DEF 14A 1 d529973ddef14a.htm DEF 14A DEF 14A
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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

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  ☐

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  Preliminary Proxy Statement
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  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-12

DowDuPont Inc.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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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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2018 PROXY STATEMENT NOTICE OF ANNUAL MEETING OF STOCKHOLDERS WEDNESDAY, APRIL 25, 2018 UNLOCKING VALUE CREATING THREE WORLD-LEADING COMPANIES AGRICULTURE MATERIALS SCIENCE SPECIALTY PRODUCTS


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NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS

Dear Stockholder of DowDuPont Inc.:

At the 2018 Annual Meeting of Stockholders (the “2018 Meeting”), stockholders will vote on the following matters either by proxy or in person:

 

 

Date:

 

Wednesday, April 25, 2018

 

Time:

 

12:00 P.M. Central Time

 

Location:

 

The Ritz-Carlton Hotel

160 E Pearson St, Chicago, IL 60611

 

     

 

Agenda:

 

1.   Election of the 16 Directors named in the Proxy Statement.

 

2.   Advisory resolution to approve executive compensation.

 

3.   Advisory resolution on the frequency of future advisory votes to approve executive compensation.

 

4.    Ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2018.

 

5–9.  Stockholderproposals.

 

10.  Transaction of any other business as may properly come before the 2018 Meeting.

 

How to Vote

Your vote is important. Whether or not you plan on attending the 2018 Meeting, please vote your shares as soon as possible by internet, telephone or mail.

 

LOGO
 

BY INTERNET

 

www.proxyvote.com

  LOGO
 

BY PHONE

 

1-800-690-6903 or the

number provided on your

voting instructions

  LOGO
 

BY MAIL

 

Use the postage-paid

envelope provided

The Board of Directors of DowDuPont Inc. (the “Board”) has set the close of business on February 26, 2018, as the record date for determining stockholders who are entitled to receive notice of the 2018 Meeting and to vote.

As permitted by U. S. Securities and Exchange Commission (the “SEC”) rules, proxy materials were made available via the internet. Notice regarding availability of proxy materials and instructions on how to access those materials were mailed to certain stockholders of record on or about March 16, 2018 (the “Notice”). The instructions included how to vote online and how to request a paper copy of the proxy materials. This method of notice and access gives the Company a lower-cost way to furnish stockholders with their proxy materials.

Proof of stock ownership is necessary to attend the 2018 Meeting. Since seating is limited, the Board has established the rule that only stockholders or one person holding a proxy for any stockholder or account (in addition to those named as Board proxies on the proxy forms) may attend. Please see page 2 of the Proxy Statement for information on attending the 2018 Meeting.

If you are unable to attend the 2018 Meeting in person, please listen to the live audio webcast or the replay after the event, at www.dow-dupont.com/investors.

Thank you for your continued support and your interest in DowDuPont Inc.

 

 

LOGO

Stacy Fox

General Counsel and Secretary

March 16, 2018

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE

STOCKHOLDER MEETING TO BE HELD ON APRIL 25, 2018

The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.


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ABOUT THE DOWDUPONT MERGER TRANSACTION AND INTENDED BUSINESS SEPARATIONS

Effective August 31, 2017, The Dow Chemical Company (“Dow”) and E. I. du Pont de Nemours and Company (“DuPont”) completed the previously announced merger of equals transaction contemplated by the Agreement and Plan of Merger dated as of December 11, 2015, as amended on March 31, 2017 (the “Merger Transaction”). The Merger Transaction resulted in each of Dow and DuPont surviving as subsidiaries of DowDuPont Inc. (“DowDuPont”). For purposes of this Proxy Statement, references to “the Company” refer to DowDuPont.

Each share of common stock of Dow was converted into the right to receive one fully paid and non-assessable share of common stock of the Company. Each share of common stock of DuPont was converted into the right to receive 1.2820 fully paid and non-assessable shares of common stock of the Company. Any shares of common stock of Dow and DuPont which were held in treasury immediately prior to the Merger Transaction were automatically cancelled and retired for no consideration.

DowDuPont is now pursuing the intended separation of the Company’s Agriculture, Materials Science and Specialty Products divisions into three independent, publicly traded companies (the “Intended Business Separations”). The Intended Business Separations, which are subject to Board approval, are expected to be in the form of pro-rata spin-off transactions, under which DowDuPont stockholders will receive shares of capital stock in the resulting companies. DowDuPont recently announced dates for the Intended Business Separations: Materials Science is expected to separate from DowDuPont by the end of the first quarter of 2019, and Agriculture and Specialty Products are each expected to separate from one another by June 1, 2019.

DowDuPont recently announced brand names for the Intended Business Separations reflecting its ongoing progress toward the separations.

 

  The Agriculture division will become Corteva Agriscience, reflecting its purpose of enriching the lives of those who produce and those who consume

 

  The Materials Science division will be called Dow, and will retain the Dow diamond as its brand, building on the Company’s globally recognized 121-year history of innovation and value creation

 

  The Specialty Products division will be the new DuPont, carrying forward a 215-year legacy of science-based innovation to transform industries and everyday life

Dow was determined to be the accounting acquirer in the Merger Transaction and, as a result, certain historical information of Dow is presented in this Proxy Statement for the periods prior to the Merger Transaction. A further description of the Merger Transaction can be found in the current report on Form 8-K filed by DowDuPont on September 1, 2017.

 

 

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Anticipated Timeline to Expected Spins 1Q18 3Q18 1Q19 MatCo Spin AgCo Spin Finalize assets and liabilities by spin Complete IT design and test File initial Forms 10 Begin to deploy IT systems and stand up legal entities Forms 10 become effective Complete equity roadshows Complete IT systems and legal entity transitions 3Q19 SpecCo Formed

 



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THREE INDUSTRY-LEADING COMPETITORS WITH STRONG FOUNDATIONS

FOR INDEPENDENT, SUSTAINABLE GROWTH

We expect to complete the separation of the Materials Science division from DowDuPont by the end of first quarter of 2019, and the separation of the Agriculture and Specialty Products divisions from one another by June 1, 2019.

 

 

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KEY CAPABILITIES

 

    Broad offering and robust pipeline across germplasm, biotech traits and crop protection.

 

    Highly productive innovation engine brings products to market faster to provide farmers with superior solutions and greater choice.

 

    Combined R&D supports innovation in data analytics, precision agriculture, enhanced output traits and promising new technologies.

 

The intended Agriculture company will become Corteva Agriscience and will bring together the strengths of DuPont Pioneer, DuPont Crop Protection and Dow AgroSciences to form a pure-play Agriculture company with the industry’s most comprehensive and balanced portfolio, focused resources, and the scale needed to deliver the innovative solutions its customers need. The highly productive innovation engine and combined robust pipeline of solutions across seed, crop protection, seed-applied technologies, and digital agriculture will enable the intended Agriculture company to bring a broader suite of products to the market faster and be an even better partner to farmers around the world, helping them to increase their productivity and profitability.

 

 

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KEY CAPABILITIES

    World-class science and engineering capabilities combined with expanded customer offerings in packaging, infrastructure and consumer care.

 

    Advantaged, flexible integration and operational excellence drive lower-cost production and competitive advantage.

 

    Materials processing and applications development expertise provides customers with enhanced performance, reduced total system cost and sustainable solutions.

 

The intended Materials Science company will be called Dow and will be the premier materials science solution provider, focused on three, high-growth market verticals: packaging, infrastructure and consumer care. Built on a foundation of the strongest and deepest chemistry and polymers toolkit, the intended Materials Science company will have robust technology and asset integration, scale and cost-competitive capabilities to enable truly differentiated and sustainable solutions for customers.

 

 

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KEY CAPABILITIES

    World-class product innovation and application development.

 

    Broad portfolio of market-leading offerings, differentiated technologies, and a robust innovation pipeline.

 

    Strong strategic marketing capabilities and comprehensive understanding of value chains and local markets.

 

 

The intended Specialty Products company will be the new DuPont and will be a premier innovation leader composed of technology-based differentiated materials, ingredients and solutions that transform multiple industries and everyday life. It will apply its market knowledge and deep expertise in science and application development to solve customer needs in attractive markets and accelerate the adoption of electronic functionality and biotechnology into consumer and industrial applications. Bringing together science and market insights, Specialty Products will be well positioned for growth opportunities where customer collaboration and innovation are central to value creation.

 

1  Pro forma information was prepared in accordance with Article 11 of Regulation S-X.


 

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AGRICULTURE MATERIALS SCIENCE SPECIALTY PRODUCTS 2017 Pro Forma Sales1 2017 Pro Forma Sales1 2017 Pro Forma Sales1 Crop Protection Seed Packaging & Specialty Plastics Industrial Intermediates & Infrastructure Performance Materials & Coatings Electronics & Imaging Transportation & Advanced Polymers Nutrition & Biosciences Safety & Construction

 



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Cautionary Statement About Forward-Looking Statements

This communication contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” and similar expressions and variations or negatives of these words.

Forward-looking statements by their nature address matters that are, to varying degrees, uncertain, including the intended separation, subject to approval of the Company’s Board of Directors, of DowDuPont’s Agriculture, Materials Science and Specialty Products businesses in one or more tax efficient transactions on anticipated terms (the “Intended Business Separations”). Forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events which may not be realized. Forward-looking statements also involve risks and uncertainties, many of which are beyond the Company’s control. Some of the important factors that could cause DowDuPont’s, Dow’s or DuPont’s actual results to differ materially from those projected in any such forward-looking statements include, but are not limited to: (i) costs to achieve and achieving the successful integration of the respective Agriculture, Materials Science and Specialty Products businesses of Dow and DuPont, anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, productivity actions, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the combined operations; (ii) costs to achieve and achievement of the anticipated synergies by the combined Agriculture, Materials Science and Specialty Products businesses; (iii) risks associated with the Intended Business Separations, including conditions which could delay, prevent or otherwise adversely affect the proposed transactions, including possible issues or delays in obtaining required regulatory approvals or clearances related to the Intended Business Separations, associated costs, disruptions in the financial markets or other potential barriers; (iv) disruptions or business uncertainty, including from the Intended Business Separations, could adversely impact DowDuPont’s business (either directly or as conducted by and through Dow or DuPont), or financial performance and its ability to retain and hire key personnel; (v) uncertainty as to the long-term value of DowDuPont common stock; and (vi) risks to DowDuPont’s, Dow’s and DuPont’s business, operations and results of operations from: the availability of and fluctuations in the cost of energy and feedstocks; balance of supply and demand and the impact of balance on prices; failure to develop and market new products and optimally manage product life cycles; ability, cost and impact on business operations, including the supply chain, of responding to changes in market acceptance, rules, regulations and policies and failure to respond to such changes; outcome of significant litigation, environmental matters and other commitments and contingencies; failure to appropriately manage process safety and product stewardship issues; global economic and capital market conditions, including the continued availability of capital and financing, as well as inflation, interest and currency exchange rates; changes in political conditions, business or supply disruptions; security threats, such as acts of sabotage, terrorism or war, natural disasters and weather events and patterns which could result in a significant operational event for the Company, adversely impact demand or production; ability to discover, develop and protect new technologies and to protect and enforce the Company’s intellectual property rights; failure to effectively manage acquisitions, divestitures, alliances, joint ventures and other portfolio changes; unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as management’s response to any of the aforementioned factors. These risks are and will be more fully discussed in the current, quarterly and annual reports filed with the U.S. Securities and Exchange Commission by DowDuPont. While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on DowDuPont’s, Dow’s or DuPont’s consolidated financial condition, results of operations, credit rating or liquidity. None of DowDuPont, Dow or DuPont assumes any obligation to publicly provide revisions or updates to any forward-looking statements whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws. A detailed discussion of some of the significant risks and uncertainties which may cause results and events to differ materially from such forward-looking statements is included in the section titled “Risk Factors” (Part I, Item 1A of DowDuPont’s 2017 Annual Report on Form 10-K).



 

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PROXY STATEMENT SUMMARY

Annual Meeting of Stockholders

 

Date and Time   Place   Record Date

April 25, 2018

12:00 P.M. Central Time

 

The Ritz-Carlton Hotel

160 E Pearson St, Chicago, IL 60611

  February 26, 2018

Meeting Agenda and Voting Recommendations

 

  Agenda Item   Board Recommendation      Page  

  1:

 

ELECTION OF DIRECTORS

 

  FOR EACH NOMINEE        14  

  2:

 

ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATION

 

 

 

FOR

    

 

 

 

68

 

 

  3:

 

ADVISORY RESOLUTION ON THE FREQUENCY OF FUTURE ADVISORY VOTES TO APPROVE EXECUTIVE COMPENSATION

 

 

 

EVERY ONE YEAR

    

 

 

 

69

 

 

  4:

 

RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

  FOR        70  

  5:

 

STOCKHOLDER PROPOSAL – ELIMINATION OF SUPERMAJORITY VOTING THRESHOLDS

 

  AGAINST

 

      

 

73

 

 

 

  6:

 

STOCKHOLDER PROPOSAL – PREPARATION OF AN EXECUTIVE COMPENSATION REPORT

 

  AGAINST

 

      

 

75

 

 

 

  7:

 

STOCKHOLDER PROPOSAL – PREPARATION OF A REPORT ON SUSTAINABILITY METRICS IN PERFORMANCE-BASED PAY

 

  AGAINST

 

      

 

77

 

 

 

  8:

 

STOCKHOLDER PROPOSAL – PREPARATION OF A REPORT ON INVESTMENT IN INDIA

 

  AGAINST

 

      

 

79

 

 

 

  9:

 

STOCKHOLDER PROPOSAL – MODIFICATION OF THRESHOLD FOR CALLING SPECIAL STOCKHOLDER MEETINGS

 

  AGAINST

 

      

 

81

 

 

 

This summary highlights information contained elsewhere in this Proxy Statement. It does not contain all information that you should consider, and you should read the entire Proxy Statement carefully before voting.

 



 

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PROXY STATEMENT SUMMARY (continued)

 

Board Nominees

Each Director nominee is elected annually by a majority of votes cast to serve for a one-year term that expires at the Annual Meeting in 2019 or until their successors are elected and qualified. While nominated for re-election, the Company has announced that Mr. Liveris will serve as a Director of DowDuPont only through July 1, 2018, at which time he will retire from the Company and the Board of Directors. As set forth in the Bylaws, the Continuing Dow Directors will identify a replacement to fill the vacancy at that time. The following table provides summary information about each Director nominee. The information is current as of the date of this Proxy Statement and the age listed is as of the 2018 Meeting.

 

 

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Overview of Business

DowDuPont Merger Transaction

Effective August 31, 2017, The Dow Chemical Company (“Dow”) and E. I. du Pont de Nemours and Company (“DuPont”) completed the previously announced merger of equals transaction contemplated by the Agreement and Plan of Merger dated as of December 11, 2015, as amended on March 31, 2017 (the “Merger Transaction”). The Merger Transaction resulted in each of Dow and DuPont surviving as subsidiaries of DowDuPont Inc. (“DowDuPont”). For purposes of this Proxy Statement, references to “the Company” refer to DowDuPont.

Dow was determined to be the accounting acquirer in the Merger Transaction and, as a result, certain historical information of Dow is presented in this Proxy Statement for the periods prior to the Merger Transaction. A further description of the Merger Transaction can be found on page i of the Proxy Statement and in the current report on Form 8-K filed by DowDuPont on September 1, 2017.

DowDuPont is now pursuing the intended separation of the Company’s Agriculture, Materials Science and Specialty Products divisions into three independent, publicly traded companies (the “Intended Business Separations”). The Intended Business Separations, which are subject to Board approval, are expected to be in the form of pro-rata spin-off transactions, under which DowDuPont stockholders will receive shares of capital stock in the resulting companies. DowDuPont recently announced dates for the Intended Business Separations: Materials Science which will be called Dow, is expected to separate from DowDuPont by the end of the first quarter of 2019, and Agriculture, which will become Corteva Agriscience, and Specialty Products, which will be the new DuPont, are each expected to separate from one another by June 1, 2019.

DowDuPont is led by a management team that reflects the strengths and capabilities of both Dow and DuPont. Each of the three divisions leads its respective industry through productive, science-based innovation to meet the needs of customers and help solve global challenges.



 

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Lamberto Andreotti Age: 67 Independent Director Since: 2012 Legacy: DuPont James A. Bell Age: 69 Independent Director Since: 2005 Legacy: Dow Edward D. Breen Age: 62 Director Since: 2015 Legacy: DuPont Robert A. Brown Age: 66 Independent Director Since: 2007 Legacy: DuPont Alexander M. Cutler Age: 66 Independent Director Since: 2008 Legacy: DuPont Jeff M. Fettig Age: 61 Independent Director Since: 2003 Legacy: Dow Marillyn A. Hewson Age: 64 Independent Director Since: 2007 Legacy: DuPont Lois D. Juliber Age: 69 Independent Director Since: 1995 Legacy: DuPont Andrew N. Liveris Age: 63 Director Since: 2004 Legacy: Dow Raymond J. Milchovich Age: 68 Independent Director Since: 2015 Legacy: Dow Paul Polman Age: 61 Independent Director Since: 2010 Legacy: Dow Dennis H. Reilley Age: 65 Independent Director Since: 2007 Legacy: Dow James M. Ringler Age: 72 Independent Director Since: 2001 Legacy: Dow Ruth G. Shaw Age: 70 Independent Director Since: 2005 Legacy: Dow Lee M. Thomas Age: 73 Independent Director Since: 2011 Legacy: DuPont Patrick J. Ward Age: 54 Independent Director Since: 2013 Legacy: DuPont

 



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PROXY STATEMENT SUMMARY (continued)

 

The management team seeks to deliver value at DowDuPont through:

 

    Enhancing EBITDA1 and cash flow generation

 

    Delivering committed run-rate cost synergies of $3.3 billion (against the original target of $3 billion) and growth synergies of at least $1 billion

 

    Efficiently standing up and separating the divisions into the three intended companies in a timely fashion

 

 

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Performance Highlights

 

    DowDuPont returned nearly $2 billion to stockholders in the fourth quarter 2017 through paid dividends ($0.9 billion) and share repurchases ($1 billion).

 

    2017 GAAP EPS from Continuing Operations of $0.95; Pro Forma Adjusted EPS2,3 Up 22% to $3.40

 

    2017 GAAP Net Income from Continuing Operations of $1.7 billion; Pro Forma Operating EBITDA2,4 up 15% to $16.2 billion

 

    2017 GAAP Net Sales of $62.5 billion; Pro Forma Net Sales2 Growth of 12% to $79.5 billion, with gains in all segments and geographies

 

    Less than two weeks following Merger Transaction close, DowDuPont announced certain targeted portfolio adjustments to the Materials Science and Specialty Products divisions to better align with end-markets and further enhance the competitive advantages of the intended companies.

 

    DowDuPont satisfied key regulatory remedies required of the Merger Transaction, including: divesting DuPont’s cereal broadleaf herbicides and chewing insecticides portfolios, as well as certain parts of its crop protection R&D pipeline and organization to FMC (the “DuPont Divested Ag Business”); divesting Dow’s PRIMACOR™ ethylene acrylic acid copolymers and ionomers business; and divesting a select portion of Dow AgroSciences’ corn seed business in Brazil. DuPont also closed its acquisition of FMC Corporation’s Health and Nutrition business.

 

    Updated the timing and sequence of the intended separation of the three divisions into standalone companies: Materials Science is expected to separate from DowDuPont by the end of the first quarter of 2019, and Agriculture and Specialty Products are each expected to separate from one another by June 1, 2019.

 

    DowDuPont achieved an annual cost synergy run-rate of more than $800 million at the end of 2017, with more than $200 million of savings realized in the fourth quarter of 2017; based upon the cost synergy run-rate achieved through the end of 2017, DowDuPont has increased the commitment on the delivery of cost synergies from $3 billion to $3.3 billion.

See Appendix A for a reconciliation to the most directly comparable U.S. GAAP financial measures.

 

1 EBITDA means Earnings Before Interest, Taxes, Depreciation and Amortization and Foreign Exchange Gains (Losses).
2 Pro forma information was determined in accordance with Article 11 of Regulation S-X.
3 Pro forma adjusted EPS is defined as “pro forma earnings per common share from continuing operations – diluted” excluding the after-tax impact of pro forma significant items and the after-tax impact of pro forma amortization expense associated with DuPont’s intangible assets.
4 Pro forma operating EBITDA is defined as earnings (i.e., “pro forma income from continuing operations before income taxes”) before interest, depreciation, amortization and foreign exchange gains (losses), excluding the impact of significant items.


 

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Agriculture Materials Science Specialty Products Crop Protection Seed Packaging & Specialty Plastics Industrial Intermediates & Infrastructure Performance Materials & Coatings Electronics & Imaging Transportation & Advanced Polymers Nutrition & Biosciences Safety & Construction

 



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PROXY STATEMENT SUMMARY (continued)

 

Corporate Governance Best Practices

As part of DowDuPont’s commitment to high ethical standards, the Board follows sound governance practices. These practices are described in more detail beginning on page 3 of the Proxy Statement and on the Company’s website at www.dow-dupont.com/investors/corporate-governance.

 

Board

Independence

       

Director

Elections

       

Board

Practices

        Stock Ownership
Requirements
       

Stockholder

Rights

14 of 16

Director

nominees are

independent

 

Co-Lead Independent Directors

with clearly

identified roles

and responsibilities

 

Independent

Compensation Committee

   

Annual

Board elections

 

Directors are

elected by a

majority

of votes cast

 

Directors

not elected

by a majority of

votes cast are

subject to the Company’s

resignation policy

   

Non-employee Directors meet in executive session without management at each regularly scheduled Board meeting

 

Annual Board

and Committee evaluations

 

Director

orientation and education programs

   

Non-employee Directors are

required to comply

with stock ownership guidelines

 

Directors are

required to hold

Company granted

shares until retirement

 

Executives and directors prohibited from hedging or pledging

Company stock

 

   

Stockholder right

to call special meetings

(with a 25%

ownership threshold)

 

Limited super-majority stockholder voting requirements*

 

Eligible

stockholders are

able to nominate directors through proxy access

 

* A vote of at least 66 2/3% of stockholders (then entitled to vote) is only required in the following, limited circumstances, in order to amend, alter, change, adopt or repeal (i) governance provisions, (ii) provisions regarding the selection of the Chief Executive Officer and Executive Chairman and (iii) provisions regarding the amendment of the Bylaws. Otherwise, all other votes to amend, alter, change, adopt or repeal the Bylaws require a simple majority of such stockholders.

Company Leadership and Board Composition

Company Leadership

In order to ensure that DowDuPont benefited from the experience and expertise of both Dow’s and DuPont’s leadership teams and Directors, it was determined prior to the Merger Transaction that Andrew N. Liveris, Chairman and CEO of Dow, would serve as the Executive Chairman of DowDuPont and Edward D. Breen, Chairman and CEO of DuPont, would serve as the Chief Executive Officer of DowDuPont.

Board Composition and Director Experience

Additionally, in order to ensure effective oversight of DowDuPont, the Board consists of sixteen Directors; eight of whom were Directors at Dow prior to the closing of the Merger Transaction (including Andrew N. Liveris and Jeff M. Fettig, former Lead Independent Director) and eight of whom were Directors at DuPont prior to the closing of the Merger Transaction (including Edward D. Breen and Alexander M. Cutler, former Lead Independent Director). The Directors collectively possess a variety of skills, professional experience, and diversity of backgrounds that allow them to



 

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PROXY STATEMENT SUMMARY (continued)

 

effectively oversee DowDuPont’s business including: leadership experience, international experience, operational experience in a variety of relevant fields and industries, public company board experience, board or other significant experience with academic research and philanthropic institutions and trade and industry organizations, and prior government or public policy experience. Each Director’s relevant experiences and attributes collectively provide the Board with a balance of perspectives that contribute to its effectiveness in overseeing the business, preparing for the Intended Business Separations, and advising the Company on navigating the regulatory environment for the Intended Business Separations.

 

Board Committees

The Board maintains an Audit Committee; Compensation Committee; Corporate Governance Committee and Environment, Health, Safety and Technology Committee (the “Standing Committees”). In addition to the Standing Committees, three Advisory Committees were established to oversee the business and affairs of each of DowDuPont’s Agriculture, Materials Science and Specialty Products divisions in preparation for the Intended Business Separations. Each Advisory Committee is responsible for overseeing their respective divisions. The responsibilities of each Standing Committee and Advisory Committee are stated in the Bylaws as well as in their respective charters. The Committees are described in more detail beginning on page 4 of the Proxy Statement.

A list of the Directors and their respective Committee memberships is below:

 

    Standing Committees   Advisory Committees

Director

  Audit   Compensation  

Corporate

Governance

 

Environment,     

Health, Safety     

and Technology     

  Agriculture  

Materials

Science

 

Specialty

Products

 

Lamberto Andreotti*

 

    X

 

        X

 

   

 

James A. Bell*

 

  CH

 

            X

 

 

 

Edward D. Breen – Chief Executive Officer

 

        CH

 

  CH

 

  X

 

  CH

 

 

Robert A. Brown*

 

  X

 

          X

 

   

 

Alexander M. Cutler*

 

      CH

 

      X

 

  A

 

  A

 

 

Jeff M. Fettig*

 

      CH

 

        X

 

 

 

Marillyn A. Hewson*

 

      X

 

      X

 

    A

 

 

Lois D. Juliber*

 

    CH

 

        X

 

   

 

Andrew N. Liveris – Executive Chairman

 

        CH

 

  X

 

  CH

 

  X

 

 

Raymond J. Milchovich*

 

    X

 

          X

 

  A

 

 

Paul Polman*

 

      X

 

        X

 

 

 

Dennis H. Reilley*

 

    CH

 

          X

 

  A

 

 

James M. Ringler*

 

  X

 

            X

 

 

 

Ruth G. Shaw*

 

        X

 

    X

 

 

 

Lee M. Thomas*

 

        X

 

  X

 

   

 

Patrick J. Ward*

 

  CH

 

              X

 

       

* = Independent    CH = Chairman or, as applicable, Co-Chairman    A = Additional Ex Officio Attendee

In addition, Advisory Committee members may participate in other Advisory Committee meetings as an attendee. Such attendees may not vote or be counted for quorum purposes. Advisory Committees also include ex officio members from the legacy Dow and legacy DuPont Boards who are not serving on the Board, as well as additional members who participate in an ex officio capacity as appointed by the Board to provide the Advisory Committees with the business context and knowledge needed to ensure an efficient and timely transition for the Intended Business Separations. Such ex officio members may not vote or be counted for quorum purposes.



 

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PROXY STATEMENT SUMMARY (continued)

 

Executive Compensation

Program Structure and Alignment with Core Principles

Both Dow and DuPont have a history of designing executive compensation programs to attract, motivate, reward and retain the high-quality executives necessary for Company leadership and strategy execution. This legacy continues at DowDuPont and positions the Company well in order to deliver on the commitment to create three independent, industry-leading companies.

The legacy Dow and DuPont compensation programs are designed and administered to follow these core principles:

 

    Establish a strong link between pay and performance

 

    Align executives’ interests with stockholders’ interests, particularly over the longer term

 

    Reinforce business strategies and drive long-term sustained stockholder value

DowDuPont is focused on implementing pay practices to ensure continued alignment with the Company’s core principles. The following summarizes DowDuPont’s key executive compensation governance practices:

 

 

KEY EXECUTIVE COMPENSATION PRACTICES

 

  Active stockholder engagement

 

  Strong links between executive compensation outcomes and company financial and market performance

 

  Compensation program structure designed to discourage excessive risk taking

 

  Significant focus on performance-based pay

 

  Each component of target pay benchmarked to median of either the peer group or the general market, as applicable

 

  Carefully structured peer group with regular Compensation Committee review

 

  Stock ownership requirements of six times base salary for the Executive Chairman and CEO and four times base  salary for the other NEOs

 

  100% independent Compensation Committee

 

  Clawback policy

 

  Anti-hedging/Anti-pledging policies

 

  Independent compensation consultants reporting to the Compensation Committee

 

  No new single-trigger change in control agreements

 

  Stock incentive plans prohibit option repricing, reloads, exchanges or options granted below market value  without stockholder approval

 

  Regular review of the Compensation Committee Charter to ensure best practices and priorities

 

As implementation of the Intended Business Separations continues, the Compensation Committee will continue to review best practices in governance and executive compensation to ensure that the compensation programs align with the Company’s core principles.

Executive Compensation Program Summary

2017 was a unique year, as both Dow and DuPont operated as standalone companies prior to the Merger Transaction, each with its own executive compensation and benefit programs and practices. Given the Intended Business Separations within a relatively short period of time after the closing of the Merger Transaction, a decision was made to not develop separate executive compensation programs at the DowDuPont level for 2017. Rather, the executive officers of DowDuPont continue to be employees of, and participants in, the compensation and benefit programs of Dow and DuPont, respectively. The only exception to this structure is related to a post-merger grant of Performance Share Units (“PSUs”) which were awarded to certain senior executives and which is discussed more fully in the section entitled “DowDuPont – Post Merger Grant” which can be found on page 45 of the Proxy Statement.



 

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PROXY STATEMENT SUMMARY (continued)

 

Each of the Dow and DuPont executive compensation programs delivers value through three primary forms of compensation: base salary, annual incentives, and long-term incentives. The compensation outcomes under the programs’ annual and long-term incentives are determined by respective company performance (and, in the case of the post-merger PSUs awarded, by the overall performance of DowDuPont).

The following table summarizes the two companies’ respective 2017 legacy executive compensation programs.

 

 

Executive Compensation Structures (Pre-Merger)

 

Element of Compensation

 

 

Dow

 

 

DuPont

 

Base Salary

(Fixed annual cash

compensation)

 

  Targeted to median of selected peer group   Targeted to median of selected peer group or of general industry market data, as applicable
Annual Incentives  

Paid in cash based on:

•  60% Operating Net Income

•  40% Management Operating Cash Flow

•  Individual Performance Modifier
(0 –125%)

•  Entire award capped at 200% of target

 

 

Paid in cash based on:

•  50% Operating EPS

•  25% Business Unit Operating Earnings

•  25% Business Unit Revenue

•  Entire award capped at 200% of target

 

Long-Term Incentives  

•  45% PSUs: Relative TSR

•  30% Stock Options

•  25% Deferred Stock

 

 

•  60% PSUs: Relative TSR

•  40% Stock Options

 

The following merger-related compensation actions were taken in 2017:

 

    Target annual compensation for the CEO was increased to more accurately reflect his experience and performance and to align to that of the Executive Chairman

 

    The Annual Incentive Target for the CEO was increased from 160% of Base Salary to 165% of Base Salary

 

    The value of Long-Term Incentives for the CEO was aligned via a post-merger grant of stock options

 

    Adjustments were made to DuPont’s annual incentive metrics for the post-merger period of 2017

 

    Operating EPS was replaced by Operating Net Income

 

    Business Unit Operating Earnings was replaced by Business Unit EBITDA

 

    Adjustments were made to outstanding equity awards to reflect the conversion into awards denominated in DowDuPont common stock, including the conversion of PSUs to RSUs and Performance Stock to Deferred Stock upon the merger at the better of target or actual performance

 

    PSUs were awarded post-merger to incentivize certain key employees in driving the realization of the Company’s cost synergies as well as timely execution of the Intended Business Separations

 

    A change in control was triggered for certain non-qualified benefit plans

 

    Dow distributed previously earned but deferred compensation and non-qualified benefit payments to certain participants of the Executives’ Supplemental Retirement Plan (“ESRP”) and Elective Deferral Plan (“EDP”) as triggered by the Merger Transaction and further described on pages 60 and 61 of the Proxy Statement; these distributions were not new or additional compensation as a result of the Merger Transaction

 

    DuPont funded, as of the Merger Transaction, a Rabbi Trust, which was established in 2013, for future payments under non-qualified deferred compensation plans in connection with a termination of employment or upon a date specified at the time of deferral. The trust is subject to the claims of creditors.


 

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Table of Contents

2018 Annual Meeting of Stockholders

DowDuPont Inc.

TABLE OF CONTENTS

 

NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS         
ABOUT THE DOWDUPONT MERGER TRANSACTION AND INTENDED BUSINESS SEPARATIONS      i  
PROXY STATEMENT SUMMARY      iv  
VOTING AND ATTENDANCE PROCEDURES      1  
CORPORATE GOVERNANCE      3  
AGENDA ITEM 1: ELECTION OF DIRECTORS      14  

Director Nominees

     17  

Director Compensation

     25  
BENEFICIAL OWNERSHIP TABLE      29  
COMPENSATION DISCUSSION & ANALYSIS      30  

 

EXECUTIVE SUMMARY

 

  

 

 

 

32

 

 

DowDuPont Merger Transaction

     32  

Performance Highlights

     32  

Named Executive Officers

     33  

Merger Transaction Considerations for CD&A

     33  

Program Structure and Alignment with Core Principles

     33  

Executive Compensation Governance Practices

     35  
  

 

COMPONENTS OF EXECUTIVE COMPENSATION AND BENEFITS

 

  

 

 

 

37

 

 

2017 NEO Targeted Total Direct Compensation Summary

     37  

Pay Mix

     37  

2017 Compensation Decisions

     38  

• Base Salary

     38  

• Annual Incentive Compensation

     38  

• Long-Term Incentive Compensation

     43  

Benefits and Perquisites

     45  
  

 

THE COMPENSATION PROCESS

 

  

 

 

 

46

 

 

Role of the Compensation Committee

     46  

Role of the Independent Compensation Consultants

     47  

Peer Group and Benchmarking

     47  
  

 

OTHER CONSIDERATIONS

 

  

 

 

 

50

 

 

Stock Ownership Guidelines

     50  

Anti-Hedging and Anti-Pledging Policies

     50  

Executive Compensation Recovery (Clawback) Policy

     50  

Compensation and Risk Management

     51  

2017 Tax Considerations

     51  
  

 

COMPENSATION TABLES AND NARRATIVES

 

  

 

 

 

52

 

 

Summary Compensation Table

     52  

Grants of Plan-Based Awards

     54  

Outstanding Equity Awards

     55  

Option Exercises and Stock Vested

     57  

CEO Pay Ratio

     57  

 

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BENEFITS

 

  

 

 

 

58

 

 

Pension Benefits

     58  

Defined-Benefit Retirement Plans

     58  

Supplemental Retirement Plans

     60  

401(k) Plans

     60  

Non-Qualified Deferred Compensation

     61  

Other Retirement Benefits

     62  

Potential Payments Upon Termination or Change in Control

     64  
  

 

COMPENSATION COMMITTEE REPORT

 

    

 

67

 

 

 

AGENDA ITEM 2: ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATION      68  
AGENDA ITEM 3: ADVISORY RESOLUTION ON THE FREQUENCY OF FUTURE ADVISORY VOTES TO APPROVE EXECUTIVE COMPENSATION      69  
AGENDA ITEM 4: RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM      70  
AUDIT COMMITTEE REPORT      72  
AGENDA ITEM 5: STOCKHOLDER PROPOSAL – ELIMINATION OF SUPERMAJORITY VOTING THRESHOLDS      73  
AGENDA ITEM 6: STOCKHOLDER PROPOSAL – PREPARATION OF AN EXECUTIVE COMPENSATION REPORT      75  
AGENDA ITEM 7: STOCKHOLDER PROPOSAL – PREPARATION OF A REPORT ON SUSTAINABILITY METRICS IN PERFORMANCE-BASED PAY      77  
AGENDA ITEM 8: STOCKHOLDER PROPOSAL – PREPARATION OF A REPORT ON INVESTMENT IN INDIA      79  
AGENDA ITEM 9: STOCKHOLDER PROPOSAL – MODIFICATION OF THRESHOLD FOR CALLING SPECIAL STOCKHOLDER MEETINGS      81  
ADDITIONAL INFORMATION      83  
APPENDIX      A-1  

 

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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE

STOCKHOLDER MEETING TO BE HELD ON APRIL 25, 2018

The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.

Stockholders may request their proxy materials be delivered to them electronically in 2019 by visiting

https://enroll.icsdelivery.com/dwdp.

VOTING AND ATTENDANCE PROCEDURES

In this Proxy Statement, you will find information on the Board of Directors of DowDuPont Inc. (the “Board”), the candidates for election to the Board, and eight other items to be voted upon at the 2018 Annual Meeting of Stockholders (the “2018 Meeting”) and any adjournment or postponement of the 2018 Meeting. The background information in this Proxy Statement has been supplied to you at the request of the Board to help you decide how to vote and to provide information on the Company’s corporate governance and compensation practices. References in this document to “the Company” and “DowDuPont” mean DowDuPont Inc., to “Dow” means The Dow Chemical Company, and to “DuPont” means E. I. du Pont de Nemours and Company. This Proxy Statement is first being distributed to stockholders on or about March 16, 2018.

Vote Your Shares in Advance

You may vote your shares by internet, telephone or signing and returning the enclosed proxy or other voting instruction form. Your shares will be voted only if the proxy or voting instruction form is properly executed and received by the independent Inspectors of Election prior to the 2018 Meeting. Except as provided below with respect to shares held in employee savings plans, if no specific instructions are given by you when you execute your voting instruction form, as explained on the form, your shares will be voted as recommended by the Board.

You may revoke your proxy or voting instructions at any time before their use at the 2018 Meeting by sending a written revocation, by submitting another proxy or voting form on a later date, or by attending the 2018 Meeting and voting in person. No matter which voting method you choose, however, you should not vote any single account more than once unless you wish to change your vote. Be sure to submit votes for each separate account in which you hold DowDuPont common stock.

Confidential Voting

The Company maintains vote confidentiality. Proxies and ballots of all stockholders are kept confidential from the Company’s management and Board unless disclosure is required by law and in other limited circumstances. The policy further provides that employees may confidentially vote their shares of Company stock held by employee savings plans, and requires the appointment of an independent tabulator and Inspectors of Election for the 2018 Meeting.

Dividend Reinvestment Plan Shares and Employee Savings Plan Shares

If you are enrolled in the direct stock purchase and dividend reinvestment plan administered by Computershare Trust Company, N.A. (the “Computershare CIP”), the DowDuPont common stock owned on the record date by you directly in registered form, plus all shares of common stock held for you in the Computershare CIP, will appear together on a single proxy voting form. If no instructions are provided by you on an executed proxy voting form, your Computershare CIP shares will be voted as recommended by the Board.

Participants in various employee savings plans, including The Dow Chemical Company Employees’ Savings Plan and the DuPont Retirement Savings Plan (each a “Plan” or collectively the “Plans”), will receive a voting instruction form. Your executed form will provide voting instructions to the respective Plan Trustee (Fidelity Management Trust Company for the Dow Plan and Merrill Lynch, Pierce, Fenner & Smith, Incorporated for the DuPont Plan). If no instructions are provided, the Trustees and/or administrators of the Plans will vote the respective Plan shares according to the provisions of each Plan. To allow sufficient time for voting, your voting instructions must be received by 11:59 P.M. Eastern Time on April 20, 2018, or, if you are voting via the Internet or by phone, by 11:59 P.M. Eastern Time on April 22, 2018. Accordingly, you may not vote your Plan shares in person at the Annual Meeting.

 

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VOTING AND ATTENDANCE PROCEDURES (continued)

 

 

DowDuPont Shares Outstanding and Quorum

At the close of business on the record date, February 26, 2018, there were 2,325,945,219 shares of DowDuPont common stock outstanding and entitled to vote. Each share of common stock is entitled to one vote. The holders of at least 50% of the issued and outstanding shares of common stock entitled to vote that are present in person or represented by proxy constitute a quorum for the transaction of business at the 2018 Meeting. For Agenda Item 1: Election of Directors, each nominee must receive more FOR votes than AGAINST votes in order to be elected. For Agenda Item 3: Advisory Resolutions on the Frequency of Future Advisory Votes to Approve Executive Compensation, the frequency (every one year, every two years or every three years) that receives the most FOR votes will be approved. For all other Agenda Items to be presented for a vote at the 2018 Meeting (2 and 4 through 9), each such item must receive more FOR votes than AGAINST votes in order to be approved. Abstentions and broker non-votes will be included in determining the presence of a quorum at the 2018 Meeting, but will not be counted or have an effect on the outcome of any matter except as specified below with respect to Agenda Item 4. Broker non-votes occur when a person holding shares through a bank or broker, meaning that their shares are held in a nominee name or beneficially through such bank or broker, does not provide instructions as to how to vote their shares and the bank or broker is not permitted to exercise voting discretion. Under New York Stock Exchange (“NYSE”) rules, your bank or broker may vote shares held in beneficial name only on Agenda Item 4: Ratification of the Appointment of the Independent Registered Public Accounting Firm, without instruction from you, but may not vote on any other matter to be voted on at the 2018 Meeting. A list of stockholders of record entitled to vote shall be open to any stockholder for any purpose relevant to the 2018 Meeting for ten days before the 2018 Meeting, during normal business hours, at the Office of the Corporate Secretary.

Proxy Solicitation on Behalf of the Board

The Board is soliciting proxies to provide an opportunity for all stockholders to vote, whether or not the stockholders are able to attend the 2018 Meeting or an adjournment or postponement thereof. Directors, officers and employees may solicit proxies on behalf of the Board in person, by mail, by telephone or by electronic communication. The proxy representatives of the Board will not be specially compensated for their services in this regard.

DowDuPont has retained Innisfree M&A Incorporated to aid in the solicitation of stockholders (primarily brokers, banks and other institutional investors) for an estimated fee of $25,000, plus reasonable expenses. Arrangements have been made with brokerage houses, nominees and other custodians and fiduciaries to send materials to their principals, and their reasonable expenses will be reimbursed by DowDuPont on request. The cost of solicitation will be borne by the Company.

Attending the 2018 Meeting

An approved form of proof of stock ownership is necessary to attend the 2018 Meeting. If you hold your shares through a bank or broker, you will need proof of record date ownership for admission to the 2018 Meeting, such as a letter from the bank or broker. In addition, such holders who wish to vote in person at the 2018 Meeting must obtain a “legal proxy” from the bank, broker or other holder of record that holds their shares in order to be entitled to vote at the 2018 Meeting.

Since seating is limited, the Board has established the rule that only stockholders or one person holding a proxy for any stockholder or account (in addition to those named as Board proxies on the proxy forms) may attend.

All stockholders and proxy holders wishing to attend the 2018 Meeting should bring and present valid government issued photo identification for admittance. Proxy holders will also be asked to present credentials for admittance.

Please note that cameras, sound or video recording equipment, or other similar equipment, electronic devices, large bags or packages will not be permitted in the Annual Meeting.

If you are unable to attend the 2018 Meeting in person, please listen to the live audio webcast or the replay after the event, at www.dow-dupont.com/investors.

Other Matters

The Board does not intend to present any business at the 2018 Meeting that is not described in this Proxy Statement. The enclosed proxy or other voting instruction form confers upon the designated persons the discretion to vote the shares represented in accordance with their best judgment. Such discretionary authority extends to any other properly presented matter. The Board is not aware of any other matter that may properly be presented for action at the 2018 Meeting.

 

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CORPORATE GOVERNANCE

Strong corporate governance is an integral part of both Dow’s and DuPont’s historic core values, and, as a result, DowDuPont is committed to applying the same sound corporate governance and leadership principles and practices. Within this section, you will find information about the Board and its governance structure and processes.

DowDuPont Board Corporate Governance Guidelines

The Corporate Governance Guidelines form an important framework for the Board’s corporate governance practices and assist the Board in carrying out its responsibilities. The Board reviews these guidelines periodically to consider the need for amendments or enhancements. Among other things, these guidelines delineate the Board’s responsibilities, leadership structure, independence, qualifications, election, annual self-evaluation, and access to management and advisors.

We invite you to visit the Company’s website at www.dow-dupont.com/investors/corporate-governance to review the following governance documents:

 

    DowDuPont Code of Conduct

 

    Amended and Restated Certificate of Incorporation

 

    Amended and Restated Bylaws

 

    Corporate Governance Guidelines

 

    DowDuPont Code of Financial Ethics

 

    Advisory Committee Charters and Membership

 

    Board Committee Charters and Membership

 

    Dow and DuPont Conflict Minerals and Human Rights Reports and Policies

 

    Dow and DuPont Political Policy and Engagement Reports and Policies

Director Independence

The Board has assessed the independence of each non-employee Director in accordance with the standards of independence of the NYSE, SEC rules and as described in the Corporate Governance Guidelines. Based upon these standards, the Board has determined that the following fourteen members of the Board are independent Directors: Lamberto Andreotti, James A. Bell, Robert A. Brown, Alexander M. Cutler, Jeff M. Fettig, Marillyn A. Hewson, Lois D. Juliber, Raymond J. Milchovich, Paul Polman, Dennis H. Reilley, James M. Ringler, Ruth G. Shaw, Lee M. Thomas and Patrick J. Ward. These independent Directors constitute a “substantial majority” of the Board, consistent with Board policy. The Corporate Governance Committee, as well as the Board, will annually review relationships that Directors may have with the Company and members of management to make a determination as to whether there are any material relationships that would preclude a Director from being independent.

All members of the Audit, Compensation, and Corporate Governance Committees are independent Directors under the Corporate Governance Guidelines and applicable regulatory and listing standards.

The Board had previously determined that the following individuals who served as Directors on the Dow Board until the effective date of the Merger Transaction were also independent Directors: Ajay Banga, Jacqueline K. Barton, Richard K. Davis, Mark Loughridge, and Robert S. (Steve) Miller.

Board Leadership Structure

The Board is responsible for broad corporate policy and overall performance of the Company through oversight of management and stewardship of the Company. Among other duties, the Board appoints the Company’s officers, assigns to them responsibility for management of the Company’s operations, and reviews their performance.

As described in the Company’s Amended and Restated Bylaws effective as of September 11, 2017 (“Bylaws”), Andrew N. Liveris currently serves as the Executive Chairman of DowDuPont and Edward D. Breen serves as the Chief Executive Officer of DowDuPont. As announced by the Company on March 12, 2018, as of April 1, 2018, Mr. Liveris will no longer serve as Executive Chairman. Effective April 1, 2018, Jeff M. Fettig will serve as a non-employee Executive Chairman. Following this transition, Mr. Liveris will continue as a Director of DowDuPont through his previously announced retirement from the Company on July 1, 2018. The previous Lead Independent Directors of each of Dow and DuPont serve as Co-Lead Independent Directors of the Board with responsibilities set forth in the Corporate Governance Guidelines. Further detail on the responsibilities of those roles follows.

 

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CORPORATE GOVERNANCE (continued)

 

 

Executive Chairman

The Executive Chairman has the lead responsibility for chairing the Board. The Executive Chairman has the following corporate-wide responsibilities:

 

(i) joint responsibility for the corporate-wide synergies of DowDuPont together with the Chief Executive Officer; and,

 

(ii) responsibility for the agenda and schedule of all meetings of the Board, in consultation with the Chief Executive Officer.

The Executive Chairman has all such other powers and may perform such other duties as may be assigned by the Board from time to time.

Chief Executive Officer

The Chief Executive Officer of DowDuPont reports to the Board and has the following corporate-wide responsibilities:

 

(i) sole responsibility for the financial affairs of DowDuPont, including the integration, ongoing operation, and performance of DowDuPont;

 

(ii) joint responsibility for the corporate-wide synergies of DowDuPont together with the Executive Chairman; and,

 

(iii) joint responsibility with the Executive Chairman for the agenda and schedule of all meetings of the Board.

The Chief Executive Officer has such other powers and may perform such other duties as may be assigned by the Board from time to time.

Co-Lead Independent Director Roles

The Board has Co-Lead Independent Directors, designated in accordance with the Bylaws, whose shared responsibilities are to:

 

(i) preside at all meetings of the Board at which the Executive Chairman and Chief Executive Officer are not present, including executive sessions of the Board’s independent Directors;

 

(ii) serve as liaisons between the Executive Chairman and/or the Chief Executive Officer, on the one hand, and the independent Directors, on the other hand;

 

(iii) determine the appropriate materials to be provided to the Board;

 

(iv) review meeting agendas and schedules and consult with the Executive Chairman regarding the same;

 

(v) serve as focal point for stockholder communications and requests for consultation that are, in each case, addressed to independent members of the Board;

 

(vi) review and approve meeting schedules to assure that there is sufficient time for discussion of all agenda items; and,

 

(vii) have authority to call meetings of the Board’s independent Directors.

Committees

Committees perform many important functions. The responsibilities of each Committee are stated in the Bylaws and in their respective Committee charters. The Board, upon the recommendation of the Corporate Governance Committee, elects members to each Committee and has the authority to change Committee chairs, memberships and the responsibilities of any Committee as set forth in the Bylaws.

The Board currently has four Standing Committees and three Advisory Committees (individually a “Committee” and collectively the “Committees”):

 

Standing Committees

  Advisory Committees

 

  Audit Committee

 

 

 

Agriculture Advisory Committee

 

 

  Compensation Committee

 

 

 

Materials Science Advisory Committee

 

 

  Corporate Governance Committee

 

 

 

Specialty Products Advisory Committee

 

 

  Environment, Health, Safety and Technology Committee

 

 

   

 

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CORPORATE GOVERNANCE (continued)

 

 

A brief description of the responsibilities of the Committees are as follows:

Standing Committees

 

Audit Committee

 

All members of the Audit Committee are independent Directors under the Board’s Corporate Governance Guidelines and applicable regulatory and listing standards.

 

The Board has determined that all members of the Audit Committee are “audit committee financial experts” within the meaning of applicable SEC rules. Further, the Board has determined, in accordance with applicable requirements of the NYSE, that the simultaneous service of Mr. Bell on the audit committees of more than three public companies does not impair his ability to effectively serve on the Audit Committee.

 

   Nominates, engages and replaces, as appropriate, the Company’s independent registered public accounting firm, subject to stockholder ratification, to audit the Company’s Consolidated Financial Statements.

 

   Pre-approves all services and fees performed by the Company’s independent registered public accounting firm.

 

   Provides oversight on the external reporting process and the adequacy of the Company’s internal controls.

 

   Reviews effectiveness of the Company’s systems, procedures and programs designed to promote and monitor compliance with applicable laws and regulations and receives prompt reports on any compliance matter that could adversely impact the Company’s external reporting process or adequacy of internal controls.

 

   Reviews the scope of the audit activities of the independent registered public accounting firm and the Company’s internal auditors and appraises audit efforts of both.

 

   Reviews services provided by the Company’s independent registered public accounting firm and other disclosed relationships as they bear on the independence of the Company’s independent registered public accounting firm.

 

   Establishes procedures for the receipt, retention and resolution of complaints regarding accounting, internal controls or auditing matters.

 

A Summary of the Audit Committee Policy on Pre-approval of Services Performed by the Independent Registered Public Accounting Firm is included as part of Agenda Item 4: Ratification of Independent Registered Public Accounting Firm in this Proxy Statement.

 

Compensation Committee

 

All members of the Compensation Committee are independent Directors under the Board’s Corporate Governance Guidelines and applicable regulatory and listing standards.

 

   Retains any compensation consultants that the Committee, in its sole discretion, deems appropriate to fulfill its duties and responsibilities; the Committee shall set the compensation and oversee the work of the consultants, including approval of an applicable executive compensation peer group.

 

   Assesses current and future senior leadership talent for Company officers.

 

   Assists the Board in Executive Chairman and CEO succession planning process.

 

   Evaluates the performance of the Executive Chairman and the CEO in light of the goals and objectives set by the Compensation Committee and, together with the other independent members of the Board, determines and approves the compensation of both the Executive Chairman and the CEO based on this evaluation.

 

   Recommends, for approval by the independent Directors, Executive Chairman and Chief Executive Officer compensation.

 

   Recommends and approves the principles guiding the Company’s executive officer compensation and benefits plans as well as other compensation and benefits plans.

 

   Reviews the Company’s incentive compensation arrangements to determine whether they encourage excessive risk-taking, and evaluates compensation policies and practices that could mitigate any such risk.

 

   Works with management to develop the Compensation Discussion and Analysis and the Compensation Committee Report for inclusion in the Company’s Annual Report on Form 10-K or annual meeting Proxy Statement.

 

   Considers the voting results of any say-on-pay or related stockholder proposals.

 

 

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CORPORATE GOVERNANCE (continued)

 

 

Corporate Governance Committee

 

All members of the Corporate Governance Committee are independent Directors under the Board’s Corporate Governance Guidelines and applicable regulatory and listing standards.

 

    Establishes the process for identifying and evaluating director nominees, determines the qualifications, qualities, skills and other expertise required to be a director, and recommends to the Board nominees for election to the Board.

 

    Monitors the functioning of Board Committees.

 

    Oversees the Board’s new director orientation program.

 

    Oversees the annual assessment of the Board and its Committees.

 

    Oversees the Company’s corporate governance practices, including reviewing and recommending to the Board for approval any changes to the Company’s Certificate of Incorporation, Bylaws and Committee charters.

 

    Oversees the Company’s ethics and compliance functions, including review of its business conduct and ethics policies.

 

Environment, Health, Safety

and Technology Committee

 

    Reviews the Company’s safety, health and environmental policies and performance.

 

    Oversees and advises the Board of Directors on matters impacting corporate social responsibility and the Company’s public reputation.

 

Advisory Committees

The Advisory Committees were established to oversee the business and affairs of each of DowDuPont’s Agriculture, Materials Science and Specialty Products divisions in preparation for the Intended Business Separations. Each Advisory Committee is responsible for overseeing the business and affairs of its respective division including:

 

(i) developing strategy and operational direction;

 

(ii) planning and making recommendations to approve operating and capital budgets;

 

(iii) evaluating the performance of, and making recommendations as to all matters related to the compensation of, the leadership team of the respective division;

 

(iv) receiving reports on financial performance and synergies;

 

(v) identifying risk areas, assessing risk management and discussing with the leadership team of the respective division, the policies and processes related thereto at the divisional level;

 

(vi) reviewing any transaction specific to the respective division that requires Board approval;

 

(vii) developing a capital structure for the respective division and presenting such capital structure to the Board; and

 

(viii) selecting, changing and making permanent the chief executive officer and leadership teams of the respective division and assessing current and future talent of the leadership team, including development and succession plans of all leadership team positions in the respective divisions.

 

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Committee Membership

The following chart shows the current Committee membership and the number of meetings that each Committee held in 2017. The total number of Standing Committee meetings is noted for Dow from January 1, 2017 until the closing of the Merger Transaction on August 31, 2017, and for DowDuPont from September 1, 2017 until December 31, 2017.

 

        Standing Committees   Advisory Committees

Director

       Audit   Compensation  

Corporate

Governance

 

Environment,  

Health, Safety  

and Technology  

  Agriculture  

Materials

Science

 

Specialty

Products

 

Lamberto Andreotti*

 

 

   

 

X

       

 

X

   

 

James A. Bell*

 

 

 

CH

           

 

X

 

 

Edward D. Breen – Chief Executive Officer

 

       

 

CH

 

 

CH

 

 

X

 

 

CH

 

Robert A. Brown*

 

 

 

X

         

 

X

   

 

Alexander M. Cutler*

 

     

 

CH

     

 

X

 

 

A

 

 

A

 

Jeff M. Fettig*

 

     

 

CH

       

 

X

 

 

Marillyn A. Hewson*

 

     

 

X

     

 

X

   

 

A

 

Lois D. Juliber*

 

   

 

CH

       

 

X

   

 

Andrew N. Liveris – Executive Chairman

 

       

 

CH

 

 

X

 

 

CH

 

 

X

 

Raymond J. Milchovich*

 

   

 

X

         

 

X

 

 

A

 

Paul Polman*

 

       

 

X

       

 

X

 

 

Dennis H. Reilley*

 

   

 

CH

         

 

X

 

 

A

 

James M. Ringler*

 

 

 

X

           

 

X

 

 

Ruth G. Shaw*

 

       

 

X

   

 

X

 

 

Lee M. Thomas*

 

       

 

X

 

 

X

   

 

Patrick J. Ward*

 

 

 

CH

         

 

X

   

 

Number of Meetings in 2017

 

 

 

Dow (17 total)

 

 

 

6

 

 

4

 

 

4

 

 

3

 

 

n/a

 

 

n/a

 

 

n/a

 

DowDuPont (14 total)

 

 

 

3

 

 

2

 

 

2

 

 

1

 

 

2

 

 

2

 

 

2

* = Independent    CH = Chairman or, as applicable, Co-Chairman    A = Additional Ex Officio Attendee

In addition, Advisory Committee members may participate in other Advisory Committee meetings as an attendee. Such attendees may not vote or be counted for quorum purposes. Advisory Committees also include ex officio members from the legacy Dow and legacy DuPont Boards who are not serving on the Board, as well as additional members who participate in an ex officio capacity as appointed by the Board to provide the Advisory Committees with the business context and knowledge needed to ensure an efficient and timely transition for the Intended Business Separations. Such ex officio members may not vote or be counted for quorum purposes.

Additional Information about the Advisory Committees

Agriculture Advisory Committee

The Agriculture Advisory Committee is comprised of (i) members of the Board who were designated by the DuPont board, (ii) the Executive Chairman of DowDuPont, (iii) the Chief Executive Officer of DowDuPont, and (iv) former members of the DuPont board who are not members of the DowDuPont Board and who serve in an ex officio capacity by virtue of their prior service on the DuPont board.

Materials Science Advisory Committee

The Materials Science Advisory Committee is comprised of (i) members of the Board who were designated by the Dow board, (ii) the Executive Chairman of DowDuPont, (iii) the Chief Executive Officer of DowDuPont, and (iv) former members of the Dow board who are not members of the DowDuPont Board and who serve in an ex officio capacity by virtue of their prior service on the Dow board.

 

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Specialty Products Advisory Committee

The Specialty Products Advisory Committee is comprised of (i) the Executive Chairman of DowDuPont, (ii) the Chief Executive Officer of DowDuPont, (iii) members of the Board as may be agreed on by the Executive Chairman and the Chief Executive Officer of DowDuPont, (iv) former members of the Dow or DuPont boards who are not members of the DowDuPont Board and who serve in an ex officio capacity by virtue of their prior service on the Dow or DuPont board, and (v) any additional members who participate in an ex officio capacity as appointed by the Executive Chairman and the Chief Executive Officer.

Decision Making and Administration

To the extent there are any disagreements between or among the Advisory Committees regarding the determinations about the capital structure of the three divisions, the matter shall be submitted to a reconciliation committee, consisting of the Chief Executive Officer, the Executive Chairman, and the Co-Lead Independent Directors, for resolution. To the extent the reconciliation committee is unable to come to a determination, a majority of the Board shall make the determination.

Pursuant to the Bylaws, the Board will have the authority to approve the Intended Business Separations or may determine to abandon, by a majority vote, the exploration or pursuit of a separation of the Agriculture division, Materials Science division or Specialty Products division, respectively. In the event that the separation of any division is consummated, the Advisory Committee with respect to such division shall be dissolved, with it being anticipated that its members would continue as members of the Board of Directors of the separated entity, and the provisions in the Bylaws with respect thereto shall be of no further force and effect. To the extent the Board determines to abandon one or more of the anticipated separations, the Advisory Committees may be dissolved at any time following the two-year anniversary of the consummation of the merger.

Provisions of the Bylaws regarding the Executive Chairman and Chief Executive Officer, the DowDuPont Board and the Advisory Committees described above may only be modified, amended or repealed, and Bylaw provisions inconsistent with such matters may only be adopted, by an affirmative vote of at least 66 2/3% of: (i) the Board or (ii) the holders of all shares of capital stock of DowDuPont then entitled to vote on such matters.

Board’s Role in the Oversight of Risk Management

The Board is responsible for overseeing the overall risk management process for the Company. Risk management is considered a strategic activity within the Company and responsibility for managing risk rests with executive management while the Standing Committees and the Board as a whole participate in the oversight of the process. Specifically, the Board has responsibility for overseeing the strategic planning process and reviewing and monitoring management’s execution of the corporate and business plan, and each Standing Committee is responsible for oversight of specific risk areas relevant to their respective charters. This process includes an assessment of potential cyber-attacks and the ongoing review of the Company’s comprehensive cyber security program.

The oversight responsibility of the Board and Standing Committees is enabled by an enterprise risk management model and process implemented by management that is designed to identify, assess, manage and mitigate risks. The Audit Committee is responsible for overseeing that management implements and follows this risk management process and for coordinating the outcome of reviews by the other Standing Committees in their respective risk areas.

 

Standing Committee

   Area(s) of Risk Management Oversight Responsibility

 

Compensation Committee

 

  

 

the Company’s executive compensation practices

 

 

Audit Committee

  

 

management and effectiveness of accounting, auditing, external reporting, compliance and internal controls, and cyber security

 

 

Corporate Governance Committee

  

 

director independence, potential conflicts of interest and other ethics and compliance

 

 

Environment, Health, Safety and Technology Committee

  

 

emerging regulatory developments related to safety, health and environment

 

Although each Standing Committee is responsible for overseeing the management of certain risks as described above, the full Board is regularly informed by the Standing Committees about these risks. This enables the Board and the Standing Committees to coordinate risk oversight and the relationships among the various risks faced by the Company.

 

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Stockholder Engagement

Throughout the year, the independent Directors and members of the management teams at Dow, DuPont, and DowDuPont continued extensive outreach to stockholders, engaging with investors who collectively held over 50% of outstanding shares of each company. Through this outreach, the management teams updated investors on a range of topics such as the Merger Transaction and Intended Business Separations, the overall business strategy, current business conditions, corporate citizenship and sustainability, corporate governance practices and executive compensation, as well as gained an understanding of the perspectives and concerns of each investor. The Boards and management teams carefully consider the feedback from these meetings, as well as stockholder support, when reviewing the business, corporate governance and executive compensation profiles.

Communications with the Board and Directors

Stockholders and other parties interested in communicating directly with the Board, Executive Chairman, Co-Lead Independent Directors or other independent Directors, may do so by writing in care of the Office of the Corporate Secretary, 974 Centre Road, Wilmington, DE 19805.

The Board’s independent Directors have approved procedures for handling correspondence received by the Company and addressed to the Board, Executive Chairman, Co-Lead Independent Directors or other outside Directors. Communications will be distributed to any or all Directors as appropriate depending upon the individual communication. However, the Directors have requested that communications that do not directly relate to their duties and responsibilities as Directors of the Company be excluded from distribution and deleted from email that they access directly. Such excluded items include “spam”; advertisements; mass mailings; form letters and email campaigns that involve unduly large numbers of similar communications; solicitations for goods, services, employment or contributions; surveys; and individual product inquiries or complaints. Additionally, communications that appear to be unduly hostile, intimidating, threatening, illegal or similarly inappropriate will also be screened for omission by the Office of the Corporate Secretary. Any omitted or deleted communication will be made available to any Director upon such Director’s request. Concerns relating to accounting, internal controls, auditing or ethical matters are brought to the attention of the internal audit function and handled in accordance with procedures established by the Audit Committee with respect to such matters.

Board, Standing Committees and Annual Meeting Attendance

From January 1, 2017 until the closing of the Merger Transaction on August 31, 2017, Dow held eight Board meetings and seventeen Standing Committee meetings. From September 1, 2017 through December 31, 2017, DowDuPont held three Board meetings and eight Standing Committee meetings. All of the Directors attended more than 75% of the sum of the total number of Board meetings and the total number of meetings of the Standing Committees on which the Director served during the past year. The Directors are encouraged to attend all Annual Meetings of Stockholders, and in 2017 all thirteen Directors then serving on the Dow Board attended the Dow Annual Meeting of Stockholders held on May 11, 2017.

Executive Sessions of Directors

The non-employee Directors meet in executive session in connection with each regularly scheduled meeting of the Board, and at other times as they may determine appropriate. From January 1, 2017 through closing of the Merger Transaction on August 31, 2017, there were five executive sessions of the Dow Board chaired by Mr. Fettig, Lead Independent Director. From September 1, 2017 through December 31, 2017, there were three executive sessions of the Board chaired by Messrs. Cutler and Fettig, Co-Lead Independent Directors for the Board. The Standing Committees typically meet in executive session in connection with every Committee meeting.

Director Qualifications and Diversity

There are certain minimum qualifications for Board membership that Director candidates should possess, including strong values and discipline, high ethical standards, a commitment to full participation on the Board and its Committees, relevant career experience, and a commitment to ethnic, racial and gender diversity. The Corporate Governance Committee has adopted guidelines to be used in evaluating candidates for Board membership in order to ensure a diverse and highly qualified Board of Directors. In addition to the characteristics mentioned above, the guidelines provide that candidates should possess

 

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individual skills, experience and demonstrated abilities that help meet the current needs of the Board and provide for diversity of membership, such as experience or expertise in some of the following areas: the chemical industry, global business, science and technology, finance and/or economics, corporate governance, public affairs, government affairs, and experience as chief executive officer, chief operating officer or chief financial officer of a major company. Other factors that are considered include independence of thought, willingness to comply with Director stock ownership guidelines, meeting applicable Director independence standards (where independence is desired) and absence of conflicts of interest. The Corporate Governance Committee may modify the minimum qualifications and evaluation guidelines from time to time as it deems appropriate.

Guidelines for Director qualifications are included in the Corporate Governance Guidelines. The guidelines for Director qualifications provide that a commitment to diversity is a consideration in the identification and nomination of Director candidates, and that candidates are evaluated to provide for a diverse and highly qualified Board. The Corporate Governance Committee and the full Board implement and assess the effectiveness of these guidelines and the commitment to diversity by referring to these guidelines in the review and discussion of Board candidates when assessing the composition of the Board and by including questions regarding the diversity of the Board membership in the Board’s annual self-evaluations.

Identifying Director Candidates

Among the Corporate Governance Committee’s most important functions is the selection of Directors who are recommended to the Board as candidates for election. The Corporate Governance Committee has adopted a process for identifying new Director candidates. Recommendations may be received by the Corporate Governance Committee from various sources, including current or former Directors, a search firm retained by the Corporate Governance Committee to assist in identifying and evaluating potential candidates, stockholders, Company executives, and by self-nomination. The Corporate Governance Committee is open to accepting stockholders’ suggestions of candidates to consider as potential Board members as part of the Corporate Governance Committee’s periodic review of the size and composition of the Board and its Committees. Such recommendations should be sent to the Corporate Governance Committee through the Office of the Corporate Secretary. The Corporate Governance Committee uses the same process to evaluate Director nominees recommended by stockholders as it does to evaluate nominees identified by other sources.

Director Candidate Nominations through Proxy Access

The Bylaws set forth procedural and content requirements for director candidate nominations through proxy access. As more specifically provided in the Bylaws, a stockholder or group of up to twenty stockholders owning 3% or more of the Company’s outstanding shares of common stock continuously for at least three years, may nominate and include in the Company’s proxy materials director nominees constituting up to the greater of two individuals or 20% of the Board, provided that the stockholder(s) and the nominee(s) satisfy the requirements detailed in the Bylaws. Nominations should be sent to the Office of the Corporate Secretary in accordance with the procedural and content requirements set forth in the Bylaws, the full text of which is available at www.dow-dupont.com/investors/corporate-governance.

Board Term

The Certificate of Incorporation provides that all Directors stand for election at each Annual Meeting of Stockholders.

The Corporate Governance Guidelines provide that Directors should not be nominated for election to the Board after reaching age 72, unless it is determined that it is in the best interests of the Company to extend the retirement date. Messrs. Ringler and Thomas are current Directors who are nominated for re-election to the Board at the 2018 Meeting, although they have already reached age 72. The Corporate Governance Committee and the Board have determined that, due to the current needs of the Board and the unique circumstances of the Intended Business Separations, the nomination of Messrs. Ringler and Thomas to stand for re-election as Directors is warranted.

Code of Conduct

The Board has adopted a Code of Conduct for Directors and Officers and a Code of Financial Ethics applicable to the Chief Executive Officer, Chief Financial Officer and Co-Controllers. In addition, the operating subsidiaries of DowDuPont have codes of conduct applicable to their respective employees. The full text of DowDuPont’s Code of Conduct as well as the codes of conduct for Dow and DuPont are available at www.dow-dupont.com/investors/corporate-governance. In addition, DowDuPont discloses on its website any waiver of or amendment to the Code of Conduct requiring disclosure under applicable rules.

 

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Related Person Transactions

The Board adopted written policies and procedures relating to the approval or ratification of each “Related Person Transaction.” Under the policies and procedures, the Corporate Governance Committee (or its Co-Chairs, under some circumstances) reviews the relevant facts of all proposed Related Person Transactions and either approves or disapproves of the entry into a particular Related Person Transaction, by taking into account, among other factors it deems appropriate:

 

(i) the commercial reasonableness of the transaction;

 

(ii) the materiality of the Related Person’s direct or indirect interest in the transaction;

 

(iii) whether the transaction may involve a conflict of interest, or the appearance of one;

 

(iv) whether the transaction was in the ordinary course of business; and

 

(v) the impact of the transaction on the Related Person’s independence under the Corporate Governance Guidelines and applicable regulatory and listing standards.

No Director may participate in any discussion or approval of a Related Person Transaction for which he/she or any of his/her immediate family members is the Related Person. Related Person Transactions are approved or ratified only if they are determined to be in the best interests of DowDuPont and its stockholders.

If a Related Person Transaction that has not been previously approved or previously ratified is discovered, the Related Person Transaction will be presented to the Corporate Governance Committee for ratification. If the Corporate Governance Committee does not ratify the Related Person Transaction, then the Company either ensures all appropriate disclosures regarding the transaction are made or, if appropriate, takes all reasonable actions to attempt to terminate the Company’s participation in the transaction.

Under DowDuPont’s policies and procedures, a “Related Person Transaction” is generally any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships in which:

 

(i) DowDuPont was, is or will be a participant;

 

(ii) the aggregate amount involved exceeds $120,000 in any fiscal year; and

 

(iii) any Related Person had, has or will have a direct or indirect material interest.

A “Related Person” is generally any person who is, or at any time since the beginning of DowDuPont’s last fiscal year was:

 

(i) a Director or an executive officer of DowDuPont or a nominee to become a Director of DowDuPont;

 

(ii) any person who is known to be the beneficial owner of more than 5% of any class of DowDuPont’s outstanding common stock; or

 

(iii) any immediate family member of any of the persons mentioned above.

Certain Relationships and Related Transactions

DowDuPont and its subsidiaries purchase products and services from and/or sell products and services to companies of which certain of the Directors and executive officers of DowDuPont, or their immediate family members, are employees. The Corporate Governance Committee and the Board have reviewed such transactions and relationships and do not consider the amounts involved in such transactions material. Such purchases from and sales to each company involve less than either $1,000,000 or 2% of the consolidated gross revenues of each of the purchaser and the seller, and all such transactions are in the ordinary course of business. Some such transactions are continuing and it is anticipated that similar transactions will occur from time to time. From time to time, the Company may have employees who are related to DowDuPont executive officers and Directors. An adult child of Mr. Charles J. Kalil is employed by Dow in a non-executive position. In 2017, she received compensation in the approximate amount of $180,000, which amount and other terms of her employment, including equity awards, are commensurate with that of her peers and determined on a basis consistent with Dow’s human resources policies.

 

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Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s Directors and executive officers and persons who own more than 10% of a registered class of the Company’s equity securities (“Reporting Persons”) to file with the SEC reports on Forms 3, 4 and 5 concerning their ownership of and transactions in the common stock and other equity securities of the Company, generally within two business days of a reportable transaction. As a practical matter, the Company seeks to assist its Directors and executives by monitoring transactions and completing and filing reports on their behalf.

Based solely upon a review of SEC filings furnished to the Company and written representations that no other reports were required, all Reporting Persons complied with these reporting requirements during fiscal year 2017, except for Forms 3 for Messrs. Reilley and Thomas, and Ms. Fox which were amended to properly state holding information as of the Merger Transaction closing.

Sustainability Initiatives

Since the 1980s, both Dow and DuPont have demonstrated industry leadership in sustainability. That commitment resulted in DowDuPont being named to the 2017 Dow Jones Sustainability World Index, recognizing DowDuPont’s continuing sustainability performance to be in the top 10% of the industry.

Both Dow and DuPont have displayed a proven, decades-long track record of consistently integrating industry-leading sustainability, environmental, and social metrics into the company strategy and using those metrics to drive company performance.

In 2015, Dow launched its third set of industry-leading, aspirational 2025 Sustainability Goals, which link sustainability metrics directly to company strategy in every business unit, function and geography. Dow’s emphasis on integrating sustainability metrics into the everyday plans of the company has been key to its economic, environmental, and social metric successes over the past two decades.

In 2015, DuPont continued its sustainability leadership effort by announcing a set of 2020 Sustainability Goals that integrate sustainability with its innovation process, further improve its operational footprint and continue its efforts to enhance global food security.

Both Dow and DuPont have notable accomplishments toward fulfillment of these sustainability goals:

 

    In 2017, Dow was the first U.S.-based company to issue its annual sustainability report according to the updated Global Reporting Initiative (GRI) Standards at the Comprehensive Level – the highest standard in corporate responsibility, transparency, and accountability.

 

    In 2017, Dow won a U.S. Presidential Green Chemistry Award, an EPA Safer Choice Partner of the Year award, and ten R&D 100 awards, six of which were for sustainability-related products.

 

    Dow announced a Circular Economy collaboration to develop the market for recycled polyols manufactured from end-of-life mattresses.

 

    Dow delivered its first certified renewable polyethylene to customers in The Netherlands and Germany.

 

    Dow delivered more than $160 million in the last two years from implementing its 2025 Valuing Nature Goal. This resulted from valuing the specific alternatives that natural infrastructure, process improvements, conservation options, and embedding natural processes into innovation could provide in business decisions.

 

    Dow initiated its Product Stewardship Academy with outreach in Kenya, Nigeria and Ghana. The program is aimed at providing training and mentoring on product safety practices in developing regions.

 

    Dow launched its partnership with the WE organization, to promote science and innovation among youth, which will include the developing a curriculum focused on chemistry innovation, safety, and sustainability.

 

    DuPont reduced absolute Scope 1 and 2 greenhouse gas emissions by more than 8.5% between 2010 and 2016 and cut total water consumption by approximately 4% over the same period.

 

    DuPont reduced non-renewable energy intensity by more than 10% since 2010.

 

    DuPont invested approximately $6 billion and introduced nearly 3,500 new products between 2010 and 2016 as part of its 2020 goal to develop innovations that produce more food, enhance nutritional value and improve agriculture sustainability.

 

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    DuPont exceeded the 2020 goal of facilitating two million engagements of youth around the world to inform and inspire the next generation to address food security.

 

    DuPont achieved the Carbon Disclosure Project CDP Climate “A-“Leadership Band.

DowDuPont continues to drive a new era of sustainable growth as it pursues the Intended Business Separations. Dow and DuPont will continue to work toward achievement of their respective sustainability goals that create value for all stakeholders, and through product innovation, business strategy and operations, the Company will meet those goals.

More information about Dow’s and DuPont’s legacy sustainability programs, goals, and reports can be found online at www.dow-dupont.com/about-dow-dupont/sustainability.

Political Engagement and Disclosure

Government policy is one of the most powerful external forces affecting DowDuPont today. New laws and changes to existing laws can fundamentally impact the Company’s operations and the markets where it does business – and in turn, the Company’s bottom line, thereby affecting DowDuPont and its subsidiaries, employees, retirees, suppliers, customers, communities and stockholders.

Because the impact of government policy is so critical to the Company’s survival and success, DowDuPont subsidiaries actively participate in both policymaking and political processes, through legally allowed advocacy efforts and by making political contributions to candidates, parties and causes. DowDuPont subsidiaries are committed to the highest standard of ethical conduct in their involvement in policymaking and political process. As part of DowDuPont’s commitment to transparency, materials on political policy and engagement are available at www.dow-dupont.com/investors/corporate-governance.

 

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AGENDA ITEM 1: ELECTION OF DIRECTORS

Board Composition

The Board consists of sixteen members – eight Directors from the legacy Dow Board and eight Directors from the legacy DuPont Board. There are two Co-Lead Independent Directors: Mr. Jeff M. Fettig, who previously served as the Lead Independent Director for Dow; and Mr. Alexander M. Cutler, who previously served as the Lead Independent Director for DuPont. Mr. Andrew N. Liveris serves as the Executive Chairman of the Board and Mr. Edward D. Breen, Chief Executive Officer, also serves on the Board.

Recommendations and Nominations for Director

In accordance with the recommendation of the Corporate Governance Committee, the Board has nominated the following individuals for election as Directors, to serve for a one-year term that expires at the Annual Meeting in 2019 or until their successors are elected and qualified: Lamberto Andreotti, James A. Bell, Edward D. Breen, Robert A. Brown, Alexander M. Cutler, Jeff M. Fettig, Marillyn A. Hewson, Lois D. Juliber, Andrew N. Liveris, Raymond J. Milchovich, Paul Polman, Dennis H. Reilley, James M. Ringler, Ruth G. Shaw, Lee M. Thomas and Patrick J. Ward. A biography is included for each nominee beginning on page 17 of the Proxy Statement. While nominated for re-election, the Company has announced that Mr. Liveris will serve as a Director of DowDuPont only through July 1, 2018, at which time he will retire from the Company and the Board of Directors. As set forth in the Bylaws, the Continuing Dow Directors will identify a replacement to fill the vacancy at that time.

The Board of Directors unanimously recommends a vote FOR the election of ALL of these nominees as Directors.

 

 

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Overview of Board Composition

 

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* Reflects years served as a legacy Dow or legacy DuPont Director and as a DowDuPont Director

Qualifications

The Corporate Governance Committee and the Board believe that the qualifications, skills, experience and attributes set forth in this Proxy Statement for all Directors nominated for election support the conclusion that these individuals are qualified to serve as Directors of the Company and collectively possess a variety of skills, professional experience, and diversity of backgrounds allowing them to effectively oversee the Company’s business. The Directors have a diverse combination of the following backgrounds and qualifications:

Leadership Experience

Directors who have held leadership positions in a public company possess an understanding of the regulations and considerations that are unique to a public company.

International / Global Experience

Directors who have experience and knowledge of international business operations are particularly important given the global presence and financial aspects of the Company.

Science / Technology Expertise

Directors who have expertise in the science or technology field are particularly important given the Company’s focus on research and innovation.

Finance and Accounting Expertise

Numerous financial metrics are used to measure performance. An advanced understanding of finance and accounting is an important qualification for Directors in the preparation of financial statements and risk management.

Public Company Board Experience

Directors with previous public company board experience provide additional corporate governance, compensation experience and financial expertise.

Industries and Markets Expertise

Directors who have experience in the industry and markets served by the Company offer valuable perspective.

Each of these experiences provides the Board with a balance of perspectives that contribute to its effectiveness in overseeing the business, preparing for the Intended Business Separations, and advising the Company on navigating the regulatory environment for the Intended Business Separations. The Corporate Governance Committee and Board have determined that the Directors nominated for election are qualified to serve as Directors of the Company. As the business evolves and preparation for the Intended Business Separations continues, the Corporate Governance Committee and Board will continue to evaluate the membership of the Board to ensure that the skills and experiences on the Board are aligned with the needs of the Company.

 

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The Board unanimously recommends a vote FOR the election of ALL of these nominees as Directors.

The Company’s Bylaws prescribe the voting standard for election of Directors as a majority of the votes cast in an uncontested election, such as this one, where the number of nominees does not exceed the number of Directors to be elected. Under the Corporate Governance Guidelines, if a nominee who already serves as a Director is not elected, that nominee shall offer to tender his or her resignation to the Board. The Corporate Governance Committee will then recommend to the Board whether to accept or reject the resignation, or whether other action should be taken. Within ninety days of the certification of election results, the Board will publicly disclose its decision regarding whether to accept or reject the resignation. As explained on the accompanying proxy card or voting information, it is the intention of the persons named as proxies to vote executed proxies FOR the candidates nominated by the Board unless contrary voting instructions are provided. If something unanticipated should occur prior to the 2018 Meeting making it impossible for one or more of the candidates to serve as a Director, votes will be cast in the best judgment of the persons authorized as proxies.

The NYSE rules do not permit brokers with discretionary authority to vote in the election of Directors. Therefore, if you hold your shares beneficially and do not provide voting instructions to your bank or broker, your bank or broker will abstain from voting on your behalf and your shares will not be voted in the election of Directors. We urge you to promptly provide voting instructions to your broker to ensure that your shares are voted on this matter. Please follow the instructions set forth in the voting information provided by your bank or broker.

 

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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)

 

 

DIRECTOR NOMINEES

Information in the biographies summarizes key qualifications and diversity attributes as they apply to the individual Directors to support the conclusion that these individuals are highly qualified to serve on the Board. The information is current as of the date of this Proxy Statement and the age listed is as of the 2018 Meeting. Each nominee is currently serving as a Director and each has consented to serve if elected for the new term.

 

 

LAMBERTO ANDREOTTI

 

 

 

LOGO

 

Age: 67

 

DowDuPont Committees:      

•    Compensation

•    Agriculture

 

Other Directorships:

•    None

 

 

Former Chairman of the Board and Chief Executive Officer, Bristol-Myers Squibb

 

Mr. Andreotti is the former Chairman of the Board and Chief Executive Officer of Bristol-Myers Squibb, a global, innovative healthcare company. He served as Chairman at Bristol-Myers Squibb from May 2015 to May 2017 and Chief Executive Officer from May 2010 to May 2015. Mr. Andreotti previously served as its President and Chief Operating Officer responsible for all of Bristol-Myers Squibb’s pharmaceutical operations worldwide. He joined Bristol-Myers Squibb’s Board of Directors in 2009, and led a broad range of businesses and regions after joining the company in 1998. Mr. Andreotti served as a Director of DuPont from 2012 until the effective date of the Merger Transaction when he became a Director of DowDuPont.

 

 

 

Skills and Expertise

•    strong track record of leading a science and technology-based corporation as Chairman and Chief Executive Officer of Bristol-Myers Squibb

 

•    global business, corporate governance and investor relations expertise

 

•    perspective on human resources, finance, marketing and government relations from his experience in various senior leadership roles with Bristol-Myers Squibb

 

 

 

JAMES A. BELL

 

 

 

LOGO

 

Age: 69

 

DowDuPont Committees:

•    Audit (Co-Chair)

•    Materials Science

 

Other Directorships:

•    Apple Inc.

•    CDW Corporation

•    J.P. Morgan Chase & Co.

 

 

Former Executive Vice President, Corporate President and Chief Financial Officer, The Boeing Company

 

Mr. Bell is the former Executive Vice President, Corporate President and Chief Financial Officer of The Boeing Company, an aerospace company and manufacturer of commercial jetliners and military aircraft. Mr. Bell joined Rockwell International, a predecessor of The Boeing Company, in 1972, and subsequently held various executive positions including Executive Vice President, Corporate President and Chief Financial Officer from 2008 to 2012. Mr. Bell served as a Director of Dow from 2005 until the effective date of the Merger Transaction when he became a Director of DowDuPont.

 

 

 

Skills and Expertise

•    global business and leadership experience as Chief Financial Officer of The Boeing Company

 

•    finance and accounting expertise including experience with, and direct involvement and supervision of, the preparation of financial statements and risk management

 

•    additional public company board experience which provides additional corporate governance and financial expertise

 

 

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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)

 

 

 

EDWARD D. BREEN

 

 

 

LOGO

 

Age: 62

 

DowDuPont Committees:

•    Environment, Health, Safety and Technology (Co-Chair)

•    Agriculture (Chair)

•    Materials Science

•    Specialty Products (Chair)

 

Other Directorships:

•    Comcast

 

 

Chief Executive Officer, DowDuPont

Chairman and Chief Executive Officer, DuPont

 

Prior to his role at DowDuPont, Mr. Breen was the Chairman of the DuPont Board and Chief Executive Officer of DuPont. He was named Interim Chairman of the DuPont Board and Chief Executive Officer on October 16, 2015, and assumed those roles permanently on November 9, 2015. He served as Chairman, from July 2002 to March 2016, and Chief Executive Officer, from July 2002 to September 2012, of Tyco International, plc, a leading global provider of security products and services, fire detection and suppression products and services and life safety products. Prior to joining Tyco, Mr. Breen held senior management positions at Motorola, including as President and Chief Operating Officer, and General Instrument Corporation, including as Chairman, President and Chief Executive Officer. Mr. Breen is a director of Comcast Corporation (since 2014 and 2005 to 2011). Mr. Breen is a member of the Advisory Board of New Mountain Capital LLC, a private equity firm. Mr. Breen served as a Director of DuPont from February 2015 until the effective date of the Merger Transaction when he became a Director of DowDuPont.

 

 

 

Skills and Expertise

•    as Chairman and Chief Executive Officer of DuPont and former Chairman and Chief Executive Officer of Tyco, Mr. Breen is well suited to lead DowDuPont during this transformative time and to help enhance the Board’s ability to consider, evaluate and maintain oversight over business strategies and risk management efforts

 

 

 

ROBERT A. BROWN

 

 

 

LOGO

 

Age: 66

 

DowDuPont Committees:

•    Audit

•    Agriculture

 

Other Directorships:

•    None

 

 

President, Boston University

 

Dr. Brown has served as President of Boston University since September 2005. Dr. Brown previously was provost and professor of chemical engineering at the Massachusetts Institute of Technology from July 1998 through July 2005. Dr. Brown is a member of the National Academy of Sciences, the American Academy of Arts and Sciences, the National Academy of Engineering and a former member of the President’s Council of Advisors on Science and Technology. He is a trustee of the University Research Association, and is a member of the Council on Competitiveness. Dr. Brown is chairman of the Academic Research Council of the Ministry of Education of the Republic of Singapore and also serves on the Research Innovation and Enterprise Council chaired by the Prime Minister of Singapore. Dr. Brown served as a Director of DuPont from 2007 until the effective date of the Merger Transaction when he became a Director of DowDuPont.

 

 

 

Skills and Expertise

•    provides the Board with an invaluable science and technology perspective gained from his positions at Boston University and the Massachusetts Institute of Technology

 

•    strong senior management capabilities

 

 

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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)

 

 

 

ALEXANDER M. CUTLER

 

 

 

LOGO

 

Age: 66

 

DowDuPont Committees:

•    Corporate Governance (Co-Chair)

•    Agriculture

 

Other Directorships:

•    KeyCorp

 

 

Former Chairman and Chief Executive Officer, Eaton

 

Mr. Cutler served as the Chairman and Chief Executive Officer of Eaton from 2000 to 2016. Mr. Cutler formerly served as Eaton’s President and Chief Operating Officer, Executive Vice President and Chief Operating Officer-Controls and Executive Vice President-Operations. He serves on the boards of KeyCorp (since 2000), United Way Services of Greater Cleveland, and the Musical Arts Association. Mr. Cutler served as a Director of DuPont from 2008 until the effective date of the Merger Transaction when he became a Director of DowDuPont.

 

 

 

Skills and Expertise

•    wealth of global business management, finance, investor relations, marketing and supply chain and logistics experience as former Chairman and Chief Executive Officer of Eaton

 

•    provides the Board with important insights in the areas of corporate governance and government relations based on his past position as Chair of The Business Roundtable Corporate Governance Committee as well as current board positions

 

 

 

JEFF M. FETTIG

 

 

 

LOGO

 

Age: 61

 

DowDuPont Committees:

•    Corporate Governance (Co-Chair)

•    Materials Science

 

Other Directorships:

•    Whirlpool Corporation

 

 

Chairman, Whirlpool Corporation

 

Mr. Fettig joined Whirlpool Corporation, a manufacturer of home appliances, in 1981 and subsequently held various executive positions including Chairman since 2004 and Chief Executive Officer from 2004 to October 1, 2017. Mr. Fettig served as a Director of Dow from 2003 until the effective date of the Merger Transaction when he became a Director of DowDuPont.

 

 

 

Skills and Expertise

•    global business and leadership experience as Chairman and former Chief Executive Officer of Whirlpool Corporation

 

•    extensive experience and knowledge of international business operations, manufacturing, marketing, sales and distribution, which is particularly important given the global presence and nature of the operations of the Company

 

•    extensive experience and knowledge of consumer dynamics, branded consumer products, and end-user markets and servicing relevant to the business operations and focus of the Company

 

 

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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)

 

 

 

MARILLYN A. HEWSON

 

 

 

 

LOGO

Age: 64

 

DowDuPont Committees:

•    Corporate Governance

•    Agriculture

 

Other Directorships:

•    Lockheed Martin Corporation

 

 

Chairman, President and Chief Executive Officer, Lockheed Martin Corporation

 

Ms. Hewson has served since January 2014 as Chairman, President and Chief Executive Officer of Lockheed Martin Corporation, a global security and aerospace company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. Ms. Hewson was Chief Executive Officer and President of Lockheed Martin from January to December 2013 and has served as director since 2012. Ms. Hewson served as a Director of DuPont from 2007 until the effective date of the Merger Transaction when she became a Director of DowDuPont.

 

 

 

Skills and Expertise

•    provides the Board broad insight and knowledge on global business management, human resources, finance, supply chain, leveraged services and systems, internal audit and government contracting based on experience gained in leadership roles and as Chairman and Chief Executive of Lockheed Martin

 

•    expertise in government relations

 

 

 

LOIS D. JULIBER

 

 

 

 

LOGO

Age: 69

 

DowDuPont Committees:

•    Compensation (Co-Chair)

•    Agriculture

 

Other Directorships:

•    Mondelez International

 

 

Former Vice Chairman, Colgate-Palmolive Company

 

Ms. Juliber served as Vice Chairman, from October 2004 to March 2005, of Colgate-Palmolive Company, the principal business of which is the production and marketing of consumer products. Ms. Juliber was Chief Operating Officer of Colgate-Palmolive from 2000 to 2004. She formerly served as Executive Vice President-Developed Markets, President, Colgate-Palmolive North America and Chief Technology Officer of Colgate-Palmolive. Ms. Juliber is a director of Mondelez International, formerly Kraft Foods Inc. (since 2007). She was previously Chairman of the MasterCard Foundation (2006-2015) and also serves as a Trustee Emeritae of Wellesley College and a member of the President’s Council at Olin College. Ms. Juliber formerly served as a director of Goldman Sachs (2004-2012). Ms. Juliber served as a Director of DuPont from 1995 until the effective date of the Merger Transaction when she became a Director of DowDuPont.

 

 

 

Skills and Expertise

•    deep and broad experience leading and profitably growing global businesses as former Vice Chairman, Chief Operating Officer and Chief Technology Officer of Colgate Palmolive, one of the world’s top science-driven consumer products companies

 

•    expertise in marketing, R&D / product development, supply chain management, information technology, human resource development and business development strongly complements DuPont’s strategic priorities

 

•    extensive experience growing U.S.-based businesses in emerging markets such as China and India

 

•    over 20 years of corporate and not-for-profit board experience, provides unique insight in governance, audit and compensation issues

 

 

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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)

 

 

 

ANDREW N. LIVERIS

 

 

LOGO

 

Age: 63

 

DowDuPont Committees:

•   Environment, Health, Safety and Technology (Co-Chair)

•   Agriculture

•   Materials Science (Chair)

•   Specialty Products

 

Other Directorships:

•   International Business Machines Corporation

 

 

 

Executive Chairman, DowDuPont

 

Chairman and Chief Executive Officer, The Dow Chemical Company

 

Mr. Liveris joined The Dow Chemical Company in 1976 and subsequently held various executive positions including President 2004 to February 2016, and Chief Executive Officer and Director 2004 to date and Chairman 2006 to date. As of the effective date of the Merger Transaction, Mr. Liveris became a Director and Executive Chairman of DowDuPont.

 

 

 

Skills and Expertise

•  global business and leadership experience as Chairman and Chief Executive Officer of The Dow Chemical Company

 

•  involvement with major business, public policy, and international organizations that contribute to addressing issues at the Company, including the U.S. President’s Export Council, the Business Roundtable Association and the U.S. Business Council

 

•  additional public company board experience as a director of International Business Machines Corporation and academic institution governance experience as a trustee of the California Institute of Technology and The King Abdullah University of Science and Technology (KAUST), which provides additional corporate governance and compensation experience and financial expertise

 

 

 

RAYMOND J. MILCHOVICH

 

 

LOGO

 

Age: 68

 

DowDuPont Committees:

•   Compensation

•   Materials Science

 

Other Directorships:

•   None

 

 

Former Chairman and Chief Executive Officer, Foster Wheeler AG

 

Mr. Milchovich served as Chief Executive Officer from 2001 to 2010 and Non-Executive Chairman of the Board and Consultant from 2010 to November 2011 of Foster Wheeler AG, a company that engineered and constructed facilities for oil and gas, liquid natural gas, refining, chemical, pharmaceutical and power industries. He also served Nucor Corporation as Director from 2002 to 2007 and 2012 to May 2017 and Lead Director from September 2013 to February 2017. Mr. Milchovich served as a Director of Dow from 2015 until the effective date of the Merger Transaction when he became a Director of DowDuPont.

 

 

 

Skills and Expertise

•  global business and leadership experience as former Lead Director of Nucor Corporation and former Chief Executive Officer of Foster Wheeler AG

 

•  finance and accounting expertise including experience with, and direct involvement in and supervision of, the preparation of financial statements and risk management

 

•  additional public company board experience as former director of Nucor Corporation and Foster Wheeler AG which provides additional corporate governance and compensation experience and financial expertise

 

 

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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)

 

 

 

PAUL POLMAN

 

 

 

LOGO

 

Age: 61

 

DowDuPont Committees:

•   Corporate Governance

•   Materials Science

 

Other Directorships:

•   Unilever PLC

•   Unilever N.V.

 

 

Chief Executive Officer, Unilever PLC and Unilever N.V.

 

Mr. Polman joined Unilever PLC and Unilever N.V., providers of nutrition, hygiene and personal care products, in October 2008 and became Chief Executive Officer in January 2009. Mr. Polman served as a Director of Dow from 2010 until the effective date of the Merger Transaction when he became a Director of DowDuPont.

 

 

 

Skills and Expertise:

•  global business and leadership experience as Chief Executive Officer of Unilever PLC and Unilever N.V.

 

•  extensive experience and knowledge of international business operations and global consumer product industries and end uses which is particularly important given the global presence and nature of the operations of the Company

 

•  active involvement with major trade, public policy and international organizations including the International Business Council of the World Economic Forum, UN Global Compact, and World Business Council for Sustainable Development, all which contributes to understanding and addressing issues at the Company

 

 

 

DENNIS H. REILLEY

 

 

 

LOGO

 

Age: 65

 

DowDuPont Committees:

•   Compensation
(Co-Chair)

•   Materials Science

 

Other Directorships:

•   Marathon Oil Corporation

•   CSX Corporation

 

 

 

Non-Executive Chairman, Marathon Oil Corporation

 

Mr. Reilley has served as Non-Executive Chairman of Marathon Oil Corporation, an oil and natural gas exploration and production company, since January 2014. Mr. Reilley served as a Director of Covidien Ltd. from 2007 to 2015, and H.J. Heinz Company from 2005 to 2013. Mr. Reilley served as a Director of Dow from 2007 until the effective date of the Merger Transaction when he became a Director of DowDuPont.

 

 

 

Skills and Expertise:

•  global business and leadership experience in multiple major corporations including Marathon Oil Corporation (Non-Executive Chairman), Covidien Ltd. (former Non-Executive Chairman), Praxair, Inc. (former Chairman, President and Chief Executive Officer), E.I. du Pont de Nemours & Co. (former Chief Operating Officer), and Conoco, Inc. (various managerial and executive positions)

 

•   extensive experience and knowledge of the global oil, petrochemical and chemical industries which is particularly important given the global presence and nature of the operations of the Company

 

•  additional public company board experience as a director of Marathon Oil Corporation and CSX Corporation, and former director of Covidien Ltd. and H.J. Heinz Company, which provides additional corporate governance and compensation experience and financial expertise

 

 

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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)

 

 

 

JAMES M. RINGLER

 

 

 

LOGO

 

Age: 72

 

DowDuPont Committees:

•   Audit

•   Materials Science

 

Other Directorships:

•   Teradata Corporation

•   Autoliv Inc.

•   John Bean
Technologies Corporation

•   TechnipFMC plc.

 

 

 

Chairman, Teradata Corporation

 

Mr. Ringler has served as Chairman of Teradata Corporation, a provider of database software, data warehousing and analytics, since October 2007. Mr. Ringler served as a Director of Ingredion Incorporated from 2001 to 2014. Mr. Ringler served as a Director of Dow from 2001 until the effective date of the Merger Transaction when he became a Director of DowDuPont.

 

 

 

Skills and Expertise:

•  global business and leadership experience as Chairman of Teradata Corporation

 

•  extensive knowledge and experience in a variety of manufacturing industries, which is particularly important given the global presence and nature of the operations of the Company

 

•  additional public company board experience as a director of Autoliv, Inc., John Bean Technologies Corporation, and TechnipFLC plc., and former director of Ingredion Incorporated, which provides additional corporate governance and compensation experience and financial expertise

 

 

 

 

 

 

RUTH G. SHAW

 

 

 

LOGO

 

Age: 70

 

DowDuPont Committees:

•   Environment, Health, Safety and Technology

•   Materials Science

 

Other Directorships:

•   DTE Energy Company

•   SPX Corporation

 

 

Former Group Executive, Public Policy and President, Duke Nuclear

 

Dr. Shaw served as Executive Advisor for Duke Energy Corporation, a provider of electricity and natural gas, from October 2006 to May 2008. She served as Group Executive, Public Policy and President of Duke Nuclear from April 2006 to October 2006. Dr. Shaw served as a Director of Dow from 2005 until the effective date of the Merger Transaction when she became a Director of DowDuPont.

 

 

 

Skills and Expertise:

•  global business and leadership experience with Duke Energy Corporation (former Group Executive and Executive Advisor) and Duke Power Company (former President and Chief Executive Officer) and leadership experience at academic institutions including Central Piedmont Community College (former President) and El Centro College (former President)

 

•  extensive knowledge of and experience with energy and power industries and markets including nuclear, coal, and natural gas, which is particularly important given the global presence and nature of the operations of the Company

 

•  additional public company board experience including current service as a director of DTE Energy Company and SPX Corporation which provides additional corporate governance and compensation experience and financial expertise

 

 

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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)

 

 

 

LEE M. THOMAS

 

 

 

LOGO

 

Age: 73

 

DowDuPont Committees:

•   Environment, Health, Safety and Technology

•   Agriculture

 

Other Directorships:

•   None

 

 

Former Chairman and Chief Executive Officer, Rayonier Inc.

 

Mr. Thomas served Rayonier Inc., a global forest products company, as Chairman from July 2007 to May 2012, and Chief Executive Officer from May 2007 to December 2011. He was also President of Rayonier from March 2007 through August 2010. Previously, Mr. Thomas was President and Chief Operating Officer of Georgia-Pacific Corp. Prior to joining Georgia-Pacific, he was chairman/Chief Executive Officer of Law Companies Environmental Group Inc., and administrator of the U.S. Environmental Protection Agency. Mr. Thomas previously served on the board of the Regal Entertainment Group (2006-2018) and the board of Airgas Inc. (1998-2016). Mr. Thomas served as a Director of DuPont from 2011 until the effective date of the Merger Transaction when he became a Director of DowDuPont.

 

 

 

Skills and Expertise

•  provides the Board with a deep understanding of corporate governance, finance, global business and investor relations based on his experiences as President/Chief Executive Officer of two public companies

 

•  offers the Board key insights on government relations and environmental management from his tenure as administrator of the Environmental Protection Agency

 

•  organizational management skills through his experiences as an independent consultant and as Chief Executive Officer of a consulting firm

 

 

 

PATRICK J. WARD

 

 

 

LOGO

 

Age: 54

 

DowDuPont Committees:

•   Audit (Co-Chair)

•   Agriculture

 

Other Directorships:

•   None

 

 

 

Chief Financial Officer, Cummins Inc.

 

Mr. Ward has served as Chief Financial Officer of Cummins Inc., a global power leader that designs, manufactures, distributes and services engines and related technologies, since May 2008. He has held a broad range of financial leadership positions since joining Cummins in 1987, including serving as Vice President, engine business controller, and Executive Director, power generation business controller. Mr. Ward previously served as a Director of DuPont from 2013 until the effective date of the Merger Transaction when he became a Director of DowDuPont.

 

 

 

Skills and Expertise

•  depth of experience in management, financial reporting, global business, capital markets, investment management, investor relations and public accounting and finance from his experiences as Chief Financial Officer and in management of a global public company

 

 

 

 

 

 

AGENDA ITEM 1: ELECTION OF DIRECTORS

The Board of Directors recommends that you vote FOR all sixteen Director nominees.

 

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DIRECTOR COMPENSATION

DowDuPont compares its non-employee Director compensation programs, designs and compensation elements to the same peer group used for executive compensation, as described in the “Peer Group and Benchmarking” section of the Compensation Discussion and Analysis. DowDuPont targets the median compensation of the peer group for all Director compensation elements. The following tables provide information concerning the compensation provided to DowDuPont’s non-employee Directors in 2017.

For the period from January 1, 2017 through August 31, 2017, Dow provided non-employee director fees as described below. These fees were adjusted in April 2017 as part of regular review of peer group benchmarking. Since the Merger Transaction, fees were adjusted to provide equitable treatment of legacy Dow and legacy DuPont Directors also as described below. These factors and others noted account for differences among the compensation of the non-employee Directors in the tables below.

Non-Employee Directors’ Fees

2017 Directors’ fees as stated below are paid only to Directors who are not employees of the Company. An overview of the 2017 Compensation Elements for Dow, DuPont and DowDuPont respectively is below.

 

Compensation Element

  

Dow

Pre-Merger ($)

    

DuPont

Pre-Merger ($)

     DowDuPont ($)  

Cash Retainer

     115,000        115,000        115,000  

Equity Retainer

     170,000        150,000        170,000  

Total Retainer

     285,000        265,000        285,000  
        
 

Audit

     35,000        25,000        35,000  

Annual Committee Chair Fees

 

Compensation

     20,000        25,000        25,000  
 

All Other

     20,000        20,000        20,000  

Lead Independent Director Fees

     50,000        30,000        50,000  

 

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DIRECTOR COMPENSATION (continued)

 

 

Director Compensation for 2017

 

Name

 

Fees Earned or

Paid in Cash ($)(a)

   

Stock

Awards ($)(b)

   

Change in

Pension Value and

Non-Qualified Deferred

Compensation Earnings ($)(c)

   

All Other

Compensation ($)(d)

     Total ($)  

Lamberto Andreotti

    38,333       13,346         300        51,979  

Ajay Banga

    76,667       170,610            247,277  

Jacqueline K. Barton

    88,750       170,610            259,360  

James A. Bell

    150,000       170,610            320,610  

Robert A. Brown

    39,444       13,346         57,822        110,612  

Alexander M. Cutler

    60,556       13,346         57,648        131,550  

Richard K. Davis

    86,667       170,610            257,277  

Jeff M. Fettig

    178,750       170,610            349,360  

Marillyn A. Hewson

    38,333       13,346         58,713        110,392  

Lois D. Juliber

    35,000       13,346       5,973       58,679        112,998  

Mark Loughridge

    86,667       170,610            257,277  

Raymond J. Milchovich

    115,000       170,610            285,610  

Robert S. (Steve) Miller

    76,667       170,610            247,277  

Paul Polman

    115,000       170,610            285,610  

Dennis H. Reilley

    136,250       170,610            306,860  

James M. Ringler

    126,250       170,610            296,860  

Ruth G. Shaw

    115,000       170,610            285,610  

Lee M. Thomas

    39,444       13,346         300        53,090  

Patrick J. Ward

    37,083       13,346               300        50,729  

 

(a) For Messrs. Andreotti, Brown, Cutler, Thomas and Ward and Mses. Hewson and Juliber, these figures represent fees paid by DowDuPont following the Merger Transaction for the period 09/01/2017 through 12/31/2017. For Dr. Barton and Messrs. Banga, Davis, Loughridge, Miller, who no longer serve on the Board, these figures represent fees paid by Dow prior to the Merger Transaction for the period 01/01/2017 through 08/31/2017.

 

(b) The 05/12/2017 full grant date fair value of Restricted Stock granted is $62.04 per share with a total value of $170,610 for each legacy Dow Director (2,750 shares) and the 11/06/2017 grant of restricted stock units for each legacy DuPont Director is represented in accordance with the same standard applied for financial accounting purposes.

 

(c) Represents the estimated change in the actuarial present value of a Director’s accumulated pension benefits under DuPont’s discontinued Retirement Income Plan for Non-Employee Directors.

 

(d) Includes DuPont-paid accidental death and disability insurance premiums, along with accruals made in 2017 for non-employee directors under DuPont’s discontinued Directors’ Charitable Gift Plan.

Non-Employee Directors Stock Grant

In May 2017, each non-employee legacy Dow Director received a grant of 2,750 shares of Restricted Stock, with provisions limiting transfer until retirement or termination of service to the Company or two years from the date of grant, whichever is longer.

In November 2017, each non-employee legacy DuPont Director serving on the Board received a grant of 190 Restricted Stock Units (“RSUs”), with provisions limiting transfer until retirement or termination of service to the Company. This transition grant was intended to create parity among the DowDuPont Directors for calendar year 2017.

Non-Employee Directors’ Stock Ownership Guidelines

Equity, in the form of Restricted Stock, RSUs or Deferred Stock, is a key component of director compensation. Directors are subject to stock ownership guidelines as previously set by Dow and DuPont. Legacy Dow Directors have a guideline of owning at least five times the amount of the annual Board retainer fee, with a five year time period after first election to achieve this level, and are also required to retain all equity awards until retirement or termination of service to the Company. Legacy DuPont Directors are required to hold until retirement all equity awards granted since 2011.

As of December 31, 2017, all Directors were in compliance with the stock ownership guidelines.

 

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DIRECTOR COMPENSATION (continued)

 

 

Non-Employee Directors Deferred Compensation Plan

Non-employee Directors may choose, prior to the beginning of each year, to have all or part of their fees credited to deferred compensation accounts in either legacy Dow or legacy DuPont programs, as applicable.

For legacy Dow Directors, at the election of the Director, fees are deferred into one of several hypothetical investment accounts that accrue investment returns according to the account selected. Investment choices include a fund with an interest rate equal to the sum of the 60-month rolling average of ten-year U.S. Treasury Note yield plus the current five-year Dow credit spread, a phantom Dow stock account tracking the market value of DowDuPont common stock with market dividends paid and reinvested, as well as funds tracking the performance of several mutual funds. These funds are identical to funds offered as part of the Elective Deferral Plan for management level employees. Such deferred amounts will be paid in installments as elected by the Director at the time of deferral commencing in July following the Director’s retirement or termination of service to the Company, in the following July or in July of the calendar year following the Director’s 72nd birthday. If the Director elects to receive payment in July following his or her 72nd birthday and if he or she remains on the Board beyond his or her 72nd birthday, payments shall start in the July following retirement or termination of service to the Company.

Under the legacy DuPont Stock Accumulation and Deferred Compensation Plan for Directors, a Director may defer all or part of the Board retainer and Committee Chair fees in cash or stock units until retirement as a Director or until a specified year after retirement. Interest accrues on deferred cash payments and dividend equivalents accrue on deferred stock units. As part of the retention requirements, equity grants will be held until retirement. However, a Director may defer payments beyond retirement.

Business Travel Accident Insurance for Non-Employee Directors

Dow and DuPont maintain a rider on their Business Travel Accident insurance policies covering each legacy non-employee Director, which will cover accidental death and dismemberment if the Director is traveling on DowDuPont business.

DuPont Directors’ Retirement Income Plan

In 1998, DuPont discontinued its legacy DuPont retirement income plan for non-employee Directors. Non-employee Directors who began their service on the DuPont Board prior to the plan’s discontinuation continue to be eligible to receive benefits under the plan. Upon retirement, annual benefits payable under the plan equal one-half of the annual Board retainer (up to $85,000 and exclusive of any Committee compensation and stock, RSU or stock option grants) in effect at the Director’s retirement. Benefits are payable for the lesser of life or ten years.

DuPont Directors’ Charitable Gift Plan

In October 2008, DuPont discontinued its legacy DuPont charitable gift plan with respect to future Directors. After the death of a Director, DuPont will donate five consecutive annual installments of up to $200,000 each to tax-exempt educational institutions or charitable organizations recommended by the Director and approved by DuPont.

A Director was fully vested in the plan after five years of service as a Director or upon death or disability. The plan is unfunded. DuPont does not purchase insurance policies to satisfy its obligations under the plan. The Directors do not receive any personal financial or tax benefit from this program because any charitable, tax-deductible donations accrue solely to the benefit of DuPont. Employee Directors were able to participate in the plan if they made a required annual contribution.

Additional Compensation from Third Point LLC

In addition to the non-employee director compensation described above to be paid by DowDuPont, Mr. Milchovich received additional compensation from a third party in connection with his election to the Board of Directors of Dow. Specifically, Mr. Milchovich was appointed to the Dow Board and/or nominated for election for the 2015 Annual Meeting of Stockholders (“2015 Meeting”) pursuant to an agreement dated as of November 20, 2014, between the Company and certain investment funds (Third Point LLC, Third Point Partners Qualified L.P., Third Point Partners L.P., Third Point Offshore Master Fund L.P., Third Point Ultra Master Fund L.P. and Third Point Reinsurance Co. Ltd. (collectively “Third Point”)).

 

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DIRECTOR COMPENSATION (continued)

 

 

In connection with his agreement to serve as a Third Point designee, Mr. Milchovich entered into an agreement with Third Point LLC (the “TP Agreement”). Pursuant to the TP Agreement, Mr. Milchovich received from Third Point LLC:

 

    $250,000 in cash paid upon the execution by Mr. Milchovich of the TP Agreement;

 

    $250,000 in cash paid upon the appointment of Mr. Milchovich to the Board. The TP Agreement required Mr. Milchovich to invest $250,000 in Dow common stock if he did not already own stock equivalent to that amount at the time of his appointment to the Board or his nomination by Third Point LLC for election to the Board. As he owned $250,000 worth of Dow common stock at the time of his appointment to the Board, he received $250,000 in cash and was not required to invest this amount in Dow common stock; and

 

    Certain stock appreciation rights (“SARs”) with respect to a total of 396,668 shares of Dow common stock as follows: (a) SARs with respect to 198,334 shares of Dow common stock (now DowDuPont common stock) payable in 2018 (“2018 SARs”); and (b) SARs with respect to 198,334 shares of Dow common stock (now DowDuPont common stock) payable in 2020 (“2020 SARs”). The 2018 SARs and 2020 SARs are each subject to his continued service as a Director on the applicable vesting date, subject to certain exceptions. As described in a Form 3 filed with the SEC on September 11, 2017, for Mr. Milchovich, the appreciation amount payable by Third Point LLC, if any, will be based upon the difference between $50.42 (the closing price of Dow common stock on the date of execution of the TP Agreement) and the volume weighted average price of the Company’s common stock during the 30 day period prior to January 1, 2018, in the case of the 2018 SARs and January 1, 2020, in the case of the 2020 SARs.

The 2018 SARs vested as follows: 50% on January 1, 2017 and 50% on January 1, 2018 and were settled in cash by Third Point LLC in January 2018. The 2020 SARs vest as follows: 50% on January 1, 2019 and 50% on January 1, 2020 and will be settled in cash by Third Point LLC within 30 days following January 1, 2020. The receipt by Mr. Milchovich of each of the payments pursuant to the 2018 SARs and the 2020 SARs is contingent upon him agreeing to stand for election to the Board (whether or not re-nominated) and not resigning from the Board, regardless of whether Third Point LLC remains a stockholder. The payment obligations with respect to the SARs are the subject of the TP agreement. Neither Dow nor the Company is a party to the TP agreement nor is the Company responsible for any such payments.

Equity Compensation Plan Information

The tables below shows the Equity Compensation Plan Information as of December 31, 2017 for Dow and DuPont respectively.

 

Dow   (1)     (2)     (3)  

Plan Category

 

# of securities to

be issued upon

exercise of outstanding

options, warrants, rights

   

Weighted-average exercise

price of outstanding

options, warrants, rights ($)

   

# of securities

remaining available

for future issuance

under equity

compensation plans

(excluding securities

reflected in column (1))

 

Equity Compensation Plans Approved by Security Holders

    40,560,311       43.61 (a)      29,183,052(b)  

As of December 31, 2017

 

(a) Calculation does not include outstanding Performance Shares that have no exercise price.

 

(b) The 2012 Stock Incentive Plan was approved by stockholders on May 10, 2012 with an initial share pool of 44,500,000 shares and another 50,500,000 shares approved by stockholders on May 15, 2014 as the Amended and Restated 2012 Stock Incentive Plan (collectively the “2012 Plan”). Shares available are calculated using the fungible method of counting shares which consumes 2.1 for each deferred stock and performance share awarded and 1 share for each stock option. The 2012 Plan also provides that stock awards under the prior 1988 Award and Option Plan which are forfeited or expire shall be added back into this share pool at the fungible ratios.

 

DuPont   (1)     (2)      (3)  

Plan Category

 

# of securities to

be issued upon

exercise of outstanding

options, warrants, rights

   

Weighted-average exercise

price of outstanding

options, warrants, rights ($)

    

# of securities

remaining available

for future issuance

under equity

compensation plans

(excluding securities

reflected in column (1))

 

Equity Compensation Plans Approved by Security Holders

    20,086,584       48.43        33,820,428  

As of December 31, 2017

 

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BENEFICIAL OWNERSHIP OF COMPANY STOCK

The following table presents the beneficial ownership of DowDuPont’s Common Stock as of February 20, 2018, except as noted, for (i) each Director of the Company, (ii) each executive officer of the Company listed in the Summary Compensation Table, (iii) all Directors and executive officers as a group, and (iv) each person beneficially owning more than 5% of the outstanding shares of DowDuPont’s Common Stock.

 

Name

 

Current Shares

Beneficially Owned(a)

   

Rights to Acquire

Beneficial

Ownership of

Shares(b)

    Total    

Percent of Shares

Beneficially Owned(c)

 
  Lamberto Andreotti     0.0       18,632.0       18,632.0           *  
  James A. Bell     35,656.0       0.0       35,656.0           *  
  Edward D. Breen     67,512.0       460,680.0       528,192.0       *  
  Robert A. Brown     146.0       42,465.0       42,611.0           *  
  James C. Collins     161,194.0       67,425.0       228,619.0       *  
  Alexander M. Cutler     6,410.0       78,139.0       84,549.0           *  
  Jeff M. Fettig     43,330.0       0.0       43,330.0           *  
  James R. Fitterling     225,961.8       618,284.0       844,245.8       *  
  Joe E. Harlan     174,393.3       274,938.0       449,331.3       *  
  Marillyn A. Hewson     3,712.0       55,107.0       58,819.0           *  
  Lois D. Juliber     2,051.0       97,555.0       99,606.0           *  
  Charles J. Kalil     274,803.7       509,459.0       784,262.7       *  
  Andrew N. Liveris     804,690.0       4,088,499.0       4,893,189.0           *  
  Raymond J. Milchovich     13,891.3       0.0       13,891.3           *  
  Paul Polman     48,780.0       0.0       48,780.0           *  
  Dennis H. Reilley     38,646.0       0.0       38,646.0           *  
  James M. Ringler     51,850.0       0.0       51,850.0           *  
  Ruth G. Shaw     42,389.0       0.0       42,389.0           *  
  Lee M. Thomas     15,544.0       19,171.0       34,715.0           *  
  Howard I. Ungerleider     129,967.2       637,389.0       767,356.2       *  
  Patrick J. Ward     0.0       13,094.0       13,094.0           *  
  Group Total     2,140,927.3       6,949,111.0       9,090,038.3       0.39%  
  All Directors and Executive Officers as a Group (25 persons)     2,361,342.8       7,364,760.0       9,726,102.8       0.42%  
  Certain Other Owners:        
  BlackRock, Inc.     156,235,635.0 (d)          6.72%  
  The Vanguard Group     173,041,983.0 (e)          7.44%  
  Capital World Investors     125,863,167.0 (f)                      5.41%  

 

(a) Except as otherwise noted and for shares held by a spouse and other members of the person’s immediate family who share a household with the named person, the named persons have sole voting and investment power over the indicated number of shares. This column also includes all shares held in a trust over which the person has or shares voting or investment power and shares, or shares held in trust for the benefit of the named party in The Dow Chemical Company Employees’ Savings Plan or the DuPont Retirement Savings Plan. Beneficial ownership of some or all of the shares listed may be disclaimed.

 

(b) This column includes any shares that the person could acquire through 04/21/2018, by (1) exercise of an option granted by Dow or DuPont; or (2) performance shares granted by Dow or DuPont to be delivered prior to 04/21/2018. To the extent that these shares have not been issued as of the record date, they cannot be voted at the Meeting.

 

(c) The percentage of shares beneficially owned is calculated based on the number of shares of common stock outstanding as of 02/26/2018.

 

(d) Based on a Schedule 13G filed by BlackRock, Inc. on 02/01/2018 with the SEC reporting beneficial ownership as of 12/31/2017. BlackRock, Inc. has sole voting power over 135,911,751 shares, shared voting power over 1,164 shares, sole dispositive power over 156,234,472 shares and shared dispositive power over 1,164 shares. BlackRock, Inc.’s address is 55 East 52nd Street, New York, NY 10055.

 

(e) Based on a Schedule 13G filed by The Vanguard Group on 02/08/2018 with the SEC reporting beneficial ownership as of 12/31/2017. The Vanguard Group has sole voting power over 3,302,654 shares, shared voting power over 492,711 shares, sole dispositive power over 169,323,003 shares and shared dispositive power over 3,718,980 shares. The Vanguard Group‘s address is 100 Vanguard Boulevard, Malvern, PA 19355.

 

(f) Based on a Schedule 13G filed by Capital World Investors on 02/14/2018 with the SEC reporting beneficial ownership as of 12/31/2017. Capital World Investors has sole voting power over 125,840,628 shares and sole dispositive power over 125,863,167 shares. Capital World Investors’ address is 333 South Hope Street, Los Angeles, CA 90071.

 

* Less than 1% of the total shares of DowDuPont common stock outstanding.

 

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COMPENSATION DISCUSSION & ANALYSIS

In the Compensation Discussion and Analysis, the details of the executive compensation programs applicable to the Named Executive Officers are described.

CD&A Table of Contents

 

        

 

EXECUTIVE SUMMARY

 

    

 

32

 

 

 

DowDuPont Merger Transaction

     32  

Performance Highlights

     32  

Named Executive Officers

     33  

Merger Transaction Considerations for CD&A

     33  

Program Structure and Alignment with Core Principles

     33  

Executive Compensation Governance Practices

     35  
  

 

COMPONENTS OF EXECUTIVE COMPENSATION AND BENEFITS

 

    

 

37

 

 

 

2017 NEO Targeted Total Direct Compensation Summary

     37  

Pay Mix

     37  

2017 Compensation Decisions

     38  

• Base Salary

     38  

• Annual Incentive Compensation

     38  

• Long-Term Incentive Compensation

     43  

Benefits and Perquisites

     45  
  

 

THE COMPENSATION PROCESS

 

    

 

46

 

 

 

Role of the Compensation Committee

     46  

Role of the Independent Compensation Consultants

     47  

Peer Group and Benchmarking

     47  
  

 

OTHER CONSIDERATIONS

 

    

 

50

 

 

 

Stock Ownership Guidelines

     50  

Anti-Hedging and Anti-Pledging Policies

     50  

Executive Compensation Recovery (Clawback) Policy

     50  

Compensation and Risk Management

     51  

2017 Tax Considerations

     51  
  

 

COMPENSATION TABLES AND NARRATIVES

 

    

 

52

 

 

 

Summary Compensation Table

     52  

Grants of Plan-Based Awards

     54  

Outstanding Equity Awards

     55  

Option Exercises and Stock Vested

     57  

CEO Pay Ratio

     57  
  

 

BENEFITS

 

    

 

58

 

 

 

Pension Benefits

     58  

Defined-Benefit Retirement Plans

     58  

Supplemental Retirement Plans

     60  

401(k) Plans

     60  

Non-Qualified Deferred Compensation

     61  

Other Retirement Benefits

     62  

Potential Payments Upon Termination or Change in Control

     64  
  

 

COMPENSATION COMMITTEE REPORT

 

    

 

67

 

 

 

 

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COMPENSATION DISCUSSION & ANALYSIS (continued)

 

 

Defined Terms

 

CEO – Chief Executive Officer

CD&A – Compensation Discussion & Analysis

EPS – Earnings Per Share

GAAP – Generally Accepted Accounting Principles

IRC – U.S. Internal Revenue Code, as amended

LTI – Long-Term Incentive

NEO – Named Executive Officer

PSU – Performance Share Unit

ROC – Return on Capital

RSU – Restricted Stock Unit

SEC – U.S. Securities & Exchange Commission

STIP – Short-Term Incentive Program

TSR – Total Shareholder Return

EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization and Foreign Exchange Gains (Losses)

Management Operating Cash Flow – Operating Net Income, plus Depreciation and Amortization, minus Capital Spending, and plus the Change in Adjusted Trade Working Capital

Operating Earnings – Income from Continuing Operations Before Taxes, excluding Significant Items

Operating EBITDA – EBITDA excluding the impact of Significant Items

Operating EPS – Net Income Available for Common Stockholders excluding the impact of Significant Items divided by Common Share from Continuing Operations – diluted.

Operating Net Income – Net Income Available for Common Stockholders excluding the impact of Significant Items

Operating ROC – Net Operating Profit after Tax (excluding Significant Items) divided by Total Average Capital

Pro Forma – Prepared in accordance with Article 11 of Regulation S-X

Pro Forma Adjusted EPS – “pro forma earnings per common share from continuing operations – diluted” excluding the after-tax impact of pro forma significant items and the after-tax impact of pro forma amortization expense associated with DuPont’s intangible assets

Pro Forma Operating EBITDA – earnings (i.e., “pro forma income from continuing operations before income taxes”) before interest, depreciation, amortization and foreign exchange gains (losses), excluding the impact of significant items

 

 

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COMPENSATION DISCUSSION & ANALYSIS (continued)

 

EXECUTIVE SUMMARY

DowDuPont Merger Transaction

Effective August 31, 2017, The Dow Chemical Company (“Dow”) and E. I. du Pont de Nemours and Company (“DuPont”) completed the previously announced merger of equals transaction contemplated by the Agreement and Plan of Merger dated as of December 11, 2015, as amended on March 31, 2017 (the “Merger Transaction”). The Merger Transaction resulted in each of Dow and DuPont surviving as subsidiaries of DowDuPont Inc. (“DowDuPont”). For purposes of this CD&A, references to “the Company” refer to DowDuPont.

Dow was determined to be the accounting acquirer in the Merger Transaction and, as a result, certain historical information of Dow is presented in this Proxy Statement for the periods prior to the Merger Transaction. A further description of the Merger Transaction can be found on page i of the Proxy Statement and in the current report on Form 8-K filed by DowDuPont on September 1, 2017.

DowDuPont is now pursuing the intended separation of the Company’s Agriculture, Materials Science and Specialty Products divisions into three independent, publicly traded companies (the “Intended Business Separations”). The Intended Business Separations, which are subject to Board approval, are expected to be in the form of pro-rata spin-off transactions, under which DowDuPont stockholders will receive shares of capital stock in the resulting companies. DowDuPont recently announced dates for the Intended Business Separations: Materials Science, which will be called Dow, is expected to separate from DowDuPont by the end of the first quarter of 2019, and Agriculture, which will become Corteva Agriscience, and Specialty Products, which will be the new DuPont, are each expected to separate from one another by June 1, 2019.

DowDuPont is led by a management team that reflects the strengths and capabilities of both Dow and DuPont. Each of the three divisions leads its respective industry through productive, science-based innovation to meet the needs of customers and help solve global challenges.

The management team seeks to deliver value at DowDuPont through:

 

    Enhancing EBITDA and cash flow generation

 

    Delivering committed run-rate cost synergies of $3.3 billion (against the original target of $3 billion) and growth synergies of at least $1 billion

 

    Efficiently standing up and separating the divisions into the three intended companies in a timely fashion

Performance Highlights

 

    DowDuPont returned nearly $2 billion to stockholders in the fourth quarter 2017 through paid dividends ($0.9 billion) and share repurchases ($1 billion).

 

    2017 GAAP EPS from Continuing Operations of $0.95; Pro Forma Adjusted EPS Up 22% to $3.40

 

    2017 GAAP Net Income from Continuing Operations of $1.7 billion; Pro Forma Operating EBITDA up 15% to $16.2 billion

 

    2017 GAAP Net Sales of $62.5 billion; Pro Forma Net Sales Growth of 12% to $79.5 billion, with gains in all segments and geographies

 

    Less than two weeks following Merger Transaction close, DowDuPont announced certain targeted portfolio adjustments to the Materials Science and Specialty Products divisions to better align with end-markets and further enhance the competitive advantages of the intended companies.

 

    DowDuPont satisfied key regulatory remedies required of the Merger Transaction, including: divesting DuPont’s cereal broadleaf herbicides and chewing insecticides portfolios, as well as certain parts of its crop protection R&D pipeline and organization to FMC; divesting Dow’s PRIMACOR™ ethylene acrylic acid copolymers and ionomers business; and divesting a select portion of Dow AgroSciences’ corn seed business in Brazil. DuPont also closed its acquisition of FMC Corporation’s Health and Nutrition business.

 

    Updated the timing and sequence of the intended separation of the three divisions into standalone companies: Materials Science is expected to separate from DowDuPont by the end of the first quarter of 2019, and Agriculture and Specialty Products are each expected to separate from one another by June 1, 2019.


 

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COMPENSATION DISCUSSION & ANALYSIS (continued)

 

    DowDuPont achieved an annual cost synergy run-rate of more than $800 million at the end of 2017, with more than $200 million of savings realized in the fourth quarter of 2017; based upon the cost synergy run-rate achieved through the end of 2017, DowDuPont has increased the commitment on the delivery of cost synergies from $3 billion to $3.3 billion.

 

See Appendix A for a reconciliation to the most directly comparable U.S. GAAP financial measures.

Named Executive Officers

This CD&A discusses the compensation of the following NEOs. Following the accounting treatment of the Merger Transaction, Dow was determined to be the accounting acquirer. As a result, the NEOs includes Mr. Liveris, as CEO of the accounting acquirer, Dow, and the tables include only compensation earned as executives of DowDuPont since September 1, 2017 for Messrs. Breen and Collins.

 

NEO        Title    Legacy Company       
Edward D. Breen     Chief Executive Officer    DuPont      
Andrew N. Liveris  

  Executive Chairman, DowDuPont and

  Chief Executive Officer, The Dow Chemical Company

   Dow      
Howard I. Ungerleider     Chief Financial Officer    Dow      
James R. Fitterling     Chief Operating Officer, Materials Science Division    Dow      
Charles J. Kalil  

  Special Counsellor to the Executive Chairman and

  General Counsel, Materials Science Division

   Dow      
James C. Collins     Chief Operating Officer, Agriculture Division    DuPont      
Joe E. Harlan  

  Former Chief Commercial Officer, The Dow Chemical

  Company (retired as of December 31, 2017)

  

Dow      

Merger Transaction Considerations for CD&A

With Dow having been determined to be the accounting acquirer in the Merger Transaction, the compensation presented in the “Compensation Tables and Narratives” section of this Proxy Statement with respect to NEOs who are legacy Dow executives includes compensation related to their service with both Dow and DowDuPont during 2017. For those NEOs who are legacy DuPont executives, the compensation presented in the “Compensation Tables and Narratives” section of this Proxy Statement includes only compensation earned relative to their service as executives of DowDuPont (i.e., from September 1, 2017 through December 31, 2017). In other sections of this Proxy Statement, however, reference may be made to full-year, annual compensation for all NEOs. All references are clearly identified as to the basis on which they are presented.

Program Structure and Alignment with Core Principles

Both Dow and DuPont have a history of designing executive compensation programs to attract, motivate, reward and retain the high-quality executives necessary for Company leadership and strategy execution. This legacy continues at DowDuPont and well positions the Company to deliver on the intention of creating three independent, industry-leading companies.

2017 was a unique year, as both Dow and DuPont operated as standalone companies prior to the Merger Transaction, each with its own executive compensation and benefit programs and practices. Given the Intended Business Separations within a relatively short period of time after the closing of the Merger Transaction, a decision was made to not develop separate executive compensation programs at the DowDuPont level for 2017. Rather, the executive officers of DowDuPont continue to be employees of, and participants in, the compensation and benefit programs of Dow and DuPont, respectively. The only exception to this structure is related to a post-merger grant of PSUs which were awarded to certain senior executives and which is discussed more fully in the section entitled “DowDuPont –Post Merger Grant” which can be found on page 45 of the Proxy Statement.



 

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COMPENSATION DISCUSSION & ANALYSIS (continued)

 

The legacy Dow and DuPont compensation programs are designed and administered to follow these core principles:

 

    Establish a strong link between pay and performance

 

    Align executives’ interests with stockholders’ interests, particularly over the longer term

 

    Reinforce business strategies and drive long-term sustained stockholder value

Each of the Dow and DuPont executive compensation programs delivers value through three primary forms of compensation: base salary, annual incentives, and long-term incentives. The compensation outcomes under the programs’ annual and long-term incentives are determined by respective company performance (and, in the case of the post-merger PSUs awarded, by the overall performance of DowDuPont).

The following table summarizes the two companies’ respective 2017 legacy executive compensation programs:

 

 

Executive Compensation Structures (Pre-Merger)

 

Element of Compensation   Dow   DuPont

Base Salary

(Fixed annual cash

compensation)

  Targeted to median of selected peer group   Targeted to median of selected peer group or of general industry market data, as applicable
Annual Incentives  

Paid in cash based on:

•  60% Operating Net Income

•  40% Management Operating Cash Flow

•  Individual Performance Modifier (0 – 125%)

•  Entire award capped at 200% of target

 

Paid in cash based on:

•  50% Operating EPS

•  25% Business Unit Operating Earnings

•  25% Business Unit Revenue

•  Entire award capped at 200% of target

Long-Term Incentives  

•  45% PSUs: Relative TSR

•  30% Stock Options

•  25% Deferred Stock

 

•  60% PSUs: Relative TSR

•  40% Stock Options

The following merger-related compensation actions were taken in 2017:

 

    Target annual compensation for the CEO was increased to more accurately reflect his experience and performance and to align to that of the Executive Chairman

 

    The Annual Incentive Target for the CEO was increased from 160% of Base Salary to 165% of Base Salary

 

    The value of Long-Term Incentives for the CEO was aligned via a post-merger grant of stock options

 

    Adjustments were made to DuPont’s annual incentive metrics for the post-merger period of 2017

 

    Operating EPS was replaced by Operating Net Income

 

    Business Unit Operating Earnings was replaced by Business Unit EBITDA

 

    Adjustments were made to outstanding equity awards to reflect the conversion into awards denominated in DowDuPont common stock, including the conversion of PSUs to RSUs and Performance Stock to Deferred Stock upon the merger at the better of target or actual performance

 

    PSUs were awarded post-merger to incentivize certain key employees in driving the realization of the Company’s cost synergies as well as timely execution of the Intended Business Separations

 

    A change in control was triggered for certain non-qualified benefit plans

 

    Dow distributed previously earned but deferred compensation payments and non-qualified benefits to certain participants of the Executives’ Supplemental Retirement Plan (“ESRP”) and Elective Deferral Plan (“EDP”) as triggered by the Merger Transaction and further described on pages 60 and 61 of the Proxy Statement; these distributions were not new or additional compensation as a result of the Merger Transaction

 

    DuPont funded, as of the Merger Transaction, a Rabbi Trust, which was established in 2013, for future payments under non-qualified deferred compensation plans in connection with a termination of employment or upon a date specified at the time of deferral. The trust is subject to the claims of creditors.


 

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Table of Contents

COMPENSATION DISCUSSION & ANALYSIS (continued)

 

Executive Compensation Governance Practices

Following the Merger Transaction, compensation of the executive officers of DowDuPont, including that of the NEOs, is overseen by the Compensation Committee (or, in the case of both the Executive Chairman and the CEO, by the Compensation Committee and the independent members of the Board). The Compensation Committee established the Dow Compensation Subcommittee and the DuPont Compensation Subcommittee and delegated certain responsibilities relating to the compensation and benefits provided to executive officers and employees of Dow and DuPont, respectively. The Board, the Compensation Committee and the respective Subcommittees are assisted in performance of their oversight duties by independent compensation consultants and management.

The following summarizes key governance characteristics related to the executive compensation programs in which the NEOs participate:

 

 

KEY EXECUTIVE COMPENSATION PRACTICES

 

 Active stockholder engagement

 

 Strong links between executive compensation outcomes and company financial and market performance

 

 Compensation program structure designed to discourage excessive risk taking

 

 Significant focus on performance-based pay

 

 Each component of target pay benchmarked to median of either the peer group or of the general market, as applicable

 

 Carefully structured peer group with regular Compensation Committee review

 

 Stock ownership requirements of six times base salary for the Executive Chairman and CEO and four times base salary for the other NEOs

 

 100% independent Compensation Committee

 

 Clawback policy

 

 Anti-hedging/Anti-pledging policies

 

 Independent compensation consultants reporting to the Compensation Committee

 

 No new single-trigger change in control agreements

 

 Stock incentive plans prohibit option repricing, reloads, exchanges or options granted below market value without stockholder approval

 

 Regular review of the Compensation Committee Charter to ensure best practices and priorities

 

As implementation of the Intended Business Separations continues, the Compensation Committee will continue to review best practices in governance and executive compensation to ensure that the compensation programs align with the Company’s core principles.



 

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Table of Contents

COMPENSATION DISCUSSION & ANALYSIS (continued)

 

 

COMPONENTS OF EXECUTIVE COMPENSATION AND BENEFITS

Executives receive a mix of variable and fixed components of compensation which are aligned with the compensation philosophy as highlighted in the chart below:

 

Component   Purpose

 

Base Salary

 

 

 

Provides a regular source of income for NEOs and acts as a foundation for other pay components (e.g., annual incentive targets for NEOs are expressed as a percentage of base salary)

 

 

Annual

Incentive

 

 

 

Rewards employees for achieving critical financial and operational goals

 

Long-Term

Incentive

 

 

Aligns the interests of executives with stockholders by linking pay and performance, with the goal of accelerating growth, profitability and stockholder return

 

Aids the Company in retaining its NEOs and other key employees

 

Benefits

and

Perquisites

 

 

 

Executives participate in the same benefit programs, within Dow and DuPont respectively, that are offered to other salaried employees

 

 

 

Limited perquisites are provided to executives to facilitate strong performance on the job and enhance their personal security and productivity

 

2017 NEO Targeted Total Direct Compensation Summary

In addition to and separate from the Summary Compensation Table, the following table is provided to aid with understanding the annual compensation of the NEOs, not including certain merger related items. The following table lists the targeted annual total direct compensation for each NEO for the full calendar year ending December 31, 2017, including compensation from (i) legacy companies prior to the Merger Transaction, and (ii) DowDuPont following the Merger Transaction.

 

Name

   2017 Base Salary  ($)     

2017 Target

Annual Incentive  ($)

     2017 LTI  ($)     

Targeted Total Direct

Compensation  ($)

 

Edward D. Breen

     1,930,800             3,185,820             12,700,000        17,816,620       

Andrew N. Liveris

     1,930,800             3,185,820             12,700,000        17,816,620       

Howard I. Ungerleider

     1,067,559             1,281,071             4,150,000        6,498,630       

James R. Fitterling

     1,140,112             1,425,140             4,750,000        7,315,253       

Charles J. Kalil

     1,050,252             1,102,765             3,450,000        5,603,017       

James C. Collins

     775,000             775,000             2,500,000        4,050,000       

Joe E. Harlan

     1,057,194             1,268,633             3,400,000        5,725,828       

Totals in the above table might not equal the summation of the columns due to rounding amounts to the nearest dollar.

Pay Mix

Executive compensation is linked strongly to the financial and operational performance of the business. On average, approximately 90% of the Executive Chairman’s and the CEO’s target annual total compensation is at risk, while over 80% of the other NEOs’ compensation, on average, is at risk.

 

Executive Chairman and CEO Target Annual Total
Compensation for 2017 (Average)
   Other NEO Target Annual Total Compensation for 2017
(Average)

 

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Variable (89%) 71% 11% 18% Variable (83%) 17% 20% 63%


Table of Contents

COMPENSATION DISCUSSION & ANALYSIS (continued)

 

 

NEO incentive compensation is based on clearly disclosed and measurable goals linked to company performance. Each of the Dow and DuPont compensation programs is targeted to deliver compensation at approximately the median of a core group of companies with whom each company respectively competed globally for business and executive talent. To the extent that an individual NEO’s compensation exceeds the median, it is attributable to factors including executive tenure, experience and stockholder value-enhancing achievement of measurable goals.

2017 Compensation Decisions

Base Salary

Base salary is a fixed portion of compensation based primarily on an individual’s skills, job responsibilities and experience, as well as more subjective factors such as the assessment by the Compensation Committee of individual NEO performance. Base salaries for executives are benchmarked against similar jobs at other companies and are targeted at the median of the respective peer group, after adjusting for each company’s revenue size.

Base salaries for the NEOs as of December 31, 2017 and December 31, 2016, respectively, are shown in the table below. As previously noted, the increase in base salary for Mr. Breen was in reflection of his experience and performance and to align his salary with that of Mr. Liveris. The increases for Messrs. Ungerleider, Fitterling, Kalil and Harlan generally represent merit increases aligned to general increases in base salaries for comparably situated positions. The increase for Mr. Collins was related to his promotion to the position of Chief Operating Officer for the Agricultural division.

 

Name

 

2016

Base Salary  ($)

   

2017

Base Salary  ($)

   

Percent/

Change in

Base Salary

 

Edward D. Breen

    1,500,000          1,930,800          29

Andrew N. Liveris

    1,930,800          1,930,800          0

Howard I. Ungerleider

    1,036,465          1,067,559          3

James R. Fitterling

    1,106,905          1,140,112          3

Charles J. Kalil

    1,029,659          1,050,252          2

James C. Collins

    700,000          775,000          11

Joe E. Harlan

    1,036,465          1,057,194          2

Annual Incentive Compensation

During 2017, the DuPont Human Resources and Compensation Committee (the “legacy DuPont Compensation Committee”), the Dow Compensation and Leadership Development Committee (the “legacy Dow Compensation Committee”) and each of the respective company’s Boards, determined that, as a result of the timing of the Merger Transaction, a new DowDuPont annual short-term incentive program would not be adopted for 2017. Rather, participants in each company’s annual short-term incentive program would remain eligible for, and subject to the terms of, their respective company’s program for 2017. The following sections summarize Dow’s and DuPont’s respective 2017 annual incentive programs. There will be a common set of metrics and overall design for all participants under the 2018 annual incentive programs.

Dow Annual Performance Award

The Performance Award is an annual cash incentive program. Dow uses this component of compensation to reward employees for achieving critical annual company goals measured by Operating Net Income and Management Operating Cash Flow. Meeting or exceeding annual business and financial goals is important to executing long-term business strategy and delivering long-term value to stockholders. The rationale for utilizing these metrics is:

 

    Operating Net Income: (1) Reflects operating strength, efficiency and profitability and (2) balances revenue growth with margin expansion

 

    Management Operating Cash Flow: Reflects ability to translate earnings to cash which can be used to return capital to stockholders through increased dividends and share repurchases as well as prioritize organic growth investments in high return attractive markets

Actual award payouts are determined each February following completion of the plan year by measuring the performance against each award component.

 

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Table of Contents

COMPENSATION DISCUSSION & ANALYSIS (continued)

 

 

2017 Dow Performance Award Metrics and Design

The amount earned is equal to a participant’s target award times Dow performance results, and adjusted by the individual performance factor assessment, which includes safety performance. The actual results for each financial performance measure can range from 0% to 200% of target, and are weighted as indicated in the graphic below. Even when including the impact of the individual performance factor the Performance Award is capped at a maximum payout of 200%.

 

 

 

LOGO

The metrics used in the Performance Award are non-GAAP measures and defined as follows:

 

  Operating Net Income: Net Income Available for Common Stockholders excluding the impact of significant items. We exclude the impact of significant items from both presentations to investors and from executive compensation performance calculations because they are not reflective of underlying operations for the particular period in which they are recorded, and therefore, could mask underlying operating trends.

 

  Management Operating Cash Flow: Operating Net Income, plus depreciation and amortization, minus capital spending, and plus the change in adjusted trade working capital.

The 2017 Performance Award corporate target goals and 2017 results are shown below.

 

Metric

 

Threshold –
0% Payout

($ in millions)

   

Target

($ in millions)

   

Max – 200%
Payout

($ in millions)

   

Actual

($ in millions)

    Payout %     Weighting    

Actual
Payout

Factor %

 

 

Operating Net Income*

 

 

 

 

 

 

4,350

 

 

 

 

 

 

 

 

 

5,178

 

 

 

 

 

 

 

 

 

6,006

 

 

 

 

 

 

 

 

 

5,296

 

 

 

 

 

 

 

 

 

114

 

 

 

 

 

 

 

 

60

 

 

 

 

 

 

 

 

68

 

 

 

 

Management Operating Cash Flow*

 

 

 

 

 

 

4,174

 

 

 

 

 

 

 

 

 

5,174

 

 

 

 

 

 

 

 

 

6,174

 

 

 

 

 

 

 

 

 

5,197

 

 

 

 

 

 

 

 

 

102

 

 

 

 

 

 

 

 

40

 

 

 

 

 

 

 

 

41

 

 

 

 

TOTAL

 

                                                 

 

 

 

 

109

 

 

 

 

* Operating Net Income and Management Operating Cash Flow are non-GAAP financial measures.

As detailed in the table above, the 2017 Performance Award resulted in an earned base award equal to 109% of the target award opportunity for employees. As allowed by the Dow plan, the Dow Compensation Subcommittee determined the individual component payout level for each NEO subject to the Dow plan to reflect their personal contributions (shown in the table below).

 

Name

 

Year End

Base

Salary ($)(a)

   

PA Target

Percent (b)

   

PA Target

Amount ($)(c)

   

Company

Component (d)

   

Individual
Factor –

Committee

Assessment (e)

   

Total PA

Payment

Percent (f)

   

Total PA

Payout

Amount ($)

 
                (a * b)                 (d * e)     (c * f)  

 

Andrew N. Liveris

 

 

 

 

 

 

 

1,930,800

 

 

 

 

 

 

 

 

 

165

 

 

 

 

 

 

 

 

3,185,820

 

 

 

 

 

 

 

 

 

109

 

 

 

 

 

 

 

 

120

 

 

 

 

 

 

 

 

  131

 

 

 

 

 

 

 

 

4,167,053

 

 

 

 

 

Howard I. Ungerleider

 

 

 

 

 

 

1,067,559

 

 

 

 

 

 

 

 

 

120

 

 

 

 

 

 

 

 

1,281,071

 

 

 

 

 

 

 

 

 

109

 

 

 

 

 

 

 

 

120

 

 

 

 

 

 

 

 

131

 

 

 

 

 

 

 

 

1,675,641

 

 

 

 

 

James R. Fitterling

 

 

 

 

 

 

1,140,112

 

 

 

 

 

 

 

 

 

125

 

 

 

 

 

 

 

 

1,425,140

 

 

 

 

 

 

 

 

 

109

 

 

 

 

 

 

 

 

120

 

 

 

 

 

 

 

 

131

 

 

 

 

 

 

 

 

1,864,083

 

 

 

 

 

Charles J. Kalil

 

 

 

 

 

 

1,050,252

 

 

 

 

 

 

 

 

 

105

 

 

 

 

 

 

 

 

1,102,765

 

 

 

 

 

 

 

 

 

109

 

 

 

 

 

 

 

 

110

 

 

 

 

 

 

 

 

120

 

 

 

 

 

 

 

 

1,322,215

 

 

 

 

 

Joe E. Harlan

 

 

 

 

 

 

1,057,194

 

 

 

 

 

 

 

 

 

120

 

 

 

 

 

 

 

 

1,268,633

 

 

 

 

 

 

 

 

 

109

 

 

 

 

 

 

 

 

100

 

 

 

 

 

 

 

 

109

 

 

 

 

 

 

 

 

1,382,810

 

 

 

 

 

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Performance Award Operating Net Income 60% Management Operating Cash Flow 40% Individual Factor 0% - 125% Payout Range Max: 200% Target: 100% Threshold: 0%


Table of Contents

COMPENSATION DISCUSSION & ANALYSIS (continued)

 

 

DuPont Short-Term Incentive Program

DuPont’s STIP is designed to ensure that DuPont executives maintain a strong focus on financial metrics (e.g., revenue growth and earnings growth) that have been shown to be closely linked to stockholder value creation over time. In addition, DuPont’s STIP is linked to both corporate and business unit performance. The legacy DuPont Compensation Committee has historically approved the STIP design, including measures and weightings, at the beginning of each fiscal year. The chart below represents the STIP structure approved by the legacy DuPont Compensation Committee at the beginning of 2017.

 

 

LOGO

 

  (1)  While final payouts may be adjusted by individual performance as determined by the Compensation Committee, for 2017, no individual performance adjustments were made to the STIP payouts for those NEOs who participated in the plan.  

In connection with, and as a result of certain impacts of, the Merger Transaction, the legacy DuPont Compensation Committee determined that the metrics utilized in the plan as approved at the beginning of the fiscal year would either not be applicable after the merger, or would have significant impediments on their continued use after the merger. As a result, the legacy DuPont Compensation Committee determined that the fiscal year would be split into a pre-merger period and post-merger period. For the pre-merger period, the metrics and weightings established by the legacy DuPont Compensation Committee at the beginning of the fiscal year remained in effect. For the post-merger period, two metrics were replaced, as noted in the table below. All metrics, both pre- and post-merger, were calculated solely based upon the results of DuPont and its Business Units.

 

Pre-Merger Metric

  Post-Merger Metric   Weighting  

 

Corporate Operating EPS

 

 

Operating Net Income

 

   

 

50

 

 

 

Business Unit Operating Earnings

 

 

Business Unit Operating EBITDA

 

   

 

25

 

 

 

Business Unit Revenue

 

 

Business Unit Revenue

 

   

 

25

 

 

The rationale for the utilization of the pre-merger measures was as follows:

 

    Corporate Operating EPS: Closely aligns stockholder and executive interests, plus provides insight with respect to ongoing operating results

 

    Business Unit Operating Earnings: Measures profitability at the business level leading to corporate EPS results

 

    Business Unit Revenue: Reflects top-line growth – critical to Company success

The rationale for changing the measures post-merger was as follows:

 

    Operating Net Income: Replacing Operating EPS with Operating Net Income reflects the fact that DuPont no longer had common shares outstanding, and therefore could no longer calculate EPS

 

    Business Unit Operating EBITDA: Measures profitability at the business level, and eliminates the impact to Operating Earnings of certain merger-related items associated with purchase accounting that are not reflective of ongoing operations

The non-GAAP measures utilized in the 2017 STIP are defined as follows:

 

    Operating EPS: Net Income from Continuing Operations Available for Common Stockholders excluding the impact of significant items divided by common share from continuing operations – diluted. DuPont excluded the impact of significant items from both presentations to investors and from executive compensation performance calculations because they are not reflective of DuPont’s underlying operations for the particular period in which they are recorded, and therefore, could mask underlying operating trends.

 

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Short Term Incentive Plan (STIP) Individual STIP Target X Corporate Performance Payout Factor 50% + Total Business Unit Performance Payout Factor 50% X Individual Factor(1) = Individual STIP Payout Max (200%) Target (100%) Threshold (60%) Below Threshold (0%)


Table of Contents

COMPENSATION DISCUSSION & ANALYSIS (continued)

 

 

    Operating Earnings: Income from continuing operations before taxes, excluding significant items

 

    Operating Net Income: Net Income from Continuing Operations Available for Common Stockholders excluding the impact of significant items

 

    Operating EBITDA: Net Income excluding the impact of significant items, before interest, income taxes, depreciation, and amortization and foreign exchange gains (losses)

In addition to the adjustment to the measures being utilized, prior to the Merger Transaction the legacy DuPont Compensation Committee made additional changes to the STIP for 2017. Due to the likely mid-quarter closing of the Merger Transaction, coupled with the fact that certain accounting and budgeting processes are aligned only to full quarters the legacy DuPont Compensation Committee determined that the measurement of business performance for the 2017 STIP would be based on full quarters only. More specifically, pre-merger results would be based only upon the full quarters completed as of the date of closing of the Merger Transaction, while post-merger results would be based only upon full quarters completed post-merger. Given that the Merger Transaction closed on August 31, 2017, this ultimately resulted in the pre-merger measurement period being based upon performance through June 30, 2017. Conversely, the post-merger measurement period is based upon performance from October 1, 2017 through December 31, 2017. These decisions were made by the legacy DuPont Compensation Committee in order to recognize a number of accounting impacts driven by the Merger Transaction that would not reflect the ongoing operations of the business. The performance through June 30, 2017 includes results related to the DuPont Divested Ag Business.

As provided for in the plan, the DuPont Compensation Subcommittee, as a successor to the legacy DuPont Compensation Committee, maintained the ability to exercise discretion in determining the final payouts for 2017 under the plan. The DuPont Compensation Subcommittee discussed at length with management the impact this full-quarter approach likely had on the overall payout factor and determined, based on a number of quantitative and qualitative criteria, including management’s estimate of the likely impact from the third quarter, to exercise negative discretion. The DuPont Compensation Subcommittee elected to make two downward adjustments, the first of which was to negate the unexpected benefits of purchase accounting associated with the Merger Transaction, and the second of which smoothed the upward impact of the full quarter approach.

Each element in the calculation of the 2017 payouts for those NEOs participating in the DuPont STIP is discussed in greater detail below.

STIP Target

DuPont’s STIP targets were set as a percentage of base salary, consistent with market practice. The target STIP percentage for each individual executive is reviewed regularly against the market and has historically been approved annually by the legacy DuPont Compensation Committee (or in the case of the CEO, by the independent members of the DuPont Board). As previously noted, in conjunction with the closing of the Merger Transaction, Mr. Breen’s STIP target as a percentage of base salary increased from 160% to 165%. Per DuPont company practice, the new base salary and STIP target percentage are utilized on a full year basis, rather than a prorated one, to calculate the STIP target for the fiscal year. The actual calculation of the 2017 STIP target amount for those NEOs participating in the plan is detailed in the table below.

 

Name

 

2017

Base Salary  ($)

   

2017

X Target STIP %

    

2017

= Target STIP ($)

 

 

Edward D. Breen

 

 

 

 

 

 

1,930,800   

 

 

 

 

 

 

 

 

 

   165%   

 

 

 

 

  

 

 

 

 

3,185,820   

 

 

 

 

 

James C. Collins

 

 

 

 

 

 

775,000   

 

 

 

 

 

 

 

 

 

100%   

 

 

 

 

  

 

 

 

 

775,000   

 

 

 

 

STIP Payout Factor

Corporate and business unit performances are converted to a corresponding payout factor based on the concept of “leverage,” i.e., the relationship between performance for a given metric and its payout factor. Leverage for each metric is 2:1 below target and 5:1 above target, meaning that participants have two percentage points in payout deducted for each one percent change in performance below target, and receive five percentage points in payout for each one percent change in performance above target. This leverage is consistent with competitive practice. All metrics are capped at a maximum 200% payout. The weighted average payout factor for the STIP is based on actual performance on each measure and the weighting of that performance measure.

The payout factors were equally aligned to corporate and business performance. Because Messrs. Breen and Collins worked across all businesses, their Business Unit payout factors were based on the total business performance compared to aggregate targets in the earnings and revenue measures.

 

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Table of Contents

COMPENSATION DISCUSSION & ANALYSIS (continued)

 

 

2017 STIP Results

The following tables highlight each of the performance measures, their weightings, targets, the actual results and payout results.

 

(1) Pre-Merger Performance1:

 

Metric

 

Target

($ in millions,

other than for EPS)

   

Actual

($ in millions,

other than for EPS)

   

% of

Target

    Weighting     

Actual
Weighted
Payout

Factor %

 

 

Corporate: Operating EPS*

 

 

 

 

 

 

2.58       

 

 

 

 

 

 

 

 

 

3.02       

 

 

 

 

 

 

 

 

 

117% 

 

 

 

 

 

 

 

 

 

50%  

 

 

 

 

  

 

 

 

 

93%  

 

 

 

 

 

Business Unit Operating Earnings*

 

 

 

 

 

 

3,544       

 

 

 

 

 

 

 

 

 

3,796       

 

 

 

 

 

 

 

 

 

107% 

 

 

 

 

 

 

 

 

 

25%  

 

 

 

 

  

 

 

 

 

34%  

 

 

 

 

 

Business Unit Revenue

 

 

 

 

 

 

14,599       

 

 

 

 

 

 

 

 

 

15,098       

 

 

 

 

 

 

 

 

 

   103% 

 

 

 

 

 

 

 

 

 

   25%  

 

 

 

 

  

 

 

 

 

29%  

 

 

 

 

 

TOTAL

 

                                  

 

 

 

 

   156%  

 

 

 

 

 

1 Pre-merger performance targets and actuals include results related to the DuPont Divested Ag Business.
* Operating EPS and business unit operating earnings are non-GAAP financial measures.

 

(2) Post-Merger Performance:

 

Metric

 

Target

($ in millions,

other than for EPS)

   

Actual

($ in millions,

other than for EPS)

   

% of

Target

    Weighting   

Actual
Weighted
Payout

Factor %

 

 

Corporate: Operating Net Income*

 

 

 

 

 

 

411       

 

 

 

 

 

 

 

 

 

472       

 

 

 

 

 

 

 

 

 

115% 

 

 

 

 

 

 

 

 

 

50%  

 

 

 

 

  

 

 

 

 

87%  

 

 

 

 

 

Business Unit Operating EBITDA*

 

 

 

 

 

 

1,037       

 

 

 

 

 

 

 

 

 

1,103       

 

 

 

 

 

 

 

 

 

106% 

 

 

 

 

 

 

 

 

 

25%  

 

 

 

 

  

 

 

 

 

33%  

 

 

 

 

 

Business Unit Revenue

 

 

 

 

 

 

5,125       

 

 

 

 

 

 

 

 

 

5,258       

 

 

 

 

 

 

 

 

 

   103% 

 

 

 

 

 

 

 

 

 

   25%  

 

 

 

 

  

 

 

 

 

28%  

 

 

 

 

 

TOTAL

 

                                  

 

 

 

 

   148%  

 

 

 

 

 

* Operating Net Income and Business Unit Operating EBITDA are non-GAAP financial measures.

A downward adjustment of 10% was made by the DuPont Compensation Subcommittee and applied to the post-merger factor to smooth the impact of the full-quarter measurement approach described above, yielding a final post-merger factor of 138%. When taken together with the pre-merger factor of 156% and weighted for the number of days applicable to each of the pre- and post-merger periods, the full year factor applicable to those NEOs participating in the plan is 150%.

(3) Individual Performance:

As previously noted, the Compensation Committee elected not to make any individual performance adjustments for those NEOs participating in the plan.

(4) Final STIP Payout

As illustrated in the table below, the final 2017 STIP payout for NEOs participating in the plan was determined by multiplying the individual STIP target amount by the final total payout factor of 150%:

 

Name

 

2017

Target STIP ($)

   

TOTAL

Payout

X Factor %

    

2017

= Final STIP ($)

 

 

Edward D. Breen

 

 

 

 

 

 

3,185,820  

 

 

 

 

 

 

 

 

 

150%  

 

 

 

 

  

 

 

 

 

4,778,730  

 

 

 

 

 

James C. Collins

 

 

 

 

 

 

775,000  

 

 

 

 

 

 

 

 

 

   150%  

 

 

 

 

  

 

 

 

 

1,162,500  

 

 

 

 

The 2017 STIP awards for legacy DuPont Section 16 officers were limited to 0.25% of adjusted net income of DuPont for the CEO and 0.15% for other legacy DuPont executive officers.

 

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COMPENSATION DISCUSSION & ANALYSIS (continued)

 

 

Long-Term Incentive Compensation

In 2017, Dow’s and DuPont’s respective LTI programs for NEOs consisted of multiple types of equity, all based on fair value on the grant date.

The following table summarizes the performance drivers, mix, and objectives for the long-term compensation as they relate to NEOs:

 

       Dow     DuPont

2017 LTI mix

 

•   45% PSUs based on Relative TSR

 

•   30% Stock Options

 

•   25% Deferred Stock

 

•   60% PSUs based on Relative TSR

 

•   40% Stock Options

 

Objectives

 

 

•   Focus on value creation for stockholders through TSR

 

•   Align executive interests with creation of long-term intrinsic value

 

Performance Share Units

Performance Share Units (“PSUs”) are a form of equity compensation whose value upon vesting is determined by attainment against specific performance goals. PSUs align executives to the Company’s financial and stock performance over a multi-year period. The following describes the pre-merger PSU programs at Dow and DuPont.

Dow – Pre-Merger Performance Shares

Prior to 2017, Dow Performance Shares were earned based on equal weighting of Operating Return on Capital (“Operating ROC”) and Relative TSR. Operating ROC was removed as a metric in the 2017 performance share program due to the potential timing of the Merger Transaction and the need to determine performance to date prior to the Merger Transaction. The rationale for utilizing these non-GAAP metrics was:

Operating Return on Capital: Measures how effectively a company has utilized the money invested in its operations. Dow defined Operating ROC as Net Operating Profit after Tax (excluding significant items) divided by total average capital (“Operating ROC”). Net Operating Profit after Tax (excluding significant items) is a net income measure that excludes preferred stock dividends, net income attributable to noncontrolling interests, and interest expense. To achieve a target payout on the Operating ROC portion, Dow’s Operating ROC must equal or exceed pre-established Operating ROC goals for the same period.

The target goal represents Dow’s expected level of Operating ROC over the three-year performance period. The threshold goal represents the minimum level of performance that would warrant any payout. The maximum goal represents stretch performance that would warrant a maximum payout. Dow’s Operating ROC target is 10% across the industry cycle and the target for this metric in the Performance Share ranges from 12% to 13% on current outstanding grants.

Relative Total Shareholder Return: Reflects how Dow has performed as measured by stock price appreciation relative to a benchmark index. For performance shares awarded in 2015-2017, Dow utilized the companies comprising the Standard & Poor’s 500 Composite Index (the “S&P 500”) as the benchmark to determine Relative TSR as defined below.

Total shareholder return is defined as stock price appreciation plus dividends paid. For Dow and each company in the S&P 500, a beginning price using a 30-trading day averaging period at the beginning of the performance period and an ending price using a 30-trading day averaging period at the end of the performance period are calculated and used to create a percentile ranking to develop a relative performance metric for purposes of compensation (“Relative TSR”).

DuPont – Pre-Merger PSUs

DuPont PSUs granted in 2015 were based on equal weighting of After-Tax Operating Earnings relative to target (“Operating Earnings”) and Relative TSR. Operating Earnings was removed as a metric in the 2016 and 2017 PSU programs due to the potential timing of the Merger Transaction and the need to determine performance to date prior to the Merger Transaction. The rationale for utilizing these non-GAAP metrics was:

Operating Earnings: is a profitability metric that measures Net Income less significant Items and Non-Operating Pension/OPEBs costs. DuPont’s Operating Earnings target was 6% annual growth over the prior year, calculated on an annual basis,

 

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for the three-year Performance Period. The base period for measurement was the fiscal year preceding the Performance Period (ending 12/31/2014) and measured annually through 12/31/2017. The resulting three-year payout factor is the average of the payout percentage earned each year. The threshold performance level for any payment to be achieved was 3%, and the maximum performance level was 10%. Threshold would have resulted In a 50% payout and maximum a 200% payout, with Interim points between threshold and target, and between target and maximum, interpolated on a straight-line basis.

Relative Total Shareholder Return: Reflects how DuPont performed as measured by stock price appreciation relative to its defined peer group, as disclosed in proxy statements from 2015, 2016 and 2017, respectively.

For DuPont and each company in its defined peer group, a beginning price using a 20-trading day averaging period at the beginning of the performance period and an ending price using a 20-trading day averaging period at the end of the performance period were calculated and used to create a percentile ranking to develop a Relative TSR ranking. Threshold Relative TSR performance would be achieved at the 25th percentile (with a payout at 25% of target), target at the median, and maximum performance at the 75th percentile (with a 200% payout). Interim points between threshold and target, and between target and maximum, would be interpolated on a straight-line basis.

Impact of Merger Transaction on Outstanding Performance Share Awards

As provided in the Merger Agreement, upon the closing of the Merger Transaction all outstanding performance shares/PSUs at both Dow and DuPont were automatically converted into deferred shares/RSUs. The number of deferred shares/RSUs into which outstanding performance shares/PSUs were converted was based on the greater of target or actual performance. Based on performance against targets, outstanding awards at Dow and DuPont, respectively, were converted as noted in the tables below. Final delivery of all converted awards will follow the original vesting periods.

 

Dow Performance Share Update

Using 2Q17 result for Operating ROC and 08/30/17 for TSR

Grant

  Metric   Min/Threshold
(35%)
  Target (100%)   Max (200%)   YTD Operating ROC TSR
Percentile
 

Payout Based on

Performance To-Date

2015 – 2017

 

 

50% Operating ROC

 

 

 

10.0%

 

 

 

12.2%

 

 

 

13.7%

 

 

 

            12.1%

 

 

 

          97%

 

 

 

50% Rel. TSR

 

 

 

26th Pctl

 

 

 

51st Pctl

 

 

 

76th Pctl

 

 

 

            83%

 

 

 

          200%

 

Weighted Total

   

 

          149%

 

2016 – 2018

 

 

50% Operating ROC

 

 

 

10.7%

 

 

 

13.0%

 

 

 

14.6%

 

 

 

            12.1%

 

 

 

          74%

 

 

 

50% Rel. TSR

 

 

 

26th Pctl

 

 

 

51st Pctl

 

 

 

76th Pctl

 

 

 

            67%

 

 

 

          166%

 

Weighted Total

   

 

          120%

 

2017 – 2019

 

 

100% Rel. TSR

 

 

 

26th Pctl

 

 

 

51st Pctl

 

 

 

76th Pctl

 

 

 

            60%

 

 

 

          137%

 

Weighted Total

     

 

          137%

 

 

DuPont PSU Update

Grant

  Metric   Min/Threshold
(50%/25%)
  Target (100%)   Max (200%)   OE metric/ TSR
Percentile
 

Payout Based on

Performance To-Date

2015 – 2017

 

 

50% Oper. Earnings

 

 

 

3%

 

 

 

6%

 

 

 

10%

 

 

 

     *

 

 

 

          100%

 

 

 

50% Rel. TSR

 

 

 

25th Pctl

 

 

 

50th Pctl

 

 

 

75th Pctl

 

 

 

     47th Pctl

 

 

 

          91%

 

Weighted Total

   

 

          96%

 

2016 – 2018

 

 

100% Rel. TSR

 

 

 

25th Pctl

 

 

 

50th Pctl

 

 

 

75th Pctl

 

 

 

     41st Pctl

 

 

 

          74%

 

Weighted Total

   

 

          74%

 

2017 – 2019

 

 

100% Rel. TSR

 

 

 

25th Pctl

 

 

 

50th Pctl

 

 

 

75th Pctl

 

 

 

     35th Pctl

 

 

 

          56%

 

Weighted Total

     

 

          56%

 

 

* The threshold, target and max percentages for the Operating Earnings metric were to be applied on an annual basis and the resulting payout percentages calculated. The payout percentages were then to be averaged for the three-year period to determine the earned award.

 

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DowDuPont – Post Merger Grant

In December 2017, a grant of PSUs was made to certain key executives in order to incentivize:

 

    The targeted cost synergies of $3 billion on a run-rate basis (the Company is performing above target and has committed to deliver a run-rate cost synergies of $3.3 billion)

 

    The timely realization of the Intended Business Separations

The parameters of these awards are outlined below:

 

          Business Performance and Payout Ranges1,3  

Metric

  Weighting    

Threshold ($)

(Synergy: 50% Payout

Spin: 25% Payout)

   

Target ($)

(100% Payout)

    

Maximum ($)

(200% Payout)

 

 

Synergy Capture

 

 

 

 

 

 

66

 

 

 

 

 

 

 

 

2.94 billion

 

 

 

 

 

 

 

 

 

3.0 billion

 

 

 

 

  

 

 

 

 

3.45 billion

 

 

 

 

 

Materials Science Spin2

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

22 months

 

 

 

 

 

 

 

 

 

19 months

 

 

 

 

  

 

 

 

 

16 months

 

 

 

 

 

Agriculture/Specialty Products Spin2

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

24 months

 

 

 

 

 

 

 

 

 

21 months

 

 

 

 

  

 

 

 

 

18 months

 

 

 

 

 

1 Payouts will be interpolated on a linear basis for performance between, respectively, Threshold and Target performance and Target and Maximum performance, respectively.
2 Spin refers to the Intended Business Separation into independent, publicly traded companies.
3 All dates measured from the Merger Transaction closing.

Given that DowDuPont intends to separate into three separate entities in the near-term, the Compensation Committee developed this post-merger grant to further incentivize key executives to meet these Merger Transaction-related objectives. However, regardless of when completion of the specified performance measures occurs, no payouts will be made until, at the earliest, twenty-four months after the close of the Merger Transaction, in order to ensure continued alignment with the strategic objectives.

The table below details the awards granted to NEOs in 2017:

 

Named Executive Officer

  

Performance Share

Target Grant Value ($)

 

 

Edward D. Breen

 

  

 

 

 

 

10,000,000

 

 

 

 

 

Howard I. Ungerleider

 

  

 

 

 

 

3,000,000

 

 

 

 

 

James R. Fitterling

 

  

 

 

 

 

3,000,000

 

 

 

 

 

James C. Collins

 

  

 

 

 

 

3,000,000

 

 

 

 

Benefits and Perquisites

Benefits

Dow and DuPont each provide benefits (including retirement benefits) to eligible employees, including the eligible NEOs, through a combination of qualified and non-qualified plans. These plans remain in place in 2018 with eligible NEOs continuing to participate in the plans of their respective legacy entity. For details on each of the following retirement plans, see “Benefits” in the “Compensation Tables and Narratives” section on page 58 of the Proxy Statement.

 

    Defined-Benefit Retirement Plans (if applicable)

 

    Supplemental Retirement Plans

 

    401(k) Plans

 

    Supplemental Savings Plans

 

    Other Retirement Benefits

 

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Perquisites

Dow and DuPont have historically offered perquisites that each of the respective legacy Compensation Committees believe are reasonable yet competitive in attracting and retaining the executive team.

The legacy Compensation Committees have regularly reviewed the perquisites provided to the respective NEOs as part of their overall review of executive compensation. We have provided additional information on perquisites in footnote (d) to the All Other Compensation column of the Summary Compensation Table on page 52 of this Proxy Statement. The following outlines the limited perquisites provided to executives:

 

    Financial and Tax Planning Support (Tax Planning for legacy Dow executives only)

 

    Executive Physical Examination (legacy Dow executives only)

 

    Executive Excess Umbrella Liability Insurance (legacy Dow executives only)

 

    Home Security Alarm System (legacy Dow executives only)

 

    In addition, the Executive Chairman and CEO each are provided the use of a company car and are required by the Board of Directors for security and immediate availability reasons to use corporate aircraft for business and personal travel

THE COMPENSATION PROCESS

The Compensation Committee, with the support of independent compensation consultants and Company management, develops and executes the executive compensation program. The Compensation Committee is responsible for recommending for approval by the independent Directors the compensation of the CEO and Executive Chairman, and for approving the compensation of all other NEOs and executive officers. The Compensation Committee annually reviews and evaluates the executive compensation program to ensure that the program is aligned with the Company’s compensation philosophy and with performance.

The Compensation Committee reviews the following factors to determine executive compensation:

 

    Competitive analysis: Median levels of compensation for similar jobs and job levels in the market, taking into account revenue relative to the peer group

 

    Company performance: Measured against financial metrics and operational targets approved by the Compensation Committee

 

    Market landscape: Business climate, economic conditions and other factors

 

    Individual roles: Each executive’s experience, knowledge, skills and personal contributions

Role of Company Management

The CEO and Executive Chairman make recommendations to the Compensation Committee regarding compensation for senior executives after reviewing the Company’s overall performance, each executive’s personal contributions and relevant compensation market data from the peer group for similar jobs and job levels.

Role of the Compensation Committee

The Compensation Committee is responsible for establishing DowDuPont’s executive compensation philosophy. The Compensation Committee is responsible for approving NEO compensation and has broad discretion when setting compensation types and amounts. As part of the review, Company management and the Compensation Committee also review summary total compensation scenarios for the NEOs. Additionally, the Compensation Committee annually reviews the corporate goals and objectives relevant to the compensation of the CEO and the Executive Chairman. The Compensation Committee evaluates the Executive Chairman’s and the CEO’s performance against their respective objectives and makes recommendations to the independent Directors regarding each of their compensation levels based on that evaluation. The Compensation Committee considers compensation market data from the peer group when setting compensation types and amounts for the CEO and the Executive Chairman.

 

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Role of Independent Board Members

The independent members of the Board of Directors are responsible for assessing the performance of the CEO and the Executive Chairman. They are also responsible for approving the compensation types and amounts for the CEO and the Executive Chairman.

Role of the Independent Compensation Consultants

The Compensation Committee has retained both Mercer and Frederic W. Cook & Co., Inc. (“FW Cook”) as independent compensation consultants on executive compensation matters including the legacy programs maintained by each of Dow and DuPont. Both consultants report directly to the Compensation Committee and provide no services to DowDuPont other than those for the Compensation Committee. Until the effective date of the Merger Transaction, Mercer was retained by Dow and FW Cook was retained by DuPont. Post-merger as it relates to the legacy executive compensation matters and programs, Mercer is aligned to the Dow Compensation Subcommittee; FW Cook is aligned to the DuPont Compensation Subcommittee.

Mercer’s and FW Cook’s responsibilities include:

 

    Advising the Compensation Committee on trends and issues in executive compensation

 

    Reviewing and advising the group of companies in the peer group

 

    Consulting on the competitiveness of the compensation structure and levels of DowDuPont’s executive officers and non-employee directors

 

    Providing advice and recommendations related to the compensation and design of DowDuPont’s compensation programs

 

    Reviewing and advising on all materials provided to the Compensation Committee for discussion and approval

 

    Participating in Compensation Committee meetings as requested and communicating with the Co-Chairs of the Compensation Committee between meetings

Mercer and FW Cook have multiple safeguards and procedures in place to maintain the independence of the consultants in their executive compensation consulting practice, and the Compensation Committee has determined that the compensation consultants’ work has not raised any conflicts of interest. These safeguards include a rigidly enforced code of conduct, a policy against investing in client organizations and separation between Mercer and FW Cook’s executive compensation consulting and their other administrative and consulting business units from a leadership, performance measurement and compensation perspective. In 2017, Mercer and its affiliates provided approximately $2.2 million in human resources consulting services to DowDuPont unrelated to the executive and director compensation consulting services. The decision to engage Mercer to provide these other services was made by management and was reported to the Compensation Committee. In 2017, Mercer’s aggregate fees for executive and director compensation consulting services were approximately $394,700. The Compensation Committee has considered factors relevant to Mercer’s and FW Cook’s independence from management under SEC rules and has determined that both are independent from management.

Peer Group and Benchmarking

DowDuPont – Post-Merger Peer Group

Prior to the Merger Transaction, Dow and DuPont maintained separate executive compensation peer groups and utilized similar selection criteria to develop their respective peer groups:

 

    Revenues

 

    Market capitalization

 

    Global presence

 

    Research intensity or innovation and/or technology

 

    Competitor for talent

 

    Industries and markets served

The Compensation Committee, with the support of the management team and independent compensation consultants, reviewed the two legacy groups and eliminated companies with revenues less than one-third or more than three times that of DowDuPont.

Then the Compensation Committee selected the sixteen companies named below from Dow’s and DuPont’s collective peer groups that meet the designated revenue range. A total of nine companies with revenue below $25 billion were excluded.

 

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The selected peer group was used for market comparisons, benchmarking and setting executive compensation:

 

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2017 Revenues