DEF 14A of Caterpillar Inc
Filed Apr 28, 2022 · FY20210001308179-22-000290
TABLE OF CONTENTS
| Director Compensation | 18 |
TABLE OF CONTENTS
| 2021 Summary Compensation Table | 43 |
TABLE OF CONTENTS
| Grants of Plan-Based Awards in 2021 | 45 |
TABLE OF CONTENTS
| Outstanding Equity Awards at 2021 Fiscal Year End | 46 |
TABLE OF CONTENTS
| 2021 Option Exercises and Stock Vested | 47 |
TABLE OF CONTENTS
| 2021 Pension Benefits | 47 |
TABLE OF CONTENTS
| 2021 Nonqualified Deferred Compensation | 48 |
TABLE OF CONTENTS
| Potential Payments Upon Termination or Change in Control | 49 |
TABLE OF CONTENTS
| CEO Pay Ratio | 51 |
OUR DIRECTOR NOMINEES
OUR DIRECTOR NOMINEES
OUR DIRECTOR NOMINEES
| Nominee and Principal Occupation | Independent | Age | Director Since | Other Public Company Boards | Caterpillar Committees | | | | | | | | | AC | CHRC | PPGC | | Kelly A. Ayotte Former U.S. Senator representing New Hampshire | Yes | 53 | 2017 | The Blackstone Group Inc. Boston Properties, Inc. News Corporation | | | | | David L. Calhoun Presiding Director of Caterpillar Inc. President and CEO of The Boeing Company | Yes | 64 | 2011 | The Boeing Company | | | | | Daniel M. Dickinson Managing Partner of HCI Equity Partners | Yes | 60 | 2006 | None | | | | | Gerald Johnson Executive Vice President, Global Manufacturing and Sustainability of General Motors Company | Yes | 59 | 2021 | None | | | | | David W. MacLennan Board Chair and CEO of Cargill, Inc. | Yes | 62 | 2021 | Ecolab Inc. | | | | | Debra L. Reed-Klages Former Chairman and CEO of Sempra Energy | Yes | 65 | 2015 | Chevron Corporation Lockheed Martin Corporation | | | | | Edward B. Rust, Jr. Former Chairman and CEO of State Farm Mutual Automobile Insurance Company | Yes | 71 | 2003 | Helmerich & Payne, Inc. S&P Global Inc. | | | | | Susan C. Schwab Professor Emerita at the University of Maryland School of Public Policy and Strategic Advisor for Mayer Brown LLP; former United States Trade Representative | Yes | 67 | 2009 | FedEx Corporation Marriott International, Inc. | | | | | D. James Umpleby III Chairman and CEO of Caterpillar Inc. | No | 64 | 2017 | Chevron Corporation | | | | | Rayford Wilkins, Jr. Former CEO of Diversified Businesses at AT&T Inc. | Yes | 70 | 2017 | Morgan Stanley Valero Energy Corporation | | | |
OUR DIRECTOR NOMINEES
| AC: Audit Committee CHRC: Compensation and Human Resources Committee PPGC: Public Policy and Governance Committee |
OUR DIRECTOR NOMINEES
| | Chair | | Member |
PROPOSAL 1 – ELECTION OF DIRECTORS
PROPOSAL 1 – ELECTION OF DIRECTORS
PROPOSAL 1 – ELECTION OF DIRECTORS
| PROPOSAL SNAPSHOT | | What am I voting on? | | Shareholders are being asked to elect the 10 director nominees named in this Proxy Statement for a one-year term. | | Board Voting Recommendation: | | FOR the election of each of the Board’s director nominees. |
OVERVIEW OF OUR BOARD
OVERVIEW OF OUR BOARD
BOARD ATTENDANCE - 2021
BOARD ATTENDANCE - 2021
BOARD ATTENDANCE - 2021
| | | | | | | | | | | | | | | | Board | 6 | 6 | 6 | 6 | 5 | 5 | 6 | 6 | 6 | 6 | 6 | 6 | 100% Attendance for incumbent directors for 2021* | | Audit | 11 | | | 11 | | 8 | | 11 | | | | | | | Compensation & Human Resources | 5 | | | | | | 5 | | | | 5 | 5 | | | Public Policy & Governance | 6 | 6 | 6 | | 5 | | | 6 | 6 | | | | | | * Mr. Johnson joined the Board on March 1, 2021, and Mr. MacLennan joined the board on April 14, 2021. Mr. Johnson and Mr. MacLennan attended all of the meetings of their respective committees and the Board held after they joined the Board. | | | | | | | | | | | | | |
BOARD ATTENDANCE - 2021
The Board’s policy is to encourage and expect that all directors attend each Annual Meeting of Shareholders. All then-serving directors attended the 2021 Annual Meeting. The independent directors generally meet in an executive session as part of each regularly scheduled Board meeting. The Board’s independent Presiding Director, David L. Calhoun, presided over the Board’s executive sessions in 2021.
DIRECTOR CANDIDATE BIOGRAPHIES AND QUALIFICATIONS
DIRECTOR CANDIDATE BIOGRAPHIES AND QUALIFICATIONS Directors have been in their current positions for the past five years unless otherwise noted. Information is as of April 1, 2022. The Board has nominated the following individuals to stand for election for a one-year term expiring at the Annual Meeting of Shareholders in 2023.
DIRECTOR CANDIDATE BIOGRAPHIES AND QUALIFICATIONS
| | KELLY A. AYOTTE | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: | CATERPILLAR BOARD COMMITTEE | | | Former U.S. Senator representing New Hampshire Age 53 Director since: 2017 INDEPENDENT | ■ The Blackstone Group Inc. ■ Boston Properties, Inc. ■ News Corporation | ■ Public Policy and Governance | | | | | OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | | | | ■ Bloom Energy Corporation | | Former Senator Ayotte provides the Board with leadership experience and in-depth knowledge in the areas of public policy, government and law from her experience as U.S. Senator, Attorney General, Deputy Attorney General and Chief of the Homicide Prosecution Unit for New Hampshire. She offers valuable insights on important public policy issues from her service on the Senate Commerce, Science and Transportation Committee and financial experience from her service on the Senate Budget Committee. In addition to the directorships mentioned above, former Senator Ayotte currently serves on three nonprofit boards that focus on human rights and other global issues. | | | |
DIRECTOR CANDIDATE BIOGRAPHIES AND QUALIFICATIONS
| | DAVID L. CALHOUN | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: | CATERPILLAR BOARD COMMITTEE | | | President and CEO of The Boeing Company (aviation and defense) Age 64 Director since: 2011 INDEPENDENT Presiding Director | ■ The Boeing Company | ■ Public Policy and Governance, Chair | | | | | OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | | | | ■ Gates Industrial Corporation plc ■ Nielsen Holdings plc | | Mr. Calhoun has been President and CEO of The Boeing Company since 2020. Prior to leading Boeing, Calhoun served as senior managing director and head of portfolio operations at The Blackstone Group from 2014. Previously, he also served as executive chairman of the board for Nielsen Holdings from January 2014 to January 2016 and served as Nielsen CEO for seven years beginning in 2006. Mr. Calhoun began his career at The General Electric Company (GE), where he rose to vice chairman of the company and president and chief executive officer of GE Infrastructure, its largest business unit. During his 26 years at GE, he held a number of operating, finance and marketing roles, and led multiple business units, including GE Transportation and GE Aircraft Engines. He provides valuable insight and perspective to the Board on strategic and business matters, stemming from his extensive operational, executive and management experience with Blackstone and Nielsen and his previous roles at GE. He provides valuable insight and perspective to the Board on strategic and business matters, stemming from his extensive operational, executive and management experience. The Board elected Mr. Calhoun as Presiding Director in 2018. | | | |
DIRECTOR CANDIDATE BIOGRAPHIES AND QUALIFICATIONS
| | DANIEL M. DICKINSON | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: | CATERPILLAR BOARD COMMITTEE | | | Managing Partner of HCI Equity Partners (private equity firm) Age 60 Director since: 2006 INDEPENDENT | ■ None | ■ Audit, Chair | | | | | OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | | | | ■ None | | Mr. Dickinson has served as Managing Partner of HCI Equity Partners since 2001. His experience in mergers and acquisitions, private equity business and investment banking provides important insights for evaluating investment opportunities. Mr. Dickinson’s significant financial experience, both in the U.S. and internationally, contributes to the Board’s understanding and ability to analyze complex issues. His experience as a former director of a large, publicly traded multinational corporation enables him to provide meaningful input and guidance to the Board. | | | |
DIRECTOR CANDIDATE BIOGRAPHIES AND QUALIFICATIONS
| | GERALD JOHNSON | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: | CATERPILLAR BOARD COMMITTEE | | | Executive Vice President, Global Manufacturing and Sustainability of General Motors Company (manufacturing) Age 59 Director since: 2021 INDEPENDENT | ■ None | ■ Public Policy and Governance | | | | | OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | | | | ■ None | | Mr. Johnson has served as Executive Vice President, Global Manufacturing and Sustainability of General Motors Company (GM) since April 2019. Prior to that he served as Vice President North America Manufacturing and Labor Relations from August 2017 to March 2019 and Vice President Global Operational Excellence from July 2014 to July 2017. He leads GM’s Global Manufacturing, Sustainability Manufacturing Engineering and Labor Relations organizations. He provides valuable insight and perspective to the Board on strategic and business matters stemming from his extensive knowledge of global manufacturing operations, strategy and business development, customer and product support and technology and sustainability. | | | |
DIRECTOR CANDIDATE BIOGRAPHIES AND QUALIFICATIONS
| | DAVID W. MACLENNAN | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: | CATERPILLAR BOARD COMMITTEE | | | Board Chair and CEO of Cargill, Inc. (food and agriculture) Age 62 Director since: 2021 INDEPENDENT | ■ Ecolab Inc. | ■ Audit | | | | | OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | | | | ■ None | | Mr. MacLennan has served as Chief Executive Officer of Cargill, Inc. since December 2013 and Board Chair since September 2015. Mr. MacLennan has held several executive positions since beginning his career at Cargill in 1991. He provides valuable insight and perspective to the Board stemming from his extensive leadership in global manufacturing operations, risk management, government and regulatory affairs and technology. Mr. MacLennan was brought to the attention of the Board through his experience as a chief executive officer of a large multinational corporation with operations relevant to the Company’s business. | | | |
DIRECTOR CANDIDATE BIOGRAPHIES AND QUALIFICATIONS
| | DEBRA L. REED-KLAGES | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: | CATERPILLAR BOARD COMMITTEE | | | Former Chairman and CEO of Sempra Energy (energy infrastructure and utilities) Age 65 Director since: 2015 INDEPENDENT | ■ Chevron Corporation ■ Lockheed Martin Corporation | ■ Compensation and Human Resources, Chair | | | | | OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | | | | ■ Halliburton Company ■ Oncor Electric Delivery Company LLC ■ Sempra Energy | | Ms. Reed-Klages retired as Chairman of the Board and CEO of Sempra Energy in 2018, having served in these roles since 2012 and 2011, respectively. The power, oil and gas industries are key end-user markets for Caterpillar products and the Board believes Ms. Reed-Klages’ background provides valuable insights into trends in these industries. In addition, her experience as a CEO and director of other large, publicly traded corporations enables her to provide meaningful input and guidance to the Board. Ms. Reed-Klages’ areas of expertise include commodity markets, sustainability, finance and compensation. | | | |
DIRECTOR CANDIDATE BIOGRAPHIES AND QUALIFICATIONS
| | EDWARD B. RUST, JR. | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: | CATERPILLAR BOARD COMMITTEE | | | Former Chairman and CEO of State Farm Mutual Automobile Insurance Company (insurance) Age 71 Director since: 2003 INDEPENDENT | ■ Helmerich & Payne, Inc. ■ S&P Global Inc. | ■ Audit | | | | | OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | | | | ■ None | | Mr. Rust retired as Chairman in 2016 and as CEO in 2015 of State Farm Mutual Automobile Insurance Company. His financial and business experience is valuable to the Board. His role as a past Chairman of the U.S. Chamber of Commerce, CEO of a major national corporation and experience as a director of other large, publicly traded multinational corporations enables him to provide meaningful input and guidance to the Board, including with respect to public company governance and strategy. In addition, his extensive involvement in education improvement complements the Company’s culture of social responsibility. | | | |
DIRECTOR CANDIDATE BIOGRAPHIES AND QUALIFICATIONS
| | SUSAN C. SCHWAB | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: | CATERPILLAR BOARD COMMITTEE | | | Professor Emerita at the University of Maryland School of Public Policy and Strategic Advisor for Mayer Brown LLP (global law firm) Age 67 Director since: 2009 INDEPENDENT | ■ FedEx Corporation ■ Marriott International, Inc. | ■ Public Policy and Governance | | | | | OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | | | | ■ The Boeing Company | | Ambassador Schwab has been Professor Emerita at the University of Maryland School of Public Policy since 2009 and Strategic Advisor for Mayer Brown LLP since 2010. She was a Professor at the University of Maryland, where she still teaches, between 2009 and 2020. Previously, she held various positions in government, including as U.S. Trade Representative (member of the President’s Cabinet) and as Assistant Secretary of Commerce. Ambassador Schwab brings extensive knowledge, insight and experience on international trade and commerce issues to the Board. Her educational experience and role as the U.S. Trade Representative provide important insights for the Company’s global business model and long-standing support of open trade. In addition, her experience as a director of other large, publicly traded multinational corporations enables her to provide meaningful input and guidance to the Board, including on strategy and the evaluation of global economic conditions. In 2022, she became board chair of the National Foreign Trade Council (NFTC). | | | |
DIRECTOR CANDIDATE BIOGRAPHIES AND QUALIFICATIONS
| | D. JAMES UMPLEBY III Chairman and CEO of Caterpillar Inc. Age 64 Director since: 2017 MANAGEMENT | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: | CATERPILLAR BOARD COMMITTEE | | | | ■ Chevron Corporation | ■ None | | | | | OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | | | | ■ None | | Mr. Umpleby has been CEO of Caterpillar since January 1, 2017, and was elected Chairman of the Board in 2018. He served as a Group President of Caterpillar from 2013 to 2016 with responsibility for Caterpillar’s Energy & Transportation segment and served as a Caterpillar Vice President and President of Solar Turbines from 2010 to 2012. Mr. Umpleby developed a deep knowledge of the Company and its end markets by serving in a wide range of leadership roles. He has extensive international experience and has worked in manufacturing, engineering, marketing, sales and services. Mr. Umpleby’s strategic planning and execution skills, along with his extensive industry experience, enables him to provide effective leadership of the Company and the Board. | | | |
DIRECTOR CANDIDATE BIOGRAPHIES AND QUALIFICATIONS
| | RAYFORD WILKINS, JR. Former CEO of Diversified Businesses at AT&T Inc. (telecommunications) Age 70 Director since: 2017 INDEPENDENT | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS: | CATERPILLAR BOARD COMMITTEE | | | | ■ Morgan Stanley ■ Valero Energy Corporation | ■ Compensation and Human Resources | | | | | OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS: | | | | | ■ None | | Mr. Wilkins retired as CEO of Diversified Businesses at AT&T Inc. in 2012. His expertise and oversight experience in the information technology arena is valuable to the Board. In addition, Mr. Wilkins’ experience as a CEO and director of other large, publicly traded corporations enables him to provide meaningful input and guidance to the Board, including with respect to corporate finance and customer and product support. | | | |
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION The following table sets forth information concerning the compensation for our non-employee directors during the year ended December 31, 2021. Mr. Umpleby, who served as Chairman and CEO during 2021, did not receive separate compensation for his service on the Board. Compensation for non-employee directors for 2021 was comprised of the following components:
DIRECTOR COMPENSATION
| Restricted Stock Units (1 Year Vesting) | $150,000 | | Cash Retainer | $150,000 | | Cash Stipends: | | | Presiding Director | $50,000 | | Audit Committee Chair | $30,000 | | Compensation and Human Resources Committee Chair | $25,000 | | Public Policy and Governance Committee Chair | $20,000 |
DIRECTOR COMPENSATION
Directors are required to own Caterpillar common stock equal to five times their annual cash retainer. Directors have a five-year period from the date of their election or appointment to meet the target ownership guidelines. All Directors are in compliance with these guidelines. In addition, under the Company’s Directors’ Deferred Compensation Plan, directors may defer 50 percent or more of their annual cash retainer and stipend into an interest-bearing account or an account representing phantom shares of Caterpillar stock, and effective for grants made on or after January 1, 2019, directors may defer 50 percent or more of any stock-based compensation (other than options and stock appreciation rights) upon vesting into an account representing phantom shares of Caterpillar stock. Directors that joined the Board prior to April 1, 2008, also are able to participate in a Charitable Award Program, under which a donation of up to $500,000 will be made by the Company in the director’s name to charitable organizations selected by the director and a donation of up to $500,000 also will be made by the Company in the director’s name to the Caterpillar Foundation. Directors derive no financial benefit from the Charitable Award Program.
DIRECTOR COMPENSATION FOR 2021
DIRECTOR COMPENSATION FOR 2021
DIRECTOR COMPENSATION FOR 2021
| Director | Fees Earned or Paid in Cash | Restricted Stock Units(1) | All Other Compensation(2) | Total | | Kelly A. Ayotte | $150,000 | $150,096 | $— | $300,096 | | David L. Calhoun | $220,000 | $150,096 | $— | $370,096 | | Daniel M. Dickinson | $180,000 | $150,096 | $22,165 | $352,261 | | Juan Gallardo | $42,857(3) | $150,096(4) | $164,767(4) | $357,720 | | Gerald Johnson | $125,000(3) | $124,907(3) | $— | $249,907 | | David W. MacLennan | $107,260(3) | $107,240(3) | $— | $214,500 | | William A. Osborn | $42,857 | $150,096(4) | $164,767(4) | $357,720 | | Debra L. Reed-Klages | $167,788(3) | $150,096 | $10,000 | $327,884 | | Edward B. Rust, Jr. | $150,000 | $150,096 | $11,014 | $311,110 | | Susan C. Schwab | $150,000 | $150,096 | $10,000 | $310,096 | | Miles D. White | $157,212(3) | $150,096 | $1,500 | $308,808 | | Rayford Wilkins, Jr. | $150,000 | $150,096 | $— | $300,096 | | (1) As of December 31, 2021, the number of RSUs (including accrued dividend equivalent units) and Phantom Shares held by those serving as non-employee directors during 2021 was: Ms. Ayotte: 2,723 (which consists of 693 RSUs and 2,030 Phantom Shares); Mr. Calhoun: 22,074 (which consists of 693 RSUs and 21,381 Phantom Shares); Mr. Dickinson: 29,962 (which consists of 693 RSUs and 29,269 Phantom Shares); Mr. Gallardo: 36,732 Phantom Shares; Mr. Johnson: 567 RSUs; Mr. MacLennan: 477 RSUs; Mr. Osborn: 513 Phantom Shares; Ms. Reed-Klages: 10,564 (which consists of 693 RSUs and 9,871 Phantom Shares); Mr. Rust: 39,227 (which consists of 693 RSUs and 38,534 Phantom Shares); Ms. Schwab: 19,454 (which consists of 693 RSUs and 18,761 Phantom Shares); Mr. White: 13,314 (which consists of 693 RSUs and 12,621 Phantom Shares) and Mr. Wilkins: 693 RSUs. Mr. Calhoun, Mr. Gallardo and Ms. Schwab elected to defer 100% of their 2021 Cash Retainer and Cash Stipend (as applicable) into Phantom Shares of Caterpillar stock in the Directors’ Deferred Compensation Plan. These deferrals, plus the accumulated value of previous retainer deferrals for each and for Ms. Ayotte, Mr. Dickinson, Ms. Reed, Mr. Rust and Mr. White, are included in the Phantom Shares totals above. Mr. Johnson elected to defer 100% of his 2021 Cash Retainer into the Interest Fund in the Directors’ Deferred Compensation Plan. Ms. Ayotte, Mr. Calhoun, Ms. Reed-Klages and Ms. Schwab elected to defer a portion of their equity award that vested on March 5, 2021, into the Directors’ Deferred Compensation Plan. These deferrals, plus the accumulated deferrals of previous equity awards, are also included in the Phantom Share totals above. Ms. Ayotte and Mr. MacLennan elected to defer 50%, and Mr. Calhoun, Ms. Reed-Klages and Ms. Schwab elected to defer 100% of the equity award granted on March 1, 2021. (2) All Other Compensation represents amounts paid in connection with the Caterpillar Foundation Matching Gift Program and the Directors’ Charitable Award Program and administrative fees associated with the Director’s Charitable Award Program. All outside directors are eligible to participate in the Caterpillar Foundation Matching Gift Program. In 2021, the Caterpillar Foundation matched contributions to eligible 501(c)(3) nonprofits and accredited U.S. public/private preK-12 schools or school districts to which contributions are tax-deductible, up to a maximum of $10,000 per participant per calendar year. Additionally in 2021, the Caterpillar Foundation also provided a 2:1 match program for a period of time in support of Giving Tuesday that allowed participants to donate up to $750 to be matched at a 2:1 ratio. The amounts listed include Charitable Foundation matching gifts as follows: Mr. Dickinson $1,500, Ms. Reed-Klages $10,000, Ms, Schwab $10,000 and Mr. White $1,500. For directors eligible to participate in the Directors Charitable Award Program, the amounts listed include the insurance premium and administrative fees as follows: Mr. Dickinson $20,665, Mr. Gallardo $14,767, Mr. Osborn $14,767, Mr. Rust $11,014. (3) Total fees earned or paid in 2021 include pro-rated Cash Retainer and/or Cash Stipends for directors who commenced or ceased Board service or transitioned between committee chair positions over the course of the year. Mr. Johnson’s and Mr. MacLennan’s Cash Retainer compensation and Restricted Stock Units include pro-ration to the dates they joined the Board, March 1, 2021, and April 14, 2021, respectively. Ms. Reed-Klages’ and Mr. White’s cash compensation reflect pro-ration of the CHRC chair stipend upon the transition of roles on April 14, 2021. Mr. Gallardo’s and Mr. Osborn’s cash compensation include pro-ration to the date their Board service ceased, April 14, 2021. (4) Mr. Gallardo and Mr. Osborn retired from the Board effective April 14, 2021, to facilitate Board refreshment and forfeited the grant of $150,096 RSU awarded March 1, 2021; in recognition of their long-standing service the CHRC recommended, and the Board approved, a special retirement cash payment of $150,000 each which is reflected under All Other Compensation. | | | | |
GOVERNANCE AND PAY FOR PERFORMANCE PHILOSOPHY
| WHAT WE DO | | WHAT WE DON’T DO | | | | Robust stock ownership requirements | | No individual change-in-control agreements | | | Thorough annual benchmarking process | | No tax gross-ups on change-in-control benefits | | | Rigorous CHRC oversight of incentive metrics, goals and pay/performance relationship | | No backdating, repricing or granting of option awards retroactively | | | Clawback Policy | | | | | Limited executive perquisites | | | | | Strict anti-hedging and anti-pledging policies | | | | | Independent compensation consultant | | |
COMPENSATION PROGRAM STRUCTURE
| BASE SALARY | | ANNUAL INCENTIVE PLAN (AIP) | | LONG-TERM INCENTIVE | | Competitive pay to attract and retain talented executives | | An opportunity to earn an annual cash award based on the Company’s financial performance and strategic business objectives | | A mix of performance-based restricted stock units (PRSUs) and stock options to align management’s interests with long-term shareholders’ interests |
COMPENSATION PROGRAM STRUCTURE
Approximately 90 percent of our CEO’s 2021 total targeted compensation was variable and/or at-risk compensation, including 50 percent of long-term incentives delivered in the form of performance based PRSUs with an ROE performance metric and the other 50 percent delivered in the form of stock options.
2021 CEO COMPENSATION ELEMENTS
2021 CEO COMPENSATION ELEMENTS * 50% of long-term incentives have performance-based vesting conditions.
PAY OUTCOMES DEMONSTRATE ALIGNMENT WITH COMPANY PERFORMANCE
| BASE SALARY | ■ Named Executive Officers (other than the CEO and the newly promoted Group President) received an average base salary adjustment of 3.7 percent. | | ANNUAL INCENTIVE | ■ Annual incentive awards for 2021 paid out, on average, at 172% percent of target. | | LONG-TERM INCENTIVE | ■ Based on the Company’s 1-, 3- and 5-year relative Total Shareholder Return (TSR) at the end of 2020, the 2021 equity grant to the CEO was set at 75th percentile of the compensation peer group and at or below the 80th percentile for the other NEOs.(1) |
CEO COMPENSATION
CEO COMPENSATION In 2021, the CHRC and the Board approved a 3.1% increase to Mr. Umpleby’s base salary in recognition of his strong safety, financial and operational performance, despite the unprecedented challenges and uncertainty associated with the COVID-19 pandemic, and to align his target compensation with the peer group median. The annual incentive was paid at 167% of target, which reflects Company’s strong results in 2021. Mr. Umpleby’s 2021 Long-Term Incentive grant was awarded at the 75th percentile of the Company’s peer group reflecting achievement of upper quartile relative performance for 1-year TSR (81st percentile); strong 3-year TSR (63rd percentile) and exceptional 5-year TSR (94th percentile) compared to the compensation peer group; as well as the robust strength of the Company’s three-year ROE performance and his leadership delivering strong operational, safety and financial performance despite the unprecedented challenges of the COVID-19 pandemic.
CEO COMPENSATION
| * Target Value Includes: Salary of $1,650,000; annual incentive of $2,887,500 and LTI grant of $11,800,000. Total Target Value: $16,337,500 ** Actual Value Includes: Salary of $1,637,500 (due to proration); annual incentive of $4,792,980 and LTI grant of $17,500,000. Total Actual Value: $23,930,480 |
INDEPENDENT COMPENSATION CONSULTANT
INDEPENDENT COMPENSATION CONSULTANT The CHRC retained Meridian Compensation Partners, LLC (“Meridian”) as its independent compensation consultant during 2021. Meridian provides executive and director compensation consulting services, including advice regarding the design and implementation of compensation programs, market information, regulatory updates and analyses and trends on executive compensation and benefits. Interactions between Meridian and management are generally limited to discussions on behalf of the CHRC or as required to fulfill requests at the CHRC’s direction. During 2021, Meridian did not provide any other services to the Company. Based on these factors, the CHRC’s evaluation of Meridian’s independence pursuant to the requirements approved and adopted by the SEC and NYSE, and information provided by Meridian, the CHRC determined that the work performed by Meridian did not raise any conflicts of interest.
BENCHMARKING COMPENSATION TO PEERS
BENCHMARKING COMPENSATION TO PEERS
2021 COMPENSATION PEER GROUP
2021 COMPENSATION PEER GROUP The CHRC regularly assesses the market competitiveness of the Company’s executive compensation programs based on peer group data. The 2021 Compensation Peer Group was established based on the following criteria: ■ Total sales and revenues and market capitalization of the peer companies relative to Caterpillar; ■ Competitors and industry segment; ■ Potential sources for top talent; ■ Global presence with a significant portion of revenues coming from non-U.S. operations; and ■ Geographic footprint.
2021 COMPENSATION PEER GROUP
| 2021 Compensation Peer Group | | | 3M Company | Ford Motor Company | | Archer-Daniels-Midland Company | General Electric Company | | The Boeing Company | Halliburton Company | | Cisco Systems, Inc. | Honeywell International Inc. | | Cummins Inc. | Intel Corporation | | Deere & Company | Johnson Controls, Inc. | | Emerson Electric Co. | PACCAR Inc. | | FedEx Corporation | Raytheon Technologies Corporation |
BENCHMARKING METHODOLOGY
BENCHMARKING METHODOLOGY To account for differences in the size of the compensation peer group companies, market data is statistically adjusted allowing for a comparison of the compensation levels to similarly-sized companies. Market data provided by the independent consultant is sourced from the Aon Total Compensation Measurement Database, and size-adjusted to Caterpillar’s three-year average revenues using regression analysis. Each element of our NEOs’ compensation is then targeted to the median of the peer group and adjusted above or below based on performance. To the extent an NEO’s total actual compensation exceeds the peer group median, it is due to outstanding performance, critical skills and notable experience. If an NEO’s compensation is below the median, it is generally due to underperformance against relevant metrics or reflective of an individual who is newer in his or her role.
2021 COMPETITOR PEER GROUP
2021 COMPETITOR PEER GROUP For 2021, the CHRC also assessed the Company’s business performance against a group of competitors that it deems to compete directly with the Company. Although the Company’s peer group described above is an appropriate benchmark for executive compensation at other similarly sized companies, the peer group data does not always provide useful comparisons to other companies that might be experiencing similar business conditions. To that end, and consistent with the Company’s pay-for-performance philosophy, the Company’s business performance is compared to its competitors by establishing a “Competitor Peer Group.” The CHRC uses the Competitor Peer Group (along with the Compensation Peer Group and S&P 500 Industrials) to assess relative performance using TSR when awarding long-term incentive awards. However, the Competitor Peer Group is not used to benchmark compensation. The 2021 Competitor Peer Group, was established based on the following criteria: ■ Compete in the same markets as the Company; ■ Offer similar products and services as the Company; or ■ Serve the same, or similar, industries and end users as the Company.
2021 COMPETITOR PEER GROUP
| 2021 Competitor Peer Group* | | | Cummins Inc. | Komatsu Ltd. | | Deere & Company | Sany Heavy Industry Co., Ltd. | | Hitachi Construction Machinery Co., Ltd. | Volvo AB | | * In June 2021, the CHRC approved the removal of Sany Heavy Industry Co., Ltd. and the addition of Siemens Energy and Wabtec Corporation to the Competitor Peer Group. This change in the Competitor Peer Group improves Energy & Transportation competitor representation. Otherwise, the Competitor Peer Group remained unchanged from the prior year. | |
BASE SALARY
BASE SALARY Base salary is the only fixed component of NEO compensation. The CHRC targets base salaries at the size-adjusted median level of the peer group. Each NEO’s base salary is determined by the individual’s level of responsibility and historic performance with reference to the market median. Base salary increases, if any, are based on achievement of individual and Company objectives, contributions to Caterpillar’s performance and culture, leadership accomplishments and a comparison to those in comparable positions at peer companies. In 2021, Mr. Umpleby’s salary was increased from $1.6 million to $1.65 million in recognition of his strong performance and to align his target compensation with the peer group median. In January 2021, Mr. Creed was promoted to Group President and his salary was increased to $665,000 at that time. Salary adjustments for all other NEO’s were made effective April 1, 2021, and set at or below the peer group median.
ANNUAL INCENTIVE
ANNUAL INCENTIVE
2021 ANNUAL INCENTIVE PLAN DESIGN
2021 ANNUAL INCENTIVE PLAN DESIGN The Company’s Annual Incentive Plan (AIP) is designed to provide each NEO with the opportunity to earn an annual cash payout based on the short-term performance of the Company and each NEO’s respective businesses. The AIP places a significant percentage of each NEO’s annual cash compensation at risk and aligns the interests of executives and shareholders. The AIP design continues to closely align pay outcomes with business performance by annually comparing the Company’s forecasted Enterprise Operating Profit to the prior year’s actual Enterprise Operating Profit. The comparison is conducted to determine whether the current year will be an “up year” (improved performance) or “down year” (weaker performance) versus the prior year’s actual Enterprise Operating Profit results. In addition, the AIP design also includes a Strategic Objective Modifier which allows the CHRC to adjust the AIP payment by +/-20% based on the NEO’s contributions. All NEOs participated in AIP in 2021.
2021 ANNUAL INCENTIVE PLAN DESIGN
2021 ANNUAL INCENTIVE PLAN DESIGN
Step 2: AIP Calculation
Step 2: AIP Calculation
2021 ANNUAL INCENTIVE PERFORMANCE MEASURES AND RESULTS
2021 ANNUAL INCENTIVE PERFORMANCE MEASURES AND RESULTS In addition to Enterprise Operating Profit performance, a portion of each NEO’s annual incentive was based on Operating Profit After Capital Charge (OPACC) and Services Revenues, all of which were subject to the same design above. Consistent with this design process, after reviewing the Company’s 2021 business plan, the CHRC determined that 2021 would be an “up year,” as Enterprise Operating Profit was forecasted to be above 2020. As a result, there were no adjustments to the target annual incentive opportunity for NEOs. For the annual incentive, at its February 2021 meeting, the CHRC approved the performance measures described below and the strategic objective to be used for determining actual payouts. The largest portion of financial measures (ranging from 50 percent to 70 percent) of each NEO’s 2021 annual incentive opportunity was based on Enterprise Operating Profit and the OPACC for their respective businesses, where applicable. The remaining portion of each NEO’s annual incentive award opportunity was determined by the Services Revenues metric for the enterprise or their respective businesses. Consistent with the Operating & Execution model, Services Revenues align the Company’s emphasis on the services growth strategy with variable incentive opportunity. When establishing the performance targets for 2021, the CHRC reviewed the Company’s business plan, historical performance, management recommendations and feedback provided by the independent compensation consultant. Targets were set for each of the performance measures at levels that were designed to be reasonably achievable with strong management performance. Maximum performance levels were designed to be difficult to achieve in light of historical performance and the Company’s business forecast at the time the measures were approved. The business forecast includes consideration of market, economic and geopolitical factors. The performance measures were also weighted according to the Company’s business priorities and the responsibilities of each NEO. The CHRC identified certain objectives to further focus management’s efforts on company’s services growth strategy. These objectives, as well as the performance measures and weightings, were communicated to the NEOs at the beginning of the performance period. The charts below and on the following page summarize the performance measures, weightings and results that the CHRC reviewed and approved for the 2021 annual incentive for each NEO.
DESCRIPTION OF PERFORMANCE MEASURES
DESCRIPTION OF PERFORMANCE MEASURES
DESCRIPTION OF PERFORMANCE MEASURES
| | PERFORMANCE MEASURE | DEFINITION | RATIONALE | | | ENTERPRISE OPERATING PROFIT | Enterprise Operating Profit measures the overall profitability of all of Caterpillar’s operations (including Machine, Energy & Transportation (ME&T) and Financial Products) before taxes, interest and other non-operating items. For AIP purposes, the Enterprise Operating Profit metric will be calculated as Caterpillar Consolidated Operating Profit excluding restructuring costs. | The CHRC approved Enterprise Operating Profit as a performance measure to incentivize management to enhance the overall profitability of the Company. The CHRC believes that Enterprise Operating Profit is an important corporate metric for shareholders to be able to assess the financial health of the Company. | | | ENTERPRISE OPERATING PROFIT AFTER CAPITAL CHARGE (OPACC) | Enterprise Operating Profit After Capital Charge (OPACC) measures how productively and efficiently Caterpillar is utilizing assets to generate shareholder value. For AIP purposes, Enterprise OPACC is calculated as ME&T adjusted operating profit excluding restructuring costs less the capital charge. For Enterprise OPACC, the capital charge equals average quarterly ME&T net assets multiplied by a pre-tax capital charge rate of 13 percent. | OPACC is designed to measure how productively and efficiently the Company’s assets are being utilized by examining the relationship between the value of the Company’s assets and the operating profit that those assets generate. An increase in OPACC means that the Company’s management is utilizing assets more efficiently to generate shareholder value, which the CHRC views as key to Caterpillar’s long-term success. | | | SEGMENT OPERATING PROFIT AFTER CAPITAL CHARGE (OPACC) | For each segment, OPACC is calculated as segment profit less the capital charge. In 2021, the capital charge was calculated as the average monthly net accountable assets multiplied by a pre-tax capital charge rate of 13 percent. | OPACC is designed to measure how productively and efficiently the Company’s assets are being utilized by examining the relationship between the value of the Company’s assets and the operating profit that those assets generate. An increase in OPACC means that the Company’s management is utilizing assets more efficiently to generate shareholder value, which the CHRC views as key to Caterpillar’s long-term success. | | | SERVICES REVENUES | ME&T Services Revenues include, but are not limited to, aftermarket parts and other service-related revenues (excludes Cat Financial and discontinued products). Due to the competitively sensitive nature of this measure, the threshold, target and result levels have all been indexed and reported as such. | The CHRC approved Services Revenues as an important measure intended to further strengthen profitability realized by growth in aftermarket parts and services. |
2021 ANNUAL INCENTIVE PERFORMANCE MEASURES AND RESULTS
2021 ANNUAL INCENTIVE PERFORMANCE MEASURES AND RESULTS * Adjusted for approved items
LONG-TERM INCENTIVE
LONG-TERM INCENTIVE
2021 DESIGN
2021 DESIGN In 2021, the CHRC granted one-half of each NEO’s total long-term incentive (LTI) value in Performance-based Restricted Stock Units (PRSUs) and one-half in non-qualified stock options (stock options). The stock options vest equally in one-third increments beginning on the first anniversary of the grant date and expire after ten years from grant. Dividend Equivalent Units (DEUs) accrue on unvested PRSUs, but are settled only if the vesting requirements are met. The DEUs will settle in additional shares, rounded to the nearest whole unit. For the 2021 PRSU grants, the CHRC selected Return on Equity (ROE) as the performance measure because it aligns the interests of the NEOs with those of our shareholders by measuring and rewarding profitability relative to shareholders’ investment in the business. The use of the ROE metric and the determination of the performance hurdle for each performance cycle are calibrated with historical performance of the compensation and competitor peer groups (as well as S&P 500 Industrials more broadly) and are intended to reward for the achievement of sustained, long-term returns throughout the cycles in the Company’s business. The CHRC believes that a strong focus on ROE reinforces effective capital management along with the need to deliver returns above the cost of capital even in a highly cyclical and often challenging macro-economic operating environment, thus aligning leadership priorities with long-term shareholder interests. The Company’s ROE performance is annually reviewed including any one-time, non-operational or other special items that might impact the ROE result. Although certain items may significantly impact the Company’s reported financial results, they are not always indicative of the underlying operational performance of the Company or its management. To that end, in its evaluation of the Company’s ROE results, the CHRC may use its discretion to make adjustments to ROE to align compensation outcomes with the operating performance of the Company.
2021 GRANT SIZING
| 1 | Benchmark the median LTI value for the Company’s Compensation Peer Group | | 2 | Review and consider financial results: 1-, 3- and 5-year TSR (vs. the Compensation Peer Group and Competitor Peer Group and the S&P 500 Industrials); operational performance; market conditions; and strategy execution | | 3 | Adjust award values to reflect individual performance including consistency of performance against goals, leadership contributions, time in role and other relevant factors |
RELATIVE TSR PERFORMANCE (PERCENTILE RANKING VS. PEERS)
RELATIVE TSR PERFORMANCE (PERCENTILE RANKING VS. PEERS)
RELATIVE TSR PERFORMANCE (PERCENTILE RANKING VS. PEERS)
| Performance Period | Compensation Peer Group | Competitor Peer Group | S&P 500 Industrials | | 1-Year | 81(st) | 33(rd) | 70(th) | | 3-Year | 63(rd) | 33(rd) | 41(st) | | 5-Year | 94(th) | 67(th) | 83(rd) | | Grant Sizing | 75(th) - 80(th) Percentile | | |
2019 – 2021 PERFORMANCE RESTRICTED STOCK UNITS (PRSUs)
2019 – 2021 PERFORMANCE RESTRICTED STOCK UNITS (PRSUs) For the 2019 – 2021 performance period, adjustments were made to the ROE to exclude the impact of certain restructuring costs, pension and other post-employment benefits (OPEB) mark-to-market gains/losses resulting from plan remeasurements and U.S. tax reform in 2019. In each case, the CHRC determined that these adjustments were an appropriate use of its discretion and in the best interests of the Company and its shareholders. For the 2019 grant, the PRSUs cliff vested based on a three-year average adjusted ROE result of 35 percent, which exceeded the goal of 18 percent. The chart below describes the Company’s ROE performance and results for the 2019 – 2021 performance period:
POST-TERMINATION AND CHANGE IN CONTROL BENEFITS
POST-TERMINATION AND CHANGE IN CONTROL BENEFITS Except for customary provisions in employee benefit plans and as required by applicable law, the NEOs do not have any pre-existing executive severance packages or contracts; however, the CHRC will consider the particular facts and circumstances of an NEO’s separation to determine whether payment of any severance or other benefit to such NEO is appropriate. Change in control benefits are provided under the Company’s long-term and annual incentive plans and represent customary provisions for these types of plans and have no direct correlation with other compensation decisions. There is no cash severance or other benefits for a termination related to change in control beyond what is provided under the long-term and annual incentive plans. The Company’s change in control provisions are subject to a “double trigger” and, when both a change in control and involuntary termination of employment without cause occur, provide accelerated vesting and target payouts under the incentive plans, as described further below. In the event of a qualifying termination of employment following a change in control, target payouts are provided under the incentive plans. ■ All unvested stock options, stock appreciation rights, performance-based restricted stock units and restricted stock units vest immediately. ■ Stock options and stock appreciation rights remain exercisable over the normal life of the grant. ■ The annual incentive plan allows for the target award opportunity, prorated based on the individual’s time of employment from the beginning of the performance period through the latter of: (1) the change in control or (2) termination of employment. Additional information is disclosed in the “Potential Payments Upon Termination or Change in Control” section of this proxy statement.
2021 SUMMARY COMPENSATION TABLE
2021 SUMMARY COMPENSATION TABLE
2021 SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary | Bonus | Stock Awards(1) | Option Awards(2) | Non-equity Incentive Plan Compensation(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(4) | All Other Compensation(5) | Total Compensation | Total Without Change in Pension Value(6) | | D. James Umpleby III Chairman & CEO | 2021 | $1,637,500 | $— | $8,749,964 | $8,750,028 | $4,792,980 | $— | $367,560 | $24,298,032 | $24,298,032 | | | 2020 | $1,600,000 | $— | $5,899,969 | $5,900,000 | $— | $— | $276,582 | $13,676,551 | $13,676,551 | | | 2019 | $1,575,000 | $— | $5,450,022 | $6,704,943 | $2,336,000 | $18,161,210 | $291,954 | $34,519,129 | $16,357,919 | | Andrew R. J. Bonfield CFO | 2021 | $853,000 | $— | $2,599,981 | $2,599,993 | $1,524,600 | $— | $118,062 | $7,695,636 | $7,695,636 | | | 2020 | $832,000 | $— | $1,800,053 | $1,800,009 | $— | $— | $152,520 | $4,584,582 | $4,584,582 | | | 2019 | $824,000 | $— | $1,799,934 | $2,214,477 | $730,000 | $— | $479,732 | $6,048,143 | $6,048,143 | | Denise C. Johnson Group President | 2021 | $846,375 | $— | $2,550,095 | $2,549,997 | $1,771,100 | $— | $138,799 | $7,856,366 | $7,856,366 | | | 2020 | $820,500 | $— | $1,849,945 | $1,849,993 | $— | $— | $222,421 | $4,742,859 | $4,742,859 | | | 2019 | $808,875 | $— | $1,799,934 | $2,214,477 | $840,000 | $— | $243,684 | $5,906,970 | $5,906,970 | | Bob De Lange Group President | 2021 | $788,100 | $— | $2,499,990 | $2,500,000 | $1,772,000 | $— | $146,620 | $7,706,710 | $7,706,710 | | | 2020 | $767,400 | $— | $1,849,945 | $1,849,993 | $— | $— | $213,557 | $4,680,895 | $4,680,895 | | | 2019 | $761,800 | $— | $1,600,018 | $1,968,433 | $820,000 | $— | $281,928 | $5,432,179 | $5,432,179 | | Joseph E. Creed Group President | 2021 | $665,000 | $— | $2,499,990 | $2,500,000 | $1,227,300 | $— | $289,991 | $7,182,281 | $7,182,281 | | (1) The amounts reported in this column represent PRSUs granted in 2021 under the Caterpillar Inc. 2014 Long-Term Incentive Plan (LTIP) and are valued based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, assuming the highest level of performance is achieved for the PRSUs, which at the time of grant reflected the probable level of achievement. Assumptions made in the calculation of these amounts are included in Note 3 “Stock-based compensation” to the Company’s consolidated financial statements for the fiscal year ended December 31, 2021, included in the Company’s Form 10-K filed with the SEC on February 16, 2022. | | | | | | | | | | | | (2) The amounts reported in this column represent non-qualified stock options granted under the LTIP that are valued based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. Assumptions made in the calculation of these amounts are included in Note 3 “Stock-based compensation” to the Company’s consolidated financial statements for the fiscal year ended December 31, 2021, included in the Company’s Form 10-K filed with the SEC on February 16, 2022. | | | | | | | | | | | | (3) The amounts in this column reflect the AIP payments for 2021, paid in 2022, for all NEOs. | | | | | | | | | | | | (4) No NEO receives preferential or above market earnings on nonqualified deferred compensation. Amounts above reflect the actuarial present value of the NEO's change in accrued benefit under all defined benefit pension plans year over year using the pension plan measurement dates for financial statement reporting purposes. See Retirement and Other Benefits on page 41 for descriptions of the pension plans, and the 2021 Pension Benefits table and related footnotes on page 47 for the present value of each NEO's accumulated pension benefits and information regarding actuarial assumptions used. | | | | | | | | | | | | (5) All Other Compensation detail for 2021 is shown in a separate table appearing on the next page. | | | | | | | | | | | | (6) To demonstrate how year-over-year changes in pension value impact total compensation, as determined under SEC rules, we have included this column to show total compensation without pension value changes. The amounts reported in this column are calculated by subtracting the change in pension value reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column, from the amounts reported in the Total Compensation column. The amounts reported in this column differ from, and are not a substitute for, the amounts reported in the Total Compensation column. | | | | | | | | | | |
GRANTS OF PLAN-BASED AWARDS IN 2021
GRANTS OF PLAN-BASED AWARDS IN 2021
GRANTS OF PLAN-BASED AWARDS IN 2021
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options(3) | Exercise or Base Price of Option Awards ($/Share) | Grant Date Fair Value of Stock and Option Awards ($)(4) | | | | Threshold ($) | Target ($) | Maximum ($) | Target (#) | | | | | | D. James Umpleby III | 3/1/2021 | | | | 39,816 | — | — | $— | $8,749,964 | | | 3/1/2021 | | | | — | — | 155,411 | $219.76 | $8,750,028 | | | AIP(5) | 1,432,962 | 2,865,925 | 5,731,849 | | | | | | | Andrew R. J. Bonfield | 3/1/2021 | | | | 11,831 | — | — | $— | $2,599,981 | | | 3/1/2021 | | | | — | — | 46,179 | $219.76 | $2,599,993 | | | AIP(5) | 490,530 | 981,060 | 1,962,121 | | | | | | | Denise C. Johnson | 3/1/2021 | | | | 11,604 | — | — | $— | $2,550,095 | | | 3/1/2021 | | | | — | — | 45,291 | $219.76 | $2,549,997 | | | AIP(5) | 486,734 | 973,467 | 1,946,934 | | | | | | | Bob De Lange | 3/1/2021 | | | | 11,376 | — | — | $— | $2,499,990 | | | 3/1/2021 | | | | — | — | 44,403 | $219.76 | $2,500,000 | | | AIP(5) | 453,212 | 906,424 | 1,812,847 | | | | | | | Joseph E. Creed | 3/1/2021 | | | | 11,376 | — | — | $— | $2,499,990 | | | 3/1/2021 | | | | — | — | 44,403 | $219.76 | $2,500,000 | | | AIP(5) | 382,375 | 764,750 | 1,529,500 | | | | | | | (1) The amounts reported represent estimated potential awards under the 2021 AIP. | | | | | | | | | | | (2) The amounts reported in this column represent estimated potential awards under the LTIP. PRSUs were granted on March 1, 2021, under the LTIP for the 2021-2023 performance period. PRSUs vest at the end of the three-year performance period subject to the Company’s achievement of an average ROE performance hurdle during that period. There is no threshold or maximum payout opportunity with respect to these PRSUs. | | | | | | | | | | | (3) Amounts reported represent stock options granted under the LTIP. The exercise price for all stock options granted to the NEOs is the closing price of Caterpillar stock on the grant date, March 1, 2021. All stock options granted to the NEOs will vest in one-third increments on March 1, 2022, March 1, 2023, and March 1, 2024. | | | | | | | | | | | (4) The amounts shown do not reflect realized compensation by the NEO. As reported in this column, the value of PRSUs granted in 2021 under the LTIP are based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, assuming the highest level of performance is achieved for the PRSUs, which at the time of the grant reflected the probable level of achievement. | | | | | | | | | | | (5) The 2021 AIP estimates shown are based upon each executive’s base salary for 2021. The actual payout was based on the achievement of corporate and business unit performance metrics and the Strategic Objective Modifier. Please refer to page 37 of the CD&A for a detailed explanation of the various performance metrics. Payments under AIP are limited by a plan cap set at $15 million. The cash payouts for the 2021 plan year are included in the column “Non-Equity Incentive Plan Compensation” of the “2021 Summary Compensation Table.” | | | | | | | | | |
OUTSTANDING EQUITY AWARDS AT 2021 FISCAL YEAR END
OUTSTANDING EQUITY AWARDS AT 2021 FISCAL YEAR END
OUTSTANDING EQUITY AWARDS AT 2021 FISCAL YEAR END
| | Option Awards | | | | | Stock Awards | | | | | | Number of Securities Underlying Unexercised SARs/Options | | | SAR / Option Exercise Price | SAR / Option Expiration Date(1) | Number of Shares or Units of Stock that have not Vested | Market Value of Shares or Units of Stock that have not Vested | Equity Incentive Plan Awards | | | | Grant Date | Exercisable | Unexercisable | | | | | Number of Unearned Shares, Units or other Rights that have not Vested(2) | Market or Payout Value of Unearned Share, Units or other Rights that have not Vested(3) | | D. James Umpleby III | 3/5/2018 | 182,944 | — | $151.12 | 3/5/2028 | — | $— | — | $— | | | 3/4/2019 | — | — | $— | | — | $— | 42,281(4) | $8,741,174 | | | 3/4/2019 | 109,077 | 54,538 | $138.35 | 3/4/2029 | — | $— | — | $— | | | 3/2/2020 | — | — | $— | | — | $— | 48,213(5) | $9,967,556 | | | 3/2/2020 | 75,701 | 151,402 | $127.60 | 3/2/2030 | — | $— | — | $— | | | 3/1/2021 | — | — | $— | | — | $— | 40,425(5) | $8,357,465 | | | 3/1/2021 | — | 155,411 | $219.76 | 3/1/2031 | — | $— | — | $— | | Andrew R. J. Bonfield | 3/4/2019 | — | — | $— | | — | $— | 13,964(4) | $2,886,917 | | | 3/4/2019 | — | 18,012 | $138.35 | 3/4/2029 | — | $— | — | $— | | | 3/2/2020 | — | — | $— | | — | $— | 14,710(5) | $3,041,145 | | | 3/2/2020 | — | 46,190 | $127.60 | 3/2/2030 | — | $— | — | $— | | | 3/1/2021 | — | — | $— | | — | $— | 12,012(5) | $2,483,361 | | | 3/1/2021 | — | 46,179 | $219.76 | 3/1/2031 | — | $— | — | $— | | Denise C. Johnson | 3/4/2019 | — | — | $— | | — | $— | 13,964(4) | $2,886,917 | | | 3/4/2019 | — | 18,012 | $138.35 | 3/4/2029 | — | $— | — | $— | | | 3/2/2020 | — | — | $— | | — | $— | 15,117(5) | $3,125,289 | | | 3/2/2020 | — | 47,473 | $127.60 | 3/2/2030 | — | $— | — | $— | | | 3/1/2021 | — | — | $— | | — | $— | 11,782(5) | $2,435,811 | | | 3/1/2021 | — | 45,291 | $219.76 | 3/1/2031 | — | $— | — | $— | | Bob De Lange | 3/7/2016 | 46,870 | — | $74.77 | 3/7/2026 | — | $— | — | $— | | | 3/6/2017 | 79,834 | — | $95.66 | 3/6/2027 | — | $— | — | $— | | | 3/5/2018 | 60,512 | — | $151.12 | 3/5/2028 | — | $— | — | $— | | | 3/4/2019 | — | — | $— | | — | $— | 12,413(4) | $2,566,264 | | | 3/4/2019 | 32,023 | 16,011 | $138.35 | 3/4/2029 | — | $— | — | $— | | | 3/2/2020 | — | — | $— | | — | $— | 15,117(5) | $3,125,289 | | | 3/2/2020 | 23,737 | 47,473 | $127.60 | 3/2/2030 | — | $— | — | $— | | | 3/1/2021 | — | — | $— | | — | $— | 11,550(5) | $2,387,847 | | | 3/1/2021 | — | 44,403 | $219.76 | 3/1/2031 | — | $— | — | $— | | Joseph E. Creed | 3/5/2018 | 18,294 | — | $151.12 | 3/5/2028 | — | $— | — | $— | | | 3/4/2019 | — | — | $— | | — | $— | 3,879(4) | $801,944 | | | 3/4/2019 | 10,008 | 5,003 | $138.35 | 3/4/2029 | — | $— | — | $— | | | 3/2/2020 | — | — | $— | | — | $— | 4,903(5) | $1,013,646 | | | 3/2/2020 | — | 15,396 | $127.60 | 3/2/2030 | — | $— | — | $— | | | 3/1/2021 | — | — | $— | | — | $— | 11,550(5) | $2,387,847 | | | 3/1/2021 | — | 44,403 | $219.76 | 3/1/2031 | — | $— | — | $— | | (1) Stock options granted in 2019, 2020 and 2021 are exercisable in one-third increments on each of the first through third year anniversaries of the date of grant for all NEOs. Stock options expire ten years from the grant date for an active employee. (2) The amounts shown include any prior PRSU grants that were not vested as of December 31, 2021. The grants provide for DEUs to accrue on unvested PRSUs when a dividend is paid by the Company. The amount shown includes any applicable DEUs accrued as of December 31, 2021 (rounded to the nearest whole unit). (3) Market value is based on the number of PRSUs, including, when applicable, DEUs that have not vested (rounded to the nearest whole unit) multiplied by $206.74, the closing price of Caterpillar’s common stock on December 31, 2021. (4) This amount represents the PRSUs that vested based on the achievement of an average ROE performance hurdle over the three-year performance cycle. The Company achieved the ROE performance hurdle, and accordingly, the PRSUs were released February 8, 2022. (5) This amount represents the PRSUs that are scheduled to vest following the end of the performance periods in 2022 and 2023, respectively, based on the Company’s achievement of an average ROE performance hurdle over the three-year performance period. The number of PRSUs reported in this table assumes the aggregate ROE performance hurdle is achieved for the three-year performance period. | | | | | | | | | |
2021 OPTION EXERCISES AND STOCK VESTED
2021 OPTION EXERCISES AND STOCK VESTED
2021 OPTION EXERCISES AND STOCK VESTED
| Name | Option Awards(1) | | Stock Awards(2) | | | | Number of Shares Acquired on Exercise | Value Realized On Exercise | Number of Shares Acquired on Vesting | Value Realized on Vesting | | D. James Umpleby III | — | $— | 46,337 | $9,117,963 | | Andrew R. J. Bonfield | 82,199 | $17,766,492 | 5,659 | $1,113,550 | | Denise C. Johnson | 60,513 | $13,304,690 | 14,258 | $2,805,618 | | Bob De Lange | 31,888 | $6,841,751 | 15,327 | $3,015,970 | | Joseph E. Creed | 7,699 | $1,887,179 | 7,197 | $1,472,623 | | (1) Upon exercise, options may have been withheld to satisfy income tax obligations. The amounts shown are gross amounts. (2) Upon vesting of RSUs or PRSUs, units may have been withheld to satisfy income tax obligations. The amounts shown are gross amounts. | | | | |
2021 PENSION BENEFITS
2021 PENSION BENEFITS
2021 PENSION BENEFITS
| Name | Plan Name(1) | Number of Years of Credited Service(2) | Present Value of Accumulated Benefit(3,4) | Payments During Last Fiscal Year | | D. James Umpleby III | RIP - Solar RP | 25 | $2,439,096 | $— | | | Solar MRO | 25 | $39,667,196 | $— | | Andrew R. J. Bonfield | | — | $— | $— | | Denise C. Johnson | | — | $— | $— | | Bob De Lange | | — | $— | $— | | Joseph E. Creed | RIP | 13.58 | $383,830 | $— | | (1) Upon his initial hire with Solar Turbines Inc, a wholly owned subsidiary of Caterpillar, on July 7, 1980, Mr. Umpleby became eligible to participate in the Solar Turbines Inc. Retirement Plan (Solar RP) and the Solar Turbines Incorporated Managerial Retirement Objective Plan (Solar MRO). Mr. Creed participates in the Caterpillar, Inc. Retirement Income Plan (RIP). The Solar RP was merged into RIP as of January 1, 2015; however, all benefit and eligibility provisions of Solar RP remain unchanged. The RIP is a noncontributory U.S. qualified defined benefit pension plan and the Solar MRO is a U.S. non-qualified pension plan. Mr. Bonfield, Ms. Johnson and Mr. De Lange do not participate in a pension plan. (2) Mr. Umpleby has more than 41 years of service with the Company and meets the early retirement eligibility requirement of age 55 with at least ten years of service. Early retirement benefits paid under Solar RP and Solar MRO have a three percent reduction per year under age 62. The Solar RP was merged into RIP as of January 1, 2015; however, all benefit and eligibility provisions of Solar RP remain unchanged. The total benefit formula for the Solar RP is 60 percent of final average salary prorated for years of service less than 25 minus 65 percent of the monthly Social Security benefit. Final average salary is the average base salary for the highest consecutive 36-month period during the 120-month period prior to the determination date. The Solar MRO provides a benefit under the same benefit formula but includes base salary and annual cash incentive pay. Amounts payable under both Solar RP and Solar MRO are based upon a maximum of 25 years of service. Mr. Creed has more than 24 years of service with the Company. The Traditional benefit formula for the RIP is 1.5% percent of final average salary times years of service as of the freeze date of the plan (up to 35). Final average salary is the average base and incentive salary for the 5 highest 12-month periods during the 120-month period prior to the determination date. Mr. Creed does not currently meet early retirement eligibility requirement criteria as defined under RIP but would be eligible upon attainment of 30 years of service or age 55, whichever comes first. The employees' annual retirement income benefits under the RIP and Solar RP are restricted by the Internal Revenue Code limitations and the excess benefit is paid from the Solar MRO for Mr. Umpleby. Solar MRO is not funded. (3) The present value of accumulated benefits payable is determined assuming commencement on the NEO’s earliest unreduced retirement date using a discount rate of 2.81% and the PRI-2012 White Collar separate annuitant and non-annuitant mortality table with a load factor of 91.2% and projected forward using Scale MP-2021 fully generational. Mr. Umpleby satisfies the plans’ unreduced early retirement criteria, attainment of age 62 with at least 10 years of service. (4) Mr. Umpleby’s pension benefit is based on the average of the highest consecutive 36 months of pensionable earnings in the 120-month period prior to the determination date of December 31, 2019, the date on which the Solar RP and Solar MRO were frozen for all sunset employees. Mr. Creed’s pension benefit under RIP is based on the average of the 5 highest 12-month periods within the 120-month period preceding the determination date of December 31, 2010, the date on which RIP was frozen for all non-sunset employees. Pensionable earnings under these plans include base salary and annual cash incentive pay. Although Mr. Umpleby and Mr. Creed no longer accrue additional benefits under these plans, the present value of the accumulated benefit as reported may increase or decrease each year based on the actuarial and interest rate assumptions used to calculate the benefits for financial reporting purposes. | | | | |
2021 NONQUALIFIED DEFERRED COMPENSATION
2021 NONQUALIFIED DEFERRED COMPENSATION The “2021 Nonqualified Deferred Compensation” table describes unfunded, non-qualified deferred compensation plans that permit the deferral of salary, bonus and short-term cash performance awards by NEOs. These plans also provide for matching and/or annual non-elective contributions by the Company. NEOs are eligible to receive the amount in their deferred compensation accounts following termination under any termination scenario unless the NEO elected to further defer the payment as permitted by the plans.
2021 NONQUALIFIED DEFERRED COMPENSATION
| Name | Plan Name(1) | Executive Contributions in 2021(2) | Registrant Contributions in 2021(2) | Aggregate Earnings in 2021(3) | Aggregate Balance At 12/31/2021(4) | | D. James Umpleby III | SDCP | $80,850 | $263,400 | $1,317,340 | $8,680,950 | | | SEIP | $— | $— | $12,209 | $65,146 | | | DEIP | $— | $— | $1,205,464 | $6,087,033 | | Andrew R. J. Bonfield | SDCP | $81,889 | $84,860 | $40,489 | $596,046 | | Denise C. Johnson | SDCP | $33,383 | $88,403 | $640,282 | $4,838,129 | | Bob De Lange | SDCP | $29,886 | $95,006 | $175,204 | $1,331,151 | | Joseph E. Creed | SDCP | $22,500 | $48,973 | $142,781 | $1,123,689 | | (1) The Supplemental Deferred Compensation Plan (SDCP) is a non-qualified deferred compensation plan, which effectively replaced the Supplemental Employees’ Investment Plan (SEIP) and Deferred Employees’ Investment Plan (DEIP). (2) SDCP allows eligible U.S. employees, including all NEOs, to voluntarily defer a portion of their base salary and annual incentive pay into the plan and receive a Company matching contribution. Amounts deferred by executives in 2021 for base salary and annual incentive pay are included in the “2021 Summary Compensation Table.” Eligible U.S. employees, including all NEOs, also receive an annual non-elective contribution to SDCP by the Company regardless of employee deferrals. Annual non-elective contributions and/or matching contributions to SDCP made by Caterpillar in 2021 are included in the “2021 All Other Compensation Table” under the “Company Contributions SDCP” column. SDCP participants may elect to receive a lump sum payment, or installment payments payable for up to 15 years, following their separation from service. (3) Aggregate earnings comprise interest, dividends, capital gains and appreciation/depreciation of notional investment results. The investment choices available to the participant mirror those of the Company’s 401(k) plans. (4) Amounts in this column include the following amounts that were previously reported in the “2021 Summary Compensation Table” for the years 2019–2021 as follows: Mr. Umpleby $1,325,700, Mr. Bonfield $494,954, Ms. Johnson $1,348,375, Mr. De Lange $641,408, Mr. Creed $71,473. | | | | | |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL Except for customary provisions in employee compensation plans or as required by law, there are no pre-existing severance or change in control agreements with the NEOs. The following is a summary of the compensation that would become payable under the existing compensation plans if an NEO’s employment had terminated on December 31, 2021, in each of the following scenarios: ■ Voluntary Separation, including retirement that does not qualify as Long-Service Separation ■ Long-Service Separation (separation after age 55 with five or more years of Company service) ■ Termination for Cause ■ Termination without Cause or for Good Reason within one year following a change in control (termination following CIC)
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
| EQUITY AWARDS | | | Voluntary Separation | ■ Stock Options: Vested awards are exercisable until the earlier of the expiration date or 60 days from the separation date; unvested awards are forfeited | | | ■ PRSUs: Unvested awards are forfeited | | Long-Service Separation | ■ Stock Options granted in 2016: Remain exercisable for the remaining term of the award | | | ■ Stock Options granted in 2017 and after: Vest over the normal vesting schedule and become exercisable for the remaining term of the award | | | ■ PRSUs: Remain outstanding and vest if and to the extent performance goal is achieved | | Termination for Cause | ■ Stock Options: Vested but unexercised awards and unvested awards are forfeited | | | ■ PRSUs: Unvested awards are forfeited | | Termination following CIC | ■ Stock Options: Vest and become immediately exercisable for remaining term of the award | | | ■ PRSUs: Accelerated vesting of outstanding awards | | ANNUAL INCENTIVE AWARDS | | | Voluntary Separation | ■ Payment is forfeited | | Long-Service Separation | ■ Payment for a pro-rated service period based on actual results | | Termination for Cause | ■ Payment is forfeited | | Termination following CIC | ■ Payment for a pro-rated service period assuming achievement of target opportunity |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
TERMS AND POTENTIAL PAYMENTS – CHANGE IN CONTROL
TERMS AND POTENTIAL PAYMENTS – CHANGE IN CONTROL The following tabular information quantifies certain payments that would become payable under existing plans and arrangements if the NEO’s employment had terminated on December 31, 2021. The information is provided relative to the NEO’s compensation and service levels as of the date specified. If applicable, they are based on the Company’s closing stock price on December 31, 2021.
TERMS AND POTENTIAL PAYMENTS – CHANGE IN CONTROL
| Name | Termination Scenario(1) | Equity Awards | | Annual Incentive(4) | Total | | | | Stock Options/ SARs(2) | PRSUs/ RSUs(3) | | | | D. James Umpleby III | Voluntary Separation | $15,711,808 | $27,066,195 | $4,792,980 | $47,570,983 | | | Termination for Cause | $— | $— | $— | $— | | | Termination Following CIC | $15,711,808 | $27,066,195 | $2,865,925 | $45,643,928 | | Andrew R. J. Bonfield | Voluntary Separation | $— | $— | $— | $— | | | Termination for Cause | $— | $— | $— | $— | | | Termination Following CIC | $4,887,318 | $8,411,423 | $981,060 | $14,279,801 | | Denise C. Johnson | Voluntary Separation | $4,988,854 | $8,448,017 | $1,771,100 | $15,207,971 | | | Termination for Cause | $— | $— | $— | $— | | | Termination Following CIC | $4,988,854 | $8,448,017 | $973,467 | $14,410,338 | | Bob De Lange | Voluntary Separation | $— | $— | $— | $— | | | Termination for Cause | $— | $— | $— | $— | | | Termination Following CIC | $4,852,005 | $8,079,400 | $906,424 | $13,837,829 | | Joseph E. Creed | Voluntary Separation | $— | $— | $— | $— | | | Termination for Cause | $— | $— | $— | $— | | | Termination Following CIC | $1,560,594 | $4,203,437 | $764,750 | $6,528,781 | | (1) If a NEO qualifies for Long-Service Separation and voluntarily separates from the company, Long-Service Separation rules will apply. In 2021, Mr. Umpleby and Ms. Johnson qualified for Long-Service Separation and would therefore receive the amounts reported under “Voluntary Separation.” (2) For valuation purposes, as of December 31, 2021, the option exercise price was lower than the year-end closing price of $206.74 for the 2019 and 2020 grants and higher than the year-end closing price of $206.74 for the 2021 grant. The 2019, 2020 and 2021 grants were not fully vested as of December 31, 2021. (3) The valuation shown is based on the number of PRSUs and RSUs, including any applicable DEUs, that would vest multiplied by the closing price of Caterpillar common stock on December 31, 2021, which was $206.74 per share. (4) The AIP provisions limit the payout to a maximum of $15.0 million per participant in any single year. Amounts shown for “Termination following CIC” represent the target payout available under the AIP. | | | | | |
CEO PAY RATIO
CEO PAY RATIO The Company is providing the following disclosure about the relationship of the annual total compensation of its employees to the annual total compensation of Mr. Umpleby, the Chairman and CEO. To better understand this disclosure, it is important to emphasize that the Company’s compensation programs are designed to reflect local market practices across our global operations. The Company strives to create a competitive global compensation program in terms of both the position and the geographic location in which Caterpillar employees are located. As a result, the Company’s compensation programs vary among each local market to provide for a competitive compensation package. ■ The median annual total compensation of all Caterpillar employees, other than Mr. Umpleby, was $51,102. ■ Mr. Umpleby’s annual total compensation, as reported in the Summary Compensation Table was $24,298,032. ■ The ratio of Mr. Umpleby’s annual total compensation compared to the median of the annual total compensation of all employees was 475 to 1. A new median employee was identified by including all full- and part-time employees as of October 1, 2021, of which approximately 42 percent were in the U.S. and 58 percent were outside of the U.S. The Company did not exclude any of its employees when determining the employee population from which to identify the median employee. For purposes of identifying the Company’s median employee, the Company considered the base salary and annual cash incentive. Base salary and annual cash incentive were chosen because (i) they represent the principal forms of compensation delivered to all employees and (ii) this information is readily available in each country. In addition, compensation was measured using the 12-month period ending December 31, 2021. The Company’s median employee’s total compensation for 2021 was calculated in accordance with Item 402(c)(2)(x) of Regulation S-K, as required pursuant to the SEC executive compensation disclosure rules.