect share repurchases that may be granted to the Board and the criteria for determining the independence of directors.
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COMPENSATION OF NON-EMPLOYEE DIRECTORS
COMPENSATION OF NON-EMPLOYEE DIRECTORS Director compensation for fiscal 2016 through September 8, 2016 for non-employee directors consisted of an annual cash retainer of $110,000 and restricted stock units (“RSUs”) with a grant date value of approximately $140,000 and a one-year vesting term. On September 8, 2016, these amounts were increased to $120,000 for the annual cash retainer and $155,000 for the grant date value of RSUs. The Lead Director received an additional $30,000 and the chairs of each of standing committees (other than the Lead Director) received an additional fee of $25,000. In addition, any member of a special committee of the Board receives meeting fees in an amount of $1,500 per day ($750 for telephonic meetings) for each special committee meeting that he or she attends. A Director who is also an employee receives no additional remuneration for services as a Director.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | All Other Compensation ($)(3) | Total ($) | | Current Directors | | | | | | Mr. David Abney | $9,130 | $- | $- | $9,130 | | Ms. Natalie Black (GC) | $11,033 | $- | $- | $11,033 | | Mr. Michael E. Daniels | $122,938 | $140,015 | $- | $262,953 | | Mr. Juan Pablo del Vale Perochena | $9,130 | $- | $- | $9,130 | | Mr. Brian Duperreault | $154,771 | $140,015 | $- | $294,786 | | Mr. Jeffrey Joerres (L)(CC) | $12,174 | $- | $- | $12,174 | | Mr. Jürgen Tinggren (AC) | $124,840 | $140,015 | $- | $264,855 | | Mr. Mark Vergnano | $11,033 | $- | $- | $11,033 | | Mr. R. David Yost | $118,067 | $140,015 | $5,000 | $263,082 | | Former Directors | | | | | | Mr. Edward D. Breen | $123,471 | $140,015 | $72,091 | $335,577 | | Mr. Herman E. Bulls | $101,630 | $140,015 | $14,903 | $256,548 | | Mr. Frank M. Drendel | $101,630 | $140,015 | $10,000 | $251,645 | | Mr. Rajiv L. Gupta | $112,550 | $140,015 | $- | $252,565 | | Mr. Brendan R. O’Neill | $112,550 | $140,015 | $- | $252,565 | | Ms. Sandra S. Wijnberg | $101,630 | $140,015 | $15,000 | $256,645 |
COMPENSATION OF NON-EMPLOYEE DIRECTORS
| (L)= | Lead Director |
COMPENSATION OF NON-EMPLOYEE DIRECTORS
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COMPENSATION OF NON-EMPLOYEE DIRECTORS
| (AC)= | Audit Committee Chair | | (CC)= | Compensation Committee Chair | | (GC)= | Governance Committee Chair |
COMPENSATION OF NON-EMPLOYEE DIRECTORS
| Fees are pro rated for the change in compensation described above.(1) |
COMPENSATION OF NON-EMPLOYEE DIRECTORS
| This column reflects the fair value of the entire amount of awards granted to Directors calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718, excluding estimated forfeitures. The fair value of RSUs is computed by multiplying the total number of shares subject to the award by the closing market price of the Company’s ordinary shares on the date of grant. RSUs granted to Board members generally vest and the underlying units are converted to shares and delivered to Board members on the anniversary of the grant date.(2) |
COMPENSATION OF NON-EMPLOYEE DIRECTORS
| All other compensation includes the aggregate value of all matching charitable contributions made by the Company on behalf of the Directors during the fiscal year for Messrs. Bulls, Drendel and Yost and Ms. Wijnberg. In calendar 2016, the Company matched the contributions of Directors made to qualifying charities up to a maximum of $10,000. The amount reported for Mr. Breen, related to his role as a former employee, reflects a tax gross-up reimbursement (related to compensation awarded to him prior to January 1, 2009) of state taxes owed by him to New York for legacy Tyco work performed in that State. The amount related to state taxes for Mr. Breen for fiscal 2016 is an estimate, pending receipt of the relevant personal state tax return information for calendar year 2016. This estimate is based primarily on amounts realized by Mr. Breen in fiscal 2016 that is deemed by New York State to have been earned by Mr. Breen in New York prior to 2009. Mr. Breen waived the New York tax gross-up with respect to compensation award after January 1, 2009.(3) |
COMPENSATION OF NON-EMPLOYEE DIRECTORS
Charitable Contributions The Board understands that its members, or their immediate family members, serve as directors, trustees, executives, advisors and in other capacities with a host of other organizations. If Johnson Controls directs a charitable donation to an organization in which a Johnson Controls Director, or their immediate family member, serves as a director, trustee, executive, advisor, or in other capacities with the organization, the Board must approve the donation. Any such donation approved by the Board will be limited to an amount that is less than 2% of that organization’s annual charitable receipts, and less than 2% of Johnson Controls’ total annual charitable contributions. In line with its matching gift policy for employees, going forward Johnson Controls will make an annual matching gift of up to $5,000 for each Director to qualifying charities.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
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COMMITTEES OF THE BOARD
COMMITTEES OF THE BOARD The table below sets forth committee membership as of the end of fiscal year 2016 and meeting information for each of the Board Committees.
COMMITTEES OF THE BOARD
| Name | Audit | Governance | Compensation | Executive | Date Elected/ Appointed to Board | | Mr. David Abney | X | | | | 9/2/2016 | | Ms. Natalie Black | | X(C) | | X | 9/2/2016 | | Mr. Michael E. Daniels | | | X | | 3/10/2010 | | Mr. Juan Pablo del Vale Perochena | | X | | | 9/2/2016 | | Mr. Brian Duperreault | | X | | | 3/25/2004 | | Mr. Jeffrey Joerres (LD) | | | X(C) | X | 9/2/2016 | | Mr. Jürgen Tinggren | X(C) | | | X | 3/5/2014 | | Mr. Mark Vergnano | X | | | | 9/2/2016 | | Mr. R. David Yost | | | X | | 3/12/2009 | | Number of Meetings During Fiscal Year 2016 | 10 | 5 | 11 | - | |
COMMITTEES OF THE BOARD
(L) = Lead Director (C) = Committee Chair During fiscal 2016, the full Board met seven times. All of our Directors attended at least 90% of the meetings of the Board and the committees on which they served in fiscal 2016. The Board’s governance principles provide that Board members are expected to attend each Annual General Meeting in person or by phone. At the 2016 Annual General Meeting, all of our current Board members who were Board members at such time were in attendance. Audit Committee. The Audit Committee monitors the integrity of Johnson Controls’ financial statements, the independence and qualifications of the independent auditors, the performance of Johnson Controls’ internal auditors and independent auditors, Johnson Controls’ compliance with legal and regulatory requirements and the effectiveness of Johnson Controls’ internal controls. The Audit Committee is also responsible for retaining, subject to shareholder approval, evaluating, setting the remuneration of, and, if appropriate, recommending the termination of Johnson Controls’ auditors. The Audit Committee has been established in accordance with Section 3(a)(58)(A) of the Securities
COMMITTEES OF THE BOARD
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COMMITTEES OF THE BOARD
Exchange Act of 1934, as amended. The Audit Committee operates under a charter approved by the Board. The charter is posted on Johnson Controls’ website at www.johnsoncontrols.com and we will provide a copy of the charter to shareholders upon request. The current members of the Audit Committee are Messrs. Tinggren, Abney and Vergnano, each of whom is independent under NYSE listing standards and SEC rules for audit committee members. Mr. Tinggren is the chair of the Audit Committee. The Board has determined that each of Messrs. Tinggren, Abney and Vergnano is an audit committee financial expert. Governance Committee. The Governance Committee is responsible for identifying individuals qualified to become Board members, recommending to the Board the Director nominees for the Annual General Meeting, developing and recommending to the Board a set of corporate governance principles, and playing a general leadership role in Johnson Controls’ corporate governance. In addition, the Governance Committee oversees our environmental, health and safety management system and enterprise risk assessment activities. The Governance Committee operates under a charter approved by the Board. The charter is posted on Johnson Controls’ website at www.johnsoncontrols.com and we will provide a copy of the charter to shareholders upon request. The current members of the Governance Committee are Ms. Black and Messrs, Duperreault and del Valle Perochena, each of whom is independent under NYSE listing standards. Ms. Black chairs the Governance Committee. Compensation Committee. The Compensation Committee reviews and approves compensation and benefits policies and objectives, determines whether Johnson Controls’ officers, Directors and employees are compensated according to these objectives, and assists the Board in carrying out certain of its Board’s responsibilities relating to the compensation of Johnson Controls’ executives. The Compensation Committee operates under a charter approved by the Board. The charter is posted on Johnson Controls’ website at www.johnsoncontrols.com and we will provide a copy of the charter to shareholders upon request. The current members of the Compensation Committee are Messrs. Joerres, Daniels and Yost. Mr. Joerres is the chair of the Compensation Committee as well as our independent lead director. The Board of Directors has determined that each of the members of the Compensation Committee is independent under NYSE listing standards. In addition, each member is a “Non-Employee” Director as defined in the Securities Exchange Act of 1934 and is an “outside director” as defined in section 162(m) of the U.S. Code. For more information regarding the Compensation Committee’s roles and responsibilities, see the Compensation Discussion and Analysis. Executive Committee. The Executive Committee assists the Board in fulfilling its oversight responsibility with its review and monitoring of major corporate actions including external corporate development activities, business portfolio optimization, capital appropriations and capital expenditures. The Executive Committee was established in September of 2016 and operates under a charter approved by the Board. The charter is posted on Johnson Controls’ website at www.johnsoncontrols.com and we will provide a copy of the charter to shareholders upon request. The current members of the Executive Committee were Messrs. Molinaroli, Joerres, Tinggren and Ms. Black. Mr. Molinaroli is the chair of the Executive Committee. Compensation Committee Interlocks and Insider Participation None of the members of the Compensation Committee during fiscal 2016 or as of the date of this proxy statement is or has been an officer or employee of the Company and no executive officer of the Company served on the compensation committee or board of any company that employed any member of the Company’s Compensation Committee or Board of Directors.
COMMITTEES OF THE BOARD
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COMMITTEES OF THE BOARD
COMPENSATION DISCUSSION & ANALYSIS EXECUTIVE SUMMARY On September 2, 2016, Johnson Controls, Inc. and Tyco International plc combined to create Johnson Controls International plc (“Johnson Controls” or the “Company”), a global leader in building products and technology, integrated solutions and energy storage. We refer to this transaction throughout this CD&A as the “Merger.” Our newly combined organization’s executive compensation programs are designed to provide competitive total rewards while aligning executive interests to those of our shareholders. Going forward, the following philosophy will guide the development, review and approval of the compensation for our executive officers:
COMMITTEES OF THE BOARD
| Objectives | Philosophy | | Our executive compensation program is designed to: · Build long-term shareholder value · Deliver sustained, strong business and financial results · Attract, motivate and retain a highly qualified and effective executive team | Our executive compensation philosophy is built on several principles: · Align compensation with shareholder interests · Avoid excessive risk-taking · Pay for performance (both company and individual) · Focus on the long term · Align compensation to market; targeting the 50(th) percentile · Provide an appropriate pay mix, with an increase in at-risk and performance-based compensation as executive responsibilities increase |
COMMITTEES OF THE BOARD
Important Information to Know When Reading this CD&A Due to the Merger, this compensation discussion and analysis (CD&A) includes information related to individuals who were executives of Tyco International plc (which we refer to as “Legacy Tyco”, and which individuals we refer to as “Legacy Tyco NEOs”) and Johnson Controls, Inc. (which we refer to as “Legacy Johnson Controls”, and which individuals we refer to as “Legacy Johnson Controls NEOs”) prior to the Merger. Because Tyco was the legal acquirer of Legacy Johnson Controls, the compensation of Legacy Tyco NEOs for periods prior to and after the Merger is discussed and analyzed. The compensation of Legacy Johnson Controls NEOs is discussed and analyzed for periods subsequent to the Merger (September 2 – September 30, 2016). Therefore, this CD&A primarily addresses Legacy Tyco programs and the decisions made by the Legacy Tyco Compensation Committee. Where necessary, we have also described Legacy Johnson Controls programs and the decisions made by the Legacy Johnson Controls Compensation Committee. We also provide a discussion and analysis of the Johnson Controls International plc executive
COMMITTEES OF THE BOARD
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COMMITTEES OF THE BOARD
compensation programs going forward, which reflect the decisions made by the Johnson Controls International plc Compensation Committee subsequent to the Merger. The following individuals are our named executive officers (or “NEOs”) for 2016:
COMMITTEES OF THE BOARD
| NEO | Position in Johnson Controls International plc | Previous Position in Legacy Company | | Alex A. Molinaroli | Chairman of the Board & Chief Executive Officer (“CEO”) | Legacy Johnson Controls Chairman of the Board, President & CEO | | George R. Oliver | President and Chief Operating Officer (“COO”) | Legacy Tyco CEO | | Brian Stief | Executive Vice President & Chief Financial Officer | Legacy Johnson Controls Executive Vice President & Chief Financial Officer | | Bruce McDonald(1) | N/A | Legacy Johnson Controls Executive Vice President & Vice Chairman | | Judy Reinsdorf | Executive Vice President & General Counsel | Legacy Tyco Executive Vice President & General Counsel | | William Jackson | Vice President & President Global Products—Building Technologies & Solutions | Legacy Johnson Controls Vice President & President—Building Efficiency | | Robert E. Olson(2) | Transition role | Legacy Tyco Executive Vice President & Chief Financial Officer | | Arun Nayar(2) | N/A | Legacy Tyco Executive Vice President & Chief Financial Officer |
COMMITTEES OF THE BOARD
| Mr. McDonald became the Chairman and CEO of Adient upon its spinoff from Johnson Controls International plc on October 31, 2016.(1) |
COMMITTEES OF THE BOARD
| Mr. Olson is expected to remain with the Company for a six month transition period following completion of the Merger. Mr. Nayar was Legacy Tyco’s Executive Vice President and Chief Financial Officer through November 13, 2015, at which time he was succeeded by Mr. Olson, and left Legacy Tyco on December 31, 2015.(2) |
COMMITTEES OF THE BOARD
2016 Business Performance 2016 was a year of transformation for Johnson Controls. It was truly a momentous year in which a new Johnson Controls emerged as the global leader in building technologies, integrated solutions and
COMMITTEES OF THE BOARD
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COMMITTEES OF THE BOARD
energy storage. We believe the Company is well-positioned strategically for long term success and to operationally deliver strong growth and profitability in 2017. During 2016, the Company successfully executed on several actions to improve long-term shareholder value, including:
COMMITTEES OF THE BOARD
| ∎ | Formation of the Hitachi joint venture on October 1, 2015, |
COMMITTEES OF THE BOARD
| ∎ | Completion of the Merger with Tyco on September 2, 2016, |
COMMITTEES OF THE BOARD
| ∎ | Completion of the Separation of the Automotive Experience business creating Adient (NYSE: ADNT) on October 31, 2016. |
COMMITTEES OF THE BOARD
At the same time, the Company exceeded external commitments for fiscal 2016. For the full year, Johnson Controls reported $37.7 billion in sales, segment EBIT of $3.0 billion and a GAAP net loss from continuing operations of $868 million, which includes one month of Legacy Tyco results as well as several special items. GAAP diluted loss per share from continuing operations for the year was $1.30 compared to earnings per share from continuing operations of $2.18 in the prior year. Adjusting for special items and excluding the Legacy Tyco results, non-GAAP adjusted diluted earnings per share* from continuing operations increased 16 percent to $3.98 from $3.42 in the prior year. Financial highlights from continuing operations for the full year include:
COMMITTEES OF THE BOARD
| ∎ | Adjusted net sales* of $36.9 billion versus $37.2 billion in the prior year. Increased volume and incremental sales from the Hitachi joint venture were more than offset by the impact of the Automotive Interiors deconsolidation. Excluding the impact of these items and foreign exchange, adjusted sales increased 1 percent. |
COMMITTEES OF THE BOARD
| ∎ | Adjusted segment EBIT* of $3.7 billion compared with $3.2 billion in the prior year, up 16 percent. Excluding the impact of the Hitachi joint venture, foreign exchange and the Automotive Interiors deconsolidation, adjusted segment EBIT increased 9 percent. |
COMMITTEES OF THE BOARD
| ∎ | Adjusted segment EBIT* margin of 10.1 percent was 150 basis points higher than the prior year. |
COMMITTEES OF THE BOARD
| ∎ | Adjusted diluted EPS* of $3.98 exceeded original 2016 guidance of $3.70 to $3.90. |
COMMITTEES OF THE BOARD
While the macro-economic environment in fiscal 2016 remained challenging in some key markets, each of the Company’s businesses generated profit and margin improvements. We believe the performance of the executive officers named in this proxy statement has positioned the Company to continue to deliver strong financial results in fiscal 2017 and beyond. We believe the Company has the financial capability to invest strategically in our businesses and to generate increased shareholder value.
COMMITTEES OF THE BOARD
| Represents Non-GAAP financial measures. See reconciliation to GAAP metrics in Annex I* |
COMMITTEES OF THE BOARD
Our Future Together The merger of Legacy Johnson Controls and Legacy Tyco has brought together best-in-class product, technology and service capabilities across controls, fire, security, HVAC, power solutions and energy storage. Going forward, the new Johnson Controls will link complementary branch networks and independent channels to drive global growth, enhancing the revenue and earnings growth profile of two established businesses. We are confident that the integration will create a world leader in buildings and energy, uniquely positioned to deliver superior value to customers, employees and shareholders through a powerful strategic combination.
COMMITTEES OF THE BOARD
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COMMITTEES OF THE BOARD
| Compensation Discussion & Analysis Program Details |
QUANTIFICATION OF PAYMENTS
QUANTIFICATION OF PAYMENTS Under the Legacy Johnson Controls 2012 Omnibus Incentive Plan (the “Johnson Controls Omnibus Plan”), Legacy Johnson Controls equity awards that were assumed by the Company will vest if a Legacy Johnson Controls NEO’s employment is terminated by the Company without cause or by the executive officer with good reason, during a specified period following a change of control. As described below, the Merger has been deemed to constitute a “change of control” for purposes of the Legacy Johnson Controls equity awards described above.
QUANTIFICATION OF PAYMENTS
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QUANTIFICATION OF PAYMENTS
Molinaroli Amended and Restated Employment Agreement Mr. Molinaroli’s amended and restated change of control employment agreement, dated as of January 24, 2016 and amended as of April 1, 2016 (referred to as the “amended Molinaroli change of control agreement”), sets forth the terms of his employment during the Succession Period. The amended Molinaroli change of control agreement supersedes his employment agreement with Legacy Johnson Controls that was in effect prior to the Merger. Pursuant to the amended Molinaroli change of control agreement, Mr. Molinaroli agreed to the terms of the succession plan described above, including his transition from Chief Executive Officer to Executive Chairman no later than 18 months following the completion of the Merger. As a result, if the succession plan proceeds as planned, we do not expect to make any severance payment to Mr. Molinaroli in connection with the Merger. Under the terms of the amended Molinaroli change of control agreement, the Merger has been deemed to constitute a change of control, although the provisions of the agreement related to guaranteed continued compensation do not apply in respect of the change of control triggered by the Merger (other than with respect to base salary). In addition, the amended Molinaroli change of control agreement provides that, in addition to the events constituting “good reason” as described in the agreement, a failure by the Company to provide target incentive compensation opportunities at least as favorable as those provided immediately prior to the closing of the Merger, or a failure to provide perquisites at least as favorable as those provided to similarly situated executives of the Company from time to time, will provide a basis for Mr. Molinaroli to terminate employment for “good reason” under the agreement. In addition, the amended Molinaroli change of control agreement provided for a restricted share unit award of the Company having an aggregate grant date fair value equal to $20 million, which the Company granted on September 8, 2016. The restricted share unit award will vest at the end of the Succession Period (i.e., on the date that is 30 months following the closing of the Merger), subject to Mr. Molinaroli’s continued employment through such date and to accelerated vesting only in the event of his earlier death or disability. As noted above, if the succession plan proceeds as planned, Mr. Molinaroli will not be entitled to any severance in connection with the Merger. Instead, the restricted share units granted on September 8, 2016 will vest at the end of the Succession Period. As of September 30, 2016, Mr. Molinaroli would have been entitled to a cash severance payment equal to approximately $41 million assuming he had experienced a qualifying termination on such date. It is important to note that under the terms of Mr. Molinaroli’s employment agreement in effect prior to the Merger, a transition from CEO to Executive Chairman would have provided Mr. Molinaroli with “good reason” as defined in that agreement, and therefore to receive severance benefits. As a result, the Legacy Johnson Controls Compensation Committee viewed the $20 million restricted share unit grant as a shareholder friendly vehicle to facilitate the consummation of the Merger and the success of the integration. Oliver Amended and Restated Employment Agreement Under the terms of Legacy Tyco’s Change in Control Severance Plan for Certain U.S. Officers and Executives (the “Tyco CIC Severance Plan”), Mr. Oliver would have been entitled to severance benefits as a result of the Merger due to his no longer being CEO of the Company. Therefore, in order to facilitate the Merger and the orderly CEO succession plan contemplated thereby, Mr. Oliver and Legacy Tyco entered into an employment agreement, dated as of January 24, 2016, which became effective upon the completion of the Merger (the “Oliver Employment Agreement”). The terms of the Oliver Employment Agreement generally are comparable to the amended Molinaroli change of control agreement. During the 33 month period following the Merger date (the “initial employment period”),
QUANTIFICATION OF PAYMENTS
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QUANTIFICATION OF PAYMENTS
Mr. Oliver is entitled to a base salary of $1,250,000 per year, a target annual bonus opportunity of 135% of his then-current base salary, and an annual long-term incentive compensation opportunity target of at least $8.25 million. The Oliver Employment Agreement also includes severance provisions that are comparable to Mr. Molinaroli’s during the initial employment period. As is the case for Mr. Molinaroli, if the succession plan proceeds as planned, we do not expect to make any severance payment to Mr. Oliver in connection with the Merger. For a discussion and analysis of these provisions, see the section entitled “Potential Payments upon Termination”. Change of Control Employment Agreements with Other Legacy Johnson Controls NEOs Each of the Legacy Johnson Controls NEOs (other than Mr. McDonald and Mr. Molinaroli) is party to a change of control employment agreement that provides for severance benefits in the event of a qualifying termination or a termination due to the executive’s death or disability. As a result of each Legacy Johnson Controls NEO entering into a letter agreement with Legacy Johnson Controls acknowledging that (i) the provisions of their agreements related to guaranteed continued compensation will not apply in respect of the change of control triggered by the Merger (other than with respect to base salary) and (ii) that implementation of the CEO succession plan described above will not constitute good reason to terminate employment under the change of control employment agreement, the Merger has been deemed to constitute a change of control under such agreement. The change of control employment agreements, as amended by the letter agreement, provide that upon a qualifying termination or a termination due to the executive officer’s death or disability within 36 months following the Merger, the terminated Legacy Johnson Controls NEO would be entitled to the following under the change of control employment agreement:
QUANTIFICATION OF PAYMENTS
| ∎ | A lump sum severance payment equal to three times the executive officer’s annual cash compensation, which includes the executive officer’s annual base salary and the greater of (a) the average of the executive officer’s annualized annual cash bonuses and long-term performance awards for the three fiscal years preceding the change of control, and (b) the sum of the annual cash bonuses and long-term performance awards for the most recently completed fiscal year (such greater amount, “average performance bonus”); |
QUANTIFICATION OF PAYMENTS
| ∎ | Payment of a pro rata portion of the executive officer’s average performance bonus (reduced, if the executive officer’s termination occurs on the change of control date, by the amount paid under the Johnson Controls Omnibus Plan in respect of performance stock unit awards as a result of a qualifying termination); |
QUANTIFICATION OF PAYMENTS
| ∎ | a cash payment equal to the lump sum value of the additional benefits the executive officer would have accrued for the remainder of the employment period under the Legacy Johnson Controls’ pension plan and the Legacy Johnson Controls’ Retirement Restoration Plan, assuming the executive officer is fully vested in such benefits at the time of termination; and |
QUANTIFICATION OF PAYMENTS
| ∎ | continued medical and welfare benefits for two years following termination of employment without cause or with good reason. |
QUANTIFICATION OF PAYMENTS
The change of control employment agreements require Legacy Johnson Controls NEOs to comply with confidentiality provisions during employment and for two years following termination of employment.
QUANTIFICATION OF PAYMENTS
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QUANTIFICATION OF PAYMENTS
The Legacy Johnson Controls NEOs would generally have “good reason” to resign under their respective change of control employment agreements if, as determined in good faith by such executive:
QUANTIFICATION OF PAYMENTS
| ∎ | the Company assigned the executive officer to duties inconsistent with the executive officer’s position or the combined company took other actions to reduce the executive officer’s authority or responsibilities; |
QUANTIFICATION OF PAYMENTS
| ∎ | the Company breached any provision of the change of control employment agreement relating to salary and any benefits required to be paid or provided following the merger (subject to the acknowledgment in the letter agreement described above); |
QUANTIFICATION OF PAYMENTS
| ∎ | the Company required the executive officer to relocate; |
QUANTIFICATION OF PAYMENTS
| ∎ | the Company terminated the executive officer’s employment other than as permitted by the change of control employment agreement; or |
QUANTIFICATION OF PAYMENTS
| ∎ | the Company requested that the executive officer perform an illegal or wrongful act in violation of the combined company’s code of conduct. |
QUANTIFICATION OF PAYMENTS
Merger Retention RSU Awards As an incentive to reward extraordinary effort required through the execution of the integration process and provide cohesive leadership to the new Company, certain executive officers (other than Mr. Molinaroli, whose award is discussed above), including the following Named Executive Officers received a restricted share unit grant on September 8, 2016:
QUANTIFICATION OF PAYMENTS
| | Number of RSUs | Value of RSUs | Vesting(1) | | Brian Stief | 52,235 | $2,500,000 | 3-year cliff | | Judy Reinsdorf | 50,146 | $2,400,000 | 2-year cliff | | William Jackson | 52,235 | $2,500,000 | 3-year cliff | | Robert E. Olson(2) | N/A | N/A | N/A |
QUANTIFICATION OF PAYMENTS
| Awards fully vest in the event of death or disability (and solely for Mr. Stief, continue to vest following retirement) and vest pro rata for any other termination except for cause.(1) |
QUANTIFICATION OF PAYMENTS
| As previously disclosed, Mr. Olson received a cash-based retention award of $600,000 that vested on December 31, 2016.(2) |
QUANTIFICATION OF PAYMENTS
RSU Awards Related to Legacy Johnson Controls Nonqualified Plans Under Legacy Johnson Controls Nonqualified Deferred Compensation and Retirement Restoration Plans, all amounts under the plans automatically became vested and payable in a lump sum cash payment as a result of the Merger. In order to partially offset the lost opportunity to earn additional supplemental benefits resulting from the accelerated payments, the Legacy Johnson Controls Compensation Committee implemented a special program for all current employee and retiree participants in these plans. Under the special program, each active and retiree participant in these
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QUANTIFICATION OF PAYMENTS
plans received an increase in his or her distribution based on a formula applied consistently across all participants. Using the same methodology, the Legacy Johnson Controls NEOs who participated in these plans were granted a restricted share award on September 8, 2016.
QUANTIFICATION OF PAYMENTS
| | Number of RSUs | Grant Date Value of RSUs | Vesting(1) | | Alex Molinaroli | 146,763 | $7,024,099 | 30 months | | Brian Stief | 36,571 | $1,750,307 | 3-year cliff | | Bruce McDonald | 105,537 | $5,051,013 | 3-year cliff | | William Jackson | 10,449 | $500,101 | 3-year cliff |
QUANTIFICATION OF PAYMENTS
| Awards fully vest in the event of a termination for any reason other than “cause”(1) |
Elements of the 2016 Legacy Tyco Executive Compensation Program
| Element | Purpose | Type of Compensation | Primary Influence Factors | | Base Pay | Provides a fixed level of cash compensation that recognizes the value of an individual’s role to the company | Cash | ∎ Role ∎ Skill ∎ Sustained performance | | Annual Incentive | Provides a cash-based incentive opportunity tied to the execution of the operating plan and other strategic goals which supported the long-term sustainability of Legacy Tyco. Annual incentive award opportunities ranged from 0% - 200% of target based on the extent to which pre-established objectives were met as well as individual contributions and behaviors. | Cash | ∎ Financial performance ∎ Operating income ∎ Revenue ∎ Working capital days ∎ Strategic initiatives ∎ Growth and innovation - Increase sales in high growth markets - Grow software related revenue ∎ Infrastructure efficiencies - Sourcing savings - Reduce real-estate footprint ∎ M&A effectiveness - performance of acquisitions vs. plan ∎ Individual performance and behaviors that demonstrate our core values of integrity, excellence, teamwork and accountability |
Elements of the 2016 Legacy Tyco Executive Compensation Program
| Element | Purpose | Type of Compensation | Primary Influence Factors | | Long-Term Incentive ∎ Performance Share Units (PSUs) ∎ Stock Options ∎ Restricted Share Units (RSUs) | Intended to attract, retain and motivate talent, and to align the interests of executives with the interests of shareholders by linking a significant portion of the officer’s total pay opportunity to share price performance. Provided long-term accountability for executives, and offered opportunities for capital accumulation for executives. | Long-Term Equity | ∎ Share price performance ∎ Earnings per share (EPS) ∎ Relative total shareholder return (TSR) ∎ Return on invested capital (ROIC) | | Health and Welfare and Retirement Benefits | Provided for opportunities to contribute toward retirement savings and promote health and wellness. | Benefit | Broadly applicable to all executives | | Termination and Transition Benefits | Essential for attracting and retaining talent and helping to insure orderly exits and transitions of executives. | Benefit | ∎ Governed by formal plan documents approved by the Board ∎ No individual agreements for executive officers | | Other Benefits and Perquisites | Help NEOs be more productive and efficient, and they provided protection from business risks and threats. | Benefit | ∎ Benefits consistent with what all employees receive ∎ Perquisites limited in amount ∎ Legacy Tyco maintained a strict policy regarding eligibility and use |
Analysis of Legacy Tyco 2016 Compensation
Annual Incentive Because the Merger occurred on September 2, 2016, with only a month remaining in each respective company’s fiscal year, NEOs were measured on the results of their legacy company for the full fiscal year. Legacy Tyco Annual Incentive Program Annual incentive compensation for the Legacy Tyco NEOs was paid in the form of an annual performance bonus under the 2012 Share and Incentive Plan (the “2012 SIP”). Annual incentive compensation rewards executives for their execution of the operating plan and other strategic initiatives, as well as for financial performance that benefits business and drives long-term shareholder value creation. It places a meaningful proportion of total cash compensation at risk, thereby aligning executive rewards with financial results. It also offers an opportunity for meaningful pay differentiation tied to the performance of individuals and groups. In fiscal 2016, the quantitative and qualitative measures applicable to Legacy Tyco NEOs were:
Analysis of Legacy Tyco 2016 Compensation
| Quantitative Performance Metrics (Non-GAAP) | Qualitative Strategic Initiatives (+/- 25% modifier) (applicable to each executive) | | ∎ 45% Tyco Operating Income ∎ 35% Tyco Revenue ∎ 20% Working Capital Days | ∎ Growth and Innovation - Increase Sales in High Growth Markets - Grow software related revenue ∎ Infrastructure Efficiencies - Sourcing Savings - Reduce real-estate footprint ∎ M&A Effectiveness - performance of acquisitions vs. plan |
Analysis of Legacy Tyco 2016 Compensation
Legacy Johnson Controls used simple weightings for the performance measures by placing a specific weighting on each metric for purposes of determining the amounts of the awards earned. In fiscal year 2016, the financial portion of the annual incentive measures had the following weights: 70% segment EBIT, 20% ROS, and 10% ROA. An executive officer could not receive a payout under an award if threshold performance levels were not met.
Analysis of Legacy Tyco 2016 Compensation
For Messrs. Molinaroli, Stief and McDonald, 100% of the financial portion of the annual incentive earned was based on performance relative to enterprise results. For Mr. Jackson 50% of the financial portion of the annual incentive earned was based on performance relative to Building Efficiency results and 50% relative to corporate results. Legacy Johnson Controls 2016 AIPP Performance Based on its review of the above information, the Legacy Johnson Controls Compensation Committee chose to set the earnings growth thresholds, targets and maximums for fiscal year 2016 primarily in line with analyst consensus earnings estimates for the S&P 500 Industrials as well as the broader S&P 500 Index. The Committee chose to set the thresholds, targets and maximums for return on sales (ROS) and return on assets (ROA) relative to Legacy Johnson Controls strategic and financial plans. This approach ensured competitive incentive compensation was provided based on market competitive performance, with continued focus on strategic deliverables. As part of the process for establishing fiscal year 2016 targets for the AIPP, the Legacy Johnson Controls Compensation Committee reviewed the following data:
Analysis of Legacy Tyco 2016 Compensation
| ∎ | Projected earnings growth estimates from Legacy Johnson Controls compensation peer group and the broader S&P 500 companies. |
Analysis of Legacy Tyco 2016 Compensation
| Performance Measures | 2016 Goals | | | 2016 Performance | 2016 Actual Awards (Non-Discretionary Portion) | | | Threshold | Target | Maximum | Actual | | | Corporate | | | | | | | Year-Over-Year Segment EBIT | 3% | 8% | 13% | 13.3% | | | Return on Sales (ROS) | 8.7% | 9.2% | 9.7% | 10.1% | 200% | | Pre-Tax ROA | 17.8% | 18.7% | 19.7% | 20.2% | | | Building Efficiency | | | | | | | Year-Over-Year Segment EBIT | 3% | 6.5% | 10% | 9.4% | | | Return on Sales (ROS) | 8.1% | 8.6% | 9% | 9.4% | 187.3% | | Pre-Tax ROA | 15.8% | 16.6% | 17.5% | 17.6% | |
Analysis of Legacy Tyco 2016 Compensation
For the discretionary portion of the award based on individual performance, a payout was authorized only if the minimum threshold performance levels under the financial portion were achieved, and negative discretion is used to deliver the intended award amount. In no event could payments under the discretionary portion of the award exceed target. The table below summarizes the threshold, target, and maximum award potential, actual payout as a percent of target, and actual payout amounts for Messrs. Molinaroli, Stief, McDonald and Jackson for fiscal year 2016 after reflecting the exercise of discretion discussed above. Actual payout could range from zero to two times the target payout percentage for the financial portion of the AIPP, depending on the achievement of goals, with the potential payments increasing as performance improved (though not above two times the target payout percentage).
Analysis of Legacy Tyco 2016 Compensation
| NEO | Award Targets | | | 2016 Actual Payout As a % of Target | 2016 Actual Payout Amount ($) | | | Threshold ($)(1) | Target ($)(2) | Maximum ($)(3) | | | | Alex A. Molinaroli | 1,135,400 | 2,838,500 | 5,677,000 | 192.0% | 5,449,922 | | Brian J. Stief | 324,450 | 811,125 | 1,622,250 | 192.0% | 1,557,362 | | R. Bruce McDonald | 618,000 | 1,545,000 | 3,090,000 | 192.0% | 2,966,402 | | William C. Jackson | 350,200 | 875,500 | 1,751,000 | 170.4% | 1,491,959 |
Analysis of Legacy Tyco 2016 Compensation
| Assumes threshold payout from financial portion of AIPP, and zero payout from discretionary portion.(1) |
Analysis of Legacy Tyco 2016 Compensation
| Assumes target payout from financial portion of AIPP, and target payout from discretionary portion.(2) |
Analysis of Legacy Tyco 2016 Compensation
| Assumes 200% payout from financial portion of AIPP, and full payout from discretionary portion.(3) |
Analysis of Legacy Tyco 2016 Compensation
Long-Term Incentives Legacy Tyco Long-Term Equity Incentive Compensation A key element in the compensation of Legacy Tyco’s executive team was long-term equity incentive awards (LTI compensation), which tied a significant portion of compensation to the company’s long-term performance. The design and structure of the LTI compensation program was reviewed annually to ensure that it was appropriate for the size and scope of the company. In 2016, three different types of long-term incentives were granted to the Legacy Tyco NEOs:
Analysis of Legacy Tyco 2016 Compensation
| ∎ | Performance share units, which vest at the end of three year-performance period and, except under unusual circumstances, pay out only if specific performance metrics are met. |
Analysis of Legacy Tyco 2016 Compensation
See Impact of the Merger on Compensation above for an explanation of how these awards were adjusted as a result of the Merger. The allocation percentage between each equity vehicle was distributed as shown below. These weightings reflected a heavy performance orientation toward the long-term incentive performance plan, while also encouraging retention by granting RSUs to executives below the CEO level.
Analysis of Legacy Tyco 2016 Compensation
| | Share Options | Restricted Share Units | Performance Share Units | | CEO | 50% | 0% | 50% | | Other NEOs | 40% | 20% | 40% |
Analysis of Legacy Tyco 2016 Compensation
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock / Unit Awards ($)(1)(2) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(1)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | | Alex A. Molinaroli | 2016 | $135,167 | $- | $27,024,053 | $- | $5,449,922 | $733,491 | $13,054,137 | $46,396,770 | | Chairman and Chief Executive Officer | | | | | | | | | | | George Oliver | 2016 | $1,018,939 | $- | $3,605,930 | $3,550,446 | $1,250,000 | $- | $182,560 | $9,607,875 | | Chief Operating Officer | 2015 | $1,000,000 | $- | $3,712,813 | $3,982,890 | $- | $- | $276,248 | $8,971,951 | | | 2014 | $993,750 | $- | $3,150,175 | $3,233,130 | $1,312,500 | $- | $308,752 | $8,998,307 | | Brian J. Stief | | | | | | | | | | | EVP & Chief Financial Officer | 2016 | $60,083 | $- | $4,250,255 | $- | $1,557,362 | $- | $- | $5,867,700 | | Robert E. Olson | 2016 | $520,814 | $- | $795,778 | $527,490 | $428,000 | $- | $29,818 | $2,301,900 | | EVP and Legacy Tyco Chief Financial Officer | | | | | | | | | | | R. Bruce McDonald | 2016 | $85,833 | $- | $5,051,013 | $- | $2,966,402 | $295,618 | $4,527,175 | $12,926,041 | | EVP and Vice Chairman | | | | | | | | | | | William C. Jackson | 2016 | $68,667 | $- | $3,000,101 | $- | $1,491,959 | $- | $- | $4,560,727 | | VP and President | | | | | | | | | | | Judith A. Reinsdorf | 2016 | $539,678 | $- | $3,318,187 | $608,649 | $428,000 | $- | $21,810 | $4,916,324 | | EVP and General Counsel | 2015 | $535,000 | $- | $894,014 | $637,251 | $- | $- | $60,756 | $2,127,021 | | | 2014 | $535,000 | $- | $929,998 | $646,622 | $449,400 | $- | $111,286 | $2,672,306 | | Former Officers (at fiscal year end) | | | | | | | | | | | Arun Nayar | 2016 | $131,250 | $- | $- | $- | $105,574 | $- | $10,500 | $247,324 | | EVP and Chief Financial Officer | 2015 | $525,000 | $- | $894,014 | $637,251 | $- | $- | $55,594 | $2,111,859 | | | 2014 | $510,417 | $- | $805,999 | $560,401 | $441,000 | $- | $101,218 | $2,419,035 |
Analysis of Legacy Tyco 2016 Compensation
| Each of the Legacy Johnson Controls nonqualified deferred compensation plans, including the Legacy Johnson Controls Retirement Restoration Plan, provided that all amounts deferred under the applicable plan (determined based on the actuarial equivalent value in the case of supplemental defined benefit pension benefits under the Legacy Johnson Controls Retirement Restoration Plan) became vested (to the extent not previously vested) and paid out in a lump sum following the consummation of the Merger. A portion of the payments to Mr. Molinaroli will be delayed until they are deductible under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). The amounts shown in this column reflect the amounts that were (or will be, in the case of the portion of the payments that were delayed for Mr. Molinaroli) paid out under the pension component of the Legacy Johnson Controls Retirement Restoration Plan.(e) |
Analysis of Legacy Tyco 2016 Compensation
| Amounts reflect costs attributable to personal use of a vehicle.(f) |
Analysis of Legacy Tyco 2016 Compensation
| Miscellaneous compensation includes payments with respect to an executive physical for Mr. Oliver and country club dues for Messrs. Molinaroli and McDonald.(g) |
Analysis of Legacy Tyco 2016 Compensation
| 80 | 2017 Proxy Statement |
Analysis of Legacy Tyco 2016 Compensation
Grants of Plan-Based Awards Table The following table summarizes cash-based and equity-based awards for each of the Company’s named executive officers that were granted in fiscal year 2016.
Analysis of Legacy Tyco 2016 Compensation
| Name | Grant Date | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Possible Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) (4) | | | | Board or Committee Approval Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (Mid- Point) (#) | Maximum (#) | | | | | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) | (m) | | Alex A. Molinaroli | 9/8/2016 | 9/8/2016 | | | | | | | 564,648 | | | $27,024,053 | | | N/A(5) | N/A(5) | $1,135,400 | $2,838,500 | $5,677,000 | | | | | | | | | George Oliver | N/A(6) | N/A(6) | $625,000 | $1,250,000 | $2,500,000 | | | | | | | | | | 10/12/2015 | 10/12/2015 | | | | 46,321 | 92,641 | 185,282 | | | | $3,605,930 | | | 10/12/2015 | 10/12/2015 | | | | | | | | 436,986 | $37.79 | $3,550,446 | | Brian J, Stief | 9/8/2016 | 9/8/2016 | | | | | | | 88,806 | | | $4,250,255 | | | N/A(5) | N/A(5) | $324,450 | $811,125 | $1,622,250 | | | | | | | | | Robert Olson | N/A(6) | N/A(6) | $214,000 | $428,000 | $856,000 | | | | | | | | | | 10/12/2015 | 10/12/2015 | | | | 6,882 | 13,763 | 27,526 | | | | $535,707 | | | 10/12/2015 | 10/12/2015 | | | | | | | 6,882 | | | $260,071 | | | 10/12/2015 | 10/12/2015 | | | | | | | | 64,923 | $37.79 | $527,490 | | R. Bruce McDonald | 9/8/2016 | 9/8/2016 | | | | | | | 105,537 | | | $5,051,001 | | | N/A(5) | N/A(5) | 618,000 | 1,545,000 | 3,090,000 | | | | | | | | | William C. Jackson | 9/8/2016 | 9/8/2016 | | | | | | | 62,684 | | | $3,000,056 | | | N/A(5) | N/A(5) | $350,200 | $875,500 | $1,751,000 | | | | | | | | | Judith A. Reinsdorf | N/A(6) | N/A(6) | $214,000 | $428,000 | $856,000 | | | | | | | | | | 10/12/2015 | 10/12/2015 | | | | 7,941 | 15,881 | 31,762 | | | | $618,147 | | | 10/12/2015 | 10/12/2015 | | | | | | | 7,940 | | | $300,053 | | | 10/12/2015 | 10/12/2015 | | | | | | | | 74,912 | $37.79 | $608,649 | | | 9/8/2015 | 9/8/2015 | | | | | | | 50,146 | | | $2,399,988 | | Former Officer | | | | | | | | | | | | | | Arun Nayar | N/A(6) | N/A(6) | $52,787 | $105,574 | $211,148 | | | | | | | |
Analysis of Legacy Tyco 2016 Compensation
| 2017 Proxy Statement | 81 |
Analysis of Legacy Tyco 2016 Compensation
| Amounts reported in columns (d) through (f) represent the range of potential cash payments under the annual performance bonuses that Messrs. Molinaroli, Stief, McDonald and Jackson could have earned under the Legacy Johnson Controls Annual Incentive Performance Plan for fiscal 2016, as described above under the heading “Annual Incentive—Legacy Johnson Controls Annual Incentive Performance Program (AIPP),” and that Messrs. Oliver, Olson and Nayar and Ms. Reinsdorf could have earned under the Company’s annual incentive plan for fiscal 2016, as described under the heading “Annual Incentive—Legacy Tyco Annual Incentive Program.” With respect to Legacy Tyco NEOs, the Board approved a maximum bonus payout of 0.50% of net income before special items for the CEO, subject to a cap of $5.0 million imposed by the 2012 SIP, and 0.25% for the other Legacy Tyco NEOs, subject to a cap of $2.5 million. The Legacy Tyco Compensation Committee further established a maximum payout of 200% of target for Legacy Tyco NEOs. Threshold amounts assume minimum performance levels are achieved with respect to each performance measure.(1) |
Analysis of Legacy Tyco 2016 Compensation
| Amounts in columns (g) through (i) represent potential share payouts with respect to PSUs granted to Legacy Tyco NEOs assuming that threshold, target and maximum performance conditions are achieved. In connection with the Merger, as described above under “Treatment of Long-Term Incentives for Legacy Tyco,” the PSUs were converted into time-vesting RSUs at target.(2) |
Analysis of Legacy Tyco 2016 Compensation
| Amounts in column (j) show the value of the RSUs granted in connection with the closing of the Merger as described above under “Impact of the Merger on Compensation—Merger Retention RSU Awards” and “-RSU Awards Related to Legacy Johnson Controls Nonqualified Plans.”(3) |
Analysis of Legacy Tyco 2016 Compensation
| Amounts in column (m) show the grant date fair value of the option awards, RSUs and PSUs granted to named executive officers (and with respect to Legacy Johnson Controls NEOs, only those granted after the Merger). These amounts represent the fair value of the entire amount of the award calculated in accordance with Financial Accounting Standards Board ASC Topic 718 (ASC Topic 718), excluding the effect of estimated forfeitures. For grants of stock options, amounts are computed by multiplying the fair value of the award (as determined under the Black-Scholes option pricing model) by the total number of options granted. For grants of RSUs, fair value is computed by multiplying the total number of shares subject to the award by the closing market price of our ordinary shares on the date of grant. For grants of PSUs, fair value is based on a model that considers the closing market price of our ordinary shares on the date of grant, the range of shares subject to such stock award, and the estimated probabilities of vesting outcomes. The value of PSUs included in the table assumes target performance.(4) |
Analysis of Legacy Tyco 2016 Compensation
| The award reflected in this row is an annual incentive performance award that Legacy Johnson Controls granted for the performance period of fiscal year 2016, the material terms of which we describe above under the heading “Annual Incentive—Legacy Johnson Controls Annual Incentive Performance Program (AIPP).”(5) |
Analysis of Legacy Tyco 2016 Compensation
| The award reflected in this row is an annual incentive performance award that Legacy Tyco granted for the performance period of fiscal year 2016, the material terms of which we describe above under the heading “Annual Incentive—Legacy Tyco Annual Incentive Program.”(6) |
Analysis of Legacy Tyco 2016 Compensation
| 82 | 2017 Proxy Statement |
Analysis of Legacy Tyco 2016 Compensation
Outstanding Equity Awards at 2016 Fiscal Year-End Table The following table shows, for each of the named executive officers, all equity awards that were outstanding as of September 30, 2016. Dollar amounts are based on the NYSE closing price of $46.53 for the Company’s common stock on September 30, 2016.
Analysis of Legacy Tyco 2016 Compensation
| | Option Awards | | | | Stock Awards | | | | | Name | Number of Securities Underlying Unexercised Options: (#) Exercisable | Number of Securities Underlying Unexercised Options: (#) Unexercisable(1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | Alex A. Molinaroli | 90,000 | - | $40.21 | 10/1/2017 | 1,145,883 | $53,317,936 | - | $- | | | 135,000 | - | $30.54 | 10/1/2020 | | | | | | | 125,000 | - | $28.54 | 10/7/2021 | | | | | | | 72,900 | - | $27.85 | 10/5/2022 | | | | | | | 65,100 | - | $30.73 | 1/23/2023 | | | | | | | 76,530 | 76,531 | $48.37 | 11/19/2023 | | | | | | | - | 169,924 | $50.23 | 11/18/2024 | | | | | | | - | 217,604 | $43.86 | 10/7/2025 | | | | | | George R. Oliver | 67,634 | - | $23.03 | 8/17/2018 | 204,827 | $9,530,600 | - | - | | | 249,860 | - | $15.01 | 10/6/2018 | | | | | | | 183,964 | - | $17.47 | 9/30/2019 | | | | | | | 153,433 | - | $19.30 | 10/11/2020 | | | | | | | 129,084 | - | $22.94 | 10/11/2021 | | | | | | | 244,313 | 81,437 | $28.42 | 11/19/2022 | | | | | | | 162,827 | - | $28.42 | 11/19/2022 | | | | | | | 142,814 | 142,814 | $38.91 | 11/19/2023 | | | | | | | 76,440 | 229,320 | $45.43 | 11/24/2024 | | | | | | | - | 436,986 | $37.79 | 10/11/2025 | | | | | | Brian J. Stief | 35,000 | - | $30.54 | 10/1/2020 | 197,656 | $9,196,934 | - | $- | | | 34,500 | - | $28.54 | 10/7/2021 | | | | | | | 21,500 | - | $27.85 | 10/5/2022 | | | | | | | 7,176 | 7,177 | $48.37 | 11/19/2023 | | | | | | | - | 32,175 | $50.23 | 11/18/2024 | | | | | | | - | 45,627 | $43.86 | 10/7/2025 | | | | | | Robert Olson | - | 64,923 | $37.79 | 10/11/2025 | 21,196 | $986,250 | - | $- | | R. Bruce McDonald | 47,248 | - | $40.21 | 10/1/2017 | 430,350 | $20,024,186 | - | $- | | | 160,000 | - | $28.79 | 10/1/2018 | | | | | | | 170,000 | - | $24.87 | 10/1/2019 | | | | | | | 150,000 | - | $30.54 | 10/1/2020 | | | | | | | 140,000 | - | $28.54 | 10/7/2021 | | | | | | | 74,800 | - | $27.85 | 10/5/2022 | | | | | | | 24,659 | 24,660 | $48.37 | 11/19/2023 | | | | | | | - | 80,437 | $50.23 | 11/18/2024 | | | | | | | - | 104,562 | $43.86 | 10/7/2025 | | | | |
Analysis of Legacy Tyco 2016 Compensation
| 2017 Proxy Statement | 83 |
Analysis of Legacy Tyco 2016 Compensation
| | Option Awards | | | | Stock Awards | | | | | Name | Number of Securities Underlying Unexercised Options: (#) Exercisable | Number of Securities Underlying Unexercised Options: (#) Unexercisable(1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | William C. Jackson | 86,000 | - | $28.54 | 10/7/2021 | 199,111 | $9,264,635 | - | $- | | | 53,800 | - | $27.85 | 10/5/2022 | | | | | | | 20,476 | 20,476 | $48.37 | 11/19/2023 | | | | | | | - | 41,441 | $50.23 | 11/18/2024 | | | | | | | - | 49,961 | $43.86 | 10/7/2025 | | | | | | Judith A. Reinsdorf | 37,858 | - | $17.47 | 9/30/2019 | 107,548 | $5,004,208 | - | $- | | | 64,449 | - | $19.30 | 10/11/2020 | | | | | | | 109,760 | - | $22.94 | 10/11/2021 | | | | | | | 58,590 | 19,529 | $28.42 | 11/19/2022 | | | | | | | 48,800 | - | $28.42 | 11/19/2022 | | | | | | | 28,563 | 28,562 | $38.91 | 11/19/2023 | | | | | | | 12,230 | 36,690 | $45.43 | 11/24/2024 | | | | | | | - | 74,912 | $37.79 | 10/11/2025 | | | | | | Former Officers | | | | | | | | | | Arun Nayar | 25,785 | - | $38.91 | 12/31/2018 | - | $- | - | $- | | | 12,229 | - | $45.43 | 12/31/2018 | | | | | | | - | 12,230 | $45.43 | 11/20/2019 | | | | | | | - | 12,229 | $45.43 | 11/20/2020 | | | | | | | - | 12,230 | $45.43 | 11/20/2021 | | | | |
Analysis of Legacy Tyco 2016 Compensation
| Vesting information for each outstanding option award for the named executive officers is described in the table below.(1) |
Analysis of Legacy Tyco 2016 Compensation
| Vesting Date | Exercise Price | Alex A. Molinaroli | George Oliver | Brian J. Stief | Robert Olson | R. Bruce McDonald | William C. Jackson | Judith A. Reinsdorf | Arun Nayar | | | | Number Of Shares Underlying Vesting Awards | | | | | | | | | 2016 | | | | | | | | | | | 11/12/2016 | $37.79 | | 109,247 | | 16,231 | | | 18,728 | | | 11/20/2016 | $45.43 | | 76,440 | | | | | 12,230 | | | 11/20/2016 | $38.91 | | 71,407 | | | | | 14,281 | | | 11/20/2016 | $28.42 | | 81,437 | | | | | 19,529 | | | 11/19/2016 | $48.37 | 76,531 | | 7,177 | | 24,660 | 20,476 | | | | 11/18/2016 | $50.23 | 84,962 | | 16,087 | | 40,218 | 20,720 | | | | 2017 | | | | | | | | | | | 10/12/2017 | $37.79 | | 109,247 | | 16,231 | | | 18,728 | | | 11/20/2017 | $45.43 | | 76,440 | | | | | 12,230 | | | 11/20/2017 | $38.91 | | 71,407 | | | | | 14,281 | | | 11/18/2017 | $50.23 | 84,962 | | 16,088 | | 40,219 | 20,721 | | | | 10/7/2017 | $43.86 | 108,802 | | 22,813 | | 52,281 | 24,980 | | | | 2018 | | | | | | | | | | | 10/12/2018 | $37.79 | | 109,246 | | 16,231 | | | 18,728 | | | 11/20/2018 | $45.43 | | 76,440 | | | | | 12,230 | | | 10/7/2018 | $43.86 | 108,802 | | 22,814 | | 52,281 | 24,981 | | | | 2019 | | | | | | | | | | | 10/12/2019 | $37.79 | | 109,246 | | 16,230 | | | 18,728 | |
Analysis of Legacy Tyco 2016 Compensation
| 84 | 2017 Proxy Statement |
Analysis of Legacy Tyco 2016 Compensation
| The amounts in columns (f) and (g) reflect, for each named executive officer, the number and market value of RSUs which had been granted as of September 30, 2016, but which remained subject to additional vesting requirements. Scheduled vesting of all RSUs and the number of shares underlying awards, for each of the named executive officer is as follows:(2) |
Analysis of Legacy Tyco 2016 Compensation
| Vesting Date | Alex A. Molinaroli | George Oliver | Brian J. Stief | Robert Olson | R. Bruce McDonald | William C. Jackson | Judith A. Reinsdorf | Arun Nayar | | | Number Of Shares Underlying Vesting Awards | | | | | | | | | 2016 | | | | | | | | | | 10/12/2016 | | | | 1,767 | | | 2,038 | | | 11/20/2016 | | 23,690 | | | | | 13,701 | | | 11/19/2016 | 46,516 | | 4,362 | | 14,988 | 12,445 | | | | 2017 | | | | | | | | | | 9/29/2017 | | 86,017 | | | | | 13,763 | | | 10/12/2017 | | | | 1,767 | | | 2,038 | | | 11/20/2017 | | | | | | | 3,761 | | | 1/23/2017 | 10,900 | | | | | | | | | 11/18/2017 | 52,571 | | 9,954 | | 24,885 | 12,821 | | | | 12/7/2017 | 210,282 | | 39,816 | | 99,542 | 51,244 | | | | 2018 | | | | | | | | | | 9/2/2018 | | | | | | | 50,146 | | | 9/28/2018 | | 95,120 | | 14,131 | | | 16,306 | | | 10/12/2018 | | | | 1,766 | | | 2,038 | | | 11/20/2018 | | | | | | | 1,719 | | | 9/24/2018 | | | | | 60,000 | | | | | 10/7/2018 | 260,966 | | 54,718 | | 125,398 | 59,917 | | | | 2019 | | | | | | | | | | 3/8/2019 | 564,648 | | | | | | | | | 9/2/2019 | | | 88,806 | | 105,537 | 62,684 | | | | 10/12/2019 | | | | 1,765 | | | 2,038 | |
Analysis of Legacy Tyco 2016 Compensation
Option Exercises and Stock Vested Table The following table shows, for each of the named executive officers, the amounts realized from options that were exercised and RSUs that vested during fiscal 2016. For Messrs. Molinaroli, Stief, McDonald and Jackson the table includes only vesting events that occurred during the period after the Merger.
Analysis of Legacy Tyco 2016 Compensation
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | | (a) | (b) | (c) | (d) | (e) (1) | | Alex A. Molinaroli | - | $ - | 226,958 | $10,599,247 | | George R. Oliver | - | $ - | 110,869 | $4,828,570 | | Brian Stief | - | $ - | 23,694 | $1,114,005 | | Robert Olson | - | $ - | - | $ - | | R. Bruce McDonald | - | $ - | 76,230 | $3,586,992 | | William Jackson | - | $ - | 66,422 | $3,080,896 | | Judith A. Reinsdorf | - | $ - | 34,525 | $1,409,173 | | Arun Nayar | 283,645 | $3,749,865 | 52,479 | $2,045,302 |
Analysis of Legacy Tyco 2016 Compensation
| The amounts in column (e) represent the product of the number of shares a named executive officer acquired on vesting and the closing market price of the shares on the vesting date, plus the value of dividend equivalents released, if any.(1) |
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
Pension Benefits As of September 30, 2016 The following table sets forth certain information with respect to the potential benefits to our named executive officers under the Legacy Johnson Controls qualified pension plan and the pension component of the Legacy Johnson Controls Retirement Restoration Plan as of September 30, 2016. Only those named executive officers who participate in these plans are included in the table.
Analysis of Legacy Tyco 2016 Compensation
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit(1) ($) | Payments During Last Fiscal Year(2) ($) | | Alex A. Molinaroli | Johnson Controls Pension Plan | 30.00 | $1,271,579 | | | | Retirement Restoration Plan | 30.00 | | $13,052,770 | | R. Bruce McDonald | Johnson Controls Pension Plan | 13.17 | $549,392 | | | | Retirement Restoration Plan | 13.17 | | $4,513,275 |
Analysis of Legacy Tyco 2016 Compensation
| Amounts in this column reflect the following assumptions: A calculation date of September 30, 2016, a 4.42% discount rate for the Johnson Controls Pension Plan, retirement occurring at normal retirement age based on Social Security Normal Retirement Age minus three years, and applicability of the 2009 Static Mortality Table for Annuitants per Treasury Regulation 1.430(h)(3)-1(e), that we used for financial reporting purposes as of September 30, 2016. The valuation method method used to determine the present value of the accumulated benefit is the same as the method we used for Financial reporting purposes as of September 30, 2016. The value that an executive will actually receive under these benefits will differ to the extent facts and circumstances vary from what these calculations assume(1) |
Analysis of Legacy Tyco 2016 Compensation
| Amounts in this column reflect the value of the immediate lump sum distribution of the defined benefit portion of the Legacy Johnson Controls Retirement Restoration Plan as a result of the Merger. Tax regulations under Section 409A of the Code allowed the deferral of Mr. Molinaroli’s Retirement Restoration Plan lump sum payment until it is deductible under Section 162(m) of the Code.(2) |
Analysis of Legacy Tyco 2016 Compensation
Legacy Johnson Controls Pension Plan. The Legacy Johnson Controls Pension Plan is a frozen defined benefit pension plan that provides benefits for most non-union U.S. employees, including Mr. Molinaroli and Mr. McDonald, who were hired by Legacy Johnson Controls prior to January 1, 2006. Because both Mr. Stief and Mr. Jackson were hired by Legacy Johnson Controls after January 1, 2006, neither are participants in the Pension Plan. Subject to certain limitations that the Code imposes, the monthly retirement benefit payable under the Legacy Johnson Controls Pension Plan to participants, at normal retirement age in a single life annuity, is determined as follows:
Analysis of Legacy Tyco 2016 Compensation
| · | 1.15% of final average monthly compensation times years of benefit service, plus |
Analysis of Legacy Tyco 2016 Compensation
| · | 0.55% of final average monthly compensation in excess of Social Security covered compensation times years of benefit service (up to 30 years) |
Analysis of Legacy Tyco 2016 Compensation
Service after December 31, 2014 does not count as benefit service in this formula. For purposes of this formula, “final average monthly compensation” means a participant’s gross compensation, excluding certain unusual or non-recurring items of compensation, such as severance or moving expenses, for the highest five consecutive years of the last ten consecutive years of employment
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
occurring prior to January 1, 2015. “Social Security covered compensation” means the average of the Social Security wage base for the 35 years preceding a participant’s normal retirement age. Normal retirement age for Johnson Controls participants is age 65. Participants in the Legacy Johnson Controls Pension Plan generally become vested in their pension benefits upon completion of five years of service. The Pension Plan does not pay full pension benefits until after a participant terminates employment and reaches normal retirement age. However, a participant who terminates employment may elect to receive benefits at a reduced level at any time after age 55, as follows: If a participant terminates employment prior to age 55 then the reduction is 5% for each year that benefits begin before their Social Security retirement age; and if a participant terminates employment on or after age 55 and after completing ten years of service, then the reduction is 5% for each year that benefits begin before the three years preceding the participant’s Social Security retirement age. Mr. Molinaroli and Mr. McDonald are currently eligible for early retirement under the Pension Plan. Legacy Johnson Controls Restoration Plan. The Legacy Johnson Controls Retirement Restoration Plan is an unfunded, nonqualified plan that provides benefits above the payments that an employee, other than a York employee, will receive from the Pension Plan in those cases in which the Code’s qualified plan limits restrict the employee’s benefits. The Retirement Restoration Plan provides a benefit equal to the difference between the actual pension benefit payable under the Pension Plan and what such pension benefit would have been without regard to any Code limitation on either the amount of benefits or the amount of compensation that the benefit formula can take into account. Messrs. Jackson and Stief are not eligible under the Retirement Restoration Plan for a benefit with respect to the Pension Plan because they are not participants in the Johnson Controls Pension Plan. A participant is vested in his or her Retirement Restoration Plan benefits only if vested in his or her benefits under the Pension Plan. Benefits under the Retirement Restoration Plan are generally payable as an annuity at the later of the participant’s termination of employment or attainment of age 55. However, under the terms of the Retirement Restoration Plan, all amounts deferred (determined based on the actuarial equivalent value) became vested (to the extent not previously vested) upon the Merger and were required to be paid out in a lump sum following the consummation of the Merger. Payments to Mr. Molinaroli will be delayed until they are deductible under Section 162(m) of the “Code”.
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
Non-Qualified Deferred Compensation Table at Fiscal Year-End The following table presents information on the non-qualified deferred compensation accounts of each named executive officer at September 30, 2016. For Messrs Molinaroli, Stief, McDonald and Jackson, the amounts shown in columns (b)-(e) in the table relate to the period after the Merger, but the balance shown in column (f) includes amounts deferred for periods prior to the Merger.
Analysis of Legacy Tyco 2016 Compensation
| Name | Executive Contributions in Last Fiscal Year ($) | Registrant Contributions in Last Fiscal Year ($) | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End ($) | | (a) | (b)(1) | (c)(1) | (d)(2) | (e)(3) | (f)(1) | | Alex A. Molinaroli | $13,060,882 | $- | $668,899 | $(8,636,934) | $18,091,607 | | George R. Oliver | $49,667 | $17,417 | $92,207 | $(80,079) | $949,899 | | Brian J. Stief | $3,605 | $- | $341,281 | $(7,537,357) | $3,625 | | Robert Olson | $178,333 | $- | $14,092 | $- | $192,425 | | R. Bruce McDonald | $5,150 | $- | $(133,213) | $(26,645,580) | $5,152 | | William C. Jackson | $4,120 | $- | $27,998 | $(2,960,122) | $4,145 | | Judith A. Reinsdorf | $18,667 | $9,667 | $217,689 | $- | $2,231,980 | | Former Officer | | | | | | | Arun Nayar | $17,500 | $10,500 | $221,858 | $(2,367,263) | $339,744 |
Analysis of Legacy Tyco 2016 Compensation
| Amounts in column (b) for Messrs. Molinaroli, Stief, McDonald and Jackson include employee contributions under the Legacy Johnson Controls Executive Deferred Compensation Plan and the Legacy Johnson Controls Retirement Restoration Plan. The Legacy Johnson Controls Executive Deferred Compensation Plan allows participants to defer up to 100% of their annual bonuses, long-term performance share units and restricted stock awards. The Retirement Restoration Plan allows executive officers to defer up to 6% of their compensation that is not eligible to be deferred into the Legacy Johnson Control 401(k) plan because of qualified plan limits that the Code imposes. The Retirement Restoration Plan also credits participants with an amount equal to the difference between the amount of retirement contributions made under the 401(k) plan and what such retirement contribution would have been without regard to the Code limits. For Mr. Molinaroli, the amount also includes the amount of his lump sum distribution described in footnote (3) that is being delayed until it is deductible under Section 162(m) of the Code. Amounts in columns (b) and (c) for Messrs. Oliver and Nayar and Ms. Reinsdorf include employee and Company contributions, respectively, under the Legacy Tyco SSRP, a non-qualified retirement savings plan. Under the terms of the SSRP, an eligible executive may choose to defer up to 50% of his or her base salary and up to 100% of his or her performance bonus. All of the amounts shown in columns (b) and (c) are also included in the Summary Compensation Table. The following Amounts shown in column (f) were reported in the Salary and Non-Equity Incentive Plan Compensation columns in the Summary Compensation Table for Mr. Molinaroli—$13,060,882(1) |
Analysis of Legacy Tyco 2016 Compensation
| The Aggregate Earnings reported in column (d) are not “above-market or preferential earnings” and therefore are not required to be reported in the Summary Compensation Table. For Messrs. Molinaroli, Stief, McDonald and Jackson, the amounts in column (d) reflect all investment earnings, net of fees, on amounts that have been deferred. Investment earnings include any(2) |
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
| amounts relating to appreciation in the price of our ordinary shares, and negative amounts relating to depreciation in the price of ordinary shares because the deferred amounts include deferred stock units, the value of which is tied to the value of our ordinary shares. For Messrs. Oliver, Olson, and Nayar and Ms. Reinsdorf, the amounts in column (d) include earnings or (losses) on the named executive officer’s notional account in the Legacy Tyco SSRP. Investment options under the Legacy Johnson Controls nonqualified deferred compensation plans include only funds that are available under Legacy Johnson Controls tax-qualified 401(k) retirement plans, and investment options under the SSRP include only funds that are available under Tyco’s tax-qualified 401(k) retirement plans |
Analysis of Legacy Tyco 2016 Compensation
| Amounts shown in column (e) for Messrs. Molinaroli, Stief, McDonald and Jackson reflect the value of the immediate lump sum distributions from the Legacy Johnson Controls Executive Deferred Compensation Plan and the account balance portion of the Retirement Restoration Plan that resulted from the Merger. The lump sum was generally paid out within 30 days or 90 days (depending on the plan) following the consummation of the Merger. A portion of Mr. Molinaroli’s distribution is being delayed until it is deductible under Section 162(m) of the Code. Amounts shown in column (e) for Messrs. Oliver and Nayar reflect distributions under the Legacy Tyco SSRP. Under the SSRP, participants may elect to receive distributions in a single lump sum payment or in up to 15 annual installments. A participant who is still employed may begin receiving distributions under the SSRP after a minimum of five years have elapsed from the plan year for which contributions have been made. A participant who has left the Company must begin receiving distributions upon his or her termination of employment or retirement.(3) |
Analysis of Legacy Tyco 2016 Compensation
Potential Payments upon Termination and Change in Control The following table summarizes the severance and other enhanced benefits that would have been payable to the named executive officers upon termination of employment or upon the occurrence of a change in control subsequent to the Merger, assuming that the triggering event or events occurred on September 30, 2016. Equity award amounts are based on the closing share price of our ordinary shares of $46.53 on the NYSE on September 30, 2016. The Merger was deemed to constitute a change in control under the change in control employment agreements (other than Mr. McDonald’s) and equity compensation plans maintained by Legacy Johnson Controls and under the Legacy Tyco Change in Control Severance Plan for Certain U.S. Officers and Executives (the “CIC Severance Plan”) and equity compensation plans, triggering certain enhanced benefits for a period following the Merger, as described above under the heading “Impact of the Merger on Compensation” and in the footnotes below the following table. The hypothetical benefits shown below under the Change-in-Control columns reflect amounts that would have been payable in connection with a change in control subsequent to the Merger under the arrangements described below. The hypothetical benefits show below under the “Other
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
Terminations” columns reflect amounts that would have been payable under the various circumstances set forth taking into account the fact that the Merger is treated as a change-in-control under certain plans and agreements applicable to the NEOs (except for Mr. McDonald).
Analysis of Legacy Tyco 2016 Compensation
| | Change in Control (other than the Merger) | | Other Terminations (including the impact of the Merger as a change in control trigger) | | | | | Name/Form of Compensation | Without Qualified Termination ($) | With Qualified Termination ($) | With Cause ($) | Without Cause/Good Reason Resignation ($) | Voluntary Resignation/ Retirement (6) ($) | Death or Disability ($) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | | Alex A. Molinaroli | | | | | | | | Severance(1) | - | 47,061,823 | - | 40,862,053 | - | 40,862,053 | | Benefit Continuation(2) | - | 1,024,073 | - | 901,174 | - | 8,588,377 | | Accelerated Vesting of Equity Awards(3)(4) | - | 35,366,980 | - | 35,366,980 | 9,690,954(4) | 54,811,169 | | George R. Oliver | | | | | | | | Severance(1) | - | 8,812,500 | - | 8,812,500 | - | 8,812,500 | | Benefit Continuation(2) | - | 16,347 | - | 16,347 | - | - | | Accelerated Vesting of Equity Awards(3)(4) | - | 16,165,177 | - | 16,165,177 | 5,264,165(4) | 16,165,177 | | Brian J. Stief | | | | | | | | Severance(1) | - | 9,248,996 | - | 9,790,350 | - | 9,790,350 | | Benefit Continuation(2) | - | 236,222 | - | 222,992 | - | 222,992 | | Accelerated Vesting of Equity Awards(3)(4) | - | 9,477,320 | - | 9,477,320 | 2,301,759(4) | 9,477,320 | | Robert Olson | | | | | | | | Severance(1) | - | 1,926,000 | - | 1,926,000 | - | - | | Benefit Continuation(2) | - | 22,297 | - | 22,297 | - | - | | Accelerated Vesting of Equity Awards(3) | - | 1,553,677 | - | 1,553,677 | - | 1,553,677 | | Other | | 600,000 | | 600,000 | - | 600,000 | | R. Bruce McDonald | | | | | | | | Severance(1) | - | 14,629,945 | - | 1,030,000 | - | - | | Benefit Continuation(2) | - | 423,260 | - | - | - | 4,881,517 | | Accelerated Vesting of Equity Awards(3)(5) | - | 20,895,455 | - | 98,225 | 6,285,908 | 20,895,455 |
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
| | Change in Control (other than the Merger) | | Other Terminations (including the impact of the Merger as a change in control trigger) | | | | | Name/Form of Compensation | Without Qualified Termination ($) | With Qualified Termination ($) | With Cause ($) | Without Cause/Good Reason Resignation ($) | Voluntary Resignation/ Retirement (6) ($) | Death or Disability ($) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | | William C. Jackson | | | | | | | | Severance(1) | - | 13,845,953 | - | 14,126,684 | - | 14,126,684 | | Benefit & Perquisite Continuation(2) | - | 219,965 | - | 187,226 | - | 187,226 | | Accelerated Vesting of Equity Awards(3) | - | 6,834,140 | - | 6,834,140 | - | 9,610,658 | | Judith A. Reinsdorf | | | | | | | | Severance(1) | - | 3,240,000 | - | 2,160,000 | - | - | | Benefit & Perquisite Continuation(2) | - | 25,281 | - | 25,281 | - | - | | Accelerated Vesting of Equity Awards(3) | - | 3,937,318 | - | 3,937,318 | - | 6,270,611 |
Analysis of Legacy Tyco 2016 Compensation
| For Messrs. Molinaroli, Stief and Jackson, amounts shown include severance amounts that would have been payable under the executive officers’ respective change in control employment agreements upon a termination by us without cause or by the officer with good reason (a “Legacy Johnson Controls qualifying termination”), or a termination due to the executive officer’s death or disability, in each case on September 30, 2016, which is within the protected 33-month (in the case of Mr. Molinaroli) or 36-month (in the case of Messrs. Stief and Jackson) period following the Merger (such protected period, the “employment period”). These amounts include: (a) a lump sum severance payment equal to three times the executive officer’s annual cash compensation, which includes the executive officer’s annual base salary and the greater of (i) the average of the executive officer’s annualized annual cash bonuses and long-term performance awards for the three fiscal years preceding the change of control, and (ii) the sum of the annual cash bonuses and long-term performance awards for the most recently completed fiscal year (such greater amount, “average performance bonus”); (b) payment of a pro rata portion of the executive officer’s average performance bonus for the year of the termination. For Mr. McDonald, under whose employment agreement the Merger was not treated as a change in control, amounts shown under “Change in Control—With Qualified Termination” include amounts described in the preceding sentence, and amounts shown under “Other Termination—Without Cause / Good Reason Resignation” include amounts that would have been payable under his employment agreement upon a termination without cause or for good reason on September 30, 2016 prior to a change in control other than the Merger. Upon such a termination without cause, Mr. McDonald would have been entitled to a cash severance benefit in an amount equal to the greater of one year of his base salary as of the termination date, or twice the amount payable under the Legacy Johnson Controls severance plan for U.S. salaried employees. For Mr. Oliver, amounts shown include amounts that would have payable under his employment agreement upon a termination by us without cause or by Mr. Oliver with good reason (a “Tyco qualifying termination of employment”), or a termination due to Mr. Oliver’s death or disability, in each case on September 30, 2016, which was within the agreement’s protected 33 month period following the Merger. These amounts include: (a) a lump sum severance payment equal to three times the sum of Mr. Oliver’s annual base salary and a bonus amount calculated using the greater of his target bonus for the year of termination or his annual bonus for the most recently completed fiscal year; and (b) payment of a prorated portion of the bonus amount for the year of termination. For Mr. Olson and Ms. Reinsdorf,(1) |
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
| amounts shown include amounts that would have been payable under the CIC Severance Plan upon a Tyco qualifying termination of employment on September 30, 2016. These amounts include a severance payment of two times base salary and two times target bonus, payable in a lump sum. In addition, the executive officer would be entitled to a prorated portion of the executive’s annual bonus for the year in which employment was terminated. The amounts shown in this table are subject to reduction to the extent necessary to prevent the application of the excise tax under Code Section 4999. |
Analysis of Legacy Tyco 2016 Compensation
| For Messrs. Molinaroli, Oliver, Stief and Jackson, amounts shown include (i) the value of continued medical and welfare benefits for two years following termination of employment without cause or with good reason under the arrangements described in the preceding footnote and (ii) a cash payment equal to the lump sum value of the additional benefits the executive officer would have accrued for the remainder of the employment period under pension and/or retirement plans, assuming the executive officer is fully vested in such benefits at the time of termination. For Mr. Olson and Ms. Reinsdorf, amounts shown include the value of one year of continuing coverage under applicable medical and dental benefit plans, a lump sum cash payment equal to the projected value of the employer portion of premiums under applicable medical and dental plans for an additional one year, and one year of outplacement services under the CIC Severance Plan. For Messrs. Molinaroli and McDonald, the payments shown in the column titled “Death or Disability” reflect the benefits under the Legacy Johnson Controls Executive Survivor Benefits Plan, which entitles the beneficiary of the participant to a lump sum death benefit equal to, two times the executives’ base salary, plus an additional “gross-up” amount. In addition, the beneficiaries would receive a continuation of the executives base salary for six months. During fiscal year 2009, the Legacy Johnson Controls Executive Survivor Benefit Plan was frozen to limit participation to current elected officers.(2) |
Analysis of Legacy Tyco 2016 Compensation
| Amounts represent the intrinsic value of unvested equity awards that would have vested upon the indicated triggering event for the named executive officers.(3) |
Analysis of Legacy Tyco 2016 Compensation
| For Messrs. Molinaroli, Oliver, Stief and McDonald, who were retirement eligible under applicable plans as of September 30, 2016, the value of certain equity awards that would vest on an accelerated basis upon retirement is presented in the table above in column (f). For Messrs. Molinaroli, Stief and McDonald, the value of certain equity awards that would continue to vest according to their original vesting schedule upon retirement is not included.(4) |
Analysis of Legacy Tyco 2016 Compensation
| Mr. McDonald became chairman and chief executive officer of Adient plc following the completion of the spin-off on October 31, 2016, and received none of the benefits described in the table above. Mr. McDonald’s employment agreement and change in control employment agreement were assigned to Adient at the time of the spin-off.(5) |
Analysis of Legacy Tyco 2016 Compensation
| A voluntary resignation represents a resignation without good reason as defined under applicable agreements and plans. As a result of the Merger and the integration of Legacy Johnson Controls and Legacy Tyco, including changes in reporting relationships and responsibilities, certain executives of the Company have the ability to trigger good reason resignation during applicable periods as specified in such agreements and plans.(6) |
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
As noted above, Messrs. Molinaroli, Oliver, Stief and McDonald were retirement eligible under applicable plans as of September 30, 2016. For Messrs. Molinaroli, Stief and McDonald, upon the executives early retirement:
Analysis of Legacy Tyco 2016 Compensation
| i. | the Company is not obligated to pay severance; |
Analysis of Legacy Tyco 2016 Compensation
| ii. | the executive will receive, at the end of the applicable performance period for each of his annual and long-term bonus awards outstanding under the Legacy Johnson Controls Omnibus Incentive Plan, a pro-rata portion of the award amount that he would have earned had he remained employed through the end of each such performance period, based on the Company’s actual performance; |
Analysis of Legacy Tyco 2016 Compensation
| iii. | with respect to stock options, the vesting of any unvested stock options that were granted to the executive under the Legacy Johnson Controls Omnibus Incentive Plan that were outstanding for at least one full calendar year after the year of grant would accelerate so that all of the options would be exercisable in full (and the executive would forfeit all other options that have not been outstanding for at least one full calendar year after the date of grant); |
Analysis of Legacy Tyco 2016 Compensation
| iv. | with respect to restricted stock and RSU awards, (A) for certain awards, the executive would retain his shares of restricted stock and RSUs that had not vested at the time of retirement, and they would continue to vest on the normal vesting schedule, and (B) for certain awards granted in 2015 and 2016, the executive would either vest pro rata in the award based on the number of full months of service completed since the grant of the award or fully vest in the award (however, in each case, the award agreements provide that the executive would not earn the award if he engaged in conduct harmful to the best interests of the Company after his retirement); |
Analysis of Legacy Tyco 2016 Compensation
| v. | with respect to performance-based share units, the executive would earn the units that he held at retirement based on actual performance at the end of the performance period, but the amount would be pro-rated based on the number of days of employment during the performance period (in the case of known retirements, the pro-ration of shares occurs at grant based on the number of days of employment during the performance period); |
Analysis of Legacy Tyco 2016 Compensation
In addition, each of Messrs. Molinaroli and McDonald would be eligible to receive pension benefits upon retirement. For an estimate of the value of these pension benefit, please see the Pension Benefits Table above. For Mr. Oliver, the terms of the equity awards applicable to him generally provide that if he were to retire at least one year following the grant of such award, the applicable award would accelerate and vest pro rata based on the number of full months of service completed since the grant date of the award.
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
THE ANNUAL GENERAL MEETING – QUESTIONS AND ANSWERS The following questions and answers are intended to address briefly some commonly asked questions regarding the Annual General Meeting. These questions and answers may not address all questions that may be important to you. For more information, please refer to the more detailed information contained elsewhere in this proxy statement, including the documents referred to or incorporated by reference herein. For instructions on obtaining the documents incorporated by reference, see “Where You Can Find More Information.” Why did I receive this Proxy statement? We have sent this notice of annual general meeting and proxy statement, together with the enclosed proxy card or voting instruction card, because our Board of Directors is soliciting your proxy to vote at the Annual General Meeting on March 8, 2017. This proxy statement contains information about the items being voted on at the Annual General Meeting and important information about Johnson Controls. Our 2016 Annual Report on Form 10-K, which includes our consolidated financial statements for the fiscal year ended September 30, 2016 (the “Annual Report”), is enclosed with these materials. Who is entitled to vote? Each holder of Johnson Controls ordinary shares in our register of shareholders (such owners are often referred to as “shareholders of record,” “record holders” or “registered shareholders”) as of the close of business on January 4, 2017, the record date for the Annual General Meeting, is entitled to attend and vote at the Annual General Meeting. On January 4, 2017, there were 938,710,115 ordinary shares outstanding and entitled to vote at the Annual General Meeting. Any Johnson Controls shareholder of record as of the record date who does not receive notice of the Annual General Meeting and proxy statement, together with the enclosed proxy card or voting instruction card and the Annual Report, may obtain a copy at the Annual General Meeting or by contacting Johnson Controls at +353-21-423-5000. We have requested that banks, brokerage firms and other nominees who hold ordinary shares on behalf of the owners of the ordinary shares (such owners are often referred to as “beneficial shareholders” or “street name holders”) as of the close of business on January 4, 2017 forward these materials, together with a proxy card or voting instruction card, to such beneficial shareholders. Johnson Controls has agreed to pay the reasonable expenses of the banks, brokerage firms and other nominees for forwarding these materials. Finally, Johnson Controls has provided for these materials to be sent to persons who have interests in its ordinary shares through participation in Johnson Controls’ retirement savings plans. These individuals are not eligible to vote directly at the Annual General Meeting. They may, however, instruct the trustees of these plans how to vote the ordinary shares represented by their interests. The enclosed proxy card will also serve as voting instructions for the trustees of the plans. How many votes do I have? Every holder of an ordinary share on the record date will be entitled to one vote per share for each matter presented at the Annual General Meeting. Because each Director’s election is the subject of a
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
separate resolution, every holder of an ordinary share on the record date will be entitled to one vote per share for each separate Director election resolution. What is the difference between holding shares as a shareholder of record and as a beneficial owner? Most of our shareholders hold their shares through a stockbroker, bank or other nominee rather than directly in their own name. As summarized below, there are some differences between shares held of record and those owned beneficially. SHAREHOLDER OF RECORD If your shares are registered directly in your name, in our share register operated by our transfer agent, Wells Fargo N.A., you are considered, with respect to those shares, the shareholder of record and these proxy materials are being sent to you directly by us. As the shareholder of record, you have the right to grant your voting proxy to the persons named in the proxy card (see “How Do I Appoint and Vote via a Proxy?” below), or to grant a written proxy to any other person, which person does not need to be a shareholder, or to attend and vote in person at the Annual General Meeting. We have enclosed a proxy card for you to use in which you can elect to appoint the officers of the Company named therein as your proxy. BENEFICIAL OWNER If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name,” and these proxy materials are being forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, the shareholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee on how to vote your shares and are also invited to attend the Annual General Meeting. However, since you are not the shareholder of record, you may only vote these shares in person at the Annual General Meeting if you follow the instructions described below under “Admission to the Annual General Meeting” and “How do I vote?” Your bank, broker or other nominee has enclosed a voting instruction card for you to use in directing your bank, broker or other nominee as to how to vote your shares, which may contain instructions for voting by telephone or electronically. How do I vote? A proxy card is being sent to each shareholder of record as of the record date. If you hold your shares in the name of a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or nominee when voting your shares. Otherwise, you can vote in the following ways:
Analysis of Legacy Tyco 2016 Compensation
| ∎ | By Mail: If you are a holder of record, you can vote by marking, dating and signing the appropriate proxy card and returning it by mail in the enclosed postage-paid envelope. If you beneficially own your ordinary shares, you can vote by following the instructions on your voting instruction card. |
Analysis of Legacy Tyco 2016 Compensation
| ∎ | By Internet or Telephone: You can vote over the Internet at www.proxyvote.com by following the instructions on the proxy card or the voting instruction card or in the Notice of Internet availability of proxy materials previously sent to you. If you are not a holder of record, you can vote using a touchtone telephone by calling 1-800-454-8683. |
Analysis of Legacy Tyco 2016 Compensation
| ∎ | At the Annual General Meeting: If you are planning to attend the Annual General Meeting and wish to vote your ordinary shares in person, we will give you a ballot at the meeting. |
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
| Shareholders who own their shares in “street name” are not able to vote at the Annual General Meeting unless they have a proxy, executed in their favor, from the holder of record of their shares. |
Analysis of Legacy Tyco 2016 Compensation
Even if you plan to be present at the Annual General Meeting, we encourage you to complete and mail the enclosed card to vote your ordinary shares by proxy. Telephone and Internet voting facilities for shareholders will be available 24 hours a day and will close at 11:59 p.m., Eastern Standard Time, on March 7, 2017. How do I appoint and vote via a proxy? If you properly fill in your proxy card appointing an officer of the Company as your proxy and send it to us in time to vote, your proxy, meaning one of the individuals named on your proxy card, will vote your shares as you have directed. You may also grant a written proxy to any other person by filling in the proxy card and identifying the person, which person does not need to be a shareholder, or attend and vote in person at the Annual General Meeting. If you sign the proxy card but do not make specific choices, your proxy will vote your shares as recommended by the Board of Directors “FOR” each Director, “FOR” the proposals set forth in agenda items one through five and seven through nine, and for the “ANNUAL” option set forth in proposal six. If a new agenda item or a new motion or proposal for an existing agenda item is presented to the Annual General Meeting, the Company officer acting as your proxy will vote in accordance with the recommendation of our Board of Directors. At the time we began printing this proxy statement, we knew of no matters that needed to be acted on at the Annual General Meeting other than those discussed in this proxy statement. Whether or not you plan to attend the Annual General Meeting, we urge you to submit your proxy. Returning the proxy card or submitting your vote electronically will not affect your right to attend the Annual General Meeting. You must return your proxy cards by the times and dates set forth below under “Returning Your Proxy Card” in order for your vote to be counted. What if I return my proxy or voting instruction card but do not mark it to show how I am voting? Your shares will be voted according to the specific instructions you have indicated on your proxy or voting instruction card. If you sign and return your proxy or voting instruction card but do not indicate specific instructions for voting, you instruct the proxy to vote your shares, “FOR” each Director, “FOR” the proposals set forth in agenda items one through five and seven through nine, and for the “ANNUAL” option set forth in proposal six. For any other matter which may properly come before the Annual General Meeting, and any adjournment or postponement thereof, you instruct, by submitting proxies with blank voting instructions, the proxy to vote in accordance with the recommendation of the Board of Directors. May I change or revoke my vote after I return my proxy or voting instruction card? You may change your vote before it is exercised by:
Analysis of Legacy Tyco 2016 Compensation
| ∎ | If you voted by telephone or the Internet, submitting subsequent voting instructions through the telephone or Internet; |
Analysis of Legacy Tyco 2016 Compensation
| ∎ | Submitting another proxy card (or voting instruction card if you beneficially own your ordinary shares) with a later date; or |
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Analysis of Legacy Tyco 2016 Compensation
| ∎ | If you are a holder of record, or a beneficial owner with a proxy from the holder of record, voting in person at the Annual General Meeting. |
Analysis of Legacy Tyco 2016 Compensation
Your presence without voting at the meeting will not automatically revoke your proxy, and any revocation during the meeting will not affect votes previously taken. If you hold your shares in the name of a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or nominee in revoking your previously granted proxy. What does it mean if I receive more than one proxy or voting instruction card? It means you have multiple accounts at the transfer agent and/or with banks and stockbrokers. Please vote all of your shares. Beneficial owners sharing an address who are receiving multiple copies of the proxy materials and Annual Report will need to contact their broker, bank or other nominee to request that only a single copy of each document be mailed to all shareholders at the shared address in the future. In addition, if you are the beneficial owner, but not the record holder, of our shares, your broker, bank or other nominee may deliver only one copy of the proxy statement and Annual Report to multiple shareholders who share an address unless that nominee has received contrary instructions from one or more of the shareholders. We will deliver promptly, upon written or oral request, a separate copy of the proxy statement and Annual Report to a shareholder at a shared address to which a single copy of the documents was delivered. Shareholders who wish to receive a separate written copy of the proxy statement, now or in the future, should submit their request to us by telephone at +353-21-423-5000 or by submitting a written request to Johnson Controls Shareholder Services, Johnson Controls International plc, One Albert Quay, Cork, Ireland. What vote is required to approve each proposal at the Annual General Meeting? Johnson Controls intends to present proposals numbered one through nine for shareholder consideration and voting at the Annual General Meeting. The vote required to approve each proposal is described below:
Analysis of Legacy Tyco 2016 Compensation
| 1. | By separate resolutions, to elect the following individuals as Directors for a period of one year, expiring at the end of the Company’s Annual General Meeting of Shareholders in 2018. The election of each director nominee requires the affirmative vote of a majority of the votes properly cast (in person or by proxy) at the Annual General Meeting. |
Analysis of Legacy Tyco 2016 Compensation
| 2. | To ratify the appointment of PricewaterhouseCoopers LLP as the independent auditors of the Company and to authorize the Audit Committee of the Board of Directors to set the auditors’ remuneration, which in each case, requires the affirmative vote of a majority of the votes properly cast (in person or by proxy) at the Annual General Meeting. |
Analysis of Legacy Tyco 2016 Compensation
| 3. | To authorize the Company and/or any subsidiary of the Company to make market purchases of Company shares, which requires the affirmative vote of a majority of the votes properly cast (in person or by proxy) at the Annual General Meeting. |
Analysis of Legacy Tyco 2016 Compensation
| 4. | To determine the price range at which the Company can re-allot shares that it holds as treasury shares (Special Resolution), which requires the affirmative vote of at least 75% of the votes properly cast (in person or by proxy) at the Annual General Meeting. |
Analysis of Legacy Tyco 2016 Compensation
| 5. | To approve, in a non-binding advisory vote, the compensation of the named executive officers, which will be considered approved with the affirmative vote of a majority of the votes properly cast (in person or by proxy) at the Annual General Meeting. The advisory vote on |
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
| executive compensation is non-binding, meaning that our Board of Directors will not be obligated to take any compensation actions or to adjust our executive compensation programs or policies as a result of the vote. |
Analysis of Legacy Tyco 2016 Compensation
| 6. | To provide, in a non-binding advisory vote, shareholder feedback regarding the frequency of the non-binding advisory vote on compensation of the named executive officers. This proposal is non-binding, meaning that our board will not be obligated to take any actions or to adjust the frequency of the advisory vote on executive compensation as a result of the vote. Although the vote is non-binding, our Board and the Compensation Committee will review the voting results and consider the feedback obtained through this process in making future decisions about the frequency of the advisory vote on executive compensation. |
Analysis of Legacy Tyco 2016 Compensation
| 7. | To approve the material terms of the performance goals under the Johnson Controls International plc 2012 Share and Incentive Plan, which requires the affirmative vote of a majority of the votes properly cast (in person or by proxy) at the Annual General Meeting. |
Analysis of Legacy Tyco 2016 Compensation
| 8. | To approve the authorization for the Board of Directors to issue shares up to 33% of its issued share capital, which requires the affirmative vote of a majority of the votes properly cast (in person or by proxy) at the Annual General Meeting. |
Analysis of Legacy Tyco 2016 Compensation
| 9. | To approve the authorization for the Board of Directors to issue shares for cash up to a maximum of approximately 5% of issued share capital, which requires the affirmative vote of at least 75% of the votes properly cast (in person or by proxy) at the Annual General Meeting. |
Analysis of Legacy Tyco 2016 Compensation
What is the quorum requirement for the Annual General Meeting? In order to conduct any business at the Annual General Meeting, holders of a majority of Johnson Controls’ ordinary shares which are outstanding and entitled to vote on the record date must be present in person or represented by valid proxies. This is called a quorum. Your shares will be counted for purposes of determining if there is a quorum, whether representing votes for, against or abstained, or broker non-votes, if you:
Analysis of Legacy Tyco 2016 Compensation
| ∎ | are present and vote in person at the meeting; |
Analysis of Legacy Tyco 2016 Compensation
| ∎ | have voted by telephone or the Internet; OR |
Analysis of Legacy Tyco 2016 Compensation
| ∎ | you have submitted a proxy card or voting instruction form by mail. |
Analysis of Legacy Tyco 2016 Compensation
What is the effect of broker non-votes and abstentions? Abstentions and broker non-votes are considered present for purposes of determining the presence of a quorum. Abstentions and broker non-votes will not be considered votes properly cast at the Annual General Meeting. Because the approval of all of the proposals is based on the votes properly cast at the Annual General Meeting, abstentions and broker non-votes will not have any effect on the outcome of voting on these proposals. A broker non-vote occurs when a broker holding shares for a beneficial owner does not vote on a particular agenda item because the broker does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner. Although brokers have discretionary power to vote your shares with respect to “routine” matters, they do not have discretionary power to vote your shares on “non-routine” matters pursuant to the rules of The New York Stock Exchange (the “NYSE”). We believe the following proposals will be considered non-routine under NYSE rules and therefore your broker will not be able to vote your shares with respect to these proposals unless the
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
broker receives appropriate instructions from you: Proposal No. 1 (Election of Directors), Proposal No. 5 (Advisory Vote on Executive Compensation), and Proposal No. 6 (Advisory Vote on the Frequency of the Executive Compensation Vote). Therefore your broker will not be able to vote your shares with respect to these proposals unless the broker receives appropriate instructions from you. How will voting on any other business be conducted? Other than matters incidental to the conduct of the Annual General Meeting and those set forth in this proxy statement, we do not know of any business or proposals to be considered at the Annual General Meeting. If any other business is proposed and properly presented at the Annual General Meeting, the proxy holders must vote in accordance with the instructions given by the shareholder. You may specifically instruct the proxy holder how to vote in such a situation. In the absence of specific instructions, by signing the proxy, you instruct the proxy holder to vote in accordance with the recommendations of the Board of Directors. Important notice regarding the availability of proxy materials for the Annual General Meeting: Our proxy statement for the Annual General Meeting and the form of proxy card are available at www.proxyvote.com. As permitted by SEC rules, we are making this proxy statement available to our shareholders electronically via the Internet. On January 20, 2017, we first mailed to our shareholders a Notice containing instructions on how to access this proxy statement and vote online. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice instructs you on how to access and review all of the important information contained in the proxy statement. The Notice also instructs you on how you may submit your proxy over the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials contained on the Notice. Returning Your Proxy Card Shareholders who are voting by mail should complete and return the proxy card as soon as possible. In order to assure that your proxy is received in time to be voted at the meeting, the proxy card must be completed in accordance with the instructions and received at one of the addresses set forth below by the dates and times specified: Ireland: By 5:00 p.m., local time, on March 7, 2017 by hand or mail at: Johnson Controls International plc One Albert Quay Cork, Ireland United States: By 5:00 p.m., Eastern Standard Time, on March 7, 2017 by mail at: Broadridge Financial Solutions c/o Vote Processing 51 Mercedes Way Edgewood, NY 11717
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
If your shares are held beneficially in “street name,” you should return your proxy card or voting instruction card in accordance with the instructions on that card or as provided by the bank, brokerage firm or other nominee who holds Johnson Controls shares on your behalf. Admission to the Annual General Meeting All shareholders are invited to attend the Annual General Meeting. For admission to the Annual General Meeting, shareholders of record should bring the admission ticket attached to the enclosed proxy card to the Registered Shareholders check-in area, where their ownership will be verified. Those who have beneficial ownership of shares held by a bank, brokerage firm or other nominee should come to the Beneficial Owners check-in area. Beneficial owners who wish to vote in person at the Annual General Meeting are requested to obtain a “legal proxy” executed in their favor, from their broker, bank, nominee or other custodian that authorizes you to vote the shares held by them on your behalf. In addition, you must bring to the Annual General Meeting an account statement or letter from the broker, bank or other nominee indicating that you are the owner of the shares. Registration will begin at 2:00 pm, local time, and the Annual General Meeting will begin at 3:00 pm, local time. Johnson Controls Annual Report The Johnson Controls International plc 2016 Annual Report containing our audited consolidated financial statements with accompanying notes is available on the Company’s Web site in the Investor Relations Section at www.johnsoncontrols.com. Copies of these documents may be obtained without charge by contacting Johnson Controls by phone at +353-21-423-5000. Copies may also be obtained without charge by contacting Investor Relations in writing, or may be physically inspected, at the offices of Johnson Controls International plc, One Albert Quay, Cork, Ireland. Presentation of Irish Statutory Accounts The Company’s Irish Statutory Accounts for the fiscal year ended September 30, 2016, including the reports of the Directors and auditors thereon, will be presented at the Annual General Meeting. The Company’s Irish Statutory Accounts have been approved by the Board of Directors of the Company. There is no requirement under Irish law that such statements be approved by shareholders, and no such approval will be sought at the Annual General Meeting. The Company’s Irish Statutory Accounts are available with the proxy statement, the Company’s Annual Report on Form 10-K and other proxy materials at www.proxyvote.com, and in the Investor Relations section of the Company’s website at www.johnsoncontrols.com. Costs of Solicitation We will pay the cost of solicitation of proxies. We have engaged Mackenzie Partners as the proxy solicitor for the Annual General Meeting for an approximate fee of $10,000, plus expenses. In addition to the use of the mails, certain of our Directors, officers or employees may solicit proxies by telephone or personal contact. Upon request, we will reimburse brokers, dealers, banks and trustees, or their nominees, for reasonable expenses incurred by them in forwarding proxy materials to beneficial owners of shares. We are furnishing this proxy statement to our shareholders in connection with the solicitation of proxies by our Board of Directors for use at an Annual General Meeting of our shareholders. We are first mailing this proxy statement and the accompanying form of proxy to shareholders beginning on or about January 20, 2017.
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
Shareholder Proposals for the 2018 Annual General Meeting In accordance with the rules established by the SEC, as well as under the provisions of our Memorandum and Articles of Association, any shareholder proposal submitted pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 (the “Exchange Act”) intended for inclusion in the proxy statement for next year’s Annual General Meeting must be received by Johnson Controls no later than September 22, 2017. Such proposals should be sent to our Secretary at our registered address, which is: One Albert Quay, Cork, Ireland. To be included in the proxy statement, the proposal must comply with the requirements as to form and substance established by the SEC and our Articles of Association, and must be a proper subject for shareholder action under applicable law. Any shareholder proposal that is not submitted for inclusion in the proxy statement but is instead sought to be presented directly at the 2018 Annual General Meeting must be received by the Secretary at the address listed above no earlier than December 6, 2017. Securities and Exchange Commission rules permit management to vote proxies in its discretion in certain cases if the shareholder does not comply with this deadline and in certain other cases notwithstanding the shareholder’s compliance with this deadline. New proposals or motions with regard to existing agenda items are not subject to such restrictions and can be made at the meeting by each shareholder attending or represented. Note that if specific voting instructions are not provided to the proxy, shareholders who submit a proxy card instruct the proxy to vote their shares in accordance with the recommendations of the Board of Directors with regard to the items appearing on the agenda. Where You Can Find More Information We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy these materials at the SEC reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on their public reference room. Our SEC filings are also available to the public at the SEC’s Web site (www.sec.gov). The SEC’s Web site contains reports, proxy statements and other information regarding issuers, like us, that file electronically with the SEC. You may find our reports, proxy statements and other information at the SEC Web site. In addition, you can obtain reports and proxy statements and other information about us at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. We maintain a Web site on the Internet at www.johnsoncontrols.com. We make available free of charge, on or through our Web site, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after such material is filed with the SEC. This reference to our Internet address is for informational purposes only and shall not, under any circumstances, be deemed to incorporate the information available at such Internet address into this proxy.
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
Security Ownership of Certain Beneficial Owners and Management The following table sets forth the number of registered shares beneficially owned as of December 31, 2016 by each current director, each named executive officer and the directors and executive officers of Johnson Controls as a group.
Analysis of Legacy Tyco 2016 Compensation
| Beneficial Owner | Title | Number of Ordinary Shares Beneficially Owned(1)(2) | Pct of Class | Cash Settled Stock Units(3) | | David P. Abney | Director | 5,661 | * | - | | Natalie A. Black | Director | - | * | - | | Michael E. Daniels | Director | 58,802 | * | - | | Brian Duperreault | Director | 32,179 | * | - | | William Jackson | Named Executive Officer | 262,267 | * | 71,884 | | Jeffrey A. Joerres | Director | 13,434 | * | - | | Alex A. Molinaroli | Chairman and CEO | 927,581 | * | 213,739 | | George R. Oliver | Director and COO | 2,296,915 | * | - | | Robert Olson | Named Executive Officer | 17,616 | * | - | | Juan Pablo del Valle Perochena | Director | - | * | - | | Judith A. Reinsdorf | Named Executive Officer | 655,735 | * | - | | Brian Stief | Named Executive Officer | 151,573 | * | 189,221 | | Jürgen Tinggren | Director | 3,822 | * | - | | Mark Vergnano | Director | 11,584 | * | - | | R. David Yost | Director | 40,747 | * | - | | All current Directors and executive officers as a group (16 persons) | Director | 4,477,916 | * | |
Analysis of Legacy Tyco 2016 Compensation
* Less than 1.0% (1) The number shown reflects the number of ordinary shares owned beneficially as of December 31, 2016, based on information furnished by the persons named, public filings and Johnson Control’s records. A person is deemed to be a beneficial owner of ordinary shares if he or she, either alone or with others, has the power to vote or to dispose of those ordinary shares. Except as otherwise indicated below and subject to applicable community property laws, each owner has sole voting and sole investment authority with respect to the shares listed. To the extent indicated in the notes below, ordinary shares beneficially owned by a person include ordinary shares of which the person has the right to acquire beneficial ownership within 60 days after December 31, 2016. There were 938,685,172 Johnson Controls ordinary shares outstanding on such date. (2) Includes the maximum number of shares for which these individuals can acquire beneficial ownership upon (i) the exercise of stock options that are currently vested or will vest within 60 days of December 31, 2016 as follows: Mr. Jackson, 218,660; Mr. Molinaroli, 787,961; Mr. Oliver, 17,616; Ms. Reinsdorf, 461,276; and Mr. Stief 131,799 and (ii) the maximum number of restricted shares and ordinary shares underlying restricted share units that will vest with 60 days of December 31, 2016 as follows: Mr. Molinaroli, 9,647. (3) Reflects ordinary share equivalents under deferred and equity based compensation plans. Each stock unit is intended to be the economic equivalent of one ordinary share of Johnson Controls International plc ordinary share. Units are settled in the form of cash and are not settled in the form of
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Analysis of Legacy Tyco 2016 Compensation
ordinary shares. These amounts are not included in the amounts in the “Number of Ordinary Shares Beneficially Owned” column. The following table sets forth the information indicated for persons or groups known to the Company to be beneficial owners of more than 5% of the outstanding ordinary shares.
Analysis of Legacy Tyco 2016 Compensation
| Name and Address of Beneficial Owner | Number of Ordinary Shares Beneficially Owned | Percentage of Ordinary Shares Outstanding | | T. Rowe Price 100 E. Pratt Street Baltimore, MD 21202 | 55,936,256(1) | 6.0% |
Analysis of Legacy Tyco 2016 Compensation
(1) Based solely on the information reported by T. Rowe Price in a Notification of Holdings under Irish law provided to the Company on November 21, 2016 and reporting ownership as of November 15, 2016. On such date, T. Rowe Price, together with its affiliates, held an interest in 55,936,256 ordinary shares. Section 16(A) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s officers and Directors and persons who beneficially own more than 10% of Johnson Controls’ ordinary shares to file reports of ownership and changes in ownership of such ordinary shares with the SEC and NYSE. These persons are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. As a matter of practice, the Company’s administrative staff assists officers and Directors in preparing initial reports of ownership and reports of changes in ownership and files those reports on their behalf. Based on the Company’s review of the copies of such forms it has received, as well as information provided and representations made by the reporting persons, other than the exception noted below, Johnson Controls believes that all of its officers, Directors and beneficial owners of more than 10% of its ordinary shares complied with Section 16(a) during the Company’s fiscal year ended September 30, 2016, except as follows: (i) the withholding of 5,539 ordinary shares from Mr. Johan Pfeiffer and to cover the tax liability for dividend equivalent units in respect of RSUs that vested on September 2, 2016 was reported in a late filing on Form 4 on October 24, 2016 and (ii) the acquisition by Mr. Bruce McDonald of 2,111 ordinary shares in respect of an RSU award granted on September 8, 2016 was reported in a late Form 4 on October 26, 2016.
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
ANNEX I NON-GAAP RECONCILIATIONS This document contains financial information regarding adjusted earnings per share, which is a non-GAAP performance measure. The adjusting items include mark-to-market for pension and postretirement plans/settlement losses, transaction/integration/separation costs, restructuring and impairment costs, significant gains or losses on business divestitures, nonrecurring purchase accounting impacts related to the Tyco merger and discrete tax items. Financial information regarding adjusted sales, adjusted segment EBIT and adjusted segment EBIT margin are also presented, which are non-GAAP performance measures. Adjusted segment EBIT excludes special items such as transaction/integration/separation costs, nonrecurring purchase accounting impacts and significant gains or losses on business divestiture because these costs are not considered to be directly related to the operating performance of its business units. Management believes that, when considered together with unadjusted amounts, these non-GAAP measures are useful to investors in understanding period-over-period operating results and business trends of the Company. Management may also use these metrics as guides in forecasting, budgeting and long-term planning processes and for compensation purposes. These metrics should be considered in addition to, and not as replacements for, the most comparable GAAP measure. The following is the year-to-date reconciliation of sales, segment EBIT and segment EBIT margin as reported to adjusted sales, adjusted segment EBIT and adjusted segment EBIT margin (unaudited):
Analysis of Legacy Tyco 2016 Compensation
| | Consolidated JCI plc | | | | 2016 | 2015 | | Sales as reported | $37,674 | $37,179 | | Adjusting items: | | | | Tyco contribution | (828) | - | | Nonrecurring purchase accounting impacts | 20 | - | | Adjusted sales | $36,866 | $37,179 | | Segment EBIT as reported | $3,023 | $3,258 | | Segment EBIT margin as reported | 8.0% | 8.8% | | Adjusting items: | | | | Tyco contribution | (86) | - | | Transaction/integration/ separation costs | 680 | 91 | | Nonrecurring purchase accounting impacts | 74 | - | | Gain on business divestiture | - | (145) | | Other—net | 18 | - | | Adjusted segment EBIT | $3,709 | $3,204 | | Adjusted segment EBIT margin | 10.1% | 8.6 |
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
A reconciliation of diluted earnings per share as reported to diluted adjusted earnings per share for the year-to-date period is shown below.
Analysis of Legacy Tyco 2016 Compensation
| | Net Income Attributable to JCI plc from Continuing Operations | | | | Twelve Months Ended September 30, | | | | 2016 | 2015 | | | (unaudited) | | | Earnings per share as reported for JCI plc | $(1.30) | $2.18 | | Adjusting items: | | | | Mark-to-market for pension and postretirement plans/settlement losses | 0.75 | 0.64 | | Related tax impact | (0.22) | (0.25) | | Transaction/integration/separation costs | 1.01 | 0.14 | | Related tax impact | (0.09) | (0.02) | | Restructuring and impairment costs | 0.91 | 0.60 | | Related tax impact | (0.14) | (0.13) | | Nonrecurring purchase accounting impacts | 0.11 | - | | Related tax impact | (0.03) | - | | Gain on business divestitures | - | (0.22) | | Related tax impact | - | 0.16 | | Discrete tax items | 2.93 | 0.33 | | Adjusted earnings per share for JCI plc* | $3.94 | $3.42 | | Less: Adjusted September results for Tyco (1) | (0.09) | | | Adjusted earnings per share for JCI plc excluding Tyco | $3.85 | | | Adjusted JCI plc diluted shares outstanding (in millions) | 672.6 | | | Adjusted net income attributable to JCI Inc. (in millions) (2) | $2,587 | | | Adjusted JCI Inc. diluted shares (in millions) | 649.4 | | | Adjusted earnings per share for JCI Inc. * | $3.98 | |
Analysis of Legacy Tyco 2016 Compensation
| May not sum due to rounding.* |
Analysis of Legacy Tyco 2016 Compensation
| Amount calculated based on adjusted Tyco segment EBIT of $86 million less Tyco’s net financing charges of $14 million, income tax expense of $9 million and noncontrolling interest impact of $1 million for the month of September.(1) |
Analysis of Legacy Tyco 2016 Compensation
| The twelve months ended September 30, 2016 includes $3,795 million for JCI plc adjusted segment EBIT less $86 million of Tyco adjusted segment EBIT, $288 million of net financing charges ($314 million for JCI plc less $14 million for Tyco and $12 million related to separation and integration costs), $582 million income tax expense ($2,238 million for JCI plc less $1,647 million related to tax impacts of adjusted segment EBIT and discrete tax items as well as $9 million for the tax impact of Tyco’s adjusted earnings) and $252 million for the impact of noncontrolling interest ($216 million of expense for JCI plc plus the noncontrolling interest impact of adjusted segment EBIT items of $37 million less the Tyco noncontrolling interest impact of $1 million).(2) |
Analysis of Legacy Tyco 2016 Compensation
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Analysis of Legacy Tyco 2016 Compensation
The following table reconciles the denominators used to calculate basic and diluted earnings per share for JCI plc (in millions):
Analysis of Legacy Tyco 2016 Compensation
| | Twelve Months Ended September 30, | | | | 2016 | 2015 | | | (unaudited) | | | Weighted Average Shares Outstanding for JCI plc | | | | Basic weighted average shares outstanding | 667.4 | 655.2 | | Effect of dilutive securities: | | | | Stock options, unvested restricted stock and unvested performance share awards | - | 6.3 | | Diluted weighted average shares outstanding | 667.4 | 661.5 |
Analysis of Legacy Tyco 2016 Compensation
For the twelve months ended September 30, 2016, the total number of potential dilutive shares due to stock options, unvested restricted stock and unvested performance share awards was 5.2 million. However, these items were not included in the computation of diluted loss per share for the twelve months ended September 30, 2016, since to do so would decrease the loss per share. On an adjusted diluted outstanding share basis, inclusion of the effect of dilutive securities results in diluted weighted average shares outstanding of 672.6 million for the twelve months ended September 30, 2016. The following table reconciles the denominators used to calculate adjusted diluted earnings per share for JCI Inc. (i.e. JCI plc excluding the impact of the Tyco merger). The JCI Inc. shares represent the JCI plc shares adjusted to exclude the merger share conversion and September Tyco dilutive securities impact. Amounts below are shown in millions.
Analysis of Legacy Tyco 2016 Compensation
| | Twelve Months Ended September 30, | | | | 2016 | 2015 | | | (unaudited) | | | Adjusted diluted weighted average shares outstanding for JCI plc | 672.6 | 661.5 | | Effect of merger share conversion | (22.7) | - | | Tyco dilutive securities impact | (0.5) | - | | Adjusted diluted weighted average shares outstanding for JCI Inc. | 649.4 | 661.5 |
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Analysis of Legacy Tyco 2016 Compensation
ANNEX II