DEF 14A of 3M Co

Filed Mar 25, 2020 · FY20190001206774-20-000907

Open on EDGAR

Director nominees
Director nominees
Director nominees
| | | Director | | 3M Committees | | | | | Director Nominee and Occupation | Age | Since | Other Current Public Boards | A | C | N&G | STS | | Thomas “Tony” K. Brown Independent Retired Group Vice President, Global Purchasing, Ford Motor Company | 64 | 2013 | • ConAgra Foods, Inc. | | | | | | Pamela J. Craig Independent Retired Chief Financial Officer, Accenture plc | 63 | 2019 | • Merck & Co. • Progressive Corporation | | | | | | David B. Dillon Independent Retired Chairman of the Board and Chief Executive Officer, The Kroger Co. | 68 | 2015 | • Union Pacific Corporation | | | | | | Michael L. Eskew Independent Lead Director Retired Chairman of the Board and Chief Executive Officer, United Parcel Service, Inc. | 70 | 2003 | • The Allstate Corporation • Eli Lilly and Company • International Business Machines Corporation (independent lead director) | | | | | | Herbert L. Henkel Independent Retired Chairman of the Board and Chief Executive Officer, Ingersoll-Rand plc | 71 | 2007 | • Herc Holdings, Inc. (non-executive chair) | | | | | | Amy E. Hood Independent Executive Vice President and Chief Financial Officer, Microsoft Corporation | 48 | 2017 | | | | | | | Muhtar Kent Independent Retired Chairman of the Board and Chief Executive Officer, The Coca-Cola Company | 67 | 2013 | | | | | | | Dambisa F. Moyo Independent Founder and CEO, Mildstorm, LLC | 51 | 2018 | • Chevron Corporation | | | | | | Gregory R. Page Independent Retired Chairman of the Board and Chief Executive Officer, Cargill | 68 | 2016 | • Deere & Company • Eaton Corporation plc • Corteva, Inc. (non-executive chair) | | | | | | Michael F. Roman Chairman of the Board, President and Chief Executive Officer, 3M Company | 60 | 2018 | | | | | | | Patricia A. Woertz Independent Retired Chairman of the Board and Chief Executive Officer, Archer-Daniels-Midland Company | 67 | 2016 | • The Procter & Gamble Company | | | | |
Director nominees
| | Chair | A: Audit | N&G: Nominating and Governance | | | Member | C: Compensation | STS: Science, Technology & Sustainability |
Director nominees
| 6 | 3M Company |
Corporate governance highlights*
Corporate governance highlights*
Corporate governance highlights*
| * The “Corporate governance highlights” above reflect the Board’s current 12 directors and related information for 2019. One of them, Edward M. Liddy, is no longer eligible to stand for re-election as he has reached the mandatory retirement age. |
Corporate governance highlights*
The Qualifications and Attributes, and Demographic Background information below reflect the eleven Director Nominees for this Annual Meeting.
Corporate governance highlights*
| 2020 Proxy Statement | 7 |
DIRECTOR NOMINEES – DIVERSITY OF SKILLS AND EXPERIENCE
DIRECTOR NOMINEES – DIVERSITY OF SKILLS AND EXPERIENCE The Nominating and Governance Committee identifies, reviews, and recommends nominees to the Board for approval. The Committee seeks individuals with distinguished records of leadership and success and who will make substantial contributions to Board operations and effectively represent the interests of all shareholders. The Committee considers a wide range of factors and experiences, including ensuring an experienced, qualified Board with expertise in the following key areas most relevant to 3M. The numbers indicated in the diagram below represent the number of director nominees who the Committee believes possess each of the skills and experiences.
DIRECTOR NOMINEES – DIVERSITY OF SKILLS AND EXPERIENCE
| | Leadership Significant leadership experience with understanding of complex global organizations, strategy, risk management, and how to drive change and growth. | | | | Manufacturing As a vertically integrated Company, manufacturing experience is important to understanding the operations and capital needs of the Company. | | | | Supply Chain Directors with expertise in the management of the upstream and downstream relationships with suppliers and customers provide important perspectives on achieving efficient operations. | | | | Technology As a diversified technology, science-based Company, directors with technology backgrounds understand 3M’s 51 technology platforms and the importance of investing in new technologies for future growth. | | | | Finance Financial metrics measures our performance. All directors must understand finance and financial reporting processes. All, but one, Audit Committee members qualify as “audit committee financial experts.” | | | | Global Global business experience is critical to 3M’s international growth with 60 percent of sales from outside the U.S. in 2019. | | | | Risk Management Directors with experience in risk management and oversight, including cybersecurity, play an important role in the Board’s oversight of risks. | | | | Marketing Organic growth is one of 3M’s financial metrics and directors with marketing expertise provide important perspectives on developing new markets. | |
Nominees for director
Nominees for director
Nominees for director
| Age 64 Director since 2013 Other current directorships • ConAgra Foods, Inc., 3M Board committee(s) • Audit • Nominating & Governance Directorships within the past five years • Tower International, Inc. (non-executive chair) | Thomas “Tony” K. Brown Independent Retired Group Vice President, Global Purchasing, Ford Motor Company Professional Highlights Mr. Brown is the Retired Group Vice President, Global Purchasing, Ford Motor Company, a global automotive industry leader. Mr. Brown served in various leadership capacities in global purchasing since joining Ford in 1999. In 2008, he became Ford’s Group Vice President, Global Purchasing, with responsibility for approximately $90 billion of production and non-production procurement for Ford operations worldwide. He retired from Ford on August 1, 2013. From 1997 to 1999 he served in leadership positions at United Technologies Corporation, including its Vice President, Supply Management. From 1991 to 1997 he served as Executive Director, Purchasing and Transportation at QMS Inc. From 1976 to 1991 he served in various managerial roles at Digital Equipment Corporation. Nominee Qualifications Mr. Brown’s bachelor’s degree in business administration from American International College in Springfield, Massachusetts, his leadership roles, including his experience serving as a director of the public companies listed, and his knowledge of and extensive experiences in global purchasing, management, and supply chain at Ford Motor Company and other companies, qualify him to serve as a director of 3M. |
Nominees for director
| Age 63 Director since 2019 Other current directorships • Merck & Co., Inc. • Progressive (Insurance) Corporation 3M Board committee(s) • Audit • Finance (until 11/12/2019) • Science, Technology & Sustainability (from 11/12/2019) Directorships within the past five years • Akamai Technologies, Inc. • VMware, Inc. • Wal-Mart Stores, Inc. | Pamela J. Craig Independent Retired Chief Financial Officer, Accenture plc Professional Highlights Ms. Craig is the Retired Chief Financial Officer, Accenture plc., a global management consulting, technology services and outsourcing company. She served as Accenture’s CFO from 2006 through 2013, following her many other leadership roles in line management, consulting and operations at Accenture during her 34 years with the company. She has a long track record of active involvement in charitable organizations, focused on education and on the advancement of women in business, including The Committee of 200, The Women’s Forum of New York, Junior Achievement of New Jersey, and the C200 Foundation. She chairs the Board of Comprehensive Development, Inc., a non-profit that provides academic and social service support to at-risk New York City high school students. Nominee Qualifications Ms. Craig’s bachelor’s degree from Smith College and M.B.A. degree from New York University Stern School, her decades of executive leadership roles and experiences at Accenture, including serving as its CFO, and her finance, management, business operations and services, global business, and technology expertise, her skills in financial, audit, compensation and governance matters, and her experiences as a director at the other public companies listed, qualify her to serve as a director of 3M. |
Nominees for director
| 14 | 3M Company |
Nominees for director
| Age 68 Director since 2015 Other current directorships • Union Pacific Corporation 3M Board committee(s) • Audit (Chair) • Nominating & Governance Directorships within the past five years • DirecTV | David B. Dillon Independent Retired Chairman of the Board and Chief Executive Officer, The Kroger Co. Professional Highlights Mr. Dillon is the Retired Chairman of the Board and Chief Executive Officer, The Kroger Co., a large retailer that operates retail food and drug stores, multi-department stores, jewelry stores, and convenience stores throughout the U.S. Mr. Dillon retired on December 31, 2014 as Chairman of the Board of Kroger, where he was Chairman since 2004 and was the Chief Executive Officer from 2003 through 2013. Mr. Dillon served as President of Kroger from 1995 to 2003 and was elected Executive Vice President in 1990. Mr. Dillon served as Director of the Kroger Co. from 1995 through 2014. Mr. Dillon began his retailing career at Dillon Companies, Inc. (later a subsidiary of The Kroger Co.) in 1976 and advanced through various management positions, including its President from 1986-1995. Nominee Qualifications Mr. Dillon’s bachelor’s degree in business from the University of Kansas and his law degree from Southern Methodist University, his leadership roles and experiences at The Kroger Co., including serving as Chairman of the Board and Chief Executive Officer, his knowledge of and extensive experiences in leading one of the world’s largest retailers, his experiences in Kroger’s successful $13 billion merger with Fred Meyer, Inc., his leadership in sustainability, his skills in financial and audit matters, and his experiences as a director at the public companies listed, qualify him to serve as a director of 3M. |
Nominees for director
| Age 70 Director since 2003 Other current directorships • The Allstate Corporation • Eli Lilly and Company • International Business Machines Corporation (lead independent director) 3M Board committee(s) • Compensation (until 11/12/2019) • Nominating & Governance | Michael L. Eskew Independent Retired Chairman of the Board and Chief Executive Officer, United Parcel Service, Inc. Professional Highlights Mr. Eskew is the Retired Chairman of the Board and Chief Executive Officer, United Parcel Service, Inc. (“UPS”), a provider of specialized transportation and logistics services. Mr. Eskew was appointed Executive Vice President in 1999 and Vice Chairman in 2000 before becoming Chairman and Chief Executive Officer of UPS in January 2002. He retired as Chairman of the Board and Chief Executive Officer at the end of 2007 but remained as a director of UPS until December 31, 2014. Nominee Qualifications Mr. Eskew’s bachelor’s degree in industrial engineering from Purdue University, his leadership roles and experiences at UPS, including serving as Chairman of the Board and Chief Executive Officer, his knowledge of and extensive experiences in global logistics, his skills in financial and audit matters, and his experiences as a director at the public companies listed, qualify him to serve as a director of 3M. Mr. Eskew is Lead Director. |
Nominees for director
| 2020 Proxy Statement | 15 |
Nominees for director
| Age 71 Director since 2007 Other current directorships • Herc Holdings, Inc. (non-executive chair) 3M Board committee(s) • Compensation (Chair) • Nominating & Governance (until 11/12/2019) • Science, Technology & Sustainability (from 11/12/2019) Directorships within the past five years • The Allstate Corporation • C. R. Bard, Inc. • Visteon Corporation | Herbert L. Henkel Independent Retired Chairman of the Board and Chief Executive Officer, Ingersoll-Rand plc Professional Highlights Mr. Henkel is the Retired Chairman of the Board and Chief Executive Officer, Ingersoll-Rand plc, a manufacturer of industrial products and components. Mr. Henkel retired as Ingersoll-Rand’s Chief Executive Officer, a position he held since October 1999, on February 4, 2010, and retired as Chairman of the Board on June 3, 2010. Mr. Henkel served as President and Chief Operating Officer of Ingersoll-Rand from April 1999 to October 1999. Mr. Henkel served in various leadership roles at Textron, Inc., including its President and Chief Operating Officer from 1998-1999. Nominee Qualifications Mr. Henkel’s bachelor’s and master’s degrees in engineering from Polytechnic University of New York and M.B.A. from the Lubin School at Pace University, his leadership roles and experiences at Textron, Inc. and Ingersoll-Rand, including serving as Chairman of the Board and Chief Executive Officer of Ingersoll-Rand, his knowledge of and extensive experiences in engineering, manufacturing, management, sales and marketing in a variety of industries, his skills in financial and audit matters, and his experiences as a director at the public companies listed, qualify him to serve as a director of 3M. |
Nominees for director
| Age 48 Director since 2017 Other current directorships • None 3M Board committee(s) • Compensation • Finance (until 11/12/2019) • Science, Technology & Sustainability (from 11/12/2019) | Amy E. Hood Independent Executive Vice President and Chief Financial Officer, Microsoft Corporation Professional Highlights Ms. Hood is Executive Vice President and Chief Financial Officer of Microsoft Corporation, a worldwide provider of software, services and solutions. As chief financial officer, Ms. Hood is responsible for leading Microsoft’s worldwide finance organization, including acquisitions, treasury activities, tax planning, accounting and reporting, and internal audit and investor relations. Prior to this role, Ms. Hood was chief financial officer of Microsoft’s Business Division, responsible for the company’s productivity applications and services including Microsoft Office 365, Office, SharePoint, Exchange, Dynamics ERP and Dynamics CRM. During her time in the Business Division, Ms. Hood helped lead the transition to the company’s Office 365 service, and she was deeply involved in the strategy development and overall execution of the company’s successful acquisitions of Skype and Yammer. Ms. Hood joined Microsoft in 2002 and previously held positions in the Server and Tools Business as well as the corporate finance organization. Prior to 2002, she worked at Goldman Sachs & Co. in various investment banking and capital markets groups roles. Nominee Qualifications Ms. Hood’s bachelor’s degree in economics from Duke University and M.B.A. from Harvard University, her extensive leadership roles and experiences at Microsoft Corporation, especially in strategic business development, finance, and digitization, qualify her to serve as a director of 3M. |
Nominees for director
| 16 | 3M Company |
Nominees for director
| Age 67 Director since 2013 Other current directorships • None 3M Board committee(s) • Compensation • Finance (Chair, until 11/12/2019) • Nominating & Governance (Chair, from 11/12/2019) Directorships within the past five years • The Coca-Cola Company | Muhtar Kent Independent Retired Chairman of the Board and Chief Executive Officer, The Coca-Cola Company Professional Highlights Mr. Kent is the Retired Chairman of the Board and Chief Executive Officer of The Coca-Cola Company, the world’s largest beverage company. Mr. Kent held the position of Chairman of the Board of The Coca-Cola Company from April 23, 2009, until his retirement on April 30, 2019. He held the position of Chief Executive Officer from July 1, 2008 until May 2017. From December 2006 through June 2008, Mr. Kent served as President and Chief Operating Officer of The Coca-Cola Company. From January 2006 through December 2006, Mr. Kent served as President of Coca-Cola International and was elected Executive Vice President of The Coca-Cola Company in February 2006. From May 2005 through January 2006, he was President and Chief Operating Officer of The Coca-Cola Company’s North Asia, Eurasia and Middle East Group, an organization serving a broad and diverse region that included China, Japan, and Russia. Nominee Qualifications Mr. Kent’s bachelor’s of science degree in economics from the University of Hull, England, and master’s of science degree in administrative sciences from City University London, his extensive leadership roles and experiences at The Coca-Cola Company across multiple geographies, and his extensive international experience at The Coca-Cola Company qualify him to serve as a director of 3M. |
Nominees for director
| Age 51 Director since 2018 Other current directorships • Chevron Corporation 3M Board committee(s) • Audit • Finance (until 11/12/2019) • Nominating & Governance (from 11/12/2019) Directorships within the past five years • Barclays PLC • Barrick Gold Corporation • SABMiller PLC • Seagate Technology Public Limited Company | Dambisa F. Moyo Independent Founder and CEO, Mildstorm LLC Professional Highlights Dr. Moyo has been the Chief Executive Officer of Mildstorm LLC since she founded it in 2015. She is a global economist and commentator, analyzing the macroeconomy and international affairs. From 2001 to 2008, she worked at Goldman Sachs in various roles, including as an economist. Prior to that she worked at the World Bank in Washington, D.C. during 1993-1995. A New York Times bestsellers’ author, Dr. Moyo’s writing regularly appears in economic and finance-related publications. Nominee Qualifications Dr. Moyo’s Ph.D in economics from the University of Oxford, her M.B.A. in finance from the American University, and her M.P.A. from Harvard’s Kennedy School of Government, her leadership roles and experience in the banking and financial services industry, her extensive knowledge of macroeconomics, geopolitics and global markets, and her experience as a director at the public companies listed, qualify her to serve as a director of 3M. |
Nominees for director
| 2020 Proxy Statement | 17 |
Nominees for director
| Age 68 Director since 2016 Other current directorships • Deere & Company • Eaton Corporation plc • Corteva, Inc. (non-executive chair) 3M Board committee(s) • Audit • Nominating & Governance (until 11/12/2019) • Science, Technology & Sustainability (Chair, from 11/12/2019) Directorships within the past five years • Cargill • Carlson Companies | Gregory R. Page Independent Retired Chairman of the Board and Chief Executive Officer, Cargill Professional Highlights Mr. Page is the Retired Chairman of the Board and Chief Executive Officer, Cargill, an international marketer, processor and distributor of agricultural, food, financial and industrial products and services. Mr. Page was named Corporate Vice President & Sector President, Financial Markets and Red Meat Group of Cargill in 1998, Corporate Executive Vice President, Financial Markets and Red Meat Group in 1999, President and Chief Operating Officer in 2000, and became Chairman of the Board and Chief Executive Officer in 2007. He served as Executive Chairman of the Board of Cargill from December 2013 until his retirement from Cargill in September 2015, and Executive Director of Cargill from September 2015 to September 2016. Mr. Page is a director and past non-executive Chair of the Board of Big Brothers Big Sisters of America. He is past President and board member of the Northern Star Council of the Boy Scouts of America. Nominee Qualifications Mr. Page’s bachelor’s degree in economics from the University of North Dakota, his leadership roles and experiences while serving as Chairman of the Board and Chief Executive Officer at Cargill, his expertise and knowledge of financial and audit matters and corporate governance, and his experiences as a director at the public companies listed, qualify him to serve as a director of 3M. |
Nominees for director
| Age 60 Director since 2018 Other current directorships • None 3M Board committee(s) • None | Michael F. Roman Chairman of the Board, President and Chief Executive Officer, 3M Company Professional Highlights Mr. Roman is the Chairman of the Board, President and Chief Executive Officer of 3M Company since May 2019. Mr. Roman previously served as Chief Executive Officer from July 1, 2018 to May 14, 2019; Chief Operating Officer and Executive Vice President from July 1, 2017 to June 30, 2018 with direct responsibilities for 3M’s five business groups and the Company’s international operations. Mr. Roman previously served as Executive Vice President, Industrial Business Group, of 3M Company from June 2014 to July 2017. Mr. Roman served as the Company’s Senior Vice President, Business Development, from May 2013 to June 2014. Prior to that, he was Vice President and General Manager of Industrial Adhesives and Tapes Division from September 2011 to May 2013. Mr. Roman also has lived in and led 3M businesses around the world, including the United States, Europe and Asia. Nominee Qualifications Mr. Roman’s bachelor’s and master’s degrees in electrical engineering from the University of Minnesota and the University of Southern California, his distinguished 3M career over 30 years with leadership roles across multiple geographies and businesses, his experience in managing 3M’s five business groups and international operations, his knowledge and skills in key areas such as manufacturing, supply chain, technology, finance, and risk management, and his accomplishments in sales growth, operational efficiency and value creation across a wide range of global businesses, qualify him to serve as a director of 3M. |
Nominees for director
| 18 | 3M Company |
Nominees for director
| Age 67 Director since 2016 Other current directorships • The Procter & Gamble Company 3M Board committee(s) • Compensation • Finance (until 11/12/2019) • Science, Technology & Sustainability (from 11/12/2019) Directorships within the past five years • Royal Dutch Shell plc • Archer-Daniels-Midland Company | Patricia A. Woertz Independent Retired Chairman of the Board and Chief Executive Officer, Archer-Daniels-Midland Company Professional Highlights Ms. Woertz is the Retired Chairman of the Board and Chief Executive Officer, Archer-Daniels-Midland Company (“ADM”), an agricultural processor and food ingredient provider. Ms. Woertz joined ADM as Chief Executive Officer and President in April 2006, and was named Chairman of the Board in February 2007. She served as Chief Executive Officer until December 2014, and Chairman of the Board until December 2015. Before joining ADM, Ms. Woertz held positions of increasing importance at Chevron Corporation and its predecessor companies. Ms. Woertz served on the President’s Export Council from 2010-2015 and chaired the U.S. section of the U.S.-Brazil CEO Forum 2013-2015. Nominee Qualifications Ms. Woertz’s bachelor’s degree from Pennsylvania State University in accounting, her experiences as a Certified Public Accountant at Ernst & Young, her experiences in finance, auditing, strategic planning, and marketing at Gulf Oil Corporation, her experiences in the financial aspects of the mergers between Gulf Oil and Chevron and Texaco and Chevron, her leadership roles and experiences at ChevronTexaco Corporation as Executive Vice President, Global Downstream from 2001-2006, her extensive experience serving as Chairman and Chief Executive Officer at Archer-Daniels-Midland, her expertise and knowledge of financial and audit matters and corporate governance, and her experiences as a director at the public companies listed, qualify her to serve as a director of 3M. |
Nominees for director
| RECOMMENDATION OF THE BOARD | | | | The Board of Directors unanimously recommends a vote “FOR” the election of these nominees as directors. Proxies solicited by the Board of Directors will be voted “FOR” these nominees unless a shareholder indicates otherwise in voting the proxy. |
Board Membership Criteria
Board Membership Criteria 3M’s Corporate Governance Guidelines contain Board Membership Criteria that include a list of key skills and characteristics deemed critical to serve 3M’s long-term business strategy and expected to be represented on 3M’s Board. The Nominating and Governance Committee periodically reviews with the Board the appropriate skills and characteristics required of Board members given the current Board composition. It is the intent of the Board that the Board, itself, will be a high-performance organization creating competitive advantage for the Company. To perform as such, the Board will be composed of individuals who have distinguished records of leadership and success in their arena of activity and who will make substantial contributions to Board operations and effectively represent the interests of all shareholders. The Committee’s and the Board’s assessment of Board candidates includes, but is not limited to, consideration of:
Board Membership Criteria
| • | Roles in and contributions valuable to the business community; | | • | Personal qualities of leadership, character, judgment, and whether the candidate possesses and maintains throughout service on the Board a reputation in the community at large of integrity, trust, respect, competence, and adherence to the highest ethical standards; | | • | Relevant knowledge and diversity of background and experience in business, manufacturing, technology, finance and accounting, marketing, international business, government, and other areas; and | | • | Whether the candidate is free of conflicts and has the time required for preparation, participation, and attendance at all meetings. |
Board Membership Criteria
| 2020 Proxy Statement | 19 |
Board Membership Criteria
In addition to these minimum requirements, the Committee will also evaluate whether the nominee’s skills are complementary to the existing Board members’ skills, the Board’s needs for particular expertise in certain areas, and will assess the nominee’s impact on Board dynamics, effectiveness, and diversity of experience and perspectives.
Director nominees – Diversity of skills and experience
Director nominees – Diversity of skills and experience The diagram below summarizes the director nominees’ key skills and experiences in the areas that are most relevant to 3M and shows the number of director nominees who possess each of the skills and experiences:
Director nominees – Diversity of skills and experience
| | Leadership Significant leadership experience with understanding of complex global organizations, strategy, risk management, and how to drive change and growth. | | | | Manufacturing As a vertically integrated Company, manufacturing experience is important to understanding the operations and capital needs of the Company. | | | | Supply Chain Directors with expertise in the management of the upstream and downstream relationships with suppliers and customers provide important perspectives on achieving efficient operations. | | | | Technology As a diversified technology, science-based Company, directors with technology backgrounds understand 3M’s 51 technology platforms and the importance of investing in new technologies for future growth. | | | | Finance Financial metrics measures our performance. All directors must understand finance and financial reporting processes. All, but one, Audit Committee members qualify as “audit committee financial experts.” | | | | Global Global business experience is critical to 3M’s international growth with 60 percent of sales from outside the U.S. in 2019. | | | | Risk Management Directors with experience in risk management and oversight, including cybersecurity, play an important role in the Board’s oversight of risks. | | | | Marketing Organic growth is one of 3M’s financial metrics and directors with marketing expertise provide important perspectives on developing new markets. | |
BOARD COMMITTEE COMPOSITION (SINCE NOVEMBER 12, 2019)
BOARD COMMITTEE COMPOSITION (SINCE NOVEMBER 12, 2019)
BOARD COMMITTEE COMPOSITION (SINCE NOVEMBER 12, 2019)
| Name of Non-employee Director | Audit | Compensation | Nominating and Governance | Science, Technology & Sustainability | | Thomas “Tony” K. Brown | | | | | | Pamela J. Craig | | | | | | David B. Dillon | | | | | | Michael L. Eskew | | | | | | Herbert L. Henkel | | | | | | Amy E. Hood | | | | | | Muhtar Kent | | | | | | Edward M. Liddy* | | | | | | Dambisa F. Moyo | | | | | | Gregory R. Page | | | | | | Patricia A. Woertz | | | | |
BOARD COMMITTEE COMPOSITION (SINCE NOVEMBER 12, 2019)
= Committee Member; = Chair
BOARD COMMITTEE COMPOSITION (SINCE NOVEMBER 12, 2019)
| * Mr. Liddy has reached the mandatory retirement age and will retire from the Board on May 12, 2020. |
BOARD COMMITTEE COMPOSITION (SINCE NOVEMBER 12, 2019)
| 2020 Proxy Statement | 37 |
BOARD COMMITTEE COMPOSITION (SINCE NOVEMBER 12, 2019)
| AUDIT COMMITTEE |
BOARD COMMITTEE COMPOSITION (SINCE NOVEMBER 12, 2019)
| Members Sondra L. Barbour (until 5/14/2019) Thomas “Tony” K. Brown Pamela J. Craig (from 5/14/2019) David B. Dillon (chair) Dambisa F. Moyo Gregory R. Page Meetings in 2019 10 The Board of Directors has determined that all Audit Committee members are “independent” and “financially literate” under the NYSE listing standards and that members of the Audit Committee received no compensation from the Company other than for service as a director. The Board has also determined that the following Audit Committee members — David B. Dillon (chair), Sondra L. Barbour, Pamela J. Craig, Dambisa F. Moyo and Gregory R. Page — have “accounting or related financial management expertise” under the NYSE listing standards and are “audit committee financial experts” as that term is defined by applicable Securities and Exchange Commission regulations. The Audit Committee has adopted, and annually reviews, its charter setting forth its roles and responsibilities. Audit Committee Charter www.3M.com > Investor Relations > Governance > Governance Documents > Committee Charters | Introduction The Audit Committee assists the Board in its oversight of the integrity of the Company’s financial statements, compliance with legal and regulatory requirements, the qualifications, independence, and performance of the Company’s independent registered public accounting firm (the “Independent Accounting Firm”), the performance of the Company’s internal auditing department, the Company’s financial risk assessment and management, and furnishes a report for inclusion in the Company’s Proxy Statement. Roles and Responsibilities • Reviews the Company’s annual audited and quarterly consolidated financial statements and internal controls over financial reporting; • Reviews the Company’s financial reporting process and internal controls over financial reporting, including any major issues regarding accounting principles and financial statement presentation, and critical accounting policies to be used in the consolidated financial statements; • Reviews and discusses with management and the Independent Accounting Firm the Company’s report on internal controls over financial reporting and the Independent Accounting Firm’s audit of internal controls over financial reporting; • Reviews earnings press releases prior to issuance; • Appoints, oversees, and approves compensation of the Independent Accounting Firm; • Reviews with the Independent Accounting Firm the scope of the annual audit, including fees and staffing, and approves all audit and permissible non-audit services provided by the Independent Accounting Firm; • Reviews findings and recommendations of the Independent Accounting Firm and management’s response to the recommendations of the Independent Accounting Firm; • Discusses policies with respect to risk assessment and risk management, the Company’s major risk exposures, and the steps management has taken to monitor and mitigate such exposures; • Periodically reviews the Company’s capital allocation and capital structure strategies, insurance coverage, funding for pension and other post-retirement benefit plans, and global tax planning; • Periodically reviews the Company’s global Treasury activities, including risks associated with cash investments, counterparties, and use of derivatives and other financial instruments for risk management purposes; • Periodically reviews and approves the Company’s use of swaps exemption pursuant to Dodd-Frank derivatives clearing policy; • Periodically obtains reports from senior management, including the Chief Information Officer, regarding the progress on the phased implementation of the global enterprise resource planning system, information technology networks and systems, and the adequacy and effectiveness of the Company’s information security policies and internal controls regarding information security; • Periodically obtains reports from the Company’s senior internal auditing executive, who has direct reporting obligations to the Committee, on the annual audit plan, scope of work, and the results of internal audits and management’s response thereto; • Periodically obtains reports from the Company’s Chief Compliance Officer, who has direct reporting obligations to the Committee, on compliance with the Company’s Code of Conduct, and at least annually, on the implementation and effectiveness of the Company’s compliance and ethics program; • Reviews with the Company’s General Counsel legal matters that may have a material impact on the consolidated financial statements and any material reports or inquiries received from regulators or government agencies regarding compliance; and • Establishes procedures for (i) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and (ii) the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters and periodically review with the Chief Compliance Officer and the Company’s senior internal auditing executive these procedures and any significant complaints received. |
BOARD COMMITTEE COMPOSITION (SINCE NOVEMBER 12, 2019)
| 38 | 3M Company |
Director compensation and stock ownership guidelines
Director compensation and stock ownership guidelines
Director compensation philosophy and elements
Director compensation philosophy and elements The Nominating and Governance Committee periodically receives reports on the status of Board compensation in relation to other large U.S. companies and is responsible for recommending to the Board changes in compensation for non-employee directors. In developing its recommendations, the Committee is guided by the following goals: • Compensation should fairly pay directors for work required in a company of 3M’s size and scope; • A significant portion of the total compensation should be paid in common stock to align directors’ interests with the long-term interests of shareholders; and • The structure of the compensation should be simple and transparent. The Nominating and Governance Committee works with an independent compensation consultant to support its objectives of maintaining a reasonable and appropriate program. For 2019, Frederic W. Cook & Co., Inc. (“FW Cook”) provided the Committee with expert advice on the compensation of non-employee directors, in addition to analyzing market data on director compensation at the same peer group of 17 companies approved by the Compensation Committee for evaluating Named Executive Officer compensation. Neither the Company nor the Nominating and Governance Committee has any arrangement with any other compensation consultant who has a role in determining or recommending the amount or form of director compensation.
Director compensation philosophy and elements
| 42 | 3M Company |
Director compensation philosophy and elements
Our director program is comprised of a mix of cash and equity that is intended to approximate the peer-group median mix. Our directors’ overall target total direct compensation is consistent with 3M’s size and market-capitalization value relative to its peers. In addition, our hold-until-termination requirement on the annual stock retainer is rigorous relative to the holding requirement of our peers. For more information on the peer group, please see the section entitled “Executive peer group” beginning on page 62 of this Proxy Statement. Non-employee directors’ compensation includes the following compensation elements: Annual Compensation — In May 2019, the Nominating and Governance Committee considered a board compensation study prepared by FW Cook. After reviewing that study, the Committee recommended no changes in the compensation for non-employee directors. As a result, the 2019 annual compensation for non-employee directors was $305,000. Approximately 44 percent of the annual compensation (or $135,000) is payable in cash in four quarterly installments and approximately 56 percent of the annual compensation (or $170,000) is payable in 3M common stock equivalents (“Deferred Stock Units”) granted after the Annual Meeting (referred to as the “annual stock retainer”). In addition, the Lead Director receives an annual fee of $35,000, the chair of the Audit Committee receives an annual fee of $25,000, and the chairs of the Compensation, Finance (before it was ended), Nominating and Governance, and Science, Technology & Sustainability Committees each receive an annual fee of $20,000. The Lead Director and committee chair fees are payable in cash in four quarterly installments. There are no meeting fees. In lieu of receiving the Deferred Stock Units, a director may elect to receive 3M common shares on a current basis, but such shares must be retained until the director leaves the Board. Similarly, in lieu of cash fees, a director may elect to receive 3M common shares or Deferred Stock Units. Non-employee directors also may elect to defer all or part of their annual compensation until they cease to be members of the Board. Deferred Stock — For each director who receives all or a portion of the annual fees in deferred stock, the Company credits his or her account with a number of Deferred Stock Units equal to the number of shares (including fractional shares) of 3M common stock that otherwise could have been purchased with such fees, as determined using the closing sales price for a share of 3M common stock on the NYSE for the last trading day immediately preceding the earliest date such amount otherwise could have been be paid to the director if taken on a current basis. For each ordinary cash dividend paid on the shares of the Company’s common stock, the Company also credits the directors’ accounts with an additional number of Deferred Stock Units on the dividend payment date. The number of additional Deferred Stock Units credited to each directors’ account is calculated by dividing the aggregate dividends that otherwise would have been paid on the shares underlying the aggregate number of Deferred Stock Units credited to the director’s account on the relevant dividend record date by the closing sales price for a share of 3M common stock on the NYSE for the last trading day immediately preceding the applicable dividend payment date. The Deferred Stock Units are fully vested upon grant but do not have voting rights. Appropriate adjustments to the number of Deferred Stock Units credited to each director’s account will be made for stock splits, stock dividends, mergers, consolidations, payments of dividends other than in cash, and similar circumstances affecting 3M common stock. The shares of 3M common stock underlying the Deferred Stock Units will be distributed in a single lump sum during the month of January in the first year after the director leaves the Board, unless the non-employee director elects an alternative distribution schedule prior to the beginning of the year in which the fees are earned. Non-employee directors may elect to receive distribution of the shares of 3M common stock underlying his or her Deferred Stock Units for a year in a single lump sum during the month of January in the first or second year following the year in which they leave the Board or in a series of three, five, or ten annual installments beginning on the first business day of January in the first year following their termination of Board service. All Other Compensation — The column below showing “All Other Compensation” includes the incremental cost of complimentary products and matching gifts. The non-employee directors are eligible to participate in the Company’s matching gift program on the same terms as 3M employees. Under this program, the 3M Foundation will match up to a total of $5,000 a year in contributions by the director to eligible educational institutions and, effective January 1, 2020, up to a total of $1,000 a year in contributions by the director to eligible charitable organizations.
Director compensation philosophy and elements
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2019 director compensation table
2019 director compensation table The total 2019 compensation of our non-employee directors is shown in the following table:
2019 director compensation table
| Non-Employee Directors | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | All Other Compensation ($)(3) | Total ($) | | Sondra L. Barbour (retired from the Board, effective May 14, 2019)** | 49,697 | — | — | 49,697 | | Thomas “Tony” K. Brown | 135,000 | 170,000 | 5,389 | 310,389 | | Pamela J. Craig (elected to the Board, effective May 14, 2019)** | 85,303 | 170,000 | 5,262 | 260,565 | | David B. Dillon* | 160,000 | 170,000 | 5,757 | 335,757 | | Michael L. Eskew* | 187,283 | 170,000 | 270 | 357,553 | | Herbert L. Henkel* | 155,000 | 170,000 | 588 | 325,588 | | Amy E. Hood | 135,000 | 170,000 | 834 | 305,834 | | Muhtar Kent* | 155,000 | 170,000 | 752 | 325,752 | | Edward M. Liddy* | 135,000 | 170,000 | — | 305,000 | | Dambisa F. Moyo | 135,000 | 170,000 | 767 | 305,767 | | Gregory R. Page* | 137,717 | 170,000 | 398 | 308,115 | | Patricia A. Woertz | 135,000 | 170,000 | 411 | 305,411 |
2019 director compensation table
| * Lead Director or Committee Chair during all or a portion of 2019. | | ** Director compensation prorated according to effective date of election or retirement. | | (1) This column represents the amount of all fees earned or paid in cash for services as a director. | | (2) This column represents the grant date fair value of the stock awards made in 2019, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation. The Company does not grant stock options to non-employee directors. Since all stock awards vest on the grant date, there are no unvested stock awards outstanding at year end. | | (3) This column includes the incremental cost of complimentary products and matching gifts. Non-employee directors are eligible to participate in the Company’s matching gift program on the same terms as 3M employees. Under this program, the 3M Foundation will match up to a total of $5,000 a year in contributions by the director to eligible educational institutions and, effective January 1, 2020, up to a total of $1,000 a year in contributions by the director to eligible charitable organizations. |
Reasonableness of non-employee director compensation
Reasonableness of non-employee director compensation As described above, our philosophy on director compensation is to pay directors fairly for work required in a company of our size and complexity, make a significant portion of the total compensation equity based to align directors’ interests with those of our shareholders and structure compensation in a simple and transparent manner. We believe that the application of this philosophy has resulted in a non-employee director compensation program that reflects best-in-class design with the following provisions:
Reasonableness of non-employee director compensation
| • | Retainer-only cash compensation with no fees for attending meetings that are an expected part of board service. | | • | Additional retainers for special roles having greater responsibilities, such as Lead Director and committee chairs, to recognize the incremental additional time and effort required. | | • | Equity delivered in the form of current or deferred full-value shares, where annual grants are based on a competitive fixed-value formula and immediate vesting helps avoid director entrenchment. | | • | A requirement to retain the stock retainer portion of annual compensation issued on or after October 1, 2007, until termination from Board service, which includes net after-tax shares attributable to current payments and pre-tax shares attributable to deferrals. | | • | Flexible voluntary deferral provisions and no material benefits or perquisites. | | • | Our 2016 Long-Term Incentive Plan, approved by shareholders at the 2016 Annual Meeting, includes a $600,000 annual compensation limit on all forms of compensation for non-employee directors. |
Reasonableness of non-employee director compensation
| 44 | 3M Company |
Factors creating alignment between pay and performance
| • | A large portion of each executive’s target Total Direct Compensation (cash plus long-term incentives) is performance-based, varying from 90 percent for Chief Executive Officer Michael Roman to a range of 72-86 percent for the other Named Executive Officers; and | | • | The incentive compensation opportunities provided to the Named Executive Officers utilize multiple performance-based metrics focused primarily on revenue and earnings performance, increase in 3M’s common stock price, efficient use of capital, and free cash flow conversion. |
2019 annual incentive compensation
2019 annual incentive compensation
2019 annual incentive compensation
| For the Named Executive Officers paid on the basis of the Company’s overall performance, the 2019 annual incentive compensation payout (before any adjustment for individual performance) was 62 percent of the target amount. The payouts reflect the Committee’s view of our performance against the goals established for 2019, as shown below. | | | | • | Local currency sales achieved 96 percent of plan, which resulted in an 80 percent payout for this metric (40 percent of target after adjusting for weighting); | | | • | 3M economic profit achieved 84 percent of plan, which was below the threshold required to receive a payment based on this metric; and | | | • | 3M’s 2019 economic profit represented 86 percent of its 2018 results, which resulted in a 72 percent payout for this metric (22 percent of target after adjusting for weighting). | |
2019 annual incentive compensation
The achievement levels described above reflect certain adjustments that the Committee believed were appropriate to better reflect the Company’s performance against its 2019 operating plan. See Appendix A to this Proxy Statement for a reconciliation of local currency sales to our results for the most directly comparable financial measure as reported under GAAP, and the calculation of 2018 and 2019 economic profit.
Performance share award payouts and accruals (long-term incentive compensation)
Performance share award payouts and accruals (long-term incentive compensation) The three-year performance period for the 2017 Performance Share Awards issued to the Named Executive Officers ended on December 31, 2019. Based on the financial results achieved during 2017 – 2019 and excluding dividend equivalents, the Named Executive Officers received 1.189 shares of 3M common stock for each target performance share subject to their 2017 Performance Share Awards. After considering the change in the market value of 3M’s common stock over the three-year performance period and the additional shares delivered pursuant to the dividend equivalent rights granted as part of the 2017 Performance Share Awards, the value of the total number of 3M shares delivered to the Named Executive Officers in settlement of these awards (determined using the closing price of a share of 3M common stock on the NYSE for December 31, 2019) equaled 120 percent of the value of the target number of performance shares subject to such awards (determined using the closing price of a share of 3M common stock on the NYSE for March 1, 2017, the grant date for the 2017 performance share awards). When evaluating the payouts for these awards against the Company’s performance, it is important to keep in mind the weightings applied to each year (2017 – 50 percent; 2018 – 30 percent; and 2019 – 20 percent) and each metric (Relative Organic Volume Growth – 40 percent; Return on Invested Capital – 20 percent; Earnings per Share Growth – 20 percent; and Free Cash Flow Conversion – 20 percent). As illustrated in the charts below, the above target payout of these awards was driven primarily by the Company’s strong 2017 Relative Organic Volume Growth, Return on Invested Capital, and Earnings per Share Growth, which was partially offset by the Company’s below target performance on certain metrics for 2018 and 2019.
Performance share award payouts and accruals (long-term incentive compensation)
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Performance share award payouts and accruals (long-term incentive compensation)
The attainment levels described above reflect certain adjustments that the Committee believed were appropriate to better reflect the Company’s performance during the performance period. See Appendix A to this Proxy Statement for a reconciliation of earnings per share, operating margin performance, free cash flow and free cash flow conversion to our results for the most directly comparable financial measures as reported under GAAP, and the calculation of return on invested capital.
Performance share award payouts and accruals (long-term incentive compensation)
| 54 | 3M Company |
Performance share award payouts and accruals (long-term incentive compensation)
The Company’s 2019 performance will have a more pronounced impact on the payouts for the 2018 Performance Share Awards and 2019 Performance Share Awards, where the weighting of 2019 performance is 30 percent and 50 percent, respectively. To illustrate this point, the table below shows the number of shares of 3M common stock accrued per target performance share based on the Company’s performance for the performance share awards that were outstanding at December 31, 2019. For additional information concerning the overall status of the performance share awards that were outstanding at December 31, 2019, and the impact that the Company’s 2019 performance had on such awards, see “Status of outstanding performance share awards” and “Performance share accruals based on 2019 performance” beginning on pages 68 and 70, respectively.
Stock and long-term incentive compensation
Stock and long-term incentive compensation The performance of 3M’s stock has a material impact on the amount of compensation actually realized by our Named Executive Officers. Our stock ownership guidelines require covered executives, including the Named Executive Officers, to own amounts of Company stock having a value exceeding a specified multiple of their base salary. If the market price of 3M’s stock declines, so does the value of the stock they own. Similarly, stock options and other long-term incentive awards held by our Named Executive Officers increase or decrease in value along with increases and decreases in the value of 3M’s common stock. The stock, stock options and other long-term incentive compensation awards held by our Named Executive Officers throughout 2019 decreased in value during the year as the closing price for a share of the Company’s common stock on the NYSE decreased from $190.54 on December 31, 2018, to $176.42 on December 31, 2019.
Total shareholder return
Total shareholder return The graphs below illustrate 3M’s stock performance relative to the stock performance of the S&P 500 and the peer companies included in the Company’s executive peer group (excluding DuPont de Nemours, Inc., formerly DowDuPont Inc., which was excluded due to its spinoff of two independent public companies during 2019 – Dow Inc. and Corteva, Inc.), as described under “Competitive pay” beginning on page 61 of this Proxy Statement. Note: 5-year period = Five years ending 12/31/19; 3-year period = Three years ending 12/31/19; 1-year period = One year ending 12/31/19 Source: Bloomberg.
Noteworthy compensation program actions since January 1, 2019
| • | Approved participation of all executive officers in the broad-based Annual Incentive Plan (as opposed to the Executive Annual Incentive Plan), effective for plan years beginning on or after January 1, 2020. | | • | Recalculated the number of shares required to be beneficially owned by our executive officers in order to maintain compliance with our stock ownership guidelines, effective December 31, 2019. | | • | Approved a new severance plan for certain U.S. executives (including the Named Executive Officers) to provide separation payments and benefits upon a qualifying termination of employment. Among other things, the new plan is intended to help support talent recruitment and retention objectives and provide a consistent approach to executive departures. For more information concerning the new severance plan, see “New severance plan” and “Rights and payments upon a qualifying termination under the severance plan” beginning on pages 61 and 85 of this Proxy Statement, respectively. |
Roles and responsibilities
| Responsible Party | Primary Roles and Responsibilities Relating to Compensation Decisions | | Compensation Committee (Composed solely of independent, non- employee directors and reports to the Board) | • Reviews the design of, and risks associated with, the Company’s compensation policies and practices; • Approves the compensation of our Chief Executive Officer and Executive Chairman (including performance metrics and goals for performance-based long-term and short-term incentive compensation), subject to ratification by the independent members of the Board of Directors; • Approves annual performance goals and objectives for our Chief Executive Officer and Executive Chairman; • Acting through the Committee’s Chairman, conducts an annual evaluation of our Chief Executive Officer’s and Executive Chairman’s performance and reviews such evaluation with the independent members of the Board of Directors; • Approves the compensation of our other Named Executive Officers (including performance metrics and goals for performance-based long-term and short-term incentive compensation); and • Approves all changes to the composition of the executive peer group. | | Independent Non- employee Members of the Board of Directors | • Considers the Committee’s annual evaluation of our Chief Executive Officer’s and Executive Chairman’s performance; and • Considers the Committee’s actions regarding the compensation of our Chief Executive Officer and Executive Chairman and, if deemed appropriate, ratifies such actions. |
Roles and responsibilities
| * During 2019, the Committee was assisted by its independent compensation consultant, George B. Paulin of FW Cook. Other than the support that it provided to the Committee, FW Cook provided no other services to the Company or 3M management, with the exception of independent advisory support to the Nominating and Governance Committee on the compensation of 3M’s non-employee directors so that valuation methodologies and peer groups are consistent with those used for executives and other employees. During the year, the Committee considered an evaluation of the independence of Mr. Paulin and his firm based on the relevant regulations of the Securities and Exchange Commission and the NYSE listing standards. The Committee concluded that the services performed by Mr. Paulin and his firm did not raise any noteworthy conflicts of interest. |
Elements of target 2019 total direct compensation
Elements of target 2019 total direct compensation The illustration below and the discussion that follows show how the target Total Direct Compensation of the Named Executive Officers (excluding our former Executive Chairman) was apportioned among base salary, annual incentives, performance share awards and stock options for 2019, and how these elements relate to the strategic business goals of the Company. Abbreviations: AIP = Annual incentive pay; PSAs = Performance share awards.
ANNUAL INCENTIVE
ANNUAL INCENTIVE
ANNUAL INCENTIVE
| Percentage of Target 2019 Total Direct Compensation: | Performance Metrics and Weighting: | | CEO – 15% Other NEOs – 17% | • 50% Local Currency Sales (of 3M or a business unit, as applicable) vs. Plan | | | • 20% Economic Profit (of 3M or a business unit, as applicable) vs. Plan | | | • 30% Economic Profit of 3M vs. Prior Year |
ANNUAL INCENTIVE
3M provides its executives with annual incentive compensation through plans that are intended to align a significant portion of their Total Cash Compensation with the financial performance of the Company and its business units. Each executive is assigned a target amount of annual incentive compensation as part of his or her target Total Cash Compensation, but the amount of annual incentive compensation actually paid depends on the performance of 3M and its relevant business units as well as each executive’s individual performance. 3M’s AIP offers eligible employees an opportunity to earn short-term incentive compensation based on three performance metrics, which were weighted for 2019 as indicated above. All 2019 performance targets for our Corporate AIP plan were set at or above 2018 results. The actual amount paid to an eligible employee for a particular year may range from 0 percent to 200 percent of the employee’s target amount for that year, depending on the performance of the Company and its business units compared to the performance goals approved by the Compensation Committee. The amount of annual incentive compensation paid to an eligible employee also may be increased (up to 30 percent), reduced or eliminated entirely based on the employee’s individual performance during that year. Individual performance takes into account both quantitative (financial results, for example) and qualitative (market and economic circumstances, for example) factors. In no event, however, may the total amount paid to an eligible employee exceed 200 percent of the employee’s target amount for the year. In determining the amount of annual incentive compensation paid to a Named Executive Officer, the Named Executive Officer’s individual performance is considered based upon the annual performance evaluation that Mr. Roman, assisted by 3M’s Senior Vice President, Human Resources, and other Company employees, completed for each Named Executive Officer (other than himself and Mr. Thulin) and the annual performance evaluation that the Compensation Committee (acting through its Chairman) completed for each of Mr. Roman and Mr. Thulin. These performance evaluations are done according to 3M’s overall performance assessment and management processes, which involve setting annual financial and non-financial goals and objectives for each individual and then assessing the individual’s overall performance against these goals and objectives at the end of the year. While the annual incentive compensation earned by eligible 3M employees generally is determined under the AIP, the annual incentive compensation earned during 2019 by the senior executives whose compensation is decided by the Committee (including all of the Named Executive Officers) was determined under the Executive Plan approved by 3M’s shareholders at the 2007 Annual Meeting. A total of 20 senior executives participated in this Executive Plan during 2019. The Company utilized the Executive Plan in 2019 to provide performance-based compensation that, at the time action was taken to designate the plan participants for 2019, was intended to be exempt from the $1 million annual deduction limit of state tax laws that are similar to Section 162(m) of the Internal Revenue Code, as in effect prior to the Tax Cuts and Jobs Act of 2017. Given the number of states that have eliminated the performance-based compensation exception to the annual deduction limit since the enactment of the Tax Cuts and Jobs Act of 2017, the Committee decided to include the Company’s senior executives in the broad-based AIP beginning in 2020.
ANNUAL INCENTIVE
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ANNUAL INCENTIVE
Assuming the Company meets the Adjusted Net Income goal, the Executive Plan provides the Committee with discretion to determine the amount of annual incentive compensation paid to 3M’s Named Executive Officers and its other senior executives. The Executive Plan establishes a maximum amount of annual incentive compensation that may be earned by each covered executive for a year (a percentage of the Company’s Adjusted Net Income for such year) and then the Committee utilizes this discretion to pay each covered executive less than this maximum amount based on such factors as it deems relevant. Since the Executive Plan was first adopted in 2007, the Committee has rarely used this discretion to pay a covered executive (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the broad-based AIP (including the individual performance multiplier).
LONG-TERM INCENTIVES
LONG-TERM INCENTIVES
LONG-TERM INCENTIVES
| Percentage of Target 2019 Total Direct Compensation: | Performance Metrics and Weighting: | | CEO – 38% Stock Options | • 20% Earnings per Share Growth | | 38% Performance Shares | • 40% Relative Organic Volume Growth | | Other NEOs – 32% Stock Options | • 20% Return on Invested Capital | | 32% Performance Shares | • 20% Free Cash Flow Conversion |
LONG-TERM INCENTIVES
3M provides long-term incentive compensation to its executives through an incentive plan approved by the Company’s shareholders. This is a typical omnibus-type plan that authorizes the Committee to grant stock options, restricted stock, restricted stock units, stock appreciation rights, performance shares, and other stock awards to employees of the Company and its subsidiaries. The Company provides its executives with this long-term incentive compensation based on 3M common stock in order to effectively motivate such executives to build long-term shareholder value. In determining the performance-adjusted target grant value of the stock options and performance shares provided to our Named Executive Officers, the Compensation Committee considers the individual performance of our Named Executive Officers using the performance evaluations described under “Annual Incentive” on page 59. Our Named Executive Officers also may receive special equity awards on an ad hoc basis as new hires or for recognition and retention, promotions, or other purposes.
New severance plan
New severance plan In the first half of 2019, the Committee’s independent compensation consultant, FW Cook, conducted an analysis of the benefits and perquisites offered to executives at companies in the executive peer group. Following completion of its work, FW Cook informed the Compensation Committee that maintenance of formal severance arrangements for some or all of their executives was a common practice among executive peer group members. Based upon the results of its analysis, FW Cook recommended that the Committee consider implementing a new executive severance plan in order to support talent recruitment and retention objectives (especially at times when there are uncertainties around restructurings and reductions in force) and to provide a consistent approach to executive departures. With FW Cook’s assistance, the Committee then discussed the pros and cons associated with adoption of a formal severance plan and other related issues over the course of the next nine months, including the benefits that a formal plan would provide the Company, the scope of eligible employees, the various termination scenarios that would be covered, and the compensation and benefits that would be offered. After considering the issues, the Committee recommended that the Board adopt a new 3M Executive Severance Plan to provide separation pay and benefits to certain U.S. employees (including each of the Named Executive Officers) in the event of a qualifying termination of employment. Upon the Committee’s recommendation, the independent members of the Board of Directors unanimously approved the 3M Executive Severance Plan, which became effective on February 3, 2020. Additional details concerning the benefits made available under the plan and the circumstances under which benefits will be made available can be found under “Rights and payments upon a qualifying termination under the severance plan” beginning on page 85.
Competitive pay
Competitive pay We compete for executive talent in a global market. In order to ensure that we are providing Total Direct Compensation that is competitive, the Committee annually conducts a rigorous benchmarking process with the help of its independent compensation consultant, FW Cook. During this process, the Committee generally considers available pay data for two peer groups: an executive peer group and a survey peer group.
Competitive pay
| 2020 Proxy Statement | 61 |
Executive peer group
Executive peer group For 2019, the executive peer group consisted of the companies identified below (which remained the same as in the previous year), as recommended by the Committee’s independent compensation consultant and approved by the Committee. The companies in this executive peer group were selected because (1) their performance was monitored regularly by the same market analysts who monitor the performance of 3M (investment peers), and/or (2) they met criteria based on similarity of their business and pay models, market capitalization (based on an eight-quarter rolling average), and annual revenues and compete with 3M for talent or capital.
Executive peer group
| (Dollars in millions) | | Trailing Eight-Quarter | | | Latest Four Quarters Revenues | | Average Market Capitalization | | | General Electric Company | $95,214 | Johnson & Johnson | $357,993 | | Johnson & Johnson | $82,059 | The Procter & Gamble Company | $258,771 | | United Technologies | $77,046 | Medtronic plc | $132,027 | | The Procter & Gamble Company | $69,594 | Honeywell International, Inc. | $116,945 | | Caterpillar Inc. | $53,800 | United Technologies Corporation | $109,629 | | Deere & Company | $38,880 | 3M Company | $106,606 | | Honeywell International, Inc. | $36,709 | General Electric Company | $91,417 | | 3M Company | $32,136 | Danaher Corporation | $91,106 | | Medtronic plc | $31,062 | Caterpillar Inc. | $77,953 | | Johnson Controls International plc | $24,080 | Deere & Company | $50,140 | | Eaton Corporation plc | $21,390 | Illinois Tool Works Inc. | $49,275 | | Kimberly-Clark Corporation | $18,450 | Kimberly-Clark Corporation | $43,137 | | Emerson Electric Co. | $18,376 | Emerson Electric Co. | $42,392 | | Danaher Corporation | $17,911 | Eaton Corporation plc | $35,127 | | Illinois Tool Works Inc. | $14,109 | Johnson Controls International plc | $31,431 | | TE Connectivity Ltd. | $13,269 | TE Connectivity Ltd. | $29,847 | | Corning Incorporated | $11,503 | Corning Incorporated | $23,820 | | 75th Percentile | $57,749 | 75th Percentile | $111,458 | | Mean | $38,966 | Mean | $96,313 | | Median | $27,571 | Median | $64,047 | | 25th Percentile | $18,260 | 25th Percentile | $40,576 | | 3M Percentile Rank | 55% | 3M Percentile Rank | 72% |
Executive peer group
All data shown was obtained from Standard & Poor’s Capital IQ. Revenues are stated in millions for the latest four quarters disclosed as of February 28, 2020. Market Capitalizations are stated in millions as of February 28, 2020. Given the significant impact that the spinoffs of two independent public companies (Dow Inc. and Corteva, Inc.) had on the revenues and market capitalization of DuPont de Nemours, Inc. (formerly DowDuPont Inc.), the table above does not include information for such entity. The Committee, with assistance from its independent compensation consultant, periodically reviews the composition of the executive peer group to determine whether any changes are appropriate. Following its review in August 2019, the Committee determined that no changes were needed at that time. The Company receives pay data and information on the executive compensation practices at the companies in 3M’s executive peer group from Aon and FW Cook.
Executive peer group
| 62 | 3M Company |
Survey peer group
Survey peer group For 2019, there were approximately 250 comparator companies in the survey peer group. Although the number and identity of the companies varies from year to year and from survey to survey, each of the companies included in the survey peer group had annual revenue exceeding $10 billion. All of the companies in the survey peer group also participate in one or more executive compensation surveys obtained from three consulting firms (Aon, FW Cook, and Willis Towers Watson). Pay data for the survey peer group is statistically regressed to recognize the different sizes of the comparator companies (based on annual revenues) as compared to the size of 3M. The Committee does not review the identity of the companies in the survey peer group.
How the Committee establishes target compensation levels using competitive pay data
How the Committee establishes target compensation levels using competitive pay data The Committee considers the pay data from the Peer Groups as a reference point when establishing the target Total Cash Compensation and the initial target value of long-term incentive compensation to be provided to our executives in any given year before consideration of individual circumstances. For each Named Executive Officer, the Committee’s general approach is to set such amounts at or very near the median for the corresponding items of compensation provided to similarly situated executives in the executive peer group. In situations where the Committee believes that there is insufficient market data for one or more positions, the Committee starts with the median amount for a similar position and adjusts that amount up or down (generally not more than 15 percent) to arrive at a number that it uses as the “median” for that position. The final amounts of target Total Cash Compensation established by the Committee for each executive may vary based on individual circumstances, but generally are set between 80 and 120 percent of the applicable median. When setting the target amounts for any individual executive, the Committee may consider the breadth and complexity of the executive’s duties and responsibilities, the scores assigned to the executive for his or her leadership behaviors (e.g., customer focus, strategic mindset, operational leadership), the financial and operational performance of the business activities for which the executive is responsible, experience and time in their current position, internal pay equity, individual performance, and such other factors as the Committee determines to be appropriate. The pay data for the survey peer group is used by the Committee to assess the reasonableness of the benchmarking results for each executive position benchmarked, helping to ensure that the Company’s compensation objectives are being met. The Committee also uses information on the executive compensation practices at companies in the executive peer group when considering design changes to the Company’s executive compensation program. Overall, the Company believes that use of this information from the Peer Groups enables the Committee to create better alignment between executive pay and performance and to help ensure that 3M can attract and retain high-performing executive leaders.
Meaning of certain terms
| Adjusted Net Income | means the net income of 3M as reported in its Consolidated Statement of Income, as adjusted to exclude special items. | | AIP | means the broad-based Annual Incentive Plan by which the Company provides annual incentive compensation to approximately 35,000 eligible employees. | | Committee | means the Compensation Committee of the Board of Directors of 3M Company. | | Economic Profit | means the adjusted net income of 3M (net income including non-controlling interest plus after-tax interest expense, as reported in its Consolidated Statement of Income) or a business unit operating income, plus interest income and minus income taxes, adjusted to exclude certain special items and the impact of acquisitions or divestitures in the year each acquisition or divestiture is completed (unless such acquisition or divestiture is included in the operating plan for the business unit), less a charge (10 percent in 2019) for the capital used to generate such operating income. The Economic Profit metric measured versus 3M’s prior year results is calculated using total Company average invested capital (equity plus debt, as reported in its Consolidated Balance Sheet), while the Economic Profit metric measured versus plan is calculated using only accounts receivable and inventories of such business unit as capital. | | Earnings per Share (EPS) Growth | means the percentage increase or decrease in 3M’s diluted earnings per share attributable to 3M common shareholders (as reported in its Consolidated Statement of Income) for a year as compared to the previous year, in each case, as adjusted to exclude certain special items. | | Executive Plan | means the Executive Annual Incentive Plan by which the Company provides annual incentive compensation to the Named Executive Officers as well as certain other executives. | | Free Cash Flow Conversion | means the sum of 3M’s operating cash flows minus capital expenditures, divided by net income, as adjusted to exclude certain special items. | | GAAP | means generally accepted accounting principles in the United States. | | Local Currency Sales | means the net sales of 3M (as reported in its Consolidated Statement of Income) or a business unit, in local currency, adjusted to exclude the impact of acquisitions or divestitures in the year each acquisition or divestiture is completed (unless such acquisition or divestiture is included in the operating plan for the business unit). | | Organic Local Currency Sales Growth | means the percentage amount by which 3M’s net sales (as reported in its Consolidated Statement of Income) for a year increase or decrease as compared to the previous year, in each case, adjusted to neutralize the sales attributable to acquisitions or divestitures for the 12-month period following the date each acquisition or divestiture is completed and to exclude currency effects. | | Peer Groups | means both 3M’s executive peer group and the survey peer group, each as described in the “Competitive pay” section of this Compensation Discussion and Analysis. | | Relative Organic Volume Growth | means the amount by which the percentage increase or decrease in 3M’s net sales (as reported in its Consolidated Statement of Income) for a year as compared to the previous year exceeds the percentage increase or decrease in worldwide real sales growth over the same period, as reflected in the Worldwide Industrial Production Index published by Global Insight. For this purpose, 3M’s net sales are adjusted to neutralize price and currency effects and, during the 12-month period following the date of each acquisition or divestiture, the sales attributable to such acquired or divested business or products. | | Return on Invested Capital | means the operating income of 3M (as reported in its Consolidated Statement of Income), plus interest income and minus income taxes, adjusted to exclude certain special items and the impact of acquisitions in the year each acquisition is completed, divided by the average invested capital (equity plus debt, as reported in its Consolidated Balance Sheet). | | Total Cash Compensation | means the total of an individual’s base salary and annual incentive compensation. | | Total Direct Compensation | means the total of an individual’s Total Cash Compensation plus the compensation value of their annual long-term incentive compensation awards (which is based on their grant date fair value as measured under accounting standards). |
2019 base salary and target total cash compensation
As a result of these increases, Mr. Roman’s target Total Cash Compensation represented 90 percent of the median value of the corresponding compensation provided to chief executive officers at companies in the executive peer group, and the target Total Cash Compensation of Mr. Gangestad and Mr. Khandpur represented 102 percent and 94 percent, respectively, of the median value of the corresponding compensation provided to executives with similar responsibilities at companies in the executive peer group. In March 2019, the Committee approved the adjustments in base salaries and target Total Cash Compensation shown below in connection with Mr. Khandpur’s appointment to Executive Vice President, Transportation and Electronics Business Group, and Mr. Vale’s appointment to Executive Vice President, Safety and Industrial Business Group. The adjustments were intended to better align the target Total Cash Compensation of each executive with the breadth of responsibilities accompanying their expanded roles after the realignment of the Company from five to four business groups.
2019 annual incentive
2019 annual incentive During 2019, the Committee provided the Named Executive Officers with the opportunity to earn short-term incentive compensation under the Executive Plan. Each Named Executive Officer’s target annual incentive for the year was equal to the difference between his or her target Total Cash Compensation and annual base salary. Each of the Named Executive Officers was assigned to an appropriate business unit (the entire Company, in some cases) established under the AIP for the purpose of measuring business performance during 2019 and converting that performance into a payout determined in accordance with the terms of the AIP. While none of the Named Executive Officers were covered by the AIP during 2019, the Committee rarely uses its discretion under the Executive Plan to pay the covered executives (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the AIP (including the individual performance multiplier). The amounts payable under the AIP for 2019 were based on the following performance results for the Company and, as applicable, the respective business units to which the Named Executive Officers were assigned for all or part of the year:
2019 annual incentive
| | Local Currency Sales (50%) | | | Economic Profit (20%) | | | Total 3M Economic Profit vs. Prior Year (30%) | | | Weighted Average Payout % | | (Dollar Amounts in Millions) Business Unit | Plan | Actual | Actual vs. Plan | Plan | Actual | Actual vs. Plan | Prior Year | Actual | Actual vs. Prior Year | Based On Payout Curve | | Total Company | 33,402 | 32,114 | 96% | 5,693 | 4,808 | 84% | 3,752 | 3,229 | 86% | 62% | | International Operations | 20,293 | 19,468 | 96% | 3,751 | 3,208 | 86% | 3,752 | 3,229 | 86% | 75% | | Transportation and Electronics Business Group | 10,351 | 9,754 | 94% | 2,063 | 1,573 | 76% | 3,752 | 3,229 | 86% | 57% | | Safety and Industrial Business Group | 12,653 | 11,910 | 94% | 2,166 | 1,791 | 83% | 3,752 | 3,229 | 86% | 57% | | Health Care Business Group | 7,100 | 6,927 | 98% | 1,481 | 1,421 | 96% | 3,752 | 3,229 | 86% | 85% | | Consumer Business Group | 5,189 | 5,512 | 99% | 750 | 721 | 96% | 3,752 | 3,229 | 86% | 87% |
2019 annual incentive
Since the Company satisfied the Executive Plan’s performance objective by earning Adjusted Net Income of $5.3 billion for 2019, the plan authorized the Committee to approve payments of annual incentive compensation to each Named Executive Officer equal to a maximum of one-quarter of one percent of such Adjusted Net Income ($13 million), subject to the Committee’s negative discretion to pay each covered executive any amount less than this maximum based on such factors as it deems relevant, including the goals set forth under the AIP. At its meeting in February 2020 and consistent with its past practice, the Committee approved (and with respect to Mr. Roman and Mr. Thulin, the independent members of the Board of Directors ratified) a payment to each executive equal to the amount such executive would have received had he or she been participating in the broad-based AIP (including the individual performance multiplier).
2019 annual incentive
| Name | Target 2019 Annual Incentive* ($) | Actual 2019 Annual Incentive ($) | Payout as a % of Target | | Michael F. Roman | 2,040,051 | 1,256,671 | 62% | | Inge G. Thulin | 620,548 | 382,259 | 62% | | Nicholas C. Gangestad | 862,953 | 531,579 | 62% | | Ashish K. Khandpur | 581,003 | 325,583 | 56% | | Julie L. Bushman | 680,538 | 507,681 | 75% | | Joaquin Delgado | 294,066 | 256,137 | 87% | | Michael G. Vale | 626,632 | 396,967 | 63% |
2019 annual incentive
| * These amounts are prorated to reflect the increases in Total Cash Compensation described above that resulted in corresponding increases (if any) in each individual’s target annual incentive compensation. The amounts shown for Mr. Thulin and Dr. Delgado have been prorated to reflect their separation from the Company, effective as of June 1, 2019, and July 1, 2019, respectively. |
2019 annual incentive
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Long-term incentives — 2019 annual grants
Long-term incentives — 2019 annual grants After considering the most recent long-term incentive compensation data available from companies in the Peer Groups and after taking into account its evaluation of their individual performance during 2018 and Mr. Thulin’s anticipated retirement in 2019, the Committee approved (and in the case of Mr. Roman and Mr. Thulin, the independent members of the Board of Directors ratified) the following performance-adjusted target compensation values for the Named Executive Officers’ 2019 long-term incentive compensation awards. For ease of comparison, the table below also shows the performance-adjusted target compensation values of the Named Executive Officers’ 2018 long-term incentive compensation awards.
Long-term incentives — 2019 annual grants
| Name | Performance- Adjusted Target Grant Value of 2018 Annual Awards ($) | Performance- Adjusted Target Grant Value of 2019 Annual Awards ($) | | Michael F. Roman | 4,720,000* | 10,000,000 | | Inge G. Thulin | 9,000,000* | 4,687,000 | | Nicholas C. Gangestad | 4,673,500 | 3,640,000 | | Ashish K. Khandpur | 2,268,290 | 3,496,080 | | Julie L. Bushman | 2,913,400 | 2,330,720 | | Joaquin Delgado | 2,268,290 | 1,165,360 | | Michael G. Vale | 2,268,290 | 2,268,290 |
Long-term incentives — 2019 annual grants
| * Excludes the target grant value of special grants made in 2018 in connection with the changes in Mr. Roman’s and Mr. Thulin’s roles and responsibilities. If such values had been included, the performance-adjusted target grant value of Mr. Roman’s and Mr. Thulin’s 2018 annual awards would have been $7,220,000 and $9,750,000, respectively. |
Long-term incentives — 2019 annual grants
Consistent with market practices at companies in the Peer Groups, during 2019, the Committee chose to deliver one-half of the performance-adjusted target grant value of the annual long-term incentive compensation awards provided to 3M’s Named Executive Officers (other than Mr. Thulin) in the form of stock options and the remaining one-half in the form of performance shares. Mr. Thulin’s awards were delivered approximately 33 percent in the form of stock options and 67 percent in the form of performance shares given the anticipated forfeiture of one half of such performance shares upon his anticipated retirement pursuant to the terms of the original grant agreements.
2019 stock options
2019 stock options Stock options granted to the Named Executive Officers in 2019 as part of their long-term incentive compensation have the following features:
2019 stock options
| • | an exercise price equal to the closing price of a share of 3M common stock on the NYSE for the date of grant; | | • | a ratable three-year vesting schedule; and | | • | a maximum term of 10 years. |
2019 performance share awards
2019 performance share awards Performance shares awarded in 2019 will result in the issuance of actual shares of 3M common stock to 3M’s Named Executive Officers if the Company achieves certain financial goals over the years 2019, 2020, and 2021. The number of shares of 3M common stock that will be issued for each 2019 performance share is linked to the Company’s performance as measured by the criteria of Earnings per Share Growth (20 percent weighting), Relative Organic Volume Growth (40 percent weighting), Return on Invested Capital (20 percent weighting), and Free Cash Flow Conversion (20 percent weighting). These performance criteria were selected because they are aligned with 3M’s operating plan and the financial objectives communicated to shareholders, and the Committee believes that they are important drivers of long-term shareholder value. Attainment of these four independent performance criteria is measured separately for each calendar year during the three-year measurement period, with each year weighted as follows: 2019 — 50 percent; 2020 — 30 percent; and 2021 — 20 percent. However, the targets by which the Company’s performance is measured do not change over the three-year performance period.
2019 performance share awards
| 2020 Proxy Statement | 67 |
2019 performance share awards
Excluding shares issued pursuant to dividend equivalent rights, the actual number of shares of 3M common stock that will be delivered at the end of the three-year performance period ending on December 31, 2021, may be anywhere from 0 percent to 200 percent of the target number of performance shares awarded, depending on the performance of the Company during the performance period. However, an executive may forfeit all or a portion of such shares if he or she does not remain employed by the Company throughout the three-year performance period. For awards tied to the achievement of performance goals over the years 2019, 2020, and 2021, the Committee approved the following targets for determining the number of shares of 3M common stock to be delivered for each performance share awarded, with the total number of shares actually delivered being the sum of the number of shares earned as a result of the Company’s achievement of each of the four financial goals, plus the number of shares issued pursuant to dividend equivalent rights granted with respect to the shares earned. In the event that the Company’s performance as measured by any of these performance criteria falls between any of the percentages listed below, the number of shares of 3M common stock earned will be determined by linear interpolation.
2019 performance share awards
| | | Relative | | | | | | | | | % of | Organic | % of | Return on | % of | | % of | Total % of | | EPS | Performance | Volume | Performance | Invested | Performance | FCF | Performance | Performance | | Growth | Shares | Growth | Shares | Capital | Shares | Conversion | Shares | Shares | | below 4.0% | 0% | below -1.0% | 0% | below 20.0% | 0% | below 95.0% | 0% | 0% | | 4.0% | 4% | -1.0% | 8% | 20.0% | 4% | 95.0% | 4% | 20% | | 8.0% | 20% | 0.5% | 40% | 22.0% | 20% | 100.0% | 20% | 100% | | 12.0% or higher | 40% | 2.0% or higher | 80% | 25.0% or higher | 40% | 105.0% or higher | 40% | 200% |
2019 performance share awards
The above targets are not a prediction of how 3M will perform during the years 2019 through 2021 or any other period in the future. The sole purpose of these formulas, which were approved by the Committee in February 2019, is to establish a method for determining the number of shares of 3M common stock to be delivered for the performance share awards described above. 3M is not providing any guidance, nor updating any prior guidance, of its future performance with the disclosure of these formulas, and you are cautioned not to rely on these formulas as a prediction of 3M’s future performance.
Long-term incentives — all outstanding performance share awards
Long-term incentives — all outstanding performance share awards The Company’s annual award cycle and three-year performance periods result in an overlap of awards. For example, the performance goals for 2019 performance share awards relate to the years 2019, 2020, and 2021. Similarly, the performance goals for 2018 performance share awards relate to the years 2018, 2019, and 2020, and so on, as shown below. Performance against the goals established for each award are measured separately for each calendar year during the measurement period, with each year weighted as shown below in parenthesis. The Committee believes this structure reduces motivation to maximize performance in any one period by providing the highest-level rewards only by building sustainable long-term results.
Long-term incentives — all outstanding performance share awards
| Award | 2017 | 2018 | 2019 | 2020 | 2021 | | 2017 PSA | Year 1 (50%) | Year 2 (30%) | Year 3 (20%) | | | | 2018 PSA | | Year 1 (50%) | Year 2 (30%) | Year 3 (20%) | | | 2019 PSA | | | Year 1 (50%) | Year 2 (30%) | Year 3 (20%) |
Status of outstanding performance share awards
Status of outstanding performance share awards The Committee periodically reviews the Company’s performance against the goals established for each performance share award throughout the duration of its applicable measurement period. The table below summarizes the status of the different performance share awards held by the Named Executive Officers as of December 31, 2019.
Status of outstanding performance share awards
| 68 | 3M Company |
Status of outstanding performance share awards
| Award and Measurement Period | Performance Measures and Weighting | Performance Levels | | | % of Shares Accrued per Performance Share at Specified Performance Levels | | | Actual Performance Level Achieved*, ** | Shares Accrued per Performance Share Based on Actual Performance*** | | | | Threshold | Target | Maximum | Threshold | Target | Maximum | | | | 2019 PSA | Earnings per | 4.0% | 8.0% | 12.0% | 4% | 20% | 40% | -6.9% (2019) | 0.000 (2019) | | | Share Growth | | | | | | | | | | 2019-2021 | Relative Organic | -1.0% | 0.5% | 2.0% | 8% | 40% | 80% | -2.9% (2019) | 0.000 (2019) | | Measurement | Volume Growth | | | | | | | | | | Period | Return on | 20.0% | 22.0% | 25.0% | 4% | 20% | 40% | 22.9% (2019) | 0.130 (2019) | | | Invested Capital | | | | | | | | | | | Free Cash Flow | 95.0% | 100.0% | 105.0% | 4% | 20% | 40% | 106.0% (2019) | 0.200 (2019) | | | Conversion | | | | | | | | | | | 2019 PSA Total (as of December 31, 2019) | | | | | | | | 0.330 shares | | 2018 PSA | Earnings per | 4.0% | 8.0% | 12.0% | 4% | 20% | 40% | -6.9% (2019) | 0.000 (2019) | | | Share Growth | | | | | | | 8.6% (2018) | 0.115 (2018) | | 2018-2020 | Relative Organic | -1.0% | 0.5% | 2.0% | 8% | 40% | 80% | -2.9% (2019) | 0.000 (2019) | | Measurement | Volume Growth | | | | | | | -1.0% (2018) | 0.040 (2018) | | Period | Return on | 18.0% | 20.0% | 23.0% | 4% | 20% | 40% | 22.9% (2019) | 0.118 (2019) | | | Invested Capital | | | | | | | 24.6% (2018) | 0.200 (2018) | | | Free Cash Flow | 95.0% | 100.0% | 105.0% | 4% | 20% | 40% | 106.0% (2019) | 0.120 (2019) | | | Conversion | | | | | | | 92.8% (2018) | 0.000 (2018) | | | 2018 PSA Total (as of December 31, 2019) | | | | | | | | 0.593 shares | | 2017 PSA | Earnings per | 4.0% | 8.0% | 12.0% | 4% | 20% | 40% | -6.9% (2019) | 0.000 (2019) | | | Share Growth | | | | | | | 8.6% (2018) | 0.069 (2018) | | | | | | | | | | 12.4% (2017) | 0.200 (2017) | | 2017-2019 | Relative Organic | -1.0% | 0.5% | 2.0% | 8% | 40% | 80% | -2.9% (2019) | 0.000 (2019) | | Measurement | Volume Growth | | | | | | | -1.0% (2018) | 0.024 (2018) | | Period | | | | | | | | 1.7% (2017) | 0.360 (2017) | | | Return on | 18.0% | 20.0% | 23.0% | 4% | 20% | 40% | 22.9% (2019) | 0.079 (2019) | | | Invested Capital | | | | | | | 24.6% (2018) | 0.120 (2018) | | | | | | | | | | 25.2% (2017) | 0.200 (2017) | | | Free Cash Flow | 95.0% | 100% | 105.0% | 4% | 20% | 40% | 106.0% (2019) | 0.080 (2019) | | | Conversion | | | | | | | 92.8% (2018) | 0.000 (2018) | | | | | | | | | | 97.3% (2017) | 0.057 (2017) | | | 2017 PSA Total (as of December 31, 2019) | | | | | | | | 1.189 shares |
Status of outstanding performance share awards
| * The reported level of performance achieved for Relative Organic Volume Growth has been determined, in part, using Worldwide IPI for each relevant period, as reported by Global Insights on January 15, 2020. The final performance level achieved may vary based on changes in reported Worldwide IPI for the relevant period. | | ** For purposes of calculating Earnings per Share Growth for any given fiscal year, the baseline earnings per share figure is set equal to the final adjusted earnings per share figure used to calculate the Earnings per Share Growth attainment for the preceding year. As a result, any increase in earnings per share attributable to adjustments in one fiscal year necessarily will make it more difficult for the Company to achieve its Earnings per Share Growth target in the following year. | | *** The number of shares of 3M common stock accrued with respect to each performance share subject to a performance share award is determined based on the Company’s performance, as adjusted for certain special items, against the specified goals established for each performance measure taking into account the weighting for the applicable performance year and measure. In the event that the Company’s performance for any given performance measure falls between any two performance levels, the number of shares of 3M common stock accrued is determined by linear interpolation. See Appendix A to this Proxy Statement for details concerning the adjustments made to certain metrics under the AIP and the outstanding performance share awards. |
Status of outstanding performance share awards
| 2020 Proxy Statement | 69 |
Performance share accruals based on 2019 performance
Performance share accruals based on 2019 performance The table below shows the number of shares of 3M common stock that were accrued (excluding dividend equivalents) for the outstanding performance share awards held by each Named Executive Officer based on the Company’s performance during 2019.
Performance share accruals based on 2019 performance
| Name | Performance Share Award | Target Number of Performance Shares | Shares Accrued Per Target Performance Share Based on 2019 Performance | Total Shares Accrued Based on 2019 Performance* | Market Value of Shares Accrued Based on 2019 Performance** ($) | | Michael F. Roman | 2019 PSA | 24,098 | 0.330 | 7,952 | 1,402,952 | | | 2018 PSA | 16,596 | 0.238 | 3,948 | 696,427 | | | 2017 PSA | 6,467 | 0.159 | 1,026 | 181,032 | | | | | | Total | 2,280,411 | | Inge G. Thulin | 2019 PSA | 7,531*** | 0.330 | 2,485 | 438,386 | | | 2018 PSA | 16,804 | 0.238 | 3,997 | 705,101 | | | 2017 PSA | 31,603 | 0.159 | 5,013 | 884,455 | | | | | | Total | 2,027,942 | | Nicholas C. Gangestad | 2019 PSA | 8,772 | 0.330 | 2,895 | 510,694 | | | 2018 PSA | 10,101 | 0.238 | 2,403 | 423,900 | | | 2017 PSA | 9,686 | 0.159 | 1,537 | 271,128 | | | | | | Total | 1,205,722 | | Ashish K. Khandpur | 2019 PSA | 8,425 | 0.330 | 2,780 | 490,433 | | | 2018 PSA | 4,903 | 0.238 | 1,166 | 205,655 | | | 2017 PSA | 3,689 | 0.159 | 586 | 103,387 | | | | | | Total | 799,475 | | Julie L. Bushman | 2019 PSA | 5,617 | 0.330 | 1,853 | 326,956 | | | 2018 PSA | 6,297 | 0.238 | 1,498 | 264,273 | | | 2017 PSA | 4,867 | 0.159 | 772 | 136,264 | | | | | | Total | 727,493 | | Joaquin Delgado | 2019 PSA | 1,405 | 0.330 | 463 | 81,739 | | | 2018 PSA | 4,903 | 0.238 | 1,166 | 205,655 | | | 2017 PSA | 5,974 | 0.159 | 948 | 167,182 | | | | | | Total | 454,576 | | Michael G. Vale | 2019 PSA | 5,467 | 0.330 | 1,804 | 318,223 | | | 2018 PSA | 4,903 | 0.238 | 1,166 | 205,655 | | | 2017 PSA | 6,138 | 0.159 | 974 | 171,799 | | | | | | Total | 695,677 |
Performance share accruals based on 2019 performance
| * The amounts in this column reflect the number of shares accrued (excluding dividend equivalents) based on, among other things, Worldwide IPI for the 2019 calendar year, as reported by Global Insights on January 15, 2020. The final number of shares accrued may vary in the event of changes in Worldwide IPI reported by Global Insights. Due to rounding, the numbers shown in this column may not equal the result obtained by multiplying the Target Number of Performance Shares by the Shares Accrued Per Target Performance Share Based on 2019 Performance. See Appendix A to this Proxy Statement for a reconciliation of the adjusted earnings per share figures used to calculate the amounts shown above to the earnings per share figures determined in accordance with GAAP. | | ** Represents the closing price of a share of 3M common stock on the NYSE for December 31, 2019 ($176.42), multiplied by the total number of shares accrued (before rounding and excluding dividend equivalents) based on the Company’s 2019 performance. | | *** In accordance with the terms of the award, the target number of performance shares subject to Mr. Thulin’s 2019 performance share award was reduced based on his June 1, 2019, retirement. Prior to this reduction, the target number of performance shares subject to Mr. Thulin’s 2019 performance share award was 15,061. |
Performance share accruals based on 2019 performance
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Performance share accruals based on 2019 performance
Although shares of 3M common stock are accrued annually for each outstanding performance share award, an executive may forfeit all or a portion of the shares otherwise issuable pursuant to his or her award if he or she does not remain employed by the Company throughout the entire three-year performance period. For additional information concerning the manner in which the compensation of the Named Executive Officers is determined and the role of the Compensation Committee and its advisors, see Section II of this Compensation Discussion and Analysis beginning on page 57.
2019 summary compensation table
2019 summary compensation table The following table shows the compensation earned or received during 2019, 2018, and 2017 by each of 3M’s named executive officers (as determined pursuant to the Securities and Exchange Commission’s disclosure requirements for executive compensation in Item 402 of Regulation S-K).
2019 summary compensation table
| Name and Principal Position | Year | Salary ($) | 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 ($)(5) | Total ($) | | Michael F. Roman(6) Chairman of the Board, President and Chief Executive Officer | 2019 | 1,249,568 | 5,000,094 | 4,999,946 | 1,256,671 | 5,642,262 | 173,025 | 18,321,566 | | | 2018 | 1,049,976 | 3,610,286 | 3,610,217 | 1,431,503 | 3,020,986 | 141,771 | 12,864,739 | | | 2017 | 839,575 | 1,227,825 | 1,228,374 | 1,090,797 | 2,347,859 | 70,788 | 6,805,218 | | Inge G. Thulin(7) Former Executive Chairman of the Board | 2019 | 416,667 | 3,125,007 | 1,562,023 | 382,259 | 2,689,641 | 31,476 | 8,207,073 | | | 2018 | 1,269,200 | 3,750,032 | 6,000,564 | 1,877,798 | — | 632,492 | 13,530,086 | | | 2017 | 1,526,595 | 6,000,146 | 6,002,785 | 4,121,830 | 2,175,108 | 708,729 | 20,535,193 | | Nicholas C. Gangestad Senior Vice President and Chief Financial Officer | 2019 | 862,953 | 1,820,102 | 1,820,002 | 531,579 | 2,488,003 | 60,357 | 7,582,996 | | | 2018 | 830,995 | 2,336,765 | 2,336,984 | 787,783 | 1,384,479 | 62,458 | 7,739,464 | | | 2017 | 778,103 | 3,339,178 | 1,839,705 | 1,110,975 | 2,110,908 | 68,372 | 9,247,241 | | Ashish K. Khandpur(8) Executive Vice President, Transportation and Electronics Business Group | 2019 | 683,422 | 1,748,103 | 1,748,032 | 325,583 | 1,342,856 | 46,535 | 5,894,531 | | Julie L. Bushman(8) Executive Vice President, International Operations | 2019 | 800,502 | 1,165,471 | 1,165,366 | 507,681 | 1,982,778 | 29,170 | 5,650,968 | | | 2018 | 792,795 | 1,456,748 | 1,456,856 | 649,048 | 945,379 | 38,525 | 5,339,351 | | Joaquin Delgado Former Executive Vice President, Consumer Business Group | 2019 | 368,892 | 582,839 | 582,700 | 256,137 | 1,155,625 | 1,788,819 | 4,735,012 | | | 2018 | 694,090 | 1,134,260 | 1,134,284 | 532,836 | 700,842 | 101,075 | 4,297,387 | | | 2017 | 680,383 | 1,134,224 | 1,134,687 | 561,067 | 1,174,715 | 99,466 | 4,784,542 | | Michael G. Vale Executive Vice President, Safety and Industrial Business Group | 2019 | 737,093 | 1,134,348 | 1,134,151 | 396,967 | 1,619,621 | 60,282 | 5,082,462 | | | 2018 | 707,186 | 1,134,260 | 1,134,284 | 533,871 | 127,703 | 65,850 | 3,703,154 | | | 2017 | 693,221 | 1,165,361 | 1,165,908 | 629,703 | 980,555 | 61,498 | 4,696,246 |
2019 summary compensation table
| (1) The amounts in the Stock Awards column reflect the aggregate grant date fair value of such awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures. Assumptions made in the calculation of these amounts are included in Note 18 to the Company’s audited financial statements for the fiscal year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020. The amounts included in this column for the performance share awards made during 2019 are calculated based on the probable satisfaction of the performance conditions for such awards. If the highest level of performance is achieved for these performance share awards, the maximum value of these awards at the grant date would be as follows: Mr. Roman — $10,000,188; Mr. Thulin — $6,250,014; Mr. Gangestad — $3,640,204; Mr. Khandpur — $3,496,206; Ms. Bushman — $2,330,942; Dr. Delgado — $1,165,678; and Mr. Vale — $2,268,696. | | (2) The amounts in the Option Awards column reflect the aggregate grant date fair value of such awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures. Assumptions made in the calculation of these amounts are included in Note 18 to the Company’s audited financial statements for the fiscal year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020. | | (3) The amounts in the Non-Equity Incentive Plan Compensation column reflect the annual incentive compensation earned by each individual during the year specified pursuant to the Company’s Executive Annual Incentive Plan. | | (4) Except with respect to Mr. Thulin, the amounts in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column reflect the actuarial increase in the present value (if any) of each individual’s pension benefits under all defined benefit pension plans of the Company, determined using the same interest rate and mortality assumptions as those used for financial statement reporting purposes. See Note 13 to the Company’s audited financial statements for the fiscal year ended December 31, |
2019 summary compensation table
| 74 | 3M Company |
2019 summary compensation table
| 2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020. Mr. Thulin commenced his pension benefits and as such, the December 31, 2019, value of his benefit under the Nonqualified Pension Plan was set equal to the gross amount of the payment he received in 2019 and the present value of his benefit under the Employee Retirement Income Plan was determined based on his final benefit amount and payment form selected. There were no above-market earnings on deferred compensation under the Company’s nonqualified deferred compensation programs. | | (5) See the All Other Compensation table below for details of the amounts reported for 2019. | | (6) Mr. Roman was appointed Chief Executive Officer, effective July 1, 2018. Prior to that, Mr. Roman served as the Company’s Executive Vice President and Chief Operating Officer from 2017 to his appointment as Chief Executive Officer. | | (7) Mr. Thulin served as the Company’s Executive Chairman from July 1, 2018, until his retirement on June 1, 2019. Prior to that, Mr. Thulin served as 3M’s Chairman of the Board, President and Chief Executive Officer from 2012 to his appointment as Executive Chairman in 2018. | | (8) No amounts are reported for Mr. Khandpur for the years 2017 and 2018, or for Ms. Bushman for the year 2017, since they first became Named Executive Officers after those years. |
Grants of plan-based awards
Grants of plan-based awards The following table reflects the various equity and non-equity plan awards granted to the Named Executive Officers during 2019. With the exception of the annual incentive compensation earned by such Named Executive Officers under the Executive Annual Incentive Plan, all of the awards referred to in this table were granted under the 2016 Long-Term Incentive Plan.
Grants of plan-based awards
| 2020 Proxy Statement | 75 |
2019 GRANTS OF PLAN-BASED AWARDS TABLE
2019 GRANTS OF PLAN-BASED AWARDS TABLE
2019 GRANTS OF PLAN-BASED AWARDS TABLE
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) | | Estimated Future Payouts Under Equity Incentive Plan Awards(3) | | | All Other Stock Awards: Number of Shares of Stock | All Other Option Awards: Number of Securities Underlying | Exercise or Base Price of Option | Grant Date Fair Value of Stock and Option | | Name | Type of Grant(1) | Grant Date | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | or Units (#) | Options (#)(4) | Awards ($/Sh)(5) | Awards ($)(6) | | Michael F. Roman | 19PS | 03/01/19 | | | 4,820 | 24,098 | 48,196 | | | | 5,000,094 | | | Option | 02/05/19 | | | | | | | 146,240 | 201.12 | 4,999,946 | | | AIP | n/a | 2,040,051 | 13,277,243 | | | | | | | | | Inge G. Thulin | 19PS | 03/01/19 | | | 3,012 | 15,061 | 30,122 | | | | 3,125,007 | | | Option | 02/05/19 | | | | | | | 45,686 | 201.12 | 1,562,023 | | | AIP | n/a | 1,500,000 | 13,277,243 | | | | | | | | | Nicholas C. Gangestad | 19PS | 03/01/19 | | | 1,754 | 8,772 | 17,544 | | | | 1,820,102 | | | Option | 02/05/19 | | | | | | | 53,232 | 201.12 | 1,820,002 | | | AIP | n/a | 862,953 | 13,277,243 | | | | | | | | | Ashish K. Khandpur | 19PS | 03/01/19 | | | 1,685 | 8,425 | 16,850 | | | | 1,748,103 | | | Option | 02/05/19 | | | | | | | 51,127 | 201.12 | 1,748,032 | | | AIP | n/a | 581,003 | 13,277,243 | | | | | | | | | Julie L. Bushman | 19PS | 03/01/19 | | | 1,123 | 5,617 | 11,234 | | | | 1,165,471 | | | Option | 02/05/19 | | | | | | | 34,085 | 201.12 | 1,165,366 | | | AIP | n/a | 680,538 | 13,277,243 | | | | | | | | | Joaquin Delgado | 19PS | 03/01/19 | | | 562 | 2,809 | 5,618 | | | | 582,839 | | | Option | 02/05/19 | | | | | | | 17,043 | 201.12 | 582,700 | | | AIP | n/a | 593,007 | 13,277,243 | | | | | | | | | Michael G. Vale | 19PS | 03/01/19 | | | 1,093 | 5,467 | 10,934 | | | | 1,134,348 | | | Option | 02/05/19 | | | | | | | 33,172 | 201.12 | 1,134,151 | | | AIP | n/a | 626,632 | 13,277,243 | | | | | | | |
2019 GRANTS OF PLAN-BASED AWARDS TABLE
| (1) Abbreviations: 19PS = 2019 performance shares; Option = stock options; AIP = annual incentive pay. | | (2) The amounts shown as the Estimated Future Payouts Under Non-Equity Incentive Plan Awards reflect the target and maximum amounts that may be earned by each individual during 2019 under the Executive Annual Incentive Plan. This plan establishes a maximum amount of annual incentive compensation that may be earned by each covered executive during a plan year (initially established with the intent of complying with performance-based compensation exception of Section 162(m) of the Internal Revenue Code and similar state laws), which for each of the Named Executive Officers was one-quarter of one percent of the Company’s Adjusted Net Income for 2019, and then permits the Compensation Committee to pay each covered executive less than this maximum amount based on such factors as it deems relevant. Since the Executive Annual Incentive Plan was first adopted in 2007, the Compensation Committee has rarely used this discretion to pay a covered executive (other than our Chief Executive Officer) anything other than the same amount such executive would have received had he or she been participating in the Company’s broad-based Annual Incentive Plan. (For additional information, see “Annual Incentive” beginning on page 59 of this Proxy Statement). | | (3) The amounts shown as the Estimated Future Payouts Under Equity Incentive Plan Awards with respect to 2019 performance shares reflect the threshold, target, and maximum number of shares of 3M common stock (disregarding dividend equivalents) that may be earned by each individual as a result of the 2019 performance shares granted under the 2016 Long-Term Incentive Plan. The actual number of shares of 3M common stock to be delivered as a result of these performance shares will be determined by the performance of the Company during the three-year performance period of 2019, 2020, and 2021, as measured against four performance criteria selected by the Compensation Committee (Relative Organic Volume Growth, Return on Invested Capital, Earnings per Share Growth and Free Cash Flow Conversion). For more information on these performance criteria and the formulas for determining the number of shares of 3M common stock payable as a result of these performance shares, please refer to the “Long-term incentives — 2019 annual grants” beginning on page 67 of this Proxy Statement. | | (4) The amounts shown as the All Other Option Awards reflect the number of shares of 3M common stock subject to nonqualified stock options granted to each individual during 2019 under the 2016 Long-Term Incentive Plan. The options granted on February 5, 2019, were part of the Company’s annual equity grants made to approximately 6,000 employees, and they vest in installments of one-third on each of the first three anniversaries of the grant date. |
2019 GRANTS OF PLAN-BASED AWARDS TABLE
| 76 | 3M Company |
2019 GRANTS OF PLAN-BASED AWARDS TABLE
| (5) The exercise price for all stock options granted under the Company’s 2016 Long-Term Incentive Plan is set at the closing price at which 3M common stock traded on the NYSE on the option grant date. | | (6) The amounts in the Grant Date Fair Value of Stock and Option Awards column were determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, excluding the effect of estimated forfeitures, and, in the case of performance share awards, are based upon the probable outcome of the applicable performance conditions at the time of grant. Assumptions made in the calculation of these amounts are included in Note 18 to the Company’s audited financial statements for the fiscal year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020. |
2019 outstanding equity awards at fiscal year-end table
2019 outstanding equity awards at fiscal year-end table
2019 outstanding equity awards at fiscal year-end table
| | Option Awards | | | | Stock Awards | | | | | Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | | Michael F. Roman | | | | | | | 10,202(7) | 1,799,837 | | | | | | | | | 6,394(7) | 1,128,029 | | | | | | | | | 24,098(8) | 4,251,369 | | | 8,906 | | 78.72 | 02/07/20 | | | | | | | 10,067 | | 89.47 | 02/08/21 | | | | | | | 9,747 | | 87.89 | 02/07/22 | | | | | | | 10,610 | | 101.49 | 02/03/23 | | | | | | | 25,867 | | 126.72 | 02/02/24 | | | | | | | 39,846 | | 165.94 | 02/03/25 | | | | | | | 48,206 | | 147.87 | 02/02/26 | | | | | | | 34,832 | 17,417(2) | 175.76 | 02/06/27 | | | | | | | 18,916 | 37,834(3) | 233.63 | 02/04/28 | | | | | | | 12,094 | 24,190(4) | 195.52 | 07/01/28 | | | | | | | | 146,240(5) | 201.12 | 02/04/29 | | | | | | Inge G. Thulin | | | | | | | 12,968(7) | 2,287,815 | | | | | | | | | 3,836(7) | 676,747 | | | | | | | | | 7,531(8) | 1,328,619 | | | 204,950 | | 101.49 | 02/03/23 | | | | | | | 206,168 | | 126.72 | 02/02/24 | | | | | | | 229,364 | | 165.94 | 02/03/25 | | | | | | | 245,116 | | 147.87 | 02/02/26 | | | | | | | 170,219 | 85,110(2) | 175.76 | 02/06/27 | | | | | | | 48,092 | 96,187(3) | 233.63 | 02/04/28 | | | | | | | — | 45,686(5) | 201.12 | 02/04/29 | | | | |
2019 outstanding equity awards at fiscal year-end table
| 2020 Proxy Statement | 77 |
2019 outstanding equity awards at fiscal year-end table
| | Option Awards | | | | Stock Awards | | | | | Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | | Nicholas C. Gangestad | | | | | | | 10,101(7) | 1,782,018 | | | | | | | | | 8,772(8) | 1,547,556 | | | 3,092 | | 89.47 | 02/08/21 | | | | | | | 6,219 | | 87.89 | 02/07/22 | | | | | | | 6,505 | | 101.49 | 02/03/23 | | | | | | | 9,592 | | 126.72 | 02/02/24 | | | | | | | 61,512 | | 165.94 | 02/03/25 | | | | | | | 69,611 | | 147.87 | 02/02/26 | | | | | | | 52,167 | 26,085(2) | 175.76 | 02/06/27 | | | | | | | 18,730 | 37,461(3) | 233.63 | 02/04/28 | | | | | | | | 53,232(5) | 201.12 | 02/04/29 | | | | | | | | | | | 6,221(6) | 1,097,509 | | | | Ashish K. Khandpur | | | | | | | 4,903(7) | 864,987 | | | | | | | | | 8,425(8) | 1,486,339 | | | 3,605 | | 89.47 | 02/08/21 | | | | | | | 5,760 | | 87.89 | 02/07/22 | | | | | | | 6,505 | | 101.49 | 02/03/23 | | | | | | | 7,838 | | 126.72 | 02/02/24 | | | | | | | 25,445 | | 165.94 | 02/03/25 | | | | | | | 29,392 | | 147.87 | 02/02/26 | | | | | | | 19,868 | 9,935(2) | 175.76 | 02/06/27 | | | | | | | 9,090 | 18,183(3) | 233.63 | 02/04/28 | | | | | | | | 51,127(5) | 201.12 | 02/04/29 | | | | | | Julie L. Bushman | | | | | | | 6,297(7) | 1,110,917 | | | | | | | | | 5,617(8) | 990,951 | | | 9,000 | | 89.47 | 02/08/21 | | | | | | | 30,875 | | 87.89 | 02/07/22 | | | | | | | 24,650 | | 101.49 | 02/03/23 | | | | | | | 40,535 | | 126.72 | 02/02/24 | | | | | | | 37,514 | | 165.94 | 02/03/25 | | | | | | | 41,181 | | 147.87 | 02/02/26 | | | | | | | 26,211 | 13,107(2) | 175.76 | 02/06/27 | | | | | | | 11,676 | 23,353(3) | 233.63 | 02/04/28 | | | | | | | | 34,085(5) | 201.12 | 02/04/29 | | | | |
2019 outstanding equity awards at fiscal year-end table
| 78 | 3M Company |
2019 outstanding equity awards at fiscal year-end table
| | Option Awards | | | | Stock Awards | | | | | Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | | Joaquin Delgado | | | | | | | 4,903(7) | 864,987 | | | | | | | | | 1,405(8) | 247,870 | | | 36,126 | | 87.89 | 02/07/22 | | | | | | | 35,490 | | 101.49 | 02/03/23 | | | | | | | 32,428 | | 126.72 | 02/02/24 | | | | | | | 48,489 | | 165.94 | 02/03/25 | | | | | | | 57,136 | | 147.87 | 02/02/26 | | | | | | | 32,175 | 16,089(2) | 175.76 | 02/06/27 | | | | | | | 9,090 | 18,183(3) | 233.63 | 02/04/28 | | | | | | | | 17,043(5) | 201.12 | 02/04/29 | | | | | | Michael G. Vale | | | | | | | 4,903(7) | 864,987 | | | | | | | | | 5,467(8) | 964,488 | | | 7,812 | | 89.47 | 02/08/21 | | | | | | | 30,875 | | 87.89 | 02/07/22 | | | | | | | 43,705 | | 101.49 | 02/03/23 | | | | | | | 31,559 | | 126.72 | 02/02/24 | | | | | | | 49,804 | | 165.94 | 02/03/25 | | | | | | | 58,684 | | 147.87 | 02/02/26 | | | | | | | 33,061 | 16,531(2) | 175.76 | 02/06/27 | | | | | | | 9,090 | 18,183(3) | 233.63 | 02/04/28 | | | | | | | | 33,172(5) | 201.12 | 02/04/29 | | | | |
2019 outstanding equity awards at fiscal year-end table
FOOTNOTES TO 2019 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
2019 outstanding equity awards at fiscal year-end table
| (1) The market value of performance shares or RSUs that have not vested was determined by multiplying the closing price of a share of 3M common stock on the NYSE for December 31, 2019 ($176.42), by the number of performance shares or RSUs shown, respectively. | | (2) These stock options vested in full on February 7, 2020. | | (3) These stock options vested or will vest in installments of one-half on February 6, 2020, and February 6, 2021. | | (4) These stock options will vest in installments of one-half on July 1, 2020, and July 1, 2021. | | (5) These stock options vested or will vest in installments of one-third on each of February 5, 2020, February 5, 2021, and February 5, 2022. | | (6) These restricted stock units will vest in installments of one-half on December 1, 2020, and December 1, 2022, provided that the holder remains in employment with 3M through such date. | | (7) The shares of 3M common stock to be delivered as a result of the Company’s performance over the three-year performance period ending December 31, 2020, will not vest until December 31, 2020. Under the terms of the awards, these shares of 3M common stock will be delivered no later than March 15, 2021, unless deferred by the executive. In accordance with the Securities and Exchange Commission’s regulations, the number of shares and payout value for these performance shares reflect the target payout under the formula for this grant since the Company’s performance during the first two years of the three-year performance period exceeded the threshold levels for this grant. | | (8) The shares of 3M common stock to be delivered as a result of the Company’s performance over the three-year performance period ending December 31, 2021, will not vest until December 31, 2021. Under the terms of the awards, these shares of 3M common stock will be delivered no later than March 15, 2022, unless deferred by the executive. In accordance with the Securities and Exchange Commission’s regulations, the number of shares and payout value for these performance shares reflect the target payout under the formula for this grant since the Company’s performance during the first year of the three-year performance period has exceeded the threshold levels for this grant. |
2019 outstanding equity awards at fiscal year-end table
| 2020 Proxy Statement | 79 |
2019 option exercises and stock vested table
2019 option exercises and stock vested table
2019 option exercises and stock vested table
| | 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) | | Michael F. Roman | 4,944(3) | 719,550 | 21,052(10) | 3,629,898 | | Inge G. Thulin | 298,530(4) | 26,270,916 | 41,081(11) | 7,247,510 | | Nicholas C. Gangestad | 1,681(5) | 205,819 | 12,591(12) | 2,221,304 | | Ashish K. Khandpur | 3,362(6) | 320,995 | 4,795(13) | 845,934 | | Julie L. Bushman | 13,172(7) | 1,592,596 | 18,972(14) | 3,262,944 | | Joaquin Delgado | 63,560(8) | 6,241,164 | 7,766(15) | 1,370,078 | | Michael G. Vale | 8,906(9) | 1,073,838 | 20,625(16) | 3,554,566 |
2019 option exercises and stock vested table
FOOTNOTES TO 2019 OPTION EXERCISES AND STOCK VESTED TABLE
2019 option exercises and stock vested table
| (1) The amounts shown as Value Realized on Exercise were determined by multiplying the number of shares acquired on exercise by the difference between the closing price of a share of 3M common stock on the NYSE for the exercise date and the per share exercise price of the options. | | (2) The amounts shown as Value Realized on Vesting were determined by multiplying the number of shares acquired on vesting by the closing price of a share of 3M common stock on the NYSE for the vesting date. | | (3) The stock options exercised by Mr. Roman were granted on February 9, 2009, and had an exercise price of $54.11 per share. | | (4) The stock options exercised by Mr. Thulin were granted on February 9, 2010, February 8, 2011 and February 7, 2012, and had an exercise price between $78.72 and $89.47 per share. | | (5) The stock options exercised by Mr. Gangestad were granted on February 9, 2010, and had an exercise price of $78.72 per share. | | (6) The stock options exercised by Mr. Khandpur were granted on February 9, 2010, and had an exercise price of $78.72 per share. | | (7) The stock options exercised by Ms. Bushman were granted on February 9, 2010, and had an exercise price of $78.72 per share. | | (8) The stock options exercised by Dr. Delgado were granted on February 9, 2010, and February 8, 2011, and had an exercise price between $78.72 and $89.47 per share. | | (9) The stock options exercised by Mr. Vale were granted on February 9, 2010, and had an exercise price of $78.72 per share. | | (10) Reflects the number of shares earned by Mr. Roman upon the vesting of restricted stock units and performance shares granted to him under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. Of this total number of shares, 12,646 were attributable to restricted stock units granted on December 1, 2014, and 8,406 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. Mr. Roman previously elected to defer receipt of all of the shares issuable pursuant to his 2017 performance shares until following his termination of employment. | | (11) Reflects the number of shares earned by Mr. Thulin upon the vesting of performance shares granted to him under the 2016 Long-Term Incentive Plan. All 41,081 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. Mr. Thulin previously elected to defer receipt of all of these shares until following his termination of employment. | | (12) Reflects the number of shares earned by Mr. Gangestad upon the vesting of performance shares granted to him under the 2016 Long-Term Incentive Plan. All 12,591 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. | | (13) Reflects the number of shares earned by Mr. Khandpur upon the vesting of performance shares granted to him under the 2016 Long-Term Incentive Plan. All 4,795 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. Mr. Khandpur previously elected to defer receipt of all of these shares until following his termination of employment. | | (14) Reflects the number of shares earned by Ms. Bushman upon the vesting of restricted stock units and performance shares granted to her under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. Of this total number of shares, 12,646 were attributable to restricted stock units granted on December 1, 2014, and 6,326 of these shares were attributable to her 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. | | (15) Reflects the number of shares earned by Dr. Delgado upon the vesting of performance shares granted to him under the 2016 Long-Term Incentive Plan. All 7,766 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. | | (16) Reflects the number of shares earned by Mr. Vale upon the vesting of restricted stock units and performance shares granted to him under the 2008 Long-Term Incentive Plan and 2016 Long-Term Incentive Plan. Of this total number of shares, 12,646 |
2019 option exercises and stock vested table
| 80 | 3M Company |
2019 option exercises and stock vested table
were attributable to restricted stock units granted on December 1, 2014, and 7,979 of these shares were attributable to his 2017 performance shares (including dividend equivalent rights) for which the three-year performance period was completed on December 31, 2019. Mr. Vale previously elected to defer receipt of all of the shares issuable pursuant to his 2017 performance shares until following his termination of employment.
Pension benefits
Pension benefits The following table shows the present value of the accumulated benefits payable to each of the Named Executive Officers, as well as the number of years of service credited to each individual, under each of the Company’s defined benefit pension plans determined using the same interest rate and mortality assumptions as those used for financial statement reporting purposes. See Note 13 to the Company’s audited financial statements for the fiscal year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 6, 2020.
2019 PENSION BENEFITS TABLE
2019 PENSION BENEFITS TABLE
2019 PENSION BENEFITS TABLE
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefits ($) | Payments During Last Fiscal Year ($) | | Michael F. Roman | Employee Retirement Income Plan | 31 | 1,839,130 | — | | | Nonqualified Pension Plan | 31 | 14,282,279 | — | | Inge G. Thulin | Employee Retirement Income Plan | 40 | 2,019,001* | 71,293 | | | Nonqualified Pension Plan | 40 | — | 28,680,254 | | Nicholas C. Gangestad | Employee Retirement Income Plan | 35 | 1,683,480 | — | | | Nonqualified Pension Plan | 35 | 8,390,844 | — | | Ashish K. Khandpur | Employee Retirement Income Plan | 25 | 1,095,946 | — | | | Nonqualified Pension Plan | 25 | 3,427,582 | — | | Julie L. Bushman | Employee Retirement Income Plan | 36 | 1,942,755 | — | | | Nonqualified Pension Plan | 36 | 8,231,838 | — | | Joaquin Delgado | Employee Retirement Income Plan | 32 | 1,710,547** | 51,145 | | | Nonqualified Pension Plan | 32 | 6,676,594 | — | | Michael G. Vale | Employee Retirement Income Plan | 27 | 1,234,502 | — | | | Nonqualified Pension Plan | 27 | 4,683,307 | — |
2019 PENSION BENEFITS TABLE
| * Mr. Thulin commenced payment of his benefits under the specified plan during 2019. As a result, the amounts shown were determined based on his final benefit amount (after adjustment to reflect the pension benefits he earned during his employment in Sweden before his transfer to the United States) and the payment form selected. | | ** Dr. Delgado commenced payment of his benefits under the specified plan during 2019. As a result, the amounts shown were determined based on his final benefit amount and the payment form selected. |
2019 PENSION BENEFITS TABLE
The Employee Retirement Income Plan (“ERIP”) is a tax-qualified defined benefit pension plan maintained by 3M for its eligible employees in the United States. Effective January 1, 2001, the Company amended the ERIP to include a pension equity formula for (1) employees hired or rehired on or after January 1, 2001, and (2) employees who voluntarily elected the pension equity formula during the one-time choice election period in 2001. The ERIP was closed to new participants effective January 1, 2009, meaning that employees hired or rehired on or after January 1, 2009, do not participate in the plan. Of the Named Executive Officers, Mr. Roman, Mr. Thulin, Mr. Gangestad, Mr. Khandpur, Ms. Bushman and Dr. Delgado participate under the non-pension equity formula of the ERIP (the Portfolio I Plan), while Mr. Vale participates under the pension equity formula of the ERIP (the Portfolio II Plan). Retirement benefits under the ERIP are based on an employee’s years of service and average annual earnings during the employee’s four highest-paid consecutive years of service. As applied to the Named Executive Officers, earnings for purposes of the ERIP include base salary and target annual incentive compensation. All benefits earned under the ERIP by the Named Executive Officers will be payable in the form of life annuities, unless an individual elects at the time their employment ends to receive the entire amount of his or her earned pension benefits in the form of a single lump-sum cash payment.
2019 PENSION BENEFITS TABLE
| 2020 Proxy Statement | 81 |
2019 PENSION BENEFITS TABLE
Under the Portfolio I Plan, employees earn annual benefits payable at retirement generally equal to 1.15 percent of their high-four average annual earnings multiplied by their years of service plus 0.35 percent of their high-four average annual earnings in excess of a Social Security breakpoint multiplied by their years of service (up to a maximum of 35 years). The Social Security breakpoint is an average of the Social Security taxable wage bases for each of the 35 years ending with the year each employee qualifies for receiving unreduced Social Security retirement benefits. Under the Portfolio I Plan, an employee may retire with an unreduced pension at age 60 (61 or 62 for employees born after 1942 and 1959, respectively). If the employee’s age and service at the time of retirement total at least 90 (91 or 92 for employees born after 1942 and 1959, respectively) the employee also would receive a Social Security bridge payment until age 62. Mr. Thulin currently receives unreduced retirement benefits, and Dr. Delgado currently receives reduced retirement benefits. As of March 13, 2020, each of Mr. Roman, Mr. Gangestad, and Ms. Bushman is eligible to retire with reduced early retirement benefits, with the reduction being equal to 5 percent of the pension otherwise payable for each year that such executive retires prior to age 61 (age 62 for Mr. Gangestad and Ms. Bushman). Under the Portfolio II Plan, employees earn pension credits (from 3 percent to 12 percent) for each year of employment based on their age and accumulated years of service under the plan. Once their employment ends, these accumulated pension credits are multiplied by their high-four average annual earnings and added to an amount determined by multiplying one-half of these accumulated pension credits by their high-four average annual earnings in excess of a Social Security integration level (70 percent of the Social Security taxable wage base in the year employment ends). The sum of these two amounts is then converted into an annuity payable over the lifetime of the employee using fixed conversion factors. The Portfolio II Plan does not provide any subsidies for early retirement. As a tax-qualified plan, the ERIP is subject to a variety of limits that apply to both the amount of any employee’s earnings that may be considered when determining the benefits earned under the plan as well as the maximum amount of benefits that any employee may earn. The Nonqualified Pension Plan is designed to provide additional benefits to employees, including the Named Executive Officers, affected by these limits. The amount of benefits earned under this Nonqualified Pension Plan generally equals the amount of benefits an employee was not able to earn under the ERIP as a result of the limits imposed by Federal tax laws. The benefits earned under this Nonqualified Pension Plan are generally paid in the form of a single lump-sum cash payment following the termination of their employment (subject to any applicable delay under Federal tax laws). Current employees were given a one-time opportunity during 2008 to elect to receive their benefits earned under this Nonqualified Pension Plan in the form of a life annuity following their retirement, and none of the Named Executive Officers elected to receive their benefits in the form of a life annuity.
Nonqualified deferred compensation
Nonqualified deferred compensation The following table reflects the participation during 2019 by the Named Executive Officers in three nonqualified deferred compensation plans offered by the Company. The Deferred Compensation Excess Plan allows eligible employees to defer for a number of years or until retirement from the Company the receipt of a portion of their base salary and annual incentive compensation. The Performance Awards Deferred Compensation Plan allows eligible employees to defer for a number of years or until retirement from the Company the payout of their performance share awards under the 2016 Long-Term Incentive Plan. The VIP Excess Plan allows eligible employees to defer until retirement from the Company the receipt of a portion of their base salary and annual incentive compensation. All three plans generally allow the eligible employees to elect to receive payment of their account balances in the form of either a single lump sum payment or in up to ten annual installments. With the exception of deferrals of performance shares under the Performance Awards Deferred Compensation Plan, earnings are credited to the amounts deferred under all three plans based on the returns paid on the investment funds available to participants in 3M’s qualified 401(k) plan or a fixed rate of return based on corporate bond yields (as selected by each participant). Earnings are credited to the deferrals of performance shares under the Performance Awards Deferred Compensation Plan based on the return on shares of 3M common stock, including reinvested dividends.
Nonqualified deferred compensation
| 82 | 3M Company |
2019 NONQUALIFIED DEFERRED COMPENSATION TABLE
2019 NONQUALIFIED DEFERRED COMPENSATION TABLE
2019 NONQUALIFIED DEFERRED COMPENSATION TABLE
| Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(4) | | Michael F. Roman | | | | | | | VIP Excess Plan | 251,645 | 56,395 | 41,029 | — | 1,235,898 | | Deferred Compensation Excess Plan | — | — | 8,458 | — | 231,049 | | Performance Awards Deferred Compensation Plan | 1,484,748 | — | (241,480) | — | 3,672,315 | | Inge G. Thulin | | | | | | | VIP Excess Plan | 210,447 | 46,825 | 133,424 | — | 3,692,807 | | Deferred Compensation Excess Plan | 938,899 | — | 326,793 | — | 9,083,916 | | Performance Awards Deferred Compensation Plan | 7,569,122 | — | (2,144,679) | — | 39,257,779 | | Nicholas C. Gangestad | | | | | | | VIP Excess Plan | 146,074 | 31,747 | 173,732 | — | 1,058,950 | | Deferred Compensation Excess Plan | — | — | — | — | — | | Performance Awards Deferred Compensation Plan | 1,072,070 | — | (216,321) | — | 3,594,778 | | Ashish K. Khandpur | | | | | | | VIP Excess Plan | 131,636 | 27,647 | 130,840 | — | 735,378 | | Deferred Compensation Excess Plan | — | — | — | — | — | | Performance Awards Deferred Compensation Plan | 900,125 | — | (114,202) | — | 1,502,658 | | Julie L. Bushman | | | | | | | VIP Excess Plan | 35,773 | 10,256 | 36,698 | — | 249,702 | | Deferred Compensation Excess Plan | — | — | — | — | — | | Performance Awards Deferred Compensation Plan | — | — | — | — | — | | Joaquin Delgado | | | | | | | VIP Excess Plan | 53,176 | 10,305 | 257,599 | — | 1,468,136 | | Deferred Compensation Excess Plan | — | — | 35,594 | — | 193,048 | | Performance Awards Deferred Compensation Plan | — | — | — | — | — | | Michael G. Vale | | | | | | | VIP Excess Plan | 108,096 | 30,283 | 109,741 | — | 1,295,387 | | Deferred Compensation Excess Plan | — | — | 2,157 | — | 23,205 | | Performance Awards Deferred Compensation Plan | 1,807,439 | — | (296,693) | — | 4,531,829 |
2019 NONQUALIFIED DEFERRED COMPENSATION TABLE
FOOTNOTES TO 2019 NONQUALIFIED DEFERRED COMPENSATION TABLE
2019 NONQUALIFIED DEFERRED COMPENSATION TABLE
| (1) With the exception of the amounts contributed by Mr. Roman, Mr. Thulin, Mr. Gangestad, Mr. Khandpur, and Mr. Vale from the payout of their performance share awards for the 2016-2018 performance period and by Mr. Khandpur from the payout of his annual incentive earned in 2018, all amounts contributed by these individuals during 2019 have been included in the Summary Compensation Table as Salary, Stock Awards, or Non-Equity Incentive Plan Compensation earned in 2017, 2018, or 2019. The Summary Compensation Table does not reflect any portion of the contributions from the payout of Mr. Roman’s, Mr. Thulin’s, Mr. Gangestad’s, Mr. Khandpur’s and Mr. Vale’s performance share awards for the 2016-2018 performance period because those awards were granted in 2016 and does not reflect any portion of the contributions from Mr. Khandpur’s 2018 annual incentive payment because those amounts were earned prior to the first year he became a Named Executive Officer. | | (2) The amounts shown reflect 3M matching contributions under the VIP Excess Plan, a nonqualified defined contribution plan. Eligibility for this plan and its matching contributions is limited to employees whose compensation exceeds a limit established by Federal income tax laws for tax-qualified defined contribution plans. The plan permits eligible employees to save additional amounts from their current cash compensation beyond the contribution limits established by Federal tax laws, and to receive |
2019 NONQUALIFIED DEFERRED COMPENSATION TABLE
| 2020 Proxy Statement | 83 |
2019 NONQUALIFIED DEFERRED COMPENSATION TABLE
Company matching contributions similar to the matching contributions provided under the tax-qualified 3M Voluntary Investment Plan and Employee Stock Ownership Plan. With the exception of 3M matching contributions to Mr. Khandpur’s VIP Excess Plan account in respect of his 2018 annual incentive payment (paid in 2019), all amounts contributed by the Company on behalf of these individuals during 2019 are included in the “All Other Compensation” column of the Summary Compensation Table. The Summary Compensation Table does not reflect any portion of the 3M matching contributions made to Mr. Khandpur’s VIP Excess Plan account in respect of his 2018 annual incentive payment because those amounts were earned prior to the first year he became a Named Executive Officer.
2019 NONQUALIFIED DEFERRED COMPENSATION TABLE
| (3) None of these amounts are included in the Summary Compensation Table as compensation earned in 2019, since none of the Company’s nonqualified deferred compensation plans provide above-market or preferential earnings. | | (4) Includes the following amounts that were reported as compensation for 2017 and 2018 in the Summary Compensation Table: Mr. Roman — $501,252; Mr. Thulin — $5,554,184; Mr. Gangestad — $384,096; Mr. Khandpur — $0; Ms. Bushman — $107,497; Dr. Delgado — $1,144,068; and Mr. Vale — $280,955. |
Potential payments upon termination or change in control
Potential payments upon termination or change in control As reflected in the Compensation Discussion and Analysis portion of this Proxy Statement, 3M has no employment agreements with any of the Named Executive Officers nor does it have any change in control plans or arrangements that would provide benefits to any of the Named Executive Officers solely in the event of a change in control of the Company. We also do not have any agreements that would provide automatic “single-trigger” accelerated vesting of equity compensation or excise tax gross-up payments to any of our Named Executive Officers in the event of a change in control of the Company. Effective February 3, 2020, 3M adopted a new severance plan to provide separation benefits to eligible U.S. employees (including the Named Executive Officers) who incur a qualifying termination. In addition, certain of the Company’s executive compensation and benefit plans provide all participants (including the Named Executive Officers) with certain rights or the right to receive payments in the event of the termination of their employment or upon a change in control of the Company. The terms applicable to these potential rights or payments in various situations are described below. Payments or benefits under other plans and arrangements that are generally provided on a non-discriminatory basis to all similarly situated employees of the Company upon the termination of their employment are not described, including (a) accrued base salary; (b) annual incentive earned with respect to completed performance periods; (c) retiree welfare benefits provided to substantially all of the Company’s U.S. employees, including retiree medical benefits; (d) distribution of vested account balances under the Company’s qualified 401(k) plan; (e) accrued pension benefits under the Company’s defined benefit pension plans payable following an employee’s retirement or other termination of employment (the amounts of these benefits earned by the Named Executive Officers are reported in the 2019 Pension Benefits Table); (f) life insurance benefits generally available to all salaried employees; and (g) distribution of account balances under the Company’s nonqualified deferred compensation plans (the account balances of the Named Executive Officers are reported in the 2019 Nonqualified Deferred Compensation Table).
Rights and payments upon termination due to death
Rights and payments upon termination due to death In the event of the termination of their employment due to death, the Named Executive Officers are entitled to receive:
Rights and payments upon termination due to death
| • | immediate vesting of all unvested stock options and restricted stock units previously granted under the Company’s stock plans, and the opportunity for the Named Executive Officer’s estate or beneficiaries to exercise all vested stock options during the two-year period following the date of death (but not beyond the original expiration date of any such stock option); | | • | payment to the Named Executive Officer’s estate or beneficiaries, no later than March 15 of the year following the year in which the Named Executive Officer died, for all previously granted performance shares (in the same amount as paid for the performance shares granted to other Named Executive Officers if the date of death occurs after the end of the three-year performance period for such shares, and at the lesser of the target value or such other amount as determined by the Committee in its discretion if the date of death occurs before the end of the three-year performance period for such shares); and | | • | payment to the Named Executive Officer’s beneficiaries of the proceeds from the life insurance policies provided for such Named Executive Officer pursuant to the Company’s Executive Life Insurance Plan. |
Rights and payments upon termination due to disability
Rights and payments upon termination due to disability In the event of the termination of their employment due to disability, the Named Executive Officers are entitled to receive:
Rights and payments upon termination due to disability
| • | continued vesting of stock options previously granted under the Company’s stock plans, and the opportunity to exercise vested stock options previously granted under such plans during the remainder of the original term (up to 10 years) of such options; | | • | immediate vesting of all restricted stock units previously granted under the Company’s stock plans; and | | • | payment for all previously granted performance shares upon completion of the respective three-year performance period, based on actual performance. |
Rights and payments upon termination for any other reason
Rights and payments upon termination for any other reason In the event of the termination of their employment for any reason that does not qualify for Severance Plan benefits other than retirement, death, or disability (and other than in connection with a change in control, as described further below):
Rights and payments upon termination for any other reason
| • | the Named Executive Officers will have the opportunity to exercise vested stock options granted under the Company’s stock plans within the first 90 days following the termination date (but not beyond the original expiration date of any such stock option), at which time any remaining vested stock options are forfeited; and | | • | all unvested stock options, restricted stock units, and performance shares granted to the Named Executive Officers are forfeited immediately. |
Rights and payments upon termination for any other reason
The amounts payable to or on behalf of each of the Named Executive Officers in each of the above situations (other than amounts relating to payments or benefits generally provided on a non-discriminatory basis to all similarly situated employees) is reflected in the table below, assuming that each individual’s employment had terminated and/or a change in control of the Company had occurred on December 31, 2019. As of December 31, 2019, Mr. Roman, Mr. Gangestad, and Ms. Bushman were eligible to retire (as that term is defined for purposes of 3M’s stock plans). Mr. Thulin retired from employment with the Company effective as of June 1, 2019, and Dr. Delgado’s employment with the Company ended on July 1, 2019. The amounts shown below do not reflect payments and benefits available under the Severance Plan, as it was not in effect on December 31, 2019.
Rights and payments upon termination for any other reason
| 2020 Proxy Statement | 87 |
2019 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
2019 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
2019 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
| Name | Termination of Employment Due to… | Cash Severance ($) | Outstanding Performance Share Awards ($)(1) | Unvested RSUs ($)(2) | Unvested Options ($)(3) | Life Insurance Proceeds ($)(4) | Total ($) | | Michael F. Roman | Retirement | — | — | — | — | — | — | | | Death | — | 7,179,235 | — | 11,495 | 3,000,000 | 10,190,730 | | | Disability | — | — | — | — | — | — | | | Qualifying Termination in connection with a Change in Control | — | 3,566,845 | — | 11,495 | — | 3,578,340 | | | Other Reason | — | — | — | — | — | — | | Inge G. Thulin | Retirement | — | — | — | — | — | — | | Nicholas C. Gangestad | Retirement | — | — | — | — | — | — | | | Death | — | 3,329,574 | 1,097,509 | 17,216 | 3,000,000 | 7,444,299 | | | Disability | — | — | 1,097,509 | — | — | 1,097,509 | | | Qualifying Termination in connection with a Change in Control | — | 1,818,367 | 1,097,509 | 17,216 | — | 2,933,092 | | | Other Reason | — | — | — | — | — | — | | Ashish K. Khandpur | Retirement | — | — | — | — | — | — | | | Death | — | 2,351,326 | — | 6,557 | 2,614,000 | 4,971,883 | | | Disability | — | — | — | — | — | — | | | Qualifying Termination in connection with a Change in Control | — | 1,131,850 | — | 6,557 | — | 1,138,407 | | | Other Reason | — | — | — | — | — | — | | Julie L. Bushman | Retirement | — | — | — | — | — | — | | | Death | — | 2,101,868 | — | 8,651 | 2,900,846 | 5,011,365 | | | Disability | — | — | — | — | — | — | | | Qualifying Termination in connection with a Change in Control | — | 1,142,458 | — | 8,651 | — | 1,151,109 | | | Other Reason | — | — | — | — | — | — | | Joaquin Delgado | Other Reason(5) | 1,750,000 | — | — | — | — | 1,750,000 | | Michael G. Vale | Retirement | — | — | — | — | — | — | | | Death | — | 1,829,475 | — | 10,910 | 2,760,000 | 4,600,385 | | | Disability | — | — | — | — | — | — | | | Qualifying Termination in connection with a Change in Control | — | 954,942 | — | 10,910 | — | 965,852 | | | Other Reason | — | — | — | — | — | — |
2019 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
FOOTNOTES TO 2019 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
2019 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
| (1) The amounts in this column reflect the value of performance share awards under the 2016 Long-Term Incentive Plan for which the three-year performance period has not been completed (adjusted to reflect the closing price of a share of 3M common stock on the NYSE for December 31, 2019 ($176.42)), and which would be paid upon the occurrence of the respective triggering events in accordance with the terms of the awards. | | (2) The amounts in this column reflect the value of the shares underlying the unvested 3M restricted stock units that would vest upon the occurrence of the respective triggering events in accordance with the terms of the awards. Share values are based on the closing price of a share of 3M common stock on the NYSE for December 31, 2019 ($176.42). | | (3) The amounts in this column reflect the intrinsic value on December 31, 2019, of unvested, in-the-money 3M stock options that will vest upon the occurrence of the respective triggering events in accordance with the existing contractual terms of the stock options. Intrinsic values are based on the closing price of a share of 3M common stock on the NYSE for December 31, 2019 ($176.42). |
2019 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
| 88 | 3M Company |
2019 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
| (4) The amounts in this column reflect the life insurance proceeds that would be payable to each individual’s beneficiary or beneficiaries pursuant to the policies obtained for them under the Executive Life Insurance Plan. Under such plan, individuals first appointed to an executive position on or before August 31, 2003, receive additional life insurance coverage that is provided through a universal life insurance policy and individuals first appointed on or after September 1, 2003, receive additional group term life insurance coverage. | | (5) The amount shown reflects the payment made to Dr. Delgado under the terms of a separation agreement. For more information concerning the arrangement with Dr. Delgado, see the section entitled “Separation pay” on page 61 of this Proxy Statement. |
Pay ratio
Pay ratio Presented below is the ratio of annual total compensation of our CEO to the annual total compensation of our median employee (excluding our CEO) for 2019. The ratio reflects a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the Securities Exchange Act of 1934. In determining the ratio below, we began by using the same median employee (a full-time production employee in the Midwestern United States) identified for purposes of calculating the ratio included in our 2018 and 2019 proxy statement because there have not been changes in our employee population or employee compensation arrangements that we believe would significantly impact the pay ratio disclosure. The median employee initially was identified based on target annual total cash compensation for each employee as of December 31, 2017. For these purposes, annual total cash compensation included base salary or hourly wages, cash incentives, commissions, and comparable cash elements of compensation in non-U.S. jurisdictions and was calculated using internal human resources records. All amounts were annualized for permanent employees who did not work for the entire year, such as new hires, employees on paid or unpaid leave of absence and employees called for active military duty. We did not apply any cost-of-living adjustments as part of the calculation. The median employee was selected from among 90,823 full-time, part-time, temporary, and seasonal workers who were employed as of December 31, 2017. As permitted by Item 402(u) of Regulation S-K, we excluded 1,575 employees (including 966 non-U.S. employees) who joined the Company during 2017 as part of our acquisition of Scott Safety when making this determination. Except for the employees excluded on the basis of the Scott Safety acquisition completed in 2017, we did not exclude any other employees (whether pursuant to the de minimis exemption for foreign employees or any other permitted exclusion). As determined in accordance with Item 402 of Regulation S-K, the 2019 annual total compensation was $18,321,566 for our CEO and $57,494 for our median employee. Among other things, these amounts include base salary, overtime, incentive payments, stock-based compensation (based on the grant date fair value of awards granted during 2019), changes in pension values and retirement plan contributions. As calculated in this manner, the ratio of our CEO’s total compensation to our median employee’s total compensation for fiscal year 2019 is 319 to 1.
Pay ratio
| 2020 Proxy Statement | 89 |
Pay ratio
| Shareholder proposal |
Pay ratio
| PROPOSAL 4 | Shareholder Proposal on Setting Target Amounts for CEO Compensation • Shareholder proposal on setting target amounts for CEO compensation, if properly presented at the meeting. • See the Board’s opposition statement. |
Pay ratio
3M has received a shareholder proposal from the United Steelworkers, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, 60 Boulevard of the Allies, Pittsburgh, PA 15222, the owner of 68 shares of 3M common stock (the “Proponent”). The Proponent has requested that the Company include the following proposal and supporting statement (in italics) in its proxy statement for the Annual Meeting of Shareholders. The proposal may be voted on at the Annual Meeting only if properly presented by the Proponent or the Proponent’s qualified representative. For the reasons set forth following the Proponent’s statement, your Board of Directors recommends that you vote “AGAINST” this proposal. RESOLVED: Shareholders of 3M Corporation (the “Company’’) request that the Compensation Committee of the Board of Directors take into consideration the pay grades and/or salary ranges of all classifications of Company employees when setting target amounts for CEO compensation. The Compensation Committee should describe in the Company’s proxy statements for annual shareholder meetings how it complies with this requested policy. Compliance with this policy is excused if it will result in the violation of any existing contractual obligation or the terms of any existing compensation plan. SUPPORTING STATEMENT Like at many companies, our Company’s Compensation Committee uses peer group benchmarks of what other companies pay their CEOs to set its target CEO compensation. These target pay amounts are then subject to performance adjustments. To ensure that our Company’s CEO compensation is reasonable relative to our Company’s overall employee pay philosophy and structure, we believe that the Compensation Committee should also consider the pay grades and/or salary ranges of Company employees when setting CEO compensation target amounts. This proposal does not require the Compensation Committee to use other employee pay data in a specific way to set CEO compensation targets. Under this proposal, the Compensation Committee will have discretion to determine how other employee pay should impact CEO compensation targets. The Compensation Committee also will retain authority to use peer group benchmarks and/or any other metric to set CEO compensation target amounts. Over time, using peer group benchmarks to set CEO compensation can lead to pay inflation. Although many companies target CEO compensation at the median of their peer group, certain companies have targeted their CEO’s pay above median. In addition, peer groups can be cherry-picked to include larger or more successful companies where CEO compensation is higher. (Charles Elson and Craig Ferrere, “Executive Superstars, Peer Groups and Overcompensation,” Journal of Corporation Law, Spring 2013).
Pay ratio
| 90 | 3M Company |
Pay ratio
The current system of using peer group benchmarks, without taking into account the pay grades or salary ranges of all company employees, when determining CEO compensation has had the effect of CEO pay far outpacing that of average employees. In 2018, the average S&P 500 CEO made 287 times that of their median employee. For our Company, the CEO/median employee ratio calculated in 2018 was 302 to 1. According to the 2006 report The State of Working America the ratio of CEO pay to average worker pay has risen from 35 to 1 in 1979, to 71 to 1 in 1989, to 248 to 1 in 1998. The current system of determining CEO compensation without taking into account the pay of average company employees has led to glaring inequality between the workers who make our company what it is and the man or woman who sits at the top. For those reasons, we urge you to vote in favor of this proposal.

DEF 14A of 3M Co

Director nominees

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Corporate governance highlights*

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DIRECTOR NOMINEES – DIVERSITY OF SKILLS AND EXPERIENCE

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Board Membership Criteria

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Director nominees – Diversity of skills and experience

Director nominees – Diversity of skills and experience

BOARD COMMITTEE COMPOSITION (SINCE NOVEMBER 12, 2019)

BOARD COMMITTEE COMPOSITION (SINCE NOVEMBER 12, 2019)

BOARD COMMITTEE COMPOSITION (SINCE NOVEMBER 12, 2019)

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Director compensation and stock ownership guidelines

Director compensation philosophy and elements

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2019 director compensation table

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Reasonableness of non-employee director compensation

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Factors creating alignment between pay and performance

2019 annual incentive compensation

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Performance share award payouts and accruals (long-term incentive compensation)

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Stock and long-term incentive compensation

Total shareholder return

Noteworthy compensation program actions since January 1, 2019

Roles and responsibilities

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Elements of target 2019 total direct compensation

ANNUAL INCENTIVE

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LONG-TERM INCENTIVES

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New severance plan

Competitive pay

Competitive pay