DEF 14A 1 proxystatement2021.htm DEF 14A Document

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
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Securities Exchange Act of 1934
 
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Kraton Corporation
 
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Letter to our Stockholders
from our Chair and our
Chief Executive Officer

Dear Fellow Stockholders,
We value this opportunity to share our reflections on 2020 and our aspirations of continuing to make a Positive Difference.
2020 Reflections
2020 was a year like no other. Given the unprecedented challenges posed by the global COVID-19 pandemic, we are extremely pleased with both Kraton's 2020 financial results and the organizational response to an ever-changing operating environment. With safety the top priority, Kraton quickly responded to address the health, safety and wellbeing of its employees, customers, suppliers and the communities in which it operates. To that end, Kraton enhanced health and safety protocols in its operating locations, provided employee resources, and successfully transitioned to a remote work environment for a significant number of Kraton's global employees. Despite the unique business environment, Kraton ensured its business continuity to serve the needs of its customers. With favorable demand trends translating to growth in Kraton's adhesives business, its medical and personal care applications, and its paving and roofing markets, 2020 proved the resiliency of Kraton's business model, and the benefits of its broad end market and portfolio diversification. Additionally, during 2020, Kraton took action to deliver approximately $20 million of run-rate cost savings, unlocked significant value accretion for its stockholders from the sale of its Cariflex business, and maintained a healthy liquidity position. Reflecting on 2020, through the close coordination of the Board and management, Kraton not only successfully navigated the unprecedented year but also positioned itself for success in 2021.
Positioned to Continue Making a Positive Difference
Of critical importance, while Kraton was focused on navigating the near-term challenges of 2020, it continued its longer-term Sustainability initiatives. Over the past year, Kraton successfully advanced its Sustainability objectives, which are broad-based and include initiatives such as responsible procurement and supply chain improvements, enhanced operational efficiency, and advancements in diversity and inclusion, as well as bio-based certification and commercialization of products that address the world’s growing need for sustainable product alternatives. Kraton's strong progress on these fronts has been recognized externally. For example, EcoVadis granted Kraton a Gold rating for its sustainability management systems, placing Kraton in the 98th percentile of its industry, and Newsweek placed Kraton as one of America's Most Responsible Companies in 2020. Kraton's key Sustainability actions over 2020 are further described in these proxy materials. There continues to be much work underway to enhance Sustainability in everything Kraton does, and we look forward to providing you with future updates on these topics.

On behalf of the entire Board of Directors we thank you, our stockholders, for your support and investment in Kraton Corporation.
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Dan F. Smith
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Kevin M. Fogarty
Chair, Board of DirectorsPresident and CEO







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NOTICE OF 2021 ANNUAL GENERAL MEETING OF STOCKHOLDERS
·Date and Time:Location1Who Can Vote
May 19, 2021
1:00 PM (central time)
Online only at www.proxydocs.com/KRA
Stockholders as of March 22, 2021

Dear Stockholder,
You are cordially invited to attend the 2021 Annual General Meeting of Stockholders of Kraton Corporation (the “Annual Meeting”), which will be held virtually only via live webcast on Wednesday, May 19, 2021, at 1:00 p.m., central time.
Due to the continued public health impact of COVID-19, our Board of Directors has decided to hold a virtual only Annual Meeting via live webcast. You will be able to attend and participate in the Annual Meeting online by visiting www.proxydocs.com/KRA. If the public health conditions regarding COVID-19 improve, we intend to hold an in-person 2022 annual general meeting of stockholders.
We are holding the meeting for the following purposes:
ProposalsBoard of Directors'
Recommendation
Page
1
To elect three Class III directors, each to serve for a three-year term, or until a successor is duly elected and qualified
FOR ALL8
2
To conduct an advisory vote to approve the compensation of our named executive officers
FOR70
3
To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the 2021 fiscal year
FOR73
4
To approve and adopt an amendment to the Kraton Corporation Amended and Restated 2016 Equity and Cash Incentive Plan to increase the number of shares available for issuance and place an annual limit on non-employee director awards thereunder
FOR75
We will also consider any other business that may properly come before the Annual Meeting and any adjournment or postponement of the meeting. All of our stockholders of record at the close of business on March 22, 2021 are entitled to notice of, and to attend and vote at, the Annual Meeting. A list of such stockholders will be open to examination by any stockholder for a period of ten days prior to the Annual Meeting during ordinary business hours at our executive offices located at 15710 John F. Kennedy Boulevard, Suite 300, Houston, Texas 77032.
On or about April 8, 2021, we plan to commence mailing a Notice of Internet Availability of Proxy Materials containing instructions on how to access our Proxy Statement and our 2020 Annual Report on Form 10-K (our “2020 Annual Report”) via the Internet and how to vote online. The Notice of Internet Availability of Proxy Materials also contains instructions on how you can receive a paper copy of the proxy materials. Our 2020 Annual Report, Notice of Internet Availability of Proxy Materials and proxy card are also first being made available online on or about April 8, 2021.
HOUSTON, TEXAS
April 8, 2021
By Order of the Board of Directors of
Kraton Corporation,
/S/ JAMES L. SIMMONS
James L. Simmons,
Senior Vice President, General Counsel and Secretary
Your vote is important! Please vote by telephone, via the internet, or by marking, signing and returning your proxy or voting instruction card as soon as possible, regardless of whether you plan to attend the Annual Meeting.



TABLE OF CONTENTS
2021 Annual Meeting of Stockholders1
Internet Access to Proxy Materials1
How to Vote1
Proposals and Voting Recommendations1
2020 Business Highlights2
Corporate Governance Highlights3
Executive Compensation Highlights5
Sustainability Highlights7
Nominees for Election as Class III Directors: Term Expiring 20248
Incumbent Class II Directors: Term Expiring 202310
Incumbent Class I Directors: Term Expiring 202211
Our Board of Directors16
Meetings of the Board18
Communications with the Board18
Committees of the Board 18
Primary Responsibilities of each Committee19
Role in Risk Oversight20
Board and Committee Effectiveness21
Board Selection and Refreshment22
Leadership Structure23
Director Resignation Policy24
Involvement in Certain Legal Proceedings24
Certain Relationships and Related Party Transactions24
Independence of the Board and its Committees25
Governance Policies25
Sustainability and Human Capital Management26
Holdings of Major Stockholders30
Holdings of Officers and Directors31
Delinquent Section 16(a) Reports31
Our Executive Compensation Program at a Glance33
Our Strategy and Performance35
Stockholder Engagement36
Roles in Determining Executive Compensation37
Selecting Performance Metrics and Setting Associated Goals39
Principles and Philosophy of the Compensation Program42



Compensation Decisions and Results46
Other Compensation for our NEOs55
Other Compensation Policies56
Summary Compensation Table60
Pay Ratio 61
Equity Compensation Plan Information62
Grants of Plan-Based Awards62
Outstanding Equity Awards at 2020 Fiscal Year-End63
Option Exercises and Stock Vested64
Pension Benefits64
Nonqualified Deferred Compensation65
Termination and Change in Control Payments66
Components of Non-Employee Director Compensation69
Director Compensation for Fiscal 202069
Primary Responsibilities71
Oversight of Independent Registered Public Accounting Firm71
2020 Audited Financial Statements72
Fees Paid to Independent Registered Public Accounting Firm73
Audit Committee Pre-Approval Policies and Procedures74
Background and Purpose of the Proposal75
Selected Data on Current Outstanding and Unissued Awards76
Selected Terms of the A&R Plan76
Federal Income Tax Consequences of Awards79
Consequences of Failing to Approve the Proposal81
Inclusion of Proposal in Our Proxy Statement and Proxy Card under the SEC's Rules82
Bylaw Requirements for Stockholder Submission of Nominations and Proposals82
Incorporation by Reference83
Available Information83
Attending the Annual Meeting83
Materials for the Annual Meeting and Proxy Solicitation84
Voting at the Annual Meeting85







PROXY STATEMENT SUMMARY
This summary does not contain all of the information you should consider before voting and is qualified in its entirety by the full Proxy Statement. Please read the entire Proxy Statement before voting. References in this Proxy Statement to (1) “we,” “us,” “our,” or the “Company” refers to Kraton Corporation and, as the context requires, our direct and indirect subsidiaries, (2) "Board" refers to our board of directors, (3) "NEO" refers to a named executive officer, (4) "other NEOs" refer to our NEOs, excluding our CEO, as a group, and (5) "Compensation Committee," "Audit Committee" or "NGS Committee" refers to the compensation committee, audit committee or nominating, governance and sustainability committee, respectively, of the Board.

2021 Annual Meeting of Stockholder
·Date and Time:Location1Who Can Vote
May 19, 2021
1:00 PM (central time)
Online only at www.proxydocs.com/KRA
Stockholders as of March 22, 2021
Internet Access to Proxy Materials
The Proxy Statement and our 2020 Annual Report will be available to stockholders at www.proxydocs.com/KRA on or about April 8, 2021.
How to Vote
8Internet)Telephone*Mail
www.proxypush.com/KRAtoll-free 866-256-0927Sign, date and mail your Proxy Card

Proposals and Voting Recommendations
ProposalsBoard
Recommendation
Page  
Item No. 1Election of Class III DirectorsFOR ALL8
Item No. 2Advisory Vote to Approve the Compensation of
our Named Executive Officers
FOR70
Item No. 3Ratification of the Appointment of KPMG LLP as our Independent Registered Public Accounting Firm FOR73
Item No. 4Vote to approve and adopt an amendment to the Kraton Corporation Amended and Restated 2016 Equity and Cash Incentive Plan to increase the number of shares available for issuance and place an annual limit on non-employee director awards thereunderFOR75


                                        


Kraton Corporation                                         1


2020 Business Highlights
Throughout 2020 we managed risks, ensured operating continuity and delivered stockholder value amid unprecedented dynamics in a business environment marked by a global pandemic. Despite these challenges, we progressed on our vision to be an admired supplier of innovation-based solutions to our pine chemical and polymer markets, creating exceptional value for our customers, stockholders, employees, and communities alike. As detailed below, we believe our strong finish to fiscal 2020 was underpinned by our diligent execution against our strategy.
Strategic Pillar2020 Select Accomplishments
Capital Discipline
Refinanced our 7.0% Senior Unsecured Notes with 4.25% Senior Unsecured Notes, providing for annual cash interest savings of approximately $11 million.
Ended 2020 with $85.9 million of cash on hand and $190.7 million of available borrowing base under our $300 million ABL Facility.
Operational Excellence
Continued disciplined approach to cost savings and capital expenditures, delivering approximately $20 million of run-rate cost reductions.
During COVID-19, focused on employee safety and well-being while continuing to operate our business and mitigate financial impacts. See also, page 46.
Portfolio Management
Divested our Cariflex business for gross proceeds of $530 million unlocking significant stockholder value.
Organic
Growth
Seeking regulatory approval of BiaXam™, a novel sulfonated polymer technology with long-lasting self-disinfecting properties, including against SARS-CoV-2.
Grew sales volumes in a tough market environment dominated by the impact of the COVID-19 pandemic, demonstrating the resiliency of our end market and product diversification.
Specialty Portfolio
Introduced REvolution™ and CirKular+™ to support the bio-economy and connect the circular economy. See also, page 28.
2020 Actual Results Related to Our Executive Compensation Performance Metrics
Consolidated debt of
$950.1 million
and
3-Year Relative TSR
Net loss of
$221.7 million
Total Recordable Incidence Rate
Consolidated Net Debt(1)(2)
$814.2 million
a reduction of
$541.4 million
12.4th
percentile(3)
and0.31
Adjusted EBITDA(1) of
$262.1 million
placing us in the top 15% of peer companies(4)
(1)    For a reconciliation of GAAP to non-GAAP financial measures, please refer to “Annex A Non-GAAP Reconciliations.”
(2)    Excluding the effect of foreign currency, which was approximately $50 million.
(3)    Based on rTSR from December 31, 2017 to December 31, 2020 using the 2018 TSR Peer Group (adjusted for peers that were no longer operating as an independent company).
(4)    Based on 2019 data from the American Chemistry Council.

COVID-19 RESPONSE
Throughout the COVID-19 pandemic, we focused on the health, safety and well-being of our global employees including through increased protocols for responsible operations. Further, we managed our business to maximize opportunities in our diverse end-markets and ensure liquidity, allowing us to adapt to changing markets and preserve our ability to maximize future performance. See page 46 for additional information on our response to COVID-19.
                                        


Kraton Corporation                                         2


Corporate Governance Highlights
DIRECTOR NOMINEES
    We ask that you vote for the election of each of our Class III directors. Detailed information about each director can be found in “Proposal 1 — Election of Class III Directors,” beginning on page 8.
NameAgeDirector
Since
Other Current
Public Boards
Committee Membership
Current Position
Shelley J. Bausch552017None
NGS(1)
SVP, Global Industrial Coatings of Axalta Coatings Systems Ltd.
Kevin M. Fogarty5520091
President and Chief Executive Officer of Kraton Corporation
Karen A. Twitchell6520091
Audit(1), Compensation
Retired Chief Financial Officer of Landmark Aviation
(1)    Chairperson

BOARD COMPOSITION AND DIVERSITY
When evaluating Board composition, the NGS Committee and the Board consider diversity in a broad context, including, self-identified diversity characteristics (such as gender, race, disability, ethnicity, nationality, religion, sexual orientation, and gender expression), business experience, tenure, skills, international experience, education, and public company board experience.
Average tenure
of
8.2 years
100%
Independent
(excluding our CEO)
Average age
of directors is
63
Board Diversity Highlights
The composition of our Board reflects the importance our Board places on diversity.
50%
of our independent directors are Women
3
of our Board Committees are chaired by Women
12.5%
of our independent directors are based outside the U.S.
12.5%
of our independent directors are Racially/Ethnically Diverse

BOARD REFRESHMENT
Our NGS Committee is responsible for reviewing the composition of, and refreshing, the Board and its Committees, through its recommendations to the Board. Recent refreshment actions, including the onboarding of new directors and the rotation of committee chairs and members, have introduced fresh perspectives and increased Board diversity.
Rotation of Audit, Compensation and NGS Committee Chairs in
2020
Three
new directors
in the last four years
Rotation of Audit and Compensation Committee members in
2020
                                        


Kraton Corporation                                         3


OUR GOVERNANCE PROGRAM
    Our Board believes that effective corporate governance and high ethical standards are conducive to strong performance and creating long-term stockholder value. Please read “Corporate Governance,” beginning on page 16, for a description of our corporate governance program, a summary of which is provided below.
O Independence
è Stockholder Matters
All non-employee directors are independent
All members of each Board committee are independent
Independent directors meet regularly without management in executive session
Robust stock ownership requirements for officers and directors
Prohibition against hedging and pledging of Company stock by directors and employees
Market-based director compensation
N Accountability
Î Board Practices
Clawback Policy
Annual evaluation of the Board, each committee and each director nominee
Resignation policy for uncontested director elections
Chairman of the Board and CEO roles held by two different people
Longstanding, year-round and proactive stockholder engagement program, including director participation
Code of Ethics and Business Conduct for all directors and employees
Corporate Governance Guidelines that are reviewed annually
Board composition reflects diversity of gender, race/ethnicity, age, and skills & experience
Ongoing Board and committee refreshment
Board orientation and continuing education
Board and committee oversight of Sustainability and human capital management
Board and committees may hire outside advisors independently of management
Comprehensive succession planning program
Comprehensive strategy and risk oversight by the Board and committees
: Internet Availability of Governance Documents
Our Corporate Governance Guidelines, our Code of Ethics and Business Conduct, our Bylaws, and the Charters of each of our Compensation, our Audit and our NGS Committee are available in the "Investors Corporate Governance" section of our website at www.kraton.com, and are available to stockholders upon request.
                                        


Kraton Corporation                                         4


Executive Compensation Highlights
    We provide highlights of our executive compensation program below. Please review the sections entitled "Compensation Discussion and Analysis" and "Named Executive Officer Compensation Tables" of this Proxy Statement for a complete understanding of our executive compensation program.
ElementDescription & Metrics2020 Results Summary
Base SalaryDelivered in cash and evaluated each year, with any changes effective April 1, based primarily on surveys and market data.Our CEO did not receive a base salary increase for 2020. Our other NEOs received modest base salary increases.
Annual Cash Incentive Delivered in cash and based on: (1) Adjusted EBITDA; (2) attainment of Consolidated Net Debt reduction;
and modified by a Safety Multiplier.
Our CEO's payout was 155.43% of Target. Our other NEOs payouts ranged from 146.52% to 164.45% of Target. These results account for a +10% safety multiplier and a discretionary adjustment in light of COVID-19 impacts.
Long-Term Equity Incentive Restricted Stock UnitsThree-year ratable vest; target grant date value based primarily on surveys and market data.Our Compensation Committee granted RSUs in accordance with historical timing practice. RSUs were 50% of the Long-Term Equity Incentive weighting.
Restricted Stock Performance UnitsThree-year cliff vest payout based on: (1) cumulative Adjusted EBITDA; and (2) relative Total Stockholder Return ("rTSR").Our Compensation Committee certified a 100% payout for the 2018 Restricted Stock Performance Units. Metrics for these units were cumulative Return on Capital Employed ("cumulative ROCE") and rTSR.
PRINCIPLES AND PHILOSOPHY OF THE COMPENSATION PROGRAM
    Our Compensation Committee focuses on (1) a pay-for-performance philosophy, (2) establishing total direct compensation at or near the 50th percentile of our peer group, and (3) granting variable compensation, primarily in the form of long-term equity incentives. These principles are intended to ensure a direct alignment between executive compensation and the creation of long-term stockholder value. For further discussion of our Compensation Committee’s philosophy and principles, see page 42.
    The tables below depict the targeted amounts for the key compensation elements for our CEO and for our other NEOs for 2020, and highlight our Compensation Committee’s focus on variable compensation tied to specific quantitative performance criteria.
OUR CEO
19%
Base Salary
$1,000,000
19%
Target ICP
$1,000,000
31%
RSUs (Time)
$1,625,000
31%
PRSUs (Target)
$1,625,000
81% Variable and At-Risk
OUR NEOs
33%
Base Salary

23%
Target ICP

22%
RSUs (Time)

22%
PRSUs (Target)

67% Variable and At-Risk
                                        


Kraton Corporation                                         5


ADHERENCE TO EXECUTIVE COMPENSATION BEST PRACTICES
    To mitigate compensation-related risk, drive performance and increase long-term stockholder value, our Compensation Committee is committed to, among other principles, the following executive compensation best practices:
ü What We Do
û What We Don't Do
Emphasis on Pay-for-Performance
No Single-Trigger Change in Control Plans
Stock Ownership and Retention Guidelines
No Individual Employment Agreements
Clawback Policy
No Excise Tax Gross-Ups
Minimum Vesting Periods for Awards
No Liberal Share Recycling
Annual Compensation Risk Assessment
No Equity Plan Evergreen Provision
Engagement of Independent Compensation Consultant
No Tax Gross-Ups for Non-Relocation Based Personal Benefits
Annual Stockholder Engagement
No Hedging or Pledging

2020 SUMMARY COMPENSATION SNAPSHOT
    For additional information on the table below, please see, “Named Executive Officer Compensation Tables — Summary Compensation Table,” beginning on page 60.
Name 
Salary 
 ($)  
Bonus
($)
Stock Awards
($)
Non-equity
Incentive Plan
Compensation
($)
Change in Pension Value ($)
All Other
Compensation
($)
Total ($)  
Kevin M. Fogarty
1,000,000 2,951,459 1,554,300 3,699 153,491 5,662,949 
Atanas H. Atanasov493,750 150,000 817,332 544,005 — 322,840 2,327,927 
Holger R. Jung
407,500 50,000508,559 471,972 — 62,529 1,500,560 
Marcello C. Boldrini
407,500 — 408,666 420,512 — 39,871 1,276,549 
James L. Simmons
443,750 125,000 408,666 454,633 — 62,555 1,494,604 
CONTINUING STOCKHOLDER OUTREACH IN 2020
    At our 2020 Annual General Meeting of Stockholders, approximately 97% of stockholders who cast an advisory vote on our say on pay proposal voted in favor of our executive compensation program. Throughout 2020, our Compensation Committee continued its outreach efforts to discuss our compensation policies and procedures with our major stockholders. For a more thorough discussion of our stockholder outreach, see “Compensation Discussion and Analysis—Stockholder Engagement” on page 36.
Stockholder Engagement in 2020 Related to the Proxy Statement
We contacted our
Top 32 Stockholders
representing over 70%
of our outstanding shares
We held telephonic meetings with stockholders
representing approximately 22%
of our outstanding shares
The Chair of our Compensation Committee attended
100% (
of the telephonic meetings

                                        


Kraton Corporation                                         6


Sustainability Highlights
We are committed to being part of the solution and to make a Positive Difference to all of our stakeholders. In 2020, we successfully advanced our Sustainability objectives, which are broad-based and include initiatives such as responsible procurement and supply chain improvements, enhanced operational efficiency, advancements in diversity and inclusion, and bio-based certification and commercialization of products that address the world’s growing need for sustainable product alternatives. Key examples of these products are our REvolution™ family of low-color Rosin Esters and our CirKular+™ polymer technology that can facilitate expansion of the circular economy and processing of post-consumer plastic waste streams. These advancements, among many others, demonstrate how Sustainability is integrated cross-functionally throughout our organization and frames our corporate strategy. For additional information on Sustainability, see page 26.
COMMITMENT TO DIVERSITY AND INCLUSION
Our innovation stems from the diverse perspectives, knowledge, and experiences of our employees. We strive to create an inclusive workplace where all employees are treated with dignity and respect. In 2020, we structured a vision for our critical focus on diversity and inclusion ("D&I"). Work on this aspirational vision will be on-going.
D&I Accomplishments in 2020 and Continuing into 2021
Among our actions in 2020, and continuing into 2021, to further D&I in Kraton, we have:
Established a Global D&I Council to ensure the sustainability of our initiatives
Updated our Code of Ethics to align more closely with our commitment to D&I
Added minority-owned investments to our U.S. 401k Plan
Expanded our Parental Leave policy
Progressed on diversity hiring initiatives
Trained over 300 of our global leaders in inclusive leadership and unconscious bias, with future training scheduled for all employees
Hosted an International Women's Day Panel with our female members of our Board, open to all global employees
Partnered with the Future of STEM Scholars Initiative to financially support students pursuing STEM disciplines at Historically Black Colleges and Universities
OUR SUSTAINABILITY REPORTING
We are committed to the transparent reporting of our Environmental, Social and Governance efforts through, among other means, our website and annual Sustainability Report ("Report"). We are also committed to the Ten Principles of the United Nations Global Compact's ("UNGC"). To learn more about our sustainability efforts and to view the Report or our 2020 UNGC Communication on Progress, please visit our "Sustainability" section of our website at www.kraton.com. Our 2020 Report is expected to be available by the end of the third quarter of 2021. Information contained on our website, in our Report, or in the UNGC Communication on Progress is not incorporated by reference in, or made a part of, this Proxy Statement.
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Kraton Corporation                                         7


PROPOSAL 1: ELECTION OF CLASS III DIRECTORS
Our Board is presently comprised of nine directors, divided into three classes, designated as Class I, Class II and Class III, each serving staggered three-year terms. With the exception of Kevin M. Fogarty, our President and Chief Executive Officer ("CEO"), all of our directors are independent for purposes of applicable New York Stock Exchange ("NYSE") listing standards and rules adopted by the U.S. Securities and Exchange Commission ("SEC").
    Our Board has nominated for election Shelley J. Bausch, Kevin M. Fogarty and Karen A. Twitchell, as Class III directors, to serve until the 2024 annual general meeting of stockholders, their respective successors are duly elected and qualified, or their earlier death, resignation or removal.
Each of Mmes. Bausch and Twitchell and Mr. Fogarty have consented to being named in this Proxy Statement and to serving as a director if elected at the Annual Meeting. If for any reason any of Mmes. Bausch and Twitchell or Mr. Fogarty becomes unable or unwilling to serve at the time of the Annual Meeting, the Board may reduce the size of the Board accordingly, or the persons named as proxies in the proxy will have the authority to vote for substitute nominees. We do not anticipate that any nominee named in the Proxy Statement will be unable or unwilling to serve.
The Board recommends that stockholders vote “FOR” each of the Company’s named nominees for Class III director.
    Set forth below is a brief biography and discussion of the specific experiences, qualifications, attributes or skills of our directors. For a further discussion of the guidelines and qualifications our NGS Committee considers when considering nominees for our Board, please see “Corporate Governance — Board Selection and Refreshment” below.

Nominees for Election as Class III Directors: Term Expiring 2024
Shelley J. Bausch
image201a.jpg
Age: 55

Director since: 2017

Board Committee:
NGS (Chair)

Independent

Senior Vice President of Global Industrial Coatings of Axalta Coatings Systems Ltd.
Other Current Public Boards
None
Biography
Ms. Bausch was appointed the Senior Vice President of Global Industrial Coatings at Axalta Coatings Systems Ltd. in January 2020. From October 2017 through 2020, Ms. Bausch served in various executive level positions with Carlisle Fluid Technologies at Carlisle Companies, Incorporated. From 2014 to October 2017, Ms. Bausch served as the Global Vice President, Global Industrial Coatings at PPG Industries, Inc., a global supplier of paints, coatings and specialty materials. Ms. Bausch began her career at Dow Corning Corporation in 1988, and most recently served as its Business Vice President, Finished Products from 2011 to 2014.
Skills and Qualifications of Particular Relevance to Kraton
Significant experience in the chemical industry and with manufacturing operations
Broad experience in marketing, commercial operations, strategic planning, and organizational management
Senior leadership experience, including internationally
                                        


Kraton Corporation                                         8


Kevin M. Fogarty
image371.jpg
Age: 55

Director since: 2009

Board Committee: Executive



President and Chief Executive Officer of Kraton Corporation
Other Current Public Boards
P.H. Glatfelter Company
Biography
Mr. Fogarty was appointed our President and CEO in January 2008. Prior to being appointed President and CEO, Mr. Fogarty served as our Executive Vice President of Global Sales and Marketing from June 2005. Mr. Fogarty joined us from Invista, where he had served as President for Polymer and Resins since May 2004. For the 13 years prior to his most recent position with Invista, Mr. Fogarty held a variety of roles within the Koch Industries, Inc. family of companies, including KoSa. Mr. Fogarty serves on the board of the American Chemistry Council.
Skills and Qualifications of Particular Relevance to Kraton
As the CEO of our Company, Mr. Fogarty sets the strategic direction of the Company under the guidance of the Board and provides valuable insight to the Board into the day to day business issues facing our Company
Extensive sales, marketing and high-level leadership experience in the chemical industry, including experience in the specialty chemicals business, with broad international business experience

Karen A. Twitchell
image221a.jpg
Age: 65

Director since: 2009

Board Committee: Audit (Chair), Compensation

Independent
Chief Financial Officer of Landmark Aviation (retired)
Other Current Public Boards
Trecora Resources (Chair)
Biography
From 2010 to 2013, Ms. Twitchell served as the Executive Vice President and Chief Financial Officer of Landmark Aviation. From 2001 to 2009, Ms. Twitchell was a Vice President and Treasurer of LyondellBasell Industries and Lyondell Chemical Company. Prior to that, she served as a Vice President and Treasurer of Kaiser Aluminum Corporation and Southdown, Inc. Before joining Southdown, Ms. Twitchell was an investment banker with Credit Suisse First Boston in its corporate finance department.
Skills and Qualifications of Particular Relevance to Kraton
Broad experience in financial management and corporate finance, including investment banking, treasury and investor relations
Extensive chemical industry experience
Longstanding experience in senior corporate positions with knowledge of financial management oversight and enterprise risk management
Prior Public Directorships (Last Five Years)
KMG Chemical, Inc.


                                        


Kraton Corporation                                         9


Incumbent Class II Directors: Term Expiring 2023
Dominique Fournier
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Age: 70

Director since: 2012

Board Committees:
Executive, Audit,
and NGS

Independent
Chairman of Interface Polymer Limited
Other Current Public Boards
None
Biography
Mr. Fournier is the Chairman of the board of directors of Interface Polymer Limited and previously served as its interim Chief Executive Officer. Mr. Fournier was the Chief Executive Officer of Infineum International Limited, a joint venture specialty chemical company between Shell and ExxonMobil, from 2005 until 2011. From 1976 to 2004, he held various manufacturing and marketing positions in ExxonMobil’s chemical businesses as well as senior leadership positions, including AIB Vice President, from 1998 to 2004, and Managing Director – Exxon Chemical France, from 1996 to 1997.
Skills and Qualifications of Particular Relevance to Kraton
Knowledge of the industry, including manufacturing, marketing and executive management, and executive level knowledge of the Company and the specialty chemicals business by virtue of commercial relationships
International business experience and knowledge of joint venture operations
Brings geographical diversity to the Board, as a French national
John J. Gallagher, III
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Age: 57

Director since: 2011

Board Committees:
Audit and
NGS

Independent
Chief Executive Officer of Stellar CJS Holdings, LLC
Other Current Public Boards
None
Biography
Mr. Gallagher is the Chief Executive Officer of Stellar CJS Holdings, LLC, a private investment company. Previously, Mr. Gallagher was the Chief Operating Officer (MDCS and Fluids) of Milacron LLC, a supplier of plastics processing equipment, technologies and services from 2014 to 2016. From 2005 to 2007, Mr. Gallagher was EVP and Chief Financial Officer of Celanese Corporation, and from 2007 to 2009, was EVP and President, Acetyls of Celanese Asia. From 1995 to 2005, Mr. Gallagher served as an executive at Great Lakes Chemical Corp., UOP, LLC, and AlliedSignal, Inc. From 1986 to 1994, Mr. Gallagher worked at Price Waterhouse, LLP. He is a certified public accountant.
Skills and Qualifications of Particular Relevance to Kraton
Significant expertise in corporate finance, public company accounting and financial reporting, including as a chief financial officer
Senior leadership, possessing international business experience in Asia
Over twenty years of industry knowledge of the chemical business
Prior Public Directorships (Last Five Years)
Milacron Holdings Corp.
                                        


Kraton Corporation                                         10


Billie I. Williamson
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Age: 68

Director since: 2018

Board Committee:
Audit

Independent

Senior Global Client Service Partner of Ernst & Young LLP (retired)
Other Current Public Boards
Cricut, Inc.
Pentair plc
Cushman & Wakefield plc
Biography
Ms. Williamson served in various roles at Ernst & Young LLP ("EY") from 1974 to 1993 and from 1998 to 2011, most recently as Senior Global Client Service Partner. Ms. Williamson was also EY's Americas Inclusiveness Officer, a member of its Americas Executive Board, which functions as the Board of Directors for EY dealing with strategic and operational matters, and a member of the EY U.S. Executive Board.
Skills and Qualifications of Particular Relevance to Kraton
Public company experience having served on eight public company boards
Broad experience in senior corporate positions with knowledge of financial and strategic oversight
Strong corporate finance, public company accounting and financial reporting experience, having served at EY for over 30 years
Prior Public Directorships (Last Five Years)
Energy Future Holdings Corp., XL Group Ltd., CSRA Inc., Janus Capital Group, ITT Exelis Inc. and Annie’s Incorporated

Incumbent Class I Directors: Term Expiring 2022
Mark A. Blinn
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Age: 59

Director since: 2017

Board Committee:
Compensation

Independent
Chief Executive Officer of Flowserve Corporation (retired)
Other Current Public Boards
Texas Instruments, Inc.
Leggett & Platt, Incorporated
Emerson Electric Co.
Biography
Mr. Blinn served in various positions at Flowserve Corporation, including as the Chief Executive Officer and President from 2009 to March 2017 and Chief Financial Officer from 2004 to 2009. Prior to Flowserve, Mr. Blinn held senior finance, treasury and planning positions at FedEx Kinko’s Office and Print Services, Inc., Centex Corp., FirstPlus Financial Inc., Electronic Data Systems Corp. and Commercial Capital Funding Inc. Mr. Blinn was formerly an attorney where he represented large financial institutions, foreign corporations and insurance companies in litigation issues.
Skills and Qualifications of Particular Relevance to Kraton
Strong corporate finance, public company accounting and financial reporting experience, having served as a Chief Financial Officer
Longstanding experience in senior corporate positions, including as Chief Executive Officer, with knowledge of financial management oversight
Public company board experience, with knowledge on corporate governance
                                        


Kraton Corporation                                         11


Anna C. Catalano
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Age: 61

Director since: 2011

Board Committees:
Compensation (Chair),
NGS

Independent
Group Vice President, Global Marketing of BP plc. (retired)
Other Current Public Boards
FrontDoor, Inc.
HollyFrontier Corporation
Willis Towers Watson
Biography
Ms. Catalano served in various capacities for BP plc, and its predecessor Amoco Corporation, from 1979 until her retirement in 2003, including from 2000 to 2003, as Group Vice President, Global Marketing, for BP plc.
Skills and Qualifications of Particular Relevance to Kraton
International experience, having served as President of Amoco Orient Oil Company, lived in Beijing for two years, and is fluent in Mandarin
Senior leadership experience, possessing extensive knowledge of marketing and communications
Broad public company experience, with a wealth of knowledge on corporate governance, executive compensation and board function
Prior Public Directorships (Last Five Years)
Mead Johnson Nutrition Company and Chemtura Corporation
Dan F. Smith
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Age: 74

Director since: 2009

Board Committees:
Compensation, Executive (Chair)

Independent, Chairman of the Board
Chief Executive Officer of Lyondell Chemical Company (retired)
Other Current Public Boards
Orion Engineered Carbons S.A.
Magnolia Oil & Gas Corporation
Biography
Mr. Smith was appointed President of Lyondell Chemical Company in August 1994 and Chief Executive Officer in December 1996. Mr. Smith was also appointed Chief Executive Officer of Equistar Chemicals, LP in December 1997 and Millennium Chemicals Inc. in November 2004, each a wholly-owned subsidiary of Lyondell. Mr. Smith retired from each of these Chief Executive Officer positions in December 2007. Mr. Smith began his career as an engineer with Atlantic Richfield Company in 1968.
Skills and Qualifications of Particular Relevance to Kraton
Industry knowledge with a long and distinguished career in the chemical industry and a degree in chemical engineering
Senior leadership with several years of service as the Chief Executive Officer of a major chemical company
Sophisticated public company experience having served as Chairman of the board of directors of Lyondell Chemical Company
Prior Public Directorships (Last Five Years)
Northern Tier Energy LLC and Nexeo Solutions, Inc.

                                        


Kraton Corporation                                         12


OUR EXECUTIVE OFFICERS
Our Board elects our officers, and our officers serve until their resignation or termination or until their successors are duly elected and qualified. Mr. Fogarty, our Chief Executive Officer, serves on our Board. For his biography, please refer to "Proposal 1 — Election of Class III Directors — Nominees for Election as Class III Directors: Term Expiring 2024" on page 8.
image371.jpg
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Kevin M. FogartyAtanas H. AtanasovMarcello C. BoldriniMelinda S. ConleyChristopher B. Gingrich
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Holger R. JungVijay MhetarSuzanna S.G. PesgensMark E. SantangeloJames L. Simmons

Atanas H. Atanasov. Mr. Atanasov, age 48, our Executive Vice President, Chief Financial Officer and Treasurer was appointed our principal financial officer in May 2019. Prior to joining Kraton, Mr. Atanasov served as Chief Financial Officer of Empire Petroleum Partners, LLC. Prior to joining Empire, Mr. Atanasov held various positions at NGL Energy Partners LP, a NYSE-traded midstream master limited partnership. Mr. Atanasov joined NGL in November 2011 as Treasurer and Senior Vice President of Finance and was promoted to Chief Financial Officer in May 2013. Prior to NGL, Mr. Atanasov spent nine years at GE Capital in various roles of increasing responsibility. Mr. Atanasov earned a Master of Business Administration from the University of Tulsa and a Bachelor of Science in Accounting from Oral Roberts University. Mr. Atanasov is a Certified Public Accountant.
Marcello C. Boldrini. Mr. Boldrini, age 59, our Senior Vice President and Chemical Segment President was appointed in April 2017 and also serves as our Chief Sustainability Officer. Prior to joining Kraton, Mr. Boldrini was the President Asia and President Global Metals and Mining for Houghton International. From October 2014 to July 2015, Mr. Boldrini was an independent management consultant. From 2010 to 2014, Mr. Boldrini held various executive management positions with Momentive, a global specialty chemical company, including most recently, the Executive Vice President and Chief Marketing Officer. Prior to his experience at Momentive, Mr. Boldrini spent over nineteen years at multiple chemical companies including Ashland, Unilever and Quaker Chemical. Mr. Boldrini holds an MS in Chemistry from the University of Milan, Italy and an M.B.A. from Bocconi University in Italy.

                                        


Kraton Corporation                                         13


Melinda S. Conley. Ms. Conley, age 55, our Senior Vice President and Chief Human Resources Officer, was appointed our principal human resources officer in May 2012. Prior to joining us, from 2006 to 2011, Ms. Conley served in various capacities, including as Vice President, Total Rewards and as Vice President, Human Resources for Dean Foods Company. Ms. Conley previously held multiple human resources positions within the United States and England, with increasing responsibility, at companies including Capital One Financial Corporation, Monsanto Corporation, AlliedSignal, and Ford Motor Company. In addition, she practiced litigation at the firm of Figari & Davenport. Ms. Conley earned a B.A. in Speech Communication and an M.A. from the School of Labor and Employment Relations at the University of Illinois at Urbana-Champaign, and received her J.D. from Southern Methodist University.
Christopher B. Gingrich. Mr. Gingrich, age 44, our Chief Accounting Officer, was appointed our principal accounting officer in December 2020. Prior to being appointed Chief Accounting Officer, Mr. Gingrich served as our Assistant Controller. Mr. Gingrich joined Kraton in April 2010 as a Senior Accountant. Prior to joining Kraton, Mr. Gingrich worked in public accounting in roles of increasing complexity with both Deloitte and Arthur Andersen. Mr. Gingrich earned a B.A. degree in Business Administration from Sam Houston State University and a M.S. degree in Accounting from the University of Houston. Mr. Gingrich is a certified public accountant.
Holger R. Jung. Dr. Jung, age 58, our Senior Vice President and Polymer Segment President was appointed in 2011. Dr. Jung is responsible for all sales, marketing and market development activities for our Polymer segment. Dr. Jung joined us from Invista, a Koch Industries subsidiary, where he held a number of positions of increasing responsibility, serving most recently since 2008 as Vice President of Invista’s North American Polyester & Intermediates business, overseeing the successful sale of that business to Indorama in 2011. Dr. Jung commenced his employment with Hoechst AG in 1990 prior to the sale of Hoechst’s polyester businesses to Koch in 1998, in positions including research and development chemist, technical service manager, and positions with oversight for quality management, strategic planning, and for the marketing and sales functions of KoSa’s European Polyester Specialty Polymer Business. Dr. Jung holds a Ph.D. in polymer chemistry from the University of Marburg in Germany.
Vijay Mhetar. Dr. Mhetar, age 50, our Senior Vice President, Chief Technology Officer, was appointed in January 2017.  Dr. Mhetar is responsible for global research & development and technical service activities as well as implementation of our company-wide innovation strategy. Dr. Mhetar joined us from General Cable Corporation, a wire and cable manufacturer, where he held a number of positions from 2008 through 2017, including most recently as Senior Vice President - Global Technology.  Prior to his employment at General Cable, Dr. Mhetar was employed by General Electric Company, Plastics as their Global Technology Manager.  Dr. Mhetar holds a Ph.D., Chemical Engineering from Texas A&M University and a Masters in Technology from the Indian Institute of Technology in Bombay, India. Dr. Mhetar is also Six-Sigma Black Belt certified.
Suzanna S.G. Pesgens. Ms. Pesgens, age 50, our Vice President and Chief Procurement Officer, was appointed in January 2016. Ms. Pesgens joined us from Arizona Chemical Company, LLC, where she was the Director of Global Procurement since 2010. Prior to Arizona Chemical Company, LLC, she held a variety of roles from 1993 to 2010 in technology, procurement and marketing at a joint venture between Akzo Nobel and Monsanto Corporation (now Eastman Chemical Company). Ms. Pesgens earned a Master of Science degree in Chemical Engineering from Eindhoven University of Technology and an M.B.A. from Rotterdam School of Management at Erasmus University.

                                        


Kraton Corporation                                         14


Mark E. Santangelo. Mr. Santangelo, age 63, our Senior Vice President, Global Operations, was appointed in May 2020. Prior to that, from May 2017, Mr. Santangelo served as Senior Vice President Manufacturing, Engineering and EH&S at Innophos, a leading international producer of essential ingredients. Prior to joining Innophos, Mr. Santangelo was an independent consultant in operations and supply chain from 2016 to 2017. From December 2014 to May 2016, Mr. Santangelo was Vice President, Global Operations and Supply Chain at Arizona Chemical Company, which was acquired by Kraton Corporation in early 2016. Mr. Santangelo began his career at Ashland Inc., where, for 33 years, he held various roles in increasing leadership responsibilities. Mr. Santangelo earned a Master of Science and a Bachelor of Science, each in Chemical Engineering, from Villanova University.
James L. Simmons. Mr. Simmons, age 55, our Senior Vice President, General Counsel and Secretary, was appointed our chief legal officer in December 2014. Mr. Simmons joined us in January 2010 and served in various capacities in the legal department, including as Deputy General Counsel and Assistant Secretary. From 2004 to 2010, Mr. Simmons served in a number of roles, with increasing responsibilities, in the legal department of HCC Tokio Marine, including as Vice President & Corporate Secretary from 2007 to 2010. Mr. Simmons earned B.A. and M.A. degrees from Stephen F. Austin State University and his J.D. degree from the University of Houston Law Center.
                                        


Kraton Corporation                                         15


CORPORATE GOVERNANCE
Our Board of Directors
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Our Board is comprised of nine members. The exact number of members of our Board will be determined from time to time by resolution of a majority of our Board, but may at no time consist of fewer than three members, nor more than nine. Our Board is divided into three classes, with each director serving a three-year term and one class being elected at each year’s annual general meeting of stockholders.
Committee Memberships
Board MemberAgeDirector
Since
IndependentClass AuditComp.NGSExec.
Shelley J. Bausch552017lIIIChair
Mark A. Blinn592017lIl
Anna C. Catalano612011lIChairl
Kevin M. Fogarty552009IIIl
Dominique Fournier702012lIIlll
John J. Gallagher, III572011lIIll
Dan F. Smith742009lIlChair
Karen A. Twitchell652009lIIIChairl
Billie I. Williamson682018lIIl
Three
new directors
in the last four years
Average tenure of
8.2 years
100% Independent (excluding our CEO)
Average age
of directors is
63
                                        


Kraton Corporation                                         16


Board Diversity Highlights
Our NGS Committee has not adopted a specific policy with respect to diversity. However, the NGS Committee and the Board does consider principles of diversity as an important factor in evaluating potential directors. When evaluating Board composition, the NGS Committee and the Board considers diversity in a broad context, including, without limitation, self-identified diversity characteristics (such as gender, race, disability, ethnicity, nationality, religion, sexual orientation, and gender expression), business experience, skills, international experience, education, other public company board experience and other relevant factors. The current composition of our Board reflects those efforts and the importance our Board places on diversity of the Board. Percentage are based on self-disclosed characteristics from our eight independent directors.
50%
of our directors are Women
3
of our Board Committees are chaired by Women
12.5%
of our directors are based outside the U.S.
12.5%
of our directors are Racially/Ethnically Diverse
DIRECTOR SKILLS AND EXPERIENCES
Our Board and the NGS Committee endeavor to ensure that the Board is composed of directors who bring diverse perspectives and exhibit a variety of skills, professional experience and backgrounds. The following chart summarizes the competencies represented on our current Board, the details of which are included in each director's profile. The absence of a "l" for a particular skill does not mean the director in question is unable to contribute to the decision-making process in that area.
Skill/ExperienceBauschBlinnCatalanoFogartyFournierGallagherSmithTwitchellWilliamson
Financial Expertllll
Capital Markets and Bankingllllll
Chemical or Manufacturing Industryllllllll
Executive Compensationllllll
Research & Developmentllllllll
Sustainabilitylllll
Cybersecuritylll
Sales & Commerciallllllll
Organizational Managementlllllllll
C-Suite Experiencelllllllll
Other Public Company Boards331212
All Directors Possess:
High Integrity & Ethical Behavior
Strategic Thinking & Planning
Knowledge of Corporate Governance
Organizational Management & C-Suite Experience
Risk Management & Compliance Expertise
Diverse Cultural Experiences
Willingness to Effectively Challenge Management
                                        


Kraton Corporation                                         17


Meetings of the Board
Our Board met ten times during 2020 and acted on other occasions by written consent. During 2020, no incumbent director attended fewer than 75 percent of the aggregate of the total number of meetings of the full Board (held during the period of service) and the total number of meetings of all committees of the Board on which he or she served (held during the period of service).
We encourage our directors to attend our Annual Meeting, but their attendance is not required. All of our current directors, who were serving at the time of the 2020 Annual General Meeting of Stockholders, attended the virtual meeting.
Communications with the Board
    You may contact the Chairman of the Board, the Board as a whole, or individual directors:
BY MAILKraton Corporation
[Director Name]
c/o Secretary
15710 John F. Kennedy Boulevard, Suite 300
Houston, Texas 77032
+

Committees of the Board
We have four standing committees of the Board: Audit Committee, Compensation Committee, NGS Committee and Executive Committee. The charter for each committee can be found in the "Investor - Corporate Governance" section of our website at www.kraton.com. In 2020, our Audit Committee met ten times, our Compensation Committee met six times, our NGS Committee met four times and our Executive Committee did not meet.


                                        


Kraton Corporation                                         18


Primary Responsibilities of each Committee
AUDIT
COMMITTEE
Manage the engagement of our independent auditors. Please refer to "Audit Committee Report" for further details.
Monitor the qualifications, independence and performance of, and approve the fees of, our independent auditors.
Assess and monitor the qualifications and performance of our internal auditors.
Discuss with management, the independent auditors, and the internal auditors the accuracy, effectiveness and integrity of the Company’s accounting policies, internal controls, audit results, financial statements, financial reporting practices, and other select financial matters.
Evaluate the hiring of current/former employees of our independent auditors.
Monitor compliance with legal and regulatory requirements, listing standards and corporate governance, including our Code of Ethics and Business Conduct, related party transactions, whistleblower activity and disclosure policy.
Assist the Board in fulfilling its risk oversight, particularly with regard to market based risk, financial reporting, corporate liquidity and effectiveness of the Company’s compliance programs.
COMPENSATION COMMITTEE
Manage the engagement, compensation, evaluation, and independence determination of compensation consultants.
Oversee and manage our executive compensation policies, plans, programs, and practices, and make recommendations to the Board on the same.
Determine our compensation philosophy and objectives.
Advise our Board on director compensation and perquisites.
Oversee our executive talent development and human capital management.
Review public disclosure regarding executive compensation.
Assist the Board in fulfilling its risk oversight, particularly with respect to compensation programs and practices.
Monitor fiduciaries under any funded employee benefit plan and appoint and oversee any subcommittee administering such plans.
Determine stock ownership guidelines for directors and officers.
Please refer to "Compensation Discussion and Analysis" for further details on the primary responsibilities of the Compensation Committee.
NOMINATING, GOVERNANCE & SUSTAINABILITY COMMITTEE
Develop candidate selection criteria and identify and recommend director candidates and committee assignments to the Board.
Review, develop and recommend governance principles applicable to the Company.
Evaluate the independence, tenure and re-election of each director.
Provide environmental, social and governance risk oversight.
Oversee the evaluation of the Board and monitor the orientation and continuing education of directors.
Review compliance with the Code of Business Conduct and Ethics and make recommendations to the Board with respect to enforcement actions.
EXECUTIVE COMMITTEE
Act on matters (1) when, due to an emergency or crisis, a meeting of the full Board cannot be convened in a timely manner and (2) as delegated by the Board.
                                        


Kraton Corporation                                         19


Role in Risk Oversight
    The Board has oversight responsibility for the Company's risk management framework, which is designed to identify, measure, assess, prioritize, mitigate, monitor and communicate risk across the Company's operations and to foster a corporate culture of integrity and risk awareness. The following depicts our risk oversight structure between the Board, its committees and our management:
THE FULL BOARD
Our Board oversees our executive team in the execution of its risk management function. Our Board executes its oversight duties through:
Assigning specific oversight duties to the Board committees; and
Periodic briefing and informational sessions by management on the types of risks the company faces and enterprise risk management.
For most enterprise risk management issues, the Board receives timely reports from management or the appropriate Board committee regarding its review of the issues. Areas of full Board oversight include: Cybersecurity, Corporate Strategy, CEO Performance, Succession Planning, and Capital Allocation.
COMMITTEES
AUDITCOMPENSATIONNGS
Oversees the development and execution of enterprise risk management processes, including assessments with internal auditors & independent public accounting firm.
Oversees risk that could have a financial impact, such as financial reporting, cybersecurity, crisis response, single-sourced raw materials, taxes, accounting, disclosure, internal controls, legal matters, and our compliance program.
Manages risks associated with personnel and compensation issues, including executive compensation, benefits and talent planning.
Together with the independent compensation consultant, evaluates risk that may be created by our compensation plans, practices and policies.
See also, "Compensation Discussion and Analysis Principles and Philosophy of the Compensation Program Compensation Risk Assessment"
Manages risk associated with governance issues, such as the independence of the Board, Board effectiveness, corporate governance and director succession planning.
Oversees risk related to sustainability initiatives, including environmental and social risks.
MANAGEMENT
Our executive management team is responsible for managing the risks inherent in our business.
Annually, internal audit conducts a risk assessment to assist management in the identification and assessment of risks.
The results of the risk assessment are communicated to executive management for evaluation and identification of the most significant risks facing the Company, including a description of any mitigating controls in place and further mitigating actions that may be considered.
Management manages identified risks through their ongoing oversight of operational activities and continued evaluation of the Company’s business goals and objectives.
On a quarterly basis, the executive management team meets to reassess the significant risks and effects of mitigating actions, as well as to consider the status of any emerging risks.
                                        


Kraton Corporation                                         20


Board and Committee Effectiveness
    The Board and its Committees are committed to a rigorous annual self-evaluation process to ensure their effective functioning. Through evaluation, directors review the performance of the Board as a whole and the Committees on which they serve. The evaluation covers areas where the Board feels it functions effectively, and importantly, areas where the Board believes it can improve.
Our Board and its Committees evaluate, among others, the following topics:
Effectiveness at discharging their respective allocated duties and responsibilities
Composition, diversity, structure and refreshment of the Board and its Committees
Board and Committee meetings, information needs and quality of materials presented
Satisfaction with individual director performance, including Committee and Board chairs
Access to management, internal and external resources, and continuing education possibilities
Areas where the Board and Committees should increase their focus
The Annual Evaluation Process:
1 Questionnaires / Interviews

Our NGS Committee reviews and approves the annual self-evaluation process. Upon approval, our legal department initiates the process. The process generally consists of written questionnaires with interviews conducted by an independent third party, generally every third year.

The evaluations solicit each director's insights, recommendations and opinions regarding the full Board and their applicable Committees. Each director also completes a full peer evaluation of the directors to be nominated at the next Annual Meeting of Stockholders.
2020 Board Follow-Up Actions
Based on responses from the most recent annual evaluation, the following actions have been implemented:

Deepened and expanded the Audit Committee's existing review of certain enterprise risks.

Increased the strategic topics presented to the Board.

Advanced the development of a pipeline of director nominees meeting diversity considerations.

Worked to improve time allocation and presentation conciseness at meetings.
2 Review and Assessment

The results and comments are aggregated and consolidated for presentation to the full Board and each Committee, highlighting opportunities for improvement, recommended actions, and trends. Responses are anonymous to promote candor.
3 Presentation and Action

As an outcome of the evaluation process, the Chairman of the Board and the Committee Chairpersons suggest changes for areas of improvement and implement action plans to address such areas. The Committee Chairpersons frequently conduct individual interviews with peer directors to gather additional direct feedback.
                                        


Kraton Corporation                                         21


ONBOARDING AND CONTINUING EDUCATION
    During initial orientation, new directors participate in one-on-one introductory meetings with our business leaders and their fellow directors, and receive presentations on our strategic plans, financial statements and key issues, policies and practices. We also conduct additional Committee-specific orientation for directors following Committee or Chair rotation. Board members receive, at our expense, on-going opportunities to obtain education through participating in meetings, subscribing to relevant publications and attending activities and professional development training. The Board periodically participates in site visits to our facilities.
Board Selection and Refreshment
Our NGS Committee is responsible for reviewing the composition of, and refreshing, the Board and its Committees, through its recommendations to the Board. Our NGS Committee uses a director recruitment process to ensure the efficient execution of its responsibilities.
Recent Refreshment Bringing Fresh Perspectives to the Board:
3
New Directors added since 2017
Rotated the Chair of each of the Audit, Compensation and NGS Committees in 2020.
Each Committee is Chaired by a Woman.
Director Recruitment Process
Assess. Our NGS Committee commences its director recruitment and Board refreshment process by using its business judgment to evaluate the needs of the Board going forward against the composition of the current Board, considering those directors who wish to continue to serve on the Board. The ongoing assessment includes a review of the corporate strategy, input from management on the evolving business needs, the annually updated director skills matrix and the results of the annual Board and Committee self-evaluations.
Assess
Assess Board composition, evaluations and effectiveness to evaluate the needs of the Board
â
Identify. Our NGS Committee identifies director candidates through the recommendations of directors, management and stockholders, and the engagement of third-party firms. The NGS Committee provides guidance to the Board, management and third-party firms about the preferred qualifications and backgrounds of a candidate, and may use third-party firms to perform reviews and evaluations. Our NGS Committee will consider director candidates recommended by our stockholders in accordance with our Bylaws. Please refer to the text of our Bylaws (including Section 1.12 “Notice of Stockholder Business and Nominations”), which are on file with the SEC, and “Stockholder Proposals and Nominations for our 2021 Annual Meeting” in this Proxy Statement for additional information.
Identify
Identify candidates from third-party firms, stockholders, management and directors
â
Evaluate
Review the universe of information on, and interview, prospective nominees
â
Appoint and Recommend
Evaluate. Our NGS Committee evaluates all incumbent directors being considered for re-nomination and all director nominees, regardless of the person or entity recommending such candidate, according to established Board-approved criteria. Our NGS Committee considers all candidates in light of the entirety of their credentials made available to the committee.
Appoint director(s) and recommend approval of director(s) at the next stockholder meeting covering the applicable class of directors
    

                                        


Kraton Corporation                                         22


In compliance with our NGS Committee’s charter, our Board has guidelines for nominees selected to serve on our Board.
Guidelines for Nominees Selected to Serve on Our Board
ability to meet any requirements of applicable law and NYSE listing standards
integrity and strength of character
high ethical standards and history in matters of compliance
ability to represent the interests of all stockholders
business experience
ability to devote sufficient time for attendance at and preparation for Board meetings
    In addition to the guidelines for nominees selected to serve on our Board, our Board also determined that prospective nominees should exhibit exemplary qualifications in one or more of the following areas: business leadership experience, especially at the highest executive levels; financial reporting experience, especially as it relates to public companies; corporate finance experience; experience in the chemical industry; expertise in marketing; and/or international business experience.
Leadership Structure
CHAIRMAN OF OUR BOARD
Our Board believes it is preferable for one of our independent directors to serve as Chairman of the Board. Therefore, we separate the roles of Chairman of the Board and CEO. Our Chairman of the Board leads the Board’s oversight of the management of the Company and presides at meetings of the Board and the stockholders. Our CEO is responsible for implementing the policies adopted by the Board and exercising general superintendence over all the business and affairs of the Company. At this time, we believe our leadership structure is appropriate for our Company because our independent Chairman, Mr. Smith, can bring his extensive experience in the petrochemical industry, and in executive management generally, to bear on matters relating to our Board’s oversight of the execution of our strategy, while Mr. Fogarty is able to use his extensive experience in the chemical industry and knowledge of the day-to-day operations of our business to focus his abilities on executing that strategy.
EXECUTIVE SESSIONS
Our non-employee directors, all of whom are independent under NYSE listing standards and SEC rules, meet regularly in executive session. Mr. Smith, as the non-employee Chairman of the Board, serves as the presiding director at each executive session.
EXECUTIVE SUCCESSION PLANNING
Our Board recognizes that thoughtful succession planning is a key component of the Company’s continued success and is critical to creating long-term stockholder value. Pursuant to our Corporate Governance Guidelines, at least on an annual basis, the Board, in its executive sessions, considers and reviews succession candidates for the CEO and other executive leadership positions for both near- and long-term planning. During these meetings the Board identifies key roles (based on business impact and retention risk), assesses likely and possible successors for these roles, including their ability to reinforce our performance culture and promote our core values, and evaluates the readiness of succession candidates, including training and development needs.

                                        


Kraton Corporation                                         23


Director Resignation Policy
We have adopted a director resignation policy to recognize principles associated with majority voting for directors. Our Corporate Governance Guidelines provide that any nominee for director in an uncontested election who receives a greater number of votes “withheld” from his or her election than votes “for” such election shall, promptly following the certification of the voting results for such election, tender his or her offer of resignation for consideration by our NGS Committee.
The NGS Committee will recommend to the Board whether to accept the offered resignation or other action to be taken, and the Board will act on the offered resignation within 90 days following the certification of voting results for such election and promptly thereafter publicly disclose its decision regarding the offered resignation and, if applicable, the reasons for rejecting the resignation offer. The NGS Committee and the Board may consider any factors and alternatives they deem appropriate in making their recommendation or decision. Any director who is required to tender his or her offer of resignation pursuant to these provisions will not participate in the NGS Committee recommendation or Board action regarding such offered resignation. In the event that each member of the NGS Committee failed to receive the required vote in favor of his or her election, then those independent directors who did not receive a majority withhold vote would appoint a committee amongst themselves to consider the resignation offers and recommend to the Board whether to accept them.
Involvement in Certain Legal Proceedings
None of our current directors or executive officers has, in the past ten years, been involved in any legal proceedings adverse to the Company or any of its subsidiaries that are otherwise material to an evaluation of their ability to serve as a director or executive officer.
Certain Relationships and Related Party Transactions
Our Board has adopted a written policy relating to the approval of related party transactions. Under our policy, we encourage our employees, officers and directors to avoid entering into any transaction that may create a conflict of interest. In addition, they must report any potential conflict of interest, including related party transactions, to their supervisors or our legal department. Pursuant to its charter, our Audit Committee is required to evaluate each related party transaction for the purpose of making recommendations to the disinterested members of our Board whether the transactions are fair, reasonable and within our policy and should be ratified and approved by the Board.
In evaluating such proposed transactions, the Audit Committee is required to consider the relevant facts and circumstances and the controls implemented to protect our interests and the interests of our stockholders, including:
the benefits of the transaction to our Company;
the terms of the transaction and whether they are arm’s-length and in the ordinary course of our Company’s business;
the direct or indirect nature of the related party’s interest in the transaction;
the size and expected term of the transaction; and
other facts and circumstances that bear on the materiality of the related party transaction under applicable law and listing standards.
Since the beginning of 2020, there were no, and there are no currently proposed, transactions in which the Company was, or is to be, a participant and the amount involved exceeds $120,000, and in which any related person had or will have a direct or indirect material interest.

                                        


Kraton Corporation                                         24


Independence of the Board and its Committees
Our Board has determined that each of our non-employee directors is independent under applicable listing standards of the NYSE and SEC rules, and references in this Proxy Statement to these directors as “independent directors” are in that capacity. Mr. Fogarty is not considered to be an independent director because he is our President and CEO. In making its subjective determination that each non-employee director is independent, the Board reviewed and discussed information with regard to each director’s business, relationships, arrangements and personal activities as they may relate to our Company and management. The Board considered the information in the context of the NYSE’s objective listing standards and the disclosure rules of the SEC regarding transactions with related parties. There are no family relationships between any of our directors or executive officers.
Our Board has determined that all members of each of the Audit Committee, NGS Committee and Compensation Committee are independent for purposes of applicable NYSE listing standards and SEC rules, and that each of Messrs. Blinn and Gallagher, and Mmes. Twitchell and Williamson qualifies as a “financial expert.” None of our Compensation Committee members were formerly, or during 2020, an officer of ours or employed by us.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mmes. Catalano and Twitchell, and Messrs. Blinn, Fournier and Smith were members of the Compensation Committee during 2020. None of the members of the Compensation Committee is or has been an executive officer of the Company, nor did any of them have any relationships requiring disclosure by the Company under Item 407 of SEC Regulation S-K. None of the Company's executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity, an executive officer of which served as a director of the Company or member of the Compensation Committee during 2020.
Governance Policies
CORPORATE GOVERNANCE GUIDELINES
We are committed to having sound corporate governance practices that maximize stockholder value in a manner consistent with legal requirements and the highest standards of integrity. Our Board has adopted guidelines that provide a framework for the governance of our company. We periodically review these guidelines and regularly monitor developments in the area of corporate governance. Our Corporate Governance Guidelines are posted in the "Investors Corporate Governance" section on our website at www.kraton.com and are available to stockholders upon request.
CODE OF ETHICS AND BUSINESS CONDUCT
We have adopted a Code of Ethics and Business Conduct (the "Code of Ethics") that is applicable to all of our directors, officers and other employees. The Code of Ethics is posted under the "Investors Corporate Governance" section on our website at www.kraton.com and is available to stockholders upon request. If there are any material changes to, or material waivers of, the Code of Ethics that apply to our CEO and/or senior financial officers, we will disclose them on our website.
PROHIBITION ON HEDGING AND PLEDGING
    For a description of the Company's polices on the prohibition of hedging and pledging, please see "Compensation Discussion and Analysis — Hedging, Pledging and Trading in Stock Derivatives" on page 58.
                                        


Kraton Corporation                                         25


Sustainability and Human Capital Management
Our vision is to be an admired sustainable supplier of innovation-based solutions to our pine chemical and polymer markets, creating exceptional value for our customers, stockholders, employees, and communities alike. We believe that by having sustainable business practices shape our strategy, we are better positioned to create long-term value for all of our stakeholders.
SUSTAINABILITY GOVERNANCE
We focus on Sustainability at every level of our organization, from our Board to our global cross-functional working groups.
BOARD OF DIRECTORSOversight & Orientation
"Our commitment to sustainability is demonstrated by our progress in driving sustainable business practices across our entire enterprise."

Kevin M. Fogarty
Chief Executive Officer
NGS Committee and
Compensation Committee
SUSTAINABILITY COUNCIL
Members of Kraton's cross-functional Leadership Team, chaired by Marcello C. Boldrini, our Chief Sustainability Officer
Strategy &
Leadership
SUSTAINABILITY TEAMSUSTAINABILITY LEADSImplement &
Execute
Program Implementation
Performance and Monitoring
Sustainability Reporting
Capacity Building
Stakeholder Engagement
 Functional implementation of program, goals and KPIs
Functional Implementation
Working groups and local teams
HEALTH AND SAFETY
The health and safety of our employees is fundamental to our success. We are committed to ensuring that employees have a safe working environment.

Our Actions to Ensure a Safe Working Environment
Conduct internal health and safety audits at our locations
Provide personal protective equipment
Participate in the American Chemistry Council Responsible Care® initiative. A majority of our US manufacturing facilities are Responsible Care 14001 certified.
Train relevant employees on health and safety risks
Implement critical thinking processes and contractor management practices
Conduct recurring employee health and detailed safety risk assessments
Maintain a global HSES tracking platform
Since the onset of the COVID-19 pandemic, we have taken an integrated approach to helping our employees manage their work and personal responsibilities, with a strong focus on employee wellbeing, health, and safety. Among other actions, we have launched a COVID-19 crisis management team, implemented work-from-home requirements for office personnel, social-distancing, and restrictions on visitors to our facilities, and limited in-person meetings and other gatherings.
Reduced our total recordable incidence rate (TRIR)
from 0.88 in 2019 to
0.31
in 2020
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Kraton Corporation                                         26


2020 SUSTAINABILITY HIGHLIGHTS
We are proud of our efforts in 2020 to drive sustainable business practices throughout our organization. In addition to our health and safety highlights detailed above, the information below highlights a few of our many other Sustainability accomplishments in 2020.
LIFE CYCLE ASSESSMENTS
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By year-end 2020, we had completed eleven cradle-to-gate life cycle assessments ('LCAs"), nine of which were completed in 2020. These LCAs provide us with an in-depth understanding of the environmental impacts of our products and their production processes. This knowledge may inform future innovation projects by allowing us to identify opportunities to improve overall product sustainability. Additionally, our customers, in an effort to reduce their own carbon footprint, have used our LCAs as an important tool to measure the environmental impact of their own products.
RESPONSIBLE PROCUREMENT PROGRAM
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We earned an EcoVadis Gold rating for our sustainability management systems, placing us in the 98th percentile of our industry. The achievement opened the door to join Together for Sustainability ("TfS"), a joint initiative of chemical companies for sustainable supply chains. TfS facilitates the exchange of global best practices to assist in embedding sustainability and responsible procurement throughout organizations and shapes the future of sustainability for the chemical industry. In 2020, we continued to execute on our responsible procurement program. Particularly, we worked to further improve the risk-evaluation methodology of our vendor base by incorporating risk-country and industry-type criteria. We also initiated Supplier Corrective Action Plans for low scoring vendors.

GREENHOUSE GAS INTENSITY
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We continuously work on product and process improvements to minimize our environmental footprint while helping customers reduce theirs. In 2020 we made strong progress towards achieving our ambitious 25% reduction target in greenhouse gas intensity by 2030. To decrease greenhouse gas emissions from our operations, we are minimizing energy use in our plants and, at some facilities we are switching to cleaner burning fuels by using our by-products for fuel. Additionally, in Europe, we continued to divert truck shipments to lower carbon-intensive modes of transport. Please refer to our 2021 Sustainability Report, expected to be published by the end of the third quarter of 2021, for the performance information regarding our actions to reduce greenhouse gas intensity.
Our Sustainability Reporting
Kraton is committed to the transparent reporting of our Environmental, Social and Governance efforts through, among other means, our website and annual Sustainability Report ("Report"). Kraton is also committed to the Ten Principles of the United Nations Global Compact's (UNGC). To learn more about our sustainability efforts and to view the Report or our 2020 UNGC Communication on Progress, please visit the "Sustainability" section on our website at www.kraton.com. Our 2020 Report is expected to be available by the end of the third quarter of 2021.

Information contained on our website, in our Report, or in the UNGC Communication on Progress
 is not incorporated by reference in, or part of, this Proxy Statement.
                                        


Kraton Corporation                                         27


2020 SUSTAINABLE PRODUCT HIGHLIGHTS
As we look downstream, we continue to leverage not only the biobased nature of our Chemical segment but also our Research & Development capability to develop and commercialize products that address our customers’ needs for sustainable solutions. In this regard, during 2020, we made solid progress in the commercialization of key platforms.

CirKular+™
Our CirKular+ technology enables more efficient recyclability of post-consumer plastic waste streams. Plastics are recycled in mixed streams, but many plastic blends collected for recycling do not easily mix with or adhere to each other. When CirKular+ is added to the mixed waste streams, it is effective as a compatabilizer, which allows recyclers to blend multiple plastic recycle streams, facilitating growth in the plastics circular economy. The plastics circular economy is a goal of sustainable plastics use because it is characterized by the reuse of plastic waste, generating value from the waste and avoiding sending recoverable plastics to landfills.

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REvolution
Our REvolution rosin ester technology enables manufacturers to achieve light color and stable hot-melt formulations with high biobased content. The REvolution platform allows for the production of rosin esters with improved color and oxidative stability in a cost-effective way. Both of these benefits are critical parameters required in various industries, such as adhesives and road markings. With high biobased content, our products have a lower carbon footprint than their fossil-based alternatives. Made from our pine-based crude tall oil feedstock, our materials are sourced from responsibly-managed forests that do not compete for land with food crops.
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Kraton Corporation                                         28


HUMAN CAPITAL
To remain a leading global producer of specialty polymers and high-value biobased products, it is crucial that we continue to attract, and retain, talent. Through our diverse and inclusive workplace, our comprehensive compensation and benefits, our career management, and our focus on health, safety and employee wellbeing (as detailed above), we strive to holistically support our employees.

DIVERSITY AND INCLUSION

Our innovation stems from the diverse perspectives, knowledge, and experiences of our employees. We strive to create an inclusive workplace where all employees are treated with dignity and respect. Our commitment to D&I starts at the top with a highly skilled and diverse Board. Of our independent directors, 50% are female, 12.5% are ethnically diverse and 12.5% are based outside of the United States. As of December 31, 2020, of our 1,808 employees globally, women represented 20% of Kraton’s full-time executive positions and 24% of full-time employees. Our workforce is also globally diverse, with approximately 65% working in North America, 29% in Europe, 1% in South America and 5% in Asia. Our Board has oversight of our D&I programs.

D&I Accomplishments in 2020 and Continuing into 2021
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In 2020, and continuing into 2021, we have committed to furthering D&I in Kraton. Among our many actions, we have:
Established a Global D&I Council to ensure the sustainability of our initiatives
Updated our Code of Ethics to align more closely with our commitment to D&I
Added minority-owned investments to our U.S. 401(k) Plan
Expanded Parental Leave policies
Progressed on diversity hiring initiatives
Trained over 300 of our global leaders in inclusive leadership and unconscious bias, with future training scheduled for all employees
Hosted a International Women's Day Panel with our female members of our Board, open to all employees
Partnered with the Future of STEM Scholars Initiative to financially support students pursuing STEM disciplines at Historically Black Colleges and Universities

TOTAL REWARDS CAREER MANAGEMENT

To ensure a compelling total rewards philosophy and practice, we have practices in place to deliver fair and equitable compensation to employees based on their contribution and performance. All full-time employees are covered by a health care package, as applicable in their particular country, and all full-time employees have access to paid annual leave and company-paid holidays, based on the particular country in which they live.

CAREER MANAGEMENT

Human capital development underpins our efforts to execute our strategy and remain a leading global producer of innovative products. We continually invest in our employees’ career growth and provide employees with a wide range of development opportunities. Particularly, our career development framework enables leaders and team members to identify career paths and opportunities. The individual development plan is the first step in this framework. Employees take ownership of their career development in consultation with their leaders and create a plan covering an appropriate time frame, given the person’s individual situation. We also conduct an annual assessment of individual performance and provide skills and leadership development training. In 2020, 100% of our in scope employees received an annual performance review.
                                        


Kraton Corporation                                         29


STOCK OWNERSHIP INFORMATION
Beneficial ownership of our stock is determined in accordance with the rules and regulations of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof, or has the right to acquire such powers within 60 days. Except as disclosed in the footnotes to the tables below, and subject to applicable community property laws, we believe that each stockholder identified in the tables possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder.
Holdings of Major Stockholders
Percentages of beneficial ownership by beneficial owners of 5% or more of the shares of our common stock reported below are based on 32,144,047 shares of common stock outstanding on the March 22, 2021 record date plus securities deemed outstanding pursuant to Rule 13d-3(d)(1) under the Securities Exchange Act of 1934 ("Exchange Act"):
Name and Address of Beneficial Owner Amount and Nature
of Beneficial Ownership  
  Percent of  Class  
BlackRock, Inc.
    55 East 52nd St., New York, NY 10055
4,879,400 (1)
15.08%
The Vanguard Group
100 Vanguard Blvd., Malvern, PA 19355
3,216,154 (2)
9.94%
Dimensional Fund Advisors LP
Building One, 6300 Bee Cave Rd., Austin, TX 78746
2,628,971 (3)
8.12%
_______________
(1)    Information is based on a Schedule 13G/A filed with the SEC on January 26, 2021. As of December 31, 2020, BlackRock, Inc. held sole power to vote 4,812,161 shares and sole power to dispose of 4,879,400 shares held by the following subsidiaries: BlackRock Life Limited, BlackRock (Netherlands) B.V., BlackRock Advisors, LLC, BlackRock Asset Management Canada Limited, BlackRock Asset Management Ireland Limited, BlackRock Asset Management Schweiz AG, BlackRock Financial Management, Inc., BlackRock Fund Advisors, BlackRock Institutional Trust Company, N.A., BlackRock Investment Management (Australia) Limited, BlackRock Investment Management (UK) Ltd, BlackRock (Luxembourg) S.A., BlackRock Fund Managers Ltd., and BlackRock Investment Management, LLC, with BlackRock Fund Advisors beneficially owning 5% or more of the outstanding shares of common stock.
(2)    Information is based on a Schedule 13G/A filed with the SEC on February 10, 2021. As of December 31, 2020, The Vanguard Group, an investment advisor, held sole power to vote 0 shares, sole power to dispose of 3,151,801 shares, shared power to vote 35,699 shares and shared power to dispose of 64,353 shares held by the following subsidiaries: Vanguard Fiduciary Trust Company, Vanguard Investments Australia, Ltd., Vanguard Asset Management, Limited, Vanguard Global Advisors, LLC, Vanguard Group (Ireland) Limited, Vanguard Investments Canada Inc., Vanguard Investments Hong Kong Limited, and Vanguard Investments UK, Limited.
(3)    Information is based on a Schedule 13G/A filed with the SEC on February 12, 2021. As of December 31, 2020, Dimensional Fund Advisors LP (“Dimensional”), reports the sole power to vote 2,532,756 shares and the sole power to dispose of 2,628,971 shares. Dimensional, an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-advisor to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). All securities reported on the Schedule 13G/A are owned by the Funds. Dimensional disclaims beneficial ownership of such securities. The Funds have the right to receive or the power to direct the receipt of dividends from, or the proceeds from, the sale of such securities held in their respective accounts. To the knowledge of Dimensional, the interest of any one such Fund does not exceed 5% of the class of securities.
                                        


Kraton Corporation                                         30


Holdings of Officers and Directors
Percentages of beneficial ownership by our directors, our NEOs, and by all directors and executive officers as a group reported below are based on 32,144,047 shares of common stock outstanding on the March 22, 2021 record date, plus securities deemed outstanding pursuant to Rule 13d-3(d)(1) under the Exchange Act.
Name and Address of Beneficial Owner(1) 
Amount and Nature of  Beneficial Ownership(2)  
  Percent of  Class  
Atanas H. Atanasov
19,043*
Shelley J. Bausch
18,150*
Mark A. Blinn
18,150*
Marcello C. Boldrini
15,646*
Anna C. Catalano
38,165*
Kevin M. Fogarty
532,3321.65%
Dominique Fournier
36,922*
John J. Gallagher, III
47,982*
Holger R. Jung
48,568*
James L. Simmons
30,474*
Dan F. Smith
71,773*
Karen A. Twitchell
38,767*
Billie I. Williamson
15,740*
All Directors and Executive Officers as a Group (18 persons)1,005,4253.11%
_______________
*    Represents beneficial ownership of less than 1%.
(1)    The address for the beneficial owners is 15710 John F. Kennedy Boulevard, Suite 300 Houston, Texas 77032.
(2)    Shares shown in the table above include shares held in the beneficial owner’s name or jointly with others, or in the name of a bank, nominee or trustee for the beneficial owner’s account. For Mr. Fogarty, the total in this column includes 215,630 shares, beneficial ownership of which he has the right to acquire within 60 days of the Record Date.

Delinquent Section 16(a) Reports
Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of Exchange Act requires our directors and executive officers, as defined under the Exchange Act, and persons who own more than 10% of our stock to file initial reports of ownership and reports of changes in ownership of our stock with the SEC. Such executive officers, directors and stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of the copies of such forms furnished to us and written representations from our directors and executive officers, all Section 16(a) reports applicable to our executive officers and directors and 10% beneficial owners were filed on a timely basis except for: One Form 4 report for Mr. Atanasov in connection with the vesting of RSUs, was filed three business days late due to administrative error.
                                        


Kraton Corporation                                         31


COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis describes the material elements of the executive compensation program of our Compensation Committee for our NEOs, who are the following for 2020:
image371.jpg
Kevin M. Fogarty

President and
Chief Executive Officer
image381a.jpg
Holger R. Jung

Senior Vice President and Polymer Segment President
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Atanas H. Atanasov

Executive Vice President, Chief Financial Officer and Treasurer
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Marcello C. Boldrini

Senior Vice President and Chemical Segment President, and Chief Sustainability Officer
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James L. Simmons

Senior Vice President, General Counsel, Corporate Secretary

Table of Contents
Our Executive Compensation Program
at a Glance
33Compensation Decisions and Results 46
Program Design and Performance Metrics for 202033COVID-19: Our Response and Impact on Executive Compensation 46
Target Total Direct Compensation34Base Salary47
Our Strategy and Performance 35Annual Cash Incentive Compensation (ICP)48
Stockholder Engagement36Long-Term Equity Incentive Compensation51
Roles in Determining Executive Compensation37Other Compensation for our NEOs55
Our Compensation Committee37Fringe Benefits/Perquisites55
Our CEO and Executive Management38Supplemental Disability Insurance55
Our Independent Compensation Consultant38U.S. 401(k) Plan55
Selecting Performance Metrics and
Setting Associated Goals
39Non-Qualified Benefits Restoration Plan55
Goals for 2020 ICP Performance Metrics39U.S. Pension Plan55
Goals for 2020 LTIP Performance Metrics 40Executive Severance Program55
Principles and Philosophy of the
Compensation Program
42Other Compensation Policies56
Total Direct Compensation Philosophy42Section 162(m) of the Internal Revenue Code56
Focus on Equity and Variable Compensation 42Financial Restatement56
Our Peer Groups and Survey Data43Executive Compensation Recoupment Policy57
Compensation Risk Assessment44Executive Stock Ownership Guidelines57
Pay-for-Performance 45Hedging, Pledging and Trading in Stock Derivatives58
                                        


Kraton Corporation                                         32


Our Executive Compensation Program at a Glance
    Our executive compensation program includes a mix of fixed and variable pay with performance periods ranging from one to three years. Our Compensation Committee established performance metrics for our annual cash incentive program ("ICP") and our long-term incentive program ("LTIP") that align with the Company’s strategy and stockholder interests. The following table outlines the primary elements of our Compensation Committee’s executive compensation program, excluding benefits, for 2020:
ElementDescription & MetricsPurpose
F
I
X
E
D
Base SalaryDelivered in cash and evaluated each year, with any changes effective April 1, based primarily on surveys and market dataProvide competitive pay to attract and retain our executive officers
V
A
R
I
A
B
L
E
Annual Cash Incentive Compensation ("ICP")
Delivered in cash and based on: (1) Adjusted EBITDA(1); (2) attainment of Consolidated Net Debt reduction;
and modified by a Safety Multiplier
Motivate and reward our executives to achieve key annual business objectives
Long-Term Equity Incentive Compensation ("LTIP")Restricted Stock Units ("RSUs")Three-year ratable vest; target grant date value based primarily on surveys and market dataAlign interests of executives with long-term stockholder value to support our growth strategy and drive long-term performance, particularly in a cyclical industry
Restricted Stock Performance Units ("PRSUs")Three-year cliff vest payout based on: (1) cumulative Adjusted EBITDA, and (2) relative Total Stockholder Return ("rTSR")
(1)    Adjusted EBITDA for Segment Presidents pertains to an equal split between consolidated Adjusted EBITDA and applicable Segment Adjusted EBITDA. Adjusted EBITDA for all other NEOs pertains to consolidated Adjusted EBITDA.
PROGRAM DESIGN AND PERFORMANCE METRICS FOR 2020
For 2020, the weighting of the components and metrics of our ICP and LTIP were as follows:

ICPè   Adjusted EBITDA
(75%)
 Consolidated Net Debt
(25%)
Safety Multiplier (+/- 10%)
Long-Term Incentive Compensation èRSUs
(50%)
PRSUs
(50%)
Relative TSR (50%)
Cumulative Adjusted EBITDA
(50%)
Stock Price Exposure
                                        


Kraton Corporation                                         33


Evolution of our Program Design
In consultation with our independent compensation consultant, our Compensation Committee structured our 2020 LTIP by (1) re-allocating the weighting of RSUs and PRSUs from ⅓ and ⅔ of the total grant value, respectively, to a 50/50 weighting of the total grant value and (2) incorporating cumulative Adjusted EBITDA as a performance metric in lieu of cumulative ROCE. Our Compensation Committee re-allocated the weighting of RSUs and PRSUs to maintain closer alignment with the practices of our peer companies and to ensure competitive compensation and the retention of talent. Our Compensation Committee selected cumulative Adjusted EBITDA because it is reflective of current business realities, focuses on performance elements in direct control of management and is used by our Board, management and stockholders to assess long-term performance. See also, page 54.
TARGET TOTAL DIRECT COMPENSATION
Our Compensation Committee delivers a substantial portion of target total direct compensation through variable and performance-based incentives that are at-risk. For 2020, 81% of our CEO's and 67% of our other NEOs' target total direct compensation was variable or at-risk.
OUR CEO
19%
Base Salary
$1,000,000
19%
Target ICP
$1,000,000
31%
RSUs (Time)
$1,625,000
31%
PRSUs (Target)
$1,625,000
81% Variable and At-Risk
OUR NEOs
33%
Base Salary

23%
Target ICP

22%
RSUs (Time)

22%
PRSUs (Target)

67% Variable and At-Risk


                                        


Kraton Corporation                                         34


Our Strategy and Performance
In 2020 we executed on our strategic pillars with a vision of being an admired sustainable supplier of innovation-based solutions to our pine chemical and polymer markets, creating exceptional value for our customers, stockholders, employees, and communities alike:
 Pillar2020 Select Accomplishments
Capital Discipline
Refinanced our 7.0% Senior Unsecured Notes with 4.25% Senior Unsecured Notes, providing for annual cash interest savings of approximately $11 million.
Ended 2020 with $85.9 million of cash on hand and $190.7 million of available borrowing base under our $300 million ABL Facility.
Operational Excellence
Continued disciplined approach to cost savings and capital expenditures, delivering approximately $20 million of run-rate cost reductions.
During COVID-19, focused on employee safety and well-being while continuing to operate our business and mitigate financial impacts. See also, page 46.
Portfolio Management
Divested our Cariflex business for gross proceeds of $530 million unlocking significant stockholder value.
Organic
Growth
Seeking regulatory approval of BiaXam™, a novel sulfonated polymer technology with long-lasting self-disinfecting properties, including against SARS-CoV-2.
Grew sales volumes in a tough market environment dominated by the impact of the COVID-19 pandemic.
Specialty Portfolio
Introduced REvolution™ and CirKular+™ to support the bioeconomy and connect the circular economy. See also, page 28.
Sustainable Business Model

During 2020, we made considerable progress in integrating sustainability into our corporate strategy. Among other actions, we strengthened our sustainability organization, executed on our management framework, affording us an EcoVadis Gold rating (placing us in the 98th percentile of our industry), and made significant progress against our sustainability key performance indicators, including completion of life-cycle assessments, reduction of single-sourced raw materials, commercialization of sustainable innovation and establishment of our diversity and inclusion initiative. See also, page 26.
Many of our 2020 select accomplishments listed above contributed to our attainment of the following results against our performance metrics for our 2020 ICP and our 2018 PRSU grants:
2020 Actual Results Related to Our Executive Compensation Performance Metrics
Consolidated debt of $950.1 million and
3-Year Relative TSR
Net loss of
$221.7 million
Total Recordable Incidence Rate
Consolidated Net Debt
$814.2 million,(1)(2)
a reduction of
$541.4 million
12.4th
percentile(3)
and
0.31(4)
Adjusted EBITDA of
$262.1 million(1)

(1)    For a reconciliation of GAAP to non-GAAP financial measures, please refer to “Annex A Non-GAAP Reconciliations.” Please see pages 49 and 50 for details on how these metrics were calculated for executive compensation purposes.
(2)    Excluding the effect of foreign currency, which was approximately $50 million.
(3)    Based on rTSR from December 31, 2017 to December 31, 2020 using the 2018 TSR Peer Group (adjusted for peers that were no longer operating as an independent company).
(4)    Based on 2019 data from the American Chemistry Council a TRIR of 0.31 would have placed the Company in the top 15 percent of peer companies.
                                        


Kraton Corporation                                         35


Stockholder Engagement
We are committed to active engagement with our stockholders. Through a year-round proactive stockholder engagement program, we communicate with stockholders to stay well-informed regarding their perspectives on current issues and to address any questions or concerns. Our Director of Investor Relations, our CEO, our CFO, and other subject-matter experts within the Company serve as liaisons between our stockholders and our Board.
Key Topics Discussed with Stockholders in 2020
We participated in
15
Investor Conferences and Non-Deal Roadshows,
and we ensure continued engagement with stockholders through individual meetings
üCorporate StrategyüInnovation
üResponse to COVID-19üRisk Oversight
üLiquidity üSustainability
üDebt RefinancingsüSafety and Operations
üAsset DispositionsüMarket Dynamics
üDiversity üGovernance Practices
In 2020, approximately 97% of the votes cast voted in favor of our executive compensation program. Complementing our year-round stockholder engagement program, the Chair of our Compensation Committee, in conjunction with our Chief Human Resources Officer and our independent compensation consultant, conducts annual stockholder outreach to:
1Solicit candid feedback and encourage discussion on compensation practices2Report stockholder views directly to our Board and Compensation Committee 3Evaluate and design the executive compensation program
Stockholder Engagement in 2020 Related to the Proxy Statement
We contacted our
Top 32 Stockholders
representing over 70%
of our outstanding shares
We held telephonic meetings with stockholders
representing approximately 22%
of our outstanding shares
The Chair of our Compensation Committee attended
100% (
of the telephonic meetings
Key Themes from Stockholder Engagement in 2020 Related to the Proxy Statement
l
Compensation Committee Discretion. Stockholders expressed that discretionary adjustments may be appropriate if reasonable and if accompanied by transparent disclosure. Our Compensation Committee implemented a discretionary adjustment to 2020 ICP payouts in light of COVID-19 and to Consolidated Net Debt and ROCE calculations in light of our refinancings, our Cariflex divestiture and our goodwill impairment. See also, pages 49 and 53.
l
Focus on Safety. We received commendation on the inclusion of a safety metric, as a sustainability metric, into our compensation program. In response, we maintained the metric and made the associated goals more rigorous. See also, page 26.
l
Board Diversity and Refreshment. Board diversity and refreshment remains a priority of our stockholders. To ensure the continuation of diverse perspectives and refreshment, our NGS Committee recommended, and our Board agreed, to rotate the Chairs of each of our three primary Board committees. Each primary Board committee is now chaired by a female director. See page 17 for our Board diversity highlights.
l
Selection of Performance Metrics. Overall, our stockholders were pleased with our mix of relative and absolute performance metrics, but requested disclosure on our Compensation Committee's decision to incorporate a cumulative Adjusted EBITDA metric in our LTIP. See also, page 40 and 54.
l
Stock Grant Practices. Stockholders appreciated our focus on LTIP, noting that 62% of our CEO's targeted compensation is in the form of LTIP. We have also added disclosure regarding the timing of our stock grant practices. See also, page 51.
                                        


Kraton Corporation                                         36


Roles in Determining Executive Compensation
OUR COMPENSATION COMMITTEE
Our Compensation Committee discharges the responsibility of the Board in determining and recommending the compensation of our executive officers, including our NEOs. The Compensation Committee’s charter contains detailed information on the Compensation Committee’s duties and function and is available on the "Investors - Corporate Governance" section of our website at www.kraton.com.
Our Compensation Committee reviews the goals and objectives related to the compensation of our NEOs. During that review, the Compensation Committee considers the balance between short-term compensation and long-term incentive compensation, evaluates market practices, and sets the compensation levels of our NEOs based on that evaluation. In determining appropriate targeted compensation, our Compensation Committee considers individual performance, Company performance, rTSR, and compensation of persons holding comparable positions at our peer companies.
Our Compensation Committee has the ultimate authority and responsibility to engage and terminate any outside consultant to assist in determining appropriate compensation levels for our NEOs. The illustration below details the main items in our Compensation Committee's annual process in discharging its responsibility relating to the compensation of our executive officers:
image471a.jpg
Human Capital Management Oversight
In 2020, our Board formally included human capital management oversight as a responsibility outlined in our Compensation Committee's charter. Accordingly, the Compensation Committee oversees processes and procedures for the evaluation and development of executive talent, succession planning, and human capital practices, including diversity and inclusion policies and programs.
                                        


Kraton Corporation                                         37


OUR CEO AND EXECUTIVE MANAGEMENT
Our CEO is typically consulted regarding the compensation of the other NEOs. Our Chief Human Resources Officer regularly attends the meetings of the Compensation Committee and provides input on compensation matters, as requested by the Compensation Committee. Our Compensation Committee and our independent compensation consultant then meet in executive session without management, to review and recommend any changes to the CEO’s recommendations and to consider other actions, from time to time, as authorized by the Compensation Committee’s charter.
OUR INDEPENDENT COMPENSATION CONSULTANT
Our Compensation Committee engaged Farient Advisors LLC ("Farient") as its independent compensation consultant. For 2020, Farient evaluated the competitiveness of, and provided recommendations with respect to, the compensation of our executive officers, including our NEOs, and the design of the program for 2020. See also, "Principles and Philosophy of the Compensation Program—Our Peer Groups and Survey Data."
    Our Compensation Committee evaluates its compensation consultant yearly, including the satisfaction of independence requirements, and our Compensation Committee has determined that Farient was independent during 2020. Our Compensation Committee assessed: (1) the advisor’s provision of other services to the Company; (2) the amount of fees received from the Company by the advisor as a percentage of the advisor’s total revenue; (3) the advisor’s policies and procedures that are designed to prevent conflicts of interest; (4) any business or personal relationship of the advisor with a Compensation Committee member or an executive officer of the Company; and (5) any advisor-owned Company stock. In 2020, Farient did not provide any additional services to the Company in an amount in excess of $120,000.
                                        


Kraton Corporation                                         38


Selecting Performance Metrics and Setting Associated Goals
    Our Compensation Committee takes a holistic approach to selecting performance metrics and setting associated goals under the incentive compensation programs. It recognizes the importance of achieving an appropriate balance between rewarding executives for strong performance over both the short and long term and establishing realistic targets that continue to motivate and retain executives. The incentive compensation programs provide for measurable, rigorous performance targets that while achievable, also challenge executives to drive business results that produce stockholder value.
Considerations in Setting Rigorous Performance Metrics and Goals
The Company's short- and long-term strategy
Publicly disclosed long-term financial targets
The Company's historical performance, year-over-year and against its peer group
Peer group data and market statistics regarding executive compensation performance metrics
Targets that are established to encourage a level of risk-taking that is appropriate, but not unreasonable, in the context of the Company’s business strategy
Targets that are structured to avoid excessive risk-taking by using a variety of performance goals that apply over performance periods of varying lengths
For each of the performance metrics, our Compensation Committee may certify the performance anywhere from 0% to 200% (and, for ICP, +/- 10% due to the safety multiplier)
Mix of absolute and relative performance metrics

GOALS FOR 2020 ICP PERFORMANCE METRICS
Our Compensation Committee selected metrics that align with our Company's strategy, as detailed in "—Our Strategy and Performance" while bolstering our sustainable business model, including our commitment to the well-being of our employees and the communities in which we operate.
ADJUSTED EBITDA
Threshold
0.3x
Target
1.0x
Stretch
2.0x
Consolidated
$200 million
$230 million
$270 million
Polymer Segment$110 million$130 million$150 million
Chemical Segment$90 million$100 million$120 million
Adjusted EBITDA is a key metric used by our management, our Board and our stockholders to measure the operational strength and performance of our business. For 2020, our Compensation Committee set Adjusted EBITDA targets by evaluating the Company's historical performance, the historical performance of peers, the approved business plan, and stockholder expectations. Our Compensation Committee also set Segment Adjusted EBITDA goals for our segment Presidents to achieve a closer alignment between segment business results and executive compensation. In setting the 2020 goals, our Compensation Committee considered the known risks and uncertainties facing the Company at the time, including, but not limited to, market fundamentals, pricing pressure, and demand for our products, particularly in China and broader Asia.
Our Adjusted EBITDA goals exclude 2020 income from our Cariflex business prior to its sale on March 6, 2020 to Daelim Industrial Co., Ltd. ("Daelim"), and exclude non-cash deferred income under our isoprene rubber supply agreement with Daelim ("IRSA"). Therefore, Adjusted EBITDA calculations for 2020 ICP will differ from our publicly reported Adjusted EBITDA, which includes such items.
                                        


Kraton Corporation                                         39


CONSOLIDATED NET DEBT
Threshold
0.3x
Target
1.0x
Stretch
2.0x
$846 million
$806 million
$766 million
Recognizing the Company’s strategic deleveraging plan, our Compensation Committee set 2020 consolidated net debt (excluding the effect of foreign currency) targets in line with stockholder expectations and Company forecasts, and with a year-over-year percentage improvement. Given the Company's exposure to non-U.S. debt, our Compensation Committee continues its practice of excluding the effect of foreign currency from its calculation of consolidated net debt by holding foreign exchange constant based on 12/31 of the prior year.
SAFETY MULTIPLIER
-10%+10%
>0.75 TRIR
0.75-0.4 TRIR
<0.4 TRIR
Our Compensation Committee selected safety as a sustainability metric to align compensation with the Company's commitment to the well-being of its employees and the communities in which it operates. For 2020, our Compensation Committee reviewed 2019 data from the American Chemistry Council ("ACC") and Company historical performance in arriving at these safety goals. Based on the 2019 ACC data, a TRIR of 0.40 would place the Company in the top quintile of medium size companies. The goals reinforce continuous improvement and meaningful progress in safety over the prior year's performance.

GOALS FOR 2020 LTIP PERFORMANCE METRICS
CUMULATIVE ADJUSTED EBITDA
Threshold
0.3x
Target
1.0x
Enhanced
1.5x
Stretch
2.0x
2020$200$230$250$270
2021****
2022****
Cumulative****
Our Compensation Committee believes that cumulative Adjusted EBITDA is a performance metric that drives multi-year performance and long-term value creation, and is more directly in the control of management. Additionally, cumulative Adjusted EBITDA reflects the current business realities of the Company and is a metric by which our Board, management and stockholders measure our year-over-year performance. As an absolute metric, alongside rTSR as a relative metric, cumulative Adjusted EBITDA also ensures a direct alignment between long-term equity compensation and stockholder interests.
The first year of the cumulative Adjusted EBITDA goal aligns with the consolidated Adjusted EBITDA ICP goals; however, the goals in the second and third years are designed to promote continuous performance and are aligned with long-term strategic goals. In setting the targets, our Compensation Committee evaluated historical performance and set realistic targets for the Company's current business. Cumulative Adjusted EBITDA projections are competitively sensitive information; therefore, they will be disclosed only in our future proxy statements as performance periods are completed.
                                        


Kraton Corporation                                         40


RELATIVE TSR
Threshold
0.5x
Target
1.0x
Stretch
2.0x
30th Percentile
50th Percentile
75th Percentile
In response to stockholder feedback to include relative measures and to include measures that directly align executive compensation to stockholder value creation, our Compensation Committee uses rTSR as a metric to provide an external benchmark of our relative performance. The achievement levels determined by our Compensation Committee have remained the same since inception of the metric and are prevalent from a market perspective. Our Compensation Committee, in consultation with its independent compensation consultant, has set the two times performance target at the 75th percentile because it is challenging for the Company to achieve top quartile performance repeatedly over multiple performance cycles. For a list of the peer group for rTSR, see "— Principles and Philosophy of the Compensation Program — Our Peer Groups and Survey Data — TSR Peer Group."
                                        


Kraton Corporation                                         41


Principles and Philosophy of the Compensation Program
´What are our Compensation Committee's Principles and Philosophies?
Provide a base salary and incentive compensation that attracts, motivates, retains and rewards high quality executives through competitiveness in the marketplace
Target total direct compensation at, or near, the 50th percentile of the Compensation Peer Group
Focus on granting compensation in the form of long-term equity and variable, or "at risk," compensation to promote alignment of our NEOs’ long-term interests with those of our Company and our stockholders
Avoid compensation practices that may encourage excessive risk taking or have a material adverse effect on the Company
Ensure compensation design is considered against a compensation peer group and TSR peer group that is appropriate and comparative
TOTAL DIRECT COMPENSATION PHILOSOPHY
Our Compensation Committee looks to total direct compensation for each NEO to determine the individual elements of compensation. To assist our Compensation Committee in designing the 2020 compensation program, Farient evaluated the total direct compensation paid to our executive officers against that paid to individuals holding comparable roles at companies in our Compensation Peer Group and additional survey data. Our Compensation Committee considers each component of compensation and aims to establish total direct compensation for our executives at, or near, the 50th percentile of the Compensation Peer Group to facilitate recruitment and retention while avoiding excessive compensation. Our Compensation Committee reserves the right to exercise its independent business judgment in determining the compensation of our NEOs or deviating from this target.
FOCUS ON EQUITY AND VARIABLE COMPENSATION
Targeted total direct compensation for 2020 reflects our Compensation Committee’s focus on granting a significant portion of total compensation in the form of variable compensation and long-term equity. In our Compensation Committee’s judgment, this focus is intended to align our NEOs’ long-term interests with those of our Company and our stockholders by linking a significant portion of the compensation with our Company’s performance. The value of variable compensation (RSUs, PRSUs, and ICP) fluctuates based on Company performance and the market value of our common stock, taking into account both short-term business performance and long-term share performance.
Analysis of 2020 Total Direct Targeted CompensationCEOOther NEOs
Proportion of pay subject to specific quantitative performance criteria50%45%
Proportion of pay at-risk (variable compensation)81%67%
Proportion of pay delivered in the form of long-term equity 62%44%
Our CEO
19%
Base Salary

19%
Target ICP

31%
RSUs (Time)

31%
PRSUs (Target)

81% Variable and At-Risk
Our Other NEOs
33%
Base Salary

23%
Target ICP

22%
RSUs (Time)

22%
PRSUs (Target)

67% Variable and At-Risk
                                        


Kraton Corporation                                         42


OUR PEER GROUPS AND SURVEY DATA
To ensure that our executive compensation program is competitive with a strong link to relative stock performance, our Compensation Committee reviews survey data and proxy data, and maintains two peer groups to evaluate and determine components of our executive compensation program. For our CEO and CFO, pay data is solely comprised of proxy disclosures and for our General Counsel pay data is comprised of a mix of proxy disclosures and survey data. For all other executives pay data is comprised solely of survey data.  The survey data is published by, among other entities, Mercer and Willis Towers Watson, which is adjusted by regression analysis to account for company size.
COMPENSATION PEER GROUP
Along with survey data, the Compensation Peer Group is used to understand and evaluate how certain NEO’s total direct compensation compares with the total direct compensation provided to individuals in similar roles within the peer group and then in determining such NEO’s total targeted compensation. With the assistance of Farient, our Compensation Committee comprehensively reviews, and subsequently revises, the prior peer groups and establishes the new appropriate peer groups. Companies are evaluated as a peer company based on the following screening criteria:
Universe
è
Evaluate Industry and Size
è
Evaluate Specific Business Model
è
Potential Peer Group
Traded on major US exchange
Headquartered in the U.S.
Specialty / Diversified Chemicals Industry
0.4x to 2.5x Kraton's Revenue(1)
Product applications focused on manufacturing processes
Customer Base
% of non-US revenue
Refined for exceptions based on strategic relevance or business fit before approving final fiscal year peer group
(1)     The median revenue for our 2020 Compensation Peer Group is $2 billion.

2020 Compensation Peer Group
Ashland Global Holdings Inc.GCP Applied Technologies, Inc.Quaker Chemical Corp.
Albemarle Corp.H.B. Fuller Co.Rayonier Advanced Materials Inc.
AvientIngevity Corporation PQ Group Holdings, Inc.
Celanese Corp.Innospec, Inc.Sensient Technologies Corp.
The Chemours Corp.Int'l Flavors & Fragrances, Inc.Stepan Co.
Element Solutions Inc. Minerals Technologies, Inc.Trinseo S.A.
Ferro Corp.Newmarket Corp.W.R. Grace & Co.



                                        


Kraton Corporation                                         43


TSR PEER GROUP
The TSR Peer Group is used to (1) assess rTSR performance, (2) determine any payout related to the rTSR portion of our PRSUs, and (3) provide additional data points to assist the Compensation Committee in goal setting pursuant to the performance metric. Our TSR Peer Group includes all companies in the Russell 3000® Index with revenue in excess of $200 million that are classified as diversified chemicals or specialty chemicals, as well as any entities in our Compensation Peer Group that are not captured in such group.
2020 TSR Peer Group
2020 Compensation Peer Group
Ecolab Inc.
OMNOVA Solutions Inc.(1)
Axalta Coating Systems Ltd.
FutureFuel Corp.
PPG Industries, Inc.
Balchem Corporation
Huntsman Corporation
RPM International Inc.
Chase Corporation
Innophos Holdings, Inc.(1)
The Sherwin-Williams Company
DuPont de Nemours, Inc.
Livent Corporation
Valhi, Inc.
Eastman Chemical Company
LSB Industries, Inc.
(1)     Peer company was subsequently removed from the 2020 TSR Peer Group due to acquisition.

COMPENSATION RISK ASSESSMENT
As part of the process undertaken to design and implement our compensation program, our Compensation Committee evaluated our compensation policies, practices and plans to evaluate whether they encourage excessive risk taking. In undertaking this evaluation, our Compensation Committee reviewed gain-sharing plans at our manufacturing sites, our equity and cash incentive plan, discretionary recognition award programs, and sales compensation plans. In addition, our Compensation Committee consulted with Farient which opined that none of our compensation policies, practices, or plans, encourages employees to take unreasonable risks related to our business. Based upon the Compensation Committee’s detailed review and assessment, the Compensation Committee determined that risks arising from our compensation policies, practices, and procedures are designed to avoid encouragement of unnecessary or excessive risk-taking and are not reasonably likely to have a material adverse effect on the Company.
                                        


Kraton Corporation                                         44


PAY-FOR-PERFORMANCE
Our Compensation Committee considers realized and realizable pay in determining our CEO’s compensation, which reflects its continuing focus on pay-for-performance. The charts below show, for each of the last three years, the difference between the LTIP and ICP compensation (1) for our CEO as reported in the summary compensation table, (2) that our CEO actually realized, and (3) that our CEO could have realized at the end of each given year based on our closing stock price on such date.
Base SalaryLong Term Equity Incentive Awards (LTIP)Annual Cash Incentive Compensation (ICP)Option Awards
$ in millions
chart-f9092bdf72b349619c01a.jpgchart-4433e10ff0994bc98c71a.jpgchart-e3275b46c93f4ee98b41a.jpg
(1)    The targeted value for our CEO's Long-Term Equity Incentive Awards remained the same for 2018 through 2020, at $3.25 million. However, the Reported value of these awards changes yearly due to the grant date fair value for the market-related TSR component of the PRSUs, which is determined using a Monte Carlo simulation model.
(2)    Reflects the value realized from the vesting of stock awards as reported in the Option Exercises and Stock Vested table for the given year. The Company has not granted any stock options since 2014, and all of the CEO's exercisable stock options expire in or before 2024.
(3)    Reflects the value that could have been realized from the vesting of stock awards granted in the year, based on the closing price for our common stock on the NYSE on the last trading day of the year. The valuation: (i) assumes vesting at target for the 2019 and 2020 PRSUs; and (ii) uses a certified performance of 100% of target for the 2018 PRSUs.

Factors Affecting Realized and Realizable Pay
201820192020
Realized pay is affected by our CEO's exercise of 137,081 stock options granted in 2010.
The LTIP Awards value decreased between Reported and Realizable pay due to a $22 stock price depreciation between the grant date and December 31.
The above-target Realized pay amount for LTIP is due to a $24 stock price appreciation between the award's 2015 grant date and 2018 vest date.
Realized pay is affected by our CEO's exercise of 39,496 stock options granted in 2010.
The value of the LTIP Awards decreased between Reported and Realizable pay due to a $10 stock price depreciation between the grant date and December 31.
The value of the LTIP Awards increased between Reported and Realizable pay due to a $17 stock price appreciation between the grant date and December 31. See also, "Timing and Amounts of our 2020 Grants" on page 51.
The below-target Realized pay amount for LTIP is due to a $17 stock price depreciation between the award's 2017 grant date and 2020 vest date.
                                        


Kraton Corporation                                         45


Compensation Decisions and Results
FixedVariable
Base SalaryCash Incentive Compensation (ICP)+
Restricted Stock Units


(3-Year Ratable Vest)
+
Restricted Stock Performance Units

(3-Year Performance Period)
Annual IncentiveLong-Term Incentive Compensation
ICPè
   Adjusted EBITDA
(75%)
 Consolidated Net Debt
(25%)
Safety Multiplier (+/- 10%)
Long-Term Incentive Compensation
è
RSUs
(50%)
PRSUs
(50%)
Relative TSR (50%)
Cumulative Adjusted EBITDA
(50%)
Stock Price Exposure
COVID-19: OUR RESPONSE AND IMPACT ON EXECUTIVE COMPENSATION
Management continues to successfully steer the Company through the unprecedented COVID-19 pandemic with proactive actions, including the below, intended to protect our employees, stockholders, and business, and preserve our ability to maximize future performance.
For our Employees: Prioritized their health, safety and financial wellbeing
Instituted a work-from-home policy for office personnel and provided a one-time payment to support their needs to outfit a more functional or ergonomically friendly home workspace.
Provided a one-time payment to regular manufacturing and laboratory employees in gratitude of their services as essential workers during the pandemic.
Implemented social-distancing, shift rotations, visitor restrictions, paid time off protocols, and other heightened safety protocols at our facilities and research labs.
Managed the business to avoid pandemic-related furloughs and workforce reductions and to maintain our annual merit increase program for our employees.
Provided access to Teladoc (in the U.S.), a resource providing medical and behavioral care, paid for COVID-19 testing and treatment of COVID-19 illnesses, and provided mental health counseling.
Opted into the 401(k) Loan Deferment Program under the CARES Act.
Implemented a dedicated COVID-19 crisis management team.
For our Business and Stockholders: Mitigated financial impacts and ensured continuous operations
Focused on cost-reduction, delivering approximately $20 million of annual cost savings.
Ensured liquidity by increasing, and extending the maturity of, our ABL Facility and refinancing our 7.0% Senior Unsecured Notes with 4.25% Senior Unsecured Notes, resulting in annual cash interest savings of approximately $11 million.
Favorably positioned the Company to benefit from raw material pricing dynamics.
Maximized sales opportunities in medical and personal protective equipment end-markets.
Held cross-functional, multi-regional meetings to address challenges in real-time and regularly informed our Board about major pandemic-related matters impacting our business and employees.
                                        


Kraton Corporation                                         46


PANDEMIC-RELATED COMPENSATION DECISIONS
Our Company experienced adverse demand trends in key applications including tires, automotive, oilfield, and lubricant/fuel additives as a result of COVID-19. While demand trends improved in the second half of 2020, COVID-19 continued to modestly affect sales volumes, particularly in our Chemical segment. We are unable to predict the pandemic's impact on our business and results of operations for 2021 and beyond due to numerous uncertainties, including the severity and duration of the pandemic, additional actions that may be taken by governmental authorities, and other unintended consequences. Throughout the pandemic, our Compensation Committee regularly discussed how to fairly recognize management’s substantial achievements in navigating the pandemic and incentivize future growth, while accounting for long-term stockholder value and business realities.
Annual Cash Incentive Compensation (ICP)
To guide its decision making, our Compensation Committee relied on its compensation principles and philosophies and, in consultation with Farient, decided to appropriately reward management's adaptability and successful execution of evolving business priorities. Accordingly, our Compensation Committee approved a discretionary adjustment to increase the Adjusted EBITDA calculations under the Company's 2020 ICP. For the quantitative impacts of such adjustment, see "Discretionary Adjustments for COVID-19 Impacts" on page 49. The Company applied the discretionary adjustment to all of the Company's global employees eligible for ICP.
Other Elements of Compensation
Our Compensation Committee did not make any other pandemic-related compensation decisions. For example, our Compensation Committee did not make off-cycle cash or equity grants, award premium priced stock options, make mid-year salary adjustments, or apply discretionary adjustments to long-term equity incentive compensation calculations as a direct result of COVID-19.
BASE SALARY
Our Compensation Committee conducts an annual review of executive base salary. For our CEO and our CFO, our Compensation Committee reviewed proxy data from the Compensation Peer Group. For our other executive officers, our Compensation Committee reviewed published survey data. Our Compensation Committee targets base salary at, or near, the 50th percentile in our Compensation Peer Group, consistent with our compensation philosophy.
Our Compensation Committee starts with a review to establish total direct compensation and then determines the component parts. Base salary accounted for approximately 19% and 33% of 2020 targeted total direct compensation, for our CEO and our other NEOs as a group, respectively. Our Compensation Committee believes these levels promote the attraction and retention of our NEOs. In addition, our Compensation Committee believes that keeping the balance weighted towards variable performance-based compensation serves the best interests of the Company and its stockholders. The base salary determinations for our CEO and for all NEOs were as follows:
Named Executive Officer
2020 Base Salary ($)
Change from 2019
2021 Base Salary($)Change from 2020
Kevin M. Fogarty 1,000,000-1,000,000-
Atanas H. Atanasov500,0005.1%500,000 -
Holger R. Jung 410,0002.5%410,000 -
Marcello C. Boldrini410,0002.5%410,000 -
James L. Simmons450,0005.7%460,000 2.2%
CEO Base Salary
Our Compensation Committee has not increased our CEO's Base Salary since 2018.
                                        


Kraton Corporation                                         47


ANNUAL CASH INCENTIVE COMPENSATION
    The purpose of ICP is to promote the interests of our Company and our stockholders by providing variable cash compensation opportunities based on the delivery of key annual performance metrics. Such purpose is designed to contribute to the short-term performance of our Company.     
FORMULA FOR CALCULATING 2020 ICP
The 2020 ICP payout for each of our NEOs was calculated using the following formula:
ICP Target
Base SalaryXTarget ICP PercentageXCompany Factor±Safety Multiplier

CALCULATION OF 2020 ICP
Based on the above formula, the ICP payout for each of our NEOs was calculated as follows:
ICP Target
Named Executive Officer
 Base Salary ($)X
Target ICP Percentage
XCompany Factor±Safety Multiplier
Kevin M. Fogarty 1,000,000100%1.4131.1 (10%)
Atanas H. Atanasov500,00070%1.4131.1 (10%)
Holger R. Jung 410,00070% 1.4951.1 (10%)
Marcello C. Boldrini410,00070% 1.3321.1 (10%)
James L. Simmons450,00065% 1.4131.1 (10%)

ICP Target
ICP Target is the product of Base Salary and Target ICP Percentage. Base Salaries and Target ICP Percentages were approved in February 2020.
Target ICP Percentages
Our Compensation Committee did not increase the Target ICP Percentages of any NEO for 2020.
    
Company Factor
Our Compensation Committee established threshold, target and stretch targets for the performance metrics, which provided a multiplier that could range from 0.3, if the threshold target is achieved, to 2.0, assuming the Company met or exceeded the stretch target. Therefore, depending on actual performance, the actual ICP payout can range from zero to two times ICP Target. For 2020, our Compensation Committee determined the Company Factor based on the following formulas and calculations:

Formula for CEO, CFO and General Counsel
Adjusted EBITDA FactorConsolidated Net Debt Factor
Consolidated Adjusted EBITDA
Multiplier
x0.75+
Consolidated Net Debt
Multiplier
x0.25
                                        


Kraton Corporation                                         48


Formula for Segment Presidents(1)
Adjusted EBITDA FactorConsolidated Net Debt Factor
Consolidated Adjusted EBITDAx0.375+
Consolidated Net Debt
Multiplier
x0.25
Segment Adj. EBITDA
Multipliers
x0.375
(1)     Dr. Jung is the Polymer Segment President, and Mr. Boldrini is the Chemical Segment President.
2020 Certified Performance and Associated Multipliers
In determining Adjusted EBITDA and Consolidated Net Debt multipliers based upon performance against goals, our Compensation Committee made the following calculation adjustments:
Discretionary Adjustments for COVID-19 Impacts
As discussed above in "— COVID-19: Our Response and Impact on Executive Compensation," our Compensation Committee approved a discretionary adjustment to Adjusted EBITDA due to management's performance despite challenges created by COVID-19. The discretionary adjustment increased each of consolidated Adjusted EBITDA and Chemical Segment Adjusted EBITDA by approximately $3.7 million, reflecting the Company's estimate of the net impact of COVID-19 on the business following management's mitigating actions. The adjustment did not have any impact on Polymer Segment Adjusted EBITDA. In determining the discretionary adjustment, our Compensation Committee, in consultation with Farient, netted any benefit from travel and entertainment savings as a direct result of COVID-19.

As a result of the adjustment, ICP payout increased $77,261 for our CEO and $102,858 for our other NEOs collectively. The discretionary adjustment also benefited the entire ICP eligible workforce.
Consolidated Net Debt Calculation Considerations
Our Compensation Committee adjusted the calculation of the 2020 consolidated net debt, excluding the effect of foreign currency, to deduct transaction fees, premiums, and expenses related to the Company's Cariflex divestiture, amendment and restatement of its ABL Facility in April 2020, and the December 2020 refinancing of its ABL Facility and private placement of its 4.25% Senior Unsecured Notes. The 4.25% coupon on our Senior Unsecured Notes will provide for annual cash interest savings of approximately $11 million. Adjusting for the impact of Board-approved refinancings and transactions is consistent with our Compensation Committee's long-term historical methodology and ensures that management is not disincentivized to optimize the Company's capital structure.

The exclusions listed above reduced consolidated net debt, excluding the effect of foreign currency, by approximately $53 million equating to an approximate 0.31 improvement to the Consolidated Net Debt factor. As a result of the adjustment, ICP payout increased $314,568 for our CEO and $382,672 for our other NEOs collectively.

                                        


Kraton Corporation                                         49


Including such calculation adjustments detailed above, our Compensation Committee certified the below Adjusted EBITDA and Consolidated Net Debt multipliers based upon performance against goals. The resulting 2020 Actual Multiplier for each metric was weighted based on the formula above to determine the final Company Factor for the NEOs.
Multiplier Goals
($ in millions)Threshold
0.3x
Target
1.0x
Stretch
2.0x
2020 Actual Multiplier
|
| 238.7
|
Consolidated Adjusted EBITDA(1)
200
230
2701.2173
138.7
Polymer Segment Adj. EBITDA(1)
110
130
1501.436
100
Chemical Segment Adj. EBITDA(1)
901001201.0
761.2
Consolidated Net Debt(2)
846806
766
2.0
(1)    Reported consolidated Adjusted EBITDA, Polymer Segment Adjusted EBITDA and Chemical Segment Adjusted EBITDA were $262.1 million, $167.5 million and $94.6 million, respectively. 2020 ICP goals were set to exclude 2020 income from our Cariflex business prior to its sale on March 6, 2020, and non-cash deferred income under our IRSA.
(2)    Excludes the effect of foreign currency.

Safety Multiplier
For each NEO, total payout was adjusted by +10% based on the Company attaining a TRIR of 0.31, placing us in the top 15 percent of peer companies according to ACC's 2019 data.
+10%-10%2020 TRIR2020 Factor
Total Recordable Incidence Rate
<0.4
>0.4 - <0.75
> 0.75
0.31
+10%
CERTIFIED PAYOUTS FOR 2020 ICP
    As a result of the above calculations, we paid the following cash incentive compensation to our NEOs for the 2020 performance year:
Named Executive Officer
2020 ICP Total ($)
Kevin M. Fogarty 1,554,300 
Atanas H. Atanasov544,005 
Holger R. Jung 471,972 
Marcello C. Boldrini420,512 
James L. Simmons454,633 
2021 DESIGN FOR ANNUAL CASH INCENTIVE COMPENSATION
Based on analysis from Farient, our Compensation Committee decided to maintain the design of the 2020 ICP program for 2021. The Adjusted EBITDA, Consolidated Net Debt and Safety Multiplier performance targets for 2021 will be disclosed in our 2022 proxy statement. Additionally, for 2021, Target ICP Percentages for our NEOs are unchanged from 2020, with the exception of Mr. Atanasov, whose Target ICP Percentage increased from 70% to 75%. Any compensation paid under our 2021 ICP will be paid in cash around March 15, 2022.
                                        


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LONG-TERM EQUITY INCENTIVE COMPENSATION
    For 2020, the targeted long-term equity incentive compensation for our NEOs was comprised of one-half RSUs and one-half PRSUs. RSUs are a useful retention tool that require an executive to continue to work for the Company during the three-year ratable vesting period. PRSUs, settled in shares of common stock of the Company, further align the interests of our executives with those of our stockholders because such awards vest, if at all, based upon the achievement of performance targets that indicate the successful operation of our business and the creation of stockholder value.
Evolution of our Program Design
In consultation with Farient, our Compensation Committee structured our 2020 LTIP by (1) re-allocating the weighting of RSUs and PRSUs from ⅓ and ⅔ of the total grant value, respectively, to a 50/50 weighting of the total grant value and (2) incorporating cumulative Adjusted EBITDA as a performance metric in lieu of cumulative ROCE. Our Compensation Committee re-allocated the weighting of RSUs and PRSUs to maintain alignment with the practices of our peer companies and to ensure competitive compensation and the retention of talent. For details surrounding our Compensation Committee's decision to incorporate cumulative Adjusted EBITDA as a performance metric, please see page 54.

RSU AND PRSU GRANTS FOR 2020 AND 2021
In each of 2020 and 2021, our Compensation Committee approved long-term equity incentive compensation to our NEOs at targeted amounts, resulting in the following grants:
Named Executive OfficerYear
RSUs (#)(1)
PRSUs (#)(2)
Targeted LTIP Value ($)
Kevin M. Fogarty2020159,119 159,119 3,250,000 
202142,070 42,070 3,350,000 
Atanas H. Atanasov202044,064 44,064 900,000 
202111,302 11,303 900,000 
Holger R. Jung202027,417 27,418 560,000 
20217,033 7,033 560,000 
Marcello C. Boldrini202022,032 22,032 450,000 
20216,279 6,280 500,000 
James L. Simmons202022,032 22,032 450,000 
20215,902 5,903 470,000 
(1)    All RSUs are subject to three-year ratable vesting.
(2)    PRSUs are reported at target levels and vest three-years from the date of grant in an amount, if at least the threshold level of performance is achieved, ranging (i) for 2020, from 0.3x to 2.0x target level depending on performance against the Compensation Committee's established metrics for the achievement of cumulative Adjusted EBITDA and rTSR; and (ii) for 2021, from 0.5x to 2.0x target level depending on performance against the Compensation Committee's established metrics for the achievement of cumulative Adjusted EBITDA and rTSR.
Timing and Amount of our 2020 Grants
Our Compensation Committee granted the 2020 grants of RSUs and PRSUs on March 2, 2020, being the third business day following the release of our earnings for the fourth quarter and full year 2019. This timing followed the Company's historical practice for the annual grant and coincides with the open trading window for the Company's insiders. Therefore, as with prior years, the grant date and number of shares were determined by formula and not selectively by our Compensation Committee. Our NEOs' Target LTIP Value for 2020 was equal to, or less than, their respective values for 2019.
                                        


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CALCULATION OF 2018 PRSU ATTAINMENT LEVEL
In 2018 our Compensation Committee granted PRSUs with a three-year performance period through December 31, 2020 ("2018 PRSUs"). For the 2018 PRSUs, our Compensation Committee certified a performance at 100% of target. The disclosure below details how our Compensation Committee calculates cumulative ROCE results, including, for the 2018 PRSUs, adjustments to the calculation to reflect the sale of the Cariflex business and exclude the Company's goodwill impairment charge, and the rTSR results.
Cumulative Return on Capital Employed (Cumulative ROCE)
    Our Compensation Committee determines cumulative ROCE by comparing the cumulative net operating profit over the three-year performance period against a range of cumulative Return Percentage (defined below) levels over the same three-year performance period. The following steps outline how the Compensation Committee determined the cumulative ROCE for outstanding PRSUs:
1
Calculate the Cumulative Net Operating Profit (for the three-year period)
    Net Operating Profit is Adjusted EBIT, net of taxes at a specified rate. Net Operating Profit for each year in the performance period is aggregated to obtain cumulative Net Operating Profit.
2
Calculate the Cumulative Return Percentage Levels (for the three-year period)
    Each year, our Compensation Committee determined the threshold, target or stretch Return Percentage levels by multiplying our average capital employed (being the annual average of total assets, less excess cash greater than $50 million, less total current liabilities, plus the current portion of long-term liabilities, all determined on a U.S. GAAP basis) by the Return Percentages for each year determined by the Compensation Committee (and disclosed annually) to ensure a meaningful improvement on our performance.
The below provides an example of the calculation described in Step 2:
Year OneYear TwoYear ThreeCumulative
Threshold (0.5x Target)Avg. Capital Employed x Return Percentage+Avg. Capital Employed x Return Percentage+Avg. Capital Employed x Return Percentage=Threshold Return Percentage
Target (1.0x Target)Avg. Capital Employed x Return Percentage+Avg. Capital Employed x Return Percentage+Avg. Capital Employed x Return Percentage=Target Return Percentage
Stretch (2.0x Target)Avg. Capital Employed x Return Percentage+Avg. Capital Employed x Return Percentage+Avg. Capital Employed x Return Percentage=Stretch Return Percentage
3Compare the Cumulative Net Operating Profit (Step 1) to the Cumulative Return Percentage Levels (green column from Step 2) to determine the performance factor for cumulative ROCE.
    Our Compensation Committee then compared the cumulative net operating profit over the performance period to the range of cumulative Return Percentage levels over the same period to determine the vesting factor.
Relative TSR (rTSR)
Relative TSR is measured by the change in stock price over the three-year performance period (calculated using the closing price on the last trading day of the applicable years), plus reinvestment of
                                        


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dividends on the ex-dividend date. This number is then compared to the applicable TSR Peer Group (as discussed above), with the payout based on our percentile rank relative to such TSR Peer Group.
ROCE Calculation Considerations
Our Compensation Committee adjusted the calculation of the 2020 ROCE calculation to:
exclude the Company's $400 million non-cash goodwill impairment charge, reported in the third quarter of 2020. The inclusion of the goodwill impairment charge would have decreased capital employed and would have improved the ROCE calculation, which our Compensation Committee did not deem appropriate. While this exclusion did not impact the attainment level for the 2018 PRSUs, it may reduce the attainment levels for the 2019 PRSUs; and
reflect the sale of the Cariflex business, which resulted in a cash gain on sale of $355.8 million ($175.2 million recognized as a GAAP gain on sale and $180.6 million related to the IRSA and amortized over the life of that agreement). In determining the treatment of the transaction, our Compensation Committee, in consultation with Farient, considered how the transaction significantly improved leverage, increased the Company's enterprise valuation, created cash value accretion, ensured liquidity, and unlocked significant stockholder value. Without this adjustment Net Operating Profit would have been $283,261. This adjustment reflects a realized value (see "—Certified Payout for 2018 PRSUs" below) of approximately $2.1 million for our CEO and approximately $1.0 million for our NEOs collectively. This increase in realized value represents a relatively low valuation compared to the Cariflex disposition's significant value to the Company and its stockholders.
CERTIFIED PAYOUTS FOR 2018 PRSUs
As a result of the calculations detailed above, our Compensation Committee certified the below results.
ROCE (50%)Relative TSR (50%)
Threshold (0.5x Target)
$504,950
Threshold (0.5x Target)
30th Percentile
Target (1.0x Target)
$582,192
Target (1.0x Target)
50th Percentile
Stretch (2.0x Target)
$676,981
Stretch (2.0x Target)
75th Percentile
Actual Net Operating Profit (with taxes at 21%)
$722,186Actual Relative TSR
12.4th Percentile
Attainment of 200%Attainment of 0%
50% Weighting x 200% Attainment = 100%
50% Weighting x 0% Attainment = 0%

Named Executive Officer(1)
# Shares at Target
Value of Grant(2)
# Shares at Vest
Realized Value(3)
Kevin M. Fogarty48,047$2,555,98048,048$2,067,025
Holger R. Jung8,870$471,8628,870$381,587
Marcello C. Boldrini6,653$353,9236,654$286,255
James L. Simmons6,653$353,9236,654$286,255
(1)    Mr. Atanasov was not granted any 2018 PRSUs because he was not an employee of the Company at the time.
                                        


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(2)    The grant-date fair value for PRSUs is computed in accordance with FASB ASC Topic 718. For a discussion of the assumptions used in calculating the fair value of our stock-based compensation, refer to Note 6, Share-Based Compensation, in the Notes to Consolidated Financial Statements contained in our 2018 Annual Report.
(3)    The realized value was calculated based on the closing price of our common stock on February 23, 2021, the date that the 2018 PRSUs fully vested, which was $43.02.

UPDATE ON THE OUTSTANDING PERFORMANCE CYCLES FOR OUR 2019 PRSUs
In 2020, we completed the second year of the three-year performance period for our 2019-2021 PRSUs. Although the cumulative ROCE levels will not be determined until the end of the performance period, and may vary significantly following next year’s financial results and any discretionary adjustments, the table below shows the current financial status of the cumulative ROCE achievement for our outstanding 2019 PRSUs. As with our calculation for the 2018 PRSUs, our calculations for the 2020 performance year (1) reflect the $355.8 million gain for the sale of the Cariflex business, included in Net Operating Profit, but (2) exclude the goodwill impairment charge of $400 million.
2019 - 2021 PRSUs201920202021Cumulative 2019/2020
Threshold (0.5x Target)
$2,614,262 x 6.6% $172,541
+
$2,506,744 x 6.7%
167,952
+
$TBD x 6.9%
=$340,493
Target
$2,614,262 x 7.5% $196,070
+
$2,506,744 x 7.8%
195,526
+
$TBD x 8.0%
=$391,596
Stretch (2.0x Target)
$2,614,262 x 8.0% $209,141
+
$2,506,744 x 8.5%
213,073
+
$TBD x 8.7%
=$422,214
Actual Net Operating Profit (with taxes at 21%)
$138,586+$403,061+$TBD=$541,647

UPDATE ON THE OUTSTANDING PERFORMANCE CYCLES FOR OUR 2020 PRSUs
In 2020, we completed the first year of the three-year performance period for our 2020-2022 PRSUs. Although the cumulative Adjusted EBITDA levels will not be determined until the end of the performance period, and may vary significantly following subsequent years' financial results and any discretionary adjustments, for 2020, our Adjusted EBITDA calculation for our PRSUs was approximately $235 million, resulting in a current attainment of approximately 112.63%.
´Why Cumulative Adjusted EBITDA?
Our Compensation Committee structured our 2020 LTIP to include cumulative Adjusted EBITDA as a performance measure because it is:
an absolute metric that, alongside rTSR as a relative metric, ensures a direct alignment between long-term equity compensation and stockholder interests;
a key metric used by our Board, management and stockholders to analyze our year-over-year performance and represents a longer-term view of performance (as opposed to our short-term ICP design); and
reflective of current business realities and focuses on performance elements in direct control of management.
2021 DESIGN FOR LONG-TERM EQUITY INCENTIVE COMPENSATION
Working with Farient, our Compensation Committee decided to maintain the design of the 2020 LTIP program for 2021. Relative TSR goals will remain the same as those in 2020. However, cumulative Adjusted EBITDA projections are competitively sensitive information; therefore, they will be disclosed only in our future proxy statements as performance periods are completed.
                                        


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Other Compensation for our NEOs
FRINGE BENEFITS/PERQUISITES
In 2020, we reimbursed Mr. Atanasov for relocation expenses to cover costs he incurred to relocate to our corporate headquarters and provided associated tax gross-up payments. No other material fringe benefits or perquisites were provided to our NEOs in 2020.
SUPPLEMENTAL DISABILITY INSURANCE
Our senior managers and executives, including our NEOs, participate in a supplemental disability insurance program for which the premiums are paid by the Company. The plan provides disability income protection at two-thirds of base salary and annual cash incentive compensation with no maximum benefit. For 2020, annual premiums for our NEOs ranged from approximately $2,430 to $25,203. The Compensation Committee determined that the provision of this benefit was appropriate in order to provide competitive, market-based benefits to our NEOs.
U.S. 401(K) PLAN
Our NEOs are eligible to participate in the Kraton Savings Plan, a broad-based tax-qualified savings plan providing for employer and employee contributions for employees employed within the United States.
NON-QUALIFIED BENEFITS RESTORATION PLAN
Our NEOs who participate in our U.S. 401(k) plan are eligible to participate in a non-qualified benefits restoration plan. This non-qualified plan is intended to restore certain benefits that may not be provided under the tax-qualified savings plan due to certain limitations imposed on tax-qualified plans by the Internal Revenue Code of 1986, as amended (the "IRC").
U.S. PENSION PLAN
Since he was hired prior to October 15, 2005, Mr. Fogarty was afforded an opportunity to participate in our broad-based tax-qualified noncontributory pension plan. Employees hired on or after October 15, 2005 are not eligible to participate in the pension plan. The pension plan was amended in 2005 to provide participants with a choice, which was effective as of January 1, 2006, between (1) continuing to accrue benefits under the final average pay formula provided for under the pension plan or (2) “freezing” benefits under the pension plan in exchange for an enhanced benefit under the Kraton Savings Plan. For participants who chose to receive the enhanced benefit under the Kraton Savings Plan, the final average earnings, service and social security benefit components of the pension formula (as defined in the plan) were frozen as of December 31, 2005. However, such participants will still be credited with service accumulated after December 31, 2005 for purposes of vesting of benefits under the pension plan. As of January 31, 2020, the pension plan has been frozen with no continuing service credit for Mr. Fogarty.
EXECUTIVE SEVERANCE PROGRAM
Certain of our executives, including our NEOs, participate in the Kraton Corporation Executive Severance Program ("Severance Program"). The Compensation Committee believes providing severance to our executive officers is consistent with market practice among our peer companies and, in the business judgment of the Compensation Committee, is necessary for our recruitment and retention goals. Each of the participants in the program has executed a non-competition and confidentiality agreement, which is a condition of participation in the Severance Program.
                                        


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The Severance Program provides for severance payments upon certain events terminating employment. In the event the NEO’s employment is terminated by us without “cause” or by the NEO for “good reason” (as each such term is defined in the Severance Program), Mr. Fogarty would be entitled to 24 months of salary, up to 24 months of medical benefit continuation and a lump-sum payment equal to 2 times the average bonus over the prior three years, and other NEOs would be entitled to 12 months of base salary, up to 12 months medical benefit continuation and a lump-sum payment equal to one times the average bonus over the prior three years. In the event such termination occurs within two years immediately following a "change in control" (as such term is defined in the Severance Program) of the Company, Mr. Fogarty would be entitled to 36 months of salary, up to 36 months of medical benefit continuation and a lump-sum payment equal to three times the target bonus for that year for Mr. Fogarty, and other NEOs would be entitled to 24 months of base salary, up to 24 months of medical benefit continuation and a lump-sum payment equal to two times the target bonus for that year. The Compensation Committee elected these multiples based upon a market assessment of the severance benefits offered by our peer companies and a determination that these levels were consistent with market practice and, therefore, serve our recruitment and retention goals.
Other Compensation Policies
SECTION 162(m) OF THE INTERNAL REVENUE CODE
For 2019, the Compensation Committee reviewed and considered the deductibility of executive compensation under Section 162(m) of the IRC, which provides that the Company may not deduct for federal income tax purposes annual compensation in excess of $1 million paid to certain covered employees, generally including the Chief Executive Officer, the Chief Financial Officer and certain of the Company’s other current and former executive officers.
For taxable years beginning prior to 2018, the $1 million limit did not apply to “qualified performance-based compensation” that met certain requirements under Section 162(m) of the IRC. Our Compensation Committee previously structured certain of the executive compensation plans and arrangements with the goal of meeting such requirements. However, following the Tax Cuts and Jobs Act’s repeal of the Section 162(m) exception for qualified performance-based compensation, effective for taxable years beginning on or after January 1, 2018, compensation paid to our covered employees in excess of $1 million will not be deductible, except with respect to certain “grandfathered” arrangements.
Although the Compensation Committee continues to consider tax deductibility as one of many factors in determining executive compensation, it has not adopted a policy that all compensation must be deductible. Rather, our Compensation Committee gives priority to the overall compensation objectives discussed above, which include alignment with long-term stockholder value creation and retains the flexibility to authorize compensation that is not deductible, consistent with our compensation policies and as determined to be in the bests interests of the Company and its stockholders.
FINANCIAL RESTATEMENT
Our former equity plan, our Kraton Corporation 2016 Equity and Cash Incentive Plan ("2016 Plan") and the Kraton Corporation Amended and Restated 2016 Equity and Cash Incentive Plan ("A&R 2016 Plan") provide that performance-based compensation granted under each such plan is subject to a right of recapture. In the event that a determination that the achievement of a performance goal was based on incorrect data and such goal was in fact not achieved, any compensation under the respective plan that was paid on the basis of the purported achievement of such goal must be returned.
                                        


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EXECUTIVE COMPENSATION RECOUPMENT POLICY
The Company has also adopted an Executive Compensation Recoupment Policy. The policy covers our Section 16 reporting persons under the Exchange Act, which includes our NEOs. The policy provides that we will, to the extent permitted by applicable law, seek to recover, at the direction of the Compensation Committee after it has considered the costs and benefits of doing so, any annual incentive compensation payment, long-term incentive payment or other payment to a covered executive under the following circumstances:
•    the payment was predicated upon achieving certain financial results that were subsequently the subject of a substantial restatement of our financial statements as filed with the SEC;
•    the Compensation Committee determines that the covered executive engaged in fraud or willful misconduct that caused or substantially caused the substantial restatement; and
•    a lower payment would have been made to the covered executive based upon the restated financial results.
In each instance, we will, to the extent practicable, seek to recover from the covered executive the amount by which the Compensation Committee has determined that an incentive payment made in the prior three years to such covered executive for the relevant period exceeded the lower payment that would have been made based on the restated financial results.
    The full text of the Executive Compensation Recoupment Policy was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on September 16, 2013.
EXECUTIVE STOCK OWNERSHIP GUIDELINES
To further align the financial interests of our executives with those of our stockholders, our Board has adopted executive stock ownership guidelines. The guidelines apply to our Section 16 reporting persons under the Exchange Act, which includes our NEOs.
Our guidelines provide that our executives should own an amount of shares equal to a multiple of the executive’s annual base salary as follows:
Covered ExecutiveOwnership Target  
Chief Executive Officer5X
Chief Financial Officer3X
SVP – Segment Presidents2.5X
Chief Technology Officer; SVP – Global Operations1.5X
Other Executives1X
Each executive covered by the guidelines is expected to comply with the ownership target within the five-year period commencing on January 1 of the year following the date on which such executive becomes subject to the guidelines. During the five-year period, such executives are expected to make reasonable progress, as determined by the Compensation Committee, toward their ownership targets. As of December 31, 2020, it was determined that all executives subject to the guidelines had reached, or were making reasonable progress toward, their respective ownership targets.
                                        


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HEDGING, PLEDGING AND TRADING IN STOCK DERIVATIVES
Our Stock Trading Policy prohibits the purchase by our directors or executive officers of financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) that are designed to hedge or offset any decrease in the market value of equity securities of the Company held, directly or indirectly, by any director or executive officer. Our Stock Trading Policy prohibits pledging of any Company stock as security by our directors or executive officers. Our Stock Trading Policy prohibits our employees, including our NEOs, from speculative trading in our common stock, including the trading of stock derivatives, and prohibits the establishment or use of a margin account with a broker-dealer for the purpose of buying or selling securities of the Company.


                                        


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COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with the Company’s management the Compensation Discussion and Analysis included in this Proxy Statement. Based upon such review, the related discussions and such other matters deemed relevant and appropriate to the Compensation Committee, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
Submitted by the Compensation Committee:
Mark A. Blinn
Anna C. Catalano, Chair
Dan F. Smith
Karen A. Twitchell
                                        


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NAMED EXECUTIVE OFFICER COMPENSATION TABLES
Summary Compensation Table
    The following table provides information concerning compensation we paid or accrued on behalf of our NEOs for each of our last three completed fiscal years.
Name  Principal Position
Year 
Salary(7) 
 ($)  
Bonus(7)
($)
Stock Awards
($)
(1)
Non-equity
Incentive Plan
Compensation
($)
(2)
Change in Pension Value and Non-qualified Deferred
Compensation Earnings ($)
(3) 
All Other
Compensation
($)
(4)
Total ($)  
Kevin M. Fogarty
20201,000,000 2,951,459 1,554,300 3,699 153,491 5,662,949 
President and Chief Executive Officer20191,000,000 4,003,915 212,000 4,857 164,101 5,384,873 
2018981,250 3,639,297 623,700 — 174,450 5,418,697 
Atanas H. Atanasov(5)
2020493,750 
150,000(6)
817,332 544,005 322,840 2,327,927 
Executive Vice President, Chief Financial Officer and Treasurer2019311,490 
250,000(6)
1,319,036 46,993 60,903 1,988,422 
2018
Holger R. Jung
2020407,500 
50,000(6)
508,559 471,972 62,529 1,500,560 
Senior Vice President and Polymer Segment President2019400,000 689,896 59,360 67,404 1,216,660 
2018400,000 671,858 149,688 73,943 1,295,489 
Marcello C. Boldrini
2020407,500 408,666 420,512 39,871 1,276,549 
Senior Vice President and Chemical Segment President2019400,000 554,398 59,360 53,963 1,067,721 
2018395,000 503,909 149,688 51,839 1,100,436 
James L. Simmons
2020443,750 
125,000(6)
408,666 454,633 62,555 1,494,604 
Senior Vice President, General Counsel & Secretary2019425,000 554,398 58,565 70,664 1,108,627 
2018418,750 
112,500(6)
503,909 159,044 69,838 1,264,041 
(1)    This column consists of RSUs, RSAs and PRSUs granted pursuant to our prior equity plan and our 2016 A&R Plan or, for Mr. Atanasov for 2019, pursuant to the Company's 2019 Equity Inducement Plan ("Inducement Plan"). Amounts set forth in the Stock Awards column represents the aggregate grant date fair value in accordance with the FASB ASC Topic 718. For the assumptions used in calculating the fair value, refer to Note 6, Share-Based Compensation, in the Notes to Consolidated Financial Statements contained in our 2020 Annual Report.

    Consistent with FASB ASC Topic 718, the table below shows the full grant date fair value for the market-related TSR component for the entire three-year performance cycle for each PRSU and was determined using a Monte Carlo simulation model. Also set forth is the grant date fair value for the performance-related component of the PRSUs (i) based upon the probable outcome of the performance-related component as of the grant date, and (ii) based upon achieving the maximum level of performance under the performance-related component as of the grant date.
Grant Date Value
NameProbable (Target) Outcome of Performance-Related Component Maximum Outcome of Performance-Related ComponentMarket-Related Component
Kevin M. Fogarty
2020$812,507$1,625,013$513,951
2019$1,083,347$2,166,694$1,837,208
2018$1,083,329$2,166,658$1,472,671
Atanas H. Atanasov
2020$225,002$450,004$142,327
2019$250,027$500,054$468,996
Holger R. Jung
2020$140,003$280,006$88,560
2019$186,664$373,329$316,568
2018$199,999$399,997