DEF 14A of Freeport-Mcmoran Inc
Filed Apr 24, 2018 · FY20170001193125-18-128916
Stockholder Engagement Highlights (page 5)
| • | Revised director compensation program to eliminate meeting attendance fees and reduce the value of annual equity awards. |
Director Nominee Highlights (page 18)
Director Nominee Highlights (page 18)
Director Nominee Highlights (page 18)
| Name | Age | Director Since | Principal Occupation | Independent | Board Committees | | Richard C. Adkerson President and Chief Executive Officer | 71 | 2006 | Vice Chairman, President and Chief Executive Officer Freeport-McMoRan Inc. | No | None | | Gerald J. Ford Non-Executive Chairman | 73 | 2000 | Chairman of the Board Hilltop Holdings Inc. | ✓ | • Audit • Executive (Chair) • Nominating and Corporate Governance (Chair) | | Lydia H. Kennard | 63 | 2013 | President and Chief Executive Officer KDG Construction Consulting | ✓ | • Corporate Responsibility • Nominating and Corporate Governance | | Jon C. Madonna | 74 | 2007 | Retired Chairman and Chief Executive Officer KPMG LLP | ✓ | • Audit (Chair) • Compensation • Nominating and Corporate Governance • Executive | | Courtney Mather | 41 | 2015 | Portfolio Manager Icahn Capital LP | ✓ | • Audit • Executive | | Dustan E. McCoy | 68 | 2007 | Retired Chairman and Chief Executive Officer Brunswick Corporation | ✓ | • Compensation (Chair) • Corporate Responsibility • Executive | | Frances Fragos Townsend | 56 | 2013 | Executive Vice President of Worldwide Government, Legal and Business Affairs MacAndrews & Forbes Holdings Inc. | ✓ | • Corporate Responsibility (Chair) • Compensation • Executive |
PROPOSAL NO. 1: ELECTION OF DIRECTORS
PROPOSAL NO. 1: ELECTION OF DIRECTORS The board currently consists of seven members. Upon the recommendation of our nominating and corporate governance committee, the board has nominated seven directors for election at our 2018 annual meeting to hold office until the next annual meeting and the election of their successors. All of the nominees are currently directors. Each agreed to be named in this proxy statement and to serve if elected. The persons named as proxies on the proxy card intend to vote your proxy for the election of each such nominee, unless otherwise directed. If, contrary to our expectations, a nominee should become unavailable for any reason, your proxy will be voted for a substitute nominee designated by the board or the board may reduce its size. The experience, qualifications, attributes and skills that led the board and the nominating and corporate governance committee to conclude that each of the nominees should serve as a director for the company are set forth in the table below, which our nominating and corporate governance committee has used for the past two years.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
| Experience, Qualifications, Attributes & Skills |
PROPOSAL NO. 1: ELECTION OF DIRECTORS
| | Adkerson | Ford | Kennard | Madonna | Mather | McCoy | Townsend | | Senior leadership experience | ✓ | ✓ | ✓ | ✓ | | ✓ | | | Accounting/financial expertise | ✓ | ✓ | ✓ | ✓ | ✓ | | | | Public company board experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Operational management | ✓ | ✓ | ✓ | ✓ | | ✓ | | | International business | ✓ | | | ✓ | | ✓ | ✓ | | Capital markets/banking | ✓ | ✓ | | | ✓ | ✓ | | | Environmental/sustainability/corporate responsibility | ✓ | | ✓ | | | ✓ | ✓ | | Government, legal and regulatory compliance | ✓ | ✓ | ✓ | ✓ | | ✓ | ✓ | | Diversity (gender, race) | | | ✓ | | | | ✓ |
PROPOSAL NO. 1: ELECTION OF DIRECTORS
For more information regarding director nominations and qualifications, see the sections titled “Corporate Governance – Director Nominations and Qualifications” and “Corporate Governance – Director Candidates Submitted by Stockholders” beginning on pages 11 and 15, respectively.
Vote Required to Elect Director Nominees
Vote Required to Elect Director Nominees Under our by-laws, in uncontested elections, directors are elected by a majority of the votes cast. In contested elections where the number of nominees exceeds the number of directors to be elected, directors are elected by a plurality vote, with the director nominees who receive the most votes being elected. In an uncontested election, any nominee for director who receives a greater number of votes “against” his or her election than votes “for” such election will be required to promptly tender his or her resignation to the board. Our nominating and corporate governance committee will recommend to the board whether to accept or reject the tendered resignation. The board will act on the committee’s recommendation and publicly disclose its decision within 90 days from the date of the annual meeting of stockholders. Any director who tenders his or her resignation will not participate in the committee’s recommendation or the board action regarding whether to accept or reject the tendered resignation. In addition, if each member of the nominating and corporate governance committee fails to be elected at the same election, the independent directors who were elected will appoint a committee to consider the tendered resignations and recommend to the board whether to accept or reject them. Any vacancies on the board may be filled by a majority of the directors then in office. Each director elected in this manner will hold office until his or her successor is elected and duly qualified. For more information on the voting requirements, see “Questions and Answers About the Proxy Materials, Annual Meeting and Voting.” OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR ALL OF THE DIRECTOR NOMINEES LISTED BELOW.
Information About Director Nominees
Information About Director Nominees The following table provides certain information as of April 10, 2018, with respect to each director nominee, including information regarding business experience, director positions with other public companies held currently or at any time during the last five years, and the experiences, qualifications, attributes or skills that led our nominating and corporate governance committee and the board to determine that such person should be nominated at our 2018 annual meeting of stockholders to serve as a director of the company. Unless otherwise indicated, each person has been engaged in the principal occupation shown for the past five years. Former public company directorships reflect positions held in the last five years.
Information About Director Nominees
| Richard C. Adkerson Vice Chairman, President and Chief Executive Officer of Freeport-McMoRan Inc. Age: 71 Director since: 2006 | Business Experience: Chief Executive Officer of the company since December 2003. President of the company since January 2008 and from April 1997 to March 2007. Chief Financial Officer of the company from October 2000 to December 2003. Vice Chairman of the Board of the company since May 2013. Co-Chairman of the Board of McMoRan Exploration Co. from 1998 until acquired by the company in 2013. President and Chief Executive Officer of McMoRan Exploration Co. from 1998 to 2004. Vice Chairman of our former parent company from 1995 to 1997. Partner in Arthur Andersen & Co. from 1978 to 1989 where he served as a Managing Director and head of the firm’s global oil and gas industry services. Professional Accounting Fellow with the Securities and Exchange Commission and Presidential Exchange Executive from 1976 to 1978. Skills and Qualifications: Mr. Adkerson is a recognized business leader in the mining industry, making him highly qualified to serve as a Vice Chairman of the Board of the company. As President and Chief Executive Officer of our company, he has demonstrated exceptional leadership abilities in developing and executing a financial strategy that has benefited our stockholders and in building an operational, financial and administrative organization that efficiently supports our business. Mr. Adkerson is recognized as a mining industry leader, having served as past Chairman of the International Council on Mining and Metals and on the Executive Board of the International Copper Association. Mr. Adkerson’s strong leadership skills and executive management experiences are instrumental in fostering strong relationships with business partners, key customers, suppliers and host governments, thereby enabling him to guide the company’s business strategy. He holds a B.S. in Accounting with highest honors and an M.B.A. from Mississippi State University and completed the Advanced Management Program at Harvard Business School. Former Public Company Directorships: McMoRan Exploration Co. |
Information About Director Nominees
| Gerald J. Ford Non-Executive Chairman of the Board of Freeport- McMoRan Inc.; Chairman of the Board of Hilltop Holdings Inc. Independent Age: 73 Director since: 2000 Committees: • Audit • Executive (Chair) • Nominating and Corporate Governance (Chair) | Business Experience: Non-Executive Chairman of the Board from January 2016 to present. Principal stockholder and Chairman of the Board of Hilltop Holdings Inc., a Texas-based, publicly traded, diversified financial holding company, since 2007, and a director of Hilltop Holdings Inc. since 2005. General Partner of Ford Financial II, L.P., a private equity firm, from 2010 to present and of Ford Financial Fund, L.P., a private equity firm, from 2010 to 2016. Chairman of the Board and Chief Executive Officer of Golden State Bancorp, Inc. and its wholly owned subsidiary, California Federal Bank, FSB, a Federal Savings Bank, from 1998 through its 2002 merger with Citigroup Inc. Chairman of the Board of First Acceptance Corporation from 1996 to 2010 and Chief Executive Officer of First Acceptance Corporation from 1996 to 2002. Skills and Qualifications: Mr. Ford is a banking and financial institutions entrepreneur who has been involved in numerous mergers and acquisitions of private and public sector financial institutions over the past 35 years. In that capacity, he acquired and consolidated 30 commercial banks from 1975 to 1993, forming First United Bank Group, Inc., a multi-bank holding company for which he served as Chairman of the Board and Chief Executive Officer until its sale in 1994. During this period, he also led investment consortiums that acquired numerous financial institutions, forming in succession, First Gibraltar Bank, FSB, First Madison Bank, FSB and First Nationwide Bank. His extensive banking industry experience and educational background provide him with expertise in financial, accounting and regulatory matters, making him a valuable member of the board of directors. In addition, Mr. Ford’s service on the board of directors and audit and corporate governance committees of a variety of public companies gives him a deep understanding of the role of the board and positions him well to serve as our non-executive chairman of the board, chair of our executive and nominating and corporate governance committees and as a member of our audit committee. He holds a B.A. in Economics and a J.D. from Southern Methodist University. Current Public Company Directorships: Hilltop Holdings Inc. and Scientific Games Corporation Former Public Company Directorships: Pacific Capital Bancorp, McMoRan Exploration Co. and SWS Group, Inc. |
Information About Director Nominees
| Lydia H. Kennard President and Chief Executive Officer of KDG Construction Consulting Independent Age: 63 Director since: 2013 Committees: • Corporate Responsibility • Nominating and Corporate Governance | Business Experience: President and Chief Executive Officer of KDG Construction Consulting, a construction and program management firm, from 2011 to present. Principal of Airport Property Ventures, LLC, a developer and operator of aviation facilities, from 2007 to present. Executive Director of Los Angeles World Airports, from 1999 to 2003, and again from 2005 to 2007. Member of the California Air Resources Board from 2004 to 2011. Skills and Qualifications: Ms. Kennard’s over 30 years of executive and operational experience in aviation, construction management and real estate development enables her to contribute to the board her leadership skills and her critical insights into the operational requirements of a large public company. As a result of her former involvement with the California Air Resources Board, she is able to share her understanding of environmental management and pollution control matters, which is valuable in enhancing the board’s insight with respect to our company’s environmental policies and practices. She holds a B.A. in Urban Planning and Management from Stanford University, a Master in City Planning from Massachusetts Institute of Technology and a J.D. from Harvard Law School. Current Public Company Directorships: Prologis, Inc. Former Public Company Directorships: Intermec, Inc. and URS Corporation | | Jon C. Madonna Retired Chairman and Chief Executive Officer of KPMG LLP Independent Age: 74 Director since: 2007 Committees: • Audit (Chair) • Compensation • Nominating and Corporate Governance • Executive | Business Experience: Retired Chairman and Chief Executive Officer of KPMG LLP, an international accounting and consulting firm. Retired from KPMG LLP in 1996 having held numerous senior leadership positions throughout his 28-year career with KPMG LLP. Chairman of DigitalThink, Inc. from 2002 to 2004 and Chief Executive Officer of DigitalThink, Inc. from 2001 to 2002. President and Chief Executive Officer of Carlson Wagonlit Corporate Travel, Inc. from 1999 to 2000 and Vice Chairman of Travelers Group, Inc. from 1997 to 1998. Skills and Qualifications: Mr. Madonna’s long career in public accounting with an international accounting firm and his service as an executive and a director for several publicly traded companies provides him with extensive experience in addressing strategic, operational, financial, accounting, and regulatory matters at the board level. His depth of experience enables him to provide valuable insight to the board of directors and makes him highly qualified to serve as the chair of our audit committee. He holds a B.S. in Accounting from The University of San Francisco. Former Public Company Directorships: Tidewater, Inc. and AT&T Inc. |
Information About Director Nominees
| Courtney Mather Portfolio Manager of Icahn Capital LP Independent Age: 41 Director since: 2015 Committees: • Audit • Executive | Business Experience: Portfolio Manager of Icahn Capital LP, the entity through which Carl C. Icahn manages investment funds, from December 2016 to present. Managing Director of Icahn Capital LP from April 2014 to November 2016. Served multiple senior investment roles with leadership responsibility at Goldman Sachs & Co. from 1998 to 2012, including most recently Managing Director responsible for Private Distressed Trading and Investing, where he focused on identifying and analyzing investment opportunities for both Goldman Sachs and clients. Skills and Qualifications: Mr. Mather’s significant business and financial experience and leadership roles in various companies provide him with the requisite set of skills to serve as a member of the board. Mr. Mather received a B.A. from Rutgers College and attended the United States Naval Academy. Mr. Mather holds the Chartered Alternative Investment Analyst and Chartered Financial Analyst professional designations. Mr. Mather was initially appointed to the board of directors in October 2015 in accordance with the terms of the Nomination and Standstill Agreement. Mr. Mather has been nominated for election to the board at our 2018 annual meeting of stockholders in accordance with such agreement. Current Public Company Directorships: Herc Holdings, Inc., Conduent Incorporated and Newell Brands Inc., in each of which Carl C. Icahn has a non-controlling interest. Former Public Company Directorships: Viskase Companies, Inc., American Railcar Industries, Inc., CVR Refining, LP and CVR Energy, Inc., each of which is indirectly controlled by Carl C. Icahn. | | Dustan E. McCoy Retired Chairman and Chief Executive Officer of Brunswick Corporation Independent Age: 68 Director since: 2007 Committees: • Compensation (Chair) • Corporate Responsibility • Executive | Business Experience: Retired Chairman and Chief Executive Officer of Brunswick Corporation, a leading, publicly traded, global manufacturer and marketer of recreation products including marine engines, boats, fitness equipment and billiards equipment, having held such positions from December 2005 to February 2016. President of the Brunswick Boat Group from 2000 until 2005. Joined Brunswick in 1999 as Vice President, General Counsel and Corporate Secretary. Prior to joining Brunswick, served as Executive Vice President for Witco Corporation, a publicly traded specialty chemical products company, with operating responsibility for a variety of global businesses and functions and served as Senior Vice President, General Counsel and Corporate Secretary. Skills and Qualifications: Mr. McCoy’s extensive experience in legal and compliance matters generally, and more specifically his experience in corporate governance and disclosure matters for publicly traded companies makes him well-suited to serve on the board of directors. Mr. McCoy’s executive management experience provides him with a broad understanding of the operational, financial and strategic issues facing large global companies, enabling him to chair our compensation committee and to provide valuable strategic advice to the board and management in advancing the company’s interests. He holds a B.A. in Political Science from Eastern Kentucky University and a J.D. from Salmon P. Chase College of Law at Northern Kentucky University. Current Public Company Directorships: Louisiana-Pacific Corporation Former Public Company Directorships: Brunswick Corporation |
Information About Director Nominees
| Frances Fragos Townsend Executive Vice President of Worldwide Government, Legal and Business Affairs at MacAndrews & Forbes Holdings Inc. Independent Age: 56 Director since: 2013 Committees: • Corporate Responsibility (Chair) • Compensation • Executive | Business Experience: Executive Vice President of Worldwide Government, Legal and Business Affairs at MacAndrews & Forbes Holdings Inc. from 2013 to present and Senior Vice President from 2010 to 2013. Partner at Baker Botts L.L.P. from 2009 to 2010. Homeland Security and Counterterrorism Advisor to President George W. Bush from 2005 until 2008 and Chair of the Homeland Security Council from 2004 to 2008. Deputy Assistant to President George W. Bush and Deputy National Security Advisor for Combatting Terrorism from 2003 until 2004. Prior to serving the President, Ms. Townsend was the first Assistant Commandant for Intelligence for the U.S. Coast Guard. Before that, Ms. Townsend spent 13 years at the U.S. Department of Justice under the administrations of President George H.W. Bush, President William J. Clinton and President George W. Bush. Ms. Townsend is a member of the Council on Foreign Relations. Skills and Qualifications: Ms. Townsend brings to the board over 25 years of domestic and international experience in legal, law enforcement and security. Her extensive public policy, government and regulatory experience enables her to provide valuable insight with respect to complex international and regulatory matters addressed at the board level. She holds a B.A. in Political Science and a B.S. in Psychology from American University and a J.D. from the University of San Diego School of Law. Current Public Company Directorships: Scientific Games Corporation and The Western Union Company Former Public Company Directorships: SIGA Technologies, Inc. |
Performance Highlights
| • Important progress for long-term stability in Indonesia. | | | • Our common stock increased 44% during 2017, putting us in the top 15% in the S&P 500. • Reduced consolidated debt, net of cash, to $8.7 billion – 1.5x 2017 EBITDA – compared with $20 billion at the start of 2016. • As a first step in recognition of our company’s improved financial strength, our board of directors reinstated a cash dividend on our common stock. The first quarterly dividend payment of $0.05 per share will occur on May 1, 2018. | |
Performance Highlights
To further support our plan, our compensation committee (the committee) designed the annual incentive plan for 2017 to focus our executive team on the goals noted above. Specifically, the 2017 financial and operational metrics and targets under the annual incentive plan, and our results for 2017, which exceeded the targets under three metrics and fell slightly below target for three metrics, were as follows:
2017 Performance Against AIP Targets
2017 Performance Against AIP Targets
Stockholder Engagement and Continued Evolution of Our Executive Compensation Program
Stockholder Engagement and Continued Evolution of Our Executive Compensation Program Our board has a history of seeking our stockholders’ feedback regarding our practices, including our compensation program, and highly values the insights we receive through this open dialogue. Over the past year, the board led a multi-stage stockholder engagement program to ensure the continuation of this process of using stockholder feedback to inform the board’s response to areas of inquiry. In the lead-up to the 2017 annual meeting, we engaged with 15 of our stockholders collectively holding over 45% of our outstanding common stock. Most investors communicated positive feedback regarding management’s execution of our long-term strategy to focus on our world-class copper portfolio and exercise capital and cost discipline. Although our stockholders were generally supportive of our compensation program’s structure and quantum, there were two primary concerns regarding our executive compensation program that we sought to address. First, the use of special annual incentive and equity awards for 2016 performance and secondly, the use of annual metrics in our long-term incentive compensation program. The committee recognized the need for responsive action following the disappointing outcome of our 2017 annual meeting vote on our say-on-pay proposal, which passed with 52% support. After our 2017 annual meeting, our committee executed a comprehensive engagement outreach program to gain additional insight into stockholders’ views of our executive compensation program and discuss potential responsive actions. In the fall of 2017, we engaged with a significant cross-section of our institutional stockholder base and indicated our intent to integrate stockholder feedback into the committee’s review of the executive compensation program as we considered changes for 2018. We sought meetings with 15 stockholders representing over 40% of our outstanding common stock and engaged with 10 investors representing about 25% of our outstanding common stock. In order to establish direct dialogue with our committee, the chair of the committee participated in many of these discussions, along with our non-executive chairman and our deputy general counsel and corporate secretary. We conducted additional engagement calls with our largest stockholders to preview the modifications to our executive compensation program and to seek any additional feedback. Through this extensive engagement process, we received valuable input from our stockholders detailed below under “Stockholder Feedback.” This feedback directly informed the incentive compensation changes made for 2018 detailed under “Adopted New Long-Term Incentive Program Structure for 2018 to Reflect Stockholder Perspectives” on page 28. What We Heard and What We Did
Stockholder Engagement and Continued Evolution of Our Executive Compensation Program
| Compensation Element | Stockholder Feedback | Direct Response | | Performance Share Units (PSUs) (50% of LTI award) | • Frequently cited return on investment (ROI) as a long-term metric to consider | • Adopted ROI metric | | | • Generally supported TSR modifier | • Maintained relative TSR modifier | | | • Preferred a metric that applied over three-year performance period | • Vesting based on metric over three-year performance period | | Other Equity Vehicles (50% of LTI award) | • Suggested awarding restricted stock units (RSUs) in place of a portion of stock options | • Adjusted program to include RSUs (25% of LTI award) and stock options (now 25% of LTI award instead of 50%) | | Special Awards | • Noted that 2017 say-on-pay votes reflected concerns regarding the special awards to executives, although many understood our rationale | • Committed to no future special awards outside of regular compensation program except in extraordinary circumstances; did not grant any additional special awards in 2018 |
Target Direct Compensation
Target Direct Compensation Our executive compensation program is significantly performance-based – linking executive pay, company performance and results for stockholders – and is appropriately balanced with short- and long-term measures. The primary components of our executive compensation program are (1) base salary, (2) annual incentive awards and (3) long-term incentive awards (which we collectively refer to as our executives’ “direct compensation”). The annual incentive awards and long-term incentive awards, which comprise the majority of our executives’ target direct compensation, are at-risk, with a significant percentage of the compensation based on measureable performance objectives, both annual and long-term (the performance share units, or PSUs), and increases in our stock price (stock options). Using these compensation components, in February 2017 the committee established the following target compensation framework for our executive officers for 2017:
2017 Target Compensation Framework*
| Executive | Annual Base Salary | Target Cash Annual Incentive (0-175%) | Target LTI Award Values | | | | | | | Options | PSUs | Total Target Direct Compensation | | Mr. Adkerson | $1,600,000 | $2,400,000 | $4,000,000 | $4,000,000 | $12,000,000 | | Ms. Quirk | 800,000 | 1,400,000 | 2,000,000 | 2,000,000 | 6,200,000 | | Mr. Arnold | 550,000 | 962,500 | 1,375,000 | 1,375,000 | 4,262,500 | | Mr. Conger | 550,000 | 962,500 | 1,375,000 | 1,375,000 | 4,262,500 |
2017 Target Compensation Framework*
| The 2018 target compensation framework remains the same except that the values reflected for options are split 50/50 between options and RSUs.* |
2017 Target Compensation Framework*
| • | Target annual incentive award increased to 150% of base salary from 100%; and |
2017 Target Compensation Framework*
| • | Target LTI award values increased to 5x base salary from 4x. |
Summary Compensation Table
Summary Compensation Table
Summary Compensation Table
| Name and Principal Position | Year | Salary | Bonus | Stock Awards (1) | Option Awards (2) | Non-Equity Incentive Plan Compensation (3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (4) | All Other Compensation (5) | Total | | Richard C. Adkerson Vice Chairman, President and Chief Executive Officer | 2017 2016 2015 | $1,541,667 1,250,000 1,250,000 | $— 1,000,000 — | $7,286,646 6,874,440 2,145,510 | $3,919,150 2,864,400 2,489,050 | $2,704,800 1,385,000 — | $2,201,935 2,029,631 1,874,626 | $741,839 579,195 806,655 | $18,396,037 15,982,666 8,570,791 | | Kathleen L. Quirk Executive Vice President, Chief Financial Officer and Treasurer | 2017 2016 2015 | 775,000 650,000 650,000 | — — — | 4,131,584 4,468,386 1,370,743 | 1,955,770 1,861,200 1,634,000 | 1,577,800 1,260,350 — | — — — | 111,668 69,637 109,089 | 8,551,822 8,309,573 3,763,832 | | Michael J. Arnold Executive Vice President and Chief Administrative Officer | 2017 2016 2015 | 550,000 550,000 550,000 | — — — | 1,971,344 3,780,942 1,191,950 | 1,346,970 1,570,800 1,376,000 | 1,084,738 1,066,450 — | — — — | 128,568 95,790 105,934 | 5,081,620 7,063,982 3,223,884 | | Harry M. Conger, IV President and Chief Operating Officer – Americas | 2017 2016 | 541,666 500,000 | — — | 1,474,704 1,947,758 | 1,346,970 818,400 | 1,084,738 1,114,925 | — — | 129,091 137,651 | 4,577,169 4,518,734 |
Adjusted Summary Compensation Table – CEO*
| Name | Year | Salary | Bonus | Stock Awards (1) | Option Awards (2) | Non-Equity Incentive Plan Compensation (3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (4) | All Other Compensation (5) | Total | | Richard C. Adkerson | 2017 2016 | $1,541,667 1,250,000 | — $1,000,000 | $4,306,806 9,854,280 | $3,919,150 2,864,400 | $2,704,800 1,385,000 | $2,201,935 2,029,631 | $741,839 579,195 | $15,416,197 18,962,506 |
2017 Grants of Plan-Based Awards
2017 Grants of Plan-Based Awards
2017 Grants of Plan-Based Awards
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | All Other Stock Awards: Number of Shares of Stock or Units (3) | All Other Option Awards: Number of Securities Underlying Options (4) | Exercise or Base Price of Option Awards (5) | Grant Date Fair Value of Stock and Option Awards | | | | Threshold | Target | Maximum | Target (6) | Maximum | | | | | | Richard C. Adkerson AIP LTI Program – PSUs LTI Program – Options Special RSU Grant Special Performance RSUs | 02/07/2017 02/07/2017 02/07/2017 02/07/2017 02/07/2017 | $1,200,000 — — — — | $2,400,000 — — — — | $4,200,000 — — — — | — 257,000 — — — | — 514,000 — — — | — — — 128,000 64,000 | — — 515,000 — — | — — $15.52 — — | — $4,306,806 3,919,150 1,986,560 993,280 | | Kathleen L. Quirk AIP LTI Program – PSUs LTI Program – Options Special RSU Grant | 02/07/2017 02/07/2017 02/07/2017 02/07/2017 | 700,000 — — — | 1,400,000 — — — | 2,450,000 — — — | — 128,000 — — | — 256,000 — — | — — — 128,000 | — — 257,000 — | — — 15.52 — | — 2,145,024 1,955,770 1,986,560 | | Michael J. Arnold AIP LTI Program – PSUs LTI Program – Options Special RSU Grant | 02/07/2017 02/07/2017 02/07/2017 02/07/2017 | 481,250 — — — | 962,500 — — — | 1,684,375 — — — | — 88,000 — — | — 176,000 — — | — — — 32,000 | — — 177,000 — | — — 15.52 — | — 1,474,704 1,346,970 496,640 | | Harry M. Conger, IV AIP LTI Program – PSUs LTI Program – Options | 02/07/2017 02/07/2017 02/07/2017 | 481,250 — — | 962,500 — — | 1,684,375 — — | — 88,000 — | — 176,000 — | — — — | — — 177,000 | — — 15.52 | — 1,474,704 1,346,970 |
2017 Grants of Plan-Based Awards
| For 2017, under the annual incentive program, each executive had a target award based on a multiple of salary, with the amount to be earned based on the company’s performance relative to defined goals established by the compensation committee. The amounts reported represent the estimated threshold, target and maximum possible annual cash incentive payments that could have been received by each named executive officer pursuant to the annual incentive program for 2017. The estimated amounts in the “Target” column were(1) |
2017 Grants of Plan-Based Awards
| approved by the compensation committee and reflect 150% of base salary for Mr. Adkerson and 175% of base salary for each of Ms. Quirk and Messrs. Arnold and Conger. Achievement of the threshold level of performance would result in a payout of 50% of the target award, and a maximum performance would result in 175% of target. For more information, see the section titled “Executive Officer Compensation – Compensation Discussion and Analysis” beginning on page 23. |
2017 Grants of Plan-Based Awards
| These awards represent PSUs awarded to the executive officers as part of the 2017 LTI Program. Each of the named executive officers received 50% of their 2017 target LTI Program award in the form of PSUs based on estimated grant date fair values as of February 7, 2017. Each PSU granted in 2017 represents a contingent right to receive shares of our common stock, with the final number of shares to be issued to our named executive officers based on the company’s achievement of annual operational and financial metrics and on our TSR compared to the TSR of our peer group during the three-year period ending on December 31, 2019. For more information regarding PSUs granted to the named executive officers, see the section titled “Executive Officer Compensation – Compensation Discussion and Analysis” beginning on page 23.(2) |
2017 Grants of Plan-Based Awards
| These awards represent one-time special awards granted in 2017 for 2016 performance, including grants of time vested RSUs that vest in annual increments over four years and, for Mr. Adkerson, performance-based RSUs that will vest upon our board’s approval of a performance condition prior to the fifth anniversary of the grant date. See the section entitled “Executive Officer Compensation – Compensation Discussion and Analysis – Stockholder Engagement and Continued Evolution of Our Executive Compensation Program” beginning on page 25.(3) |
2017 Grants of Plan-Based Awards
| Each of the named executive officers received 50% of their 2017 LTI Program award in the form of options based on the estimated grant date fair value as of February 7, 2017.(4) |
2017 Grants of Plan-Based Awards
| The exercise price of each stock option reflected in this table was determined by reference to the closing quoted per share sale price of our common stock on the composite tape for NYSE-listed stocks on the grant date.(5) |
2017 Grants of Plan-Based Awards
| For the 2017 PSU awards, the executives may receive between 0% and 200% of the target PSU award based on achievement of the applicable performance goals, thus there was no determinable threshold.(6) |
Outstanding Equity Awards at December 31, 2017
Outstanding Equity Awards at December 31, 2017
Outstanding Equity Awards at December 31, 2017
| | Option Awards | | | | | Stock Awards | | | | | Name | Option Grant Date | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable (1) | Option Exercise Price (2) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (3) | Market Value of Shares or Units of Stock That Have Not Vested (4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (5) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (4)(5) | | Richard C. Adkerson | 01/28/08 02/02/09 02/01/10 02/07/11 02/06/12 02/02/09 02/02/10 02/08/11 02/06/12 01/29/13 02/04/14 02/03/15 02/02/16 02/07/17 | 162,000 162,000 162,000 135,000 135,000 250,000 1,000,000 500,000 330,000 450,000 251,250 290,000 271,250 — | — — — — — — — — — — 83,750 290,000 813,750 515,000 | $27.860 11.930 29.130 31.950 24.080 12.295 36.255 55.640 46.730 35.010 30.940 18.980 4.350 15.520 | 01/28/18 02/02/19 02/01/20 02/07/21 02/06/22 02/02/19 02/02/20 02/08/21 02/06/22 01/29/23 02/04/24 02/03/25 02/02/26 02/07/27 | 128,000 | $2,426,880 | 1,101,000 | $17,462,160 | | Kathleen L. Quirk | 01/28/08 02/02/09 02/01/10 02/07/11 02/06/12 02/02/09 02/02/10 02/08/11 02/06/12 01/29/13 02/04/14 02/03/15 02/02/16 02/07/17 | 40,500 40,500 40,500 40,500 40,500 300,000 300,000 150,000 110,000 150,000 165,000 190,000 176,250 — | — — — — — — — — — — 55,000 190,000 528,750 257,000 | 27.860 11.930 29.130 31.950 24.080 12.295 36.255 55.640 46.730 35.010 30.940 18.980 4.350 15.520 | 01/28/18 02/02/19 02/01/20 02/07/21 02/06/22 02/02/19 02/02/20 02/08/21 02/06/22 01/29/23 02/04/24 02/03/25 02/02/26 02/07/27 | 128,000 | 2,426,880 | 633,000 | 9,821,280 | | Michael J. Arnold | 02/02/09 02/02/10 02/08/11 02/06/12 01/29/13 02/04/14 02/03/15 02/02/16 02/07/17 | 180,000 240,000 120,000 100,000 135,000 138,750 160,000 148,750 — | — — — — — 46,250 160,000 446,250 177,000 | 12.295 36.255 55.640 46.730 35.010 30.940 18.980 4.350 15.520 | 02/02/19 02/02/20 02/08/21 02/06/22 01/29/23 02/04/24 02/03/25 02/02/26 02/07/27 | 32,000 | 606,720 | 518,000 | 7,925,280 | | Harry M. Conger, IV | 01/28/08 02/02/09 02/02/10 02/08/11 02/06/12 01/29/13 02/04/14 02/03/15 02/02/16 02/07/17 | 30,000 23,000 100,000 50,000 65,000 65,000 28,125 37,500 — — | — — — — — — 9,375 37,500 232,500 177,000 | 42.650 12.295 36.255 55.640 46.730 35.010 30.940 18.980 4.350 15.520 | 01/28/18 02/02/19 02/02/20 02/08/21 02/06/22 01/29/23 02/04/24 02/03/25 02/02/26 02/07/27 | 5,000 | 94,800 | 258,000 | 4,891,680 |
Outstanding Equity Awards at December 31, 2017
| The stock options become exercisable in 25% annual increments on each of the first four anniversaries of the date of grant and have a term of 10 years. The unvested stock options will become immediately exercisable if there is a qualifying termination of employment following a change in control.(1) |
Outstanding Equity Awards at December 31, 2017
| The exercise price of the stock options granted by the company was determined by reference to the closing price of our common stock on the grant date.(2) |
Outstanding Equity Awards at December 31, 2017
| Represents RSUs held by the named executive officers, as set forth in the tables below, which will vest and be paid out in shares of our common stock, provided the applicable service conditions are satisfied, as set forth in the table below.(3) |
Outstanding Equity Awards at December 31, 2017
| Name | RSUs | Vesting Date | | Mr. Adkerson | 128,000 | 02/15/21 | | Ms. Quirk | 128,000 | 02/15/21 | | Mr. Arnold | 32,000 | 02/15/21 | | Mr. Conger | 5,000 | 02/15/18 |
Outstanding Equity Awards at December 31, 2017
| The market value of the unvested RSUs and PSUs reflected in this table was based on the $18.96 closing market price per share of our common stock on December 29, 2017.(4) |
Outstanding Equity Awards at December 31, 2017
| Represents target PSUs held by the named executive officers, as set forth in the table below. The PSUs will vest following the end of the applicable performance period and be paid out in shares of our common stock based on satisfaction of the applicable performance goals. With respect to the 2015 PSU awards, the executives earned between 0% and 200% of the target PSU award based on the company’s TSR compared to the TSR of the company’s peer group. With respect to the 2016 and 2017 PSU awards, the executives will earn between 0% and 175% of the target PSU award based on the company’s achievement of annual operational and financial metrics and up to an additional 25% of the target PSU award based on the company’s TSR compared to the TSR of the company’s peer group. Accordingly, the number of units reported in the table above represent the target value of all outstanding PSUs as of December 31, 2017, but the values reported reflect a 0% payout with respect to the 2015 PSU awards and a payout at the target amount with respect to the 2016 and 2017 PSU awards. In addition, Mr. Adkerson’s total includes 64,000 special performance RSUs, which vest upon satisfaction of a performance condition provided such performance occurs before February 7, 2022.(5) |
Outstanding Equity Awards at December 31, 2017
| Name | Grant Date | PSUs | | | Last Day of Performance Period | | | | Threshold* | Target | Maximum | | | Mr. Adkerson | 2/3/2015 3/30/2016 2/7/2017 | 72,000 n/a n/a | 180,000 600,000 257,000 | 360,000 1,200,000 514,000 | 12/31/17** 12/31/18 12/31/19 | | Ms. Quirk | 2/3/2015 3/30/2016 2/7/2017 | 46,000 n/a n/a | 115,000 390,000 128,000 | 230,000 780,000 256,000 | 12/31/17** 12/31/18 12/31/19 | | Mr. Arnold | 2/3/2015 3/30/2016 2/7/2017 | 40,000 n/a n/a | 100,000 330,000 88,000 | 200,000 660,000 176,000 | 12/31/17** 12/31/18 12/31/19 | | Mr. Conger | 3/30/2016 2/7/2017 | n/a n/a | 170,000 88,000 | 340,000 176,000 | 12/31/18 12/31/19 |
Outstanding Equity Awards at December 31, 2017
| For the 2016 and 2017 PSU awards, each executive may receive between 0% and 200% of the target PSU award based on achievement of the applicable performance goals, thus there was no determinable threshold.* |
Outstanding Equity Awards at December 31, 2017
| In February 2018, the compensation committee certified a 0% payout with respect to the 2015 PSU awards.** |
2017 Option Exercises and Stock Vested
2017 Option Exercises and Stock Vested
2017 Option Exercises and Stock Vested
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise | Value Realized on Exercise (1) | Number of Shares Acquired on Vesting | Value Realized on Vesting (2) | | Richard C. Adkerson | — | — | — | — | | Kathleen L. Quirk | — | — | — | — | | Michael J. Arnold | — | — | — | — | | Harry M. Conger, IV | 77,500 | $843,975 | 10,000 | $153,700 |
2017 Option Exercises and Stock Vested
| The value realized on exercise of options is based on the difference between the closing sale price on the date of exercise and the exercise price of each option.(1) |
2017 Option Exercises and Stock Vested
| The value realized on vesting of RSUs is based on the closing sale price on the date of vesting of the RSUs or, if there were no reported sales on such date, on the last preceding date on which any reported sale occurred.(2) |
Nonqualified Deferred Compensation
Nonqualified Deferred Compensation
Nonqualified Deferred Compensation
| Name | Plan | Executive Contributions in Last Fiscal Year (1) | Registrant Contributions in Last Fiscal Year (2) | Aggregate Earnings in Last Fiscal Year (3) | Aggregate Withdrawals/ Distributions | Aggregate Balance at Last Fiscal Year End (4) | | Richard C. Adkerson | NQDC plan | $114,750 | $303,025 | $1,112,456 | — | $28,187,785 | | | Deferred RSUs | — | — | 7,819,713 | — | 21,009,713 | | Kathleen L. Quirk | NQDC plan | 53,500 | 79,334 | 76,048 | — | 1,990,526 | | Michael J. Arnold | NQDC plan | 25,500 | 53,386 | 169,659 | — | 4,314,061 | | Harry M. Conger, IV | NQDC plan | 13,583 | 54,361 | 17,509 | — | 480,778 |
Nonqualified Deferred Compensation
| The amounts reflected in this column are included in the “Salary” column for each named executive officer for 2017 reported in the “Summary Compensation Table.”(1) |
Nonqualified Deferred Compensation
| The amounts reflected in this column are included in the “All Other Compensation” column for each named executive officer for 2017 in the “Summary Compensation Table,” although the “Plan Contributions” reflected in footnote (5) to that table also include contributions to the company’s ECAP.(2) |
Nonqualified Deferred Compensation
| The assets in the NQDC plan are treated as if invested to produce a rate of interest equal to the prime rate, as published in the Federal Reserve Statistical Report at the beginning of each month. For 2017, that rate of interest was 3.75% during the period from January 1, 2017 to March 15, 2017; 4.00% during the period from March 16, 2017 to June 14, 2017; 4.25% during the period from June 15, 2017 to December 13, 2017; and 4.50% during the period from December 14, 2017 to December 31, 2017. None of the earnings were considered preferential. With respect to Mr. Adkerson’s deferred RSUs, the amount represents (a) the number of deferred RSUs multiplied by the change in the price of our common stock from December 31, 2016 ($13.19) to December 29, 2017 ($18.96), and (b) accrued dividend equivalents and interest (calculated using the prime rate) on those RSUs of $2,049,713.(3) |
Nonqualified Deferred Compensation
| The following amounts reflected in this column were included in the 2016 “Total” compensation for each named executive officer in the “Summary Compensation Table”: Mr. Adkerson – $243,400, Ms. Quirk – $77,450, Mr. Arnold – $57,950 and Mr. Conger – $47,162. The following amounts reflected in this column were included in the 2015 “Total” compensation for each named executive officer in the “Summary Compensation Table”: Mr. Adkerson – $300,275, Ms. Quirk – $105,888, and Mr. Arnold – $79,400.(4) |
Nonqualified Deferred Compensation
Supplemental Executive Retirement Plan – Mr. Adkerson. In February 2004, we established an unfunded SERP for Mr. Adkerson. The compensation committee, advised by its independent compensation consultant at that time, approved the SERP, which was then recommended to and approved by the board. The SERP provides for benefits payable in the form of a 100% joint and survivor annuity, life annuity or an equivalent lump sum. The annuity will equal a percentage of Mr. Adkerson’s highest average base pay for any three of the five calendar years immediately preceding Mr. Adkerson’s completion of 25 years of credited service, plus his average annual incentive awards for the same three years; provided that such average amount cannot exceed 200% of the average base pay. The percentage used in this calculation is 2% for each year of credited service for the company and its predecessor beginning in 1981, but capped at 25 years. Mr. Adkerson has attained 25 years of credited service and his annuity was fixed as of January 1st of the year in which he completed 25 years of credited service, and will only increase at retirement as a result of mortality and interest adjustments. The SERP benefit is reduced by the value of all benefits from current and former retirement plans (qualified and nonqualified) sponsored by the company, by FM Services Company or by any predecessor employer (including our former parent company), except for benefits produced by accounts funded exclusively by deductions from the participant’s pay. The amount provided in the table below reflects these reductions. As of December 31, 2017, Mr. Adkerson was 100% vested under the SERP and has elected to receive his SERP benefit in a lump sum.
Pension Benefits
Pension Benefits
Pension Benefits
| Name | Plan Name | Number of Years Credited Service (1) | Present Value of Accumulated Benefit (2) | | Richard C. Adkerson | Supplemental Executive Retirement Plan | 25 | $34,835,248 |
Pension Benefits
| The years of credited service under the SERP is the participant’s years of service with the company and its predecessor beginning in 1981, but capped at 25 years.(1) |
Pension Benefits
| The accrued benefit was fixed as of January 1st of the year Mr. Adkerson attained 25 years of credited service, but will continue to increase year to year due to actuarial increases based on (a) an assumed 6% interest component, and (b) a mortality adjustment based on the IRS mortality table (as published in Revenue Ruling 2001-62) and defined under the SERP. These actuarial increases compensate for the fact that the benefit is expected to be paid over a shorter timeframe (i.e., life expectancy). The actuarially increased benefit is then present valued to reflect a lump sum payment.(2) |
Potential Payments Upon Termination or Change of Control
Potential Payments Upon Termination or Change of Control Employment Agreement—Ms. Quirk. As of December 31, 2017, we had an employment agreement with Ms. Quirk, which was approved by our compensation committee and the board and which is described below. For additional information, see the section titled “Executive Officer Compensation – Compensation Discussion and Analysis” beginning on page 23. The employment agreement with Ms. Quirk provides for a base salary of at least $650,000, and provides that she is eligible to participate in our annual incentive plan. Ms. Quirk continues to be eligible for all other benefits and compensation generally provided to our most senior executives. The term of the agreement continues through January 1st, with automatic one-year extensions unless prior written notice is given by the compensation committee that it does not wish to extend the agreement. In the event of a change of control, the agreement will expire three years following the change of control. The agreement also contains non-competition, non-disclosure and other provisions intended to protect our interests if Ms. Quirk ceases to be employed by us. In addition to the post-employment benefits provided under the company’s retirement benefit programs described above, Ms. Quirk’s employment agreement entitles her to the following additional benefits. Severance Benefits. If, during the term of her employment agreement, we terminate Ms. Quirk’s employment without cause or she terminates employment for good reason, she will be entitled to the following:
Potential Payments Upon Termination or Change of Control
| • | payment of a pro rata annual incentive award for the year in which the termination of employment occurs, based on actual results under our AIP; |
Potential Payments Upon Termination or Change of Control
| • | a cash payment equal to three times the sum of (a) her base salary plus (b) the average of the annual incentive awards paid to her for the immediately preceding three years; |
Potential Payments Upon Termination or Change of Control
| • | continuation of insurance and welfare benefits for three years or until she accepts new employment, if earlier; |
Potential Payments Upon Termination or Change of Control
| • | acceleration of the vesting and payout of all outstanding stock options and RSUs; and |
Potential Payments Upon Termination or Change of Control
| • | under the PSU agreements, in the case of termination without cause, retention of outstanding PSUs, which will vest after the end of the applicable performance period based on the company’s achievement of the performance goal. |
Potential Payments Upon Termination or Change of Control
Under Ms. Quirk’s employment agreement, “cause” is generally defined as her (a) failure to perform substantially the executive’s duties with the company, (b) breach of the agreement, (c) felony conviction, (d) unauthorized acts resulting in harm to the company, or (e) falsification of financial records. “Good reason” is generally defined as (a) any failure by the company to materially comply with any of the provisions of the agreement or (b) the assignment to Ms. Quirk of any duties inconsistent in any material respect with her position, authority, duties, or responsibilities under the agreement. If Ms. Quirk’s employment terminates as a result of death, disability, or retirement during the term of her employment agreement, she (or her estate, as applicable) will be entitled to receive payment of a pro rata annual incentive award for the year of termination (based on actual results under our AIP) and, in the case of retirement, the continuation of insurance and welfare benefits for three years or until she accepts new employment, if earlier. As a condition to receipt of these severance benefits, Ms. Quirk must retain in confidence all confidential information known to her concerning our business. Ms. Quirk has agreed not to compete with us for a period of six months after termination of employment. Change of Control Severance Benefits. Ms. Quirk’s employment agreement provides that the terms and conditions of her employment (including position, compensation, and benefits) will not be adversely changed until the third anniversary of the change of control. If Ms. Quirk is terminated without “cause,” as generally defined above, or if she terminates for “good reason” during the three-year period after a change of control, Ms. Quirk is generally entitled to receive the same payments and benefits that she would receive in the event of a similar termination under the employment agreement, described above, except that Ms. Quirk would receive a cash payment equal to three times the sum of her base salary plus the highest annual incentive award paid to her (rather than the average annual incentive award paid to her) for the immediately preceding three fiscal years. The term “good reason” includes the failure of the acquirer to provide the executive with substantially the same position, authority, duties, and responsibilities held prior to the change of control, in addition to the reasons generally provided above. The confidentiality and non-competition provisions continue to apply after a change of control. If employment terminates as a result of death, disability, or retirement following a change of control, Ms. Quirk will receive the same benefits described above under “Severance Benefits” in the event of death, disability, or retirement. Severance and Change of Control Benefits – Other NEOs. We currently do not have severance or change of control agreements with any of Messrs. Adkerson, Arnold, or Conger. Mr. Conger is a participant in the company’s executive change of control severance plan, which is available to certain senior executives of the company and provides benefits if a participant is terminated without cause or with good reason within two years following a change of control. Under this plan, Mr. Conger would be entitled to receive a cash payment equal to the sum of his base salary plus the highest annual incentive award paid to him for the immediately preceding three fiscal years, and continuation of insurance and welfare benefits for one year. For additional information regarding the impact of retirement on the various awards, see the footnotes to the “Potential Payments Upon Termination or Change of Control” table on pages 52 and 53. Equity-Based Incentive Awards – Impact of Termination of Employment and Change of Control. The terms of our outstanding equity-based incentive award agreements (which include options, PSUs, and RSUs) generally provide that the subject award will be forfeited if the award recipient terminates employment prior to the vesting of the award, except under certain circumstances described below. In addition, a change of control alone will not automatically result in an acceleration of the vesting of outstanding awards. Unless otherwise provided in a separate agreement, the following summarizes the effect of a termination of employment under certain scenarios on the outstanding equity-based incentives held by our NEOs:
Potential Payments Upon Termination or Change of Control
| • | Stock Options – Upon a recipient’s termination due to disability or retirement, any unvested stock options scheduled to vest within one year will vest as of the termination of employment, and the holder will have the lesser of three years or the remaining term of the option to exercise. Upon a recipient’s death, the option will vest in full if not previously vested. In connection with a change of control, any unvested options will vest in full if the recipient is terminated by the company without cause or terminates with good reason within one year of the change of control. |
Potential Payments Upon Termination or Change of Control
| • | Performance Share Units (PSUs) – Upon a recipient’s termination of employment due to death during the performance period of a PSU award, the award (and any related accrued dividend equivalents) will vest in full and pay out at the target level. If the termination of employment is due to disability or retirement, the award will not be forfeited nor accelerate, but will remain outstanding and vest following the end of the performance period, provided the applicable performance conditions are met. In the event of a change of control, outstanding PSUs will convert into an equivalent number of RSUs (at the target amount), which award (and any related accrued dividend equivalents) will vest on the earlier of the last day of the applicable performance period or the date the recipient is terminated without cause or terminates for good reason. |
Potential Payments Upon Termination or Change of Control
| • | Restricted Stock Units (RSUs) – Upon a recipient’s termination due to death, any outstanding RSUs (and any related accrued dividend equivalents) will vest in full. If the termination is due to disability, any RSUs scheduled to vest within one year (and any related accrued dividend equivalents) will vest as of the termination of employment. In connection with a change of control, the RSUs (and any related accrued dividend equivalents) will vest in full if the recipient is terminated by the company without cause or terminates with good reason within one year of the change of control. With respect to the special RSU and performance RSU grants made to certain executive officers in February 2017, the RSUs will fully vest upon a recipient’s termination due to death, disability or retirement, and the performance RSUs will fully vest upon a recipient’s termination due to death or disability. |
Potential Payments Upon Termination or Change of Control
The letter agreement between the company and Mr. Adkerson in December 2013 provides that with respect to Mr. Adkerson’s equity-based incentive awards, he will receive retirement treatment as set forth in the applicable award agreement following any termination of employment, except a termination due to death or termination by the company for cause. No Excise Tax Gross-Ups. We do not provide excise tax gross-up protections in any of our change of control arrangements with our executive officers. Under Ms. Quirk’s employment agreement, if any part of the payments or benefits received by Ms. Quirk in connection with a termination following a change of control constitutes an excess parachute payment under Section 4999 of the Internal Revenue Code, she will receive the greater of (a) the amount of such payments and benefits reduced so that none of the amount constitutes an excess parachute payment, net of income taxes, or (b) the amount of such payments and benefits, net of income taxes and net of excise taxes under Section 4999 of the Internal Revenue Code. The following table quantifies the potential payments to our named executive officers under the contracts, arrangements or plans discussed above for various scenarios involving a change of control or termination of employment of each of our named executive officers. In addition to the benefits identified, our named executive officers would be entitled to receive the retirement and pension benefits described above under “Executive Officer Compensation – Executive Compensation Tables – Retirement Benefit Programs,” and outstanding vested stock options, which amounts are reflected in footnote (4) to the “Potential Payments Upon Termination or Change of Control” table below. In accordance with SEC rules, the information below assumes a termination date of December 31, 2017 and reflects the arrangements in effect at that time. We have used the closing price of our common stock of $18.96 on December 29, 2017, as reported on the NYSE, for purposes of calculating the value of the unvested and accelerated options, RSUs and PSUs.
Potential Payments Upon Termination or Change of Control
Potential Payments Upon Termination or Change of Control
Potential Payments Upon Termination or Change of Control
| Name | Lump Sum Payment | Options (Unvested and Accelerated) (1) | Restricted Stock Units (Unvested and Accelerated) (2) | Accumulated Dividends and Interest Payable on Accelerated RSUs | Performance Share Units (Unvested and Accelerated) (3) | Accumulated Dividends Payable on Accelerated PSUs | Health and Welfare Benefits | Total (4) | | Richard C. Adkerson | | | | | | | | | | • Retirement/Termination – No Cause | n/a | $4,405,863 | $2,426,880 | n/a | — | n/a | n/a | $6,832,743 | | • Disability | n/a | 4,405,863 | 3,640,320 | n/a | — | n/a | n/a | 8,046,183 | | • Death | n/a | 13,660,488 | 3,640,320 | | $16,248,720 | n/a | | 33,549,528 | | • Qualifying Termination after Change of Control (5) | n/a | 13,660,488 | 3,640,320 | n/a | 16,248,720 | n/a | n/a | 33,549,528 | | Kathleen L. Quirk | | | | | | | | | | • Retirement | n/a | 2,796,033 | 2,426,880 | n/a | — | n/a | $43,761 | 5,266,674 | | • Disability | n/a | 2,796,033 | 2,426,880 | n/a | — | n/a | n/a | 5,222,913 | | • Death | n/a | 8,609,118 | 2,426,880 | n/a | 9,821,280 | n/a | n/a | 20,857,278 | | • Termination – Good Reason | $4,797,850 | 8,609,118 | 2,426,880 | n/a | n/a | n/a | 43,761 | 15,877,609 | | • Termination – No Cause | 4,797,850 | 8,609,118 | 2,426,880 | n/a | n/a | n/a | 43,761 | 15,877,609 | | • Qualifying Termination after Change of Control (5)(6) | 6,181,050 | 8,609,118 | 2,426,880 | n/a | 9,821,280 | n/a | 43,761 | 27,082,089 | | Michael J. Arnold | | | | | | | | | | • Retirement | n/a | 2,325,458 | 606,720 | n/a | — | n/a | n/a | 2,932,178 | | • Disability | n/a | 2,325,458 | 606,720 | n/a | — | n/a | n/a | 2,932,178 | | • Death | n/a | 7,128,593 | 606,720 | n/a | 7,925,280 | n/a | n/a | 15,660,593 | | • Termination – No Cause (7) | — (8) | n/a | n/a | n/a | n/a | n/a | n/a | n/a | | • Qualifying Termination after Change of Control (7)(8) | n/a | 7,128,593 | 606,720 | n/a | 7,925,280 | n/a | n/a | 15,660,593 | | Harry M. Conger, IV | | | | | | | | | | • Retirement | n/a | 1,284,495 | n/a | n/a | — | n/a | n/a | 1,284,495 | | • Disability | n/a | 1,284,495 | 94,800 | $1,303 | — | n/a | n/a | 1,380,598 | | • Death | n/a | 4,005,705 | 94,800 | 1,303 | 4,891,680 | n/a | n/a | 8,993,488 | | • Termination – No Cause (7) | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | | • Qualifying Termination after Change of Control (5) | 1,664,925 | 4,005,705 | 94,800 | 1,303 | 4,891,680 | n/a | 27,077 | 10,685,490 |
Potential Payments Upon Termination or Change of Control
| “n/a” means that the benefit is not provided to the executive or the executive did not have any of the referenced awards as of December 31, 2017.* |
Potential Payments Upon Termination or Change of Control
| The value of the accelerated options is determined by multiplying (a) the difference between the December 29, 2017 closing price of our common stock and the applicable exercise price of each option, by (b) the number of unvested and accelerated options under each scenario.(1) |
Potential Payments Upon Termination or Change of Control
| The values of the RSUs were determined by multiplying the December 29, 2017 closing price of our common stock by the number of RSUs to be vested under each scenario.(2) |
Potential Payments Upon Termination or Change of Control
| The values of the PSUs in connection with death or a qualifying termination after a change of control were determined by multiplying the December 29, 2017 closing price of our common stock by the target number of PSUs with performance periods ending after December 31, 2017. No value is reflected for awards of PSUs granted in 2016 and 2017 in the event of termination upon retirement or disability, or, for Mr. Adkerson, termination with no cause, because the PSU agreements do not provide for automatic vesting of outstanding PSUs and the related dividend equivalent credits in those circumstances. Instead, the awards will remain outstanding through the performance period and vest if the applicable performance conditions are met. For more information, see the “Outstanding Equity Awards at December 31, 2017” table on page 46.(3) |
Potential Payments Upon Termination or Change of Control
| In addition to the amounts reflected in this column, upon the occurrence of each event of termination listed in the table, each named executive officer would be entitled to the following additional benefits, as applicable: outstanding, in-the-money stock options that were vested at the time of termination, the executive’s aggregate balance in the NQDC plan (as reflected on page 48), and, for Mr. Adkerson, the present value of his SERP (as reflected on page 49). The aggregate value of these additional benefits for each of our named executive officers, assuming a termination on December 31, 2017, is as follows: Mr. Adkerson – $71,450,356, Ms. Quirk – $6,849,754, Mr. Arnold – $7,686,998 and Mr. Conger – $634,073. These amounts do not include benefits under our ECAP or life insurance policies generally available to all employees. In addition to the standard life insurance policy generally available to employees, Mr. Adkerson has an executive life insurance policy providing for a death benefit of $1.5 million.(4) |
Potential Payments Upon Termination or Change of Control
| With respect to the stock options and PSUs granted by the company in 2016 and 2017, the agreements provide for the benefits described in the table following a change of control only if the recipient is terminated without cause or terminated with good reason within one year after the change of control. The amounts stated in the rows titled “Qualifying Termination after Change of Control” assume the full vesting of options granted in 2014, 2015, 2016, and 2017 and full vesting and payout at target for PSUs granted in 2016 and 2017.(5) |
Potential Payments Upon Termination or Change of Control
| Pursuant to the terms of Ms. Quirk’s employment agreement, the total payments may be subject to reduction if such payments result in the imposition of an excise tax under Section 280G of the Internal Revenue Code.(6) |
Potential Payments Upon Termination or Change of Control
| Each of Messrs. Arnold and Conger is entitled to certain severance benefits in the event of his termination without cause under the company’s severance plan, which is generally available to certain eligible employees.(7) |
Potential Payments Upon Termination or Change of Control
| Mr. Arnold is entitled to certain benefits in the event of his termination following a change of control under the company’s change of control plan, which is generally available to certain eligible employees.(8) |
CEO Pay Ratio
CEO Pay Ratio As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our median employee and the annual total compensation of Mr. Adkerson, our CEO. We believe the pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. We identified the median employee by examining the total earnings for the nine-month period ending September 30, 2017 for all individuals, excluding our CEO, who were employed by us and our consolidated subsidiaries on October 1, 2017, whether employed on a full-time, part-time, seasonal or temporary basis, with the following adjustments:
CEO Pay Ratio
| • | As of October 1, 2017, our employee population consisted of 25,124 individuals, with 43% of these individuals located in the United States, 30% located in Indonesia, 19% located in Peru, and the remaining 8% located in other foreign jurisdictions. To reduce administrative costs and as permitted by SEC rules, we have excluded from the calculation each foreign jurisdiction where we employ less than 100 individuals, namely the employees in each of Australia, Bulgaria, Canada, China, the Democratic Republic of the Congo, Germany, Japan, the Netherlands, the Philippines, the Russian Federation, South Africa, Taiwan and the United Kingdom. This adjustment resulted in the exclusion from the calculation of approximately 300 total employees, representing approximately 1% of our employee population. |
CEO Pay Ratio
| • | With respect to permanent employees hired after January 1, 2017, we assumed for purposes of the calculation that those employees worked the full nine-month period in 2017. |
CEO Pay Ratio
| • | With respect to employees in foreign jurisdictions, we applied a foreign currency to U.S. dollar exchange rate to the compensation paid in foreign currency based on an average exchange rate for the period from July 1, 2017 to September 30, 2017. We did not make any cost of living adjustments. |
CEO Pay Ratio
| • | Of the possible median employees, we selected the employee without atypical elements of pay in his or her earnings, such as disability payments or special earnings while on leave. |
CEO Pay Ratio
After identifying the median employee, we calculated annual total compensation for such employee using the same methodology we use for our named executive officers as set forth in the Summary Compensation Table on page 42. The annual total compensation of our median employee (other than our CEO) for 2017 was $66,490. As disclosed in the Summary Compensation Table, Mr. Adkerson’s annual total compensation for 2017 was $18,396,037. Based on the foregoing, our estimate of the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all other employees was 277 to 1. Given the different methodologies that various public companies will use to determine an estimate of their pay ratio, the estimated ratio reported above should not be used as a basis for comparison between companies.
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION
Director Compensation Philosophy
Director Compensation Philosophy We use a combination of cash and equity-based incentive compensation to attract and retain qualified candidates to serve on the board. In setting director compensation, the board is guided by the following principles:
Director Compensation Philosophy
| • | Compensation should fairly pay directors for work required in a company of our size and scope, and differentiate among directors where appropriate to reflect different levels of work and responsibilities; |
Director Compensation Philosophy
| • | A significant portion of the total compensation should be paid in common stock to align directors’ interests with the long-term interests of our stockholders; and |
Director Compensation Philosophy
| • | The structure of the compensation program should be simple and transparent. |
Process of Setting Director Compensation
Process of Setting Director Compensation In February 2017, the board revised the charters of the nominating and corporate governance and compensation committees to transfer the oversight of director compensation to the compensation committee, including the authority to grant equity-based awards. The compensation committee conducts an annual review and assessment of all compensation, cash and equity-based, paid to our non-management directors under our director compensation program in light of the principles set forth under “Director Compensation – Director Compensation Philosophy.” In December 2017, the compensation committee engaged Pay Governance, the board’s independent compensation consultant, to conduct a market review of non-management director remuneration practices and evaluate the company’s program in light of the review. After this review, the compensation committee decided to maintain the company’s current director compensation program. The compensation committee will continue to seek advice from the board’s independent compensation consultant at least every other year, or more often as needed, in connection with evaluating our program relative to relevant market data and formulating its recommendations to the full board. In addition, under the 2016 Stock Incentive Plan, our stockholders have placed a limit on the cash and equity compensation that may be paid to a non-management director each year. Under the terms of the plan, an annual limit of $750,000 per calendar year applies to the sum of all cash, equity-based awards (calculating the value of any such awards based on the grant date fair value of such awards for financial reporting purposes), and other compensation granted to each non-management director for services as a member of the board, although the maximum number of shares subject to equity-based awards that may be granted during a single fiscal year may not exceed $500,000 of such annual limit.
Director Compensation Table
Director Compensation Table The table below summarizes the total compensation paid to or earned by our non-management directors during 2017.
Director Compensation
Director Compensation
Director Compensation
| Name of Director | Fees Earned or Paid in Cash (1) | Stock Awards (2)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (4) | All Other Compensation (5) | Total | | Gerald J. Ford | $152,500 | $169,460 | $7,002 | $277 | $329,239 | | Lydia H. Kennard | 90,000 | 169,460 | n/a | 215 | 259,675 | | Andrew Langham (6) | 92,500 | 169,460 | n/a | — | 261,960 | | Jon C. Madonna | 117,500 | 169,460 | 42,238 | 5,793 | 334,991 | | Courtney Mather | 87,500 | 169,460 | n/a | — | 256,960 | | Dustan E. McCoy | 102,500 | 169,460 | 65,275 | 4,523 | 341,758 | | Frances Fragos Townsend | 100,000 | 169,460 | n/a | 215 | 269,675 |
Director Compensation
| During 2017, each of Messrs. Ford and Mather elected to receive an equivalent number of shares of our common stock in lieu of 100% of his annual fee, and Mr. Langham elected to receive an equivalent number of shares of our common stock in lieu of 50% of his annual fee and to defer 50% of his annual fee to be paid in one installment after his separation from the board. The amounts reflected in this column include the fees used to purchase shares of our common stock and fees deferred by the directors. In addition, the $50,000 fee paid to Mr. Ford in connection with his service as non-executive chairman of the board was paid in shares of our common stock.(1) |
Director Compensation
| On June 1, 2017, each non-management director was granted 14,800 RSUs. Amounts reflect the aggregate grant date fair value of the RSUs, which are valued on the date of grant, or the previous trading day if no sales occur on that date, at the closing sale price per share of our common stock.(2) |
Director Compensation
| Beginning in June 2013, our non-management directors received annual equity awards payable solely in RSUs. The following table sets forth the total number of outstanding RSUs (including vested but deferred RSUs) and stock options held by each non-management director as of December 31, 2017:(3) |
Director Compensation
| Name of Director | RSUs | Options | | Gerald J. Ford | 23,725 | 98,900 | | Lydia H. Kennard | 24,675 | — | | Andrew Langham | 14,800 | — | | Jon C. Madonna | 40,325 | 80,000 | | Courtney Mather | 14,800 | — | | Dustan E. McCoy | 67,200 | 80,000 | | Frances Fragos Townsend | 31,625 | — |
Director Compensation
| Amounts reflect the aggregate change in the actuarial present value of each director’s accumulated benefit under the revised retirement plan as calculated in accordance with Item 402 of Regulation S-K. As noted above, the director retirement plan was terminated in 2008 for any future directors.(4) |
Director Compensation
| Includes (a) interest credited on dividend equivalents on unvested RSUs during 2017 (beginning with RSU grants in 2015, interest credits on dividend equivalents are no longer provided) and (b) the dollar value of life insurance premiums and the related tax reimbursement paid by the company pursuant to an arrangement assumed in connection with our acquisition of Phelps Dodge as follows:(5) |
Director Compensation
| Name of Director | Interest Credited on Dividend Equivalents | Life Insurance Premium and Tax Paid | | Gerald J. Ford | $277 | — | | Lydia H. Kennard | 215 | — | | Andrew Langham | — | — | | Jon C. Madonna | 4,517 | $1,276 | | Courtney Mather | — | — | | Dustan E. McCoy | 3,786 | 737 | | Frances Fragos Townsend | 215 | — |
Director Compensation
| Mr. Langham resigned from the board effective as of March 5, 2018.(6) |