DEF 14A 1 d323730ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

 

☐  Preliminary Proxy Statement

 

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

 

☒  Definitive Proxy Statement

 

☐  Definitive Additional Materials

 

☐  Soliciting Material Pursuant to §240.14a-12

 

 

ALCOA CORPORATION

 

(Name of Registrant as Specified In Its Charter)

 

 

 

  

 

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

 

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Table of Contents

LOGO

Alcoa
The Element of PossibilityTM
NOTICE OF 2017 ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT


Table of Contents

 

LOGO

March 17, 2017

Dear Alcoa Stockholders:

We are pleased to invite you to attend the 2017 Annual Meeting of Stockholders of Alcoa Corporation (“Alcoa” or the “Company”) to be held on Wednesday, May 10, 2017, at 10:00 a.m., Eastern Daylight Time, at the David L. Lawrence Convention Center, Room 405, 1000 Fort Duquesne Boulevard, Pittsburgh, Pennsylvania, 15222.

This will be our first annual meeting as a public company. Alcoa Corporation launched as an independent enterprise on November 1, 2016 upon its separation from Alcoa Inc. (now called Arconic Inc.), but we brought with us nearly 130 years of history, innovation, and operational excellence in the aluminum industry. This strong foundation positioned us well for a successful start as a public company, and we embraced the challenge, ending 2016 with net performance improvements, a more streamlined asset portfolio, and an increased cash position.

At the annual meeting, stockholders will vote on the matters set forth in the 2017 Proxy Statement and the accompanying notice of the annual meeting. The 2017 Proxy Statement describes our governance structure, which features several governance best practices, and our executive compensation program, which “pays for performance.” We believe that both our governance structure and compensation program reinforce our alignment with stockholder interests. Highlights of the detailed information included in this Proxy Statement can be found in the “Proxy Statement Summary” starting on page 4.

Alcoa’s strategic priorities are to reduce complexity in all aspects of our business, drive returns for our stockholders, and strengthen our balance sheet. These priorities highlight our commitment to continued improved Company performance, and transparency for and accountability to our stockholders and stakeholders.

Your vote is important to us. Whether or not you will attend the meeting, we hope that your shares are represented and voted. In advance of the meeting on May 10, please cast your vote through the Internet, by telephone, or by mail. Instructions on how to vote are found in the section entitled “Proxy Statement Summary—How to Cast Your Vote” on page 4.

Thank you for being a stockholder of Alcoa. We are excited to begin this Company’s journey with you.

We look forward to seeing you at the meeting.

Sincerely,

 

LOGO

 

  

LOGO

 

 

     

Michael G. Morris

Chairman

  

Roy C. Harvey

Chief Executive Officer and Director

  


Table of Contents

Table of Contents

 

Notice of 2017 Annual Meeting of Stockholders

    1  

Proxy Statement

    2  

Proxy Statement Summary

    4  

Item 1 Election of Directors

    9  

Majority Voting for Directors

    9  

Director Nominees

    9  

Director Qualifications, Skills, and Attributes

    9  

Nominating Board Candidates – Procedures and Director Qualifications

    18  

Stockholder Recommendations for Director Nominees

    18  

Advance Notice Director Nominations

    18  

Proxy Access Director Nominations

    18  

Minimum Qualifications for Director Nominees and Board Member Attributes

    18  

Process of Evaluation of Director Candidates

    19  

Non-Employee Director Compensation Program

    20  

Director Fees

    20  

2016 Director Compensation

    21  

Stock Ownership Guideline for Non-Employee Directors

    21  

Prohibitions against Short Sales, Hedging, Margin Accounts and Pledging

    22  

Corporate Governance

    23  

Corporate Governance Highlights

    23  

Corporate Governance Guidelines

    24  

Business Conduct Policies and Code of Ethics

    25  

Board Information

    25  

Director Independence

    25  

Board Leadership Structure

    25  

Board Meetings and Attendance

    25  

Board, Committee and Director Evaluations

    26  

Committees of the Board

    26  

The Board’s Role in Risk Oversight

    28  

Communications with Directors

    28  

Related Person Transactions

    29  

Compensation Matters

    30  

Compensation Committee Interlocks and Insider Participation

    30  

Compensation Consultants

    30  

Recovery of Incentive Compensation

    30  

Beneficial Ownership

    32  

Section 16(a) Beneficial Ownership Reporting Compliance

    32  

Stock Ownership of Certain Beneficial Owners

    32  

Stock Ownership of Directors and Executive Officers

    33  

 

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Item 2 Ratification of Appointment of Independent  Registered Public Accounting Firm

    34  

Report of the Audit Committee

    35  

Audit Committee Pre-Approval Policy

    36  

Audit and Non-Audit Fees

    36  

Item 3 Advisory Approval of Executive Compensation

    37  

Item  4 Advisory Approval on the Frequency of the Advisory Vote to Approve Executive Compensation

    38  

Executive Compensation

    39  

Compensation Discussion and Analysis

    40  

Compensation Committee Report

    55  

Summary Compensation Table

    56  

2016 Grants of Plan-Based Awards

    59  

2016 Outstanding Equity Awards at Fiscal Year-End

    61  

2016 Option Exercises and Stock Vested

    62  

2016 Pension Benefits

    62  

2016 Nonqualified Deferred Compensation

    63  

Potential Payments upon Termination or Change in Control

    64  

Item  5 Approval of the Alcoa Corporation Annual Cash Incentive Compensation Plan (as Amended and Restated)

    70  

Item 6 Approval of the Alcoa Corporation 2016 Stock Incentive Plan (as Amended and Restated)

    75  

Equity Compensation Plan Information

    85  

Questions and Answers About the Meeting and Voting

    86  

Attachments

    A-1  

ATTACHMENT A — Peer Group Companies for Market Information for 2016 Executive Compensation Decisions

    A-1  

ATTACHMENT B — Calculation of Financial Measures

    B-1  

ATTACHMENT C — Alcoa Corporation Annual Cash Incentive Compensation Plan (as Amended and Restated)

    C-1  

ATTACHMENT D — Alcoa Corporation Annual 2016 Stock Incentive Plan (as Amended and Restated)

    D-1  

 

  ii  


Table of Contents

LOGO

 

 

 

Notice of 2017 Annual Meeting of Stockholders

 

 

Wednesday, May 10, 2017

10:00 a.m. Eastern Daylight Time

    

David L. Lawrence Convention Center

Room 405, 1000 Fort Duquesne Boulevard, Pittsburgh, Pennsylvania, 15222

 

 

The Annual Meeting of Stockholders of Alcoa Corporation (“Alcoa” or the “Company”) will be held on Wednesday, May 10, 2017 at 10:00 a.m., local time, at the David L. Lawrence Convention Center, Room 405, 1000 Fort Duquesne Boulevard, Pittsburgh, Pennsylvania, 15222. Stockholders of record of Alcoa common stock at the close of business on March 13, 2017 are entitled to vote at the meeting.

The agenda for the annual meeting is:

1. to elect the 12 directors identified in the accompanying Proxy Statement to serve one-year terms expiring at the 2018 annual meeting of stockholders;
2. to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2017;
3. to approve, on an advisory basis, executive compensation;
4. to approve, on an advisory basis, the frequency of the executive compensation advisory vote;
5. to approve the Alcoa Corporation Annual Cash Incentive Compensation Plan, as Amended and Restated;
6. to approve the Alcoa Corporation 2016 Stock Incentive Plan, as Amended and Restated; and
7. to transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Only holders of Alcoa common stock or their authorized representatives by proxy may attend the annual meeting. You will need an admission ticket if you plan to attend the annual meeting. Please see the questions and answers section of the Proxy Statement for instructions on how to obtain an admission ticket. All attendees will need to present valid photo identification for admission to the meeting.

We will provide a live webcast of the annual meeting at our website, www.alcoa.com under “Investors—Events and Presentations.”

For information about Alcoa, please visit our website at www.alcoa.com.

On behalf of Alcoa’s Board of Directors,

 

LOGO

Jeffrey D. Heeter

Executive Vice President, General Counsel and Secretary

March 17, 2017

 

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LOGO

390 Park Avenue

New York, NY 10022-4608

 

 

 Proxy Statement

 

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF

PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 10, 2017

 

The Company’s Notice of 2017 Annual Meeting of Stockholders and Proxy Statement and 2016 Annual Report are available at www.ReadMaterial.com/AA.

 

The Board of Directors (the “Board”) of Alcoa is providing this Proxy Statement in connection with Alcoa’s 2017 Annual Meeting of Stockholders to be held on Wednesday, May 10, 2017, at 10:00 a.m., local time, at the David L. Lawrence Convention Center, Room 405, 1000 Fort Duquesne Boulevard, Pittsburgh, Pennsylvania, 15222, and at any adjournment or postponement thereof.

Proxy materials or a Notice of Internet Availability of Proxy Materials (the “Notice”) are being first released or mailed to stockholders on or about March 17, 2017. In accordance with rules and regulations adopted by the Securities and Exchange Commission (the “SEC”), instead of mailing a printed copy of the Company’s proxy materials to each stockholder of record, the Company may furnish proxy materials by providing access to those documents on the Internet. The Notice contains instructions on how to access our proxy materials and vote online, or in the alternative, request a paper copy of the proxy materials and a proxy card.

 

LOGO   2  


Table of Contents
2017 PROXY STATEMENT   

 

Proxy Statement (continued)

 

 

 

Cautionary Statement regarding Forward-Looking Statements

Certain statements in this proxy statement are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those containing such words as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “intends,” “may,” “outlook,” “plans,” “projects,” “seeks,” “sees,” “should,” “targets,” “will,” or other words of similar meaning. All statements that reflect Alcoa’s expectations, assumptions, or projections about the future other than statements of historical fact are forward-looking statements, including, without limitation, statements regarding forecasts concerning global demand growth for aluminum, end market conditions, supply/demand balances, and growth opportunities for our products; targeted financial results or operating performance; and statements about Alcoa’s strategies, outlook, and business and financial prospects. These statements reflect beliefs and assumptions that are based on Alcoa’s perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. Forward-looking statements are subject to a number of known and unknown risks, uncertainties, and other factors and are not guarantees of future performance. The most significant factors known to us that could materially adversely affect our business, reputation, operations, industry, financial position, or future financial performance are described in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 15, 2017, in Part I, Item 1A, “Risk Factors.” Actual results could differ materially from those anticipated in the forward-looking statements. The risks and uncertainties described in our Annual Report on Form 10-K are not exclusive and further information concerning our Company and our businesses, including factors that potentially could materially affect our operating results or financial condition, may emerge from time to time. Alcoa Corporation disclaims any obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law. Market projections are subject to the risks discussed above and other risks in the market.

Incorporation by Reference

Neither the Compensation Committee Report nor the Audit Committee Report shall be deemed soliciting material or filed with the SEC and neither of them shall be deemed incorporated by reference into any prior or future filings made by us under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate such information by reference. In addition, this document includes several website addresses. These website addresses are intended to provide inactive, textual references only. The information on these websites is not part of this document.

 

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2017 PROXY STATEMENT   

 

Proxy Statement Summary

 

LOGO

 


Below are highlights of certain information in this Proxy Statement. As it is only a summary, it may not contain all of the information that is important to you. For more complete information, please refer to the complete Proxy Statement and Alcoa’s 2016 Annual Report before you vote. References to “Alcoa,” “we,” “us” or “our” refer to Alcoa Corporation.

2017 ANNUAL MEETING OF STOCKHOLDERS

 

  Time and Date:

10:00 a.m., Eastern Daylight Time, May 10, 2017

 

  Place:

David L. Lawrence Convention Center, Room 405, 1000 Fort Duquesne Boulevard, Pittsburgh, Pennsylvania, 15222

 

  Record Date:

March 13, 2017

 

  Webcast:

We will provide a live webcast of the annual meeting at our website, www.alcoa.com under “Investors—Events and Presentations.”

 

  Voting:

Stockholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the other proposals to be voted on.

 

  Admission:

An admission ticket is required to enter Alcoa’s annual meeting. See Question 6 in the “Questions and Answers About the Meeting and Voting” section for how to obtain a ticket.

How to Cast Your Vote

Your vote is important! Please cast your vote and play a part in the future of Alcoa.

Stockholders of record, who hold shares registered in their names, can vote by:

 

 

LOGO

   LOGO    LOGO

Internet at

www.cesvote.com

  

calling 1-888-693-8683

toll-free from the

U.S. or Canada

  

mail

return the signed

proxy card

The deadline for voting online or by telephone is 6:00 a.m. EDT on May 10, 2017. If you vote by mail, your proxy card must be received before the annual meeting. If you hold shares in an Alcoa savings plan, your voting instructions must be received by 6:00 a.m. EDT on May 8, 2017.

Beneficial owners, who own shares through a bank, brokerage firm or similar organization, can vote by returning the voting instruction form, or by following the instructions for voting via telephone or the Internet, as provided by the bank, broker or other organization. If you own shares in different accounts or in more than one name, you may receive different voting instructions for each type of ownership. Please vote all of your shares.

If you are a stockholder of record or a beneficial owner who has a legal proxy to vote the shares, you may choose to vote in person at the annual meeting. Even if you plan to attend our annual meeting in person, please cast your vote as soon as possible.

See the “Questions and Answers About the Meeting and Voting” section for more details.

 

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Table of Contents
2017 PROXY STATEMENT   

 

Proxy Summary (continued)

 

 

 

About Alcoa and the Separation

On November 1, 2016, Alcoa Corporation, a Delaware corporation, launched as an independent, publicly traded company upon its separation (the “Separation”) from Alcoa Inc. (also known as “Arconic,” “ParentCo”, or “former parent company”). To effect the Separation, ParentCo distributed 80.1% of Alcoa Corporation’s issued and outstanding shares of common stock on the basis of one share of Alcoa Corporation common stock for every three shares of ParentCo common stock held by ParentCo stockholders as of the close of business on October 20, 2016, the record date for the distribution. Please see our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (the “2016 Annual Report”) for additional information.

Voting Matters and Board Recommendations

 

  Voting Matters  

Board’s

    Recommendation    

 

Page Reference

    (for more detail)    

  Item 1.

   Election of 12 Director Nominees to Serve for a One-Year Term Expiring in 2018    FOR Each

    Nominee

  9

  Item 2.

   Ratification of Appointment of PricewaterhouseCoopers LLP as the Company’s Independent Registered Public Accounting Firm for 2017    FOR   34

  Item 3.

   Advisory Vote to Approve Executive Compensation    FOR   37

  Item 4.

   Advisory Vote on the Frequency of the Executive Compensation Advisory Vote    FOR EVERY

    ONE YEAR

  38

  Item 5.

   Approval of the Annual Cash Incentive Compensation Plan, as Amended and Restated    FOR   70

  Item 6.

   Approval of the 2016 Stock Incentive Plan, as Amended and Restated    FOR   75

 

 

 

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Table of Contents
2017 PROXY STATEMENT   

 

Proxy Summary (continued)

 

 

 


 

Director Nominees (page 9)

Alcoa’s Board is comprised of 12 members, each of whom was appointed to the Board in connection with the Separation. Under our Bylaws, directors are elected for one-year terms. The following table provides summary information about each director nominee standing for election to the Board for a one-year term expiring in 2018.

 

  Name    Age         Professional Background     Independent        Committee
Memberships
 

Other Current

Public

Company Boards

Michael G. Morris (Chairman)

  70       Retired Chairman and Chief Executive Officer of American Electric Power Company, Inc.   Yes       Executive (Chair)   L Brands, Inc., The Hartford Financial Services Group, Inc., Spectra Energy Corp.

Mary Anne Citrino

  57       Senior Advisor, The Blackstone Group L.P.   Yes       Governance and Nominating; Public Issues   HP Inc., Dollar Tree Inc., Ahold Delhaize

Timothy P. Flynn

  60       Retired Chairman of KPMG International   Yes       Audit; Public Issues   JPMorgan Chase & Co., Walmart Stores, Inc., United Health Group

Kathryn S. Fuller

  70       Vice Chair, Smithsonian National Museum of Natural History; Chair, Institute at Brown for Environment & Society   Yes       Compensation and Benefits; Governance and Nominating (Chair); Executive  

Roy C. Harvey

  43       Chief Executive Officer, Alcoa Corporation   No       Executive  

James A. Hughes

  54       Retired Chief Executive Officer of First Solar, Inc.   Yes       Audit; Public Issues   TPI Composites Inc.

James E. Nevels

  65       Founder and Chairman, The Swarthmore Group   Yes       Compensation and Benefits; Governance and Nominating; Executive   First Data Corporation, WestRock Company (Lead Independent Director), The Hershey Company (Lead Independent Director)

James W. Owens

  71       Retired, Chairman, and Chief Executive Officer of Caterpillar Inc.   Yes       Compensation and Benefits (Chair); Governance and Nominating   International Business Machines Corporation; Morgan Stanley

Carol L. Roberts

  57       Senior Vice President and Chief Financial Officer, International Paper Company   Yes       Audit (Chair); Compensation and Benefits; Executive   VF Corporation

Suzanne Sitherwood 

  52       President and Chief Executive Officer of Spire Inc.   Yes       Audit; Public Issues   Spire Inc.

Steven W. Williams

  61       President and Chief Executive Officer of Suncor Energy Inc.   Yes       Compensation and Benefits; Governance and Nominating; Executive   Suncor Energy Inc.

Ernest Zedillo

  65       Frederick Iseman ’74 Director of the Yale Center for the Study of Globalization and Professor, Yale University   Yes       Audit; Public Issues (Chair)  

Citigroup Inc.; Promotora de Informaciones, S.A.; The Procter & Gamble Company

 

 

 

 

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2017 PROXY STATEMENT   

 

Proxy Summary (continued)

 

 

 


 

Corporate Governance Highlights (Page 23)

The Company is committed to good corporate governance practices, which we believe recognize stockholder interests and support the success of our business. Our corporate governance practices, highlighted below, are described in greater detail in the “Corporate Governance” section.

 

    Independent Board Chairman  

 

    11 of 12 Board members are independent (all directors other than the CEO)  

 

    Diversity in Board composition  

 

    Limits on other public company board service  

 

    Regular executive sessions of independent directors  

 

    Director attendance at Alcoa Board and Committee meetings was 100% in 2016  

 

    Independent Audit, Compensation and Benefits, Governance and Nominating, and Public Issues Committees  

 

    Majority voting policy for directors  

 

    Risk oversight by full Board and Committees  

 

    Stockholders’ ability to nominate directors through proxy access  

 

    Stockholder right to call special meetings  

 

    Stockholders’ ability to take action by written consent  

 

    Commitment to sustainable business practices  

 

    Director and officer stock ownership guidelines  

 

    Policies prohibiting short sales, hedging, margin accounts and pledging  

 

 

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2017 PROXY STATEMENT   

 

Proxy Summary (continued)

 

 

 

Executive Compensation Highlights (Page 39)

After the Separation, Alcoa became a separate public company. Prior to the Separation, in 2016, the compensation decisions relating to our named executive officers were made by the Compensation and Benefits Committee of the ParentCo board of directors and guided by an executive compensation philosophy that was based on three guiding principles to drive pay-for-performance and stockholder alignment:

 

    Target salary compensation at median, while using annual incentive compensation and long-term incentive to reward exceptional performance and to attract and retain exceptional talent.  
    Equity is the most significant portion of total compensation for senior executives and managers and we increase the portion of performance-based equity commensurate with the level of responsibility.  
    Annual incentive and long-term incentive metrics focus management’s actions on achieving the greatest positive impact on financial performance.  

Alcoa’s executive compensation programs, policies, and practices are similar to those of ParentCo, with certain modifications that the Compensation and Benefits Committee of the Board believe to be relevant to Alcoa’s business following the Separation. The Compensation Discussion and Analysis section of this Proxy Statement provides a focused discussion of Alcoa’s executive compensation philosophy and the pay programs applicable to our named executive officers in 2016.

 

 

 WHAT WE DO

      

 

WHAT WE DON’T DO

    We pay for performance  

 

    We consider peer groups in establishing compensation  

 

    We review tally sheets  

 

    We have robust stock ownership guidelines  

 

    We schedule and price stock option grants to promote transparency and consistency  

 

    We have clawback policies incorporated into our incentive plans  

 

    We have double-trigger equity vesting in the event of a change-in-control where awards are assumed  

 

    We pay reasonable salaries to our senior executives  

 

    We provide appropriate benefits to our senior executives  

 

    We have a conservative compensation risk profile  

 

    We consider tax deductibility when designing and administering our incentive compensation  

 

    The Compensation and Benefits Committee retains an independent compensation consultant.  
  û   We do not pay dividend equivalents on stock options and unvested restricted share units  

 

  û   We do not allow share recycling  

 

  û   We do not allow repricing of underwater stock options (including cash-outs)  

 

  û   We do not allow hedging or pledging of Company stock  

 

  û   We do not have excise tax gross-ups in our Change in Control Severance Plan  

 

  û   We do not enter into multi-year employment contracts  

 

  û   We do not provide significant perquisites  
 

 

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2017 PROXY STATEMENT   

 

Item 1 Election of Directors

 

LOGO

 

Alcoa’s Board, upon the recommendation of the Governance and Nominating Committee, has nominated 12 directors for election at this year’s annual meeting to hold office until the next annual meeting in 2018. Directors are to be elected on an annual basis for one-year terms.

All of the nominees currently are directors and were appointed to the Board in connection with the Separation. Mses. Fuller and Roberts and Messrs. Morris, Owens and Zedillo each served as directors of ParentCo until the Separation.

We expect that each director nominee will be able to serve, if elected. If any director nominee is not able to serve, proxies may be voted for substitute nominees, unless the Board chooses to reduce the number of directors serving on the Board.

Majority Voting for Directors

Alcoa’s Bylaws provide a majority voting standard for election of directors in uncontested elections. Each director will be elected by the affirmative vote of a majority of the votes cast, meaning that the number of votes cast “FOR” a director nominee exceeds fifty percent (50%) of the number of votes cast with respect to that director’s election.

If an incumbent director nominee is not elected in an uncontested election and no successor has been elected at such meeting, the director must promptly tender his or her resignation to the Board. The Governance and Nominating Committee (excluding the nominee, if applicable) then will make a recommendation to the Board as to whether to accept or reject the resignation, or whether other action should be taken. The Board, excluding the nominee, will act on the resignation and publicly disclose its decision in accordance with the Bylaws.

An election of directors is considered to be contested if there are more nominees for election than positions on the Board to be filled by election at the meeting of stockholders. In a contested election, the required vote would be a plurality of votes cast.

Director Nominees

The Board has affirmatively determined that each of the nominees qualifies for election under the Company’s criteria for evaluation of directors (see “Minimum Qualifications for Director Nominees and Board Member Attributes” on page 18). Following is biographical information about the director nominees and their specific experience, skills and qualifications that have led the Board and the Governance and Nominating Committee to conclude that they should continue to serve as directors of Alcoa. In addition, the Board has determined that each non-employee director nominee qualifies as an independent director under New York Stock Exchange (“NYSE”) corporate governance listing standards and the Company’s Director Independence Standards. See “Director Independence” on page 25.

Director Qualifications, Skills, and Attributes

Our directors have a diversity of experience that spans a broad range of industries and in the public and not-for-profit sectors. They bring to our Board a wide variety of skills, qualifications and viewpoints that strengthen the Board’s ability to carry out its oversight role on behalf of our stockholders. In the director biographies below, we describe certain areas of individual expertise that each director brings to our Board.

 

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2017 PROXY STATEMENT   

 

Item 1 Election of Directors (continued)

LOGO

 

The table below is a summary of the range of skills and experiences that each director brings to the Board. Because it is a summary, it does not include all of the skills, experiences, qualifications, and diversity that each director offers, and the fact that a particular experience, skill, or qualification is not listed does not mean that a director does not possess it. In addition, as described in the Company’s Corporate Governance Guidelines, all directors should be financially literate.

 

 

LOGO

 

* As determined by the Alcoa Board with respect to current Audit Committee members. Other directors may have similar qualifications.

Our directors have a broad range of experience that spans different industries, encompassing the business, philanthropic, academic and governmental sectors. Directors bring to our Board a variety of skills, qualifications and viewpoints that both strengthen their ability to carry out their oversight role on behalf of our stockholders and bring richness to Board deliberations. As described above and in the director biographies, our directors possess qualities that, in additional to leadership, include experience in international relations, finance, economics, engineering, and governmental matters, as well as relevant industry knowledge.

Our policy on Board diversity relates to the selection of nominees for the Board. Our policy provides that while diversity and variety of experiences and viewpoints represented on the Board should always be considered, a director nominee should not be chosen nor excluded solely or largely because of race, color, gender, national origin or sexual orientation or identity. In selecting a director nominee, the Governance and Nominating Committee focuses on skills, expertise and background that would complement the existing Board, recognizing that the Company’s businesses and operations are diverse and global in nature. For example, our directors are citizens of the United States, Mexico, Canada and the United Kingdom and we have four women directors as of the date of this Proxy Statement.

 

The Board of Directors recommends a vote “FOR” ITEM 1, to elect each of the following director nominees.

 

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Attributes, Experience and Skills Michael G. Morris Mary Anne Citrino Timothy P. Flynn Kathryn S. Fuller Roy C. Harvey James A. Hughes James E. Nevels James W. Owens Carol L. Roberts Suzanne Sitherwood Steven W. Williams Ernesto Zedillo
Gender (1/3 of the Board is female) M F M F M M M M F F M M Leadership Experience (Chairman, CEO, President, Senior Managing Director and/or CFO) International Experience Financial Literacy Audit Committee Financial Expertise* Government Relations Experience Relevant Industry Experience Risk Management Expertise Environmental and Sustainability Experience


Table of Contents
2017 PROXY STATEMENT   

 

Item 1 Election of Directors (continued)

 

 

 

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Michael G. Morris (Chairman)

 

Director since: 2016

 

Age: 70

 

Committees: Executive Committee (Chair)

 

Other Current Public Directorships:

L Brands, Inc.; The Hartford Financial Services Group, Inc.; Spectra Energy Corp.

 

Career Highlights and Qualifications: Mr. Morris was Chairman of American Electric Power Company, Inc. (AEP), one of the nation’s largest utility generators and owner of the largest electricity transmission system in the United States, from 2004 through 2013. He served as Chief Executive Officer of AEP and all of its major subsidiaries from 2004 until his retirement in November 2011 and as President from 2004 to 2011. From 1997 to 2003, Mr. Morris was Chairman, President and Chief Executive Officer of Northeast Utilities. Prior to that, he held positions of increasing responsibility in energy and natural gas businesses.

Other Current Affiliations: In addition to his public company board memberships, Mr. Morris serves as Chairman of the Eastern Michigan University Board of Regents as well as Chair of the Finance Committee of the Michigan State University Law College. He is also Chair of the Columbus Downtown Development Corporation, a non-profit organization dedicated to the development of facilities in the city. Lastly, Mr. Morris serves on the board of Battelle Institute, which oversees many of the U.S. national labs.

Previous Directorships: Mr. Morris was a director of Alcoa Inc. from 2008 to 2016 and was Chairman of AEP from 2004 through 2013.

Attributes and Skills: Mr. Morris has proven business acumen, having served as the Chief Executive Officer of significant, complex organizations. Mr. Morris’ experience in the energy field is a valuable resource to the Company, which has significant energy assets. In addition, Mr. Morris is a leader in developing the carbon sequestration process, a technology that could be used in reducing greenhouse gas emissions.

 

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Mary Anne Citrino

 

Director since: 2016

 

Age: 57

 

Committees: Governance and Nominating Committee; Public Issues Committee

 

Other Current Public Directorships:

HP Inc., Dollar Tree Inc., Ahold Delhaize

 

Career Highlights and Qualifications: Ms. Citrino has served as Senior Advisor of The Blackstone Group L.P., a multinational private equity, alternative asset management and financial services corporation, since 2015, and as Senior Managing Director of Blackstone Advisory Partners L.P. from 2004 until 2015. At Blackstone, she advised a broad range of clients in the consumer products industry including Procter & Gamble, Kraft Foods and Nestlé. Before joining Blackstone, she spent more than 20 years advising clients at Morgan Stanley. From 1986 until 2004, she served as a Managing Director at Morgan Stanley, holding positions as Global Head of Consumer Products Investment Banking Group and Co-Head of Health Care Services Investment Banking. She previously served as a Mergers and Acquisitions Analyst at Morgan Stanley from 1982 until 1984.

Other Current Affiliations: In addition to her public company board memberships, Ms. Citrino serves on the Retail & Tourism Advisory Board of the Partnership Fund for New York City and on the Advisory Council at Princeton University’s Center for Health and Wellness.

Attributes and Skills: Ms. Citrino’s more than 30-year career as an investment banker provides the Board with substantial knowledge regarding business operations strategy, as well as valuable financial and investment expertise. Her expertise in finance and business operations is an invaluable asset to Alcoa as it pursues its strategic plans as an independent publicly-traded company.

 

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Timothy P. Flynn

 

Director since: 2016

 

Age: 60

 

Committees: Audit Committee;

Public Issues Committee

 

Other Current Public Directorships:

JPMorgan Chase & Co., Walmart Stores, Inc., United Health Group

 

Career Highlights and Qualifications: Mr. Flynn was Chairman of KPMG International, a global professional services organization that provides audit, tax and advisory services, from 2007 until his retirement in October 2011. He served as Chairman from 2005 to 2010 and Chief Executive Officer from 2005 to 2009 of KPMG LLP in the U.S., the largest individual member firm of KPMG International. Before serving as Chairman and CEO, Mr. Flynn was Vice Chairman, Audit and Risk Advisory Services, with operating responsibility for the Audit, Risk Advisory and Financial Advisory Services practices.

Other Current Affiliations: In addition to his public company board memberships, Mr. Flynn serves as a director for International Integrated Reporting Council and a trustee for the University of St. Thomas—Minnesota.

Previous Directorships: Mr. Flynn was a director of The Chubb Corporation from 2013 until 2016.

Attributes and Skills: Through his leadership positions at KPMG, Mr. Flynn gained perspective on the evolving business and regulatory environment, and brings to the Board his experience with many of the issues facing complex, global companies, as well as expertise in financial services and risk management. Mr. Flynn is an audit committee financial expert.

 

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Kathryn S. Fuller

 

Director since: 2016

 

Age: 70

 

Committees: Compensation and Benefits Committee; Governance and Nominating Committee (Chair); Executive Committee

 

Career Highlights and Qualifications: Ms. Fuller serves as Vice Chair of the Board of Directors of the Smithsonian’s National Museum of Natural History, the world’s preeminent museum and research complex, having served as Chair until November 2016. She currently serves on the board, and chairs the Nominating and Governance Committee at, The Robert Wood Johnson Foundation, a leading philanthropy in the field of health and health care. Ms. Fuller is also the Chair of the Institute at Brown for Environment & Society (Brown University) which seeks to prepare leaders to understand and holistically manage complex social and environmental systems.

Ms. Fuller retired as Chair of The Ford Foundation, a nonprofit organization, in September 2010, after having served in that position since May 2004.

Ms. Fuller retired as President and Chief Executive Officer of World Wildlife Fund U.S. (WWF), one of the world’s largest nature conservation organizations, in July 2005, after having served in those positions since 1989. Ms. Fuller continues her affiliation with WWF as President Emerita and an honorary member of the Board of Directors. Ms. Fuller was a Public Policy Scholar at the Woodrow Wilson International Center for Scholars, a nonpartisan institute established by Congress for advanced study of national and world affairs, for the academic year beginning in October 2005.

Ms. Fuller had various responsibilities with WWF and The Conservation Foundation from 1982 to 1989, including executive vice president, general counsel and director of WWF’s public policy and wildlife trade monitoring programs. Before that, she held several positions in the U.S. Department of Justice, including as attorney / advisor in the Office of Legal Counsel, which advises the White House and Executive Branch on constitutional and federal statutory questions, and culminating as Chief, Wildlife and Marine Resources Section, from 1981 to 1982.

Previous Directorships: Ms. Fuller was a director of Alcoa Inc. from 2002 to 2016.

 

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Attributes and Skills: Ms. Fuller has led three internationally recognized and respected organizations, having served as the chief executive officer of WWF, Chair of The Ford Foundation, and Chair of the Smithsonian’s National Museum of Natural History. Her experience in managing world-class organizations, combined with her proven leadership skills, international experience and environmental and health focus, contribute to the diversity of the Board. The Company recognizes the need to earn the right to continue to do business in the communities in which it operates, and as a result, the Board seeks the input of directors, such as Ms. Fuller, who have a broad perspective on sustainable development.

 

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Roy C. Harvey

 

Director since: 2016

 

Age: 43

 

Committees: Executive Committee

Career Highlights and Qualifications: Mr. Harvey is the Chief Executive Officer of Alcoa.

From October 2015 until the Separation, he was Executive Vice President of ParentCo and President of ParentCo’s Global Primary Products business. From June 2014 to October 2015, he was Executive Vice President, Human Resources and Environment, Health, Safety and Sustainability at ParentCo. As part of that role, he also oversaw the Alcoa Foundation, one of the largest corporate foundations in the U.S. In addition, Mr. Harvey held a variety of operational and financial assignments across the U.S., Europe and Latin America during his career at ParentCo, predominantly in its upstream business. As the Chief Operating Officer for Global Primary Products at ParentCo from July 2013 to June 2014, he oversaw the day-to-day global operations of ParentCo’s mining, refining, smelting, casting and energy businesses. Prior to that role, he was Chief Financial Officer for Global Primary Products from December 2011 to July 2013. Mr. Harvey also interfaced with securities analysts and investors globally as Director of Investor Relations at ParentCo from September 2010 to November 2011, and he was Director of Corporate Treasury from January 2010 to September 2010. Mr. Harvey joined ParentCo in 2002 as a business analyst for Global Primary Products in Knoxville, Tennessee.

Attributes and Skills: As the only management representative on the Board, Mr. Harvey’s leadership of, and extensive experience and familiarity with, Alcoa’s businesses provides the Board with invaluable insight into the Company’s operations and strategic direction. His broad range of operational, financial, investor relations and other roles at ParentCo has given him an in-depth and well-rounded understanding of the Company.

 

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James A. Hughes

 

Director since: 2016

 

Age: 54

 

Committees: Audit Committee; Public Issues Committee

 

Other Current Public Directorships:

TPI Composites Inc.

Career Highlights and Qualifications: Mr. Hughes is former Chief Executive Officer and Director of First Solar, Inc., a leading global provider of comprehensive photovoltaic solar systems which use its advanced module and system technology. He joined First Solar, Inc. in March 2012 as Chief Commercial Officer and was appointed Chief Executive Officer in May 2012. He stepped down as Chief Executive Officer on June 30, 2016 and resigned from the board on September 1, 2016. Prior to joining First Solar, Mr. Hughes served, from October 2007 until April 2011, as Chief Executive Officer and Director of AEI Services LLC, which owned and operated power distribution, power generation (both thermal and renewable), natural gas transportation and services, and natural gas distribution businesses in emerging markets worldwide. From 2004 to 2007, he engaged in principal investing with a privately held company based in Houston, Texas that focused on micro-cap investments in North American distressed manufacturing assets. Previously, he served, from

 

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Item 1 Election of Directors (continued)

 

 

 

2002 until March 2004, as President and Chief Operating Officer of Prisma Energy International, which was formed out of former Enron interests in international electric and natural gas utilities. Prior to that role, Mr. Hughes spent almost a decade with Enron Corporation in positions that included President and Chief Operating Officer of Enron Global Assets, President and Chief Operating Officer of Enron Asia, Pacific, Africa and China, and Assistant General Counsel of Enron International.

Other Current Affiliations: In addition to his public company board membership, Mr. Hughes serves as the Chairman of the Los Angeles Branch of the Federal Reserve Bank of San Francisco. He also serves as Chairman of the board of directors of Eos Energy Storage LLC.

Previous Directorships: First Solar, Inc. (2012-2016) and APR Energy PLC (2013-2015)

Attributes and Skills: Mr. Hughes’s extensive experience in the energy sector will benefit the Company given the Company’s portfolio of energy assets. His previous leadership positions at large energy and utility companies enable him to contribute valuable business, operational and management expertise. Mr. Hughes’ service as Chairman of the Los Angeles Branch of the Federal Reserve Bank of San Francisco also imparts significant financial expertise. Mr. Hughes is an audit committee financial expert.

 

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James E. Nevels

 

Director since: 2016

 

Age: 65

 

Committees: Compensation and Benefits Committee; Governance and Nominating Committee; Executive Committee

 

Other Current Public Directorships:

First Data Corporation; WestRock Company (Lead Independent Director); The Hershey Company (Lead Independent Director)

Career Highlights and Qualifications: Mr. Nevels founded The Swarthmore Group in 1991 and has served as its Chairman since that time. He has more than 36 years of experience in the securities and investment industry and is a member of The Swarthmore Group’s Executive Committee. Mr. Nevels was appointed by the President of the United States to the Advisory Committee to the Pension Benefit Guaranty Corporation and served as Chairman from 2005 until 2007. In December 2001, Mr. Nevels was appointed by the Governor of Pennsylvania as Chairman of the Philadelphia School Reform Commission and served through September 2007 overseeing the turnaround of the Philadelphia School System, then the ninth largest school district in the United States. In addition, Mr. Nevels served as a member of the Board of The Federal Reserve Bank of Philadelphia from 2010 to 2015, and served as Chair of the Board in 2014 and 2015. Mr. Nevels has announced his intention not to seek reelection to The Hershey Company board of directors in May 2017.

Other Current Affiliations: In addition to his public company board memberships, Mr. Nevels is currently a member of the Board of the Marine Corps Heritage Foundation, member of the Board of MMG Insurance Company (term expiring in April 2017), member of the Board of The Barbara Bush Foundation for Family Literacy, member of the Board of Trustees of the Pro Football Hall of Fame (Emeritus Status), a member of the Council of Foreign Relations, a member of the Board of Trustees of PGA Reach, and a member of the Board of Trustees of Trout Unlimited.

Attributes and Skills: Mr. Nevels’ background and experience as an investment advisor and director and chairman of large public companies give him broad knowledge and perspective on the governance and leadership of publicly traded companies, as well as financial expertise that provide the Board with valuable insight.

 

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James W. Owens

 

Director since: 2016

 

Age: 71

 

Committees: Compensation and Benefits Committee (Chair); Governance and Nominating

 

Other Current Public Directorships:

International Business Machines Corporation; Morgan Stanley

Career Highlights and Qualifications: Mr. Owens served as Chairman and Chief Executive Officer of Caterpillar Inc., a leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines, from February 2004 through June 2010. He was Executive Chairman from June to October 2010, when he retired from the company.

Mr. Owens served as Vice Chairman of Caterpillar from December 2003 to February 2004 and as Group President from 1995 to 2003, responsible at various times for 13 of the company’s 25 divisions. Mr. Owens joined Caterpillar in 1972 as a corporate economist and was named chief economist of Caterpillar Overseas S.A. in Geneva, Switzerland in 1975. From 1980 until 1987, he held managerial positions in the Accounting and Product Source Planning Departments. In 1987, he became managing director of P.T. Natra Raya, Caterpillar’s joint venture in Indonesia. He held that position until 1990, when he was elected a Corporate Vice President and named President of Solar Turbines Incorporated, a Caterpillar subsidiary in San Diego, California. In 1993, he was elected Vice President and Chief Financial Officer.

Other Current Affiliations: In addition to his public company board memberships, Mr. Owens is Chairman of the Board of Trustees of N.C. State University, and Chairman of the Executive Committee at the Peterson Institute for International Economics. He is also a member of the Council on Foreign Relations.

Previous Directorships: Mr. Owens was a director of Alcoa Inc. from 2005 to 2016 and was Chairman of Caterpillar Inc. from 2004 to 2010. He was also former Chairman and Executive Committee member of the Business Council.

Attributes and Skills: Mr. Owens’ previous leadership positions, including as Chief Executive Officer of a significant, complex global industrial company, bring to the Board proven business acumen, management experience and economics expertise. His background as former Chief Financial Officer of Caterpillar also provides a strong financial foundation.

 

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Carol L. Roberts

 

Director since: 2016

 

Age: 57

 

Committees: Audit Committee (Chair); Compensation and Benefits Committee; Executive Committee

 

Other Current Public Directorships:

VF Corporation

Career Highlights and Qualifications: Ms. Roberts is Senior Vice President and Chief Financial Officer of International Paper Company (IP), a global leader in packaging and paper with manufacturing operations in 24 countries. Ms. Roberts has over 35 years of industrial manufacturing experience, having worked in multiple facilities and across various functions at IP. Before being named Chief Financial Officer in 2011, Ms. Roberts led IP’s largest business, the Industrial Packaging Group. While in that role, she led IP’s acquisition of Weyerhaeuser’s packaging business. Ms. Roberts has also served as IP’s Vice President of People Development for three years, during which she developed human resources programs that have had a major impact on IP’s talent posture and employee engagement. Ms. Roberts has served in a variety of operational and technical roles since beginning her career with IP in 1981 as an associate engineer at the company’s Mobile, Alabama mill. Ms. Roberts announced her intention to retire from IP at the end of March 2017.

Previous Directorships: Ms. Roberts was a director of Alcoa Inc. from 2014 to 2016.

 

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Attributes and Skills: Ms. Roberts’ career spans engineering, manufacturing, business management, human resources and finance, bringing a strong set of cross-functional experiences to the Board. Her role as Chief Financial Officer of IP has provided a strong foundation for valuable contributions to Board discussions relating to financial and strategic matters. Ms. Roberts is an audit committee financial expert.

 

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Suzanne Sitherwood

 

Director since: 2016

 

Age: 52

 

Committees: Audit Committee; Public Issues Committee

 

Other Current Public Directorships:

Spire Inc.

Career Highlights and Qualifications: Ms. Sitherwood has been the Chief Executive Officer of Spire Inc. (formerly The Laclede Group, Inc.) since February 2012 and has been its President since September 2011.

Spire is the fifth largest, publicly-traded natural gas utility in the U.S., serving more than 1.7 million customers. Under her leadership, Spire acquired four natural gas utilities serving customers across Missouri, Alabama, and Mississippi and quadrupled its enterprise value. Prior to joining Spire, Ms. Sitherwood was President of three natural gas utilities at AGL Resources serving more than 1.6 million customers.

Other Current Affiliations: Ms. Sitherwood serves as deputy chair of the Federal Reserve Bank of St. Louis. She also serves on the boards of Civic Progress St. Louis, United Way of Greater St. Louis’ Executive Committee and Board, Birmingham Business Alliance and the American Gas Association, and is a Board Member of Southern Polytechnic State University in Marietta, Georgia. She also serves as a Board Member for Emory Hospital Visiting Committee.

Attributes and Skills: With more than 35 years of experience in the natural gas industry, serving in roles ranging from chief engineer to vice president gas operations and capacity planning, to the President and Chief Executive Officer of a public company owning five natural gas utilities, Ms. Sitherwood possesses significant leadership and management experience working in a regulatory environment while implementing strategic growth initiatives. Additionally, Ms. Sitherwood possesses finance acumen, as evidenced by her service as Deputy Chair of the Federal Reserve Bank of St. Louis.

 

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Steven W. Williams

 

Director since: 2016

 

Age: 61

 

Committees: Compensation and Benefits Committee; Governance and Nominating Committee; Executive Committee

 

Other Current Public Directorships:

Suncor Energy Inc.

Career Highlights and Qualifications: Mr. Williams has served as President of Suncor Energy since December 2011 and Chief Executive Officer since May 2012. His career with Suncor Energy began in 2002 when he was appointed Executive Vice President, Corporate Development and Chief Financial Officer. He also served at Suncor Energy as Executive Vice President, Oil Sands, from 2003 to 2007 and as Chief Operating Officer, from 2007 to 2011. Mr. Williams has more than 39 years of international energy industry experience, including 18 years at Esso/Exxon.

Other Current Affiliations: In addition to his public company board membership, Mr. Williams is a fellow of the Institution of Chemical Engineers and is a member of the Institute of Directors. He is one of 12 founding CEOs of Canada’s Oil Sands Innovation Alliance (COSIA), a member of the advisory board of Canada’s Ecofiscal Commission, a member of the Board of the Business Council of Canada, and vice-chair of the Alberta Premier’s Advisory Committee on the Economy.

 

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Attributes and Skills: Mr. Williams has decades of experience in leadership positions at large, publicly-traded energy companies. His expertise in the energy sector, both on the operational and financial side, brings valuable insight and experience to the Board. Mr. Williams also has extensive experience with business leadership organizations and advising government organizations regarding businesses and the economy.

 

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Ernesto Zedillo

 

Director since: 2016

 

Age: 65

 

Committees: Audit Committee; Public Issues Committee (Chair)

 

Other Current Public Directorships:

Citigroup Inc.; Promotora de Informaciones, S.A.; The Procter & Gamble Company

 

Career Highlights and Qualifications: Dr. Zedillo has been at Yale University since 2002, where he is the Frederick Iseman ’74 Director of the Yale Center for the Study of Globalization; Professor in the Field of International Economics and Politics; Professor of International and Area Studies; and Professor Adjunct of Forestry and Environmental Studies. He was a Distinguished Visiting Fellow at the London School of Economics in 2001.

Dr. Zedillo was President of Mexico from December 1994 to December 2000. He served in the Federal Government of Mexico as Undersecretary of the Budget (1987-1988); as Secretary of Economic Programming and the Budget and board member of various state owned enterprises, including PEMEX, Mexico’s national oil company (1988-1992); and as Secretary of Education (1992-1993). From 1978 to 1987, he was with the central bank of Mexico where he served as deputy manager of economic research and deputy director. From 1983 to 1987, he was the founding General Director of the Trust Fund for the Coverage of Exchange Risks, a mechanism created to manage the rescheduling of the foreign debt of the country’s private sector that involved negotiations and complex financial operations with hundreds of firms and international banks.

Dr. Zedillo earned his Bachelor’s degree from the School of Economics of the National Polytechnic Institute in Mexico and his M.A., M.Phil. and Ph.D. at Yale University. In Mexico, he taught economics at the National Polytechnic Institute and El Colegio de Mexico.

Other Current Affiliations: In addition to his public company board memberships, Dr. Zedillo belongs to the international advisory board of BP. He is a senior advisor to the Credit Suisse Research Institute. His current service in non-profit institutions includes being Chair of the Natural Resource Governance Institute and Co-Chair of the Board of Inter-American Dialogue.

Previous Directorships: Dr. Zedillo was a director of Alcoa Inc. from 2002 to 2016, a director of Electronic Data Systems Corporation from 2007 to 2008, and a director of the Union Pacific Corporation from 2001 to 2006.

Attributes and Skills: From his broad experience in government and international politics and his prior service as President of Mexico, Dr. Zedillo brings international perspective and insight to matters such as governmental relations and public issues in the various countries in which Alcoa operates. Dr. Zedillo also has significant financial experience, having previously served on the audit committee of Union Pacific and as the Secretary of Economic Programming and the Budget for Mexico, as well as having held various positions at Banco de México, the central bank of Mexico. Dr. Zedillo is an audit committee financial expert.

 

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Nominating Board Candidates – Procedures and Director Qualifications

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Stockholder Recommendations for Director Nominees

Any stockholder wishing to recommend a candidate for director should submit the recommendation in writing to our principal executive offices: Alcoa Corporation, Governance and Nominating Committee, c/o Corporate Secretary, 390 Park Avenue, New York, New York 10022-4608. The written submission should comply with all requirements set forth in the Company’s Certificate of Incorporation and Bylaws. The committee will consider all candidates recommended by stockholders who comply with the foregoing procedures and satisfy the minimum qualifications for director nominees and Board member attributes.

Advance Notice Director Nominations

Alcoa’s Bylaws provide that any stockholder entitled to vote at an annual stockholders’ meeting may nominate one or more director candidates for election at that annual meeting by following certain prescribed procedures. To be timely, the stockholder must provide to Alcoa’s Corporate Secretary written notice of the stockholder’s intent to make such a nomination or nominations not earlier than 120 days and not later than 90 days at the close of business before the anniversary date of the immediately preceding annual meeting, except as otherwise provided in the Bylaws. The notice must contain all of the information required in the Company’s Bylaws.

Any such notice must be sent to our principal executive offices: Alcoa Corporation, 390 Park Avenue, New York, New York 10022-4608, Attention: Corporate Secretary. For the 2018 annual meeting, such notice must be delivered to the Corporate Secretary no earlier than January 10, 2018 and no later than February 9, 2018.

Proxy Access Director Nominations

In addition to advance notice procedures, our Bylaws also include provisions permitting, subject to certain terms and conditions set forth therein, stockholders who have maintained continuous qualifying ownership of at least 3% of our outstanding common stock for at least three years to nominate a number of director candidates not to exceed the greater of two candidates or 20% of the number of directors then in office who will be included in our annual meeting proxy statement. Stockholders who wish to nominate a proxy access candidate must follow the procedures described in our Bylaws. Proxy access candidates and the stockholder nominators meeting the qualifications and requirements set forth in our Bylaws will be included in the Company’s proxy statement and ballot. To be timely, a stockholder’s proxy access notice must be delivered to our principal executive offices, Alcoa Corporation, 390 Park Avenue, New York, New York 10022-4608, Attention: Corporate Secretary, no earlier than 150 days and no later than 120 days before the one-year anniversary of the date that we commenced mailing of our definitive proxy statement (as stated in such proxy statement) for the immediately preceding annual meeting, except as otherwise provided in the Bylaws. For the 2018 annual meeting, such notice must be delivered to our principal executive offices no earlier than October 18, 2017 and no later than November 17, 2017.

Minimum Qualifications for Director Nominees and Board Member Attributes

The Governance and Nominating Committee is charged with determining the criteria, objectives and procedures for selecting members of the Board. The Board membership criteria are set forth in the Company’s Corporate Governance Guidelines, and the Committee will consider such criteria in the context of the existing composition and needs of the Board and its Committees.

Alcoa has adopted the following criteria for identification, evaluation and selection of directors:

 

Directors must have demonstrated the highest ethical behavior and must be committed to the Company’s values.
Directors must be committed to seeking and balancing the legitimate long-term interests of all of the Company’s stakeholders, including its stockholders, customers, employees and the communities where the Company has an impact. Directors must not be primarily beholden to any special interest group or constituency.

 

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It is the objective of the Board that all non-management directors be independent. In addition, no director should have, or appear to have, a conflict of interest that would impair that director’s ability to make decisions consistently in a fair and balanced manner.
Directors must be independent in thought and judgment. They must each have the ability to speak out on difficult subjects; to ask tough questions and demand accurate, honest answers; to constructively challenge management; and at the same time, act as an effective member of the team, engendering by his or her attitude an atmosphere of collegiality and trust.
Each director must have demonstrated excellence in his or her area and must be able to deal effectively with crises and to provide advice and counsel to the Chief Executive Officer and his or her peers.
Directors should have proven business acumen, serving or having served as a Chief Executive Officer, Chief Operating Officer or Chief Financial Officer of a significant, complex organization, or other senior leadership role in a significant, complex organization; or serving or having served in a significant policy-making or leadership position in a well-respected, nationally or internationally recognized educational institution, not-for-profit organization or governmental entity; or having achieved a widely recognized position of leadership in the director’s field of endeavor, which adds substantial value to the oversight of material issues related to the Company’s business.
Directors must be committed to understanding the Company and its industry; to regularly preparing for, attending and actively participating in meetings of the Board and its committees; and to ensuring that existing and future individual commitments will not materially interfere with the director’s obligations to the Company. The number of other board memberships in light of the demands of a director nominee’s principal occupation, should be considered, as well as travel demands for meeting attendance.
Directors must understand the legal responsibilities of board service and fiduciary obligations. All members of the Board should be financially literate and have a sound understanding of business strategy, business environment, corporate governance and board operations. At least one member of the Board must satisfy the requirements of an “audit committee financial expert.”
Directors must be self-confident and willing and able to assume leadership and collaborative roles as needed. They need to demonstrate maturity, valuing board and team performance over individual performance and respect for others and their views.
New director nominees should be able to, and committed to, serve as a member of the Board for an extended period of time.
While diversity and a variety of experiences and viewpoints represented on the Board should always be considered, a director nominee should not be chosen nor excluded solely or largely because of race, color, gender, national origin or sexual orientation or identity. In selecting a director nominee, the Governance and Nominating Committee will focus on any special skills, expertise or background that would complement the existing Board, recognizing that the Company’s businesses and operations are diverse and global in nature.
Directors should have reputations, both personal and professional, consistent with the Company’s image and reputation.

Process of Evaluation of Director Candidates

The Governance and Nominating Committee will make a preliminary review of a prospective candidate’s background, career experience and qualifications based on available information. If a consensus is reached by the committee that a particular candidate would likely contribute positively to the Board’s mix of skills and experiences, and a Board vacancy exists or is likely to occur, the committee will conduct interviews with the candidate and may invite other Board members or senior Alcoa executives to interview the candidate to assess the candidate’s overall qualifications. The committee will consider the candidate against the criteria it has adopted in the context of the Board’s then current composition and the needs of the Board and its committees, and make a recommendation to the Board as to whether the candidate should be nominated for election. This procedure is the same for all candidates, including director candidates identified by stockholders.

Alcoa Board members who had not previously served on the ParentCo board of directors prior to the Separation either were identified through a nationally-recognized search firm retained by ParentCo or were recommended by ParentCo directors.

 

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Non-Employee Director Compensation Program

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Our non-employee director compensation program is designed to attract and retain outstanding director candidates who have the requisite experience and background as set forth in our Corporate Governance Guidelines, as well as to recognize the substantial time and effort necessary to exercise oversight of a complex global organization like Alcoa and fulfill the other responsibilities required of our directors. Non-employee directors receive a mix of cash and equity-based compensation totaling $240,000 per year (plus committee service fees, if applicable) for service on the Board. Mr. Harvey, our sole employee director, does not receive additional compensation for his Board service.

Consistent with its charter, the Governance and Nominating Committee will review director compensation periodically and recommend changes to the Board as it deems appropriate. The Board approved a Non-Executive Chairman Fee of $150,000, with effect from November 1, 2016, based on a comparative market analysis prepared by Pay Governance LLC, the independent compensation consultant selected by the Compensation and Benefits Committee.

Director Fees

The table below sets forth the components of compensation for our non-employee directors (to be prorated based on actual service periods) approved by the Board:

 

  Annual Compensation Element    Amount  

  Retainer for Non-Employee Directors

   $ 120,000  

  Equity Award for Non-Employee Directors

   $ 120,000 (1) 

  Annual Cash Fees(2)

  

  Non-Executive Chairman Fee

   $ 150,000  

  Audit Committee Chair Fee (includes Audit Committee Member Fee)

   $   27,500  

  Audit Committee Member Fee

   $   11,000  

  Compensation and Benefits Committee Chair Fee

   $   20,000  

  Other Committee Chair Fee

   $   16,500  
  
  Stock Ownership Requirement    $ 750,000  
(1) The annual equity award is granted in the form of restricted share units following the annual meeting for continuing directors, generally with one-year cliff vesting. Non-employee directors were granted a restricted share unit award as compensation for service from November 2016 to May 2017, in accordance with the Alcoa Corporation Non-Employee Director Compensation Policy. Vested restricted share units will be settled in a lump sum or installments following termination of service on the Board in accordance with the elections made by non-employee directors.
(2) Each non-employee director may elect to defer all or part of the cash compensation, including into additional restricted share units that are fully vested at grant, pursuant to the Alcoa Corporation Directors’ Deferred Fee Plan. Deferred amounts are paid in cash either in a lump sum or installments following termination of service on the Board in accordance with the elections made by non-employee directors.

 

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Item 1 Election of Directors (continued)

 

 

 

2016 Director Compensation

The following table sets forth the total compensation of the Company’s non-employee directors for the year ended December 31, 2016.

 

  Name   

Fees Earned or

Paid in Cash

($)(1)

    

Stock Awards

($)(2)

    

Total

($)

 

  Michael G. Morris

   $ 45,000      $ 60,013      $ 105,013  

  Mary Anne Citrino

   $ 20,000      $ 60,013      $ 80,013  

  Timothy P. Flynn

   $ 21,833      $ 60,013      $ 81,846  

  Kathryn S. Fuller

   $ 22,750      $ 60,013      $ 82,763  

  James A. Hughes

   $ 21,833      $ 60,013      $ 81,846  

  James E. Nevels

   $ 20,000      $ 60,013      $ 80,013  

  James W. Owens

   $ 23,333      $ 60,013      $ 83,346  

  Carol L. Roberts

   $ 24,583      $ 60,013      $ 84,596  

  Suzanne Sitherwood

   $ 21,833      $ 60,013      $ 81,846  

  Steven W. Williams

   $ 20,000      $ 60,013      $ 80,013  

  Ernesto Zedillo

   $ 24,583      $ 60,013      $ 84,596  
(1) This column reflects the cash fees earned by directors for Board and Committee service to Alcoa beginning November 1, 2016, whether or not such fees were deferred.
(2) This column reflects the aggregate grant date fair value, determined in accordance with the Financial Accounting Standard Board’s Accounting Standards Codification 718, Compensation—Stock Compensation (“ASC Topic 718”), of the restricted share unit awards granted by Alcoa on December 1, 2016. A discussion of the relevant assumptions is set forth in Note M to the consolidated financial statements set forth in the 2016 Annual Report. As of December 31, 2016, each director held 2,078 restricted share units.

Stock Ownership Guideline for Non-Employee Directors

To further align the interests of directors with the long-term interests of our stockholders, non-employee directors are required to own, until retirement from the Alcoa Board, at least $750,000 in our common stock (including shares relating to restricted share units). For non-employee directors who previously served on the ParentCo board of directors and participated in the ParentCo director deferred fee plan, cash-settled deferred share units relating to ParentCo common stock that, upon the Separation, were converted from cash-settled deferred share units relating to Alcoa common stock, are counted for purposes of meeting the stock ownership requirement. Accordingly, whether a director holds shares of Alcoa common stock, restricted share units, or deferred share units, directors have the same economic interest in the performance of the Company, which further aligns directors’ interests with those of our stockholders.

 

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Item 1 Election of Directors (continued)

 

 

 

The following table shows the value of each non-employee director’s holdings in Alcoa common stock, restricted share units, and deferred share units as of March 1, 2017, based on the closing price per share of our common stock on the New York Stock Exchange on that date.

 

  Non-Employee Directors   

Value of Alcoa Stock,

Restricted Share Units and

Deferred Share Units

 

  Mary Anne Citrino

   $ 78,945   

  Timothy P. Flynn

   $ 78,945   

  Kathryn S. Fuller

   $ 1,028,000   

  James A. Hughes

   $ 78,945   

  Michael G. Morris

   $ 1,884,000   

  James E. Nevels

   $ 80,200   

  James W. Owens

   $ 1,394,650   

  Carol L. Roberts

   $ 594,500   

  Suzanne Sitherwood

   $ 78,945   

  Steven W. Williams

   $ 78,945   

  Ernesto Zedillo

   $ 1,664,450   

Prohibitions against Short Sales, Hedging, Margin Accounts and Pledging

Company policy prohibits directors and executive officers from pledging, holding in margin accounts, or engaging in short sales or hedging transactions with respect to any of their Company stock, which continues to align the interests of our directors and executive officers with those of our stockholders.

 

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Corporate Governance

 

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The Board has adopted a number of policies to support our values and good corporate governance, which we believe are important to the success of our business and in advancing stockholder interests.

Corporate Governance Highlights

The following governance documents are available on our website, www.alcoa.com, under “Investors — Corporate Governance — Governance Documents.”

 

  Certificate of Incorporation and Bylaws
  Committee Charters
  Corporate Governance Guidelines
  Director Independence Standards
  Board Confidentiality Policy
  Business Conduct Policies
  Code of Ethics for our Chief Executive Officer, Chief Financial Officer and Other Financial Professionals
  Insider Trading Policy
  Policy for Hiring Members (or Former Members) of Independent Public Auditors
  Related Person Transaction Approval Policy
 

 

Paper copies of the above documents can be obtained by writing to the Alcoa Corporation, 390 Park Avenue, New York, New York 10022-4608, Attention: Corporate Secretary.

Presented below are some highlights of Alcoa’s corporate governance program. You can find details about these and other corporate governance policies and practices within this Proxy Statement.

 

Board Independence   

   11 of our 12 directors are independent as defined by the listing standards of the NYSE and the Company’s Director Independence Standards.

   Our Chief Executive Officer is the only management director.

Board Composition   

   Currently, the Board has fixed the number of directors at 12.

   We will regularly assess the performance of our Board and can adjust the number of directors according to our needs.

   As shown under “Director Qualifications, Skills and Attributes”, our Board has a diverse mix of skills, experience, and background.

Accountability to Stockholders   

   Majority Voting in the Election of Directors/Resignation. Our Bylaws provide for majority voting in uncontested elections of directors and that any incumbent nominee for director who is not elected must promptly tender his or her resignation to the Board for its consideration, in accordance with the Bylaws.

   Special Meetings. Stockholders are permitted to call special meetings in accordance with the Company’s Certificate of Incorporation and Bylaws.

   Action by Written Consent. Stockholders may act by written consent in accordance with the Certificate of Incorporation and Bylaws.

   Engagement with Stockholders. Stockholders may contact our Board or management by email or regular mail.

Board Committees   

   We have five Board committees. Audit, Compensation and Benefits, Governance and Nominating, Public Issues, and Executive.

   Independent Committee Members. All of the Board committees, except the Executive Committee, are composed entirely of independent directors.

   Charters. Each Board committee has a written charter, that will be reviewed and re-assessed annually, which is posted on our website.

 

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Corporate Governance (continued)

 

 

 

Board Participation   

    Limits on Public Company Audit Committee Memberships. Directors who serve on our Audit Committee should not serve on more than two other public companies’ audit committees.

    Limits on CEO Public Board Memberships. Directors who serve as chief executive officers of public companies should not serve on more than two outside public company boards (in addition to the company’s board for which he or she is the chief executive officer).

    Other Directors. Other directors should not serve on more than four outside public company boards (in addition to our Board).

    Attendance. Directors’ attendance at annual meetings is expected.

Prohibition Against Short Sales, Hedging, Margin Accounts and Pledging   

    Insider Trading Policy. Our Insider Trading Policy contains restrictions that, among other things, prohibit: (1) short sales of Alcoa securities and derivative or speculative transactions in Alcoa securities; (2) the use of financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) that are designed to hedge or offset any decrease in the market value of Alcoa securities; and (3) directors and executive officers from holding Alcoa securities in margin accounts or pledging Alcoa securities as collateral.

Proxy Access   

    Our Bylaws include provisions permitting, subject to certain terms and conditions, stockholders who have maintained continuous qualifying ownership of at least 3% of our outstanding common stock for at least three years to use our annual meeting proxy statement to nominate a number of director candidates not to exceed the greater of two candidates or 20% of the number of directors then in office.

Commitment toward Sustainability   

    Alcoa is committed to operating sustainably in the communities in which we do business.

    We will be publishing our first sustainability report as Alcoa Corporation in 2017.

Risk Oversight   

    Our full Board is responsible for risk oversight, and has designated committees to have particular oversight of certain key risks. Our Board oversees management as it fulfills its responsibilities for the assessment and mitigation of risks and for taking appropriate risks.

Board Oversight of Political Activities   

    The Public Issues Committee oversees the Company’s policies and practices relating to its political activities.

Succession Planning   

    The Board intends to actively monitor our management succession and development plans and receive regular updates on employee engagement, diversity and retention matters.

Board and Committee Self-Evaluation   

    We will implement an annual self-evaluation process for the Board and each standing Committee of the Board.

Stock Ownership Guidelines   

    We have robust stock ownership guidelines.

    The CEO and each of the other NEOs must retain equity equal in value to 6 times and 2 to 3 times their base salaries, respectively.

    Non-employee directors must retain equity in value of at least $750,000.

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines, which are designed to assist the Board in the exercise of its duties and responsibilities to the Company. They reflect the Board’s commitment to monitor the effectiveness of decision-making at the Board and management level with a view to achieving Alcoa’s strategic objectives. They are subject to modification by the Board at any time.

 

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Corporate Governance (continued)

 

 

 

Business Conduct Policies and Code of Ethics

The Company’s Business Conduct Policies apply equally to the directors and to all officers and employees of the Company, as well as those of our controlled subsidiaries, affiliates and joint ventures. The directors and employees in positions to make discretionary decisions are surveyed annually regarding their compliance with the policies.

The Company also has a Code of Ethics applicable to the Chief Executive Officer, Chief Financial Officer and other financial professionals, including the principal accounting officer, and those persons subject to it are surveyed annually for compliance with it.

Only the Audit Committee can amend or grant waivers from the provisions of the Company’s Code of Ethics and Business Conduct Policies, and any such amendments or waivers will be posted promptly at on our website, www.alcoa.com. To date, no such amendments have been made or waivers granted.

Board Information

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Director Independence

Providing objective, independent judgment is at the core of the Board’s oversight function. Under the Company’s Director Independence Standards, which conform to the corporate governance listing standards of the NYSE, a director is not considered “independent” unless the Board affirmatively determines that the director has no material relationship with the Company or any subsidiary in the consolidated group. The Director Independence Standards include a list of all categories of material relationships affecting the determination of a director’s independence. Any relationship that falls below a threshold set forth in the Director Independence Standards, or is not otherwise listed in the Director Independence Standards or the NYSE listing standards, and is not required to be disclosed under Item 404(a) of SEC Regulation S-K, is deemed to be an immaterial relationship.

The Board has affirmatively determined that all the directors are independent except Mr. Harvey, who is employed by the Company (and therefore does not meet the independence standards set forth in the Director Independence Standards). In the course of making its determination regarding independence, the Board did not find any material relationships that would impact a director’s independence, other than Mr. Harvey’s employment.

Board Leadership Structure

The Company’s current Board leadership structure provides for a non-executive Chairman of the Board who is appointed by the independent directors of the Board. The Board believes this current structure of separating the roles of Chairman and Chief Executive Officer allows for better alignment of corporate governance with the interests of stockholders. The Board also believes that this structure allows our Chief Executive Officer to focus on operating and managing the Company and leverages our Chairman’s experience in guidance and oversight. While the Board believes that this structure currently is in the best interests of Alcoa and its stockholders, it does not have a policy with respect to separating these two roles and could adjust the structure in the future as it deems appropriate.

Board Meetings and Attendance

The Board met once in 2016. In 2016, the directors attended all of the meetings of the Board and committees on which they served. Under Alcoa’s Corporate Governance Guidelines, all directors are expected to attend the annual meeting of stockholders.

 

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Corporate Governance (continued)

 

 

 

The following table sets forth the Board committees and the current members of each of the committees:

 

          Audit             Compensation
and Benefits
       

Governance and

Nominating

         Public Issues            Executive  

  Mary Anne Citrino*

                              

  Timothy P. Flynn*

                              

  Kathryn S. Fuller*

                 Chair              

  Roy C. Harvey

                              

  James A. Hughes*

                              

  Michael G. Morris*

                               Chair

  James E. Nevels*

                              

  James W. Owens*

          Chair                     

  Carol L. Roberts*

   Chair                            

  Suzanne Sitherwood*

                              

  Steven W. Williams*

                              

  Ernesto Zedillo*

                            Chair         

  2016 Meetings

   1        1        1        1       
* Independent Director

Board, Committee and Director Evaluations

The Board will implement an annual process to assess the effectiveness of the full Board, the operations of its committees and the contributions of director nominees. The Governance and Nominating Committee will oversee the evaluation of the Board as a whole and its committees, as well as individual evaluations of those directors who are being considered for possible re-nomination to the Board.

Committees of the Board

There are five standing committees of the Board. The Board has adopted written charters for each committee, which are available on our website at www.alcoa.com under “Investors—Corporate Governance—Governance Documents.”

Each of the Audit, Compensation and Benefits, Governance and Nominating, and Public Issues Committees consists solely of directors who have been determined by the Board to be independent in accordance with SEC regulations, NYSE listing standards and the Company’s Director Independence Standards (including the heightened independence standards and considerations for members of the Audit and Compensation and Benefits Committees).

 

COMMITTEE    RESPONSIBILITIES
Audit Committee   

    Oversees the integrity of the financial statements and internal controls, including review of the scope and the results of the audits of the internal and independent auditors

    Appoints the independent auditors and evaluates their independence and performance

    Reviews the organization, performance and adequacy of the internal audit function

    Pre-approves all audit, audit-related, tax and other services to be provided by the independent auditors

    Oversees the Company’s compliance with legal, ethical and regulatory requirements

    Discusses with management and the auditors the policies with respect to risk assessment and risk management, including major financial risk exposures

Each member of the Audit Committee is financially literate, and the Board has determined that Messrs. Flynn and Hughes, Ms. Roberts and Dr. Zedillo each qualify as an “audit committee financial expert” under applicable SEC rules.

 

 

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Corporate Governance (continued)

 

 

 

COMMITTEE    RESPONSIBILITIES
Compensation and Benefits Committee   

   Establishes the Chief Executive Officer’s compensation based upon an evaluation of performance in light of approved goals and objectives

   Reviews and approves the compensation of the Company’s other officers

   Oversees the implementation and administration of the Company’s compensation and benefits plans, including pension, savings, incentive compensation and equity-based plans

   Reviews and approves general compensation and benefit policies

   Reviews and advises the Board with respect to clawback policies

   Approves the Compensation Discussion and Analysis for inclusion in the Proxy Statement

   Has the sole authority to retain and terminate a compensation consultant, as well as to approve the consultant’s fees and other terms of engagement (see “Compensation Consultants” on page 30 regarding the committee’s engagement of a compensation consultant.)

The Compensation and Benefits Committee may form and delegate its authority to subcommittees and management, when appropriate, including to a management employee benefits committee that administers certain broad-based employee benefit plans and delegation to the Chief Executive Officer to determine and approve annual incentive and long-term incentive awards for non-executive employees of the Company as prescribed by the Compensation and Benefits Committee. Executive officers do not determine the amount or form of executive or director compensation although the Chief Executive Officer provides recommendations to the Compensation and Benefits Committee regarding compensation changes and incentive compensation for executive officers other than himself. For more information on the responsibilities and activities of the committee, including its processes for determining executive compensation, see the “Compensation Discussion and Analysis” section.

 

Executive Committee   

   Has the authority to act on behalf of the Board, including during the intervals between regularly scheduled Board meetings when Board action is needed

Governance and Nominating Committee   

   Identifies individuals qualified to become Board members and recommends them to the full Board for consideration, including evaluating all potential candidates, whether initially recommended by management, other Board members or stockholders

   Makes recommendations to the Board regarding Board committee assignments

   Developed and will annually review the Company’s Corporate Governance Guidelines, and oversees other corporate governance matters

   Reviews related person transactions

   Oversees an annual performance review of the Board, Board committees and individual director nominees

   Periodically reviews and makes recommendations to the Board regarding director compensation

Public Issues Committee   

   Provides guidance on matters relating to the Company’s corporate social responsibility, including good corporate citizenship, environmental sustainability, health and safety and social issues

   Oversees and monitors Alcoa’s policies and practices to ensure alignment with its vision and values

   Advises on significant public issues that are pertinent to Alcoa and its stakeholders

   Considers, and brings to the attention of the Board, as appropriate, political, social and environmental trends and major global legislative and regulatory developments or other public policy issues

   Oversees Alcoa’s policies and practices relating to its political activities, diversity and charitable contributions

   Monitors Alcoa’s reputation and environmental sustainability progress

All Board members are invited to the meetings of the Public Issues Committee.

 

 

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Corporate Governance (continued)

 

 

 

The Board’s Role in Risk Oversight

The Board is actively engaged in overseeing and reviewing the Company’s strategic direction and objectives, taking into account (among other considerations) Alcoa’s risk profile and exposures. It is management’s responsibility to manage risk and bring to the Board’s attention the most material risks to the Company. The Board has oversight responsibility of the processes established to report and monitor systems for material risks applicable to the Company. The Board annually reviews Alcoa’s enterprise risk management and receives regular updates on risk exposures.

The Board as a whole has responsibility for risk oversight, including succession planning relating to the Chief Executive Officer and risks relating to the competitive landscape, strategy, business conditions and capital requirements. The committees of the Board also oversee Alcoa’s risk profile and exposures relating to matters within the scope of their authority. The Board regularly receives detailed reports from the committees regarding risk oversight in their areas of responsibility.

The Audit Committee discusses the Company’s risk profile, risk management, and exposure (and Alcoa’s policies relating to the same) with management, the internal auditors and the independent auditors. Such discussions include the Company’s major financial risk exposures and the steps management has taken to monitor and control these exposures. The Audit Committee also is charged with oversight of Alcoa’s risks relating to cybersecurity, including review of the state of the Company’s cybersecurity, emerging cybersecurity developments and threats, and the Company’s strategy to mitigate cybersecurity risks.

The Compensation and Benefits Committee considers risks related to the attraction and retention of talent, the design of compensation programs and incentive arrangements, and the investment management of the Company’s principal retirement and savings plans. Following the Separation, the Compensation and Benefits Committee will periodically undertake a review of Alcoa’s incentive structure to avoid encouraging material risk taking through financial incentives. Based on determinations made by the ParentCo Compensation Committee prior to the Separation, the Company believes that it is not reasonably likely that the compensation and benefit plans incentivize undue risk. See “Compensation Discussion and Analysis—Executive Compensation Policies and Practices—What We Do—Maintain a Conservative Compensation Risk Profile” on page 43.

The Governance and Nominating Committee considers risks related to corporate governance, and oversees succession planning for the Board and the appropriate assignment of directors to the Board committees for risk oversight and other areas of responsibilities.

The Public Issues Committee considers risks related to the Company’s reputation, and risks relating to environmental and sustainability matters, health and safety issues, and community/government relations.

The Company believes that the Board leadership structure supports its role in risk oversight. There is open communication between management and directors, and all directors are actively involved in the risk oversight function.

Communications with Directors

The Board welcomes input and suggestions. Stockholders and other interested parties wishing to contact the Chairman or the non-management directors as a group may do so by sending a written communication to the attention of the Chairman c/o Alcoa Corporation, 390 Park Avenue, New York, NY 10022-4608. To communicate issues or complaints regarding questionable accounting, internal accounting controls or auditing matters, send a written communication to the Audit Committee c/o Alcoa Corporation, 390 Park Avenue, New York, New York 10022-4608. Alternatively, you may place an anonymous, confidential, toll free call in the United States to Alcoa’s Integrity Line at 1-800-346-7319. You may also make reports by web, email or standard mail. For a listing of web, email and mailing addresses, and of Integrity Line telephone numbers outside the United States, go to www.alcoa.comWho We Are—Ethics and Compliance—Integrity Line.”

Communications addressed to the Board or to a Board member are distributed to the Board or to any individual director or directors, as appropriate, depending upon the facts and circumstances outlined in the communication. On behalf of the

 

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Corporate Governance (continued)

 

 

 

Board, the Corporate Secretary’s Office will submit to the Board all communications received, excluding only those items that are not related to Board duties and responsibilities, such as junk mail and mass mailings; product complaints and product inquiries; new product or technology suggestions; job inquiries and resumes; advertisements or solicitations; and surveys.

Related Person Transactions

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Review, Approval and Ratification of Transactions with Related Persons

The Company has a written Related Person Transaction Approval Policy regarding the review, approval and ratification of transactions between the Company and related persons. The policy applies to any transaction in which Alcoa or its subsidiary is a participant, the amount involved exceeds $120,000 and a related person has a direct or indirect material interest. A related person means any director or executive officer of the Company, any nominee for director, any stockholder known to the Company to be the beneficial owner of more than 5% of any class of the Company’s voting securities, and any immediate family member of any such persons.

Under this policy, reviews are conducted by management to determine which transactions or relationships should be referred to the Governance and Nominating Committee for consideration. The Governance and Nominating Committee then reviews the material facts and circumstances regarding a transaction and determines whether to approve, ratify, revise or reject a related person transaction, or to refer it to the full Board or another committee of the Board for consideration. The Related Person Transaction Approval Policy operates in conjunction with other aspects of the Company’s compliance program, including its Business Conduct Policies which require that all directors, officers and employees have a duty to be free from the influence of any conflict of interest when they represent Alcoa in negotiations or make recommendations with respect to dealings with third parties, or otherwise carry out their duties with respect to the Company.

The Board has considered the following types of potential related person transactions and pre-approved them under the Related Person Transaction Approval Policy as not presenting material conflicts of interest:

(i) employment of executive officers (except employment of an executive officer that is an immediate family member of another executive officer, director, or nominee for director) as long as the Compensation and Benefits Committee has approved the executive officer’s compensation;
(ii) director compensation that the Board has approved;
(iii) any transaction with another entity in which the aggregate amount involved does not exceed the greater of $1,000,000 or 2% of the other entity’s total annual revenues, if a related person’s interest arises only from:
  (a) such person’s position as an employee or executive officer of the other entity; or
  (b) such person’s position as a director of the other entity; or
  (c) the ownership by such person, together with his or her immediate family members, of less than a 10% equity interest, in the aggregate, in the other entity (other than a partnership); or
  (d) both such position as a director and ownership as described in (b) and (c) above; or
  (e) such person’s position as a limited partner in a partnership in which the person, together with his or her immediate family members, have an interest of less than 10%;
(iv) charitable contributions in which a related person’s only relationship is as an employee (other than an executive officer), or a director or trustee, if the aggregate amount involved does not exceed the greater of $250,000 or 2% of the charitable organization’s total annual receipts;
(v) transactions, such as the receipt of dividends, in which all stockholders receive proportional benefits;
(vi) transactions involving competitive bids;
(vii) transactions involving the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority; and
(viii) transactions with a related person involving services from a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture, or similar services.

 

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Corporate Governance (continued)

 

 

 

Transactions with Related Persons in 2016

Please see Part III, Item 13 of the 2016 Annual Report for a description of related person transactions in 2016.

Compensation Matters

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Compensation Committee Interlocks and Insider Participation

No member of the Compensation and Benefits Committee has served as one of our officers or employees at any time. None of our executive officers serves as a member of the compensation committee of any other company that has an executive officer serving as a member of our Board. None of our executive officers serves as a member of the board of directors of any other company that has an executive officer serving as a member of our Compensation and Benefits Committee.

Compensation Consultants

In 2016, the ParentCo Compensation Committee directly retained an independent consultant, Pay Governance LLC, that provided advice as requested by the ParentCo Compensation Committee on the amount and form of certain executive compensation components, including, among other items, advising on executive compensation best practices, insights concerning SEC and say-on-pay developments, and an analysis and review of ParentCo’s compensation plans for executives. The independent consultant did not provide any services to ParentCo other than the services provided directly to the ParentCo Compensation Committee. ParentCo utilized broad-based comparative compensation survey data from Willis Towers Watson, which survey data was not customized for ParentCo, to assist with its general understanding as to whether its compensation programs were competitive with the market.

Our Compensation Committee also has retained Pay Governance LLC to advise it on compensation matters as an independent compensation consultant. See “Compensation Discussion and Analysis—Executive Compensation Policies and Practices—What We Do—The ParentCo Compensation Committee Retained, and the Alcoa Corporation Compensation Committee Retains, an Independent Compensation Consultant” on page 43. The Compensation and Benefits Committee assessed Pay Governance’s independence and found no conflict of interest. In its assessment, the Committee considered: that Pay Governance provides no other services to the Company; the amount of fees received from the Company by Pay Governance as a percentage of Pay Governance’s total revenue; the policies and procedures that Pay Governance has in place to prevent conflicts of interest; any business or personal relationships between the consultant(s) at Pay Governance performing consulting services and any committee members or any executive officer; and any ownership of Company stock by the consultant(s).

Recovery of Incentive Compensation

Alcoa’s Corporate Governance Guidelines provide that if the Board learns of any misconduct by an executive officer that contributed to the Company having to restate all or a portion of its financial statements, it shall take such action as it deems necessary to remedy the misconduct, prevent its recurrence and, if appropriate, based on all relevant facts and circumstances, take remedial action against the wrongdoer in a manner it deems appropriate. In determining what remedies to pursue, the Board shall take into account all relevant factors, including whether the restatement was the result of negligent, intentional or gross misconduct. The Board will, to the full extent permitted by governing law, in all appropriate cases, require reimbursement of any bonus or incentive compensation awarded to an executive officer or effect the cancellation of unvested restricted or deferred stock awards previously granted to the executive officer if: a) the amount of the bonus or incentive compensation was calculated based upon the achievement of certain financial results that were subsequently the subject of a

 

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Corporate Governance (continued)

 

 

 

restatement, b) the executive engaged in intentional misconduct that caused or partially caused the need for the restatement, and c) the amount of the bonus or incentive compensation that would have been awarded to the executive had the financial results been properly reported would have been lower than the amount actually awarded. In addition, the Board may dismiss the executive officer, authorize legal action for breach of fiduciary duty or take such other action to enforce the executive’s obligations to Alcoa as the Board determines fit the facts surrounding the particular case. The Board may, in determining appropriate remedial action, take into account penalties or punishments imposed by third parties, such as law enforcement agencies, regulators or other authorities. The Board’s power to determine the appropriate punishment for the wrongdoer is in addition to, and not in replacement of, remedies imposed by such entities.

Alcoa’s incentive plans also contain “clawback” provisions regarding recoupment of compensation.

 

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Beneficial Ownership

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Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities, to file initial reports of ownership and reports of changes in ownership of the Company’s common stock and other equity securities with the SEC within specified periods. Due to the complexity of the reporting rules, the Company undertakes to file such reports on behalf of its directors and executive officers and has instituted procedures to assist them with these obligations. Based solely on a review of filings with the SEC and written representations from the Company’s directors and executive officers, the Company believes that in 2016 all of its directors and executive officers filed the required reports on a timely basis with respect to Alcoa’s equity securities under Section 16(a).

Stock Ownership of Certain Beneficial Owners

The following stockholders reported to the SEC that they beneficially owned more than 5% of Alcoa common stock as of December 31, 2016, except as otherwise noted below.

 

  Name and Address of Beneficial Owner    Title of Class     

Amount and Nature of

Beneficial Ownership (#)

    

Percent

of Class(1)

 

  The Vanguard Group
  100 Vanguard Boulevard
  Malvern, PA 19355

     Common Stock        13,347,654 (2)       7.2

  Arconic Inc.
  390 Park Avenue,
  New York, New York 10022-4608

     Common Stock        12,958,767 (3)       7.0

  Elliott Associates, L.P.
  40 West 57th Street
  New York, NY 10019

  Elliott International, L.P.
  c/o Maples & Calder
  P.O. Box 309
  Ugland House, South Church Street George Town
  Cayman Islands, British West Indies

  Elliott International Capital Advisors Inc.
  40 West 57th Street
  New York, NY 10019

     Common Stock        10,237,457 (4)       5.6
(1) Percentages are based on 184,191,713 shares of Company common stock outstanding as of March 1, 2017.
(2) As reported in a Schedule 13G dated February 9, 2017. The Vanguard Group, an investment adviser, reported that it had sole power to vote 86,754 shares, sole power to dispose of 13,252,035 shares, shared power to vote 16,021 shares, and shared power to dispose of 95,619 shares.
(3) As reported in a Form 4 dated February 16, 2017. Arconic has the sole power to vote 0 shares, sole power to dispose of 12,958,767 shares, shared power to vote 0 shares, and shared power to dispose of 0 shares. On November 1, 2016, Arconic completed the Separation of Alcoa through the distribution of approximately 80.1% of the shares of common stock of Alcoa to Arconic’s stockholders. Immediately following the distribution, Arconic owned 36,311,767 shares, or approximately 19.9%, of the common stock of Alcoa. Alcoa entered into a stockholder and registration rights agreement with Arconic as of October 31, 2016 (the “Stockholder Agreement”), pursuant which Arconic granted to Alcoa a proxy to vote its shares of Alcoa common stock owned by Arconic immediately after the distribution, in proportion to the votes cast by Alcoa’s other stockholders. As a result, Arconic does not exercise voting power over any of the shares of Alcoa common stock that it beneficially owns. The Stockholder Agreement also provided for registration rights with respect to the shares held by Arconic, whereby Alcoa agreed to use commercially reasonable efforts to effect the registration, under applicable federal and state securities laws, of any shares of Alcoa common stock held by Arconic. Alcoa filed a registration statement on Form S-1 pursuant to the Stockholder Agreement, which was declared effective by the SEC on February 10, 2017. On February 14, 2017, Arconic sold 23,353,000 Alcoa shares in the open market.
(4) As reported in a Schedule 13G amendment dated February 14, 2017. Elliott Associates L.P. had sole power to vote and dispose of 3,275,985 shares of our common stock, Elliott International, L.P. had shared power to vote and dispose of 6,961,472 shares of our common stock, and Elliott International Capital Advisors Inc. had shared power to vote and dispose of 6,961,472 shares of our common stock.

 

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Beneficial Ownership (continued)

 

Stock Ownership of Directors and Executive Officers

The following table shows the ownership of Alcoa common stock, as of March 1, 2017, by each director, each of the NEOs, and all directors and executive officers (serving as of such date) as a group. The address of each director and executive officer shown in the table below is c/o Alcoa Corporation, 390 Park Avenue, New York, New York 10022-4608. Executive officers and directors are subject to stock ownership guidelines. Please see the “Compensation Discussion and Analysis” for a discussion of executive stock ownership guidelines and the “Stock Ownership Guideline for Non-Employee Directors” for a discussion of non-employee stock ownership guidelines.

 

   Name of Beneficial Owner  

Shares of

Common Stock2

   

Percentage

of Class
Beneficially
Owned

    Restricted Stock
Units
3
   

Deferred Share

Units4

    Total
including
Shares  and
Units
5
 

  Directors

         

  Michael G. Morris

    3,346            *          2,078            44,168            49,592       

  Mary Anne Citrino

    —              *          2,078            —              2,078       

  Timothy P. Flynn

    —              *          2,078            —              2,078       

  Kathryn S. Fuller

    —              *          2,078            24,982            27,060       

  James A. Hughes

    —              *          2,078            —              2,078       

  James E. Nevels

    33            *          2,078            —              2,111       

  James W. Owens

    1,669            *          2,078            33,464            37,211       

  Carol L. Roberts

    —              *          2,078            13,571            15,649       

  Suzanne Sitherwood

    —              *          2,078            —              2,078       

  Steven W. Williams

    —              *          2,078            —              2,078       

  Ernesto Zedillo

    —              *          2,078            41,735            43,813       

  Named Executive Officers

         

  Roy C. Harvey1

    128,096            *          —              —              128,096       

  William F. Oplinger

    236,650            *          —              313            236,963       

  Tómas M. Sigurðsson

    35,626            *          —              —              35,626       

  Leigh Ann C. Fisher

    65,429            *          —              —              65,415       

  Jeffrey D. Heeter

    4,000            *          —              —              4,000       

  All Directors and Executive Officers as a Group (17 individuals)

    475,895            *          22,858            158,233            656,986       
* Indicates that the percentage of beneficial ownership does not exceed 1%, based on 184,191,713 shares of Company common stock outstanding as of March 1, 2017.
1. Mr. Harvey also is a director of Alcoa.
2. This column shows beneficial ownership of Company common stock as calculated under SEC rules. This column includes shares held of record, shares held by a bank, broker or nominee for the person’s account, shares held through family trust arrangements, shares held jointly with the named individuals’ spouses, and for executive officers, share equivalent units held in the Company’s retirement savings plan which confer voting rights through the plan trustee with respect to shares of Company common stock. This column includes shares of Company common stock that may be acquired under employee stock options that are exercisable as of March 1, 2017 or will become exercisable within 60 days thereafter as follows: Mr. Harvey (118,334); Mr. Oplinger (193,689); Ms. Fisher (55,999); Mr. Sigurðsson (24,246); none for Mr. Heeter; and all executive officers as a group (392,268). No non-employee directors have Company stock options. As of March 1, 2017, individual directors and executive officers, as well as all directors and executive officers as a group, beneficially owned less than 1% of the outstanding shares of our common stock.
3. Restricted share units have time-based vesting and are payable following a director’s Separation from service from the Board, pursuant to the terms of the Company’s Non-Employee Director Compensation Policy.
4. This column lists (i) for executive officers, deferred share equivalent units held under the Alcoa Corporation Deferred Compensation Plan, and (ii) for directors, deferred share equivalent units that had been acquired pursuant to ParentCo’s deferred fee plans for directors. Deferred share equivalent units are payable in cash and do not have voting rights.
5. This table does not include performance-based restricted share units or time-based only restricted share units granted to the executive officers, which will not be earned and/or paid within 60 days of March 1, 2017.

 

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2017 PROXY STATEMENT   

 

Item 2 Ratification of Appointment of Independent Registered Public Accounting Firm

 

LOGO

 

Under its written charter, the Audit Committee of the Board has sole authority and is directly responsible for the appointment, retention, compensation, oversight, evaluation and termination of the independent registered public accounting firm retained to audit the Company’s financial statements.

The Audit Committee evaluated the qualifications, performance and independence of the Company’s independent auditors and based on its evaluation, has appointed PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2017. PricewaterhouseCoopers LLP served as the independent auditor of ParentCo and Alcoa during 2016. The Audit Committee and the Board believe that the retention of PricewaterhouseCoopers LLP to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and its stockholders.

The Audit Committee is responsible for the approval of the engagement fees and terms associated with the retention of PricewaterhouseCoopers LLP. In addition to assuring the regular rotation of the lead audit partner as required by law, the Audit Committee will be involved in the selection and evaluation of the lead audit partner and considers whether, in order to assure continuing auditor independence, there should be a regular rotation of the independent registered public accounting firm.

Although the Bylaws do not require that we seek stockholder ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm, we are doing so as a matter of good corporate governance. If the stockholders do not ratify the appointment, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers LLP.

Representatives of PricewaterhouseCoopers LLP are expected to be present at the annual meeting, will have the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions by stockholders.

 

The Board of Directors recommends a vote “FOR” ITEM 2, to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2017.

 

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Item 2 Ratification of Appointment of Independent Registered Public Accounting Firm (continued)

 

 

Report of the Audit Committee

In accordance with its written charter, the Audit Committee of the Board is responsible for assisting the Board to fulfill its oversight of:

 

  the integrity of the Company’s financial statements and internal controls,
  the Company’s compliance with legal and regulatory requirements,
  the independent auditors’ qualifications and independence, and
  the performance of the Company’s internal audit function and independent auditors.

It is the responsibility of Alcoa’s management to prepare the Company’s financial statements and to develop and maintain adequate systems of internal accounting and financial controls. The Company’s internal auditors are responsible for conducting internal audits intended to evaluate the adequacy and effectiveness of the Company’s financial and operating internal control systems.

PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm for 2016 (the independent auditor), is responsible for performing an independent audit of the Company’s consolidated financial statements and issuing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States of America (GAAP). The independent auditors also review the Company’s interim financial statements in accordance with applicable auditing standards.

In evaluating the independence of PricewaterhouseCoopers LLP, the Audit Committee has (i) received the written disclosures and the letter from PricewaterhouseCoopers LLP required by applicable requirements of the Public Company Accounting Oversight Board (PCAOB) regarding the audit firm’s communications with the Audit Committee concerning independence, (ii) discussed with PricewaterhouseCoopers LLP the firm’s independence from the Company and management and (iii) considered whether PricewaterhouseCoopers LLP’s provision of non-audit services to the Company is compatible with the auditors’ independence. In addition, the Audit Committee assures that the lead audit partner is rotated at least every five years in accordance with SEC and PCAOB requirements, and considered whether there should be a regular rotation of the audit firm itself in order to assure the continuing independence of the outside auditors. The Audit Committee has concluded that PricewaterhouseCoopers LLP is independent from the Company and its management.

The Audit Committee has reviewed with the independent auditors and the Company’s internal auditors the overall scope and specific plans for their respective audits, and the Audit Committee is monitoring the progress of both in assessing the Company’s preparedness for future compliance with Section 404 of the Sarbanes-Oxley Act.

At every regular meeting, the Audit Committee meets separately, and without management present, with the independent auditor and the Company’s Vice President—Internal Audit to review the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s accounting and financial reporting. The Audit Committee also meets separately at its regular meetings with the Chief Financial Officer, The Controller, the General Counsel, and the Chief Ethics and Compliance Officer.

The Audit Committee has met and discussed with management and the independent auditors the fair and complete presentation of the Company’s financial statements. The Audit Committee has also discussed and reviewed with the independent auditors all matters required to be discussed by PCAOB Auditing Standard No. 1301 (Communications with Audit Committees). The Audit Committee has discussed significant accounting policies applied in the financial statements, as well as alternative treatments. Management has represented that the consolidated financial statements have been prepared in accordance with GAAP, and the Audit Committee has reviewed and discussed the audited consolidated financial statements with both management and the independent auditors.

Relying on the foregoing reviews and discussions, the Audit Committee recommended to the Board, and the Board approved, inclusion of the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, for filing with the SEC. In addition, the Audit Committee has approved, subject to stockholder ratification, the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2017.

The Audit Committee

Carol L. Roberts, Chair

Timothy P. Flynn

James A. Hughes

Suzanne Sitherwood

Ernesto Zedillo

 

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Item 2 Ratification of Appointment of Independent Registered Public Accounting Firm (continued)

 

 

 

Audit Committee Pre-Approval Policy

The Audit Committee has adopted policies and procedures for pre-approval of audit, audit-related, tax and other services, and for pre-approval of fee levels for such services. These procedures require that the terms and fees for the annual audit service engagement be approved by the Audit Committee. The Audit Committee is required to pre-approve the audit and non-audit services performed by the independent auditor in order to assure that the provision of such services does not impair the auditor’s independence. Unless a type of service to be provided by the independent auditor has received pre-approval under this policy, it will require specific pre-approval by the Audit Committee before the service is provided. Any proposed services exceeding pre-approved cost levels under the policy will require specific pre-approval by the Audit Committee before the service is provided. The term of any pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically provides for a different period. The Audit Committee will periodically revise the list of pre-approved services, based on subsequent determinations. Under the policy, the committee has delegated limited pre-approval authority to the chair of the committee; the chair is required to report any pre-approval decisions to the Audit Committee at its next scheduled meeting. All services set forth in the following table below were approved by ParentCo’s Audit Committee or the Alcoa Audit Committee before being rendered.

Audit and Non-Audit Fees

The following table shows fees for professional services rendered by PricewaterhouseCoopers LLP for the fiscal year ended December 31, 2016 (in millions). Due to the Separation from ParentCo on November 1, 2016, no fees are reflected for Alcoa Corporation for the year ended December 31, 2015, as we did not pay any fees for professional services to PricewaterhouseCoopers LLP. The 2016 fees below include fees allocated by ParentCo and those paid directly by Alcoa Corporation.

 

      2016  

  Audit Fees

   $ 7.3  

  Audit-Related Fees

   $ 0.2  

  Tax Fees

   $ 0  

  All Other Fees

   $ 0  

  Total

   $ 7.5  

Audit Fees include the base audit fee, effects of foreign currency exchange rates on the base audit fee, scope adjustments to the base audit requirements, Alcoa Corporation’s 2016 standalone audit, and accounting and audit advisory services.

Audit-Related Fees include audits of employee benefit plans and agreed-upon or expanded audit procedures for accounting or regulatory requirements.

 

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2017 PROXY STATEMENT   

 

Item 3 Advisory Approval of Executive Compensation

 

LOGO

 

As required pursuant to Section 14A of the Exchange Act, the Board is asking you to approve, on an advisory basis, the executive compensation programs and policies and the resulting 2016 compensation of the named executive officers listed in the “Summary Compensation Table” on page 56 of this Proxy Statement, commonly referred to as the “Say on Pay” vote.

The Say on Pay vote is advisory, and so the result will not be binding on the Company, the Board, or the Compensation and Benefits Committee and it will not affect, limit or augment any existing compensation or awards. The Compensation and Benefits Committee will, however, take into account the outcome of the vote when considering future compensation arrangements.

We believe you should read the “Compensation Discussion and Analysis” and the compensation tables in determining whether to approve this proposal.

The Board recommends approval of the following resolution:

RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the executive compensation tables and the related narrative discussion, is hereby APPROVED.

 

The Board of Directors recommends a vote “FOR” ITEM 3, to approve, on an advisory basis, the compensation of the Company’s named executive officers, as stated in the above resolution.

 

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Item 4 Advisory Approval on the Frequency of the Advisory Vote to Approve Executive Compensation

 

LOGO

 

In addition to providing stockholders with the opportunity to cast a “Say on Pay” advisory vote on the compensation of our named executive officers, in accordance with SEC rules, we are also providing our stockholders with the opportunity to indicate how frequently we should seek an advisory vote on the compensation of our named executive officers in the future. This non-binding advisory vote is commonly referred to as a “Say on Frequency” vote. Under this proposal, our stockholders may indicate whether they would prefer to have an advisory vote on executive compensation every year, every two years, or every three years.

The Compensation and Benefits Committee and the Board believe that the advisory vote on executive compensation should be conducted every year because we believe this frequency will enable our stockholders to vote, on an advisory basis, on the most recent executive compensation information that is presented in our Proxy Statement, leading to more meaningful and timely communication between the Company and our stockholders on the compensation of our named executive officers.

Stockholders are not voting to approve or disapprove the Board’s recommendation. Instead, you may cast your vote on your preferred voting frequency by choosing any of the following four options with respect to this proposal: “every one year,” “every two years,” “every three years,” or “abstain.”

For the reasons discussed above, we are asking our stockholders to vote for a frequency of “every one year.”

The Say on Frequency vote is advisory, and therefore is not binding on the Company, the Board, or the Compensation and Benefits Committee. However, the Board and the Compensation and Benefits Committee value the opinions expressed by stockholders in their vote on this proposal, and will consider the option that receives the most votes in determining the frequency of future advisory votes on compensation of our named executive officers.

The Board of Directors recommends approval of the following resolution:

RESOLVED, that the advisory vote relating to compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the executive compensation tables and the related narrative discussion, shall be conducted EVERY ONE YEAR.

 

The Board of Directors recommends a vote for “EVERY ONE YEAR” on ITEM 4, on an advisory basis, relating to the frequency of the advisory vote to approve executive compensation, as stated in the above resolution.

 

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2017 PROXY STATEMENT   

 

Executive Compensation

 

LOGO

 

Summary

Our executive compensation programs are developed by the Compensation and Benefits Committee (the “Committee”). The compensation programs outlined in the Compensation Discussion and Analysis (“CD&A”), and under which the 2016 performance-based compensation of our named executive officers (“NEOs”) was paid, were developed by the ParentCo Compensation Committee prior to the Separation. Following the Separation, the Committee has taken an active role in reviewing and developing the future performance-based plans, as outlined in our Current Report on Form 8-K filed on February 24, 2017. These performance-based plans are focused on enhancing stockholder return, motivating superior operating results by focusing management on core controllable earnings and attracting and retaining critical talent that is vital to the success of our Company.

Overview of 2016 Performance-Based Pay

Performance targets were established at the beginning of 2016 for both the annual incentive compensation (IC) program and long-term incentive awards to ensure that Alcoa was positioned for success following the Separation as a new publicly-traded company. In addition to leadership playing a critical role in managing the Separation of a global organization with a complex infrastructure, as well as securing the financing needed to support the new organization as a successful stand-alone company, our NEOs were able to drive significant business results: exceeding our gross productivity target and delivering net performance improvement; annual production records set at the Juruti bauxite mine, as well as at three alumina refineries and four smelters; increase of third party shipments of bauxite, to 6.0M bone dry metric tons and securing an export license from Western Australia for future bauxite shipments; and progress with respect to customer qualifications at the Ma’aden Rolling Company and successful transitioning of the Warrick rolling mill to cold metal sourcing. All the while, leadership also focused on return-seeking and sustaining capital projects that serve as the foundation of our growth for the future. Overall, the Company was able to meet or exceed the goals established for the IC, but we fell short of our goals for the long-term incentive awards for the prior 3-year period, both of which are further detailed in the CD&A.

While the financial results varied based on the business unit or resource unit of the NEO prior to the Separation, the following 2016 IC methodology was consistently applied to all NEOs. As illustrated below with respect to our CEO each NEO’s salary and IC award target were prorated based on their positions both prior to and following the Separation, as well as the corresponding company performance results during these times to prevent a windfall to the executive. Generally, NEOs received 10 months of salary and IC based on their prior position with ParentCo and the final 2 months of salary and IC based on their new position with Alcoa Corporation. The Committee then specifically reviewed each NEO’s performance relative to their respective roles and the contributions in light of a successful Separation into a standalone publicly-traded company. The results presented in the CD&A represent not only the achievement of Company performance above target for IC, but also the significant individual performance of each NEO both prior to and following the Separation.

 

 

CEO 2016 IC Final Payment Recommendation

 
NAME   Period     Salary     Earnings    

IC Target

%

    IC Target
$
   

 

Financial
Results %

    Financial
Result $
    Weighting     Individual
Multiplier
    Total IC
Payout
 

 

   Harvey, Roy C.

 

Part 1

 

 

 

 

Jan-Oct 2016

 

 

 

 

$

 

525,000

 

 

 

 

$

 

437,500

 

 

 

 

 

 

100

 

 

 

$

 

437,500

 

 

 

 

 

 

100.7

 

 

 

$

 

440,563

 

 

    50%       150%       $533,737  
 

 

 

 

Nov-Dec 2016

 

 

 

 

$

 

925,000

 

 

 

 

$

 

154,167

 

 

 

 

 

 

140

 

 

 

$

 

215,833

 

 

 

 

 

 

125.6

 

 

 

$

 

271,087

 

 

     
                   

Part 2

 

 

 

 

Jan-Oct 2016

 

 

 

 

$

 

525,000

 

 

 

 

$

 

437,500

 

 

 

 

 

 

100

 

 

 

$

 

437,500

 

 

 

 

 

 

125.6

 

 

 

$

 

549,500

 

 

    50%       150%       $615,440  
 

 

 

 

Nov-Dec 2016

 

 

 

 

$

 

925,000

 

 

 

 

$

 

154,167

 

 

 

 

 

 

140

 

 

 

$

 

215,833

 

 

 

 

 

 

125.6

 

 

 

$

 

271,087

 

 

     
                   

 

Payout Based on Financial Results and Individual Multiplier at 100%:

 

 

 

$

 

  1,149,177

 

 

The 2016 tranches of the long-term incentive awards were originally granted in 2014, 2015 and 2016, with 2016 constituting one-third of the overall award. The NEOs with such awards received below target earnings for the 2016 tranches based upon 2016 financial results. The applied financial results for each NEO were based on their business unit or resources unit at the beginning of 2016.

 

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Executive Compensation (continued)

 

Compensation Discussion and Analysis

LOGO

This Compensation Discussion and Analysis (“CD&A”) describes Alcoa’s executive compensation philosophy and the pay programs applicable to the below-referenced NEOs in 2016. On November 1, 2016, Alcoa became an independent publicly-traded company as a result of the Separation. In order to provide a fulsome view of 2016 compensation provided to the NEOs, this CD&A and the related compensation tables include information regarding compensation paid by, and executive compensation policies and practices of, ParentCo as they relate to our NEOs prior to the Separation, as well as Alcoa’s compensation structure following the Separation. Since the Separation, the 2016 ParentCo executive compensation programs, policies, and practices applicable to the NEOs have been reviewed by the Committee and the similar executive compensation programs, policies, and practices implemented for Alcoa after the Separation were ratified by the Committee. The Committee will continue to consider our executive compensation programs, policies and practices in the context of our business needs on a going-forward basis.

The 2016 NEOs are comprised of our Chief Executive Officer and Chief Financial Officer, and the three most highly compensated officers of Alcoa at December 31, 2016:

  Roy C. Harvey, our Chief Executive Officer (the “CEO”). Prior to the Separation, Mr. Harvey served as Executive Vice President and Group President, Global Primary Products for ParentCo.
  William F. Oplinger, our Executive Vice President and Chief Financial Officer (the “CFO”). Prior to the Separation, Mr. Oplinger served as Executive Vice President and Chief Financial Officer for ParentCo.
  Tomas M. Sigurðsson, our Executive Vice President and Chief Operating Officer. Prior to the Separation, Mr. Sigurðsson served as Vice President and Chief Operating Officer—Global Primary Products for ParentCo.
  Leigh Ann C. Fisher, our Executive Vice President and Chief Administrative Officer. Prior to the Separation, Ms. Fisher served as Chief Financial Officer—Global Primary Products for ParentCo.
  Jeffrey D. Heeter, our Executive Vice President, General Counsel and Secretary. Prior to the Separation, Mr. Heeter served as Assistant General Counsel and Assistant Officer for ParentCo.

As discussed above, until the consummation of the Separation, Alcoa was part of ParentCo and was not an independent company. The NEOs’ respective 2016 compensation relates to (i) ParentCo from January 1, 2016 through October 31, 2016 and (ii) Alcoa from November 1, 2016 through December 31, 2016. Decisions regarding the establishment of the 2016 compensation of Messrs. Harvey and Oplinger, who were also named executive officers of ParentCo in its proxy statement filed on March 24, 2016, were made by the Compensation and Benefits Committee of the ParentCo board of directors (the “ParentCo Compensation Committee”). Decisions regarding the establishment of the 2016 compensation of Messrs. Sigurðsson and Heeter and Ms. Fisher were made by the ParentCo Compensation Committee or ParentCo management in accordance with the applicable plan or program.

This CD&A is organized as follows: (i) Alcoa’s and ParentCo’s overall executive compensation philosophies, (ii) Alcoa’s and ParentCo’s executive compensation policies and practices, (iii) the impact of ParentCo’s 2015 “say-on-pay” vote on 2016 executive compensation, (iv) ParentCo’s 2016 executive compensation decision-making, (v) components of ParentCo’s 2016 executive compensation program and how the Separation affected the program, and (vi) other compensation plans and arrangements.

Executive Compensation Philosophy

ParentCo’s executive compensation philosophy prior to the Separation was based on three guiding principles to drive pay-for-performance and stockholder alignment:

  1. Target salary compensation at median, while using annual incentive compensation (“IC”) and long-term incentive (“LTI”) to reward exceptional performance and to attract and retain exceptional talent.
  2. Make equity the most significant portion of total compensation for senior executives and managers, increasing the portion of performance-based equity with the level of responsibility.
  3. Choose IC and LTI metrics that focus management’s actions on achieving the greatest positive impact on financial performance.

 

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Executive Compensation | Compensation Discussion and Analysis | Executive Compensation Philosophy (continued)

 

Prior to the Separation, the ParentCo Compensation Committee used its business judgment to determine the appropriate compensation targets and awards for its executive officers, including Messrs. Harvey and Oplinger, in 2016. As part of this determination, the ParentCo Compensation Committee assessed several factors, including:

  Individual, group, and corporate performance;
  Market positioning based on peer group data;
  Complexity and importance of the role and responsibilities;
  Aggressiveness of targets;
  Unanticipated events impacting target achievement;
  Retention of key individuals in a competitive talent market; and
  Leadership and growth potential.

Our Executive Compensation Philosophy generally is based on ParentCo’s above-described philosophy, as modified to be relevant to our business following the Separation. The Committee expects to continue to refine our executive compensation to align with our business needs, stockholder value, and peer group practices going forward.

Executive Compensation Policies and Practices

 

The executive compensation programs, policies, and practices implemented by the Committee are similar to those of ParentCo, with certain modifications that the Committee believed to be relevant to our business. These executive compensation policies and practices, as well as those relevant to NEO compensation during 2016, are highlighted below.

What We Do:

Pay for Performance. We believe in a “pay for performance” philosophy. ParentCo historically linked executive compensation to measured performance in key financial and nonfinancial areas, and our practices are consistent with this philosophy. For purposes of 2016 compensation decisions, ParentCo evaluated performance against rigorous business metrics, including adjusted free cash flow, adjusted EBITDA, safety, environmental, and workplace diversity. These metrics incentivized performance during 2016.

Consider Peer Groups in Establishing Compensation. To help determine total 2016 direct compensation for its executive officers prior to the Separation, including for Messrs. Harvey and Oplinger, the ParentCo Compensation Committee used a peer group consisting of 137 companies who participated in the Willis Towers Watson Executive Compensation survey with revenues between $15 billion and $50 billion (excluding financial companies), which reflected the broad-based group of companies with which ParentCo competed for non-CEO executive talent (the “2016 ParentCo Peer Group”). This group was selected as ParentCo’s aluminum industry peers did not provide an adequate basis for compensation comparison purposes because there were too few of them, they were all located outside of the United States and they did not disclose sufficient comparative compensation data. The data from the 2016 ParentCo Peer Group was considered by ParentCo in establishing 2016 executive compensation prior to the Separation to ensure that ParentCo provided and maintained executive compensation levels in line with the market and could attract, retain and motivate employees through the normal course of business and the pending Separation, including the NEOs. The ParentCo Compensation Committee’s independent compensation consultant reviewed and endorsed the 2016 ParentCo Peer Group. The component companies of the 2016 ParentCo Peer Group are described under “2016 ParentCo Peer Group” in Attachment A.

In preparation for the Separation, the ParentCo Compensation Committee developed and approved two peer groups applicable to our management; one for our CEO (the “New CEO Peer Group”) which is also used as a secondary peer group for NEOs as applicable and a second management peer group that also applies to the other NEOs (the “New Non-CEO Peer Group”). The peer group data was used to assist in determining competitive compensation for our management in connection with the Separation and their respective assumption of senior roles with the new organization. The component companies for these peer groups are described under “New CEO Peer Group” and “New Non-CEO Peer Group,” in Attachment A.

Review Tally Sheets. For 2016 executive compensation decisions prior to the Separation, the ParentCo Compensation Committee reviewed tally sheets that summarized various elements of historic and current compensation for each of its

 

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executive officers, including Messrs. Harvey and Oplinger. This information included compensation opportunity, actual compensation realized and wealth accumulation analyses. The tally sheets helped ParentCo synthesize the various components of its 2016 compensation program. The Committee plans to review tally sheets in connection with making annual compensation decisions.

Maintain Robust Stock Ownership Guidelines. Alcoa maintains stock ownership requirements that align the interests of management with those of its stockholders by requiring executives to hold substantial equity in Alcoa until retirement. Our stock ownership guidelines require that the CEO and each of the non-CEO NEOs retain equity equal in value to 6 times and 2 to 3 times their base salaries, respectively. As Alcoa Corporation has been a standalone public company only since November 1, 2016, and with most NEOs being new to their roles, none of the NEOs have yet satisfied these stock ownership requirements. These guidelines reinforce management’s focus on long-term stockholder value and commitment to Alcoa.

Schedule Stock Option Grants to Promote Transparency and Consistency. Prior to the Separation, ParentCo’s historical practice was to grant stock options to its executives at a fixed time every year, and with an exercise price based on the closing market price per share of ParentCo stock on the grant date. We expect to follow similar stock option grant practices.

Clawback Policies Incorporated into Incentive Plans. Alcoa’s Incentive Compensation Plan (the “Incentive Compensation Plan”), the Internal Revenue Code 162(m) Compliant Annual Cash Incentive Plan (the “Section 162(m) Annual Incentive Plan,” and together with the Incentive Compensation Plan, the “Annual Incentive Plans”), and 2016 Stock Incentive Plan (the “2016 Stock Incentive Plan”) each contain “clawback” provisions regarding recoupment of compensation. In accordance with our Corporate Governance Guidelines, if the Board learns of any misconduct by an executive officer that contributed to Alcoa having to restate all or a portion of its financial statements, the Board may take remedial action against such person to recover certain incentive compensation, among other actions.

Double-Trigger Equity Vesting in the Event of a Change in Control. Double-trigger vesting generally means that if outstanding awards under the 2016 Stock Incentive Plan are replaced by the acquirer or related entity in a change in control of Alcoa, those replacement awards will not immediately vest on a “single trigger” basis, but vesting would accelerate only if the participant is terminated without cause or quits for good reason (as those terms are defined in the Alcoa Corporation Change in Control Severance Plan) within 24 months following the change in control. Performance-based stock awards will be converted to time-vested stock awards upon a change in control under the following terms: (i) if 50% or more of the performance period has been completed as of the date on which the change in control has occurred, then the number of shares or the value of the award will be based on actual performance completed as of the date of the change in control; or (ii) if less than 50% of the performance period has been completed as of the date on which the change in control has occurred, then the number of shares or the value of the award will be based on the target number or value.

Pay Competitive Salaries to Senior Executives. Prior to the Separation, ParentCo set the salaries of its 2016 executive officers, including Messrs. Harvey and Oplinger, after consideration of the median of the peer group for their respective positions, performance, and other factors. ParentCo used this same approach in setting and approving base salaries for our NEOs, other than Mr. Oplinger, who were being promoted to senior executive positions with Alcoa at the time of the Separation. Mr. Oplinger’s salary, IC and LTI targets were reviewed, but not changed, based on ParentCo’s determination that his compensation was appropriate for his position in a company having the size and global scope of Alcoa following the Separation. We describe more fully the decisions regarding 2016 base salaries for our NEOs below under 2016 Base Salaries.

Provide Appropriate Benefits to Senior Executives. The NEOs participate in the same benefit plans as our salaried employees. We provide retirement and benefit plans to senior executives for the same reasons we provide them to employees—to provide a competitive compensation package that offers an opportunity for retirement, savings and health and welfare benefits. Retirement plans for senior executives generally pay the same formula amount as retirement plans for salaried employees. At the time of the Separation, ParentCo benefit plans were replicated for our employees.

 

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Executive Compensation | Compensation Discussion and Analysis | Executive Compensation Policies and Practices (continued)

 

Maintain a Conservative Compensation Risk Profile. Prior to the Separation, the ParentCo Compensation Committee evaluated the risk profile of ParentCo’s compensation programs when establishing policies and approving 2016 plan design, and the ParentCo Board of Directors annually considered risks related to compensation in its oversight of enterprise risk management. These evaluations noted numerous ways in which compensation risk is effectively managed or mitigated, including the following factors:

  A balance of corporate and business unit weighting in incentive compensation plans;
  Balanced mix between short-term and long-term incentives;
  Caps on incentives;
  Use of multiple performance measures in the Annual Incentive Plans and the 2016 Stock Incentive Plan, with a focus on operational targets to drive free cash flow and profitability;
  Discretion retained by the ParentCo Compensation Committee to adjust awards;
  Stock ownership guidelines requiring holding substantial equity in ParentCo until retirement;
  Clawback policies applicable to all forms of IC;
  Anti-hedging provisions in the insider trading policy; and
  Restricting stock options to 20% of the value of equity awards to senior officers.

The Committee will evaluate risk relative to our compensation programs for 2017.

Consider Tax Deductibility When Designing and Administering Incentive Compensation. Section 162(m) of the Internal Revenue Code, as amended (the “Code”), limits deductibility of certain compensation to $1 million per year for the CEO and each of the three other most highly compensated executive officers (other than the CFO) who are employed at year-end (“covered employees”). If certain conditions are met, performance-based compensation may be excluded from this limitation. Our Annual Incentive Plans are designed with the intention that performance-based compensation paid under them may be eligible to qualify for deductibility under Section 162(m) and, in making compensation decisions, the Committee intends to consider the potential deductibility of proposed compensation.

Section 162(m) includes a special transition period for certain spin-offs of subsidiaries of publicly held companies that become separately held public companies. During this transition period, any compensation paid to covered employees under the Annual Incentive Plans and the 2016 Stock Incentive Plan will be exempt from the deduction limits under Section 162(m) for a limited period of time even without stockholder approval, so long as the other applicable requirements of Section 162(m) are met (i.e., requirements relating to the composition of the compensation committee, the performance goals and the certification of the performance goals). This transition period is applicable for compensation paid in connection with annual incentive bonuses, stock options, stock appreciation rights, restricted shares or restricted share units granted under the Annual Incentive Plans and the 2016 Stock Incentive Plan, as applicable, prior to the first regularly scheduled meeting of our stockholders that occurs beginning 12 months after the date of the Separation (which occurred on November 1, 2016). For compensation paid, and stock options, stock appreciation rights or restricted property granted under the Annual Incentive Plans and the 2016 Stock Incentive Plan after the date of that meeting, the plans must be approved by Alcoa’s stockholders to retain this exemption from deduction limits under Section 162(m).

The Committee retains flexibility in administering its compensation programs and may exercise discretion to authorize awards or payments that it deems to be in the best interests of Alcoa and its stockholders which may not qualify for tax deductibility.

The ParentCo Compensation Committee Retained, and the Alcoa Corporation Compensation Committee Retains, an Independent Compensation Consultant. In 2016, the ParentCo Compensation Committee directly retained an independent consultant, Pay Governance LLC, that provided advice as requested by the ParentCo Compensation Committee on the amount and form of certain executive compensation components, including, among other items, executive compensation best practices, insights concerning SEC and say-on-pay developments, and analysis and review of ParentCo’s compensation plans for executives. The independent consultant did not provide any services to ParentCo other than the services provided directly to the ParentCo Compensation Committee. ParentCo utilized broad-based comparative compensation survey data from Willis Towers Watson, which survey data was not customized for ParentCo, to assist with its general understanding as to whether its compensation programs were competitive with the market.

The Committee has retained Pay Governance LLC to advise it on matters relating to executive and director compensation.

 

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Executive Compensation | Compensation Discussion and Analysis | Executive Compensation Policies and Practices (continued)

 

What We Don’t Do

No Dividend Equivalents on Stock Options and Unvested Awards. Alcoa currently does not pay a regular dividend. If and to the extent that we determine to pay dividends in the future, dividend equivalents would be accrued and paid on certain awards only if and when such awards vest. Such dividend equivalents would be calculated at the same rate as any dividends paid on our common stock. Dividend equivalents would not be paid on stock options. Restricted share units, granted by the ParentCo, have accrued dividend equivalents, which will be paid only if and when such awards vest.

No Share Recycling. The 2016 Stock Incentive Plan generally prohibits share recycling. Shares tendered in payment of the purchase price of a stock option award or withheld to pay taxes may not be added back to the available pool of shares.

No Repricing of Underwater Stock Options (including cash-outs). The 2016 Stock Incentive Plan prohibits repricing, including cash-outs.

No Short Selling, Hedging or Pledging of Alcoa Stock. Short sales of Alcoa securities (sales of securities which are not then owned) and derivative or speculative transactions in Alcoa securities by our directors, officers and employees are prohibited. No director, officer or employee or any designee of such director, officer or employee is permitted to purchase or use financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) that are designed to hedge or offset any decrease in the market value of Alcoa securities. Directors and officers subject to Section 16 of the Exchange Act are prohibited from holding Alcoa securities in margin accounts and from pledging Alcoa securities as collateral.

No Excise Tax Gross-Ups for Participants in the Alcoa Corporation Change in Control Severance Plan. The Change in Control Severance Plan provides that no excise or other tax gross-ups will be paid, and that severance benefits will be available only upon termination of employment for “good reason” by an officer or without cause by Alcoa. For a discussion of the Alcoa Corporation Change in Control Severance Plan, see “Other Compensation Plans and Arrangements of Alcoa” and “Potential Payments upon Termination or Change in Control.”

No Employment Contracts. None of the NEOs have employment contracts.

No Significant Perquisites. Consistent with our Executive Compensation Philosophy, we limit the perquisites provided to executive officers to those that serve reasonable business purposes.

2015 ParentCo Say-on-Pay Vote and Impact on 2016 Executive Pay Decisions

 

 

ParentCo viewed the significant support (92% of the votes cast at ParentCo’s 2016 stockholders’ meeting in favor of ParentCo’s 2015 say-on-pay proposal) as reinforcement of stockholder support of ParentCo’s executive compensation philosophy and plans and, as such, the vote did not impact the overall design of the 2016 executive compensation program.

The Committee will consider stockholder input, including the advisory Say on Pay vote, as it evaluates the design of executive compensation programs and the specific compensation decisions for executive officers in the future, including as a result of the Say on Pay vote to be held at the 2017 annual meeting.

ParentCo’s 2016 Executive Compensation Decisions

 

 

Because we have been an independent company only since November 2016, most of the decisions impacting 2016 executive compensation were made by ParentCo and grounded in its executive compensation philosophy and policies. The Committee reviewed and affirmed decisions made by ParentCo in November 2016.

To attract, motivate, align and retain high performing executives, ParentCo designed its 2016 executive compensation program at median base salary levels while providing cash and equity incentives that motivate exceptional performance. Given the demanding leadership challenges confronting the aluminum industry in recent years, the prospect of an upside in IC and LTI had proven to be a major retention factor and had a demonstrable impact on motivating managers to achieve strong operational and financial performance. ParentCo set thresholds that eliminate payouts for missing targets by more than a small margin. While the reduced payout slope from target to minimum was steep, ParentCo established payout multiples for overachievement that could be earned only with significant upside performance.

 

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Executive Compensation | Compensation Discussion and Analysis | ParentCo’s 2016 Executive Compensation Decisions (continued)

 

ParentCo designed its 2016 executive compensation program to make equity the most significant portion of total compensation for senior executives and managers, increasing the portion of performance-based equity with the level of responsibility. For 2016, post-Separation, 12% to 32% of NEO compensation was fixed in the form of base salary, and the remaining 68% to 88% was performance-based and at-risk, which included IC and LTI awards.

Components of ParentCo’s 2016 Executive Compensation Program

 

 

2016 Base Salaries

Each ParentCo 2016 executive officer, including Messrs. Harvey and Oplinger, received a salary that was determined after consideration of the median of the peer group for their respective positions, performance and other factors. ParentCo paid salaries to its executive officers to ensure an appropriate level of fixed compensation that enables the attraction and retention of highly skilled executives and mitigates the incentive to assume highly risky business strategies to maximize annual cash IC. The base salaries for the NEOs at the beginning of 2016 were as follows: Mr. Harvey, $525,000, Mr. Oplinger, $550,000, Mr. Sigurðsson, $444,000, Ms. Fisher, $346,688, and Mr. Heeter, $265,421.

In connection with the Separation, changes were made to the base salaries of the NEOs, other than Mr. Oplinger, to reflect their promotions into senior executive roles with Alcoa. The base salaries of Messrs. Harvey, Sigurðsson, and Heeter, and Ms. Fisher increased to $925,000, $480,000, $390,000, and $390,000, respectively. As previously described, Mr. Oplinger’s base salary remained the same, as he continued in the same role following the Separation.

2016 Annual Incentive Compensation

2016 Annual Cash Incentive Compensation Target Setting

For 2016, ParentCo developed targets consistent with the expectation of a Separation occurring in 2016, as follows:

  Targets were established based on the performance of ParentCo for the 10 months prior to the Separation (i.e., January 1, 2016 through October 31, 2016) (the “ParentCo Performance Targets”).
  Targets also were established based on (i) ParentCo’s Global Primary Products business, which primarily constitutes the business of Alcoa following the Separation, and (ii) an allocation of ParentCo corporate costs for Alcoa (the “Alcoa Performance Targets”).

Annual cash IC for 2016 for the NEOs was based on the following parameters:

  80% financial targets, consisting of adjusted free cash flow (40%) and adjusted EBITDA (40%), as more fully described below; and
  20% other targets, consisting of safety (5%), environmental (5%), and diversity (10%), each as more fully described below.

The annual cash IC was measured in one of two ways for the NEO, depending upon the NEO’s business or resource unit at the beginning of the performance period:

  100% of the IC payout for Messrs. Oplinger and Heeter and 50% of the IC payout for Messrs. Harvey and Sigurðsson and Ms. Fisher was based on (i) the ParentCo Performance Targets for the 10 months prior to the Separation and (ii) the Alcoa Performance Targets for the two months following the Separation; and
  The remaining 50% of the IC payout for Messrs. Harvey and Sigurðsson and Ms. Fisher was based on the Alcoa Performance Targets for the entire 12-month performance period for 2016.

 

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Executive Compensation | Compensation Discussion and Analysis | Components of ParentCo’s 2016 Executive Compensation Program (continued)

 

The below chart describes the specific metrics and results for ParentCo and Alcoa for the 2016 annual IC awards:

 

  Performance Metric(1)  

    ParentCo

    Targets

   

    ParentCo

    Performance

   

    Alcoa

    Targets

   

    Alcoa

    Performance

    Metric Weight
(%)
 

  Adjusted Free Cash Flow(2)

  $ (710)  M    $ (533)  M    $ (247)  M    $ 6     40%    

  Adjusted EBITDA(2)

  $ 2,386  M    $ 2,360  M    $ 893  M    $ 1,002  M      40%    

  Safety(3)

  DART

  (measured in days away from work)

    0.48       0.36       0.385       0.276       5%    

  Environmental(4)

  CO2 Emissions Reduction

  (thousand tons)

    195       101       171       38.5       5%    

  Diversity

  (as percentage of workforce)

            10%    

  Executive Level Women, Global

    22.8     23.2     20.9     20.9  

  Executive Level Minorities, U.S.

    16.0     16.1     23.4     24.3  

  Professional Level Women, Global

    28.0     28.3     20.9     20.7  

  Professional Level Minorities, U.S.

    19.0     18.6     16.8     17.6  

  Total

    —         —         —         —         100%    
(1) The maximum payout for each financial and non-financial metric is 200%.
(2) The free cash flow and EBITDA financial measures have not been calculated in accordance with generally accepted accounting principles (“GAAP”). A description of the calculation of each non-GAAP financial measure to the most directly comparable GAAP financial measure is provided in “Calculation of Financial Measures” in Attachment B.
(3) The safety metric focuses on reducing the number of serious injuries, based upon the DART (Days Away, Restricted and Transfer) rate, which measures injuries and illnesses that involve one or more days away from work per 100 full-time workers and days in which work is restricted or employees are transferred to another job due to injury per 100 full-time workers.
(4) The environmental metric relates to a reduction of carbon dioxide emissions in 2016.

The 2016 annual IC awards have been structured with the intent of enabling the Committee to award compensation that constitutes performance-based compensation under Section 162(m) of the Code. Because adjusted EBITDA (calculated as described above and normalized for LME and FX, both of which are further described below) was greater than $500 million in 2016, the 2016 plan pool funded at 300% of each NEO’s individual maximum annual IC, with the Committee exercising its discretion to reduce 2016 annual IC pay-outs at levels below the NEOs’ maximum annual IC, based on the formulas described below for each NEO.

Additional Information Regarding Financial Measures

The 2016 financial measures for annual IC were equally weighted between adjusted free cash flow and adjusted EBITDA. As adjusted, these metrics exclude Separation costs. Additionally, to adjust for certain items that are outside of management’s control, we normalize for the following factors, which may have significant effects on financial results, and none of which management performance may impact:

  London Metal Exchange Pricing (“LME”): Without normalization, in years when the LME price of aluminum rises rapidly relative to plan (i.e., our forecasts), annual IC would be less effective as a performance incentive because management would receive an unearned benefit. Conversely, when the LME price of aluminum falls dramatically relative to our plan, failure to normalize would demotivate employees by placing annual IC awards out of reach for reasons beyond their control. Our use of normalization enables us to drive operational and financial performance, particularly in recent years of volatile LME aluminum prices.
  Currency Exchange Rates: Since our revenues are largely United States dollar-denominated, while costs in non-United States locations are largely denominated in local currency, the volatility of currency exchange rates may have a significant impact on earnings. As our commodities are traded in United States dollars, we typically have seen an inverse correlation to foreign currency exchange. Therefore, to avoid double counting, the normalization for the commodity price swings needs to be corrected by concurrent normalization of foreign exchange.

 

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  Premiums/Special Items: In addition to LME and foreign currency normalization, results historically have been adjusted by ParentCo to account for 50% of fluctuations in regional aluminum premiums compared to plan. Also, to ensure management maximizes performance on factors within their control, special item adjustments may be recommended to the Board for approval such as restructuring programs and one-time production disruption events.

Because we generally do not hedge foreign exchange or LME fluctuations, normalization is a practice that ParentCo has followed for many years, and that Alcoa expects to continue to follow. Normalization adjustments for LME, currency exchange rates, and 50% of regional premiums were made relative to the 2016 business plan and the 2016 annual IC awards. These normalization adjustments were immaterial to the 2016 IC awards.

2016 Target Annual IC Opportunities of Each NEO and Impact of the Separation

In January 2016, target incentive opportunities were set for each NEO based on his or her then-current job band. Following the Separation, the 2016 target bonus opportunities for each NEO, other than Mr. Oplinger, increased in connection with their assumption of senior executive roles with Alcoa (and related increase to base salary amounts). These target opportunities are set forth in the chart below.

 

  Named Executive Officer   

Target Annual
IC Opportunity

Pre-Separation

(% of Base
Salary Earnings)

    

Target Annual
IC Opportunity

Post-Separation

(% of Base
Salary Earnings)

    

Total Target

Annualized IC
Opportunity for
2016

(% of Base
Salary Earnings)

 

  Roy C. Harvey

     100                140                107          

  William F. Oplinger

     100                100                100          

  Tomas M. Sigurðsson

     65                100                71          

  Leigh Ann C. Fisher

     55                75                58          

  Jeffrey D. Heeter

     45                75                50          

2016 Annual IC Payout Determination

In February 2017, the Committee met to consider 2016 performance and determine IC payouts for 2016. Based on the metrics outlined earlier in this section, results were as follows:

  the ParentCo results were 100.7% of target; and
  the Alcoa Corporation results were 125.6% of target.

100% of the annual IC payout for Messrs. Oplinger and Heeter and 50% of the annual IC payout for Messrs. Harvey and Sigurðsson and Ms. Fisher was based on the following formula, which is (i) ParentCo Performance Targets, measured from January 1, 2016 through October 31, 2016 and (ii) Alcoa Performance Targets, measured annually and prorated for November 1, 2016 through December 31, 2016:

 

  1.    Payout based on ParentCo Performance Targets (January 1, 2016—October 31, 2016)

Pre-Separation Base

Salary Earnings

(10-month period)

  x  

Pre-Separation  

Target Incentive  

Opportunity

  x  

% Achievement

Based on Results

  x  

Individual

Performance

Multiplier(1)

  =  

Pre-Separation

Portion of

Annual IC(2)

 
+

  2.    Payout based on Alcoa Performance Targets (November 1, 2016—December 31, 2016)

Post-Separation

Base Salary Earnings

(two-month period)

  x  

Post-Separation  

Target Incentive  

Opportunity  

  x  

% Achievement

Based on Results

  x  

Individual

Performance

Multiplier(1)

  =  

Post-Separation

Portion of

Annual IC(3)

(1) Following the end of the annual performance period, individual performance multipliers were assigned to the NEOs by the Committee, as further described below. Additionally, the performance goals applicable to the awards were subject to the same normalization and adjustment principles described above under “2016 Annual Incentive Compensation-Financial Measures,” as set forth in “Calculation of Financial Measures” in Attachment B.
(2) Prorated over 10-month period.
(3) Prorated over two-month period.

 

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The remaining 50% of the annual IC payout for Messrs. Harvey and Sigurðsson and Ms. Fisher was based on the following formula, which consisted of Alcoa Performance Targets, measured annually and prorated for November 1, 2016 through December 31, 2016:

 

  Payout Based on Alcoa Performance Targets (January 1, 2016—December 31, 2016)

Pre-Separation Base Salary Earnings

(10-month period)

  x  

Pre-Separation  

Target Incentive   Opportunity

  x   % Achievement Based on Results   x   Individual Performance Multiplier(1)   =   Pre-Separation Portion of Annual IC(2)
+

Post-Separation

Base Salary Earnings

(two-month period)

  x  

Post-Separation  

Target Incentive   Opportunity

  x   % Achievement Based on Results   x   Individual Performance Multiplier(1)   =   Post-Separation Portion of Annual IC(3)
(1) Following the end of the annual performance period, individual performance multipliers were assigned to the NEOs by the Committee, as further described below. Additionally, the performance goals applicable to the awards were subject to the same normalization and adjustment principles described above under “2016 Annual Incentive Compensation-Financial Measures,” as set forth in “Calculation of Financial Measures” in Attachment B.
(2) Prorated over 10-month period.
(3) Prorated over two-month period.

In determining the 2016 IC payouts, the Committee performed a qualitative review of each NEO’s performance, with specific review and emphasis upon their respective roles and contributions to the successful consummation of the Separation of Alcoa into a standalone publicly-traded company on November 1, 2016. In light of the complexity of the Separation, each of the NEO’s critical roles in the successful completion of the Separation, and consideration of the performance of Alcoa throughout 2016, the Committee approved the following individual multipliers to apply to each of the NEO’s 2016 annual IC awards:

 

  Named Executive Officer   

Performance Multiplier

for 2016 IC Awards

 
  Roy C. Harvey      150%              

  William F. Oplinger

     150%              

  Tomas M. Sigurðsson

     125%              

  Leigh Ann C. Fisher

     150%              

  Jeffrey D. Heeter

     130%              

2016 Annual IC Payout Amounts

The foregoing performance determinations by the Committee resulted in the following amounts paid out to the NEOs for their 2016 IC awards:

 

  Named Executive Officer   

2016 IC Total Target

% Achievement

    

2016 IC Total

Earned Amount

 

  Roy C. Harvey

     176%                $ 1,149,177  

  William F. Oplinger

     157%                $ 865,013  

  Tomas M. Sigurðsson

     145%                $ 465,758  

  Leigh Ann C. Fisher

     174%                $ 361,536  

  Jeffrey D. Heeter

     142%                $ 208,621  

 

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Executive Compensation | Compensation Discussion and Analysis (continued)

 

2016 Equity Awards: Stock Options, Restricted Share Units and Performance-Based Restricted Share Units

 

 

2016 Long-Term Incentive Awards

In January 2016, ParentCo granted 2016 LTI awards to the NEOs in order to align their interests with those of stockholders, link compensation to stock price appreciation over a multi-year period, and support the retention of the ParentCo management team. The 2016 LTI awards were in the form of performance-based restricted share units and/or either time-vesting stock options or restricted share units based upon the job band of the NEO at the time and their performance.

  The ParentCo stock options vest ratably over a three-year period (one-third vests each year on the anniversary of the grant date) and, if unexercised, will expire the earlier of ten years from the date of grant or five years after retirement.
  Time-vested ParentCo restricted share units vest on the third anniversary of the grant date, providing a multi-year retention incentive.
  For performance-based ParentCo restricted share units, performance is based on achievement against annual targets. Earned performance-based restricted share units will be converted into shares of common stock three years from the date of the grant (subject to Committee approval of performance results) if the executive remains actively employed. The number of performance-based restricted share units earned at the end of the three-year plan will be determined as follows, based on the annual payout percentages over the three-year period: (i) 1/3 of the award is based on performance against the 2016 targets; (ii) 1/3 of the award will be based on performance against the targets to be established for 2017; and (iii) 1/3 of the award will be based on performance against the targets to be established for 2018.

For each year, a minimum performance level has been or will be established. For performance below such minimum level, the portion of the award subject to performance criteria in that year will be forfeited and will not carry over into any future performance period.

Upon Separation, outstanding equity awards held by the NEOs were converted into equity awards relating to Alcoa stock with the same terms and conditions, including vesting and exercise periods, as further discussed below.

2016 Grants of Long-Term Incentive Awards to Each NEO

The following chart provides information regarding ParentCo’s 2016 grants of equity awards to each NEO (as adjusted for ParentCo’s 1:3 reverse stock split effected on October 5, 2016):

 

  Name    Stock Options      Restricted Share Units      Performance-Based
Restricted  Share Units
(Target)
 

  Roy C. Harvey

     57,000              0                    71,720              
  William F. Oplinger      50,316              0                    63,306              

  Tomas M. Sigurðsson

     0              14,973                    14,973              

  Leigh Ann C. Fisher

     13,920              4,640                    9,280              

  Jeffrey D. Heeter(1)

     0              12,373                    0              

 

(1) Mr. Heeter was not eligible for performance-based restricted share unit awards in 2016.

Treatment of Equity-based Compensation in the Separation

Alcoa adopted the 2016 Stock Incentive Plan in connection with the Separation. The Alcoa equity-based compensation awards into which the outstanding ParentCo equity-based compensation awards were converted upon the Separation, pursuant to the terms of the separation and distribution agreement, were issued pursuant to the 2016 Stock Incentive Plan and, accordingly, reduced the shares available for issuance under the 2016 Stock Incentive Plan.

  Stock Options Held by Alcoa Employees. Each award of ParentCo stock options held by a NEO was converted into an award of stock options with respect to Alcoa common stock. The exercise price of, and number of shares subject to, each such award was adjusted in a manner intended to preserve the aggregate intrinsic value of the original ParentCo award as measured immediately before and immediately after the Separation, subject to rounding. Such adjusted award otherwise continues to have the same terms and conditions that applied to the original ParentCo award immediately prior to the Separation.

 

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  Restricted Share Units Held by Alcoa Employees. Each award of ParentCo restricted share units held by a NEO was converted into an award of restricted share units with respect to Alcoa common stock. The number of shares subject to each such award was adjusted in a manner intended to preserve the aggregate intrinsic value of the original ParentCo award as measured immediately before and immediately after the Separation, subject to rounding. Such adjusted award otherwise continues to have the same terms and conditions that applied to the original ParentCo award immediately prior to the Separation.
  Performance-Based Restricted Share Units Held by Alcoa Employees. Each award of ParentCo performance-based restricted share units held by a NEO was converted into an award of performance-based restricted share units with respect to Alcoa common stock. The number of shares subject to each such award was adjusted in a manner intended to preserve the aggregate intrinsic value of the original ParentCo award as measured immediately before and immediately after the Separation, subject to rounding. Such adjusted award otherwise continues to have the same terms and conditions that applied to the original ParentCo award immediately prior to the Separation.

Post-Separation Conversion of 2016 Alcoa Long-Term Incentive Awards

The following chart shows the as-converted 2016 ParentCo equity awards into Alcoa equity awards for each NEO following the Separation.

 

2016 Alcoa Corporation Equity Awards

(As-Converted from ParentCo Equity Awards)

 
  Named Executive Officer   

Options
(1)
     Time-Based
Restricted Share
Units
(2)
    

Performance-Based
Restricted Share Units

(at target)(3)(4)

 
  Roy C. Harvey      76,354            0                96,072              

  William F. Oplinger

     67,400            0                84,801              

  Tomas M. Sigurðsson

     0            20,057                20,057              
  Leigh Ann C. Fisher      18,646            6,215                12,431              

  Jeffrey D. Heeter

     0            16,574                0              
(1) Options vest ratably over a three-year period and, if unexercised, will expire the earlier of (i) 10 years from the date of grant or (ii) five years following retirement.
(2) Restricted share units cliff-vest on the third anniversary of the grant date. The ParentCo Compensation Committee granted the restricted share units at amounts based on the NEO’s job band and consideration of prior year individual performance.
(3) The target award opportunities for performance-based restricted share units were set by the ParentCo Compensation Committee prior to the Separation, based on the NEO’s job band and a review of market data, and subsequently reviewed by the Committee. The target awards are subject to achievement of Alcoa performance goals (as described in greater detail below).
(4) The number of performance-based restricted share units earned is based on performance over a three-year period, as follows: (i) 1/3 of the award is based on performance against 2016 targets (the “2016 performance-based restricted share units”), achievement of which is described in greater detail below; (ii) 1/3 of the award will be based on performance against the targets established for 2017; and (iii) 1/3 of the award will be based on performance against the targets to be established for 2018, which targets will be set by the Committee in early 2018. The performance-based restricted share units have a maximum payout opportunity of 200%. Additionally, the performance goals applicable to the awards are subject to the same normalization and adjustment principles described above under “2016 Annual Incentive Compensation—Financial Measures,” and set forth in “Calculation of Financial Measures” in Attachment B.

 

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Executive Compensation | Compensation Discussion and Analysis | 2016 Equity Awards: Stock Options, Restricted Share Units and Performance-Based Restricted Share Units (continued)

 

Performance-Based Restricted Share Units Design and 2016 Performance Targets

In anticipation of the Separation, the ParentCo Compensation Committee set performance goals applicable to the 2016 tranches of each of the 2016, 2015 and 2014 performance-based restricted share unit awards in one of two ways, depending upon the NEO’s business or resource unit at the beginning of 2016. The below chart describes the applicable targets and measurement dates, with a detailed description of the 2016 metrics following below (Mr. Heeter was not eligible for 2016 performance-based restricted share unit awards):

 

  2016 Tranche of Performance-Based Restricted Share Unit Targets for Mr. Oplinger

  Pre-Separation Performance

  (January 1, 2016 through October 31, 2016)

  

     ParentCo (excluding Alcoa) Performance Targets (weighted 50%)

     Alcoa Performance Targets(1) (weighted 50%)

  Post-Separation Performance

  (November 1, 2016 through December 31, 2016)

  

     Alcoa Performance Targets(2) (weighted 100%)

 

  2016 Tranche of Performance-Based Restricted Share Unit Targets for Messrs. Harvey and Sigurðsson and Ms. Fisher

  Full-Year Performance

  (January 1, 2016 through December 31, 2016)

  

     Alcoa Performance Targets(2)

      (weighted 100%)

(1) Measured performance for January 1, 2016 through October 31, 2016.
(2) Measured Alcoa performance (annualized) for January 1, 2016 through December 31, 2016.

These targets and the below metrics were structured so that ParentCo could monitor and incentivize progress each year of the three-year business plan, a critical factor given the volatility of the pricing of the aluminum commodity and of ParentCo’s overall business condition. The ParentCo Compensation Committee set 2016 financial targets and metrics using the same philosophy and methodology as discussed above for the determination of financial targets and metrics for annual IC.

The below charts describe the specific metrics and results for ParentCo (excluding Alcoa) Performance Targets and Alcoa Performance Targets for the 2016 tranches of the performance-based restricted share unit awards:

 

ParentCo (excluding Alcoa) Performance Targets

(January 1, 2016—October 31, 2016)

 
  Metric (%)    Target      Results      Weighting  

  Revenue Growth(1)

     10.6%        1.7%        25%  

  EBITDA Margin(1)(2)

     14.5%        14.9%        75%  

  Total

                       100%  

 

Alcoa Performance Targets

(January 1, 2016—December 31, 2016)

 
  Metric ($ millions/MT)    Target     

Results(3)

January 1, 2016—
October 31, 2016

    

Results

November 1, 2016—
December 31, 2016

     Weighting  

  Aluminum EBITDA per metric ton(1)

   $ 108      $ 108          $ 105            50%  

  Alumina EBITDA per metric ton(1)

   $ 39      $ 38          $ 36            50%  

  Total

     —          —                    —                    100%  
(1) These financial measures have not been calculated in accordance with GAAP. A description of the calculation of each non-GAAP financial measure to the most directly comparable GAAP financial measure is provided in “Calculation of Financial Measures” in Attachment B.
(2) EBITDA margin is calculated by dividing EBITDA by total revenue for the period January 1, 2016 through October 31, 2016.
(3) Applies to Mr. Oplinger as further described below.

Performance-Based Restricted Share Unit Awards—2016 Determination

The 2016 tranches of performance-based restricted share unit awards were determined as follows.

 

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The 2016 tranche payout for Mr. Oplinger was determined based on the sum of the formulae shown in the chart below:

 

  1.    Payout Based on Pre-Separation Performance (January 1, 2016—October 31, 2016)

Target Opportunity

(Number of

Restricted Share Units)

  x   10/12   x   

% Achievement Based on

ParentCo (excluding Alcoa) Performance Targets (50%) and Alcoa Performance Targets

(50%)

  =    Potential Payout based on 1/1/2016—10/31/2016 Performance

+

  2.    Payout Based on Post-Separation Performance (November 1, 2016—December 31, 2016)

Target Opportunity

(Number of

Restricted Share Units)

  x   2/12   x   

% Achievement Based on

Alcoa Performance Targets

(100%)

  =    Potential Payout based on 11/1/2016—12/31/2016 Performance

The 2016 tranche earned for Messrs. Harvey and Sigurðsson and Ms. Fisher were determined based on the formula shown in the below chart:

 

Payout Based on Full-Year Performance (January 1, 2016—December 31, 2016)

Target Opportunity

(Number of Restricted Share Units)

  x   

% Achievement Based on

Alcoa Performance Targets

(100%)

  =   Potential Payout based on Performance

Performance-Based Restricted Share Unit Awards—2016 Earned Amounts

The NEOs each earned the 2016 tranches of their performance-based restricted share unit awards based on, and to the extent of, the achievement of the above-described 2016 performance targets, as determined by the Committee in accordance with the metrics described above. The performance range for each metric was 0% to 200%. Additionally, the performance goals applicable to the awards were subject to the same normalization and adjustment principles described above under “2016 Annual Incentive Compensation—Financial Measures.”

The Committee determined that the 2016 tranches of performance-based restricted share unit awards had been earned in accordance with the metrics described above. In connection with the Committee’s determination, the NEOs’ 2016 tranches of performance-based restricted share unit awards were earned as follows.

 

Named Executive Officer   

2016 Tranche

Total % Achievement

    

2016 Tranche

Total Earned Shares

 

Roy C. Harvey

     80.1      37,197  

William F. Oplinger

     87.8      53,516  

Tomas M. Sigurðsson

     80.1      9,672  

Leigh Ann C. Fisher

     80.1      6,223  

Jeffrey D. Heeter

     —          —    

Other Compensation Plans and Arrangements of Alcoa

 

 

Alcoa Corporation Internal Revenue Code 162(m) Compliant Annual Cash Incentive Compensation Plan

In connection with the Separation, the Company adopted the 162(m) Annual Incentive Plan, which is administered by the Committee. Each executive officer designated by the Committee is eligible to participate in the 162(m) Annual Incentive Plan. The Company’s annual IC plan has been structured with the intent of enabling the Committee to award compensation that constitutes performance-based compensation under Section 162(m) of the Code.

At the beginning of each performance period, the Committee will designate the participants and establish specific performance goals applicable to the awards and incentive amounts that may be earned by participants. Performance periods will typically be a fiscal year of Alcoa or such shorter period as may be designated by the Committee with respect to an award. The Committee has the discretion to structure awards in any manner it deems advisable, including specifying that the award may become payable in the event of death, disability or a change in ownership or control to the extent

 

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permissible under Section 162(m) of the Code. The Committee may also structure awards as an allocation of a cash bonus pool for bonus pool participants, provided that, among other matters, each participant allocation satisfies the maximum individual amount limit set forth in the Section 162(m) Annual Incentive Plan of $9,000,000 per participant for each fiscal year performance period.

The performance goals applicable to awards granted under the Section 162(m) Annual Incentive Plan will relate to one or more of the following (and, if applicable, may be normalized for fluctuations in currency or the price of aluminum on the LME) as determined by the Committee: (i) earnings, including operating income, earnings before or after taxes, and earnings before or after interest, taxes, depreciation, and amortization; (ii) book value per share; (iii) pre-tax income, after-tax income, income from continuing operations, or after tax operating income; (iv) operating profit or improvements thereto; (v) earnings per common share (basic or diluted) or improvement thereto; (vi) return on assets (net or gross); (vii) return on capital; (viii) return on invested capital; (ix) sales, revenues or returns on sales or revenues or growth in sales, revenues or returns on sales or revenues; (x) share price appreciation; (xi) total shareholder return; (xii) cash flow, operating cash flow, free cash flow, cash flow return on investment (discounted or otherwise), improvements in cash on hand, reduction of debt, improvements in the capital structure of the Company including debt to capital ratios; (xiii) implementation or completion of critical projects or processes; (xiv) economic profit, economic value added or created; (xv) cumulative earnings per share growth; (xvi) achievement of cost reduction goals; (xvii) return on shareholders’ equity; (xviii) total stockholders’ return improvement or relative performance as compared with other selected companies or as compared with Alcoa, a subsidiary, division or business unit history; (xix) reduction of days working capital, working capital or inventory; (xx) operating margin or profit margin or growth thereof; (xxi) cost targets, reductions and savings, productivity and efficiencies; (xxii) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion, customer satisfaction (including improvements in product quality and delivery), employee satisfaction, human resources management including improvements in diversity representation, supervision of litigation, information technology, and goals relating to acquisitions, divestitures, joint ventures and similar transactions, and budget comparisons; (xxiii) personal professional objectives, including any of the foregoing performance goals, the implementation of policies and plans, the negotiation of transactions, the development of long-term business goals, formation of joint ventures, research or development collaborations, technology and best practice sharing within Alcoa, and the completion of other corporate goals or transactions; (xxiv) the achievement of sustainability measures, community engagement measures or environmental, health or safety goals of Alcoa or a subsidiary, division or business unit of Alcoa for or within which the participant is primarily employed; (xxv) improvement in performance against competition benchmarks approved by the Alcoa Compensation Committee; or (xxvi) improvements in audit and compliance measures. The Committee may also specify adjustments and any inclusion(s) or exclusion(s) for charges related to any event(s) or occurrence(s) which the Committee determines should be included or excluded, as appropriate, for purposes of measuring performance against the applicable performance goals.

The Committee also uses the Incentive Compensation Plan, described under “Incentive Compensation Plan” below, as a sub-plan to the Section 162(m) Annual Incentive Plan to supplement the terms and conditions of awards granted under the Section 162(m) Annual Incentive Plan.

Change in Control Severance Plan

In connection with the Separation, Alcoa adopted the Alcoa Corporation Change in Control Severance Plan (the “CIC Severance Plan”). The NEOs and other officers designated by the Committee are eligible to participate in the CIC Severance Plan. Under the CIC Severance Plan, an eligible employee who incurs a qualifying termination of employment, which is generally a termination without cause or resignation for good reason within two years following a change in control, will generally be entitled to receive (i) cash severance equal to three times, in the case of the CEO, CFO and General Counsel, and two times, in the case of other participants, the sum of the employee’s annual base salary and his or her target incentive compensation with respect to the year of the change in control, (ii) a pro-rated annual bonus for the year in which the termination occurs, (iii) continued life, accident and health benefits for up to three years, in the case of the CEO, CFO and General Counsel, and up to two years, in the case of other participants, following the qualifying termination of employment, (iv) a cash lump sum amount representing the estimated equivalent of three years, in the case of the CEO, CFO and General Counsel, and two years, in the case of other participants, of Alcoa contributions to the Alcoa defined contribution plans in which the employee participates, (v) a cash lump sum amount representing the estimated incremental

 

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increase in actuarial benefit that would have been accrued on behalf of the employee during the three years, in the case of the CEO, CFO and General Counsel, and two years, in the case of other participants, following the qualifying termination under the Alcoa defined benefit plans in which the employee participates, if any, and (vi) reasonable outplacement services for a period of up to six months. In addition, the eligible employee will be entitled to receive benefits under Alcoa’s post-retirement health care if the employee would have become entitled to benefits under this plan had he or she remained employed during the three years, in the case of the CEO, CFO and General Counsel, and two years in the case of other participants, following the qualifying termination. If amounts payable to an officer under the CIC Severance Plan would be subject to an excise tax under Section 4999 of the Code, such amounts will be reduced if necessary to maximize the after-tax payment to the officer.

Severance Agreements

Severance agreements were entered into by and between Alcoa and each of the CEO and CFO (together, the “CEO/CFO Severance Agreements”) and other NEOs (collectively, the “Officer Severance Agreements”), for the purpose of providing severance benefits to such officers upon a qualifying termination of employment that occurs other than in connection with a change in control. Payment is generally contingent upon the officer’s execution of a release of claims.

Under the CEO/CFO Severance Agreements, the officer will receive a payment of $50,000 upon a voluntary resignation where such officer provides three months’ notice to Alcoa contingent upon a release of claims. Upon an involuntary termination, such officer is generally entitled to receive (i) cash severance equal to two times the officer’s annual base salary, (ii) a pro-rated annual bonus for the year in which the termination occurs, (iii) $50,000 in consideration of execution of a release of claims, (iv) continued health benefits for two years following termination, and (v) a cash lump sum amount designed to provide two years of additional pension or retirement benefits under the Company defined benefit plans or, as applicable, defined contribution plans in which the officer participates.

Under the Officer Severance Agreements, upon an involuntary termination of the officer’s employment, the officer is generally entitled to receive (i) cash severance equal to the officer’s annual base salary, (ii) a pro-rated annual bonus for the year in which the termination occurs, (iii) continued health benefits for one year following termination, and (iv) either one year of additional pension service under the Alcoa defined benefit plans or a lump sum amount equal to Alcoa’s contribution to the defined contribution plans for one year.

Alcoa Corporation Deferred Compensation Plan

Under the Alcoa USA Corp Deferred Compensation Plan, participants may defer base salary amounts and certain incentive plan awards until a later date. Generally, earnings on nonqualified deferred compensation include returns on notional investments that mirror the investment alternatives available to all salaried employees under the Alcoa Retirement Savings Plan for Salaried Employees.

Incentive Compensation Plan

In connection with the Separation, Alcoa adopted the Incentive Compensation Plan. Officers and other key employees of Alcoa and its subsidiaries who are designated by the Committee, including NEOs, are eligible to participate in the Incentive Compensation Plan. The Incentive Compensation Plan provides for the grant of annual cash incentive compensation awards to eligible participants with respect to calendar year performance. Awards under the Incentive Compensation Plan are earned based on individual performance and achievement of financial and non-financial performance metrics established by the Committee.

Employment Termination and Change in Control Terms in Annual Incentive and Equity Awards

 

Change in Control Provisions in the Alcoa Corporation 2016 Stock Incentive Plan

The Alcoa Corporation 2016 Stock Incentive Plan provides for double-trigger equity vesting in the event of a change in control (as defined in the 2016 Stock Incentive Plan). This generally means that if outstanding awards under the 2016 Stock

 

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Executive Compensation | Compensation Discussion and Analysis | Employment Termination and Change in Control Terms in Annual Incentive and Equity Awards (continued)

 

Incentive Plan are replaced by the acquirer or related entity in a change in control of Alcoa, those replacement awards will not immediately vest on a “single trigger” basis, but vesting would accelerate only if the participant is terminated without cause or quits for good reason (as those terms are defined in the Alcoa Change in Control Severance Plan) within 24 months following the change in control.

Change in Control Provisions in Alcoa Corporation Incentive Compensation Plan

In the event of a change in control, officers and other key employees receiving compensation pursuant to the Incentive Compensation Plan, at the discretion of the Committee, shall be paid a pro-rata portion of target incentive compensation for the calendar year for which awards were made, based on the days of service during such calendar year from the beginning of the calendar year through the date of the change in control.

Compensation Committee Report

The Compensation and Benefits Committee (the “Committee”) has:

 

1. reviewed and discussed with management the “Compensation Discussion and Analysis” included in this proxy statement; and
2. based on the review and discussions referred to in paragraph (1) above, the Committee recommended to the Board that the “Compensation Discussion and Analysis” be included in the Company’s proxy statement relating to the 2017 annual meeting of stockholders.

The Compensation and Benefits Committee

James W. Owens, Chair

Kathryn S. Fuller

James E. Nevels

Carol L. Roberts

Steven W. Williams

 

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Executive Compensation (continued)

 

 

 

Summary Compensation Table

The following table sets forth information concerning the compensation awarded to, earned by, or paid to, our named executive officers.

 

 Name and

 Principal Position

 (a)(1)

 

  Year  

(b)

   

  Salary  

($)

(c)

   

 Bonus 

($)
(d)
(2)

   

Stock

  Awards  

($)
(e)
(3)

   

Option

  Awards  

($)
(f)
(3)

    Non-Equity
Incentive
Plan
Compensation
($)
(g)
(4)
    Change in
Pension Value
and Non-
Qualified
Deferred
Compensation
Earnings
($)
(h)
(5)
    All Other
Compensation
($)
(i)
(6)
    Total
($)
(j)
 

 Roy C. Harvey(7)

    2016     $ 591,667     $ —       $ 946,334     $ 362,682     $ 1,149,177     $ 262,577     $ 773,519     $ 4,085,956  
 Chief Executive Officer     2015     $ 508,068       $ 1,100,318     $ 275,039     $ 454,307     $ 160,233     $ 523,369     $ 3,021,334  

 William F. Oplinger

    2016     $ 550,000     $ —       $ 1,389,794     $ 320,150     $ 865,013     $ 446,202     $ 72,453     $ 3,643,612  
 Executive Vice President
 and Chief Financial Officer
    2015     $ 541,667       $ 1,600,406     $ 400,020     $ 479,375     $ 327,386     $ 37,500     $ 3,386,354  
    2014     $ 500,000       $ 1,288,037     $ 322,028     $ 849,375     $ 413,526     $ 30,000     $ 3,402,966  

 Tómas M. Sigurðsson

    2016     $ 450,001     $ —       $ 568,966     $ 0     $ 465,758     $ 3,758     $ 204,779     $ 1,693,262  
 Executive Vice President and
 Chief Operating Officer
    2015     $ 444,000       $ 495,423     $ 166,150     $ 340,635     $ —       $ 295,103     $ 1,741,311  

 Leigh Ann C. Fisher

    2016     $ 353,907     $ —       $ 262,031     $ 88,569     $ 361,536     $ 370,547     $ 18,710     $ 1,455,300  
 Executive Vice President and
 Chief Administrative Officer
    2015     $ 342,657       $ 330,904     $ 0     $ 230,629     $ 258,983     $ 15,900     $ 1,179,073  

 Jeffrey D. Heeter

    2016     $ 284,017     $ 60,000     $ 250,267     $ 0     $ 208,621     $ 197,450     $ 22,422     $ 1,022,777  
 Executive Vice President,
 General Counsel and
 Secretary
                                                                       

Notes to Summary Compensation Table

(1) Named Executive Officers. The NEOs include our Chief Executive Officer, Chief Financial Officer, and the next three highest paid executive officers at fiscal year-end 2016. We have excluded compensation for prior years to the extent permitted by applicable SEC rules. For purposes of determining the most highly compensated executive officers, the amounts shown in column (h) were excluded. As of November 1, 2016, Mr. Sigurðsson began to be paid in Icelandic króna and the amount reflected in the table are US dollar equivalents using an internal monthly average rate of .0087 Icelandic króna to US Dollars. Prior to November 1, 2016, Mr. Sigurðsson was paid in United States dollars.
(2) Bonus. Amounts in this column represents cash award paid by ParentCo in connection with efforts related to the Separation.

 

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Executive Compensation (continued)

 

 

 

(3) Stock Awards and Option Awards. The value of stock awards in column (e) and stock options in column (f) equals the grant date fair value, which is calculated in accordance with ASC Topic 718. Amounts reflected in column (e) of the Summary Compensation Table include both time-vested and performance-based awards. Performance-based restricted share unit awards granted, or for which the performance criteria was established, in 2016 are shown at 100% of target. The grant date fair value of the performance-based restricted share unit awards, at target and maximum, are as follows:

 

            2016 Grant Date Value of
Performance RSU Award
(b)
 
  Name    Grant Date(a)    At Target      At Maximum  

  Roy C. Harvey

   1/19/2016    $ 483,562      $ 967,125  
   1/20/2015    $ 366,795      $ 733,589  
   1/16/2014    $ 95,977      $ 191,954  
     

 

 

    

 

 

 
   Total    $ 946,334      $ 1,892,669  

  William F. Oplinger

   1/19/2016    $ 426,832      $ 853,663  
   1/20/2015    $ 533,526      $ 1,067,052  
   1/16/2014    $ 429,436      $ 858,873  
     

 

 

    

 

 

 
   Total    $ 1,389,794      $ 2,779,588  

  Tomas M. Sigurdsson

   1/19/2016    $ 100,959      $ 201,917  
   1/20/2015    $ 110,098      $ 220,195  
   1/16/2014    $ 55,049      $ 110,098  
     

 

 

    

 

 

 
   Total    $ 266,105      $ 532,210  

  Leigh Ann C. Fisher

   1/19/2016    $ 62,574      $ 125,149  
   1/20/2015    $ 55,136      $ 110,272  
   1/16/2014    $ 50,474      $ 100,948  
     

 

 

    

 

 

 
   Total    $ 168,184      $ 336,368  

  Jeffrey D. Heeter

   1/19/2016      —          —    
   1/20/2015      —          —    
   1/16/2014      —          —    
     

 

 

    

 

 

 
     Total      —          —    
  (a) For each award, the performance criteria applicable to the 2016 tranche of the three-year performance period were approved by the ParentCo Compensation Committee in 2016. The grant dates listed in the column are the dates that the ParentCo Compensation Committee approved the establishment of the awards at the commencement of the applicable three-year performance period.
  (b) A restricted share unit is valued at the market price of a share of stock on the date of grant as determined by the closing price per share of the common stock. At the date of grant on January 19, 2016, the closing price per share of Alcoa Inc. common stock was $6.74. The adjusted grant date fair value was $15.10 after accounting for ParentCo’s one-for-three reverse stock split in October 2016 and the subsequent distribution ratio relating to the Separation.

For a discussion of the assumptions used to estimate the fair value of stock awards and stock options, please refer to the following sections in the 2016 Annual Report “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Stock-based Compensation” and Note M to the consolidated financial statements respectively.

 

(4) Non-Equity Incentive Plan Compensation. The amount in this column reflects the cash payments made under the Annual Incentive Plans as further described on page 45.
(5) Change in Pension Value and Nonqualified Deferred Compensation Earnings. The amounts shown for 2016 reflects the aggregate change in the actuarial present value of each NEO’s accumulated benefit under all defined benefit and actuarial plans, including supplemental plans, from December 31, 2015 to December 31, 2016. Pension values may fluctuate significantly based on a number of factors, including age, years of service, average annual earnings, discount rate, mortality and exchange rate assumptions used for measurement of pension obligations from 2015 to 2016. Assumptions used are further described under “2016 Pension Benefits.”
(6) All Other Compensation. Please see the information below regarding amounts set forth in this column.
  (a)

Company Contributions to Savings Plans. Effective August 1, 2016, the NEOs were eligible to participate in the Retirement Savings Plan for Salaried Employees of Alcoa USA Corp and the Alcoa USA Corp. Deferred Compensation Plan. Prior to this time, the NEOs were eligible to participate in the Alcoa Retirement Savings Plan, a tax-qualified retirement savings plan maintained by ParentCo, and the Deferred Compensation Plan, a non-qualified deferred compensation plan maintained by ParentCo. The plans maintained by Alcoa and by ParentCo operate in the same manner. Under the tax-qualified 401(k) plan, participating employees

 

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  may contribute up to 25% of base pay on a pretax basis including up to 10% on an after-tax basis. The employer matches 100% of employee pretax contributions up to 6% of base pay. For U.S. salaried employees hired on or after March 1, 2006, including Mr. Sigurðsson, the employer makes an additional contribution (called the Employer Retirement Income Contribution) in an amount equal to 3% of salary and annual incentive compensation. This additional contribution is in lieu of a defined benefit pension plan, which was available to employees hired before March 1, 2006. Mr. Sigurðsson also participated in two Icelandic defined contribution saving plans in which the Company provided contributions of 8.5% for the mandatory plan and 4% for the voluntary plan.

 

       If an NEO’s contributions to the tax-qualified plan exceed the limit on contributions imposed by the Code, the executive may elect to have the amount over the limit “spill over” into the nonqualified deferred compensation plan. In 2016, total contributions by ParentCo and the Company were as follows:

 

      Matching Contribution      3% Retirement
Contribution
     Total
Contribution
 
  

Savings

Plan

    

Def. Comp.

Plan

    

Savings

Plan

    

Def. Comp.

Plan

    

  Roy C. Harvey

   $ 15,900      $ 0      $ 0      $ 0      $ 15,900  

  William F. Oplinger

   $ 15,900      $ 16,500      $ 0      $ 0      $ 32,400  

  Tómas M. Sigurðsson

   $ 15,900      $ 6,300      $ 7,950      $ 13,369      $ 43,519  

  Leigh Ann C. Fisher

   $ 15,900      $ 0      $ 0      $ 0      $ 15,900  

  Jeffrey D. Heeter

   $ 15,485      $ 1,556      $ 0      $ 0      $ 17,041  

 

       Mr. Sigurðsson also participated in Icelandic defined contribution plans in which matching contributions in the amount of $8,763 were made by Alcoa. These contributions are included in the “All Other Compensation” column.
  (b) Relocation Expenses. In 2016, ParentCo provided a cash allowance of $262,500 to Mr. Harvey to assist in his transition from Knoxville, TN to the ParentCo headquarters in New York, NY. An additional $490,989, which includes a gross-up amount of $235,785, was provided as part of his relocation to New York, NY, in his then role as Executive Vice President and Group President, Global Primary Products with ParentCo. In 2016, Mr. Sigurðsson also received $130,784, which includes a gross-up amount of $67,446, in connection with his relocation from Switzerland to the United States.
  (c) Charitable Contributions. In 2016, the Alcoa Foundation matched $5,000 in contributions made by Mr. Oplinger to an approved charitable organization.
  (d) Company Car. In 2016, the Company provided a car allowance to Mr. Sigurðsson in the amount of $7,206.
  (e) Dividend Equivalents and Fractional Shares. In 2016, ParentCo paid the associated accrued dividend in relation to the vesting of the 2013 time-vested and performance-based restricted share unit awards. Additionally, ParentCo, in association with ParentCo’s one-for-three reverse stock split effected on October 5, 2016 and the converted 2016 ParentCo equity awards into Alcoa equity awards post-Separation effective November 1, 2016, made cash payments for any fractional shares resulting from the aforementioned events.

 

  Name    Relocation      Dividends
and
Fractional
Shares
     Auto
Allowance
     Charitable
Contribution
     Total All
Other Comp
(less Savings
Plan)
 

  Roy C. Harvey

   $ 753,489      $ 4,130        0        0      $ 757,619  

  William F. Oplinger

     0      $ 35,053        0      $ 5,000      $ 40,053  

  Tómas M. Sigurðsson

   $ 130,784      $ 14,506      $ 7,206        0      $ 152,497  

  Leigh Ann C. Fisher

     0      $ 2,810        0        0      $ 2,810  

  Jeffrey D. Heeter

     0      $ 5,381        0        0      $ 5,381  

 

  (7) Director Position. Mr. Harvey does not receive any additional compensation in connection with his service on the Board.

 

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2016 Grants of Plan-Based Awards

The following table provides information on equity and non-equity plan-based awards granted by ParentCo to the NEOs as part of their fiscal year 2016 equity and cash incentive opportunity.

The amounts that represent equity awards granted prior to the Separation (which amounts were made in shares of ParentCo common stock), have been adjusted and converted into Alcoa equity awards. The exercise price of outstanding stock options was also adjusted in order to preserve the intrinsic value of the outstanding awards immediately prior to Separation. In general, the adjusted and converted equity awards are subject to substantially the same terms and conditions as the original equity awards, including the original vesting schedule. Please refer to “Compensation Discussion and Analysis—Treatment of Equity-based Compensation in the Separation” for additional information, including a presentation of the post-Separation 2016 equity awards.

 

                   Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards
(1)
           Estimated Future Payouts
Under Equity Incentive Plan
Awards
(2)
   

All Other
Stock
Awards:
Number
of Shares
of Stock

or Units(4)

(#)

   

All Other
Option
Awards:
Number of
Securities
Underlying

Options(3)

(#)

   

Exercise
or Base
Price of
Option

Awards

($/sh)

   

2016 Grant
Date Fair
Value of
Stock and
Option

Awards

($)

 

  Name

 

Award

   

Grant

Dates

   

Threshold

($)

   

Target

($)

   

Maximum(4)

($)

         

Threshold

(#)

   

Target

(#)

   

Maximum

(#)

         
  (a)   (b)     (c)     (d)     (e)     (f)            (g)     (h)     (i)     (j)     (k)     (l)     (m)  

  Roy C. Harvey

    IC(1)       1/19/2016     $ 326,667       $653,333     $ 1,960,000                  
    Option(3)       1/19/2016                       76,354       $15.10     $ 362,682  
    RSU(4)       1/19/2016                     —          
    PRSU(2)       1/19/2016               0       32,024       64,048           $ 483,562  
    PRSU(2)       1/20/2015               0       10,531       21,062           $ 366,795  
    PRSU(2)       1/16/2014               0       3,881       7,762           $ 95,977  
     

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Total       $ 326,667       $653,333     $ 1,960,000         0       46,436       92,872         76,354       $ 1,309,016  

  William F. Oplinger

    IC(1)       1/19/2016     $ 275,000       $550,000     $ 1,650,000                  
    Option(3)       1/19/2016                       67,400       $15.10     $ 320,150  
    RSU(4)       1/19/2016                     —          
    PRSU(2)       1/19/2016               0       28,267       56,534           $ 426,832  
    PRSU(2)       1/20/2015               0       15,318       30,636           $ 533,526  
    PRSU(2)       1/16/2014               0       17,365       34,730           $ 429,436  
     

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Total       $ 275,000       $550,000     $ 1,650,000         0       60,950       121,900         67,400       $ 1,709,944  

  Tómas M. Sigurðsson

    IC(1)       1/19/2016     $ 160,250       $320,500     $ 961,500                  
    Option(3)       1/19/2016                       —         —         —    
    RSU(4)       1/19/2016                     20,057         $ 302,861  
    PRSU(2)       1/19/2016               0       6,686       13,372           $ 100,959  
    PRSU(2)       1/20/2015               0       3,161       6,322           $ 110,098  
    PRSU(2)       1/16/2014               0       2,226       4,452           $ 55,049  
     

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Total       $ 160,250       $320,500     $ 961,500         0       12,073       24,146       20,057         $ 568,966  

  Leigh Ann C. Fisher

    IC(1)       1/19/2016     $ 103,824       $207,649     $ 622,946                  
    Option(3)       1/19/2016               —         —         —           18,646       $15.10     $ 88,569  
    RSU(4)       1/19/2016                     6,215         $ 93,847  
    PRSU(2)       1/19/2016               0       4,144       8,288           $ 62,574  
    PRSU(2)       1/20/2015               0       1,583       3,166           $ 55,136  
    PRSU(2)       1/16/2014               0       2,041       4,082           $ 50,474  
     

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Total       $ 103,824       $207,649     $ 622,946         0       7,768       15,536       6,215       18,646       $ 350,600  

  Jeffrey D. Heeter

    IC(1)       1/19/2016     $ 73,654       $147,308     $ 441,924                  
    Option(3)       1/19/2016                       —         —         —    
    RSU(4)       1/19/2016                     16,574         $ 250,267  
     

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
      Total             $ 73,654       $147,308     $ 441,924                                       16,574                     $ 250,267  
(1) Represents 2016 annual cash incentive awards originally granted under ParentCo’s Incentive Compensation Plan and assumed under the Annual Incentive Plans post-Separation. For additional information, please see “Compensation Discussion and Analysis—2016 Annual Incentive Compensation.”
(2) Performance-based restricted share units originally granted under the 2013 Alcoa Stock Incentive Plan and converted and assumed by Alcoa as performance-based restricted share unit awards under the 2016 Stock Incentive Plan post-Separation. Grant dates for the performance-based restricted share units are for the 2016 tranches of such awards and are determined in accordance with ASC Topic 718. See “Compensation Discussion and Analysis—2016 Equity Awards: Stock Options, Restricted Share Units and Performance-Based Restricted Share Units.”

 

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(3) Time-vested stock options originally granted under the 2013 Alcoa Stock Incentive Plan and converted and assumed by Alcoa as time-based vesting stock options under the 2016 Stock Incentive Plan post-Separation. See “Compensation Discussion and Analysis—2016 Equity Awards: Stock Options, Restricted Share Units and Performance-Based Restricted Share Units.”
(4) Time-vesting restricted share units originally granted under the 2013 Alcoa Stock Incentive Plan and converted and assumed by Alcoa as time-vested restricted share unit awards under the 2016 Stock Incentive Plan post-Separation. See “Compensation Discussion and Analysis—2016 Equity Awards: Stock Options, Restricted Share Units and Performance-Based Restricted Share Units.”

 

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Executive Compensation (continued)

 

 

 

2016 Outstanding Equity Awards at Fiscal Year-End

The following table provides information on outstanding Alcoa equity awards held by the NEOs at December 31, 2016. In connection with the Separation, ParentCo equity awards held by the NEOs were converted into Alcoa equity awards effective November 1, 2016.

 

     Option Awards     Stock Awards  
  Name   Number of
Securities
Underlying
Unexercised
Options
(Exercisable)
(1)
(#)
    Number of
Securities
Underlying
Unexercised
Options
(Unexercisable)
(1)
(#)
    Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
   

Option
Exercise
Price

($)

    Option
Expiration
Date
   

Number

of
Shares
or Units
of Stock

That
Have
Not
Vested
(2)
(#)

   

Market

Value of
Shares
or
Units
of
Stock
That

Have Not
Vested*
($)

   

Equity
Incentive
Plan
Awards:
Number

of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(3)
(#)

   

Equity
Incentive
Plan

Awards:
Market or
Payout

Value

of
Unearned
Shares,

Units

or Other
Rights
That
Have
Not
Vested*

($)

 
  (a)   (b)     (c)     (d)     (e)     (f)     (g)     (h)     (i)     (j)  

  Roy C. Harvey

                 

  Stock Awards2,3

              52,633     $ 1,477,935       74,579     $ 2,094,178  

  Time-Vested

  Options1

                 
    —         76,354       —         15.10       2026/01/19          
    9,158       18,316       —         34.83       2025/01/20          
    31,054       15,526       —         24.73       2024/01/16          
    12,431       —         —         19.89       2023/01/16          
    4,625       —         —         22.78       2022/01/20          
    10,930       —         —         36.38       2021/01/25          

  William F. Oplinger

                 

  Stock Awards2,3

              100,177       $2,812,970       71,852       $2,017,604  

  Time-Vested

  Options1

    —         67,400       —         15.10       2026/01/19          
    13,320       26,638       —         34.83       2025/01/20          
    33,753       16,876       —         24.73       2024/01/16          
    40,293       —         —         19.89       2023/01/16          
    44,473       —         —         22.78       2022/01/20          
    2,384       —         —         36.38       2021/01/25          
    6,804       —         —         30.33       2020/01/26          

  Tomas M. Sigurðsson

                 

  Stock Awards2,3

              54,904       $1,541,704       16,532       $ 464,219  

  Time-Vested

  Options1

    5,533       11,064       —         34.83       2025/01/20          
    13,181       —         —         22.78       2022/01/20          

  Leigh Ann C. Fisher

                 

  Stock Awards2,3

              25,586       $ 718,455       9,870       $ 277,150  

  Time-Vested

  Options1

                 
    —         18,646       —         15.10       2026/01/19          
    8,168       4,083       —         24.73       2024/01/16          
    13,395       —         —         19.89       2023/01/16          
    7,983       —         —         22.78       2022/01/20          
    5,009       —         —         36.38       2021/01/25          
    11,145       —         —         30.33       2020/01/26          

  Jeffrey D. Heeter

                 

  Stock Awards2

                                            32,700       $ 918,216       0       $0  
* The closing price per share of Alcoa’s common stock on December 30, 2016 was $28.08 (December 31, 2016 was not a trading day).
(1) Time-vested options have a term of ten years and vest incrementally over three years (1/3 each year).
(2)

Stock awards in column (g) include earned performance-based restricted share unit awards, which have not vested, and time-based restricted share unit awards. The performance-based restricted share unit awards vest after a three year performance period, if

 

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  earned, and subject to continued employment of the grantee. Each annual tranche of the performance-based restricted share unit awards has performance criteria established at the beginning of each such annual period.
     All time-based restricted share units cliff-vest three years from the date of grant.
(3) Stock awards in column (i) include unearned performance restricted share unit awards (at the target amount) and for which the performance period has not ended.

2016 Option Exercises and Stock Vested

The following table sets forth the actual value received by the NEOs upon exercise of stock options or vesting of stock awards in 2016.

 

  Name

  (a)

   Option Awards      Stock Awards(1)  
  

Number of

Shares
Acquired
on Exercise

(#)

   

Value Realized
    on Exercise    

($)

    

Number

of Shares

Acquired
on Vesting

(#)

    

Value
Realized

on Vesting

($)

 
   (b)     (c)      (d)      (e)(2)  

  Roy C. Harvey

     —         —          11,259      $ 75,886  

  William F. Oplinger

     —         —          97,159      $ 654,852  

  Tómas M. Sigurðsson

     —         —          40,072      $ 270,085  

  Leigh Ann C. Fisher

     —         —          7,500      $ 50,550  

  Jeffrey D. Heeter

     —         —          14,760      $ 99,482  
(1) Reflects vesting of restricted share unit awards and performance-based restricted share unit awards upon completion of the three-year performance period in January 2016.
(2) Amounts were calculated using $6.74 per share, which was the closing price of ParentCo stock on the vesting date of January 16, 2016.

2016 Pension Benefits

The following table provides information with respect to each plan that provides for specified retirement payments or benefits that will be provided primarily following retirement, including tax-qualified defined benefit plans and non-qualified defined benefit plans, but excluding defined contribution plans.

 

  Name   Plan Names   Number of
Years of
Credited
Service
(#)
   

Present

Value of
Accumulated
Benefits ($)

   

Payments
During
Last

Fiscal

Year ($)

 

  Roy C. Harvey

 

Pension Plan for Certain Salaried Employees of Alcoa USA (Rule IM)

    14.9     $ 274,333       N/A  
 

Alcoa USA Corp. Nonqualified Supplemental Retirement Plan C

    14.9     $ 531,804    

  William F. Oplinger

 

Pension Plan for Certain Salaried Employees of Alcoa USA (Rule IM)

    16.8     $ 409,230       N/A  
 

Alcoa USA Corp. Nonqualified Supplemental Retirement Plan C

    16.8     $ 1,257,539    

  Tómas M. Sigurðsson(1)

 

    —         —         —    
 

    —         —      

  Leigh Ann C. Fisher

 

Pension Plan for Certain Salaried Employees of Alcoa USA (Rule IC)

    27.6     $ 899,450       N/A  
 

Alcoa USA Corp. Nonqualified Supplemental Retirement Plan C

    27.6     $ 903,221    

  Jeffrey D. Heeter

 

Pension Plan for Certain Salaried Employees of Alcoa USA (Rule IC)

    18.8     $ 651,337       N/A  
   

Alcoa USA Corp. Nonqualified Supplemental Retirement Plan C

    18.8     $ 265,092          
(1) Mr. Sigurðsson does not participate in Alcoa’s defined benefit plans.

The discount rate assumption used in calculating the present value of accumulated benefits was 4.17% for the Pension Plan for Certain Salaried Employees of Alcoa USA Corp. and 4.20% for the Alcoa USA Corp. Nonqualified Supplemental Retirement Plan.

Qualified Defined Benefit Plan. Effective August 1, 2016, in anticipation of the Separation, ParentCo spun off certain assets and liabilities from Alcoa Retirement Plan I (the “Predecessor Retirement Plan”) attributable to certain employees including Messrs. Harvey, Oplinger, Heeter and Ms. Fisher to form the Pension Plan for Certain Salaried Employees of

 

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Executive Compensation (continued)

 

 

 

Alcoa USA Corp (Plan I), sponsored by Alcoa USA Corp. The new Plan is intended as a continuation of the Predecessor Retirement Plan for the Participants covered by the new Plan and recognizes elections and retirements under the Predecessor Retirement Plan for affected employees and former employees.

The new Plan is a funded, tax-qualified, non-contributory defined benefit pension plan that covers a majority of U.S. salaried employees hired before March 1, 2006. Benefits under the plan are based upon years of service and final average earnings. Final average earnings include salary plus 100% of annual cash incentive compensation, and are calculated using the average of the highest five of the last ten years of earnings, in the case of Ms. Fisher and Mr. Heeter, and the highest consecutive five of the last ten years of earnings for Messrs. Harvey and Oplinger. The new Plan reflects compensation limits imposed by the Code, which was $265,000 for 2016. The base benefit payable at age 65 is 1.1% of final average earnings up to the social security covered compensation limit plus 1.475% of final average earnings above the social security covered compensation limit, times years of service. Benefits are payable as a single life annuity, a reduced 50% joint and survivor annuity, or a reduced 75% joint and survivor annuity upon retirement.

Nonqualified Defined Benefit Plans. Effective August 1, 2016, in anticipation of the Separation, ParentCo separated the Alcoa Inc. Employees’ Excess Benefits Plan C (the “Predecessor Excess Benefit Plan”) into two separate plans: the Alcoa USA Corp. Nonqualified Supplemental Retirement Plan C and the Predecessor Excess Benefit Plan (renamed Arconic Employees’ Excess Benefits Plan C). Alcoa USA Corp. has adopted and is the sponsor of the Alcoa USA Corp. Nonqualified Supplemental Retirement Plan C (this “Non-Qualified Pension Plan”) effective August 1, 2016. This new Non-Qualified Pension Plan is intended as a continuation of the Predecessor Excess Benefit Plan for the participants covered by this new Non-Qualified Pension Plan and recognizes retirements and service accrued under the Predecessor Excess Benefit Plan for affected employees and former employees.

In 2016, Messrs. Harvey, Oplinger, and Heeter and Ms. Fisher participated in the new Non-Qualified Pension Plan. This plan is a nonqualified plan which provides for benefits that exceed the limits on compensation imposed by the Code. The benefit formula is identical to the Pension Plan for Certain Salaried Employees of Alcoa USA Corp formula. Benefits under the nonqualified plan are payable as a reduced 50% joint and survivor annuity