DEF 14A 1 d92014ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

(Rule 14a-101)

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant             Filed by a Party other than the Registrant

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to §240.14a-12

Cabot Corporation

 

(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  1)

Title of each class of securities to which transaction applies:

      

 

 

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Aggregate number of securities to which transaction applies:

      

 

 

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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

      

 

 

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Total fee paid:

      

 

 

Fee paid previously with preliminary materials.

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

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Amount Previously Paid:

      

 

 

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LOGO

Cabot Corporation

2021 Proxy Statement

The Annual Meeting of Stockholders

of Cabot Corporation will be held virtually:

Thursday, March 11, 2021 at 1:00 p.m. ET

at www.meetingcenter.io/241544347


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LOGO   

Cabot Corporation

Two Seaport Lane

Suite 1400

Boston, MA 02210-2019

United States

 

 

 

January 27, 2021

Dear Fellow Cabot Corporation Stockholders,

You are cordially invited to attend the Annual Meeting of Stockholders of Cabot Corporation (the “Company” or “Cabot”), which will be held virtually on Thursday, March 11, 2021, at 1:00 pm, Eastern Time. In light of the continuing public health impact of the ongoing COVID-19 pandemic and to support the health and safety of the Company’s stockholders and attendees, the Annual Meeting will be held in a virtual meeting format via live webcast at www.meetingcenter.io/241544347, where you will be able to listen to the meeting live, submit questions and vote. The meeting password is CBT2021 and you will need your control number included in your Notice of Internet Availability of Proxy Materials or proxy card. There will be no in-person meeting.

At the Annual Meeting, we will ask you to elect three members of our Board of Directors, provide your advisory approval of our executive compensation, approve the Cabot Corporation Amended and Restated 2017 Long-Term Incentive Plan, and ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for our fiscal year ending September 30, 2021. We will also discuss any other business matters properly brought before the meeting. The attached proxy statement explains our voting procedures, describes the business we will conduct, and provides information about the Company that you should consider when you vote your shares.

We are using the “Notice and Access” method of providing proxy materials to you via the Internet. We are mailing to you a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of the proxy materials and 2020 Annual Report. Notice and Access provides a convenient and environmentally friendly way for you to access Cabot’s proxy materials. The Notice includes instructions on how to access our proxy statement and our 2020 Annual Report and how to vote your shares. The Notice also contains instructions on how to receive a paper copy of the proxy materials and our 2020 Annual Report, if you prefer.

Your vote is very important to us. Whether or not you plan to attend the Annual Meeting, we encourage you to vote promptly. You may vote by mailing a completed proxy card, by phone or the Internet.

Thank you for your continued support of Cabot Corporation.

Sincerely,

 

 

LOGO

SEAN D. KEOHANE

President and

Chief Executive Officer


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LOGO   

Cabot Corporation

Two Seaport Lane

Suite 1400

Boston, MA 02210-2019

United States

Notice of Annual Meeting of Stockholders

 

Date:

March 11, 2021

 

Time:

1:00 p.m., Eastern Time

 

Webcast:

www.meetingcenter.io/241544347

 

Record Date:

You may vote if you were a stockholder of record at the close of business on January 15, 2021.

 

Voting by Proxy:

To ensure that your vote is properly recorded, please vote as soon as possible, even if you plan to attend the annual meeting. Stockholders who own shares in their own name (a record owner) have three options for submitting their vote by proxy: (1) by Internet, (2) by phone or (3) by mail. You may also vote online during the annual meeting by clicking on the Cast Your Vote link at www.meetingcenter.io/241544347. The meeting password is CBT2021. When you access the virtual meeting webpage, have available your control number, which is included on your Notice of Internet Availability of Proxy Materials or proxy card. For further details about voting, please refer to the section entitled “About the Annual Meeting” beginning on page 1 of the attached proxy statement.

 

  If you hold your shares in “street name,” you must follow the instructions of your bank, broker or other nominee in order to direct them how to vote the shares held in your account, or obtain a legal proxy to vote online at the meeting. You must provide your broker, bank or other nominee with instructions on how to vote your shares in order for your shares to be voted on certain non-routine matters presented at the annual meeting. If you do not instruct your broker, bank or other nominee on how to vote in the election of directors, the advisory approval of the compensation of our named executive officers, or the approval of the Cabot Corporation Amended and Restated 2017 Long-Term Incentive Plan, your shares will not be voted on these matters. For an explanation of how you can vote your “street name” shares at the meeting, see “How do I vote?” on page 4.

 

Items of Business

  To elect three directors, Cynthia A. Arnold, Douglas G. Del Grosso and Christine Y. Yan, to the class of directors whose term expires in 2024;

 

 

  To approve, in an advisory vote, our executive compensation;

 

 

  To approve the Cabot Corporation Amended and Restated 2017 Long-Term Incentive Plan;

 

 

  To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2021; and

 

 

  To transact such other business as may properly come before the annual meeting or any adjournment or postponement thereof.

This notice and proxy statement are first being made available to stockholders on or about January 27, 2021. Our 2020 Annual Report is available at http://www.edocumentview.com/cbt.

By order of the Board of Directors,

Jane A. Bell

Secretary

Boston, Massachusetts 02210-2019

January 27, 2021


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2021 PROXY STATEMENT   

 

 

 

 

Table of Contents

 

About the Annual Meeting

    1  

Board Leadership, Structure, Governance and Composition, and Risk Management

    6  

Important Factors in Assessing Director Qualifications

    6  

How We Assess Director Independence

    9  

Corporate Governance Guidelines

    9  

Our Leadership Structure—Non-Executive Chair of the Board; Executive Sessions

    10  

How our Board Operates

    10  

Environmental, Social and Governance (“ESG”) Oversight and Activities

    14  

How We Evaluate the Board’s Effectiveness

    14  

Our Board’s Role in Risk Oversight

    14  

Governance

    16  

Proposal 1 — Election of Directors

    16  

Certain Information Regarding Directors

    17  

Other Governance Policies and Practices

    22  

Transactions with Related Persons

    22  

Stockholder Engagement

    23  

Procedures for Stockholders to Recommend Director Nominees

    23  

Director Attendance at Meetings

    23  

Code of Business Ethics

    23  

Communications with the Board

    23  

Director Compensation

    24  

Director Compensation Table

    26  

Beneficial Stock Ownership of Directors, Executive Officers and Persons Owning More Than Five Percent of
Common Stock

    27  

Executive Compensation

    29  

Compensation Committee Report

    29  

Compensation Discussion and Analysis

    29  

Summary Compensation Table

    50  

Grant of Plan-Based Awards Table

    52  

Outstanding Equity Awards at Fiscal Year-End Table

    54  

Option Exercises and Stock Vested Table

    55  

Pension Benefits

    55  

Deferred Compensation

    57  

Potential Payments Upon Termination or Change in Control

    59  

CEO Pay Ratio

    63  

Proposal 2 — Advisory Approval of Executive Compensation

    64  

Proposal 3 — Approval of Cabot Corporation Amended and Restated 2017 Long-Term Incentive Plan

    66  

Audit Committee Matters

    74  

Audit Committee Report

    74  

Audit Fees

    75  

Audit Committee Pre-Approval Policy

    75  


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2021 PROXY STATEMENT   

 

 

 

 

About the Annual Meeting

 

Cabot Corporation

Two Seaport Lane, Suite 1400

Boston, Massachusetts 02210-2019

Proxy Statement

References to “the Company”, “Cabot”, “we”, “us”, and “our” in this proxy statement mean Cabot Corporation.

About the Annual Meeting

Who is soliciting my vote?

The Board of Directors of Cabot Corporation is soliciting your vote at the 2021 Annual Meeting of Stockholders (“2021 Annual Meeting” or the “meeting”).

What am I voting on?

You are voting on:

 

 

Proposal 1: Election of Cynthia A. Arnold, Douglas G. Del Grosso and Christine Y. Yan to the class of directors whose term expires in 2024 (see page 16);

 

 

Proposal 2: Advisory approval of our executive compensation (commonly referred to as “say-on-pay”) (see page 64);

 

 

Proposal 3: Approval of the Cabot Corporation Amended and Restated 2017 Long-Term Incentive Plan (see page 66);

 

 

Proposal 4: Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2021 (see page 76); and

 

 

Any other business properly coming before the meeting.

How does the Board recommend that I vote my shares?

The Board’s recommendation can be found with the description of each item in this proxy statement. In summary, the Board recommends that you vote:

 

 

FOR each of the three nominees for director;

 

 

FOR the advisory approval of our executive compensation;

 

 

FOR the approval of the Cabot Corporation Amended and Restated 2017 Long-Term Incentive Plan; and

 

 

FOR the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2021.

Who is entitled to vote?

Only stockholders of record at the close of business on January 15, 2021 will be entitled to vote at the 2021 Annual Meeting. As of that date, there were 56,614,121 shares of our common stock outstanding. Each share of common stock is entitled to one vote. There is no cumulative voting.

What is the difference between a stockholder of record and a stockholder who holds stock “in street name”?

If you hold your shares directly in the form of stock certificates or in book-entry form with our transfer agent, Computershare, then you are a “stockholder of record.” If your shares are registered at Computershare in the name of a broker, bank, trustee, nominee or other similar holder of record, your shares are held in “street name.”

 

CABOT CORPORATION    1


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2021 PROXY STATEMENT   

 

 

About the Annual Meeting (continued)

 

 

 

Who can attend the meeting?

The 2021 Annual Meeting is open to all Cabot stockholders entitled to vote at the meeting and their legal proxies by following the instructions below under the heading “How can I attend the 2021 Annual Meeting?” You need not attend the 2021 Annual Meeting to vote.

How can I attend the 2021 Annual Meeting?

In light of the continuing public health impact of the ongoing COVID-19 pandemic and to support the health and safety of the Company’s stockholders and attendees, the 2021 Annual Meeting will be held in a virtual meeting format via live webcast. There will be no in-person meeting.

Visit www.meetingcenter.io/241544347 to attend the meeting. The meeting password is CBT2021. To attend the meeting, stockholders of record as of January 15, 2021 will not need to register in advance but will need the control number included on their Notice of Internet Availability of Proxy Materials or proxy card. Stockholders whose shares are held in “street name” may attend the meeting by registering and obtaining a control number in advance using the instructions below under the heading “How do I register to attend the 2021 Annual Meeting?” The control number will be required to attend the meeting.

The meeting webcast will begin promptly at 1:00 p.m., Eastern Time. We encourage you to access the meeting prior to the start time. You should allow ample time for the check-in procedures.

We are committed to ensuring that stockholders will be afforded the same rights and opportunities to participate as they would at an in-person meeting. You will be able to attend the meeting online, vote your shares electronically and submit questions during the meeting by visiting www.meetingcenter.io/241544347. We will try to answer as many stockholder-submitted questions as time permits that comply with the meeting rules of conduct. However, we reserve the right to edit inappropriate language or to exclude questions that are not pertinent to meeting matters or that are otherwise inappropriate. If we receive substantially similar questions, we will group such questions together and provide a single response to avoid repetition.

How do I register to attend the 2021 Annual Meeting?

If you were a stockholder of record on January 15, 2021, you do not need to register in advance to attend the 2021 Annual Meeting. Please follow the instructions on the Notice of Internet Availability of Proxy Materials or the proxy card that you received.

If you hold your shares in “street name,” you must register and obtain a control number in advance to attend, vote and ask questions at the virtual meeting. To register to attend the meeting you will need to obtain a legal proxy from your bank, broker or other nominee. Follow the instructions provided to you by your bank, broker or other nominee or contact them to request a legal proxy form. Once you have received a legal proxy from them, you must submit the form of legal proxy provided by your bank, broker or other nominee reflecting the number of your shares along with your name and email address to Computershare. Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on March 8, 2021. After Computershare receives your registration materials, you will receive a confirmation email from Computershare of your registration and control number.

Requests for registration may be directed to Computershare as follows:

 

  1.

by email – send an email with your legal proxy information attached to legalproxy@computershare.com, labeled as “Legal Proxy.”

 

  2.

by mail – send your legal proxy information, labeled as “Legal Proxy,” to Computershare at the following address:

Computershare

Cabot Corporation Legal Proxy

P.O. Box 43001

Providence, RI 02940-3001

 

2    CABOT CORPORATION


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2021 PROXY STATEMENT   

 

 

About the Annual Meeting (continued)

 

 

 

Why did I receive a “Notice of Internet Availability of Proxy Materials” but no proxy materials?

We are distributing our proxy materials to stockholders via the Internet under the “Notice and Access” approach permitted by rules of the Securities and Exchange Commission (“SEC”). This approach benefits the environment, while providing a timely and convenient method of accessing the materials and voting. On January 27, 2021, we will begin mailing a “Notice of Internet Availability of Proxy Materials” to stockholders, which includes instructions on how to access our proxy statement and our 2020 Annual Report and how to vote your shares. The Notice of Internet Availability of Proxy Materials also contains instructions on how to receive a paper copy of the proxy materials and our 2020 Annual Report, if you prefer.

How many votes must be present to hold the meeting?

Your shares are counted as present at the 2021 Annual Meeting if you attend the meeting or if you properly return a proxy by Internet, telephone or mail. In order for us to hold our meeting, holders of a majority of our outstanding shares of common stock as of January 15, 2021 must be present or represented by proxy at the meeting. This majority is referred to as a quorum. Shares present virtually during the 2021 Annual Meeting will be considered shares of common stock present at the 2021 Annual Meeting. If you are a stockholder of record, your shares are counted as present at the 2021 Annual Meeting if you properly return a proxy by Internet, telephone or mail or if you attend the meeting virtually. If you hold your shares in “street name,” you must follow the instructions of your bank or broker in order to direct them how to vote the shares held in your account, or obtain a legal proxy to vote online at the meeting. Proxy cards or broker voting instruction forms that reflect abstentions and broker non-votes will be counted as shares present to determine whether a quorum exists to hold the 2021 Annual Meeting.

What is a broker non-vote?

Under the rules that govern brokers who have record ownership of shares that they hold in “street name” for their clients who are the beneficial owners of the shares, brokers normally have discretion to vote such shares on routine matters, such as ratifications of independent registered public accounting firms, but not on non-routine matters. Broker non-votes generally occur when the beneficial owner of shares held by a broker does not give the broker voting instructions on a non-routine matter for which the broker lacks discretionary authority to vote the shares. Proposals 1, 2 and 3 are non-routine matters.

Therefore, if your shares are held in “street name” and you do not provide instructions as to how your shares are to be voted on proposals 1, 2 and 3, your broker will not be able to vote your shares on these proposals. We urge you to provide instructions to your broker so that your votes may be counted on these important matters.

How are votes counted? How many votes are needed to approve each of the proposals?

For each of proposals 1, 2, 3 and 4, you may vote “FOR”, “AGAINST”, or “ABSTAIN”.

 

 

Proposal 1 — Election of Directors. Pursuant to our bylaws, a nominee will be elected to the Board of Directors if the votes properly cast “for” his or her election exceed the votes properly cast “against” such nominee’s election. Broker non-votes and abstentions will have no effect on the results of this vote.

 

 

Proposal 2 — Say-on-Pay. Because proposal 2 is an advisory vote, there is no minimum vote requirement that constitutes approval of this proposal.

 

 

Proposal 3 — Approval of the Cabot Corporation Amended and Restated 2017 Long-Term Incentive Plan. The affirmative vote of a majority of the votes properly cast on proposal 3 is required to approve the Cabot Corporation Amended and Restated 2017 Long-Term Incentive Plan. Abstentions will have the effect of votes against this proposal. Broker non-votes will have no effect on the results of this vote.

 

 

Proposal 4 — Ratification of Independent Registered Public Accounting Firm. The affirmative vote of a majority of the votes properly cast on proposal 4 is required to ratify the appointment of Cabot’s independent registered public accounting firm. Under Delaware law, abstentions are not considered “votes cast” and, therefore, will have no effect

 

CABOT CORPORATION    3


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2021 PROXY STATEMENT   

 

 

About the Annual Meeting (continued)

 

 

 

 

on the results of this vote. Brokers generally have discretionary authority to vote on the ratification of our independent registered public accounting firm, thus we do not expect any broker non-votes on this proposal. To the extent there are any broker non-votes, they will also have no effect on the results of this vote.

What if there are more votes “AGAINST” a nominee for director than votes “FOR”?

Each of the nominees is an incumbent director who has tendered a conditional resignation that is effective upon (i) the failure to receive a majority of the votes cast for his or her re-election at the 2021 Annual Meeting and (ii) the Board’s acceptance of this resignation. The Governance and Nominating Committee of the Board of Directors (the “Governance Committee”) would be responsible for initially considering the resignation and making a recommendation to the Board of Directors. The director whose resignation is under consideration is expected to abstain from participating in any decision regarding his or her resignation. The Governance Committee may consider any factors it deems relevant in deciding whether to accept a director’s resignation. If the resignation is not accepted, the director will continue to serve until his or her successor is elected and qualified.

How do I vote?

You can vote either online during the meeting or by proxy without attending the meeting. For additional information on how to attend the meeting, please refer to “How can I attend the 2021 Annual Meeting?” above. Even if you plan to attend the 2021 Annual Meeting, we encourage you to vote your shares by proxy. Stockholders of record have three options for submitting their votes by proxy:

 

  1.

by Internet – go to www.envisionreports.com/CBT and follow the instructions on the secure site,

 

  2.

by phone – call the toll-free number 1-800-652-VOTE and follow the instructions on your proxy card and the recorded telephone instructions, or

 

  3.

by mail – mark, sign and date the proxy card and return it promptly in accordance with the voting instructions on your proxy card.

In order for your vote to be counted, you must return your completed and signed proxy card so that it is received by mail by the Company’s transfer agent by March 10, 2021, vote by Internet or by phone until the start of the meeting, or vote at the virtual meeting if you are attending.

If you hold your shares in “street name,” you must follow the instructions of your bank, broker or other nominee in order to direct them how to vote the shares held in your account, or obtain a legal proxy to vote online at the meeting. Please follow the directions on your voting instruction form carefully.

How do I vote if I hold my stock through the Cabot 401(k) plan?

The Vanguard Fiduciary Trust Company is the trustee of the Cabot Common Stock Fund and the Cabot Common ESOP Fund portions of the Cabot 401(k) plan and is the record owner of all of those shares. If you hold Cabot stock through the Cabot 401(k) plan, you have the right to instruct Vanguard how to vote your shares. Vanguard will tabulate the voting instructions of each participant in the plan and will vote the shares of all participants by submitting a final proxy card representing the plan’s shares for inclusion in the tally at the 2021 Annual Meeting.

Your vote will influence how Vanguard votes those shares for which no instructions are received from other plan participants as those shares will be voted in the same proportion as shares for which instructions are received. If you hold shares in the plan and do not vote, Vanguard will vote your shares (along with all other shares in the plan for which instructions are not provided) in the same proportion as those shares for which instructions are received from other participants in the plan.

In order for your instructions to be followed, you must provide instructions for the shares you hold through the Cabot 401(k) plan by returning your completed and signed proxy card so that it is received by the Company’s transfer agent by March 8, 2021 or by voting by telephone or over the Internet by 9:00 a.m., Eastern Time, on March 9, 2021.

 

4    CABOT CORPORATION


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2021 PROXY STATEMENT   

 

 

About the Annual Meeting (continued)

 

 

 

Can I change or revoke my vote?

Yes. You can change or revoke your vote by (1) re-voting by telephone or over the Internet as instructed above (only your latest telephone or Internet vote will be counted), (2) signing and dating a new proxy card or voting instruction form and submitting it as instructed above (only your latest proxy card or voting instruction form will be counted), or (3) attending the meeting and voting online, if you are a stockholder of record or hold your shares in “street name” and have obtained a legal proxy from your bank, broker or other nominee. If your shares are registered in your name, you may also revoke your vote by delivering timely notice to the Secretary, Cabot Corporation, Two Seaport Lane, Suite 1400, Boston, Massachusetts 02210. Attending the meeting will not in and of itself revoke a previously submitted proxy unless you specifically request it. If you hold shares through a bank or broker, you must follow the instructions on your voting instruction form to revoke or change any prior voting instructions.

Who counts the votes?

We have hired Computershare Trust Company, N.A., our transfer agent, to count the votes represented by proxies cast by ballot, telephone and the Internet. A representative of Computershare and either Cabot’s Secretary or Assistant Secretary will act as Inspectors of Election.

What if I return my proxy card but don’t vote for some of the matters listed?

If you return a signed proxy card without indicating your vote, your shares will be voted in line with the recommendation of the Board of Directors for each of the proposals for which you did not indicate a vote.

Can other matters be decided at the 2021 Annual Meeting?

We are not aware of any other matters that will be considered at the 2021 Annual Meeting. If any other matters properly arise that require a vote, the named proxies will vote in accordance with their best judgment.

What is “householding” and how does it affect me as a stockholder?

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements. This means that only one copy of this proxy statement may have been sent to multiple stockholders in the same household. We will promptly deliver a separate copy of this proxy statement to any stockholder upon request to: Secretary, Cabot Corporation, Two Seaport Lane, Suite 1400, Boston, Massachusetts 02210. Any stockholder who wants to receive a separate copy of this proxy statement, or of our proxy statements or annual reports in the future, or any stockholder who is receiving multiple copies and would like to receive only one copy per household, should contact the stockholder’s bank, broker, or other nominee record holder, or the stockholder may contact us at the address and phone number above.

Important Notice Regarding the Availability of Proxy Materials for the 2021 Annual Meeting

This proxy statement and our 2020 Annual Report on Form 10-K are available at the following Internet address:

http://www.edocumentview.com/CBT.

 

CABOT CORPORATION    5


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2021 PROXY STATEMENT   

 

 

 

Board Leadership, Structure, Governance and Composition, and Risk Management

 

As a leading global specialty and performance materials company, we value integrity, respect, excellence and responsibility. We are committed to living these values every day as they are an integral part of the way we conduct our business. Our “Advancing the Core” strategy articulates how we intend to deliver sustained and attractive total shareholder return, built on earnings growth and a balanced capital allocation framework. Our Board is responsible for overseeing the execution of our strategy, and in doing so, the Board seeks to provide leadership as the Company navigates the challenges, not only from the ongoing COVID-19 pandemic, but also from issues around climate change, technological innovation and an evolving regulatory climate. The Governance Committee is charged with reviewing the composition of the Board and recommending board refreshment as appropriate so that the Board as a whole reflects a range of talents, skills, diversity and expertise needed to meet the evolving needs of our Company and its businesses in this changing landscape and to oversee the execution of our strategy.

Important Factors in Assessing Director Qualifications

Director Qualifications. The Governance Committee strives to maintain an engaged, independent board with broad and diverse experience and judgment that is committed to representing the interests of our stakeholders. Board candidates as well as nominees for re-election are evaluated in the context of the current composition of the Board of Directors and in relation to the Board’s current and anticipated requirements. We expect our directors and any candidate or nominee to have integrity and to demonstrate high ethical standards. The Committee also considers a wide range of factors when assessing director qualifications, including:

Ensuring an experienced, qualified Board with expertise in areas relevant to Cabot. The Committee seeks directors who have held significant leadership positions and can bring to the Board specific types of experience relevant to Cabot. It is the Board’s policy that the Board as a whole reflect a range of talents, skills and expertise, particularly in these areas:

 

 

Management Leadership and Strategic Planning Experience. We believe that directors who have held significant leadership positions over an extended period of time possess strong leadership qualities and demonstrate a practical understanding of organizations, processes, strategy and risk management and know how to drive change and growth. As a publicly traded company, we value experience on the boards of other publicly traded companies and other complex organizations.

 

Specialty Chemicals or Adjacent Industry and Operations Experience. We have sought directors with leadership and operational experience in specialty chemicals or adjacent industries and the value chains in which we operate.

 

Global Experience. We value directors with global business experience because our continued success depends, in part, on growing our businesses outside the United States. Further, we have significant manufacturing operations outside the U.S., and, as in recent prior years, a majority of our revenues came from outside of the U.S. in fiscal 2020.

 

Accounting and Finance Experience. We use a broad set of financial metrics to measure our performance, and accurate financial reporting and robust auditing are critical to our success.

 

Technology and Market Experience. As a science and technology company and an innovator, we value directors with an understanding of technology and material science and the value chains in which we participate. We seek to grow by developing new products and formulations and identifying new applications and markets for our materials. Under our “Advancing the Core” strategy, this is critical as we continue to intensify our focus on application innovation and formulated solutions.

Enhancing the Board’s diversity of background. As a global company, we consider diversity an essential element of our culture. At the Board level and throughout our company we value the benefits we receive from different perspectives and strive for a talented and diverse workforce and a diverse Board that is representative of our global business, customers, employees and stockholders. In evaluating the suitability of individual Board nominees, the Governance Committee takes into account many factors, including general understanding of the disciplines relevant to the success of

 

6    CABOT CORPORATION


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2021 PROXY STATEMENT   

 

 

Board Leadership, Structure, Governance and Composition, and Risk Management (continued)

 

 

 

a publicly traded company with global manufacturing operations in today’s business environment, professional experience, background, education, skill, age, race, gender and national origin. Our Corporate Governance Guidelines include diversity of origin, gender, background, experience and thought as important director selection criteria and, given this, we do not have a separate formal written policy that solely addresses diversity. The Governance Committee reviews its effectiveness in balancing these considerations when assessing the composition of the Board.

Individual Attributes. The Board believes that to function effectively, all directors should demonstrate sound judgment, compassion, a willingness and ability to work with other members of the Board openly and constructively and the ability to communicate clearly and persuasively, and to dedicate the time sufficient to ensure the diligent performance of their duties on our behalf.

Complying with the Board’s independence guidelines. When selecting and recruiting candidates, the Board looks at other positions the candidate has held or holds, including other board memberships, as well as the candidate’s other relationships, to determine whether any material relationship with Cabot exists that could impair the candidate’s independence.

 

CABOT CORPORATION    7


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2021 PROXY STATEMENT   

 

 

Board Leadership, Structure, Governance and Composition, and Risk Management (continued)

 

 

 

As highlighted in the graphics below, which reflect the current composition of the Board, other than Mr. Wrighton, who is retiring effective as of the 2021 Annual Meeting, we believe the Board as a whole possesses a balanced mix of the talents, skills, diversity, expertise, tenure and independence needed to meet the evolving needs of the Company and its businesses and to oversee the execution of our Advancing the Core strategy. The numbers of directors counted as possessing a qualification or expertise indicates a specific area of focus or expertise that the director brings to the Board and does not mean that directors not counted do not possess such qualifications or expertise. More details on each director’s qualifications, skills and expertise are included in the director biographies on the following pages.

 

 

LOGO

 

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Board Leadership, Structure, Governance and Composition, and Risk Management (continued)

 

 

 

Candidate Recommendations. We identify candidates for election to the Board of Directors through the business networks of the directors and management and from recommendations made by third-party search firms upon the request of the Governance Committee. Over the past year, the Governance Committee retained a search firm to help identify potential candidates. We evaluate candidates recommended by our stockholders in the same manner and on the same basis as candidates recommended by our directors, management or third-party search firms. Mr. Del Grosso was initially identified as a candidate for election to the Board by a third-party search firm, and upon the recommendation of the Governance Committee, the Board elected Mr. Del Grosso a director effective April 2020. In considering Mr. Del Grosso’s candidacy, the Board considered how Mr. Del Grosso’s significant leadership experience and global operational expertise within the automotive sector would enhance the Board’s depth and capabilities to oversee our Advancing the Core strategy.

Board Refreshment. A number of changes have occurred in our Company’s Board of Directors over the past several years as part of our continuing efforts to ensure that our Board has the right skills and tenures to best oversee management and the execution of our strategy and the associated risks. Taking into account the upcoming retirement of Mr. Wrighton, approximately one-third of our directors have joined the Board in the last two years. Our Board does not have a mandatory retirement policy. With respect to director tenure, the Board is of the view that a mix of tenures that takes into consideration appropriate levels of continuity, institutional memory and fresh perspectives is critical in achieving and maintaining a high-performing board. The Board will continue to proactively manage its composition and make-up to ensure it has the appropriate mix of tenures and the requisite skills to address the Company’s current and future needs.

How we Assess Director Independence

The Board’s Guidelines. It is the Board’s policy that at least the majority of the Board’s members must be independent under our Corporate Governance Guidelines. The Governance Committee annually reviews the independence of all directors and reports its findings to the full Board. Following the retirement from the Board in March 2020 of our former President and CEO, Mr. Prevost, all of our current directors have been “independent” under the Board’s director independence standards, other than Mr. Keohane, our President and CEO. For a director to be considered independent, the Board must determine that he or she does not have any material relationship with Cabot. The Board’s guidelines for director independence are consistent with the independence requirements in the New York Stock Exchange’s listing standards. In addition to applying these guidelines, the Board evaluates all relevant facts and circumstances in making an independence determination. In assessing director independence, the Board considers all known relationships, transactions and arrangements among directors, their family members, and Cabot. The Board concluded that none of the non-management directors who served as directors during the 2020 fiscal year, other than Mr. Prevost, had a material relationship with Cabot.

Corporate Governance Guidelines

Our Board of Directors has adopted Corporate Governance Guidelines that address director qualifications and independence, Board Committees, director compensation, Board performance evaluations, Board and Committee meetings, access to senior management, and Chief Executive Officer (“CEO”) performance evaluation and succession planning, among other matters. Many of the Board’s practices and policies set out in these Guidelines are described throughout this discussion of Board Leadership, Structure, Governance and Composition and Risk Management. The Corporate Governance Guidelines are posted on our website (www.cabotcorp.com) under the heading “Company — About Cabot – Governance – Resources.”

 

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Board Leadership, Structure, Governance and Composition, and Risk Management (continued)

 

 

 

Our Leadership Structure — Non-Executive Chair of the Board; Executive Sessions

Sue H. Rataj has served as Non-Executive Chair of the Board of Directors since March 9, 2018.

Although our Corporate Governance Guidelines do not require that our Chair and Chief Executive Officer positions be separate, our Board believes that this leadership structure is appropriate at this time because it allows our Chief Executive Officer to focus on the strategic and operational aspects of our business, while allowing the Non-Executive Chair of the Board to provide independent leadership for the Board. Our Board recognizes that future circumstances may lead it to change the leadership structure depending on Cabot’s needs at the time and, as such, believes that it is important to retain flexibility. In the future, if the Chief Executive Officer also serves as Chair of the Board, our Corporate Governance Guidelines require that an independent director be appointed annually as lead director to set the agenda for and lead the executive sessions of the non-management directors at Board meetings and to undertake such other responsibilities as the independent directors designate.

Key Responsibilities. Our Non-Executive Chair of the Board focuses on the Board’s processes and ensuring it is prioritizing the right matters. Specifically, the Chair has the following responsibilities, and may perform other functions at the Board’s request:

 

 

presiding over meetings of our Board and stockholders, including executive sessions of the non-management directors;

 

serving as an ex-officio member of each Board committee of which he or she is not a member and, upon invitation, attending those committee meetings where possible;

 

establishing an agenda for each Board meeting in collaboration with our CEO and meeting with our CEO following each meeting to discuss any open issues and follow-up items;

 

facilitating and coordinating communication among the non-management directors and our CEO and an open flow of information between management and our Board;

 

in collaboration with the Governance Committee, leading our Board’s annual performance review;

 

meeting with each non-management director at least annually;

 

providing assistance to our CEO by attending selected internal business management meetings and meeting with our CEO as necessary;

 

coordinating the periodic review of management’s strategic plan;

 

in collaboration with the Compensation Committee, leading our Board’s review of the succession plans for our CEO; and

 

working with management on effective stockholder communication and engagement.

How our Board Operates

Our Board of Directors has six scheduled Board meetings to review and discuss Cabot’s performance and prospects as well as the issues we face, with calls and communications between meetings as appropriate. The Board interacts directly with senior management during its meetings. The Board typically dedicates one multiple-day meeting a year to a discussion of longer-term strategic issues the Company faces. During fiscal 2020, the Board met seven times and acted by written consent once.

A significant portion of the Board’s oversight responsibility is carried out through its four operating committees.

Committee Composition. All of the members of our Audit Committee, Governance and Nominating Committee and Compensation Committee satisfy the NYSE’s definition of an independent director.

Committee Operations. Each Committee meets periodically throughout the year, reports its actions to the Board, receives reports from senior management, annually evaluates its performance and can retain outside advisors. Each Committee’s meeting materials are available for review by all directors.

Committee Responsibilities. The primary responsibilities of each Committee are listed below. For more detail about the responsibilities and functions of each Committee, see the Committee charters on our website (www.cabotcorp.com) under the heading “Company — About Cabot — Governance — Resources.”

 

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Board Leadership, Structure, Governance and Composition, and Risk Management (continued)

 

 

 

Audit Committee

Members

 

Michael M. Morrow, Chair

   Frank A. Wilson  

Douglas G. Del Grosso

    

10 meetings in fiscal 2020

Financial Acumen. Mr. Morrow, Mr. Del Grosso and Mr. Wilson are “audit committee financial experts” under SEC rules and each of these directors is “financially literate” under NYSE rules.

Primary Responsibilities

The Audit Committee assists the Board of Directors in its oversight of (i) the integrity of Cabot’s financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent registered public accounting firm’s qualifications and independence, (iv) the performance of our internal audit function and (v) our risk assessment and risk management processes. The Audit Committee, among other functions:

 

 

Has the sole authority to appoint, retain, terminate and determine the compensation of our independent registered public accounting firm.

 

Monitors the qualifications, independence and performance of our independent registered public accounting firm and approves professional services provided by the independent registered public accounting firm.

 

Reviews with our independent registered public accounting firm the scope and results of the audit engagement.

 

Reviews the activities and recommendations of our independent registered public accounting firm.

 

Discusses Cabot’s annual audited financial statements, quarterly financial statements and earnings releases with management and Cabot’s independent registered public accounting firm, as well as our disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

Reviews Cabot’s accounting policies, risk assessment and risk management processes, control systems, legal matters and compliance activities.

During fiscal 2020, the Committee’s other priorities included treasury matters, including cash and debt management; internal controls practices; accounting matters, including those related to the valuation allowance recorded against the Company’s U.S. deferred tax assets, the impairment of certain assets related to the Company’s Purification Solutions business, and the reserve established for potential respirator liabilities; and tax matters. The Committee also discussed the Company’s comprehensive cyber-security risk management programs, data and system testing procedures and cyber incident response plan; and discussed the Company’s corporate compliance program with the members of the Company’s Office of Compliance.

Compensation Committee

Members

 

Matthias L. Wolfguber, Chair

   Mark S. Wrighton*   

William C. Kirby

     

 

*

Mr. Wrighton is retiring effective at the 2021 Annual Meeting.

4 meetings and 3 actions by written consent in fiscal 2020

Primary Responsibilities

The primary responsibilities of the Compensation Committee are to:

 

 

Approve the corporate goals and objectives relevant to the compensation of our CEO, evaluate the CEO’s performance in light of those goals and objectives and, either as a Committee or together with the other independent directors (as directed by the Board), determine and approve the CEO’s compensation level based on this evaluation.

 

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Board Leadership, Structure, Governance and Composition, and Risk Management (continued)

 

 

 

 

Establish policies applicable to the compensation, severance or other remuneration of Cabot’s Management Executive Committee, review and approve performance measures and goals under incentive compensation plans applicable to such employees, and approve their salaries, annual short-term and long-term incentive awards, any severance payments and any other remuneration.

 

Review and approve the aggregate amount of bonuses to be paid to participants in Cabot’s annual short-term incentive program.

 

Administer Cabot’s incentive compensation plans, equity-based plans and supplemental benefits arrangements, which includes approving the aggregate number of shares of stock granted under Cabot’s long-term incentive program.

 

Monitor the activities of the Company’s Investment Committee.

 

Review on a periodic basis reports prepared by management of gender-based pay equity at the Company.

Important items for fiscal 2020 included assessing the effectiveness of our executive compensation programs and establishing appropriate performance measures and goals under our incentive compensation plans for fiscal 2021, in both cases, particularly in light of the impact of the COVID-19 pandemic on the Company’s overall performance in the fiscal year. As part of this review, the Committee made a number of refinements in the financial measures and their relative weighting used in the Company’s short-term and long-term incentive programs for fiscal 2021 to better reflect the Company’s strategy. The Committee also reviewed management’s detailed assessment of gender-based pay equity at the Company, received regular updates of trends and regulatory developments affecting executive compensation, and assessed the market competitiveness of our executives’ compensation.

With respect to Board and Committee oversight of our 2025 Sustainability Goals described below, the Committee will oversee the portion of our goal under Caring for our People and Communities related to retention and development.

Governance and Nominating Committee

Members

 

Sue H. Rataj, Chair

   Michael M. Morrow   

Juan Enriquez

   Matthias L. Wolfgruber   

5 meetings and one action by written consent in fiscal 2020

Primary Responsibilities

The Governance Committee is charged primarily with:

 

 

Developing and recommending to the Board corporate governance policies and procedures.

 

Identifying individuals qualified to become directors of Cabot.

 

Recommending director candidates to the Board to fill vacancies and to stand for election at the annual meeting of stockholders.

 

Recommending Committee assignments.

 

Leading the annual review of the Board’s performance.

 

Recommending compensation and benefit policies for Cabot’s directors.

 

Reviewing and making determinations regarding interested transactions under Cabot’s Related Person Transaction Policy and Procedures.

During fiscal 2020, the Governance Committee continued its focus on Board composition and refreshment, and during the year, Douglas Del Grosso joined our Board. The Committee also introduced a director overboarding policy to our Corporate Governance Guidelines. With respect to our director compensation program, the Committee last formally conducted an assessment of the competitiveness of this program in 2018. Ordinarily, the Committee would have performed this assessment in November 2020 and any changes would have been effective as of January 2021. In light of the impact of the COVID-19 pandemic on the Company, the Committee deferred this assessment until next year.

 

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Board Leadership, Structure, Governance and Composition, and Risk Management (continued)

 

 

 

With respect to Board and Committee oversight of environmental, social and governance (“ESG”) matters generally, while we have not delegated to the Committee oversight of any specific goals under our 2025 Sustainability Goals described below, as noted above, the Committee is charged with reviewing the composition of the Board and refreshing it as appropriate to ensure the Board as a whole reflects a range of talents, skills, diversity and expertise needed to meet the evolving needs of our Company and its businesses.

Safety, Health, Environment & Sustainability (“SHE&S”) Committee

Members

 

Juan Enriquez, Chair    Christine Y. Yan   

Cynthia A. Arnold

     

4 meetings in fiscal 2020

Primary Responsibilities

The SHE&S Committee reviews aspects of Cabot’s safety, health, environmental and sustainability performance, process safety, security, product toxicology and registrations, community engagement and governmental affairs. In particular, the Committee reviews the following:

 

 

Cabot’s environmental reserve and risk management and remediation programs.

 

Environmental and safety audit programs, risk assessments, performance metrics and performance against such metrics.

 

Management processes related to our safety, health, environment and sustainability programs.

During fiscal 2020, particular areas of Committee focus included the Company’s process safety management programs; natural disaster risk management and preparedness, particularly relating to flooding and hurricanes in North America; developments in greenhouse gas regulations around the world and in other environmental regulatory changes in the geographies where we operate, particularly in China; the Company’s planned and anticipated significant environmental-related capital expenditures, and the Company’s environmental remediation activities, as well as the Company’s response to the COVID-19 pandemic with respect to employee health and safety.

With respect to Board and Committee oversight of our 2025 Sustainability Goals described below, the Committee will oversee (i) two goals under the Caring for our People and Communities pillar: community engagement and occupational health and safety, and (ii) all five of the goals under the Acting Responsibly for the Planet pillar: emissions, energy, wastes and spills, water and environmental compliance.

Executive Committee

Members

 

Sue H. Rataj, Chair

   Michael M. Morrow   

Sean D. Keohane

     

One meeting and one action by written consent in fiscal 2020

Primary Responsibilities

The Executive Committee reviews and, where appropriate, approves corporate action with respect to the conduct of our business between Board of Directors’ meetings. Actions taken by the Executive Committee are reported to the Board at its next meeting.

 

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Board Leadership, Structure, Governance and Composition, and Risk Management (continued)

 

 

 

Environmental, Social and Governance (“ESG”) Oversight and Activities

At Cabot, we are committed to operating responsibly, conserving resources and developing innovative performance materials in the pursuit of solutions to the sustainability challenges of our customers, communities and the world. We therefore work to incorporate environmental sustainability, employee safety and well-being, diversity and inclusion and other values into our decision-making in a manner that we believe will both mitigate risk and drive long-term value. We believe that our commitment to ESG matters has historically helped us, and will continue to help us, tap into new markets and expand in existing markets, enable us to reduce costs by implementing sustainable solutions, reduce the risk of regulatory and legal intervention, and increase talent retention and employee productivity.

In fiscal 2020, we adopted our new 2025 Sustainability Goals to further articulate our commitment to ESG matters and facilitate the integration of this commitment into the operation of our business. These goals address 11 topics that we have identified as important to Cabot, and are categorized under the following three pillars: Caring for our People and Communities, Acting Responsibility for the Planet, and Building a Better Planet Together. Our work to achieve each of these goals is resourced by teams across our Company and each goal is sponsored by a member of our Management Executive Committee. Information on these goals and the various ESG-related awards we have received is available on our website at www.cabotcorp.com under the heading “Company – Sustainability”, which information is not part of, or incorporated by reference into, this proxy statement.

With respect to Board oversight of ESG matters in general, rather than concentrating oversight of all ESG initiatives into any one Committee, the Board takes the approach that certain matters are most appropriately overseen by the Board as a whole and for other topics, the most appropriate Committee should maintain oversight. The goals we have established under the Building a Better Planet Together pillar address product sustainability, suppliers’ sustainability, and economic value generated and distributed. We believe each of these goals is most appropriately overseen by the Board as a whole. In addition, the goals we have established with respect to diversity under our Caring for our People and Communities pillar is overseen by the Board as a whole. While our Compensation Committee has oversight of the portion of our goal under Caring for our People and Communities related to retention and development, the Board annually allocates significant time for discussion of talent management and management succession planning, as well as the Company’s diversity and inclusion objectives and achievements, and will continue this practice. The Board’s expectations for Committee oversight of our other 2025 Sustainability Goals is included above with information on the Board Committees, their responsibilities, and areas of risk oversight, under the heading “How our Board Operates”.

How We Evaluate the Board’s Effectiveness

Each year, the Governance Committee leads our Board’s annual evaluation process. The process focuses on the effectiveness of the Board as a whole, prioritizing issues, and identifying specific matters for future discussion. In 2020, our General Counsel solicited feedback from each director based on a series of questions covering Board and Committee membership, operations and responsibilities, as well as open-ended questions so that each director had leeway to provide feedback on the issues he or she believed to be the most pertinent. The key themes, observations and suggestions were summarized and discussed with the Governance Committee and the full Board. Based on these discussions, opportunities to further enhance the Board’s effectiveness have been and are being implemented. In addition, our Non-Executive Chair conducted one-on-one discussions with each director as part of the Board’s annual strategic review meeting.

Our Board’s Role in Risk Oversight

Our Board oversees our enterprise-wide program of risk management. Cabot management is primarily responsible for day-to-day risk management practices and, together with other personnel, regularly engages in an enterprise-wide risk assessment. This assessment is updated on a continual basis and includes a comprehensive review of a broad range of risks, including financial, operational, business, legal, regulatory, reputational, governance and managerial risks which may potentially affect the Company. From this assessment, the most significant risks in terms of their likelihood and severity are identified, and plans to manage and mitigate these risks are developed. Cabot management regularly reports to either the full Board or the relevant Committee of the Board our major risk exposures, their potential

 

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Board Leadership, Structure, Governance and Composition, and Risk Management (continued)

 

 

 

operational or financial impact on Cabot, and the steps we take to manage them. The Company has a robust risk management program, the strength of which, we believe, is not dependent on the Board’s leadership structure.

Our Board has ultimate responsibility for risk oversight and oversees our corporate strategy, business development, capital structure, market concentration and country specific risks. This includes business continuity risks, including from climate-related risks, if identified as having a material impact on our business, strategy or operations. Each Committee also has responsibility for risk oversight within their areas of responsibility and expertise.

Our Board Committee structure provides for risk oversight as follows:

 

 

Audit Committee — focuses on financial risk, including internal controls and legal and compliance risks and receives regular reports from our independent registered public accounting firm, our CFO, our Controller, our Treasurer, our Director of Internal Audit and our General Counsel. The Audit Committee also oversees the Company’s enterprise risk management processes and cybersecurity program.

 

SHE&S Committee — assists the Board in fulfilling its oversight responsibility by reviewing the effectiveness of our safety, health, environment and sustainability programs and initiatives and overseeing matters related to stewardship and sustainability of our products and manufacturing processes.

 

Compensation Committee — considers human resources risks and evaluates and sets compensation programs that encourage decision-making predicated upon a level of risk consistent with our business strategy. The Compensation Committee also oversees senior management succession planning and management leadership development, including leadership development that takes into account the Company’s diversity talent and diversity representation on the slate for key positions, and reviews gender-based pay disparity.

 

Governance Committee — considers governance and Board succession risks, and evaluates director skills and qualifications.

For more information on the Board Committees, their responsibilities, and areas of risk oversight, see the section above under the heading “How our Board Operates”.

Our Compensation Discussion and Analysis (“CD&A”) describes our compensation policies, programs and practices for our named executive officers. Our corporate goal-setting, assessment and compensation decision-making processes described in our CD&A apply to all participants in our corporate short- and long-term incentive programs.

Participants in our long-term incentive program receive awards consisting of time-based restricted stock units and performance-based restricted stock units, and, in the case of members of the Management Executive Committee and a limited number of other participants, stock options. Beyond our corporate short- and long-term incentive programs, a substantial number of our facilities offer an annual cash incentive plan.

The Compensation Committee directed management, working with the Committee’s independent consultant, Meridian Compensation Partners, to provide an evaluation on the design of all of our incentive plans to assess whether any portion of our incentive compensation programs encourages excessive risk taking. That assessment was presented to and reviewed by the Compensation Committee. Among the program features evaluated were the types of compensation offered, performance metrics, the alignment between performance goals, payout curves and the Company’s business strategy, and the overall mix of incentive awards. The Company’s compensation programs are designed with features that mitigate risk without diminishing the incentive nature of the compensation. Specific features of the programs to mitigate risk include, as applicable, the following: caps limiting the amount that can be paid under the corporate short- and long-term incentive programs and all of the local cash incentive programs; a balanced mix of annual and longer-term incentive opportunities; a mix of cash and equity incentives; multiple performance metrics; management processes to oversee risk associated with each of our incentive programs; stock ownership guidelines for members of the Management Executive Committee; a company compensation recoupment policy; and significant controls for important business decisions. In our CD&A we describe in more detail the features of our executive compensation programs that are designed to mitigate risk, including the oversight provided by the Compensation Committee, which reviews and approves the design, goals and payouts under our corporate short- and long-term incentive programs and each executive officer’s compensation. Based on our assessment, we believe our compensation policies, programs and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.

 

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Governance

Proposal 1 — Election of Directors

 

Board of Directors

Our Board of Directors currently has eleven members and is divided into three classes serving staggered three-year terms. Directors for each class are elected at the annual meeting of stockholders held in the year in which the term for their class expires. Three directors are proposed to be elected at the 2021 Annual Meeting. The terms of Cynthia A. Arnold, Christine Y. Yan, and Douglas G. Del Grosso expire at the 2021 Annual Meeting and our Board of Directors has nominated each of them for a three-year term that will expire at the annual meeting in 2024. All of them are current directors and, with the exception of Mr. Del Grosso, have been elected by stockholders at previous annual meetings.

Mark S. Wrighton, whose term of office expires at the 2021 Annual Meeting, is not up for re-election at the 2021 Annual Meeting and will retire from the Board effective at such meeting. Upon the election of the nominated directors, and with Mr. Wrighton’s retirement, Cabot’s Board of Directors will have ten members. We expect that all of the nominees will be available for election, but if any of the nominees is not available at the time of the 2021 Annual Meeting, proxies received will be voted for substitute nominees to be designated by the Board of Directors or, if no substitute nominees are identified by the Board, proxies will be voted for a lesser number of nominees. In no event will the proxies be voted for more than three nominees.

Vote Required

A nominee will be elected to the Board of Directors if the votes properly cast “for” his or her election exceed the votes properly cast “against” such nominee’s election. Abstentions will have no effect on the results of this vote.

Recommendation

The Board of Directors recommends that you vote “FOR” the election of its three nominees.

 

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2021 PROXY STATEMENT   

 

 

Proposal 1 — Election of Directors (continued)

 

 

 

Certain Information Regarding Directors

 

 

 

LOGO

Cynthia A. Arnold

(Nominee for Election)

 

 

Director Since: 2018

Committee Memberships: SHE&S

Term of Office Expires: 2021

Age: 62

Independent

Business Experience:

•  Chief Technology Officer, The Valspar Corporation, a global paints and coatings company, January 2011 until retirement in July 2017

•   Chief Technology Officer, Sun Chemical Corporation, a producer of inks, coatings and supplies, pigments, polymers, liquid compounds, solid compounds and application materials, 2004 to 2010

•   Vice President of Coatings, Adhesives and Specialty Chemicals Technology, Eastman
Chemical Company, a global advanced materials and specialty additives company, 2003-2004

•   Management and technology leadership positions, General Electric Company, a high technology industrial leader, 1994 to 2003

Other Boards and Positions:

•   Member, Supervisory Board, Avantium N.V., a technology company in renewable chemistry (September 2020 to present)

•   Director, Milliken & Company, a global diversified industrial company for specialty chemicals, performance materials and textiles (April 2019 to present)

•   Director, Citrine Informatics, a global AI-driven materials data management company (2019 to present)

•   Member, Advisory Board, University of Minnesota Dept of Chemical Engineering and Materials Science

Dr. Arnold has a depth of global experience in the specialty chemicals industry, particularly in technology and innovation, with an understanding of the value chains and markets in which Cabot participates.

 

   

 

 

LOGO

Douglas G. Del Grosso

(Nominee for Election)

 

 

Director Since: 2020

Committee Memberships: Audit

Term of Office Expires: 2021

Age: 59

Independent

Business Experience:

•   Director, President and Chief Executive Officer, Adient, plc, a global manufacturer of automotive seating, since October 2018

•   President and Chief Executive Officer, Chassix, Holdings, Inc., a supplier of chassis, brake and powertrain components, from 2016 to 2018

•   President and Chief Executive Officer, Henniges Automotive, a provider of sealing systems, anti-vibration components and encapsulated glass systems, from 2012 to 2015

•   Vice President and General Manager, TRW Automotive, a supplier of automotive systems, modules and components, from 2007 to 2012

•   President and Chief Operating Officer, Lear Corporation, a manufacturer of automotive seating and electrical distribution systems, from 2005 to 2007

Other Boards and Positions:

•   Director, National Association of Manufacturers, a trade association representing manufacturers in the United States (2020 to present)

Mr. Del Grosso has significant leadership and global operational experience within the automotive sector and valuable experience in management, strategic planning, manufacturing, risk management and international business and marketing.

 

   

 

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Proposal 1 — Election of Directors (continued)

 

 

 

 

 

LOGO

Christine Y. Yan

(Nominee for Election)

 

 

Director Since: 2019

Committee Memberships: SHE&S

Term of Office Expires: 2021

Age: 55

Independent

Business Experience:

•   Stanley Black & Decker, a global leader in power tools, hand tools and storage solutions, engineered fastening systems and security services:

•  President, Asia 2014 – 2018

•  President, Stanley Storage and Workspace Systems 2013 – 2014

•  President Americas, Stanley Engineered Fastening 2008 – 2013

•  President Global Automotive, Stanley Engineered Fastening 2006 – 2008

Other Boards and Positions:

•   Director, Modine Manufacturing Company, a thermal management company (2014 to present)

•   Director, ON Semiconductor, a provider of energy efficient semiconductor-based solutions (2018 to present)

•   Director, Ansell Limited, a provider of protective industrial and medical gloves (2019 to present)

Ms. Yan has extensive background in automotive, industrial and consumer markets with years of experience in global manufacturing and engineering and significant experience with international business, particularly in Asia.

 

   

 

 

LOGO

Michael M. Morrow

 

 

Director Since: 2017

Committee Memberships: Audit (Chair), Governance

Term of Office Expires: 2022

Age: 64

Independent

Business Experience:

•  Partner, PricewaterhouseCoopers, a public accounting firm, 1986 until retirement in June 2016, as audit partner and in various leadership and governance roles, including Lead Director of PwC’s U.S. Board of Partners

•  Consultant, PwC, June 2016 to June 2017

Other Boards and Positions:

•  Chair, Financial Accounting Standards Advisory Committee (FASAC), an advisory body to the Financial Accounting Standards Board (FASB) (beginning January 2020, and Member from January 2019 to present)

•  Member, Board of Visitors, Wake Forest University School of Business (2011 to 2017)

•  Member, Business Advisory Council, University of Rhode Island School of Business (2010 to 2015)

Mr. Morrow has substantial expertise in accounting, finance and financial reporting matters, and significant leadership, business and corporate governance experience.

 

   

 

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Proposal 1 — Election of Directors (continued)

 

 

 

 

LOGO

Sue H. Rataj

Non-Executive

Chair of the Board

 

 

Director Since: 2011

Committee Memberships: Executive (Chair), Governance (Chair)

Term of Office Expires: 2022

Age: 63

Independent

Business Experience:

•   Chief Executive, Petrochemicals for BP, a global energy company, April 2008 until retirement in April 2011

•   Senior management positions with BP, including Group Vice President, Refining and Marketing, July 2007 to April 2008

Other Boards and Positions:

•   Director, Agilent Technologies, Inc., a global leader providing instruments, software and consumables to laboratories in the life sciences, diagnostics and applied chemical markets (2015 to present)

•   Supervisory Board Member, Bayer AG, a life science enterprise developing and manufacturing products in the pharmaceuticals, consumer health, animal health and crop science segments (2012 to 2017)

Ms. Rataj has substantial management leadership and strategic planning experience, significant expertise in operations, safety, health and environmental matters, risk management, accounting and finance matters, particularly in the context of a chemicals company, as well as corporate governance experience.

 

   

 

LOGO

Frank A. Wilson

 

 

Director Since: 2018

Committee Memberships: Audit

Term of Office Expires: 2022

Age: 62

Independent

Business Experience:

•   Senior Vice President and Chief Financial Officer, PerkinElmer, Inc., a life sciences diagnostics, discovery and analytical solutions company, May 2009 until retirement in May 2018

•   Finance, business development and investor relations leadership positions, Danaher Corporation, a life sciences and industrial conglomerate, 1997 to May 2009

Other Boards and Positions:

•   Director, Alkermes, a fully integrated, global biopharmaceutical company (September 2019 to present)

•   Senior Advisor, Astor Place Holdings, the private investment arm of Select Equity Group, L.P., (2018 to present)

•   Director, Sparton Corporation, a provider of design, development and manufacturing services for electromechanical devices (2015 to March 2018)

Mr. Wilson has significant financial expertise and skills in strategic planning, investor relations and business development within international public companies.

 

   

 

CABOT CORPORATION    19


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2021 PROXY STATEMENT   

 

 

Proposal 1 — Election of Directors (continued)

 

 

 

 

LOGO

Matthias L. Wolfgruber

 

Director Since: 2014

Committee Memberships: Compensation (Chair), Governance

Term of Office Expires: 2022

Age: 67

Independent

Business Experience:

•   CEO, Altana AG, a global specialty chemicals company, 2007 until retirement in January 2016

•   President and CEO, Altana Chemie AG, member of the management board of Altana AG, 2002 to 2007

•   Management positions at Wacker-Chemie in the U.S. and Europe, 1985 to 2002

Other Boards and Positions:

•   Chairman, Lanxess AG, a leading global manufacturer of specialty chemicals and intermediates (May 2018 to present, and Supervisory Board Member from 2015 to 2018)

•   Chairman, Altana AG (May 2020 to present, and Supervisory Board Member from 2016 to 2020)

•   Supervisory Board, Grillo-Werke AG, a manufacturer and supplier of zinc alloy products and chemicals (2014 to announced retirement in March 2021)

•   Chairman, Ardex Group, a global supplier of high-performance specialty building materials (2015 to announced retirement in March 2021)

Dr. Wolfgruber has extensive leadership experience managing specialty chemicals businesses with global operations, with particular expertise in manufacturing, strategic investments and acquisitions.

 

   

 

LOGO

Juan Enriquez

 

 

Director Since: 2005

Committee Memberships: SHE&S (Chair), Governance

Term of Office Expires: 2023

Age: 60

Independent

Business Experience:

•  Chairman and CEO, Biotechonomy Ventures, a life sciences research and investment firm, since 2003

•  Managing Director, Excel Venture Management, a life sciences investment company, since March 2008

•  Director, Life Science Project at Harvard Business School, 2001 to 2003

Other Boards and Positions:

•  Director, various start-up companies

•  Boston Museum of Science (Trustee)

•  American Academy of Arts and Sciences, Trustee

•  Trustee, WGBH

Mr. Enriquez has significant expertise in technology, start-up companies and international business, and leadership experience from his broad experience in technology ventures.

 

   

 

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2021 PROXY STATEMENT   

 

 

Proposal 1 — Election of Directors (continued)

 

 

 

 

LOGO

Sean D. Keohane

 

Director Since: 2016

Committee Memberships: Executive

Term of Office Expires: 2023

Age: 52

Business Experience:

•   President and CEO, Cabot Corporation, since March 2016

•   EVP, President, Reinforcement Materials, November 2014 to March 2016; SVP, President, Performance Chemicals, March 2012 to November 2014; General Manager, Performance Chemicals, May 2008 to March 2012; Vice President in March 2005; joined Cabot Corporation August 2002

•   General management positions, Pratt & Whitney, a division of United Technologies, prior to 2002

Other Boards and Positions:

•   Director, The Chemours Company, a global provider of performance chemicals (2018 to present)

•   Director, American Chemistry Council, a trade association representing the business of chemistry at the global, national and state levels (2016 to present)

Mr. Keohane has a deep understanding of Cabot’s businesses, strong knowledge of the chemicals industry and significant experience in management, strategic planning, manufacturing, international business and marketing.

 

   

 

LOGO

William C. Kirby

 

 

Director Since: 2012

Committee Memberships: Compensation

Term of Office Expires: 2023

Age: 69

Independent

Business Experience:

•   Spangler Family Professor of Business Administration, Harvard Business School; T.M. Chang Professor of China Studies, Harvard University, since July 2008

•   Harvard University Distinguished Service Professor and Chairman of the Harvard China Fund, since July 2006

•   Harvard faculty member since 1992, served as Chair of Harvard’s History Department, Director of the Harvard University Asia Center, Dean of the Faculty of Arts and Sciences and Director of the Fairbank Center for Chinese Studies

Other Boards and Positions:

•   Director, The Taiwan Fund, Inc., a diversified closed-ended management investment company (2013 to present)

•   Director, Harvard University Press

•   Director, Harvard Magazine

•   Director, The American Council of Learned Societies, a federation of scholarly organizations whose mission is to promote the circulation of humanistic knowledge throughout society (2018 to present)

•   Director, JAMM Active Limited, a global producer of innovative performance fabrics for athletic use (2016 to January 2021)

•   Director, The China Fund, Inc., a non-diversified closed-ended management investment company (2007 to 2019)

Mr. Kirby has extensive business knowledge and particular expertise regarding the business, economic and political environment in China.

 

   

 

CABOT CORPORATION    21


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2021 PROXY STATEMENT   

 

 

 

 

Other Governance Policies and Practices

 

Transactions with Related Persons

Policy and Procedures for the Review of Related Person Transactions

Our Board has adopted a written policy for the review and approval or ratification of transactions involving related persons. “Related persons” consist of any person who is or was (since the beginning of the fiscal year) a director, nominee for director or executive officer of Cabot, any greater than 5% stockholder of Cabot and the immediate family members of any of those persons. The Governance Committee is responsible for applying the policy with the assistance of our General Counsel.

Transactions covered by the policy consist of any transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements, or relationships in which (1) the aggregate amount involved will or may be expected to exceed $100,000 with respect to any fiscal year, (2) Cabot is a participant and (3) any related person has or will have a direct or indirect interest, other than solely as a result of being a director or a less than 10% beneficial owner of another entity (an “interested transaction”). Under the policy, the following interested transactions have a standing pre-approval from the Governance Committee, even if the aggregate amount is greater than $100,000:

 

 

Certain sales of stock by executive officers to Cabot. (1) Sales of Cabot stock by an executive officer (including the CEO) to Cabot pursuant to the terms of our long-term incentive program or (2) other sales by executive officers (excluding the CEO) provided that the sale has been approved by our CEO, the per share purchase price is the fair market value of our common stock on the date of sale, the proceeds from the sale to the executive officer do not exceed $500,000, and the sale does not take place during a quarterly blackout period.

 

Certain transactions with other companies. Any transaction between Cabot and another company if the aggregate amount involved does not exceed the greater of $1,000,000 or 2% of that company’s total revenues, or any transaction where Cabot is indebted to another company if the total amount of Cabot’s indebtedness to the other company does not exceed 1% of that company’s total consolidated assets. In both cases, the pre-approval applies if the related person’s only relationship is as an employee (other than executive officer), director or beneficial owner of less than 10% of the other company’s shares.

 

Employment of executive officers; director compensation. Any employment by Cabot of an executive officer if the related compensation is required to be reported in our proxy statement or if the compensation was approved by our Compensation Committee. Any compensation paid to a director if the compensation is required to be reported in our proxy statement.

 

Other transactions. Competitively bid or regulated public utility services transactions; transactions involving trustee-type services; and transactions where the related person’s interest arises solely from the ownership of our common stock and all common stockholders received the same benefit on a pro rata basis.

Each interested transaction by a related person that does not have standing pre-approval under the policy should be reported to our General Counsel for presentation to the Governance Committee for approval before its consummation or for ratification, if necessary, after its consummation. The Chair of the Governance Committee has the authority to pre-approve or ratify (as applicable) any interested transaction with a related person in which the aggregate amount involved is expected to be less than $500,000. In determining whether to approve or ratify an interested transaction, the Governance Committee and the Chair may take into account such factors as they deem appropriate, which may include whether the interested transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.

Transactions with Related Persons

Since the beginning of fiscal 2020, Cabot and its subsidiaries had no transactions, nor are there any currently proposed transactions, in which Cabot or its subsidiaries was or is to be a participant and the amount involved exceeds $120,000 and any related person (as defined above) had or will have a direct or indirect material interest reportable under SEC rules.

 

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2021 PROXY STATEMENT   

 

 

Other Governance Policies and Practices (continued)

 

 

 

Stockholder Engagement

The Company welcomes stockholder engagement. Our directors are available to answer questions from stockholders at the 2021 Annual Meeting. In addition, management of the Company conducts stockholder outreach throughout the year to ensure management and the Board understand and consider the issues that matter most to our stockholders. We provide regular updates regarding the Company’s performance and strategic actions to the investor community, and we participate in numerous investor conferences, one-on-one meetings, earnings calls, investor days, and educational investor and analyst conversations. We also communicate with stockholders and other stakeholders through various media, including our annual report, proxy statement and other filings with the SEC, news releases and our website. We believe ongoing stockholder engagement allows us to respond effectively to stockholder concerns.

Procedures for Stockholders to Recommend Director Nominees

The Governance Committee has a policy with respect to the submission of recommendations by stockholders of candidates for director nominees, which is available on our website. A stockholder wishing to recommend a candidate must submit the recommendation by a date not later than the 120th calendar day before the first anniversary of the date that Cabot released its proxy statement to stockholders in connection with the previous year’s annual meeting. Recommendations should be submitted to the Company’s Secretary in writing at Cabot Corporation, Two Seaport Lane, Suite 1400, Boston, Massachusetts 02210. The notice to the Secretary should include all information about the candidate that Cabot would be required to disclose in a proxy statement in accordance with Securities and Exchange Act rules or as required by the Company’s by-laws, consent of the candidate to serve on the Board of Directors, if nominated and elected, and agreement of the candidate to complete, upon request, questionnaires customary for Cabot directors and to comply with applicable Company policies.

Director Attendance at Meetings

During fiscal 2020, each director attended at least 75% of the aggregate of the total Board meetings and the total meetings held by all of the Committees on which he or she served during the periods that he or she served. Because of travel restrictions that were being implemented at the time of our 2020 Annual Meeting to reduce the spread of COVID-19, each of our Directors attended our 2020 Annual Meeting by telephone, other than Mr. Keohane, who participated from the Company’s offices, and Dr. Wolfgruber.

Code of Business Ethics

We have adopted a code of ethics that applies to all of our employees and directors, including the Chief Executive Officer, the Chief Financial Officer, the Controller and other senior financial officers. In fiscal 2020, each of our directors completed our Code of Business Ethics on-line compliance training program that we require our employees to complete. The Code of Business Ethics is posted on our website (www.cabotcorp.com) under the caption “Company —About Cabot — Code of Business Ethics.”

Communications with the Board

Stockholders or other interested parties wishing to communicate with the Board, the non-management directors or any individual director may contact the Non-Executive Chair of the Board by calling 1-800-853-7602; by sending an email through our website using the link that is located under the caption “Company — About Cabot — Governance — Contact the Board of Directors”; or by writing to Cabot Corporation Board of Directors, c/o Alertline Anonymous, P.O. Box 3767, 13950 Ballantyne Corporate Place, Suite 300, Charlotte, North Carolina 28277.

Anyone who has a complaint or concern regarding our accounting, internal accounting controls or auditing matters may communicate that concern to the Chair of the Audit Committee by calling 1-800-853-7602; by sending an email through our website using the link that is located under the caption “Company — About Cabot — Governance — Contact the Board of Directors”; or by writing to Cabot Corporation Audit Committee, c/o Alertline Anonymous, P.O. Box 3767, 13950 Ballantyne Corporate Place, Suite 300, Charlotte, North Carolina 28277. All such communications to the Board of Directors or the Audit Committee will also be sent to Cabot’s Office of Compliance.

 

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2021 PROXY STATEMENT   

 

 

 

 

Director Compensation

 

Annual compensation for our non-employee directors is comprised of cash compensation and a grant of Cabot common stock. The Governance Committee is responsible for reviewing the form and amount of compensation paid to our non-employee directors and recommends changes to our Board of Directors as appropriate. In November 2018, the Governance Committee, with the assistance of Mercer LLC, a national executive compensation firm, evaluated the reasonableness of our director compensation and the appropriate mix of cash and equity compensation and at that time, based on that evaluation and upon the recommendation of the Governance Committee, the Board approved changes in our director compensation. Ordinarily, the Governance Committee would have performed this assessment again in November 2020 and any changes would have been effective as of January 2021. In light of the impact of the COVID-19 pandemic on the Company, the Governance Committee deferred this assessment. Directors who are Cabot employees do not receive compensation for their services as directors.

Cash Compensation

Cash compensation for our non-employee directors consists of the following components:

 

 

retainer of $90,000

 

$20,000 for serving as Chair of the Audit Committee

 

$15,000 for serving as Chair of the Compensation Committee

 

$10,000 for serving as Chair of the SHE&S Committee

 

$10,000 for serving as Chair of the Governance Committee, except when the Chair of the Governance Committee is also serving as Non-Executive Chair of the Board of Directors, in which case this retainer is waived

 

$110,000 for serving as Non-Executive Chair of the Board of Directors

Cash compensation is paid quarterly and, when changes occur in Board or Committee membership during a quarter, the compensation is pro-rated.

Stock Compensation

Under the Cabot Corporation 2015 Directors’ Stock Compensation Plan (the “Directors’ Stock Plan”), each non-employee director is eligible to receive each calendar year shares of Cabot common stock as part of his or her compensation for services to be performed in that year. For calendar year 2020, each non-employee director whose term of office continued after the 2020 Annual Meeting of Stockholders received an award of shares having a grant date value as close as possible to $120,000 (2,635 shares). Patrick Prevost and John O’Brien, who retired at the 2020 Annual Meeting, each received a pro-rated grant of 659 shares. The closing price of our common stock on January 9, 2020, the date such shares were granted, was $45.54. Upon his election to the Board effective April 30, 2020, Mr. Del Grosso received a grant of 2,361 shares as compensation for his services as a non-employee director to be performed in calendar 2020. The closing price of our common stock on April 30, 2020 was $33.89.

As of January 8, 2021, there were 214,291 shares available for issuance under the Directors’ Stock Plan.

We believe that it is desirable for directors to have an equity interest in Cabot and we encourage all directors to own a reasonable amount of Cabot stock to align director and stockholder interests and to enhance a director’s long-term perspective. Accordingly, our Corporate Governance Guidelines require non-employee directors to have an equity ownership in Cabot of at least 10,000 shares. It is expected that this ownership level will generally be achieved within a five-year period beginning when a director is first elected to the Board. For purposes of determining a director’s compliance with this ownership requirement, any deferred shares held by a director are considered owned by the director. In addition, each non-employee director is required to retain the shares granted in any given year for a period of at least three years from the date of issuance or until the director’s earlier retirement.

 

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2021 PROXY STATEMENT   

 

 

Director Compensation (continued)

 

 

 

Reimbursement of Certain Expenses; Charitable Giving

Our Corporate Governance Guidelines state that Cabot will not provide retirement or other benefits or perquisites to non-employee directors. Directors, however, are reimbursed for reasonable travel and out-of-pocket expenses incurred in connection with attending Board and Committee meetings and other Cabot business-related events and are covered by Cabot’s travel accident insurance policy for such travel. In connection with the retirement of Mr. Prevost and Mr. O’Brien from the Board of Directors at the 2020 Annual Meeting and in recognition for their many years of service, the Cabot Corporation Foundation made an aggregate contribution on each of their behalf of $25,000 to charities they selected.

Deferred Compensation

Under the Cabot Corporation Non-Employee Directors’ Deferral Plan (the “Deferred Compensation Plan”), directors can elect to defer receipt of any cash compensation payable in a calendar year for a period of at least three years or until they cease to be members of the Board of Directors. In any year, these deferred amounts are, at the director’s choice, either (i) credited with interest at a rate equal to the Moody’s Corporate Bond Rate for the month of November prior to the beginning of the applicable year or (ii) treated as invested in Cabot phantom stock units, based on the market price of shares of Cabot common stock at the time of deferral (with dividends paid on shares credited and treated as if reinvested in Cabot phantom stock units). Messrs. Del Grosso and Enriquez and Dr. Wolfgruber elected to defer receipt of their calendar years 2019 and 2020 cash compensation, as applicable, and treat the deferred amounts as invested in Cabot phantom stock units. Mr. Prevost elected to defer receipt of his calendar year 2019 cash compensation and have it credited with interest at a rate equal to the Moody’s Corporate Bond Rate, and Mr. Kirby elected to defer receipt of his calendar years 2019 and 2020 cash compensation and have it credited with interest at a rate equal to the Moody’s Corporate Bond Rate. The Moody’s Corporate Bond Rate used to calculate interest during calendar year 2020 was 3.45%.

Under the Deferred Compensation Plan, directors also may defer receipt of the shares of common stock issuable to them under the Directors’ Stock Plan. For each share of stock deferred, a director is credited with one Cabot phantom stock unit to a notional account created in the director’s name. Dividends that would otherwise be payable on the deferred shares accrue in the account and are credited with interest at a rate equal to the Moody’s Corporate Bond Rate for the month of November prior to the beginning of the year. The rate used to calculate interest during calendar year 2020 was 3.45%. At the end of the deferral period, the deferred shares of Cabot common stock are issued to the director, along with the accrued cash dividends and interest earned, either in one issuance or in installments over a period of up to ten years, as selected by the director. Messrs. Del Grosso, Enriquez, Kirby, Morrow, and Wilson, Ms. Yan, and Dr. Wolfgruber elected to defer their calendar year 2020 stock awards.

 

CABOT CORPORATION    25


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2021 PROXY STATEMENT   

 

 

Director Compensation (continued)

 

 

 

Director Compensation Table

The following table sets forth the compensation earned by our non-employee directors in fiscal 2020:

 

Name

 

 

Fees Earned or

Paid in Cash

($)(1)

 

 

Stock

Awards

($)(2)

 

   

 

Change in

Pension

Value and
Nonqualified
Deferred
Compensation

Earnings($)(3)

 

   

All Other
Compensation

($)(4)

 

   

Total($)

 

 

  Cynthia A. Arnold

 

  90,000

 

 

119,998

 

 

 

 

 

 

 

 

 

209,998 

 

  Douglas G. Del Grosso

 

  37,500

 

 

80,014

 

 

 

3

 

 

 

 

 

 

117,517 

 

  Juan Enriquez

 

  95,000

 

 

119,998

 

 

 

2,990

 

 

 

 

 

 

217,988 

 

  William C. Kirby

 

  90,000

 

 

119,998

 

 

 

16,059

 

 

 

 

 

 

226,057 

 

  Michael M. Morrow

 

110,000

 

 

119,998

 

 

 

131

 

 

 

 

 

 

230,129 

 

  John F. O’Brien

 

  52,500

 

 

30,011

 

 

 

 

 

 

25,000

 

 

 

107,511 

 

  Patrick M. Prevost

 

  45,000

 

 

30,011

 

 

 

2,391

 

 

 

25,000

 

 

 

102,402 

 

  Sue H. Rataj

 

200,000

 

 

119,998

 

 

 

 

 

 

 

 

 

319,998 

 

  Frank A. Wilson

 

  90,000

 

 

119,998

 

 

 

67

 

 

 

 

 

 

210,065 

 

  Matthias L. Wolfgruber

 

102,500

 

 

119,998

 

 

 

472

 

 

 

 

 

 

222,970 

 

  Mark S. Wrighton

 

  90,000

 

 

119,998

 

 

 

10,600

 

 

 

 

 

 

220,598 

 

  Christine Y. Yan

 

  90,000

 

 

119,998

 

 

 

34

 

 

 

 

 

 

210,032 

 

 

1.

Cash compensation earned reflects changes in Board and Committee service that occurred during the fiscal year. The amounts reported in this column for Messrs. Del Grosso, Enriquez, and Kirby, and Dr. Wolfgruber, and a portion of the amount reported for Mr. Prevost, were deferred under the Deferred Compensation Plan described above.

2.

Reflects the grant date fair value of shares of Cabot common stock granted to each non-employee director computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. The grant date fair value was calculated by multiplying the number of shares granted to the director by the closing price of our common stock on the date of grant, which, for all directors other than Mr. Del Grosso, was January 9, 2020 ($45.54). The grant date for Mr. Del Grosso was April 30, 2020 ($33.89). The stock awards reported in this column for Messrs. Del Grosso, Enriquez, Kirby, Morrow, and Wilson, Ms. Yan, and Dr. Wolfgruber were deferred under the Deferred Compensation Plan described above.

3.

Represents above-market interest (the portion exceeding 120% of the applicable long-term rate) on compensation deferred under the Deferred Compensation Plan.

4.

Consists of charitable contributions made in connection with retirement from the Board of Directors.

 

26    CABOT CORPORATION


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2021 PROXY STATEMENT   

 

 

 

 

Beneficial Stock Ownership of Directors, Executive

Officers and Persons Owning More Than Five

Percent of Common Stock

 

The following table shows the amount of Cabot common stock beneficially owned as of January 15, 2021 (unless otherwise indicated) by each person known by Cabot to beneficially own more than 5% of our outstanding common stock, by each director of Cabot, by each of our named executive officers and by all directors, nominees for director and executive officers of Cabot as a group. Unless otherwise indicated, each person has sole investment and voting power over the securities listed in the table.

 

 

Name

 

  

 

Total Number
of Shares
(1)

 

   

 

Percent of  

Class(2)  

 

 

  Holders of More than Five Percent of Common Stock

    

BlackRock, Inc.

     5,203,174 (3)      9.19

55 East 52nd Street

    

New York, NY 10055

    

The Vanguard Group

     5,042,068 (4)      8.90

100 Vanguard Blvd.

    

Malvern, PA 19355

    

Wellington Management Group LLP

     2,938,778 (5)      5.19

Wellington Group Holdings LLP

    

Wellington Investment Advisors Holdings LLP

    

c/o Wellington Management Company LLP

    

280 Congress Street

    

Boston, MA 02210

    

LSV Asset Management Group

     2,917,155 (6)      5.15

155 N. Wacker Drive, Suite 4600

    

Chicago, IL 60606

    

  Directors and Executive Officers

    

Cynthia A. Arnold

     9,391       *  

Douglas G. Del Grosso

     4,850 (7)      *  

Juan Enriquez

     35,209 (8)      *  

Karen A. Kalita

     16,540 (9)      *  

Hobart C. Kalkstein

     119,594 (10)      *  

Sean D. Keohane

     511,820 (11)      *  

William C. Kirby

     19,271 (12)      *  

Erica McLaughlin

     55,965 (13)      *  

Michael M. Morrow

     12,073 (14)      *  

Sue H. Rataj

     21,317       *  

Frank A. Wilson

     8,323 (15)      *  

 

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2021 PROXY STATEMENT   

 

 

Beneficial Stock Ownership of Directors, Executive Officers and Persons Owning More Than Five Percent of Common Stock (continued)

 

 

 

 

Name

 

  

 

Total Number
of Shares
(1)

 

   

 

Percent of  

Class(2)  

 

 

Matthias L. Wolfgruber

     15,612 (16)      *  

Mark S. Wrighton

     47,690 (17)      *  

Christine Y. Yan

     6,942 (18)      *  

Jeff Zhu

     137,287 (19)      *  

Directors and executive officers as a group (15 persons)

     1,021,884 (20)      1.78

 

*

Less than one percent.

1.

For Cabot’s executive officers, the number includes shares of Cabot common stock held for their benefit by the trustee of Cabot’s 401(k) Plan. The shares of common stock allocated to the accounts of Cabot’s executive officers in the 401(k) Plan constitute less than 1% of our common stock.

2.

The calculation of percentage of ownership of each listed beneficial owner is based on 56,614,121 shares of Cabot common stock, which represents the number of shares outstanding on January 15, 2021, plus any shares that such individual or entity has the right to acquire within 60 days of January 15, 2021, unless otherwise noted.

3.

Based on an amendment to a Schedule 13G filed with the SEC on February 5, 2020 by BlackRock, Inc. (“BlackRock”). The Schedule 13G reports that BlackRock has sole voting power with respect 4,963,699 shares and sole dispositive power with respect to 5,203,174 shares.

4.

Based on an amendment to a Schedule 13G filed with the SEC on February 12, 2020 by The Vanguard Group (“Vanguard”). The Schedule 13G reports that Vanguard has sole voting power with respect to 30,280 shares, shared voting power with respect to 9,200 shares, sole dispositive power with respect to 5,011,324 shares and shared dispositive power with respect to 30,744 shares.

5.

Based on an amendment to a Schedule 13G filed with the SEC on January 8, 2020 by Wellington Management Group LLP (“WMG”) and Wellington Group Holdings LLP (“WGH”) and Wellington Investment Advisors Holdings LLP (“WIAH”, WMG, WGH and WIAH referred to collectively as “Wellington”). The Schedule 13G reports that Wellington has shared voting power with respect to 2,728,721 shares and shared dispositive power with respect to 2,938,778 shares.

6.

Based on a Schedule 13G filed with the SEC on February 11, 2020 by LSV Asset Management (“LSV”). The Schedule 13G reports that Vanguard has sole voting power with respect to 1,779,034 shares and shared dispositive power with respect to 2,917,155 shares.

7.

Mr. Del Grosso has deferred receipt of these shares under applicable Cabot deferred compensation plans.

8.

Includes 33,109 shares the receipt of which Mr. Enriquez has deferred under applicable Cabot deferred compensation plans. Mr. Enriquez has shared investment power with respect to 2,100 shares.

9.

Includes 12,760 shares of common stock that Ms. Kalita has the right to acquire within 60 days of January 15, 2021 upon the exercise of stock options and 540 shares of Cabot common stock held by the trustee for Cabot’s 401(k) Plan for her benefit.

10.

Includes 72,373 shares of common stock that Mr. Kalkstein has the right to acquire within 60 days of January 15, 2021 upon the exercise of stock options and 6,620 shares of Cabot common stock held by the trustee for Cabot’s 401(k) Plan for his benefit.

11.

Includes 390,975 shares of common stock that Mr. Keohane has the right to acquire within 60 days of January 15, 2021 upon the exercise of stock options and 12,631 shares of Cabot common stock held by the trustee for Cabot’s 401(k) Plan for his benefit.

12.

Mr. Kirby has deferred receipt of these shares under applicable Cabot deferred compensation plans.

13.

Includes 43,519 shares of common stock that Ms. McLaughlin has the right to acquire within 60 days of January 15, 2021 upon the exercise of stock options.

14.

Includes 10,073 shares the receipt of which Mr. Morrow has deferred under applicable Cabot deferred compensation plans.

15.

Mr. Wilson has deferred receipt of these shares under applicable Cabot deferred compensation plans.

16.

Dr. Wolfgruber has deferred receipt of these shares under applicable Cabot deferred compensation plans.

17.

Includes 100 shares held by Dr. Wrighton’s wife, who retains sole voting control over the shares. Dr. Wrighton disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.

18.

Ms. Yan has deferred receipt of these shares under applicable Cabot deferred compensation plans.

19.

Includes 91,545 shares of common stock that Mr. Zhu has the right to acquire within 60 days of January 15, 2021 upon the exercise of stock options.

20.

Shares of our common stock shown as being beneficially owned by directors and executive officers as a group includes 19,791 shares of Cabot common stock held by the trustee for Cabot’s 401(k) Plan for the benefit of such persons, as applicable.

 

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Executive Compensation

 

Compensation Committee Report

The Compensation Committee of the Board of Directors (referred to as the “Compensation Committee” or the “Committee”) has reviewed the Compensation Discussion and Analysis (“CD&A”) section included in this Proxy Statement. The Compensation Committee has also reviewed and discussed the CD&A with the members of management who are involved in the compensation process.

Based on these reviews and discussions, the Compensation Committee recommended to the Board of Directors that the CD&A be included in this Proxy Statement and incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended September 30, 2020.

Matthias L. Wolfgruber, Chair

William C. Kirby

Mark S. Wrighton

Compensation Discussion and Analysis

As context for our named executive officers’ fiscal 2020 compensation, below we summarize Cabot’s fiscal 2020 performance and provide a brief overview of the decisions made with respect to executive compensation in fiscal 2020 and our executive compensation programs for that fiscal year. We then describe our compensation philosophy and objectives, our compensation setting process and other compensation and governance related policies, and compensation awarded, earned and paid for fiscal 2020. For fiscal 2020, our named executive officers and their current positions are:

 

 

Sean D. Keohane, President and Chief Executive Officer;

 

Erica McLaughlin, Senior Vice President and Chief Financial Officer;

 

Karen A. Kalita, Senior Vice President and General Counsel;

 

Hobart C. Kalkstein, Senior Vice President and President, Reinforcement Materials Segment, and President, Americas Region; and

 

Jeff Zhu, Senior Vice President and President, Performance Additives business, and President, Asia Pacific Region.

Executive Summary

Our “Advancing the Core” strategy is designed to extend our leadership in performance materials by (i) investing for growth in our core businesses, (ii) driving application innovation with our customers, and (iii) generating strong cash flows through efficiency and optimization. The aim of this strategy is to deliver sustained and attractive total shareholder return (“TSR”), built on earnings growth and a balanced capital allocation framework comprised of growth investments and cash return to shareholders. This strategy is intended to ensure that we invest sufficiently in our core businesses to capture opportunities and drive long-term earnings growth while also providing our shareholders with a meaningful cash return.

Fiscal 2020 was unlike any other fiscal year we have experienced, as we battled through a global health crisis and the associated economic uncertainty. The global COVID-19 pandemic severely and negatively impacted demand from our key tire and auto customers, especially in our third fiscal quarter, and that impact was reflected in our fiscal 2020 financial results. While the business environment was challenging, we remained intensely focused on the health, safety and well-being of our employees and on protecting our Company for the long-term through cost reduction efforts, working capital management, and cash flow generation and were able to maintain our strong liquidity position. Beginning during our second fiscal quarter, operations at many of our customers’ plants in China were completely or partially curtailed and, beginning in late March 2020, a number of our key customers, notably most automotive and tire manufacturers in the Americas and Europe, temporarily closed their manufacturing operations. In our third fiscal quarter, many of our plants operated at significantly lower manufacturing levels than usual in response to reduced customer demand and government-mandated closures.

 

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Executive Compensation (continued)

 

 

 

Our response to the COVID-19 pandemic was immediate and we quickly implemented a tactical plan focused on protecting the health and safety of our employees and ensuring business continuity, establishing employee pay and leave policies, and developing contingency plans and operational guidance for our manufacturing sites. We also began implementing countermeasures to address the reduced demand environment and uncertain business outlook. We developed a holistic response plan comprised of seven distinct workstreams to ensure our capability and capacity to respond quickly when the demand for our essential products returned, each of which was under the leadership of members of our Management Executive Committee, which includes our named executive officers. Our base case plan assumed the pandemic would have a shorter-term impact on our business rather than a long-term structural impact. Our philosophy was focused on protecting the Company and our employees to the greatest extent possible.

The actions we took to mitigate the financial impact of the COVID-19 pandemic included reducing our manufacturing costs, implementing a hiring freeze, lowering structural STA costs and eliminating discretionary spending. We also focused intensely on cash preservation by aggressively reducing inventory levels and accounts receivable to release working capital, reducing our capital expenditures, and temporarily suspending our share repurchases. With these actions, we were able to limit the financial impact on our employees generally, and with the exception of selected employee furloughs where our operations were curtailed and the implementation of limited reduced work and pay policies, we did not make executive level or broad-based compensation or benefits adjustments (other than Mr. Keohane’s temporary salary suspension, at his request) nor did we conduct any broad-based layoffs. Further, with the pace of the recovery in the automotive and tire markets we began to see in the first quarter of fiscal 2021, despite the continued economic uncertainty related to the COVID-19 pandemic, management made the decision to proceed with annual merit-based base salary increases for calendar year 2021 in accordance with the Company’s customary practices, and these increases became effective as of our first payroll period in January 2021. The Compensation Committee approved merit-based salary increases for each of our named executive officers for 2021, and market-based adjustments for Mses. McLaughlin and Kalita and Mr. Kalkstein, as described further below.

Compensation Actions related to the COVID-19 Pandemic

At Mr. Keohane’s request, due to the uncertainty created by the COVID-19 pandemic, his salary was temporarily suspended for the third fiscal quarter.

As a result of the impact of the COVID-19 pandemic on the Company’s financial performance in fiscal 2020, our short-term incentive (“STI”) and long-term incentive (“LTI”) programs operated as follows with respect to corporate performance:

 

 

STI program: Company performance was below the threshold level of the adjusted earnings before interest and taxes (“EBIT”) goal resulting in no payout against the 70% portion of the program based on Company performance;

 

LTI program: Company performance was below the threshold levels of adjusted earnings per share (“EPS”) and adjusted return on net assets (“RONA”) goals established for 2020 performance under all outstanding performance-based restricted stock unit (“PSU”) awards resulting in no PSUs being earned on the basis of fiscal 2020 performance.

The Compensation Committee took into consideration various factors as they determined potential actions with regard to our incentive programs. In the case of both the STI and LTI programs, the Committee determined that it was appropriate to leave the performance metrics in place without adjustment and did not otherwise make any discretionary adjustments with respect to fiscal 2020 performance, even though the global effect of the COVID-19 pandemic was not foreseeable when these metrics were established in 2017, 2018 and 2019, as applicable.

In making this decision, the Committee determined that it was appropriate to measure the performance of the Company and our leadership team against the metrics that were initially set and that required strong (and, after the effects of the pandemic became knowable, extraordinary) performance in order to be earned. In addition, with respect to the STI program, the Committee took into account that 30% of the target awards are payable on the basis of the executive’s individual performance. With respect to the LTI program, the Committee is generally of the view that, taking into account the cyclicality of the Company’s business, this program is intended to reward performance over the long-term through the achievement of financial targets that are aligned with our Advancing the Core strategy to return 7%-10% adjusted EPS CAGR over time. Further, the Committee considered the structure of our LTI program, which provides for an award that delivers value in three components, PSUs, time-based restricted stock units (“TSUs”), and stock options,

 

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Executive Compensation (continued)

 

 

 

with PSUs representing 35% of the total grant date value of the award assuming target level achievement of applicable performance goals. Following a review of the effectiveness of the LTI program since the adoption of our current strategy in 2015 and as projected through 2023, the Committee confirmed its view that the LTI program as currently structured continues to be effective in supporting the Company’s compensation philosophy, and thus determined to not adjust the performance metrics.

Our Performance in Fiscal 2020

With respect to our financial performance in fiscal 2020, we achieved the following results and returned $124 million of cash to our shareholders:

 

LOGO

Our strong balance sheet and cash generation power allowed us to successfully navigate the COVID-19 pandemic while remaining focused on our long-term strategy and capital allocation framework. During the year we executed on important initiatives to extend our leadership positions and to position us well for sustained growth in earnings and free cash flow. During the 2020 fiscal year, we:

 

 

managed our investments to strengthen our core manufacturing asset footprint, executed the successful start-up of our new fumed silica plant in Carrollton, Kentucky and continued work to upgrade the carbon black plant we purchased in China in 2018 for the production of specialty carbons; and

 

continued to implement the transformation plan for our Purification Solutions business, including improving the efficiency of the business with the sale of our lignite mine in Marshall, Texas and the execution of a long-term supply agreement for lignite-based activated carbon.

We also significantly advanced our targeted growth efforts in new applications. With respect to our energy materials product line, we completed our acquisition of Shenzhen Sanshun Nano, a leading producer of carbon nanotubes and formulations for the high growth lithium-ion battery market. This acquisition broadened our range of conductive carbon additives and formulation capabilities. When combined with our legacy range of conductive carbon blacks and carbon nanostructures, we believe our innovative offerings will be differentiated in this important high growth application. Additionally, customer qualifications in our Inkjet packaging applications continued to build momentum during the year, as this application begins its transition from analog to digital printing technology.

To improve our efficiency and further optimize our operations, we implemented a number of cost reduction initiatives across the Company during the fiscal year, in addition to the temporary cost reduction initiatives described above. These included the move of our shared service center in the U.S. to Latvia and the establishment of our Global Business Services (“GBS”) organization, to drive the efficiency and effectiveness of those processes that power our way of doing business.

 

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Executive Compensation (continued)

 

 

 

During fiscal 2020 we also advanced our sustainability agenda with the launch of our new 2025 sustainability goals. These goals expand our focus to include areas such as product development, supplier sustainability, diversity and inclusion, and community involvement. In addition, we received a Gold rating from EcoVadis, an independent sustainability monitoring organization, for our Sustainability Report, which is the fifth consecutive year that we have received a Gold rating. In December 2020 we were named one of America’s Most Responsible Companies 2021 by Newsweek magazine for the second year in a row. Further, we continue to focus on creating a more inclusive and diverse organization and, currently, four of the ten members of our Management Executive Committee provide gender and ethnic diversity among our most senior leadership.

Highlights of our Fiscal Year 2020 Named Executive Officer Compensation Decisions and the Impact of Company Performance on Compensation.

We believe fiscal 2020 compensation appropriately aligned named executive officers’ compensation with our corporate performance, with a significant portion of the compensation paid to our named executive officers based on our performance against pre-established corporate financial goals. Specifically, 65% of the total direct compensation opportunity for our CEO (base salary, target STI award and LTI awards (with PSUs valued at target, without giving effect to his salary suspension)) was performance-based and not guaranteed, and, on average, the total direct compensation opportunities for our other named executive officers that were performance-based was 55%. The charts below show the total direct compensation opportunities provided to our named executive officers for fiscal 2020, as well as the mix between short- and long-term compensation, noting the elements that constitute performance-based compensation.

 

 

LOGO    LOGO

Base Salary. All of our named executive officers received a base salary increase for calendar 2020 during our annual salary review process that took place in November 2019, with the exception of Mr. Keohane, whose base salary was determined to be competitive by the Committee at that time based on a review of benchmark compensation data and the Committee’s targeting strategy for executive compensation (as further described below). The increases in the base salaries of our named executive officers other than Mr. Keohane during the annual review process ranged from 3.5% to 10% and were made in recognition of the officers’ strong individual performance and leadership, and, in the case of Ms. McLaughlin and Ms. Kalita, to bring their base salaries closer to the market median of the benchmark compensation data used by the Committee, as further described below. With these increases, we believe the base salaries of our named executive officers for fiscal 2020 were aligned and consistent with our compensation philosophy, which considers individual performance and leadership, scope of responsibilities, the number of years the executive has held the position, and benchmark compensation data to arrive at a market competitive base level of compensation appropriate for the individual. (See pages 43-46 for further details).

 

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Executive Compensation (continued)

 

 

 

STI Awards and Payouts. As discussed above, as a result of the impact of the COVID-19 pandemic on our financial performance in fiscal 2020, Company performance was below the threshold level of the adjusted EBIT goal established by the Committee under our STI program for fiscal 2020, resulting in no payout against the 70% portion of the award that is based on our financial performance. The Committee did not adjust the EBIT goal or the net working capital (“NWC”) days goal under the STI program or otherwise make any discretionary adjustments with respect to fiscal 2020 performance. The amounts paid in STI to members of our Management Executive Committee, including our named executive officers, were limited to the 30% portion of the award that is tied to individual performance. The amounts paid reflected their individual contributions and leadership, and ranged from 110% to 130% of target. The total STI awards made to the members of our Management Executive Committee, including our named executive officers, ranged from 33% to 39% of the named executive officer’s overall target award. (See pages 43-46 for further details about awards and payouts made to our named executive officers).

LTI Awards and Payouts. Our LTI program is 70% performance-based and 30% time-based, consisting of a combination of PSUs (35%), stock options (35%) and TSUs (30%) (with percentages measured based on the awards’ grant date values, assuming target level achievement of applicable performance goals in the case of PSUs). The grant date value of the awards granted in fiscal 2020 to each named executive officer was based on an assessment of the named executive officer’s position, role and responsibilities within the Company, the overall competitiveness of his or her total direct compensation, and internal equity (the relationship of pay among the executive officers in the context of their responsibilities) and retention considerations. (See pages 43-46 for further details.)

Further, as described on page 41, each PSU award is allocated evenly into three tranches, with each tranche having a separate fiscal year performance period and the entire award having a cumulative three-year overall vesting period. All performance goals for each performance period are established at the time of grant to cover the full three-year performance period. Our financial performance in each fiscal year determines the percentage of the target award earned for that fiscal year performance period in three outstanding PSU awards. For each performance metric, adjusted EPS and adjusted RONA, achieving the target level of performance results in 100% of the portion of the award that relates to that metric being earned. As discussed above, as a result of the impact of the COVID-19 pandemic on our financial performance in fiscal 2020, we did not achieve the threshold level for 2020 performance under any of our outstanding PSU awards, and no outstanding PSUs were earned on the basis of our fiscal 2020 performance. As was the case with our STI program, the Committee did not adjust the adjusted EPS and adjusted RONA targets under the PSU awards eligible to be earned in 2020 or otherwise make any discretionary adjustments with respect to fiscal 2020 performance.

 

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Executive Compensation (continued)

 

 

 

Characteristics of our Executive Compensation Programs

Our executive compensation programs include a number of practices intended to align the interests of management and our shareholders.

 

What We Do    What We Don’t Do

  Link pay to performance; significant portion of executive pay is not guaranteed

 

  Tie performance-based awards to achievement of pre-established financial metrics

 

  Use our STI awards to recognize individual performance and leadership and achievement of corporate goals

 

  Balance the mix of pay components, including cash, stock options, and restricted stock units (both performance- and time-based)

 

  Cap incentive awards under our STI and LTI programs

 

  Provide long-term focus by setting multiple years of performance goals for PSU grants at the time of grant

 

  Maintain stock ownership guidelines

 

  Subject STI and LTI program compensation to our recoupment policy

 

  Provide modest perquisites consisting primarily of financial planning and an executive physical examination

  

 Enter into employment contracts with our CEO and other named executive officers (other than Mr. Zhu)

 

 Provide for excise tax gross-ups in the event of a change in control

 

 Reprice underwater stock options without shareholder approval

 

 Permit hedging or short sales of company stock by executive officers or directors

 

 Provide single-trigger change in control vesting in our equity awards

Consideration of Results of Shareholder Advisory Votes on Executive Compensation

At our 2020 Annual Meeting, we conducted an advisory (non-binding) shareholder vote on executive compensation, as required by the Dodd-Frank Act. Approximately 94% of the shares voted approved the executive compensation discussed and disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and other related tabular and narrative disclosures contained in our 2020 proxy statement. In considering the results of this most recent favorable advisory vote on executive compensation, among other things, the Compensation Committee determined that the Company’s executive compensation programs have been effective in implementing the Company’s stated compensation philosophy and objectives, and directly aligning compensation paid or earned with Company performance. Therefore, the Committee did not make any changes in the structure of these programs or in response to this vote.

The Compensation Committee recognizes that executive pay practices and corporate governance principles continue to evolve. Accordingly, it will continue to monitor executive compensation practices and make adjustments as necessary to ensure that our executive compensation programs continue to support our corporate goals and objectives, appropriately incentivize management and reflect good corporate governance principles.

The Compensation Committee pays close attention to the advice of its compensation advisors and provides access for our shareholders who would like to communicate on executive compensation directly with the Compensation Committee or the Board. You may contact the Board of Directors through our website at “Company — About Cabot — Governance — Contact the Board of Directors”.

Compensation Philosophy, Objectives and Process

Continuing to position Cabot for future success requires the talent to support our business and Advancing the Core strategy. Our executive compensation programs are designed to provide a competitive and internally equitable compensation and benefits package that rewards individual and Company performance and reflects job complexity and the strategic value of the individual’s position while promoting long-term retention and motivation. We seek to accomplish these goals in a way that is aligned with the long-term interests of our shareholders.

 

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Executive Compensation (continued)

 

 

 

To achieve these goals, our executive compensation programs adhere to these principles:

 

 

Offer a total compensation opportunity and a benefits package that are competitive in our industry;

 

Reward executives based on our business performance by closely aligning a meaningful portion of their compensation with the performance of the Company on both a short- and long-term basis;

 

Set challenging but achievable performance goals that support the Company’s short- and long-term financial goals;

 

Motivate individual performance by rewarding the specific performance and achievements of individual executives and their demonstrated leadership; and

 

Align the interests of our executives and our shareholders through performance-based compensation, equity grants and stock ownership guidelines.

Our Compensation Setting Process

The Compensation Committee

As discussed under “Board Leadership, Structure, Governance and Composition, and Risk Management — How our Board Operates — Compensation Committee”, on page 11, the Compensation Committee is responsible for all compensation decisions related to members of the Company’s Management Executive Committee, which includes all our named executive officers.

The annual compensation planning process for the preceding fiscal year concludes at the Committee’s meeting in November, when the Committee evaluates the Company’s performance against the corporate performance goals set for the just-concluded fiscal year and also evaluates each executive officer’s individual performance and, on this basis, determines the amounts payable or earned, as applicable, in the fiscal year under our STI and LTI programs. Each November, the Compensation Committee also (i) determines any adjustments to base salaries, with any adjustment typically effective the following January, (ii) sets corporate performance metrics applicable to our STI and LTI programs for the current fiscal year, (iii) grants LTI awards, and (iv) establishes performance goals and maximum payment levels under our STI and LTI programs for awards granted in the current fiscal year, in each case, for each named executive officer.

A description of the Compensation Committee’s roles and responsibilities is set forth in its written charter adopted by the Board of Directors, which can be found at www.cabotcorp.com under “Company — About Cabot — Governance — Resources.”

Role of the Compensation Consultant

The Compensation Committee has retained Meridian Compensation Partners (“Meridian”) as its independent compensation consultant for purposes of advising on executive compensation matters since March 2018. During fiscal 2020, Meridian provided the Committee with advice on a broad range of executive compensation matters, including the following:

 

 

Apprising the Committee of compensation-related trends and developments in the marketplace, including developments relating to the COVID-19 pandemic;

 

Informing the Committee of regulatory developments relating to executive compensation practices;

 

Reviewing and assessing the composition of the group of peer companies used for benchmarking purposes;

 

Providing the Committee with an assessment of the market competitiveness of our executive compensation programs;

 

Assessing the relationship between executive compensation actually paid and corporate performance;

 

Identifying potential changes to our executive compensation programs to maintain market competitiveness and consistency with business strategies, good governance practices and alignment with shareholder interests;

 

Assessing the proposal to seek shareholder approval to increase the shares available for issuance under the Cabot Corporation 2017 Long-Term Incentive Compensation Plan included as Proposal 3 in this proxy statement; and

 

Reviewing the disclosure of our executive compensation programs in this proxy statement.

Meridian attended all regularly scheduled meetings of the Compensation Committee during fiscal 2020.

The Compensation Committee has assessed the independence of Meridian pursuant to SEC rules and concluded that no conflict of interest exists that prevents Meridian from independently advising the Compensation Committee.

 

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Executive Compensation (continued)

 

 

 

Role of the Chief Executive Officer and Other Officers

Each year, our CEO and our Chief Human Resources Officer (“CHRO”), working with internal resources as well as Meridian, review the design of our executive compensation programs and recommend modifications to existing, and/or the adoption of new, plans and programs to the Compensation Committee. In addition, our CEO recommends to the Committee the performance metrics and goals to be used to determine payouts under our STI and LTI programs, and each named executive officer’s individual performance goals (other than the CEO’s) are jointly developed by the executive and the CEO.

Before the Compensation Committee makes compensation decisions regarding the compensation of our named executive officers, the CEO provides his assessment of each named executive officer’s performance, other than his own, taking into consideration factors such as the officer’s achievement of individual goals, leadership accomplishments, contribution to Cabot’s performance and the achievement of Company goals, and areas of strength and areas for development. He then makes specific award recommendations. In preparing compensation recommendations for the Committee, our CEO, our CHRO and other members of management involved in the process review compensation and survey data compiled by the Committee’s independent compensation consultant for similarly-situated executives at our peer group of companies and other external competitive market data provided by such consultant, as described below. Our CEO attends Compensation Committee meetings but is not present for, and does not participate in, any discussions concerning his own compensation. All decisions relating to the compensation of our named executive officers are made solely by the Committee and are reported to the full Board of Directors.

Use of Benchmarking Comparison Data

The companies we have included in our compensation peer group consist of companies in the diversified chemicals or specialty chemicals industries with similar products and services and with revenues and a market capitalization generally between one-third and three times the Company’s revenue and market capitalization. The Compensation Committee reviews executive compensation data for executives with comparable positions at these peer group companies to gauge the reasonableness of its executive compensation decisions and the competitiveness of our executive compensation programs. The Compensation Committee believes maintaining market-competitive executive compensation programs allows us to successfully attract and retain experienced executive talent who are critical to our long-term success.

The Compensation Committee annually reviews the companies included in our compensation peer group and may add or eliminate companies as it determines to be appropriate. For purposes of fiscal 2020 compensation matters our compensation peer group consisted of the following 20 companies:

 

•  Albemarle Corporation

•  Ashland Global Holdings, Inc.

•  Axalta Coating Systems

•  Celanese Corporation

•  The Chemours Company

•  FMC Corporation

•  Ferro Corporation

•  H.B. Fuller Company

•  Huntsman Corporation

•  Innospec Inc.

  

•   Kraton Corporation

•   Minerals Technologies

•   NewMarket Corporation

•   Element Solutions, Inc. (formerly Platform Specialty Products Corporation)

•   Avient Corporation (formerly PolyOne Corporation)

•   RPM International Inc.

•   Stepan Company

•   Trinseo S.A.

•   Tronox Limited

•   W.R. Grace & Co.

In preparation for the fiscal 2021 executive compensation review season and the decisions that the Compensation Committee has made and will make with respect to fiscal 2021 compensation, the Compensation Committee reviewed, with Meridian, the peer group companies listed above and confirmed the continued appropriateness of the peer group for benchmarking the Company’s executive compensation programs. As a result, the Compensation Committee did not make any changes in our compensation peer group for fiscal 2021 compensation decisions.

The Compensation Committee and management also consider executive compensation survey data. The survey data used is based on information reported in the Willis Towers Watson Executive Compensation survey.

 

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Executive Compensation (continued)

 

 

 

At least annually the Compensation Committee reviews tally sheets that detail all elements of each named executive officer’s compensation and benefits for the current and prior fiscal years, as well as a projection of his or her compensation for the upcoming fiscal year. These are provided to the Committee as a means to review the total compensation and benefits package for each named executive officer and the impact of any compensation decisions on such compensation

and benefits levels.

Factors Considered in Determining Amounts of Compensation

The Compensation Committee considers the following factors in determining each named executive officer’s total annual and long-term compensation opportunities:

 

 

the officer’s role, level of responsibility, performance, leadership, and experience;

 

the number of years the officer has held the position;

 

the current target total compensation for each officer;

 

employee retention and internal equity considerations; and

 

external competitiveness.

The Compensation Committee has adopted a targeting strategy for executive compensation decisions that defines competitiveness as a “range around the market 50th percentile” for all elements of total direct compensation (base salary, target STI awards and LTI awards (with PSUs valued at target)). For members of the Management Executive Committee who are promoted from within Cabot, and whose total direct compensation is not competitive at the time of their promotion under our targeting strategy, our philosophy and intention is to bring such executive’s total direct compensation to the market median of the benchmark compensation data used by the Committee over a three-year period from the time of their promotion. The Committee believes that the use of a range provides the Committee with the framework to target the market median of the benchmarking data used by the Committee, as described under “Use of Benchmarking Comparison Data” above, but to vary compensation opportunities as it deems appropriate based on individual and Company circumstances.

Developing Company Performance Metrics

The performance metrics we use for our STI and LTI programs are intended to support our short- and long-term business plans and strategies. In fiscal 2020, we used four financial metrics to promote well-rounded Company and management performance, as described below.

For our STI awards we used adjusted EBIT as the principal financial performance metric because it reflects an important near-term goal of improving our operating profitability and is a key driver of TSR. To increase the focus on efficiently managing our working capital, and to measure our short-term financial health, we also used a NWC days metric in our STI awards.

For our PSU awards, we used adjusted EPS as the principal financial performance metric because it reflects an important longer-term financial goal of improving our after-tax profitability. Because our business is capital intensive, we believe it was also appropriate to include a return metric under our LTI program and, as a result, used adjusted RONA, which measures how effectively and efficiently we use our operating assets to generate earnings.

Our philosophy in setting goals for each of the metrics is to establish goals that will drive the achievement of our short- and long-term objectives under our Advancing the Core strategy. Accordingly, in setting our adjusted EBIT and adjusted EPS goals for fiscal 2020, we began with our performance in the just completed fiscal year and set a growth target from that base. In setting our NWC days goals we considered the prior fiscal year’s performance to establish goals that were intended to incentivize a reduction in our net working capital days and continued improvement in our NWC management. Finally, in setting adjusted RONA goals, we seek to drive earnings growth at return levels greater than our weighted average cost of capital. Overall, we intend to set challenging, but achievable target goals, that will only be realized as a result of strong execution and performance. We recognize that from time to time we may need to change the metrics we use to reflect new priorities and business circumstances. We expect to continue to reassess our performance metrics and goal setting process annually.

 

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Executive Compensation (continued)

 

 

 

Our Performance-based Compensation Philosophy

How Did our Fiscal 2020 STI Program Operate?

We provide annual STI awards to drive the achievement of key short-term business results and to recognize individuals based on their contributions to those results and Cabot’s overall performance. Each named executive officer has an annual target incentive opportunity under our STI program, which is expressed as a percentage of his or her base salary, as summarized below:

 

            Name

 

 

  

FY20 STI Target

 

 

 

FY20 STI Target 

Amount 

  Sean D. Keohane

    

 

120

%

   

$

1,200,000 

  Erica McLaughlin

    

 

70

%

   

$

338,100 

  Karen A. Kalita

    

 

55

%

   

$

202,675 

  Hobart C. Kalkstein

    

 

60

%

   

$

288,268 

  Jeff Zhu

    

 

60

%

   

$

293,357 

The actual amounts payable under the STI program range from 0% to 200% of the target award opportunity, with 70% of each award based on the achievement of pre-established corporate financial goals and the remaining 30% of each award based on individual performance and achievements. We used two financial metrics to measure corporate performance for determining payouts under our STI program for fiscal 2020: adjusted EBIT, which had an 80% weighting, and NWC days, which had a 20% weighting. The Committee established threshold, target, and maximum performance level goals for each financial metric, and for adjusted EBIT, also a stretch performance level goal, with payout for performance between performance levels determined on a straight-line basis. For NWC days, the target level was a narrow “dead band” of days so that small variations around demonstrated performance levels would not be rewarded or penalized. In addition, the awards made for fiscal 2020 specified that if the threshold adjusted EBIT goal was not achieved, no payouts against corporate performance under our STI program would be made. Under our STI Program, the Committee retains the discretion, after determining the amount that would otherwise be payable under an award for a performance period, to adjust the actual payment, if any, to be made under such award. The Committee did not exercise such discretion with respect to fiscal 2020 awards. The threshold adjusted EBIT goal was not achieved and, accordingly, no payouts were made against the 70% weighted corporate financial performance component under our STI program.

 

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Executive Compensation (continued)

 

 

 

At the beginning of each fiscal year, the non-Executive Chair, with input from the other independent directors, develops the individual performance goals for our CEO, which are then approved by the Committee. Each of our other executive officers develops with the CEO his or her individual performance goals for the year. In assessing each executive officer’s individual performance, the Committee considers the officer’s personal achievements, including his or her achievements against established individual performance goals, as well as individual contributions to the management team and to the Company, and leadership and management of the executive officer’s business, region or function, as applicable. The Committee does not assign specific numerical weightings or ratings to the individual performance goals and the performance of each officer is evaluated as a whole. Furthermore, there are no formal threshold levels of achievement applicable to the individual performance component of our STI program. Ultimately, the determination of the payout of the portion of the STI awards based on individual performance is based on the judgment of the Committee (with respect to our CEO) and our CEO and the Committee (with respect to our CEO’s direct reports), in each case, after reviewing all relevant factors, with the final determination made by the Committee.

 

 

LOGO

The adjusted EBIT and NWC days targets for the fiscal 2020 STI awards and our actual fiscal 2020 performance were as follows:

Fiscal 2020 STI Program Targets and Results

 

     

 

Threshold
Level
(50%
payout)

 

  

 

Target
Level
(100%
payout)

 

  

 

Stretch
Level
(150%
payout)

 

  

 

Maximum
Level
(200%
payout)

 

  

 

Fiscal 2020
Results

 

  

 

Performance 
Modifier 

 

  Adjusted EBIT (80%)*

    

 

$347 million

    

 

$414 million

    

 

$433 million

    

 

$473 million

    

 

$242 million

    

 

0.0

  NWC Days (20%)

    

 

83

    

 

78-76

    

 

    

 

71

    

 

72

    

 

180.0

  Weighted average payout

                                                           

 

0.0

 

*

Threshold adjusted EBIT must be achieved to make any payment on the basis of corporate performance.

The portion of the STI award that was earned by each named executive officer based on individual performance reflected his or her individual performance and leadership in fiscal 2020 (ranging from 110% to 120% of target), with the total STI awards earned ranging from 33% to 36% of the named executive officer’s overall target award. Detailed information about each named executive officer’s fiscal 2020 STI payout is set forth in the discussion below under the heading “Fiscal 2020 Compensation Decisions”.

 

CABOT CORPORATION    39


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2021 PROXY STATEMENT   

 

 

Executive Compensation (continued)

 

 

 

How Did our Fiscal 2020 LTI Program Operate?

We provide our named executive officers with LTI awards to incentivize sustainable growth and long-term value creation, to further align the interests of our executives with those of our shareholders by tying the executives’ realized compensation to stock price changes during the performance and/or vesting periods, and to promote retention. The grant date value of LTI awards granted to each named executive officer for a given year is based on an assessment of the individual’s position, role and responsibilities within the Company, the overall competitiveness of his or her total direct compensation opportunity, and internal equity considerations. The Committee also considers compensation peer group and other market data for a general understanding of competitive equity compensation practices and considers the impact of the grants on equity incentive plan usage and share dilution, as well as the Company’s compensation expense and employee retention concerns.

70% of the target value of our executives’ LTI awards is performance-based, consisting of a combination of PSUs and stock options, which only provide value when the share price increases above the share price on the date of grant. When making LTI awards for fiscal 2020, the Compensation Committee first determined the total grant date value of the awards to be granted to each executive, and then delivered that value in three components: PSUs representing 35%, stock options representing 35%, and TSUs representing 30%, respectively, of the total grant date value of the award, assuming target level achievement of applicable performance goals for PSUs. The terms of each type of LTI award are described in further detail below, which terms are generally applicable to LTI awards granted in fiscal 2020 and in previous fiscal years.

PSUs reward performance and the execution of our goal to deliver year-over-year and long-term growth in earnings and to increase the operating profit we generate relative to the capital we invest in our businesses. Stock options are performance-based because no value is created unless the value of our common stock appreciates after grant and they encourage employee retention through the use of a time-based vesting schedule. TSUs encourage employee retention by providing some level of value to executives who remain employed for three years. PSUs, stock options and TSUs also support an ownership culture and thereby encourage our executives to take actions that are best for Cabot’s long-term success. Importantly, although each of these equity awards provides a competitive economic value on the date of grant, their ultimate value to an executive will depend upon the degree to which we achieve objectively measurable performance metrics and/or the market value of our common stock after the end of the relevant vesting period. That value will be largely dependent upon our performance and the performance of our stock.

 

 

LOGO

 

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2021 PROXY STATEMENT   

 

 

Executive Compensation (continued)

 

 

 

PSUs

To reinforce the long-term nature of the PSU awards and to reward performance and the execution of our long-term growth goals, at the time of grant, the performance metrics and goals for each of the three one-year performance periods of the award are established. Specifically, each award of PSUs is allocated evenly into three tranches, with each tranche having a one-year performance period and the entire award having a three-year vesting period. When the award vests at the end of the applicable three-year period, the number of shares of stock issuable, if any, will depend on the degree of achievement of corporate performance goals for each year within the overall three-year performance period. Based on the degree to which we achieve the performance goals, an executive may earn between 0% to 200% of the number of PSUs allocated to each tranche of his or her award.

To drive long-term performance, threshold, target, stretch and maximum goals are established for the corporate performance metrics for each tranche in the three-year performance period at or before the time of grant of the PSUs. In November 2019, at the time it approved the grant of PSU awards, the Committee established the specific performance metrics and goals for the fiscal 2020, fiscal 2021 and fiscal 2022 performance periods of these awards, based on the Company’s prior fiscal year performance and management’s expectations for incremental earnings growth and performance over that three-year period and taking into account our Advancing the Core strategy. Setting metrics and goals in this way serves to both reinforce the long-term nature of these awards and to incentivize our leaders to achieve incrementally more challenging goals for each fiscal year included in the award. Our actual performance against those goals determines the number of shares that will be issuable in respect of the PSUs when the awards vest, with the number of shares issuable for performance between performance levels interpolated on a straight-line basis. The financial metrics used to measure corporate performance for these awards are adjusted EPS, with an 80% weighting, and adjusted RONA, with a 20% weighting.

 

 

LOGO

To reinforce the capital allocation goal of returning a substantial portion of free cash flow to shareholders under our Advancing the Core strategy, dividend equivalent payments are made in cash in respect of PSUs that are earned based on the achievement of applicable performance metrics, but that have not vested based on time, when and if dividends are declared and paid on the Company’s common stock. The objective of providing such dividend equivalent payments is to help focus our executives on, and to reward them for, managing the business so as to produce cash that is capable of being distributed to shareholders in the form of a dividend. Dividend equivalents also mirror the income generation associated with stock ownership.

 

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2021 PROXY STATEMENT   

 

 

Executive Compensation (continued)

 

 

 

Stock options

Stock options are granted with an exercise price equal to 100% of the closing price of Cabot’s common stock on the date of grant. They generally vest, subject to continued employment, over a three-year period (30% on each of the first and second anniversaries of the date of grant and 40% on the third anniversary of the date of grant) and have a ten-year term.

TSUs

TSUs generally vest, subject to continued employment, in their entirety at the end of three years. When the TSUs vest, they are settled in shares of Cabot common stock. During the vesting period, dividend equivalents are paid in cash on each TSU when and if dividends are declared and paid on the Company’s common stock.

Practices Regarding the Grant of Equity Awards

Annual equity grants are made at the Compensation Committee’s regularly scheduled meeting in November to align the timing of grants with our fiscal year, most importantly for PSUs, which are earned based on a fiscal year performance period. The exercise price of stock options is the closing price of Cabot stock on the NYSE on the date the options are granted. From time to time, equity awards outside of the annual grant program are made for recruiting or retention purposes or in connection with promotions or to recognize specific achievements or performance. We do not have a program, plan, or practice to time “off-cycle” awards in coordination with the release of material non-public information.

PSUs Earned under Outstanding PSU Awards on the Basis of Fiscal 2020 Performance

The following tables show the performance metrics and goals and the relative weighting of each metric that the Committee set for the fiscal 2020 performance period of PSUs granted in fiscal 2017, 2018, and 2019, our degree of attainment of these goals and the percentage of the awards earned, measured against the target award. As the performance metrics and goals for the fiscal 2020 performance period of these awards were established at different times based on when they were granted, they each reflect the long-term goals and target-setting philosophy in place when they were awarded. In light of the impact of the COVID-19 pandemic on our financial performance in fiscal 2020, because we did not achieve the threshold level for 2020 performance under any of our outstanding PSU awards, no outstanding PSUs were earned on the basis of our fiscal 2020 performance.

Performance Goals (set in November 2017) and Results for

Performance Year 3 of the PSUs that Vested in November 2020

 

    

 

Threshold

Level

(50% payout)

 

 

 

Target
Level
(100% payout)

 

 

 

Stretch
Level
(150% payout)

 

 

 

Maximum

Level

(200% payout)

 

 

Fiscal
2020 Results

 

 

Percent 
Earned 

 

  Adjusted EPS (80%)

   

$

2.70

   

$

3.82

   

$

4.20

   

$

4.50

   

$

2.08

   

 

0.0

  Adjusted RONA (20%)

   

 

9.0

%

   

 

12.0

%

   

 

13.1

%

   

 

15.0

%

   

 

7.6

%

   

 

0.0

  Composite

                                                     

 

0.0

Performance Goals (set in November 2018) and Results for

Performance Year 2 of the PSUs that Vest in November 2021

 

    

 

Threshold

Level

(50% payout)

 

 

 

Target
Level
(100% payout)

 

 

 

Stretch
Level
(150% payout)

 

 

 

Maximum

Level

(200% payout)

 

 

Fiscal
2020 Results

 

 

Percent 
Earned 

 

  Adjusted EPS (80%)

   

$

3.84

   

$

4.61

   

$

5.06

   

$

5.64

   

$

2.08

   

 

0.0

  Adjusted RONA (20%)

   

 

11.7

%

   

 

14.4

%

   

 

15.4

%

   

 

17.2

%

   

 

7.6

%

   

 

0.0

  Composite

                                                     

 

0.0

 

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2021 PROXY STATEMENT   

 

 

Executive Compensation (continued)

 

 

 

Performance Goals (set in November 2019) and Results for

Performance Year 1 of the PSUs that Vest in November 2022

 

    

 

Threshold

Level

(50% payout)

 

 

 

Target
Level
(100% payout)

 

 

 

Stretch
Level
(150% payout)

 

 

 

Maximum

Level

(200% payout)

 

 

Fiscal
2020 Results

 

 

Percent 
Earned 

 

  Adjusted EPS (80%)

   

$

3.32

   

$

4.18

   

$

4.38

   

$

4.89

   

$

2.08

   

 

0.0

  Adjusted RONA (20%)

   

 

11.0

%

   

 

13.0

%

   

 

14.0

%

   

 

15.0

%

   

 

7.6

%

   

 

0.0

  Composite

                                                     

 

0.0

PSUs Earned under PSU Award that Vested in 2020

The chart below shows the composite 2018 PSU achievement under the PSU awards granted in November 2017 that vested in November 2020. The performance periods of these awards were our 2018, 2019, and 2020 fiscal years. As described above, the Committee established the performance metrics and goals for each of these performance periods based on the Company’s expectations for the Company’s earnings growth and performance over that three-year period at the time of grant.

Results for PSUs granted in Fiscal 2018 that Vested 2020

 

 Performance Year 

 

  

Adjusted EPS
Target
(100% Payout)

 

  

Adjusted
EPS Actual

 

  

% Achieved

 

  

Adjusted RONA
Target
(100% Payout)

 

  

Adjusted
RONA
Actual

 

  

% Achieved

 

  

Overall
Achievement 

 

  2018 (Y1)

    

 

$3.60

 

    

 

$4.03

    

 

167.8%

 

    

 

12.4%

 

    

 

14.3%

 

    

 

183.3%

 

    

 

170.9%

 

  2019 (Y2)

    

 

$3.71

 

    

 

$3.91

    

 

134.5%

 

    

 

12.1%

 

    

 

12.7%

 

    

 

133.3%

 

    

 

134.3%

 

  2020 (Y3)

    

 

$3.82

 

    

 

$2.08

 

    

 

0.0%

 

    

 

12.0%

 

    

 

7.6%

 

    

 

0.0%

 

    

 

0.0%

 

  Composite

                                                                      

 

101.7%

 

Fiscal 2020 Compensation Decisions

The compensation decisions the Committee made with respect to our named executive officers for fiscal 2020 are described below.

In considering each officer’s individual performance in fiscal 2020 and determining his or her STI award payout for fiscal 2020 and making the other compensation decisions discussed above, the Committee specifically considered the following:

Sean D. Keohane, President and CEO.

Fiscal 2020 Performance Summary

The Committee believes that Mr. Keohane performed extremely well in fiscal 2020. The Committee specifically recognized Mr. Keohane’s steady leadership guiding the Company through the COVID-19 pandemic, balancing objectives to protect the Company and its employees during very uncertain times, while continuing to advance key strategic initiatives that will enable the Company to capture opportunities and drive long-term earnings growth. The Committee also recognized Mr. Keohane’s role in:

 

 

our strong SH&E performance in the year;

 

the development and roll-out of our 2025 Sustainability Goals, and our progress in integrating sustainability throughout Cabot and in developing a more inclusive and diverse organization;

 

our execution of important strategic initiatives, including continued implementation of the transformation plan for our Purification Solutions business and actions taken to remove hurdles to our divestiture of this non-core business;

 

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Executive Compensation (continued)

 

 

 

 

the acquisition of Shenzhen Sanshun Nano to strengthen our product capabilities and market position in the fast growing lithium ion battery application;

 

the investments we made to strengthen our manufacturing asset footprint, reflected most notably in the successful start-up of our additional fumed silica capacity in Carrollton, Kentucky and the continued work to upgrade the carbon black plant we purchased in China in 2018 for the production of specialty carbons, which we expect to be completed in 2022;

 

the establishment of our GBS organization to increase the efficiency and effectiveness of those processes that power our way of doing business; and

 

the strengthening of our investor outreach that resulted in, among other things, an increase in analyst coverage of the Company.

Compensation Decisions for Fiscal 2020

 

  Base Salary

 

  

 

Base Salary
Increase

 

 

 

STI Target
Amount

 

  

Actual STI

Payout(1)

 

  

 

FY20 LTI Grant

Amount(2)

 

  

 

FY20 LTI Grant(2) 

 

 

  $1,000,000

    

 

 

 

0

 

%

   

 

$

 

1,200,000

 

    

 

$

 

432,000

 

    

 

$

 

4,500,000

 

  

 

31,355 PSUs 

26,876 TSUs 

147,471 Options 

 

 

 

 

(1)

The STI payout was based on the achievement of 0.0% of target against corporate performance and 120% of target against individual performance, resulting in a payout of 36% of target.

(2)

The number and grant date value of PSUs assumes target level of achievement of applicable performance goals.

Erica McLaughlin, SVP and CFO.

Fiscal 2020 Performance Summary

Among Ms. McLaughlin’s key achievements that the Committee considered were the following:

 

 

her role in helping the Company manage through the COVID-19 pandemic, including the strong financial support provided in the development of plans focused on business continuity and maintaining our access to liquidity and as a member of the COVID-19 pandemic workstream focused on cash generation and liquidity, and on internal and external communications related to the impact of, and the Company’s response to, the COVID-19 pandemic;

 

her role in leading the Company’s cash generation activities, which resulted in our generating $377 million of cash flow from operations, including a $185 million decrease in net working capital;

 

her role in the execution of our capital allocation strategy, which included returning $124 million to our shareholders through dividends and share repurchases;

 

her strong leadership of our M&A and other strategic activities, including the acquisition of Shenzhen Sanshun Nano and the strategic sale of our Marshall lignite mine and related long-term activated carbon supply agreement; and

 

her role leading our investor communications program, including successful outreach efforts that resulted in an increase in analyst coverage of the Company.

Compensation Decisions for Fiscal 2020

 

  Base Salary    Base Salary
Increase
  STI Target
Amount
   Actual  STI
Payout
(1)
   FY20 LTI  Grant
Amount
(2)
   FY20 LTI Grant(2) 
  $483,000        5 %     $ 338,100      $ 121,716      $ 825,000       

5,748 PSUs

4,927 TSUs

27,036 Options


 

(1)

The STI payout was based on the achievement of 0.0% of target against corporate performance and 120% of target against individual performance, resulting in a payout of 36% of target.

(2)

The number and grant date value of PSUs assumes target level of achievement of applicable performance goals.

 

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2021 PROXY STATEMENT   

 

 

Executive Compensation (continued)

 

 

 

Karen A. Kalita, SVP and General Counsel.

Fiscal 2020 Performance Summary

Among Ms. Kalita’s key achievements that the Committee considered were the following:

 

 

her role in helping the Company manage through the COVID-19 pandemic, including the strong legal support provided in relation to business continuity matters, and in developing employee pay and leave policies, contingency plans and operational guidance for our manufacturing sites, and, as a member of the COVID-19 pandemic workstream, ensuring the Company accessed available government subsidies and support programs around the globe;

 

her guidance to the Board on governance matters;

 

her strong legal guidance and support overseeing the negotiation of key commercial, M&A and other strategic activities;

 

her strong leadership within the Company’s Office of Compliance and to the Company on ethics and compliance matters, and her role in managing our regulatory compliance programs;

 

her role in providing risk management counsel; and

 

her effective oversight of complex litigation and environmental matters toward positive outcomes for the Company.

Compensation Decisions for Fiscal 2020

 

  Base Salary    Base Salary
Increase
  STI Target
Amount
   Actual  STI
Payout
(1)
   FY20 LTI  Grant
Amount
(2)
   FY20 LTI Grant(2) 
  $368,500        10 %     $ 202,675      $ 66,883      $ 600,000       

4,180 PSUs

3,583 TSUs

19,662 Options


 

(1)

The STI payout was based on the achievement of 0.0% of target against corporate performance and 110% of target against individual performance, resulting in a payout of 33% of target.

(2)

The number and grant date value of PSUs assumes target level of achievement of applicable performance goals.

Hobart C. Kalkstein, SVP and President, Reinforcement Materials Segment, and President, Americas Region.

Fiscal 2020 Performance Summary

Among Mr. Kalkstein’s key achievements that the Committee considered were the following:

 

 

his role in helping the Company manage through the COVID-19 pandemic, including his strong leadership in developing contingency plans for our Reinforcement Materials segment manufacturing sites and action plans to mitigate the financial impact of the coronavirus on the Company, and, as a member of the COVID-19 pandemic workstream focused on cost savings measures to protect the Company’s earnings;

 

his strong contribution to the Company’s successful working capital reduction;

 

his role in effectively implementing new commercial terms to manage volatility in our feedstock costs;

 

his leadership in strengthening strategic customer relationships within the Reinforcement Materials Segment and the successful negotiation of supply agreements with certain of our major tire customers;

 

his role in advancing the development and commercialization of our E2C solutions; and

 

his role in leading our Americas Region.

Compensation Decisions for Fiscal 2020

 

  Base Salary    Base Salary
Increase
  STI Target
Amount
   Actual  STI
Payout
(1)
   FY20 LTI  Grant
Amount
(2)
   FY20 LTI Grant(2) 
  $480,447        3.5 %     $ 288,268      $ 95,129      $ 800,000       

5,574 PSUs

4,778 TSUs

26,217 Options


 

(1)

The STI payout was based on the achievement of 0.0% of target against corporate performance and 110% of target against individual performance, resulting in a payout of 33% of target.

(2)

The number and grant date value of PSUs assumes target level of achievement of applicable performance goals.

 

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2021 PROXY STATEMENT   

 

 

Executive Compensation (continued)

 

 

 

Jeff Zhu, SVP and President, Performance Additives business (since October 2, 2019) and President, Asia Pacific Region.

Fiscal 2020 Performance Summary

Among Mr. Zhu’s key achievements that the Committee considered were the following:

 

 

his role in helping the Company manage through the COVID-19 pandemic, including his strong leadership in developing contingency plans for our Performance Additives business manufacturing sites and action plans to mitigate the financial impact of the coronavirus on the Company, and, as a member of the COVID-19 pandemic workstream focused on cost savings measures to protect the Company’s earnings;

 

his role in leading the business as it lays the foundation to restore profitability to its historical levels;

 

his strong contribution to the Company’s successful working capital reduction;

 

his role in the successful start-up of our additional fumed silica capacity in Carrollton, Kentucky, which secures access to long-term feedstock and will allow us to meet growing demand for our high-performance fumed silica;

 

his role overseeing the modification of the carbon black plant we purchased in China in 2018 for the production of specialty carbons;

 

his leadership of the business’s application development and strategic activities, particularly with our acquisition of Shenzhen Sanshun Nano; and

 

his role in leading our Asia Pacific Region.

Compensation Decisions for Fiscal 2020

 

  Base Salary    Base Salary
Increase
  STI Target
Amount
   Actual  STI
Payout
(1)
  

FY20 LTI Grant(2)

Amount

   FY20 LTI Grant(2) 
  $488,928        5 %     $ 293,357      $ 96,808      $ 800,000       

5,574 PSUs

4,778 TSUs

26,217 Options


 

(1)

The STI payout was based on the achievement of 0.0% of target against corporate performance and 110% of target against individual performance, resulting in a payout of 33% of target

(2)

The number and grant date value of PSUs assumes target level of achievement of applicable performance goals.

What’s New for 2021 Compensation

In connection with fiscal 2021 compensation decisions, our management team recommended to the Compensation Committee a number of refinements to our STI and LTI programs, all of which were adopted and reflected in the incentive awards made for fiscal 2021, which will be further discussed in next year’s CD&A.

The refinements in our STI program consist of the following:

 

 

Adding Discretionary Free Cash Flow (“DFCF”) as a third financial metric to measure corporate performance for determining payouts under our STI program for fiscal 2021. Adding this metric incentivizes cash flow management and more closely aligns the incentive metrics under our STI awards with each of the elements of our Advancing the Core strategy.

 

Adjusting the weighting of the financial metrics, with adjusted EBIT weighing 60%, and NWC days and DFCF each weighing 20% (compared to adjusted EBIT and NWC days with an 80% and 20% weighting, respectively, for fiscal 2020).

 

Removing the minimum adjusted EBIT achievement level (or gate) for payouts against each performance metric under our STI program. This emphasizes the relative importance of the achievement of each of the three financial metrics.

 

Linking the scorecard of annual objectives for each business and function to determine the funding of awards based on individual performance as a whole for each business and function. This is intended to provide for greater differentiation and recognition of the achievement of individual performance among the Company’s businesses and functions.

 

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2021 PROXY STATEMENT   

 

 

Executive Compensation (continued)

 

 

 

The refinement made in our LTI program for awards made for fiscal 2021 consists of modifying the weighting of the two financial metrics used for our PSUs. For PSUs granted before November 2020, adjusted EPS and adjusted RONA have an 80% and 20% weight, respectively. For awards granted in November 2020 (during fiscal 2021), adjusted EPS and adjusted RONA have a 65% and 35% weight, respectively. Increasing the weight of the adjusted RONA performance is intended to further incentivize the effective and efficient use of our operating assets to generate earnings.

2021 Compensation Decisions

In addition to the refinements to our STI and LTI programs, we conducted our annual review of the market competitiveness of the compensation of our executive officers. As part of this review, we made market-based adjustments to the base salaries of certain of our named executive officers and each of our named executive officer’s target STI incentive opportunity for 2021, other than Mr. Keohane’s, was increased to bring the target total direct compensation of our named executive officers closer to the market median of the benchmark compensation data used by the Committee. The table below sets forth the base salary and target STI incentive opportunity for 2021 for each of our named executive officers.

 

Name   

2021 Base Salary

Merit Increase

  2021 Base Salary
Market Adjustment
  2021 Base
Salary
  

 FY21 STI Target as % 

of Base Salary

  Sean D. Keohane

       3.5 %         $ 1,035,000        120 %

  Erica McLaughlin

       3.5 %       6 %     $ 529,899        75 %

  Karen A. Kalita

       3.5 %       12 %     $ 427,165        65 %

  Hobart C. Kalkstein

       3.5 %       1.8 %     $ 506,213        70 %

  Jeff Zhu

       3.5 %               $ 506,040        70 %

Risk Assessment

We monitor the risks associated with our executive compensation programs and policies on an on-going basis. In May 2020, management presented the Committee with the results of a study it conducted of our compensation programs to assess the potential risks arising from these programs. We believe the following policies and practices reflect sound risk management practices within our compensation programs and mitigate excessive risk-taking that could harm our value or reward poor judgment by our executives and other employees:

 

 

Use of short- and long-term performance periods in our LTI program and multiple levels of tiered performance (threshold, target, stretch and maximum) in both our STI and LTI programs;

 

Targeting pay within a reasonable range of market median;

 

Use of maximum payout caps in both the STI and LTI programs;

 

Use of different financial performance metrics across the STI and LTI programs covering multiple dimensions of performance (income statement, balance sheet, share price, etc.);

 

Ability of the Committee to use discretion to modify STI awards;

 

Annual Committee review and approval of the STI and LTI program design, performance metrics and goals and earned payouts;

 

Mix of equity awards and multi-year vesting used in the LTI program;

 

Availability of a Company recoupment policy; and

 

Use of share ownership guidelines.

Based on these mitigating factors, the Committee agreed with the study’s findings that our compensation programs do not encourage inappropriate or unacceptable risk to the Company, and that any risks are within our ability to effectively monitor and manage and are not reasonably likely to have a material adverse effect on the Company.

 

CABOT CORPORATION    47


Table of Contents

 

2021 PROXY STATEMENT   

 

 

Executive Compensation (continued)

 

 

 

Share Ownership Guidelines

To further align the interests of our executives and our shareholders, in November 2008, we adopted share ownership guidelines for members of our Management Executive Committee. Under our guidelines, we expect our CEO to own equity in the Company in an amount equal to five times his or her annual base salary, and each other officer who reports directly to the CEO to own equity in an amount equal to three times his or her annual base salary. Each executive has five years from the date he or she becomes subject to the share ownership guidelines to meet his or her target. The Committee reviews compliance with these guidelines annually. At the time of this filing, all of the members of the Management Executive Committee who have been subject to these guidelines for five years or longer had satisfied such share ownership guidelines.

Recoupment of Compensation

The Company adopted a recoupment (clawback) policy in 2012. The policy applies to performance-based compensation, such as STI and LTI compensation, paid to participants in our LTI program (which includes our named executive officers), and covers awards made for fiscal 2013 and thereafter. Under the policy, if the Company is required to restate its financial statements due to material non-compliance with financial reporting requirements under applicable securities laws, and the amount of performance-based compensation awarded or paid would have been lower had the achievement of applicable financial performance been calculated based on the restated financial results, the amount of the excess compensation awarded or paid during the three-year period preceding the date on which the Company is required to prepare the restatement is subject to recoupment, in the discretion of the Compensation Committee. In addition, if a participant knowingly engaged in misconduct that is a material factor in the Company’s obligation to restate its financial statements, the Company will have the right to seek recoupment of the proceeds from the sale of shares issued upon the exercise of stock options or upon the vesting of restricted stock units (including TSUs and PSUs) occurring during the twelve-month period following the filing with the SEC of the financial statements required to be restated, in an amount deemed appropriate by the Compensation Committee under the circumstances.

Other Information

Retirement and Other Benefit Programs

Except for Mr. Zhu, our named executive officers participate in the full range of benefit programs and are covered by the same retirement plans on the same terms as are generally provided to our full-time U.S. salaried employees, are eligible to participate in and/or receive benefits under our Deferred Compensation Plan and our Death Benefit Protection Plan, and participate in our Senior Management Severance Protection Plan. These plans are described in the footnotes and text that accompany the compensation tables that follow this CD&A.

Mr. Zhu is a participant in our Senior Management Severance Protection Plan, but as a China-based employee, does not participate in the other retirement and benefit programs described above. Instead, Mr. Zhu participates in the China Supplemental Pension Plan, which is provided to full-time Cabot employees in China, and participates in the insurance and other benefit programs consistent with other employees who are on an international assignment. These benefits, and their costs to Cabot, are described in the footnotes and text that accompany the compensation tables that follow this CD&A.

Health and Welfare Plans

The health and welfare plans offered to our named executive officers are the same as those offered to all other employees working in the same country. Mr. Zhu is also covered by the health and welfare plans and life and disability benefits offered to our employees who are on an international assignment.

Perquisites

We provide our named executive officers a modest level of perquisites, consisting principally of financial planning and tax assistance services and an executive physical examination. We provide these benefits to help our executives maintain their health and manage their finances, in each case, so that they are able to focus their attention on Cabot’s business. Mr. Zhu receives certain benefits as a result of his international assignment as described further below.

 

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Executive Compensation (continued)

 

 

 

Employment Arrangements

With the exception of Mr. Zhu, our named executive officers serve without employment agreements. The compensation of our named executive officers is set by the Compensation Committee as described above.

When Mr. Zhu joined Cabot in February 2012, Cabot reimbursed him for expenses related to his relocation from Singapore to Shanghai. Under the terms of his offer letter, Mr. Zhu receives additional benefits, many of which are offered to employees who are on an international assignment. These benefits consist of tax equalization, housing (including utilities), a car and driver, an annual home leave, and a travel allowance. The tax equalization benefit is intended to ensure that Mr. Zhu’s tax obligations are equal to the taxes he would have paid on his earnings had he remained a resident in Singapore, with the Company paying all other Chinese taxes associated with the income Mr. Zhu earns while based in China. In addition, under the terms of Mr. Zhu’s offer letter with the Company, if Mr. Zhu’s employment is terminated at Cabot’s initiation, while based in China, for any reason other than dismissal due to a violation of law or applicable company policy, Cabot will pay the costs to repatriate Mr. Zhu and his family back to Singapore. Mr. Zhu’s base salary and short-term incentive and equity awards are determined in U.S. Dollars and then converted to local China RMB at the time of payment.

Hedging Policy

The Company’s insider trading policy prohibits executives, directors, their family members who share the same address or are financially dependent upon them, and entities owned or controlled by any such persons, from, among other things, engaging in any “short sales”, including short sales “against the box”, or purchases, sales, or other arrangements involving, puts, calls or other derivative securities on the Company’s common stock, and issuing any standing or limit orders for the sale of the Company’s common stock that remain outstanding for more than five days, other than in connection with a Rule 10b5-1 trading plan adopted in compliance with the policy. No categories of hedging transactions are specifically permitted and, other than the transactions described above, no other categories of hedging transactions are specifically disallowed.

Tax and Accounting Information

We consider the tax and accounting rules associated with various forms of compensation when designing our compensation programs. However, to maintain flexibility to compensate our executive officers in a manner designed to promote short- and long-term corporate goals and objectives, the Compensation Committee has not adopted a policy that all compensation must be deductible or have the most favorable accounting treatment to the Company and has paid, and will continue to pay, compensation that is not deductible.

 

CABOT CORPORATION    49


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2021 PROXY STATEMENT   

 

 

Executive Compensation (continued)

 

 

 

Summary Compensation Table

The following table and footnotes describe the compensation for our named executive officers for the three most recently completed fiscal years (or such shorter period as described in the footnotes below). Each component of our executive compensation program is described under the heading “Compensation Discussion and Analysis,” which begins on page 29.

 

Name and

Principal

Position

  Year  

Salary

($)(3)

 

Stock

Awards

($)(4)

 

Option

Awards

($)(5)

 

Non-Equity

Incentive Plan

Compensation

($)

 

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($)(6)

 

All Other

Compensation

($)(7)

 

Total

($)

  Sean D. Keohane(1)

  President and CEO

      2020       750,000       2,924,943       1,574,400       432,000             136,180       5,817,523   
      2019       987,500       2,925,000       1,574,578       964,272       15,469       212,560       6,679,379
      2018       937,500       2,599,951       1,399,898       1,567,500             270,593       6,775,442

  Erica McLaughlin

  Senior Vice President and CFO

      2020       477,250       536,205       288,636       121,716             76,332       1,500,139
      2019       445,000       503,750       271,171       263,576             84,775       1,568,272
      2018       323,779       403,659       179,277       273,839             57,770       1,238,324

  Karen A. Kalita(2)

  Senior Vice President and

  General Counsel

      2020       360,125       389,935       209,912       66,883       1,309       57,523       1,085,687
      2019       281,756       237,454       87,516       90,263       819       39,818       737,626
                                                                               

  Hobart C. Kalkstein

  Senior Vice President,

  President, Reinforcement

  Materials Segment, and

  President, Americas Region

      2020       476,385       519,981       279,893       95,129       4,552       59,647       1,435,587
      2019       453,650       520,000       279,921       236,341       2,629       88,466       1,581,007
      2018       416,000       487,464       262,474       440,568       2,675       102,224       1,711,405
                                                                               

  Jeff Zhu(1)(2)

  Senior Vice President, President,

  Performance Additives business,   and President, Asia Pacific Region

      2020       483,107       519,981       279,893       96,808             775,562       2,155,351

 

1.

Mr. Keohane’s fiscal year 2020 annual base salary was $1,000,000. In recognition of the impact of the coronavirus pandemic on the Company’s business and operations during fiscal year 2020, at his request, Mr. Keohane’s salary was temporarily suspended from April 1 through June 30, 2020.

Under the terms of Mr. Zhu’s employment arrangements, his base salary, short-term incentive award, and equity-based compensation are determined in U.S. Dollars and then converted to China RMB at time of payment. For purposes of the disclosure in this proxy statement, certain amounts that were paid and recorded in China RMB have been converted to U.S. Dollars using the average monthly exchange rate during the 12-month period ended September 30, 2020 of U.S.D 7.00695 to one China RMB.

 

2.

For Ms. Kalita, information is only provided for fiscal 2019 and 2020 because she was not a named executive officer for fiscal 2018. For Mr. Zhu, information is only provided for fiscal 2020 because he was not a named executive officer for fiscal 2018 or 2019.

3.

We review base salaries annually in November and any changes are generally effective on January 1 of the following calendar year. The amounts reported in this column reflect salary earned during each fiscal year.

4.

The amounts reported in this column reflect the aggregate grant date fair value of TSUs and PSUs granted in the applicable fiscal year to each named executive officer, computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. The grant date fair value per unit of the TSUs and PSUs is equal to the closing price of Cabot common stock on the date of grant, with the grant date fair value of the PSUs calculated based on the probable outcome of applicable performance conditions, which assume that the target level of performance is achieved, and, for PSUs made for fiscal 2020, these amounts are as follows: Mr. Keohane: $1,574,962; Ms. McLaughlin: $288,722; Ms. Kalita: $209,961; Mr. Kalkstein: $279,982; and Mr. Zhu: $279,982. If the maximum level of performance were to be achieved under the PSUs granted in fiscal 2020, the grant date fair value of these awards would be as follows: Mr. Keohane: $3,149,924; Ms. McLaughlin: $577,444; Ms. Kalita: $419,922; Mr. Kalkstein: $599,964; and Mr. Zhu: $599,964. We pay dividend equivalents on all TSU awards, and on PSUs (to the extent earned) if, and when, we pay dividends on our common stock, which is factored into the grant date fair value for these awards. The assumptions used to calculate the

 

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Executive Compensation (continued)

 

 

 

  grant date fair value of stock awards are set forth in Note O to our Consolidated Financial Statements filed with our Annual Report on Form 10-K for fiscal 2020.
5.

The amounts reported in this column reflect the aggregate grant date fair value of stock option awards granted in the applicable fiscal year to each named executive officer, computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures, determined using the Black-Scholes option-pricing model. The assumptions used to calculate the grant date fair value of option awards under the Black-Scholes model are set forth in Note O to our Consolidated Financial Statements filed with our Annual Report on Form 10-K for fiscal 2020.

6.

The amounts reported in this column consist of:

  a.

The Cash Balance Plan was terminated on July 31, 2019 and each named executive officer, except Mr. Zhu, received a lump sum payment from the plan on September 11, 2020. Therefore, the change in actuarial present value consists only of the benefits under the Supplemental Cash Balance Plan, measured from October 1, 2019 to September 30, 2020 as follows: for Mr. Keohane: $(21,469); for Ms. McLaughlin: $(1,799); and for Mr. Kalkstein: $(5,113). Ms. Kalita and Mr. Zhu do not have a balance in the Supplemental Cash Balance Plan. These amounts are presented in accordance with SEC rules, which require the use of the same assumptions as required by FASB ASC Topic 715. When such amounts are negative, they are not reflected in the amount reported in the column. The Supplemental Cash Balance Plan is frozen and, therefore, the change in the Present Value of Accrued Benefits (PVAB) is due to (i) one less year to accumulate benefits to normal retirement, resulting in a shorter discounting period and an increase to the PVAB; and (ii) a change in the discount rate assumption for the plan, the net effect of which decreased the PVAB. Details on the Cash Balance Plan and the Supplemental Cash Balance Plan and the actuarial assumptions to calculate the amounts above can be found below under the heading “Pension Benefits”.

  b.

Above-market interest (the portion exceeding 120% of the applicable federal long-term rate) credited to deferrals under Cabot’s Deferred Compensation Plan as follows: for Ms. Kalita: $819 in 2019 and $1,309 in 2020; and for Mr. Kalkstein: $2,675 in 2018, $2,629 in 2019 and $4,552 in 2020.

 

7.

The table below identifies the amounts shown for fiscal 2020 in the “All Other Compensation” column. All of the amounts reflect the actual cost to Cabot of providing the payment or benefit described below.

 

    

Company

Contributions

to 401(k)
Plan

($)(a)

 

Company

Contributions to

Supplemental

401(k) Plan

($)(a)

  

Company

Contributions

to China

Supplemental
Pension

Plan

($)(a)

 

Company

Contributions

to Deferred

Compensation

Plan

($)(a)

 

Financial

Planning

and Tax

Assistance

($)(b)

  Additional
Benefits
and Tax
Equalization
($)
(c )
 

Other

($)(d)

 

Total

($)

  Sean D. Keohane

      28,500       89,700                    15,316             2,664       136,180   

  Erica McLaughlin

      28,500       31,379                    15,182             1,271       76,332

  Karen A. Kalita

      32,345       4,140              1,672       18,572             794       57,523

  Hobart C. Kalkstein

      28,500       15,083              7,000       7,794             1,270       59,647

  Jeff Zhu

                   33,584             5,514       672,017       64,447       775,562

 

  a.

The 401(k) Plan, the Supplemental 401(k) Plan, the Deferred Compensation Plan, and the China Supplemental Pension Plan are described under the heading “Deferred Compensation” beginning on page 57.

  b.

Consists of amounts paid or reimbursed by Cabot for financial planning and tax assistance services during fiscal 2020.

  c.

Mr. Zhu receives additional benefits, many of which are provided to employees on an international assignment, that amounted to $672,017 for fiscal 2020. These benefits included the payment by Cabot of expenses related to his assignment to China, consisting of $157,952 for rent and utilities for housing in China, $9,357 for home leaves during the year, and $14,536 for a travel allowance. Mr. Zhu will also receive an estimated $490,172 in tax equalization benefits with respect to fiscal 2020. The tax equalization benefit is intended to ensure that Mr. Zhu’s tax obligations are equal to the taxes he would have paid on his earnings had he remained a resident in Singapore, with the Company paying all other Chinese taxes associated with the income Mr. Zhu earns while based in China. Certain of these amounts were paid in China RMB and have been converted to U.S. dollars as described above.

  d.

Consists of the amount paid by Cabot for an annual physical exam (none in 2020); and for each U.S.-based named executive officer, the cost to Cabot of insurance premiums under our Death Benefit Protection Plan, which provides a death benefit equal to three times a named executive officer’s annual base salary at the time of his or her death, up to a maximum benefit of $3,000,000. These premiums are paid directly to the life insurance carriers. For Mr. Zhu, this amount includes the insurance premium paid by Cabot under the Company’s international benefits program for health and welfare, life, and disability insurance, as well as $27,750 for the cost of a car and driver. The life insurance plan for employees on international assignment provides a benefit equal to two times base salary up to a maximum benefit of $300,000.

 

      

The table does not include any amounts related to the use of tickets for sporting and cultural events by the named executive officers because no incremental costs are incurred by Cabot in providing these benefits. Cabot purchases season tickets to sporting and cultural events for business outings with customers and vendors. If the tickets are not being used for business purposes, the named executive officers and other employees may have opportunities to use these tickets.

 

CABOT CORPORATION    51


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2021 PROXY STATEMENT   

 

 

Executive Compensation (continued)

 

 

 

Grant of Plan-Based Awards Table

The following table reports plan-based awards granted to the named executive officers during fiscal 2020. The material terms of our STI and LTI awards are described in “Compensation Discussion and Analysis — Our Performance-based Compensation Philosophy” beginning on page 38.

 

Name  

Grant

Date

   

 

Estimated Future Payouts

Under Non-Equity Incentive
Plan Awards(1)

   

 

Estimated Future Payouts

Under Equity Incentive
Plan Awards(2)

   

All Other

Stock

Awards:

Number

of Shares

of Stock

or

Units(3)

(#)

   

All Other

Option

Awards:

Number of

Securities

Underlying

Options

(#)

   

Exercise

or Base

Price of

Option

Awards

($/Sh)(4)

   

Grant

Date Fair

Value of

Stock

and

Option

Awards

($)(5)

 
 

Threshold

($)

   

Target

($)

   

Maximum

($)

   

Threshold

(#)

   

Target

(#)

   

Maximum

(#)

 

  Sean D. Keohane

                     

  TSU

 

 

11/8/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26,876

 

 

 

 

 

 

 

 

 

1,349,981

 

  PSU

 

 

11/8/2019

 

 

 

 

 

 

 

 

 

 

 

 

15,678

 

 

 

31,355

 

 

 

62,710

 

 

 

 

 

 

 

 

 

 

 

 

1,574,962

 

  Options

 

 

11/8/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

147,471

 

 

 

50.23

 

 

 

1,574,400

 

  STI

 

 

 

 

 

420,000

 

 

 

1,200,000

 

 

 

2,400,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Erica McLaughlin

                     

  TSU

 

 

11/8/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,927

 

 

 

 

 

 

 

 

 

247,483

 

  PSU

 

 

11/8/2019

 

 

 

 

 

 

 

 

 

 

 

 

2,874

 

 

 

5,748

 

 

 

11,496

 

 

 

 

 

 

 

 

 

 

 

 

288,722

 

  Options

 

 

11/8/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,036

 

 

 

50.23

 

 

 

288,636

 

  STI

 

 

 

 

 

118,335

 

 

 

338,100

 

 

 

676,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Karen A. Kalita

                     

  TSU

 

 

11/8/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,583

 

 

 

 

 

 

 

 

 

179,974

 

  PSU

 

 

11/8/2019

 

 

 

 

 

 

 

 

 

 

 

 

2,090

 

 

 

4,180

 

 

 

8,360

 

 

 

 

 

 

 

 

 

 

 

 

209,961

 

  Options

 

 

11/8/2019

 

 

 

 

 

 

 

 

 

 

         

 

19,662

 

 

 

50.23

 

 

 

209,912

 

  STI

 

 

 

 

 

70,936

 

 

 

202,675

 

 

 

405,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Hobart C. Kalkstein

                     

  TSU

 

 

11/8/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,778

 

 

 

 

 

 

 

 

 

239,999

 

  PSU

 

 

11/8/2019

 

 

 

 

 

 

 

 

 

 

 

 

2,787

 

 

 

5,574

 

 

 

11,148

 

 

 

 

 

 

 

 

 

 

 

 

279,982

 

  Options

 

 

11/8/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26,217

 

 

 

50.23

 

 

 

279,893

 

  STI

 

 

 

 

 

100,894

 

 

 

288,268

 

 

 

576,536

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Jeff Zhu

                     

  TSU

 

 

11/8/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,778

 

 

 

 

 

 

 

 

 

239,999

 

  PSU

 

 

11/8/2019

 

 

 

 

 

 

 

 

 

 

 

 

2,787

 

 

 

5,574

 

 

 

11,148

 

 

 

 

 

 

 

 

 

 

 

 

279,982

 

  Options

 

 

11/8/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26,217

 

 

 

50.23

 

 

 

279,893

 

  STI

 

 

 

 

 

102,675

 

 

 

293,357

 

 

 

586,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.

The amounts in these columns represent bonus opportunities under our STI program and assume that performance goals for adjusted EBIT and NWC days, the financial metrics for corporate performance for fiscal 2020 as described in the Compensation Discussion and Analysis section of this proxy statement, are achieved at the threshold, target and maximum levels, as applicable. The amounts included in the “Threshold” column reflect 50% of the target bonus opportunity payable for corporate performance, which is weighted 70%, and do not reflect any payout for individual performance because there is no formal threshold payout level for individual performance. The amounts included in the “Target” column reflect 100% of the total target bonus opportunity payable for both corporate and individual performance. The amounts included in the “Maximum” column reflect 200% of the total target bonus opportunity payable for both corporate and individual performance. Actual bonus payments made under our STI program for fiscal 2020 are included in the Summary Compensation Table on page 50 in the column “Non-Equity Incentive Plan Compensation.” For Mr. Keohane, his STI target amount is based on his annual base salary, without regard to the temporary suspension of his salary as described in the Compensation Discussion and Analysis.

2.

The amounts in these columns represent PSU awards. These awards vest three years after the date of grant, generally subject to the named executive officer’s continued employment through the vesting date, and the number of shares issuable, if any, when the award vests will depend on the degree of achievement of corporate performance goals for each year within the three-year performance period. For fiscal 2020 awards, the two financial metrics used to measure corporate performance were adjusted EPS and adjusted RONA. The amount included in the “Target” column reflects the total number of shares that would be issued when the award vests if the Company achieves target financial performance against the adjusted EPS and adjusted RONA goals each year. The amount in the “Threshold” column reflects 50% of the target award and the total number of

 

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  shares that would be issued when the award vests if the Company achieves threshold financial performance each year, and the amount in the “Maximum” column reflects 200% of the target award and the total number of shares that would be issued when the award vests if the Company achieves maximum financial performance each year.
3.

The amounts in this column represent TSU awards. These awards vest three years after the date of grant, generally subject to the named executive officer’s continued employment through the vesting date.

4.

All stock options were granted with an exercise price equal to the closing price of our common stock on the date of grant and generally vest, subject to continued employment, over a three-year period (30% on each of the first and second anniversaries of the date of grant and 40% on the third anniversary of the date of grant).

5.     a.

Reflects the grant date fair value of TSUs, PSUs and option awards, calculated in accordance with FASB ASC Topic 718 as described in more detail in footnotes 4 and 5 to the Summary Compensation Table above.

  b.

The grant date fair value per unit for TSUs and PSUs is equal to the closing price of Cabot common stock on the date of grant ($50.23) and, for PSUs, was calculated based on the probable outcome of applicable performance conditions, which assume that the target level of performance is achieved. The grant date fair value of these awards assuming the maximum level of performance is achieved is set forth in footnote 4 to the Summary Compensation Table. We pay dividend equivalents on all TSU awards, and on PSUs (to the extent earned), if, and when, we pay dividends on our common stock, which is factored into the grant date fair value for these awards. Option awards are valued using the Black-Scholes option pricing model. The assumptions used to calculate the grant date fair value of these awards are set forth in Note O to our Consolidated Financial Statements filed with our Annual Report on Form 10-K for fiscal 2020.

 

CABOT CORPORATION    53


Table of Contents

 

2021 PROXY STATEMENT   

 

 

Executive Compensation (continued)

 

 

 

Outstanding Equity Awards at Fiscal Year-End Table

The following table shows information regarding outstanding equity awards held by our named executive officers as of September 30, 2020.

 

   

 

Option Awards

          

 

Stock Awards

Name  

Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable

 

Number of

Securities

Underlying

Unexercised

Options

(#)(1)

Unexercisable

 

Option

Exercise

Price

($)

 

Option

Expiration

Date

           

Number

of Shares

or Units

of Stock

That

Have Not

Vested

(#)

 

Market

Value of

Shares or

Units of

Stock That

Have Not

Vested

($)(5)

 

Equity

Incentive

Plan

Awards:

Number

of

Unearned

Shares,

Units or

Other

Rights

That

Have Not

Vested

(#)

 

Equity

Incentive

Plan

Awards:

Market or

Payout

Value of

Unearned

Shares,

Units or

Other

Rights

That Have

Not Vested

($)(5)

 

  Sean D. Keohane

      14,297             47.62       11/7/2023                 19,280       694,658            
 
      17,857             46.03       11/13/2024                 27,000       972,810            
 
      25,617             39.54       11/11/2025                 26,876       968,342            
 
      26,455             49.26       3/20/2026                 22,882 (2)        824,438            
 
      87,981             50.46       11/10/2026                 7,980 (3)        287,519       5,250 (6)        189,158
 
      55,153       36,770       62.24       11/9/2027                 (4)              10,452 (7)        376,586
 
      41,302       96,372       50.00       11/8/2028                          
 
 

 

            147,471       50.23       11/7/2029      

 

 

 

 

 

     

 

 

 

 

 

     

 

 

 

 

 

     

 

 

 

 

 

     

 

 

 

 

 

     

 

 

 

 

 

 

  Erica McLaughlin

      2,295             46.03       11/13/2024                 1,542       55,558            
 
      3,293             39.54       11/11/2025                 1,839       66,259            
 
      3,534             50.46       11/10/2026                 4,650       167,540            
 
      1,890       1,261       62.24       11/9/2027                 4,927       177,520            
 
      5,346       3,564       61.17       5/14/2028                 1,045 (2)        37,651            
 
      7,113       16,597       50.00       11/8/2028                 2,182 (2)        78,617            
 
            27,036       50.23       11/7/2029                 1,374 (3)        49,505       905 (6)        32,607
 
 

 

     

 

 

 

 

 

     

 

 

 

 

 

     

 

 

 

 

 

     

 

 

 

 

 

     

 

 

 

 

 

     

 

 

 

 

 

      (4)              1,918 (7)        69,106
 

  Karen A. Kalita

      3,431       8,006       40.91       6/2/2029                 723       26,050            
 
            19,662       50.23       11/7/2029                 900       32,427            
 
                                1,833       66,043            
 
                                3,583       129,095            
 
                                489 (2)        17,619            
 
                                152 (3)        5,477       100 (6)        3,603
 
                                541 (3)        19,492       357 (6)        12,863
 
 

 

     

 

 

 

 

 

     

 

 

 

 

 

     

 

 

 

 

 

     

 

 

 

 

 

     

 

 

 

 

 

     

 

 

 

 

 

      (4)              1,395 (7)        50,262
 

  Hobart C. Kalkstein

      4,017             46.03       11/13/2024                 3,615       130,248            
 
      5,763             39.54       11/11/2025                 4,800       172,944            
 
      4,251             47.23       4/6/2026                 4,778       172,151            
 
      18,558           50.46       11/10/2026                 4,289 (2)        154,533            
 
      10,340       6,895       62.24       11/9/2027                 1,418 (3)        51,091       934 (6)        33,652
 
      7,342       17,133       50.00       11/8/2028                 (4)              1,858 (7)        66,944
 
 

 

            26,217       50.23       11/7/2029      

 

 

 

 

 

     

 

 

 

 

 

     

 

 

 

 

 

     

 

 

 

 

 

     

 

 

 

 

 

     

 

 

 

 

 

 

  Jeff Zhu

      13,763             35.25       11/8/2022                 3,856       138,932            
 
      22,415             39.54       11/11/2025                 4,800       172,944            
 
      14,434             50.46       11/10/2026                 4,778       172,151            
 
      11,030       7,354       62.24       11/9/2027                 4,575 (2)        164,837            
 
      7,342       17,133       50.00       11/8/2028                 1,418 (3)        51,091       934 (6)        33,652
 
 

 

            26,217       50.23       11/7/2029      

 

 

 

 

 

     

 

 

 

 

 

      (4)              1,858 (7)        66,944

 

54    CABOT CORPORATION


Table of Contents

 

2021 PROXY STATEMENT   

 

 

Executive Compensation (continued)

 

 

 

1.

Under our LTI Program, options generally vest over a three-year period as follows, generally subject to the named executive officer’s continued employment through the vesting date: 30% on each of the first and second anniversaries of the date of grant and 40% on the third anniversary of the date of grant. All options have a date of grant that is ten years prior to the “Option Expiration Date” listed in the table.

2.

Reflects the portion of the fiscal 2018 PSUs earned based on the degree of achievement of the annual financial performance goals (adjusted EPS and adjusted RONA goals) for each of the three years within the three-year performance period of the award. These units vested and settled on November 10, 2020, which was the third anniversary of the date of grant for all awards except for the supplemental award granted to Ms. McLaughlin in May 2018 in connection with her promotion, the date the Compensation Committee determined the achievement of the adjusted EPS and adjusted RONA goals used to determine the number of PSUs earned during fiscal year 2020.

3.

Reflects the portion of the fiscal 2019 PSUs earned based on the degree of achievement of the annual financial performance goals (adjusted EPS and adjusted RONA goals) for the first two years within the three-year performance period of the award. These units will vest on November 9, 2021, generally subject to the named executive officer’s continued employment through the vesting date.

4.

No portion of the fiscal 2020 PSUs was earned based on the degree of achievement of the annual financial performance goals (adjusted EPS and adjusted RONA goals) for the first year within the three-year performance period of the award.

5.

The value of unvested restricted stock units was calculated by multiplying the closing price of our common stock on September 30, 2020 ($36.03) by the number of unvested restricted stock units.

6.

Reflects the portion of the fiscal 2019 PSUs that may be earned based on the degree of achievement of the annual financial performance goals (adjusted EPS and adjusted RONA goals) for the third year within the three-year performance period of the award. These units, to the extent earned, will vest on November 9, 2021, generally subject to the named executive officer’s continued employment through the vesting date. The number of shares shown for each named executive officer’s PSU award assumes the Company will achieve the threshold adjusted EPS goal and threshold adjusted RONA goal with respect to such award, based on fiscal 2020 performance.

7.

Reflects the portion of the fiscal 2020 PSUs that may be earned based on the degree of achievement of the annual financial performance goals (adjusted EPS and adjusted RONA goals) for the second and third year within the three-year performance period of the award. These units, to the extent earned, will vest on November 8, 2022, generally subject to the named executive officer’s continued employment through the vesting date. The number of shares shown for each named executive officer’s PSU award assumes the Company will achieve the threshold adjusted EPS goal and threshold adjusted RONA goal with respect to such award, based on fiscal 2020 performance.

Option Exercises and Stock Vested Table

The following table shows the TSUs and PSUs that vested for each named executive officer during fiscal 2020. There were no option exercises by our named executive officers during fiscal 2020. The value of stock realized on the vesting of TSUs is the product of the number of shares vested and the closing price of our common stock o