DEF 14A 1 d502418ddef14a.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)

 

Payment of Filing Fee (Check the appropriate box):

 

☒  No fee required.

 

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

 

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☐  Fee paid previously with preliminary materials.

 

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

 

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Table of Contents

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Notice of 2018 Annual Meeting of Stockholders

and Proxy Statement

 

 

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Reduce Complexity

 

 

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Drive Returns

 

 

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Strengthen the Balance Sheet


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March 20, 2018

Dear Alcoa Stockholders:

We are pleased to invite you to attend the 2018 Annual Meeting of Stockholders of Alcoa Corporation (“Alcoa,” or the “Company”) to be held on Wednesday, May 9, 2018, at 10:00 a.m., Eastern Daylight Time (EDT), at the Westin Convention Center-Pittsburgh, Pennsylvania Ballroom, 1000 Penn Avenue, Pittsburgh, Pennsylvania 15222.

At the Annual Meeting, stockholders will vote on the matters set forth in the 2018 Proxy Statement and the accompanying notice of the Annual Meeting. The 2018 Proxy Statement describes our governance structure, which features numerous 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 continuous improvement of Company performance, and transparency for and accountability to our stockholders and stakeholders. Furthermore, while continuously working toward these strategic priorities, we stand on our three corporate values—Act with Integrity, Operate with Excellence, Care for People—that provide a strong foundation for our actions.

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 9, 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”.

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

We look forward to seeing you at the meeting.

Sincerely,

 

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Michael G. Morris

Chairman

  

Roy C. Harvey

President, Chief Executive Officer and Director

  


Table of Contents

Table of Contents

 

 

Notice of 2018 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

 

 

 

 

 

 

19

 

 

 

 

 

Process of Evaluation of Director Candidates

 

 

 

 

 

 

20

 

 

 

 

 

Non-Employee Director Compensation Program

 

 

 

 

 

 

20

 

 

 

 

 

Director Fees

 

 

 

 

 

 

20

 

 

 

 

 

2017 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

 

 

 

 

 

 

25

 

 

 

 

 

Business Conduct Policies and Code of Ethics

 

 

 

 

 

 

25

 

 

 

 

 

Board Information

 

 

 

 

 

 

25

 

 

 

 

 

Director Independence

 

 

 

 

 

 

25

 

 

 

 

 

Board Leadership Structure

 

 

 

 

 

 

25

 

 

 

 

 

Board Meetings and Attendance

 

 

 

 

 

 

26

 

 

 

 

 

Board and Committee Self-Evaluation Process

 

 

 

 

 

 

26

 

 

 

 

 

Committees of the Board

 

 

 

 

 

 

27

 

 

 

 

 

The Board’s Role in Risk Oversight

 

 

 

 

 

 

28

 

 

 

 

 

Communications with Directors

 

 

 

 

 

 

29

 

 

 

 

 

Related Person Transactions

 

 

 

 

 

 

29

 

 

 

 

 

Compensation Matters

 

 

 

 

 

 

30

 

 

 

 

 

Compensation Committee Interlocks and Insider Participation

 

 

 

 

 

 

30

 

 

 

 

 

Compensation Consultants

 

 

 

 

 

 

30

 

 

 

 

 

Recovery of Incentive Compensation

 

 

 

 

 

 

31

 

 

 

 

 

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

 

 

 

 

Item 2 Ratification of Appointment of Independent  Registered Public Accounting Firm

    35  

 

Report of the Audit Committee

 

 

 

 

 

 

36

 

 

 

 

 

Audit Committee Pre-Approval Policy

 

 

 

 

 

 

37

 

 

 

 

 

Audit and Non-Audit Fees

 

 

 

 

 

 

37

 

 

 

 

Item 3 Advisory Approval of Executive Compensation

    38  

 

Executive Compensation

 

 

 

 

 

 

39

 

 

 

 

 

Compensation Discussion and Analysis

 

 

 

 

 

 

40

 

 

 

 

 

Compensation Committee Report

 

 

 

 

 

 

54

 

 

 

 

 

Summary Compensation Table

 

 

 

 

 

 

55

 

 

 

 

 

2017 Grants of Plan-Based Awards

 

 

 

 

 

 

58

 

 

 

 

 

2017 Outstanding Equity Awards at Fiscal Year-End

 

 

 

 

 

 

59

 

 

 

 

 

2017 Option Exercises and Stock Vested

 

 

 

 

 

 

60

 

 

 

 

 

2017 Pension Benefits

 

 

 

 

 

 

61

 

 

 

 

 

2017 Nonqualified Deferred Compensation

 

 

 

 

 

 

62

 

 

 

 

 

Potential Payments upon Termination or Change in Control

 

 

 

 

 

 

63

 

 

 

 

 

2017 Pay Ratio

 

 

 

 

 

 

69

 

 

 

 

Equity Compensation Plan Information

    70  

Item  4 Approval of the Alcoa Corporation 2016 Stock Incentive Plan (as Amended and Restated)

    71  

Transactions with Related Persons in 2017

 

   

 

80

 

 

 

Questions and Answers About the Meeting and Voting

    87  

Attachments

    A-1  

 

ATTACHMENT A—Peer Group Companies for Market Information for 2017 Executive Compensation Decisions (Non-CEO Peer
Group)

 

 

 

 

 

 

A-1

 

 

 

 

 

ATTACHMENT B—Calculation of Financial Measures

 

 

 

 

 

 

B-1

 

 

 

 

 

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

 

 

 

 

 

 

C-1

 

 

 

 

 

 

 

  i  


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           Notice of 2018 Annual Meeting of Stockholders

 

 

Wednesday, May 9, 2018

10:00 a.m. Eastern Daylight Time

    

The Westin Convention Center-Pittsburgh

Pennsylvania Ballroom

1000 Penn Avenue

Pittsburgh, Pennsylvania 15222

 

 

The Annual Meeting of Stockholders of Alcoa Corporation will be held on Wednesday, May 9, 2018 at 10:00 a.m. (EDT) at The Westin Convention Center-Pittsburgh, Pennsylvania Ballroom, 1000 Penn Avenue, Pittsburgh, Pennsylvania 15222. Stockholders of record of Alcoa common stock at the close of business on March 13, 2018 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 2019 annual meeting of stockholders;
2. to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2018;
3. to approve, on an advisory basis, 2017 executive compensation of the named executive officers;
4. to approve the Alcoa Corporation 2016 Stock Incentive Plan, as Amended and Restated; and
5. 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 via 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,

 

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Jeffrey D. Heeter

Executive Vice President, General Counsel and Secretary

March 20, 2018

 

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201 Isabella Street, Suite 500

Pittsburgh, Pennsylvania 15212

 

 

 Proxy Statement

 

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF

PROXY MATERIALS FOR THE ANNUAL MEETING OF  STOCKHOLDERS    

TO BE HELD ON MAY 9, 2018

 

The Company’s Notice of 2018 Annual Meeting of Stockholders and Proxy Statement and 2017 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 2018 Annual Meeting of Stockholders to be held on Wednesday, May 9, 2018, at 10:00 a.m. (EDT), at The Westin Convention Center-Pittsburgh, Pennsylvania Ballroom, 1000 Penn Avenue, 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 March 20, 2018. 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.

 

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Table of Contents
2018 PROXY STATEMENT   

 

Proxy Statement (continued)

 

 

 

Cautionary Statement regarding Forward-Looking Statements

Certain statements in this Proxy Statement relate to future events and expectations and as such constitute 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,” “goal,” “intends,” “may,” “outlook,” “plans,” “projects,” “seeks,” “sees,” “should,” “targets,” “will,” “would,” or other words of similar meaning. All statements by Alcoa Corporation that reflect expectations, assumptions or projections about the future, other than statements of historical fact, are forward-looking statements, including, without limitation, forecasts concerning global demand growth for bauxite, alumina, and aluminum, and supply/demand balances; statements, projections or forecasts of future or targeted financial results or operating performance; and statements about strategies, outlook and business and financial prospects. These statements reflect beliefs and assumptions that are based on Alcoa Corporation’s perception of historical trends, current conditions and expected future developments, as well as other factors that management believes are appropriate in the circumstances. Forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and changes in circumstances that are difficult to predict. Although Alcoa Corporation believes that the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that these expectations will be attained and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. Such risks and uncertainties include, but are not limited to: (a) material adverse changes in aluminum industry conditions, including global supply and demand conditions and fluctuations in London Metal Exchange-based prices and premiums, as applicable, for primary aluminum, alumina and other products, and fluctuations in indexed-based and spot prices for alumina; (b) deterioration in global economic and financial market conditions generally; (c) unfavorable changes in the markets served by Alcoa Corporation; (d) the impact of changes in foreign currency exchange rates on costs and results; (e) increases in energy costs; (f) declines in the discount rates used to measure pension liabilities or lower-than-expected investment returns on pension assets, or unfavorable changes in laws or regulations that govern pension plan funding; (g) the inability to achieve the level of revenue growth, cash generation, cost savings, improvement in profitability and margins, fiscal discipline, or strengthening of competitiveness and operations anticipated from restructuring programs and productivity improvement, cash sustainability, technology advancements, and other initiatives; (h) the inability to realize expected benefits, in each case as planned and by targeted completion dates, from acquisitions, divestitures, facility closures, curtailments, restarts, expansions, or joint ventures; (i) political, economic and regulatory risks in the countries in which Alcoa Corporation operates or sells products; (j) the outcome of contingencies, including legal proceedings, government or regulatory investigations and environmental remediation; (k) the impact of cyberattacks and potential information technology or data security breaches; and (l) the other risk factors described in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (the “2017 Annual Report”) filed with the SEC on February 26, 2018, 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 2017 Annual Report 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 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 (the “Exchange Act”), 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 Proxy Statement.

 

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Table of Contents

 

2018 PROXY STATEMENT   

 

 

Proxy Statement Summary

 

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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 2017 Annual Report before you vote. References to “Alcoa,” “the Company,” “we,” “us” or “our” refer to Alcoa Corporation.

2018 ANNUAL MEETING OF STOCKHOLDERS

 

  Time and Date:

10:00 a.m. (EDT), May 9, 2018

 

  Place:

The Westin Convention Center-Pittsburgh

Pennsylvania Ballroom

1000 Penn Avenue, Pittsburgh, Pennsylvania 15222

 

  Record Date:

March 13, 2018

 

  Webcast:

We will provide a live webcast of the Annual Meeting via 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:

 

 

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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 9, 2018. 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 7, 2018.

Beneficial owners who own shares through a bank, brokerage firm or similar organization can vote by returning the voting instruction card, 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

 

2018 PROXY STATEMENT   

 

 

Proxy Summary (continued)

 

 

 

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 2019    FOR Each

    Nominee

  9

  Item 2.

   Ratification of Appointment of PricewaterhouseCoopers LLP as the Company’s Independent Registered Public Accounting Firm for 2018    FOR   35

  Item 3.

   Advisory Vote to Approve 2017 Executive Compensation of the Named Executive Officers    FOR   38

  Item 4.

   Approval of the 2016 Stock Incentive Plan, as Amended and Restated    FOR   71

 

 

 

 

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2018 PROXY STATEMENT   

 

 

Proxy Summary (continued)

 

 

 

Director Nominees

Alcoa’s Board is comprised of 12 members; under our Amended and Restated Bylaws (the “Bylaws”), each director is elected for a one-year term. The following table provides summary information about each director nominee standing for election to the Board for a one-year term expiring in 2019.

 

  Name    Age          Professional Background     Independent        Committee
Memberships
 

Other Current

Public

Company Boards

Michael G. Morris (Chairman)

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

Mary Anne Citrino

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

Timothy P. Flynn

  61       Retired Chairman, KPMG International   Yes       Compensation and Benefits; Safety, Sustainability and Public Issues   JPMorgan Chase & Co., Walmart Stores, Inc., United Health Group

Kathryn S. Fuller

  71       Vice Chair, Smithsonian National Museum of Natural History; Chair, Institute at Brown for Environment & Society; Chair of Nominating and Governance Committee at The Robert Wood Johnson Foundation   Yes       Compensation and Benefits; Governance and Nominating (Chair); Executive  

Roy C. Harvey

  44       President and Chief Executive Officer, Alcoa Corporation   No       Executive  

James A. Hughes

  55       Chief Executive Officer and Managing Director, Prisma Energy Capital   Yes       Audit; Safety, Sustainability and Public Issues   TPI Composites Inc.

James E. Nevels

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

James W. Owens

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

Carol L. Roberts

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

Suzanne Sitherwood 

  57       President and Chief Executive Officer, Spire Inc.   Yes       Audit; Safety, Sustainability and Public Issues   Spire Inc.

Steven W. Williams

  62       President and Chief Executive Officer, Suncor Energy Inc.   Yes       Compensation and Benefits; Governance and Nominating; Executive   Suncor Energy Inc.

Ernest Zedillo

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

Citigroup Inc.; The Procter & Gamble Company

 

 

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2018 PROXY STATEMENT   

 

 

Proxy Summary (continued)

 

 

 

2017 Highlights

Business

2017 was our first full year as a stand-alone public company, and we enjoyed many successes, as illustrated by the achievements below, driven by our strategic priorities to reduce complexity, drive returns, and strengthen the balance sheet:

 

    Revenue of $11.7 billion, 25% higher than in 2016  

 

    Net income of $217 million, or $1.16 per share  

 

    Adjusted EBITDA excluding special items of $2.35 billion*, more than double earnings in 2016  

 

    $1.36 billion cash on hand at December 31; up 59% year-over-year  

 

    Earnings per share of $1.16  

 

    One-year total stockholder return of 92%, more than four times higher than both the Standard & Poor’s 500® Index and the Standard & Poor’s 500® Metals & Mining GICS Level 3 Index.  

 

  * A non-GAAP measure. Please see Attachment B for a reconciliation of the non-GAAP measure to the most directly comparable GAAP measure.  

Corporate Governance

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 of this Proxy Statement.

 

    Independent Board Chairman  

 

    11 of 12 Board members are independent (all directors other than our Chief Executive Officer)  

 

    Diversity in Board composition—one-third of our Board members are women  

 

    All directors with tenure on our Board of less than two years  

 

    Limits on other public company board service  

 

    Regularly-scheduled executive sessions of independent directors  

 

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

 

    Director attendance at Board and committee meetings averaged 96% in 2017  

 

    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  

 

    Commitment to sustainable business practices  

 

    Director and officer stock ownership guidelines  

 

    Policies prohibiting short sales, hedging, margin accounts, and pledging of Alcoa stock  

 

    Sustainability Report issued in 2017  

 

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2018 PROXY STATEMENT   

 

 

Proxy Summary (continued)

 

 

 

Executive Compensation

Our Compensation and Benefits Committee has adopted an executive compensation philosophy that is based on three guiding principles to drive pay-for-performance and stockholder alignment:

 

    Target base salary compensation at median, while using annual incentive compensation and long-term incentives to reward exceptional performance and to attract and retain exceptional talent.  
    Equity is the most significant portion of total compensation for NEOs to align the interests of NEOs with the stockholders.  
    Annual incentive and long-term incentive metrics focus management on achieving the greatest positive impact on financial performance.  

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 2017.

 

 

 WHAT WE DO

      

 

  WHAT WE DON’T DO

    We pay for performance  

 

    We consider and benchmark against 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 use a mix of stock price appreciation and operational metrics to address the interests of all stakeholders  

 

    We have a conservative compensation risk profile  

 

    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) without stockholder approval  

 

  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 pay above-market earnings on deferred compensation or other nonqualified plans  

 

  û   We do not encourage excessive risk-taking in compensation practices  
 

 

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2018 PROXY STATEMENT   

 

 

Item 1 Election of Directors

 

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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 2019. Directors are elected on an annual basis for one-year terms.

All of the nominees currently serve as directors on the Alcoa Board and were elected to the Board by the stockholders at the 2017 Annual Meeting.

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 is a plurality of votes cast. The election of directors at the 2018 Annual Meeting is an uncontested election of directors.

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”). Below is biographical information about the director nominees and their specific experience, skills and qualifications that has led the Board and the Governance and Nominating Committee to conclude that they should continue to serve as directors on Alcoa’s Board. In addition, the Board has determined that each non-employee director nominee qualifies as an independent director under the New York Stock Exchange (“NYSE”) corporate governance listing standards and the Company’s Director Independence Standards. See “Director Independence”.

Director Qualifications, Skills, and Attributes

Our directors have a diversity of experience that spans a broad range of industries 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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Item 1 Election of Directors (continued)

 

 

 

The table below summarizes the range of skills and experiences of each director. Because it is a summary, it does not include all of the skills, experiences, qualifications, and diversity that each director offers. In addition, as described in the Company’s Corporate Governance Guidelines, all directors should be, and are, financially literate.

 

                         
Attributes, Experience and Skills   LOGO        LOGO        LOGO        LOGO        LOGO        LOGO        LOGO        LOGO        LOGO        LOGO        LOGO        LOGO     

Age

 

  71    

 

  58    

 

  61    

 

  71    

 

  44    

 

  55    

 

  66    

 

  72    

 

  58    

 

  57    

 

  62    

 

  66    

 

Gender (1/3 of the Board is female)

 

  M    

 

  F    

 

  M    

 

  F    

 

  M    

 

  M    

 

  M    

 

  M    

 

  F    

 

  F    

 

  M    

 

  M    

 

Minority

 

                              

 

                      

 

 

 

Leadership Experience

(Chairman, CEO, President, Senior

Managing Director and/or CFO)

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

 

 

International Experience

 

          

 

      

 

      

 

      

 

      

 

          

 

      

 

          

 

      

 

 

 

Financial Literacy

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

 

 

Audit Committee Financial Expertise*

 

                          

 

              

 

      

 

          

 

 

 

Government/Regulatory Experience

 

      

 

      

 

      

 

      

 

          

 

      

 

              

 

      

 

      

 

Relevant Industry Experience

 

      

 

                  

 

      

 

          

 

      

 

      

 

      

 

   

Risk Management Expertise

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

      

 

 

 

Environmental and Sustainability Experience

 

                  

 

      

 

      

 

                  

 

      

 

      

 

 

 

Legal/Technical Expertise

 

      

 

              

 

          

 

      

 

      

 

      

 

          

 

   

Labor/Human Resources Experience

 

                      

 

                  

 

           

Mergers & Acquisitions Experience

 

      

 

      

 

      

 

          

 

      

 

          

 

      

 

      

 

      

 

   

 

* As determined by the Alcoa Board with respect to current Audit Committee members. Other directors also possess this qualification.

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 addition 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.

 

 

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

 

 

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Item 1 Election of Directors (continued)

 

 

 

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Michael G. Morris (Chairman)

 

Director since: 2016

 

Age: 71

 

Committees: Executive Committee (Chair)

 

Other Current Public Directorships:

L Brands, Inc.; The Hartford Financial Services Group, Inc.

 

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 time, he held positions of increasing responsibility in energy and natural gas businesses.

Other Current Affiliations: 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. 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, Chairman of AEP from 2004 through 2013, and served on the audit and conflicts committees of Spectra Energy Partners GP, LLC from 2013 through 2017.

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: 58

 

Committees: Governance and Nominating Committee; Safety, Sustainability and 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 was 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, where she served as a Managing Director.

Other Current Affiliations: Ms. Citrino serves on the Retail & Tourism Advisory Board of the Partnership Fund for New York City.

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 financial and investment expertise. Her expertise in finance and business operations is an invaluable asset to Alcoa as it pursues its strategic plans.

 

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Item 1 Election of Directors (continued)

 

 

 

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Timothy P. Flynn

 

Director since: 2016

 

Age: 61

 

Committees: Compensation and Benefits Committee; Safety, Sustainability and 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: Mr. Flynn serves as 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.

 

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Kathryn S. Fuller

 

Director since: 2016

 

Age: 71

 

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 of The Robert Wood Johnson Foundation, a leading philanthropic organization 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. In 2017, Ms. Fuller was elected to be a member of the American Academy of Arts and Sciences, one of the oldest learned societies in the United States that is devoted to the advancement and study of key societal, scientific, and intellectual issues.

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, including executive vice president, general counsel and director of WWF’s public policy and wildlife trade monitoring programs and has held several positions in the U.S. Department of Justice.

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: 44

 

Committees: Executive Committee

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

Mr. Harvey has served as Chief Executive Officer of Alcoa since November 2016 and President since May 2017. From October 2015 until November 1, 2016, the date that Alcoa became an independent, publicly-traded company upon its separation from Alcoa Inc. (since renamed Arconic Inc.) (the “Separation”), Mr. Harvey was Executive Vice President of Alcoa Inc. and President of its Global Primary Products business. From June 2014 to October 2015, he was Executive Vice President, Human Resources and Environment, Health, Safety and Sustainability at Alcoa Inc. 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 Alcoa Inc., predominantly in its upstream business. As the Chief Operating Officer for Global Primary Products from July 2013 to June 2014, he oversaw the day-to-day global operations of the 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 from September 2010 to November 2011, and he was Director of Corporate Treasury from January 2010 to September 2010. Mr. Harvey joined Alcoa Inc. 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 have given him an in-depth and well-rounded understanding of the Company.

 

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James A. Hughes

 

Director since: 2016

 

Age: 55

 

Committees: Audit Committee; Safety, Sustainability and Public Issues Committee

 

Other Current Public Directorships:

TPI Composites Inc.

Career Highlights and Qualifications: Mr. Hughes is CEO and Managing Director of Prisma Energy Capital, a private entity focused on investments in energy storage, since December 2017. He is the 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.

 

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Prior to joining First Solar, Mr. Hughes served, from October 2007 until April 2011, as Chief Executive Officer and Director of AEI Services LLC, a private company that 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 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: Mr. Hughes is the former Chairman and serves as a Director of the Los Angeles Branch of the Federal Reserve Bank of San Francisco.

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 on the board 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: 66

 

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

 

Other Current Public Directorships:

First Data Corporation; WestRock Company (Lead Independent Director), XL Group

Career Highlights and Qualifications: Mr. Nevels founded The Swarthmore Group, an investment advisory firm, in 1991 and has served as its Chairman since that time. He has more than 37 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 from 2014 through 2015.

Other Current Affiliations: Mr. Nevels is currently a 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.

Previous Directorships: Mr. Nevels served as the Chairman of the Board of Directors of the Hershey Company from 2009 through 2015 and was its lead independent director from 2015 through 2017.

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

 

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Item 1 Election of Directors (continued)

 

 

 

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James W. Owens

 

Director since: 2016

 

Age: 72

 

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

 

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. He held managerial positions in the Accounting and Product Source Planning Departments and then became managing director of P.T. Natra Raya, Caterpillar’s joint venture in Indonesia, 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 and served as Chairman and Chief Executive Officer of Caterpillar from 2004 until 2010. He was also former Chairman and Executive Committee member of the Business Council.

Other Current Affiliations: Mr. Owens is the former 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: 58

 

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

 

Other Current Public Directorships:

VF Corporation

Career Highlights and Qualifications: Ms. Roberts was 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, from 2011 until 2017 when she retired. 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 had also served as IP’s Vice President of People Development for three years, during which she developed human resources programs that had a major impact on IP’s talent posture and employee engagement. Ms. Roberts 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.

 

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Item 1 Election of Directors (continued)

 

 

 

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

Other Current Affiliations: Ms. Roberts also serves on the Board of Trustees for the University of Memphis.

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: 57

 

Committees: Audit Committee; Safety, Sustainability and 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 and a member of its board since September 2011. She serves on Spire’s Strategy Committee.

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 sits on the boards of Civic Progress St. Louis, United Way of Greater St. Louis’ Executive Committee and Board, St. Louis Regional Chamber Executive Committee and Board of Directors and the American Gas Association.

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 that she brings to our Board. Ms. Sitherwood is an audit committee financial expert.

 

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Steven W. Williams

 

Director since: 2016

 

Age: 62

 

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 40 years of international energy industry experience, including 18 years at Esso/Exxon.

Other Current Affiliations: Mr. Williams is a fellow of the Institution of Chemical Engineers, a member of the Institute of Directors, and is a member of the National Association of Corporate Directors. He is one of 12 founding chief executive officers of Canada’s Oil Sands Innovation Alliance (COSIA), a member of the advisory board of Canada’s Ecofiscal Commission and a member of the Board of the Business Council of Canada.

 

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Item 1 Election of Directors (continued)

 

 

 

Attributes and Skills: Mr. Williams has decades of experience in leadership positions at large, publicly-traded energy companies that he brings to our Board. 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: 66

 

Committees: Audit Committee; Safety, Sustainability and Public Issues Committee (Chair)

 

Other Current Public Directorships:

Citigroup Inc.; 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). Earlier, he was with the central bank of Mexico where he served as deputy manager of economic research and deputy director and 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.

Also in Mexico, he taught economics at the National Polytechnic Institute and El Colegio de Mexico.

Other Current Affiliations: 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, a director of the Union Pacific Corporation from 2001 to 2006, and a director of Promotora de Informaciones, S.A. from 2010 to 2017.

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 to our Board. 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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Item 1 Election of Directors (continued)

 

 

 

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, 201 Isabella Street, Suite 500, Pittsburgh, Pennsylvania 15212-5858. 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 the close of business 90 days before the anniversary date of the immediately preceding Annual Meeting, except as otherwise provided in the Bylaws. If the number of directors is increased by the Board and there is no public announcement at least 100 days prior to the anniversary date of the immediately preceding Annual Meeting, a previously submitted timely notice will be considered timely with regard to nominees for the new positions on the Board if received before the close of business on the tenth day following public announcement of the increase of the size of the Board.

If a stockholder intends to nominate directors for a special meeting of the Board at which directors will be elected, to be timely, the stockholder must provide written notice to Alcoa’s Corporate Secretary not earlier than 120 days prior and not later than the close of business 90 days prior to the special meeting. If the first public announcement of the special meeting is less than 100 days prior to the special meeting, a notice will be timely if received within ten days of the public announcement of the special meeting.

A stockholder nominating a director for election must provide the information regarding that nominee in the format required by the Bylaws, and otherwise comply with all applicable requirements in the Bylaws. Any such notice must be sent to our principal executive offices: Alcoa Corporation, 201 Isabella Street, Suite 500, Pittsburgh, Pennsylvania 15212-5858, Attention: Corporate Secretary. For the 2019 Annual Meeting, such notice must be delivered to the Corporate Secretary no earlier than January 9, 2019 and no later than February 8, 2019.

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 outstanding Alcoa Corporation 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. Alcoa Corporation first became an independent, publicly-traded company on November 1, 2016 and, as a result, eligible stockholders will first be able to nominate a proxy access candidate for the Company’s 2020 annual meeting of stockholders. Once available, eligible 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, an eligible stockholder’s proxy access notice must be delivered to our principal executive offices, Alcoa Corporation, 201 Isabella Street, Suite 500, Pittsburgh, Pennsylvania 15212-5858, 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.

 

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2018 PROXY STATEMENT   

 

 

Item 1 Election of Directors (continued)

 

 

 

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.
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 other members of executive management of the Company.
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 be 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.

 

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Item 1 Election of Directors (continued)

 

 

 

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.

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. In addition, Mr. Morris receives a non-executive Chairman fee in the amount of $150,000, which amount was recommended to the Board by the Governance and Nominating Committee based on a comparative market analysis prepared by Pay Governance LLC (“Pay Governance”), the independent compensation consultant selected by the Compensation and Benefits Committee. 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.

Director Fees

The table below sets forth the components of compensation for our non-employee directors approved by the Board with respect to 2017:

 

  Annual Compensation Element    Amount  

 

  Cash 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 for continuing directors following the annual meeting, and generally with one-year cliff vesting, 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.

 

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Item 1 Election of Directors (continued)

 

 

 

(2) Each non-employee director may elect to defer all or part of his or her cash compensation pursuant to the Alcoa Corporation Directors’ Deferred Fee Plan (“Deferred Fee Plan”). Directors may elect to defer their cash compensation into various investment options or into restricted share units that are fully vested at grant. Deferred cash 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. Cash fees that are deferred into 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.

2017 Director Compensation

The following table sets forth the total compensation of the Company’s non-employee directors for the year ended December 31, 2017.

 

  Name   

Fees Earned or

Paid in Cash

($)(1)

    

Stock Awards

($)(2)

    

Total

($)

 

 

  Michael G. Morris

 

  

 

$

 

 

270,000

 

 

 

 

  

 

$

 

 

120,007

 

 

 

 

  

 

$

 

 

390,007

 

 

 

 

 

  Mary Anne Citrino

 

  

 

$

 

 

120,000

 

 

 

 

  

 

$

 

 

120,007

 

 

 

 

  

 

$

 

 

240,007

 

 

 

 

 

  Timothy P. Flynn

 

  

 

$

 

 

126,417

 

 

 

 

  

 

$

 

 

120,007

 

 

 

 

  

 

$

 

 

246,424

 

 

 

 

 

  Kathryn S. Fuller

 

  

 

$

 

 

136,500

 

 

 

 

  

 

$

 

 

120,007

 

 

 

 

  

 

$

 

 

256,507

 

 

 

 

 

  James A. Hughes

 

  

 

$

 

 

131,000

 

 

 

 

  

 

$

 

 

120,007

 

 

 

 

  

 

$

 

 

251,007

 

 

 

 

 

  James E. Nevels

 

  

 

$

 

 

120,000

 

 

 

 

  

 

$

 

 

120,007

 

 

 

 

  

 

$

 

 

240,007

 

 

 

 

 

  James W. Owens

 

  

 

$

 

 

140,000

 

 

 

 

  

 

$

 

 

120,007

 

 

 

 

  

 

$

 

 

260,007

 

 

 

 

 

  Carol L. Roberts

 

  

 

$

 

 

147,500

 

 

 

 

  

 

$

 

 

120,007

 

 

 

 

  

 

$

 

 

267,507

 

 

 

 

 

  Suzanne Sitherwood

 

  

 

$

 

 

131,000

 

 

 

 

  

 

$

 

 

120,007

 

 

 

 

  

 

$

 

 

251,007

 

 

 

 

 

  Steven W. Williams

 

  

 

$

 

 

120,000

 

 

 

 

  

 

$

 

 

120,007

 

 

 

 

  

 

$

 

 

240,007

 

 

 

 

 

  Ernesto Zedillo

 

  

 

$

 

 

 

147,500

 

 

 

 

 

 

  

 

$

 

 

 

120,007

 

 

 

 

 

 

  

 

$

 

 

 

267,507

 

 

 

 

 

 

(1) This column reflects the cash fees earned by directors for Board and committee service to Alcoa from January 1, 2017 through December 31, 2017, whether or not such fees were deferred. Three of our directors deferred their cash fees, or a portion thereof, into restricted share units in the following amounts: Mr. Flynn, $126,348; Mr. Williams, $119,951; and Dr. Zedillo, $73,682.
(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 May 12, 2017. A discussion of the relevant assumptions is set forth in Note M to the consolidated financial statements set forth in the 2017 Annual Report. As of December 31, 2017, each of our directors held 3,775 unvested 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 of our common stock, including restricted share units. Cash-settled deferred share equivalent units relating to Alcoa common stock (acquired at Separation due to certain directors’ service on the board of our former parent company pursuant to the Deferred Fee Plan) are counted for purposes of meeting the stock ownership requirement. Therefore, whether directors hold shares of Alcoa common stock, restricted share units, or deferred share units, they have the same economic interest in the performance of the Company, which further aligns the 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, 2018, based on the closing price per share of our common stock on the NYSE on that date.

 

  Non-Employee Directors   

Value of Alcoa Stock,

Restricted Share Units and

Deferred Share Units

 

 

  Mary Anne Citrino

 

  

 

$

 

 

263,795

 

 

 

 

 

  Timothy P. Flynn

 

  

 

$

 

 

404,680

 

 

 

 

 

  Kathryn S. Fuller

 

  

 

$

 

 

1,389,730

 

 

 

 

 

  James A. Hughes

 

  

 

$

 

 

263,795

 

 

 

 

 

  Michael G. Morris

 

  

 

$

 

 

2,422,375

 

 

 

 

 

  James E. Nevels

 

  

 

$

 

 

265,282

 

 

 

 

 

  James W. Owens

 

  

 

$

 

 

1,849,670

 

 

 

 

 

  Carol L. Roberts

 

  

 

$

 

 

875,440

 

 

 

 

 

  Suzanne Sitherwood

 

  

 

$

 

 

263,795

 

 

 

 

 

  Steven W. Williams

 

  

 

$

 

 

396,525

 

 

 

 

 

  Ernesto Zedillo

 

  

 

$

 

 

2,226,320

 

 

 

 

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, including Director Independence Standards
  Business Conduct Policies
  Code of Ethics for our Chief Executive Officer, Chief Financial Officer and Other Financial Professionals
 

 

Paper copies of the above documents can be obtained by writing to the Alcoa Corporation, Attention: Corporate Secretary, 201 Isabella Street, Suite 500, Pittsburgh, Pennsylvania 15212-5858.

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 President and CEO is the only management director.

 

   
Board Composition   

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

   We annually assess the composition of our Board and under our Bylaws 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 backgrounds.

 

   
Accountability to Stockholders   

   Majority Voting in the Election of Directors/Resignation Policy. 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.

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

 

   
Board Committees   

   Five standing Board committees. Audit; Compensation and Benefits; Governance and Nominating; Safety, Sustainability and 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 is reviewed and re-assessed annually. Each Board committee charter 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. Directors who are not public company chief executive officers should not serve on more than four outside public company boards in addition to the Alcoa Board.

   Attendance. Directors’ attendance at annual meetings of stockholders is expected.

 

   

Prohibition Against Short Sales, Hedging, Margin Accounts and Pledging

 

  

   Directors and officers are prohibited from (1) executing short sales of Alcoa securities and derivative or speculative transactions in Alcoa securities; (2) using 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) 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 outstanding Alcoa Corporation 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 as described under “Nominating Board Candidates—Procedures and Director Qualifications.”

 

   
Commitment toward Sustainability   

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

   We published our first sustainability report as Alcoa Corporation in 2017, which is available on our website, and will be publishing our second in May 2018.

 

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

 

   
Succession Planning   

   The Board actively monitors our management succession and development plans and receives regular updates on employee engagement, diversity, and retention matters.

 

   

Board and Committee Self- Evaluation

 

  

   We have 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 named executive officers 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.

 

   
Executive Sessions   

   Our non-employee directors meet in regularly-scheduled executive sessions without management participation.

   Mr. Morris, our non-executive Chairman, presides during the Board’s executive sessions.

 

   
Ethics Program   

   Alcoa has a robust ethics and compliance program, which includes regular employee training.

   Our Business Conduct Policies and Code of Ethics applicable to the CEO, CFO and Financial Professionals, as well as other policies, are available on our website.

 

 

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Corporate Governance (continued)

 

 

 

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.

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 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. We conduct annual surveys regarding compliance with the policies.

 

Only the Audit Committee can amend or grant waivers from the provisions of the Business Conduct Policies and Company’s Code of Ethics, and any such amendments or waivers applicable to directors and executive officers will be posted promptly on our website, www.alcoa.com. No waivers have been 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 NYSE listing standards and 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 the Chairman to provide 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.

Our Corporate Governance Guidelines provide that the non-executive Chairman will: call and chair all meetings of the Board, including executive sessions of the independent directors; chair the annual stockholders meeting, ensure that he or she is available for consultation and direct communication with major stockholders or joint venture partners, as appropriate; oversee Board governance, including approval of meeting agendas and meeting schedules to assure that all agenda items are adequately addressed; ensure personal availability for consultation and communication with independent directors; call special meetings of the independent directors, as the Chairman may deem appropriate; and provide guidance and communication to the Chief Executive Officer in matters of strategic importance.

 

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Corporate Governance (continued)

 

 

 

Board Meetings and Attendance

The Board met eight times in 2017. In 2017, director attendance at meetings of the Board and committees on which they served averaged 96% (and no director attended less than 75% of the meetings of the Board or the committees on which he or she served during the period of service for such committee). Under Alcoa’s Corporate Governance Guidelines, all directors are expected to attend the annual meeting of stockholders, and all directors attended the 2017 Annual Meeting.

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

 

     

    Audit    

 

       

Compensation
and Benefits

 

       

Governance and

Nominating

 

       

Safety,
Sustainability
and
 Public Issues 

 

       

  Executive  

 

         

Mary Anne Citrino*

 

                

 

 

 

      

 

      
         

Timothy P. Flynn*

 

         

 

             

 

      
         

Kathryn S. Fuller*

 

         

 

      

Chair

 

             

 

         

Roy C. Harvey(1)

 

                              

 

         

James A. Hughes*

 

  

 

                    

 

      
         

Michael G. Morris*(1)

 

                              

Chair

 

         

James E. Nevels*

 

         

 

      

 

             

 

         

James W. Owens*

 

         

Chair

 

      

 

             
         

Carol L. Roberts*

 

  

Chair

 

      

 

                    

 

         

Suzanne Sitherwood*

 

  

 

                    

 

      
         

Steven W. Williams*

 

         

 

      

 

             

 

         

Ernesto Zedillo*

 

  

 

                        

Chair

 

        
         

2017 Meetings

 

  

8

 

      

7

 

      

5

 

      

5

 

      

0

 

* Independent Director
(1) As a management director, Mr. Harvey attends each committee meeting, except to the extent the Board or committee requests to meet without him present or the Board or committee is meeting in executive session. As non-executive Chairman of the Board, Mr. Morris attends each Board and committee meeting.

Board and Committee Self-Evaluation Process

The Governance and Nominating Committee has developed an annual process to assess the performance and effectiveness of the full Board, the operations of its committees, and the contributions of directors. The Governance and Nominating Committee oversees the evaluation process. The evaluation process is designed to solicit robust feedback regarding the Board and individual directors. It consists of one-on-one interviews conducted by the Chairman of the Board with individual directors regarding the function of the Board and each committee, and one-on-one interviews conducted by the Chair of the Governance and Nominating Committee regarding the performance of the Chairman. The Governance and Nominating Committee will also consider individual director performance when evaluating directors for possible re-nomination to the Board.

 

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Corporate Governance (continued)

 

 

 

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 Safety, Sustainability 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.

   Approves the audit committee report for inclusion in the Proxy Statement.

   Discusses with management and the auditors the Company’s policies with respect to risk assessment and risk management, including major financial risk exposures and cybersecurity.

 

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

 

   

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 and the compensation committee report 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”)

 

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 to the Chief Executive Officer to determine and approve annual incentive and long-term incentive awards for officer employees of the Company as prescribed by the Compensation and Benefits Committee. 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 the other officers. 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.

 

 

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Corporate Governance (continued)

 

 

 

   

  COMMITTEE

 

  

RESPONSIBILITIES

 

   

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 annually reviews the Company’s Corporate Governance Guidelines, and oversees other corporate governance matters.

   Reviews related person transactions in accordance with the Company’s policy on such transactions.

   Oversees an annual performance evaluation of the Board and its committees.

   Periodically reviews and makes recommendations to the Board regarding director compensation.

 

   

Safety, Sustainability and Public Issues Committee

  

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

   Oversees Alcoa’s initiatives, policies and practices to ensure alignment with its values.

   Considers, and brings to the attention of the Board, as appropriate, current and emerging safety and health, environmental and sustainability, social, and political trends and major global legislative and regulatory developments or other government relations, trade or public policy issues.

   Advises on significant stakeholder concerns relating to safety, the environment, sustainability, corporate and social responsibility, and other public issues.

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

   Considers developments affecting the Company’s corporate reputation and provides guidance regarding the protection of the Company’s reputation.

 

In 2017, the name of this committee was changed from the “Public Issues Committee” to the “Safety, Sustainability and Public Issues Committee” to emphasize the importance of safety at all levels of the Company and highlight the specific responsibilities of this committee in regard to safety oversight. All Board members are invited to the meetings of the Safety, Sustainability and Public Issues Committee.

 

   

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.

 

 

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 for the processes established to report and monitor systems for material risks applicable to the Company. The Board annually reviews Alcoa’s enterprise risk management process 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.

 

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Corporate Governance (continued)

 

 

 

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. The Compensation and Benefits Committee periodically reviews Alcoa’s incentive structure to avoid encouraging material risk taking through financial incentives. Based on these determinations, the Company believes that it is not reasonably likely that Alcoa’s compensation and benefit plans incentivize undue risk or create risks that are reasonably likely to have a material adverse effect on us. See “Compensation Discussion and Analysis—Executive Compensation Policies and Practices—What We Do—Maintain a Conservative Compensation Risk Profile”.

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 Safety, Sustainability and Public Issues Committee considers risks related to the Company’s reputation, and risks relating to safety and health, public policy, environmental sustainability, and social issues.

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, 201 Isabella Street, Suite 500, Pittsburgh, Pennsylvania 15212-5858.

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, 201 Isabella Street, Suite 500, Pittsburgh, Pennsylvania 15212-5858. 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.com—Who We Are—Ethics and Compliance—Integrity Line.” See also www.alcoa.com—Investors—Corporate Governance—Contact Directors.

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 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

LOGO

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 a subsidiary is a participant, where 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

 

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Corporate Governance (continued)

 

 

 

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.

Transactions with Related Persons in 2017

Please see page 80 of this Proxy Statement for a description of related person transactions in 2017.

Compensation Matters

LOGO

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 Consultant

The Compensation and Benefits Committee directly retained an independent consultant, Pay Governance. Pay Governance provided advice during 2017 as requested by the Compensation and Benefits 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 the compensation plans for executives. See “Compensation Discussion and Analysis—Executive Compensation Policies and Practices—What We Do—The Compensation Committee Retains, an Independent Compensation Consultant”. The Compensation and

 

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Corporate Governance (continued)

 

 

 

Benefits Committee performed its annual assessment of the consultant’s independence and found no conflict of interest. In its assessment, the committee considered, among other matters: 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). Additionally, the Company utilized broad-based comparative compensation survey data from Willis Towers Watson, which survey data was not customized for the Company, in order to assist the Company with its general understanding as to whether its compensation programs were competitive with the market.

Recovery of Incentive Compensation

The Alcoa Corporation 2016 Stock Incentive Plan, as amended and restated (the “2016 Stock Incentive Plan”) and the Annual Cash Incentive Compensation Plan (the “Annual Incentive Plan”) each provide that if the Board learns of (i) any violation of the Company’s Business Conduct Policies, code of ethics, or similar codes and/or policies that results in significant financial or reputational harm to the Company, as determined in the Board’s sole discretion, then the Board will, to the extent permitted by law, effect the full or partial cancellation or recovery of awards previously granted to a former or current executive officer (in the case of the 2016 Stock Incentive Plan, as proposed to be amended at this Annual Meeting) or (ii) any misconduct by a current or former executive officer that contributed to the Company having to restate all or a portion of its financial statements, then the Board will, to the full extent permitted by governing law, in all appropriate cases, effect the cancellation and recovery of any incentive compensation previously granted to such executive officer if: (A) the amount of the incentive compensation was calculated based upon the achievement of certain financial results that were subsequently the subject of a restatement, (B) the executive engaged in intentional misconduct that caused or partially caused the need for the restatement, and (C) the amount of the incentive compensation had the financial results been properly reported would have been lower than the amount actually awarded. Furthermore, all incentive compensation (including incentive compensation that has already vested) is subject to the terms and conditions, if applicable, of any other recoupment policy adopted by the Company from time to time or any recoupment requirement imposed under applicable laws, rules, regulations or stock exchange listing standards, including, without limitation, recoupment requirements imposed pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Section 304 of the Sarbanes-Oxley Act of 2002, or any regulations promulgated thereunder, or recoupment requirements under the laws of any other jurisdiction.

 

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Beneficial Ownership

LOGO

 

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 2017 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 table sets forth the number and percentage of shares of our common stock beneficially owned as of December 31, 2017 as reported by such stockholders to the SEC and who may be considered a beneficial owner of more than 5% of the outstanding shares of our common stock as of March 1, 2018.

 

  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        16,277,111 (2)       8.7

  Capital World Investors
  333 South Hope Street
  Los Angeles, CA 90071

     Common Stock        11,798,741 (3)       6.3
1. Percentages are based on 186,180,694 shares of Company common stock outstanding as of March 1, 2018.
2. As reported in a Schedule 13G amendment filed on February 12, 2018. The Vanguard Group, an investment adviser, reported that it had sole power to vote 94,586 shares, sole power to dispose of 16,175,218 shares, shared power to vote 20,377 shares, and shared power to dispose of 101,893 shares.
3. As reported in a Schedule 13G filed on February 14, 2018. Capital World Investors, a division of Capital Research and Management Company (“CRMC”), reported that Capital World Investors’ divisions of CRMC and Capital International Limited collectively provide investment management services under the name Capital World Investors, and that it is deemed to have sole voting power and sole dispositive power with respect to 11,798,741 shares, with no shared voting and dispositive power.

 

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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, 2018, by each director, the named executive officers, 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, 201 Isabella Street, Suite 500, Pittsburgh, Pennsylvania 15212-5858. 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 director stock ownership guidelines.

 

    

 

Beneficial Ownership

 

         
         

   Name of Beneficial Owner

 

 

Shares of      
Common Stock
(2)      

 

 

Total Beneficial      

Ownership(3)       

 

 

Percentage      

of Class      

Beneficially      

Owned      

 

 

Additional      

Underlying      

Stock  Units(4)      

 

 

Total      

 

         

  Directors

 

                   
         

  Michael G. Morris

 

     

 

    5,424        

 

 

     

 

    5,424        

 

 

     

 

*      

 

 

     

 

  47,943        

 

 

     

 

  53,367        

 

 

         

  Mary Anne Citrino

 

     

 

    2,078        

 

 

     

 

    2,078        

 

 

     

 

*      

 

 

     

 

    3,775        

 

 

     

 

    5,853        

 

 

         

  Timothy P. Flynn

 

     

 

    5,204        

 

 

     

 

    5,204        

 

 

     

 

*      

 

 

     

 

    3,775        

 

 

     

 

    8,979        

 

 

         

  Kathryn S. Fuller

 

     

 

    2,078        

 

 

     

 

    2,078        

 

 

     

 

*      

 

 

     

 

  28,757        

 

 

     

 

  30,835        

 

 

         

  James A. Hughes

 

     

 

    2,078        

 

 

     

 

    2,078        

 

 

     

 

*      

 

 

     

 

    3,775        

 

 

     

 

    5,853        

 

 

         

  James E. Nevels

 

     

 

    2,111        

 

 

     

 

    2,111        

 

 

     

 

*      

 

 

     

 

    3,775        

 

 

     

 

    5,886        

 

 

         

  James W. Owens

 

     

 

    3,747        

 

 

     

 

    3,747        

 

 

     

 

*      

 

 

     

 

  37,239        

 

 

     

 

  40,986        

 

 

         

  Carol L. Roberts

 

     

 

    2,078        

 

 

     

 

    2,078        

 

 

     

 

*      

 

 

     

 

  17,346        

 

 

     

 

  19,424        

 

 

         

  Suzanne Sitherwood

 

     

 

    2,078        

 

 

     

 

    2,078        

 

 

     

 

*      

 

 

     

 

    3,775        

 

 

     

 

    5,853        

 

 

         

  Steven W. Williams

 

     

 

    5,023        

 

 

     

 

    5,023        

 

 

     

 

*      

 

 

     

 

    3,775        

 

 

     

 

    8,798        

 

 

         

  Ernesto Zedillo

 

     

 

    3,887        

 

 

     

 

    3,887        

 

 

     

 

*      

 

 

     

 

  45,510        

 

 

     

 

  49,397        

 

 

         

  Executive Officers

 

                   
         

  Roy C. Harvey(1)

 

     

 

203,176        

 

 

     

 

203,176        

 

 

     

 

*      

 

 

     

 

  216,167          

 

 

     

 

419,343        

 

 

         

  William F. Oplinger

 

     

 

  67,367        

 

 

     

 

  67,367        

 

 

     

 

*      

 

 

     

 

    85,734          

 

 

     

 

153,101        

 

 

         

  Tómas M. Sigurðsson

 

     

 

  45,881        

 

 

     

 

  45,881        

 

 

     

 

*      

 

 

     

 

    56,473          

 

 

     

 

102,354        

 

 

         

  Jeffrey D. Heeter

 

     

 

  12,842        

 

 

     

 

  12,842        

 

 

     

 

*      

 

 

     

 

    50,558          

 

 

     

 

  63,400        

 

 

         

  Leigh Ann Fisher

 

     

 

  80,769        

 

 

     

 

  80,769        

 

 

     

 

*      

 

 

     

 

    36,176          

 

 

     

 

116,945        

 

 

         

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

 

     

 

446,297        

 

 

     

 

446,297        

 

 

     

 

*      

 

 

     

 

650,953        

 

 

     

 

1,097,250           

 

 

* Indicates that the percentage of beneficial ownership does not exceed 1%, based on 186,180,694 shares of Company common stock outstanding as of March 1, 2018.
(1) Mr. Harvey also is a director of the Company.
(2) 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, vested shares held by non-employee directors that are payable upon separation from service from the Board, and for executive officers, share equivalent units held in the Company’s retirement savings plan that confer voting rights through the plan trustee with respect to shares of Company common stock as follows: Mr. Harvey, 864; Mr. Oplinger, 522; and Ms. Fisher, 1,021. This column also includes shares of Company common stock that may be acquired under employee stock options that are exercisable as of March 1, 2018 or will become exercisable within 60 days thereafter as follows: Mr. Harvey, 182,397; Mr. Oplinger, 10,710; Mr. Sigurðsson, 35,672; Mr. Heeter, 4,017; Ms. Fisher, 65,898; and all executive officers as a group 298,694. Non-employee directors do not have Company stock options.
(3) This column shows beneficial ownership of Company common stock as calculated under SEC rules. This column does not include performance-based restricted share units or time-based restricted share units granted to the executive officers that will not or could not be earned and/or paid within 60 days of March 1, 2018.
(4)

For executive officers and non-employee directors, respectively, this column includes deferred share equivalent units held under the deferred compensation plan for executives and deferred share equivalent units (acquired at Separation

 

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Beneficial Ownership (continued)

 

 

 

  due to certain directors’ service on the board of our former parent company) pursuant to the Deferred Fee Plan. Deferred share equivalent units are payable in cash and do not have voting rights. For non-employee directors, this column includes unvested restricted share units, which 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. For executive officers, this column includes unvested time-based awards of restricted share units and stock options that will not or could not be earned and/or paid within 60 days of March 1, 2018. For executive officers, this column does not include performance restricted share units, which, in addition to service-based vesting criteria, have performance-based criteria that render the total amount of shares ultimately issuable indeterminable until such awards are deemed earned and payable by the Compensation and Benefits Committee.

 

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Item 2 Ratification of Appointment of Independent Registered Public Accounting Firm

 

LOGO

 

Under its 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 fiscal year 2018. PricewaterhouseCoopers LLP served as the independent auditor of Alcoa during 2017. The Audit Committee believes that PricewaterhouseCoopers LLP is knowledgeable about the Company’s operations and accounting practices. 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. The Audit Committee considers whether the services provided by PricewaterhouseCoopers LLP are compatible with maintaining the independence of the Company’s independent registered public accounting firm. 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 the retention of 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 2018.

 

 

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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 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 2017 (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 regularly monitors the progress of both in assessing the Company’s compliance with Section 404 of the Sarbanes-Oxley Act, including their findings, required resources, and progress to date.

At every regular meeting, the Audit Committee meets separately, with the independent auditor and the Company’s Vice President—Internal Audit, with and without management present, 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, 2017, 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 2018.

The Audit Committee

Carol L. Roberts, Chair

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 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 Audit 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 were approved by the 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, 2017 and December 31, 2016 (in thousands). The 2016 fees below include fees allocated by Arconic Inc. (“Arconic”) to, and paid directly by, Alcoa Corporation.

 

      2017      2016  

  Audit Fees

   $ 7,737      $ 7,262  

  Audit-Related Fees

   $ 102      $ 219  

  Tax Fees

   $ 41      $ 41  

  All Other Fees

   $ 22      $ 5  

  Total

   $ 7,902      $ 7,527  

Audit Fees consisted of fees related to the annual integrated audit of the Company’s consolidated financial statements and review of the interim financial statements, effects of foreign currency exchange rates on the audit fee, statutory audits, and issuance of comfort letters and consents.

Audit-Related Fees consisted of fees relating to audits of employee benefit plans, agreed-upon or expanded audit procedures for accounting or regulatory requirements and compliance audits.

Tax Fees consisted of fees relating to international tax support.

Other Fees consisted of fees relating to a captive insurance company audit and for subscription to PricewaterhouseCoopers’s online resource.

 

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Item 3 Advisory Vote to Approve 2017 Executive Compensation

 

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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 2017 compensation of the named executive officers listed in the “Summary Compensation Table” on page 55 of this Proxy Statement, commonly referred to as the “Say on Pay” vote. At the 2017 Annual Meeting, stockholders voted, on an advisory basis, to hold a “Say on Pay” vote on an annual basis. Accordingly, Alcoa has determined to submit an annual advisory vote on our executive compensation program to our stockholders at each annual meeting until the Company seeks another advisory vote on the frequency of the advisory vote on executive compensation, which is anticipated to occur at the 2023 Annual Meeting.

The Say on Pay vote is advisory; therefore, 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. In 2017, our Say on Pay proposal received support from approximately 96% of the shares voted at our Annual Meeting.

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

The Board recommends stockholders’ approval of the following resolution:

RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in the Company’s Proxy Statement for the 2018 Annual Meeting of Stockholders 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.

 

 

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Executive Compensation

 

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Summary

2017 was Alcoa Corporation’s first full year as an independent, publicly traded company following the Separation on November 1, 2016. We began 2017 with a dynamic leadership team, strong workforce, deep history and a strong vision for the future. The compensation programs outlined in the Compensation Discussion and Analysis (“CD&A”) were primarily developed by our Compensation and Benefits Committee (for purposes of this section, the “Compensation Committee” or the “Committee”), although certain compensation programs were developed by the Compensation and Benefits Committee of the board of directors of Arconic (the “Arconic Compensation Committee”) prior to the Separation and subsequently retained by the Company following their review by our Compensation Committee.

Our Compensation Committee recognized the important evolution of Alcoa Corporation as a new independent company and the need to ensure that our pay programs are strongly aligned with our new strategic priorities, which are to reduce complexity, drive returns for our stockholders, and strengthen the balance sheet. Guided by these three strategic priorities, leadership played a critical role in managing the new organization as a successful stand-alone company and our CEO and named executive officers were able to drive significant business results:

 

Reduce Complexity      

   Streamlined organizational structure and reduced administrative locations.

 

   Addressed multiple legacy issues, including the Rockdale power contract.

 

   Warrick smelter restart on track.

Drive Returns      

   Revenue of $11.7 billion; up $2.3 billion as compared to 2016.

 

   Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) excluding special items of $2.35 billion*, which was more than double earnings in 2016.

Strengthen Balance Sheet       

   $1.36 billion cash balance at year-end; up 59% year-over-year.

 

   $1.2 billion cash from operations; $0.8 billion* free cash flow.

 

   Taking actions to address long-term pension and other post-employment benefits related liabilities.

* Please see Attachment B for a reconciliation of non-GAAP financial measures.

Overview of 2017 Performance-Based Compensation

In early 2017, the Committee engaged in a process of evaluating our pay-for-performance practices to strengthen stockholder alignment, while ensuring that unnecessary risk was appropriately mitigated within our pay programs. The result of this evaluation included a redesign of our long-term equity incentive (“LTI”) program, by:

  Adjusting the equity mix for named executive officers to 60% performance restricted share units (“PRSUs”), 20% stock options, and 20% time-based restricted share units (“RSUs”); and
  With respect to the PRSUs granted in 2017, establishing a three-year cumulative PRSU program, for the performance period of January 1, 2017 through December 31, 2019, with the equally-weighted performance metrics of return on capital (“ROC”) improvement and total stockholder return (“TSR”) (as compared to the S&P 500 Index) over the three-year period to strengthen alignment of executives with the interests of stockholders. The adoption of the 2017 PRSU program was a departure from the legacy PRSU programs implemented by the Arconic Compensation Committee which have a three-year performance period but with annual performance goals for each year within the period approved at the commencement of such year. The legacy Arconic PRSU awards from 2015 and 2016 were outstanding in 2017 and assumed under the Alcoa 2016 Stock Incentive Plan at the time of the Separation (the “legacy Arconic PRSU awards”).

In addition, the Committee established performance metrics and targets for annual incentive compensation (“IC”) under the Annual Incentive Plan and for the 2017 one-year tranches of PRSU awards granted in 2015 and 2016 by the Arconic Compensation Committee.

The Company was able to meet or exceed many goals established for 2017, as noted above; however, we fell slightly short of our targets under the 2017 IC (with overall metric performance at 96.2%), and failed to meet threshold goals under the

 

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Executive Compensation (continued)

 

 

 

legacy Arconic PRSUs granted in 2015 and 2016 based on 2017 Company performance. The three-year performance period of the 2015 PRSU awards ended at December 31, 2017, and the awards vested with an aggregate pay-out of either 50.2% or 52.7% depending on the NEO’s associated legacy Arconic business unit.

With respect to the legacy Arconic PRSU awards, because the performance goals for the 2017 one-year tranches of such awards were established in 2017 by the Committee, the grant date fair value of such awards are included in the 2017 row of the “Stock Awards” column of the Summary Compensation Table, along with the three-year grant date fair value of the 2017 PRSU awards.

Compensation Discussion and Analysis

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This CD&A describes Alcoa’s executive compensation philosophy and the pay programs applicable to the below-referenced named executive officers in 2017, which was the first full year for our Chief Executive Officer and other NEOs (as defined below) participating under our executive compensation programs developed by our Committee.

The 2017 named executive officers are comprised of our President and Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and the next three most highly compensated executive officers of Alcoa (other than the CEO and CFO) at December 31, 2017 (the “NEOs”):

 

  Roy C. Harvey, President and CEO
  William F. Oplinger, Executive Vice President and CFO
  Tómas M. Sigurðsson, Executive Vice President and Chief Operating Officer
  Jeffrey D. Heeter, Executive Vice President, General Counsel and Secretary
  Leigh Ann Fisher, Executive Vice President and Chief Administrative Officer

This CD&A is organized as follows: (i) Alcoa’s overall executive compensation philosophy; (ii) Alcoa’s executive compensation policies and practices; (iii) the impact of the 2017 “say-on-pay” vote; (iv) 2017 executive compensation decision-making; (v) other compensation plans and arrangements; and (vi) employment termination and change in control arrangements.

Executive Compensation Philosophy

 

Our executive compensation philosophy is based on three guiding principles to drive pay-for-performance and alignment of the compensation program with the interests of stockholders:

 

  1. Target base salary compensation at median of market, while using the annual and long-term equity incentive plans to reward exceptional performance and to attract and retain exceptional talent.
  2. Ensure that equity is the most significant portion of total compensation for NEOs, which serves to align the NEOs with stockholders.
  3. Choose annual and long-term incentive metrics that focus management’s actions to achieve the greatest positive impact on financial performance without undue risk.

The Committee used its experience and business judgment to determine the appropriate compensation metrics, targets and awards for our executive officers in 2017. As part of this determination, the Committee assessed numerous factors, including:

 

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

 

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

 

 

 

Our executive compensation philosophy is continuously reviewed and refined by the Committee to align with our strategic priorities, corporate values, business needs, stockholder value, and peer group practices.

Executive Compensation Policies and Practices

 

Our executive compensation programs, policies, and practices are highlighted below.

What We Do

Pay for Performance. We believe in a “pay for performance” philosophy that links executive compensation to measured performance in key financial and non-financial areas, as well as the long-term interests of stockholders. For purposes of short-term compensation, the Company evaluated performance against rigorous business metrics to incentivize performance, including free cash flow, EBITDA, safety and environmental compliance, and workplace diversity. With respect to LTI awards, the Committee chose the metrics of ROC improvement and relative TSR over a three-year period in support of the strategic priority to drive returns to stockholders. Under our compensation plans, we normalize for market factors, as further described herein.

Consider Peer Groups in Establishing Compensation. To help determine total 2017 direct compensation for NEOs, the Committee developed and approved the use of two peer groups: one for our CEO (the “CEO Peer Group”), which consists of 16 companies and also is used as a secondary peer group for our other NEOs, and a second group, consisting of 230 companies, for our other NEOs (the “Non-CEO Peer Group”). The CEO peer group was primarily determined based on Global Industry Classification Standards, revenue, and market capitalization. The Non-CEO Peer Group primarily was based on revenue and is limited to companies who also participated in the Willis Towers Watson Executive Compensation Survey, excluding financial services and insurance companies. The component companies for the CEO Peer Group are listed below, and the component companies for the Non-CEO Peer Group are set forth in Attachment A to this Proxy Statement.

 

Air Products and Chemicals Inc.   AK Steel Holding Corporation   Commercial Metals Company   Freeport-McMoRan Inc
Eastman Chemical Company   Huntsman Corporation   International Paper Co   Newmont Mining Corporation
Nucor Corporation   PPG Industries Inc   Praxair, Inc   Reliance Steel & Aluminum Co
Steel Dynamics Inc.   United States Steel Corporation   The Sherwin-Williams Co   WestRock Company

Review Tally Sheets. For 2017, the Committee utilized and reviewed tally sheets that summarized various elements of historic and current compensation for the CEO and other NEOs, which help the Committee synthesize the various components of the 2017 executive compensation program. This information included compensation opportunity, actual compensation, and historical awards.

Maintain Robust Stock Ownership Guidelines. Alcoa maintains stock ownership requirements that align the interests of management with those of stockholders by requiring executives to hold substantial equity in Alcoa until retirement. Our stock ownership guidelines require that the CEO and each of the other NEOs retain equity equal in value to six times and two to three times their base salaries, as shown below. All of our NEOs satisfied their stock ownership requirements as of December 31, 2017, with the exception of our CEO, who only became our CEO at the time of the Separation in November 2016. These guidelines reinforce management’s focus on long-term stockholder value and their commitment to Alcoa. The Committee continues to monitor the NEOs’ and all of senior management’s achievement of their respective stock ownership requirements.

 

  Named Executive Officer    Stock Ownership Guideline
Multiple of Salary
  Roy C. Harvey    6x

  William F. Oplinger

   3x

  Tomas M. Sigurðsson

   3x

  Jeffrey D. Heeter

   2x

  Leigh Ann Fisher

   2x

 

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

 

 

 

Schedule Equity Award Grants to Promote Transparency and Consistency. Alcoa’s practice has been to grant equity awards on the same day as its first Committee meeting each year, typically held in January or February, with an exercise price based on the closing market price per share of Alcoa stock on the grant date.

Clawback Policies Incorporated into Incentive Plans. Alcoa’s Annual Incentive Plan and 2016 Stock Incentive Plan each contain “clawback” provisions regarding recoupment of compensation. For a description of the clawback provisions, see “Compensation Matters—Recovery of Incentive Compensation.”

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. Vesting would accelerate only if the participant is terminated without “cause” or resigns 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 and, similarly, would be subject to the same double-trigger vesting provisions.

Pay Competitive Salaries. The Committee reviewed and set the salaries of its 2017 executive officers, including the NEOs, after consideration of the median of the peer group for their respective positions, performance, previous salary changes including those associated with the Separation, experience, and other factors. In 2017, Mr. Oplinger was the only NEO to receive a base salary increase, since the other NEOs’ salaries were adjusted in connection with the Separation.

Provide Appropriate Benefits. Our NEOs participate in the same benefit plans as our salaried employees for their respective countries. 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.

Maintain a Conservative Compensation Risk Profile. The Committee evaluates the risk profile of our compensation programs when establishing policies and approving annual and LTI plan designs, and the Board annually considers risks related to compensation in its oversight of enterprise risk management. These evaluations noted numerous ways in which we believe compensation risk is effectively managed or mitigated, including as follows:

  A balance of corporate and business unit weighting;
  The mix between short-term and long-term incentives, and balance between cash and equity programs;
  Caps on incentives;
  Use of multiple financial and nonfinancial performance measures in the Annual Incentive Plan and the 2016 Stock Incentive Plan;
  Discretion retained by the Committee to adjust awards;
  Stock ownership guidelines requiring holding substantial equity in Alcoa until retirement;
  Clawback policies applicable to all forms of annual and long-term incentive compensation;
  Anti-hedging provisions in the insider trading policy; and
  Restricting stock option awards to 20% of the overall value of equity awards to NEOs.

The Committee continues to evaluate risk relative to our compensation programs.

The Compensation Committee Retains an Independent Compensation Consultant. In 2017, the Committee directly retained an independent consultant, Pay Governance, that provided advice as requested by the Committee on the amount and form of certain executive compensation, including, among other items, executive compensation best practices, insights concerning SEC and say-on-pay developments, and analysis and review of Alcoa’s compensation plans for executives. The independent consultant did not provide any services to Alcoa other than the services provided directly to the Committee. Alcoa utilized broad-based comparative compensation survey data from Willis Towers Watson, which was not customized for Alcoa (other than to remove insurance and financial services companies), to assist with its general understanding as to whether its compensation programs were competitive with the market.

 

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

 

 

 

What We Don’t Do

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

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, including puts and calls, 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 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 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 Significant Perquisites. Consistent with our executive compensation philosophy, we limit the perquisites provided to executive officers to business-related relocation and international assignments which serve reasonable business purposes. In 2017, Alcoa made it a strategic priority to reduce complexity and costs, resulting in the decision to close our New York City office and move our global headquarters and principal executive office to our existing location in Pittsburgh, PA. In connection with the relocation, Messrs. Harvey and Oplinger received standard relocation assistance in their transition from New York, NY to Pittsburgh, PA in accordance with the Company’s relocation policy applicable to senior executives.

Limited Tax Gross-Ups Reserved for Certain Critical Business-Related Purposes. Alcoa does not provide our NEOs with tax gross-ups or reimbursements on perquisites, other than in limited circumstances for business-related relocation and international assignments which are deemed in the best interests of the Company to retain our executive talent, and are consistent with market practice. As noted above, Alcoa decided to close its New York City office and move its global headquarters and principal executive office to our existing location in Pittsburgh in 2017 which will generate savings for the Company over time. As a result, consistent with our executive and non-executive relocation policies, the Company provides NEOs and other employees with gross-ups on their expenses for relocations. The Company does not provide gross-ups under any other circumstances. We believe that providing a tax gross-up on the relocation benefit is appropriate given the expected benefits of retaining executive talent. Additionally, under our executive relocation policy, Mr. Harvey is subject to a repayment agreement for such relocation amounts if he terminates employment with us within the two-year period following payment of this benefit. Mr. Oplinger did not receive a gross-up and as a result is not subject to the repayment agreement under the terms of the relocation policy.

No Dividend Equivalents on Stock Options and Stock Appreciation Rights, and No Payment of Dividend Equivalents on Unvested Stock 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 are not paid on stock options or stock appreciation rights.

No Discounting of Stock Options or Repricing of Underwater Stock Options (including cash-outs). The 2016 Stock Incentive Plan prohibits the discounting and the repricing of stock options, including cash-outs, without stockholder approval.

Stockholder Engagement and 2017 Say-on-Pay Vote

 

Alcoa conducted investor outreach late in 2016 and 2017 as a new publicly traded company. The Committee heavily weighed this input and made several changes to our LTI program, including the adoption of the 2017 three-year cumulative PRSU program. The Committee also considered our 2017 say-on-pay vote (over 96% of the votes cast voted in favor) as a sign of our stockholders’ support of Alcoa’s executive compensation philosophy and plans.

The Committee will consider stockholder input, including the advisory say-on-pay vote, as it evaluates the design of executive compensation program and specific compensation decisions for executive officers in the future.

 

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Executive Compensation | Compensation Discussion and Analysis | Executive Compensation Process and 2017 Executive Compensation

 

Executive Compensation Process and 2017 Executive Compensation

 

In 2017, the process illustrated below was followed for determining the CEO and other NEOs compensation for 2017:

 

 

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To attract, motivate, align, and retain high performing executives, we designed our executive compensation program at median base salary levels while providing cash and equity incentives that motivate exceptional performance. Since demanding leadership challenges have confronted the aluminum industry in recent years, the prospect of an upside in annual and long-term incentive compensation is a proven, major retention factor with a demonstrable impact on motivating managers to achieve strong operational and financial performance. While the reduced payout slope from target to minimum was steep, Alcoa established payout multiples for overachievement that could be earned only with significant upside performance.

Alcoa designed its 2017 executive compensation program to pay for performance, with equity as the most significant portion of total compensation and by increasing the weighting of performance-based incentives commensurate with the individual’s level of responsibility. For 2017, 88% of our CEO’s target compensation and 68% to 78% of our other NEOs’ target compensation was performance-based and at-risk, with the remaining amounts in the form of base salary.

We established performance metrics and targets at the beginning of 2017 for the Annual Incentive Plan, the 2017 tranches of the legacy Arconic PRSU awards granted in 2015 and 2016, and our new 2017 three-year cumulative PRSU program.

 

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Executive Compensation | Compensation Discussion and Analysis | Components of 2017 Executive Compensation Program

 

 

 

Components of 2017 Executive Compensation Program

 

Component   Purpose   Design
   
Base Salary (cash)  

Base salary compensation reflects the experience of the NEO and expected day-to-day contributions, supported by competitive market data.

 

  Reviewed at least annually to consider changes in responsibility, experience, and market competitiveness.
   

Annual Incentive Compensation

(short-term cash)

  Short-term at risk pay designed to motivate achievement of annual performance goals in support of our strategic priorities.  

Market competitive targets established for NEOs.

 

Performance-based annual financial and non-financial metrics (EBITDA, Free Cash Flow, Safety/Environmental and Diversity). There are no payouts if performance is below threshold and participants have an opportunity for above target payout when targets are exceeded.

 

   

Long-Term Incentive

(long-term equity)

  Long-term at risk pay designed to balance short-term at risk pay, align executives with stockholders, support our strategic priorities, and for executive retention competitive with market practices.  

Our NEOs receive their LTI compensation in three parts:

 

1)  PRSUs, to reward performance based on Relative TSR and ROC improvement;

2)  Time-Based RSUs, to retain NEOs through the challenges of a commodity driven business; and

3)  Stock Options, to reward solid business decisions that increase the stock price in alignment with the benefit realized by stockholders.

 

2017 Base Salaries

Each NEO’s base salary was reviewed with the following primary considerations: experience in the position, the median of the peer group for their respective position, and individual performance. Alcoa pays salaries to its NEOs 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 incentive compensation. The base salaries for our CEO and other NEOs were reviewed at the beginning of 2017. However, only Mr. Oplinger’s base salary was increased during 2017, because the other NEOs’ base salaries already had been adjusted in connection with the Separation, as follows:

 

  Name   

Salary as of        

January 01, 2017        

 

Salary as of        

March 1, 2017        

 

2017        

Increase %        

  Roy C. Harvey

 

   $925,000        

 

  $925,000        

 

    0%        

 

  William F. Oplinger

 

   $550,000        

 

  $605,000        

 

  10%        

 

  Tómas M. Sigurðsson*

 

   $480,000        

 

  $480,000        

 

    0%        

 

  Jeffrey D. Heeter

 

   $390,000        

 

  $390,000        

 

    0%        

 

  Leigh Ann Fisher

 

   $390,000        

 

  $390,000        

 

    0%        

 

* Mr. Sigurðsson’s salary was set in US Dollars upon Separation. Mr. Sigurðsson subsequently relocated to Iceland and is paid in his local currency, Icelandic króna (ISK).

 

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Executive Compensation | Compensation Discussion and Analysis | 2017 Annual Incentive Compensation

 

 

 

2017 Annual Incentive Compensation

We based annual cash incentive opportunities for 2017 on the following parameters:

 

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

The below chart describes the specific 2017 metrics and results for Alcoa’s annual incentive compensation awards:

 

  Performance Metrics(1)  

Metric

Weight 

 

Performance 

Minimum
(0%)

 

Performance 

Target
(100%)

 

Performance 

Maximum
(200%)

 

Performance 

Results

  Achievement %   

Weighted 

Result

  Financial Metrics (80%)

  Adjusted Free Cash Flow ($M)(2)

  40%   (329)   21   671   523   179%   71.5%

  Adjusted EBITDA ($M)(2)

  40%   1,157   1,482   1,982   1,247   30%   12.0%

  Non-Financial Metrics (20%)

  Safety

  FSI-Actual (count)(3)(5)

  5%   4   3   2   5   0%   0.0%

  Environmental

  CO2 Emissions Reduction (KTons)(4)(5)

  5%   100.2   163.7   227.1   -59   0%   0.0%

  Diversity

  Global Women %(5)

  10%   14.2%   14.5%   14.8%   14.6%   127%   12.7%

  Total

  100%       96.2%
(1) The maximum payout for each financial and non-financial metric is 200%.
(2) Please see “Additional Information Regarding Financial Measures” below for more information about how these numbers are calculated from Alcoa’s consolidated financial statements.
(3) The safety metric focuses on reducing the number of fatal and serious injuries/illnesses that are life-altering or life-ending.
(4) The environmental metric relates to a reduction of carbon dioxide emissions in 2017.
(5) Threshold performance for each non-financial measure is 50%.

Section 162(m) Considerations

The 2017 annual incentive compensation awards were structured with the intent of enabling the Committee to award compensation that constituted performance-based compensation under Section 162(m) of the Internal Revenue Code (“Code”). Because adjusted EBITDA (calculated and normalized as further described below) was greater than $500 million in 2017, the 2017 plan pool funded at 300% of each NEO’s individual maximum annual incentive compensation, with the Committee reducing 2017 annual incentive compensation pay-outs at levels below the NEOs’ maximum annual incentive compensation, based on the formulas described below for each NEO.

However, the applicable qualified performance-based tax-deductibility exception to Section 162(m) of the Code has been repealed for tax years beginning in 2018 under the Tax Cuts and Jobs Act, such that compensation paid to our NEOs in excess of $1 million will not be deductible unless it qualifies for transition relief applicable for compensation paid pursuant to a written binding contract that was in effect as of November 2, 2017. Despite the Committee originally structuring the 2017 annual incentive compensation for the NEOs in a manner that was exempt from Section 162(m) of the Code and, therefore, not subject to its deduction limits, because of the ambiguities and uncertainties as to the interpretation of the scope of the application of the transition relief under the legislation repealing Section 162(m) of the Code’s exemption from the deduction limit, no assurance can be given that compensation originally intended to satisfy the requirements for exemption from Section 162(m) will, in fact, be fully deductible.

Additional Information Regarding Financial Measures

The Company’s Adjusted Free Cash Flow and Adjusted EBITDA for incentive compensation purposes are calculated by taking Alcoa’s Free Cash Flow and Adjusted EBITDA (see Attachment B), which are derived from the Company’s audited consolidated financial statements, and normalizing such metrics for certain factors not in management’s control and adjusting such metrics to exclude special items. The following describes each of these components.

 

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Executive Compensation | Compensation Discussion and Analysis | 2017 Annual Incentive Compensation (continued)

 

 

 

Free Cash Flow and Adjusted EBITDA are non-GAAP (accounting principles generally accepted in the United States of America) financial measures. Management does not consider these non-GAAP measures to be a replacement of the most directly comparable GAAP measure, but instead provides such measures as additional information to consider when evaluating the Company’s financial performance.

Free Cash Flow is cash from operations minus capital expenditures. Management believes that this measure is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures, which are both necessary to maintain and expand Alcoa’s asset base and expected to generate future cash flows from operations. It is important to note that Free Cash Flow does not represent the residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from the measure.

Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation, depletion, and amortization. Net margin is equivalent to Sales minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; Research and development expenses; and Provision for depreciation, depletion, and amortization. Management believes that this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to Alcoa’s operating performance and the Company’s ability to meet its financial obligations. The Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies.

The 2017 financial measures for annual incentive compensation were equally weighted between Adjusted Free Cash Flow and Adjusted EBITDA. To adjust for certain items that are outside of management’s control, we normalize for aluminum (including premiums) and alumina pricing and currency exchange rates, which may have significant effects on financial results, and that are not impacted by management performance. Additionally, we adjust for certain items deemed to be special items to the Company’s financial results. A description of the normalization and adjustment of these factors follows:

 

  London Metal Exchange (“LME”) Pricing and Alumina Pricing Index (“API”): Without normalization, in years when the LME price of aluminum, or the price of alumina through the API, rises rapidly relative to plan (i.e., our forecasts), annual incentive compensation would be less effective as a performance incentive because management would receive an unearned benefit. Conversely, when LME and API prices for aluminum and alumina, respectively, fall dramatically relative to our plan, failure to normalize would demotivate employees by placing annual incentive compensation 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 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.

 

  Premiums: In addition to LME, API and foreign currency normalization, results historically have been adjusted to neutralize 50% of the fluctuations in regional aluminum premiums compared to plan.

 

  Special Items: 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 against fluctuations in foreign exchange rates or LME and API prices, normalization adjustments for LME, API currency exchange rates, and 50% of regional premiums were made relative to the 2017 business plan and the 2017 annual IC awards.

 

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Executive Compensation | Compensation Discussion and Analysis | 2017 Annual Incentive Compensation (continued)

 

 

 

2017 Target Annual Incentive Compensation Opportunities

In February 2017, the following target incentive opportunities were set and approved by the Committee for each NEO based on his or her then-current job band and aligned with the median of applicable peer group market data.

 

       

  Named Executive Officer

 

  

Total Target

Annualized IC
Opportunity for
2017

(% of Base
Salary Earnings)

 

    

IC Target $

 

    

IC Target Maximum $(1)

 

 
     

  Roy C. Harvey

 

    

 

140%        

 

 

 

   $

 

1,295,000

 

 

 

    

 

$3,885,000        

 

 

 

     

  William F. Oplinger

 

    

 

100%        

 

 

 

   $

 

595,833

 

 

 

    

 

$1,787,499        

 

 

 

     

  Tómas M. Sigurðsson*

 

    

 

100%        

 

 

 

   $

 

519,574

 

 

 

    

 

$1,558,722        

 

 

 

     

  Jeffrey D. Heeter

 

    

 

75%        

 

 

 

   $

 

292,500

 

 

 

    

 

$   877,500        

 

 

 

     

  Leigh Ann Fisher

 

    

 

75%        

 

 

 

   $

 

292,500

 

 

 

    

 

$   877,500        

 

 

 

(1) The maximum payout under the metric results is 200% and the maximum individual performance multiplier is 150%.
 * Amounts shown in this table and all other compensation tables unless otherwise noted were converted from ISK into US Dollars and reflect the currency exchange rate reflected in Note 1 to the Summary Compensation Table.

2017 Annual Incentive Compensation Payout Determination and Amounts

In January 2018, the Committee met to consider 2017 performance and determine IC payouts for each NEO for 2017. At the beginning of 2017, each NEO’s performance goals and objectives were established in support of the overall organization and as to each function (as described below). The Committee undertook a qualitative review of each NEO’s performance in determining the 2017 IC payouts and the individual performance multiplier for each NEO, placing specific emphasis on the NEO’s respective roles and contributions to the establishment and success of the Company through 2017, its first full year as a standalone publicly-traded company. The IC payouts and individual performance multipliers reflect the achievements of the new executive leadership team in successfully navigating the transitions and challenges of this new company, including establishing strategic priorities and new corporate values, launching restructuring initiatives and operations (in particular, the partial restart of the Warrick, Indiana smelter and the restart of the Portland, Australia smelter), undertaking cost reductions such as the consolidation of administrative offices, reducing legacy liabilities carried over from Arconic as part of the Separation, engaging in investor outreach, meeting financial objectives, and achieving one-year total stockholder return of over 90%. The following is a description of the Committee’s findings with respect to each NEO:

The impact of these actions and the results are also reflected in the Summary on page 39.

 

  President and CEO. Mr. Harvey demonstrated leadership over, transformation of, and strategic focus on Alcoa as an independent public company. This focus included the development of strategic priorities to reduce complexity, drive returns, strengthen the balance sheet, and drive the corporate values throughout the organization. As CEO, Mr. Harvey provided outstanding leadership and direction to the management team by guiding them through challenging financial and employee focused decisions. Throughout the year, he maintained active engagement with the Chairman and the rest of the Board, providing full transparency on all aspects of the Company’s performance. Specifically, he focused on (i) employees, through safety, culture, morale, diversity, and ownership initiatives; (ii) strengthening the Company’s relationships with stakeholders; and (iii) delivering financial results by meeting or exceeding plan targets.
  Executive Vice President and Chief Financial Officer. Mr. Oplinger demonstrated leadership of the finance, tax, treasury, and investor relations functions, which included strengthening the Company’s reputation among research analysts, rating agencies, and stockholders; results include improved corporate credit ratings. He drove cost reduction initiatives across the resource and business units which included managing and reducing legacy liabilities assumed from Arconic as part of the Separation and actions to strengthen the balance sheet, developing an investor communication framework with improved investor communications and disclosures throughout the year, and leading the refinancing and renegotiation for the Company’s revolving credit agreement with more favorable terms.
 

Executive Vice President and Chief Operating Officer. Mr. Sigurðsson demonstrated leadership of the global operations (Bauxite, Alumina, and Aluminum), which included his leadership in all operational aspects including special focus on a culture of safety and simplification at the business units. He led both the consolidation and reorganizations of

 

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Executive Compensation | Compensation Discussion and Analysis | 2017 Annual Incentive Compensation (continued)

 

 

 

 

operations (i.e., six business units to three), drove operational and capital project management efficiencies, led the focus on sustainable system improvements in the business units to drive working capital improvements, and led the asset optimization processes, which in 2017 led to the announcement of the restart of the Warrick smelter.

  Executive Vice President, General Counsel and Secretary. Mr. Heeter’s demonstrated leadership of the legal, governance, ethics and compliance, and global security functions of the Company, and his valuable contributions to the tactical and strategic decision-making of the executive team. In 2017, Mr. Heeter’s teams assisted in the business in managing legacy risks and liabilities assumed from Arconic as part of the Separation and new risks facing the Company in the ordinary course of business; provided critical support to certain key business actions, including the disposition of Arconic’s 19.9% retained interest in the Company, the resolution of the Rockdale power contract, and the renegotiation of the Company’s revolving credit facility and certain labor agreements; implemented a robust governance and compliance structure for the new company; facilitated active and transparent engagement with the Board of Directors; and addressed key challenges in global asset and personal security, including the development and implementation of a crisis management plan.
  Executive Vice President and Chief Administrative Officer. Ms. Fisher demonstrated leadership of the Human Resources and Global Business Services functions, which included her skill in driving efficiencies and cost reduction initiatives in all resource and business units. Emphasis was placed on driving our new corporate values throughout the organization which includes a focus on safety, culture, engagement, diversity, and ownership initiatives. Additional initiatives include management of the redesign of the Company’s performance management processes, identification and installation of a new people system, and focus on both the re-filling of our talent pipeline after the Separation and the delivery of superior customer service through reduced complexity and process redesign.

Based on the above, the Committee set the following performance multipliers for the 2017 annual incentive compensation awards.

 

   

  Named Executive Officer

 

  

Performance Multiplier

for 2017 IC Awards

 

 
 

  Roy C. Harvey

 

    

 

150%            

 

 

 

 

  William F. Oplinger

 

    

 

125%            

 

 

 

 

  Tómas M. Sigurðsson

 

    

 

110%            

 

 

 

 

  Jeffrey D. Heeter

 

    

 

150%            

 

 

 

 

  Leigh Ann Fisher

 

    

 

125%            

 

 

 

Based on the metrics outlined earlier in this section, the Alcoa Corporation performance results under the 2017 IC program were 96.2% of target. The resulting annual IC payout for our NEOs was based on the following formula, with performance measured from January 1, 2017 through December 31, 2017.

 

 

  Payout based on Alcoa Performance Targets (January 1, 2017—December 31, 2017)

 

                 

Base

Salary Earnings ($)

(fiscal year)

 

  x   

Target Incentive  

Opportunity  

(%)  

 

  x  

Achievement

Based on

Results (%)

 

  x  

Individual

Performance

Multiplier (%)

 

  =  

Annual IC

Payout ($)

 

The foregoing performance determinations by the Committee and the above-described formula resulted in the following 2017 incentive compensation payout amounts to the NEOs:

 

               

  Name

 

 

    Earnings    

 

   

    IC Target %    

 

 

    IC Target $    

 

   

Financial

    Results %    

 

 

Financial

    Result $    

 

   

Individual

    Multiplier    

 

 

Total IC

    Payout    

 

 
             

  Roy C. Harvey

 

  $

 

925,000

 

 

 

  140%

 

  $

 

1,295,000

 

 

 

  96.2%

 

  $

 

1,245,790

 

 

 

  150%

 

  $

 

1,868,685

 

 

 

             

  William F. Oplinger

 

  $

 

595,833

 

 

 

  100%

 

  $

 

595,833

 

 

 

  96.2%

 

  $

 

573,192

 

 

 

  125%

 

  $

 

716,490

 

 

 

             

  Tómas M. Sigurðsson

 

  $

 

519,574

 

 

 

  100%

 

  $

 

519,574

 

 

 

  96.2%

 

  $

 

499,830

 

 

 

  110%

 

  $

 

549,813

 

 

 

             

  Jeffrey D. Heeter

 

  $

 

390,000

 

 

 

    75%

 

  $

 

292,500

 

 

 

  96.2%

 

  $

 

281,385

 

 

 

  150%

 

  $

 

422,078

 

 

 

             

  Leigh Ann Fisher

 

  $

 

390,000

 

 

 

    75%

 

  $

 

292,500

 

 

 

  96.2%

 

  $

 

281,385

 

 

 

  125%

 

  $

 

351,731

 

 

 

 

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Executive Compensation | Compensation Discussion and Analysis| 2017 Equity Awards: Performance-Based Restricted Share Units, Time-Based Restricted Share Units and Time-Vested Stock Options

 

 

2017 Equity Awards: Performance-Based Restricted Share Units, Time-Based Restricted Share Units and Time-Vested Stock Options

In February 2017, Alcoa granted the 2017 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 retention. The 2017 LTI awards were in the form of 60% PRSUs 20% time-based RSUs and 20% time-vested stock options based upon the job band of the NEO and their contributions to the Company at the time of grant. The LTI mix was changed from 80% PRSUs and 20% stock options to the mix set forth below to reduce overall risk in the equity portfolio and to better align with the market.

Mix of Long-Term Incentive Awards

 

 

LOGO

 

  PRSUs (60%). 2017 PRSU award performance is based on achievement against cumulative three-year performance targets (relative TSR and ROC improvement). Earned PRSUs will be settled in shares of common stock after the end of the three-year performance period. The maximum award level is 200% of the target award.
  Time-based RSUs (20%). RSUs vest on the third anniversary of the grant date, providing a multi-year retention incentive.
  Time-based stock options (20%). Stock options vest ratably over a three-year period (one-third vests each year on the anniversary of the grant date).

2017 Grants of Long-Term Incentive Awards to Each NEO

In February 2017, 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, as well as a quantitative review of peer group median market compensation data. In light of each NEO’s critical role in the successful completion of the Separation and performance of each NEO throughout 2016 (which, for Messrs. Oplinger, Sigurðsson and Heeter and Ms. Fisher, included the application of their respective individual performance multipliers used for their 2016 IC payouts to their target LTI dollar amount), the Committee granted the following 2017 LTI awards for each NEO:

 

         

  Name

 

  

2017 LTI Fair Market

Value at Grant

 

    

Performance-Based
Restricted Share Units
(Target)

 

    

Time-Based
Restricted Share

Units

 

    

Stock Options

 

 
       

  Roy C. Harvey

 

   $

 

5,500,352

 

 

 

    

 

87,580        

 

 

 

    

 

29,200        

 

 

 

    

 

88,360    

 

 

 

       

  William F. Oplinger

 

   $

 

2,000,288

 

 

 

    

 

31,850        

 

 

 

    

 

10,620        

 

 

 

    

 

32,130    

 

 

 

       

  Tomas M. Sigurðsson

 

   $

 

1,100,321

 

 

 

    

 

17,520        

 

 

 

    

 

  5,840        

 

 

 

    

 

17,680    

 

 

 

       

  Jeffrey D. Heeter

 

   $

 

750,642

 

 

 

    

 

11,950        

 

 

 

    

 

  3,990        

 

 

 

    

 

12,050    

 

 

 

       

  Leigh Ann Fisher

 

   $

 

687,701

 

 

 

    

 

10,950        

 

 

 

    

 

  3,650        

 

 

 

    

 

11,050    

 

 

 

The 2017 PRSU awards have a performance period of January 1, 2017 through December 31, 2019. If and to the extent determined by the Committee to be earned, the 2017 PRSUs will be paid out in shares of the Company’s common stock on a one-unit to one-share basis. The amount of the 2017 PRSUs earned, if any, will be based on the Company’s performance against goals relating to the following metrics, with payout ranging from 0 to 200% of each NEO’s 2017 PRSU award (at target):

 

  ROC Improvement (50%): Return on capital improvement measured against the 2016 baseline result of 1.5% (that was normalized for LME and API pricing, 50% of regional premiums and foreign currency exchange rate fluctuations), with the Committee reserving the discretion to normalize achievement by applying adjustments (measured in basis points and determined by subtracting the baseline ROC from actual ROC results).

 

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Executive Compensation | Compensation Discussion and Analysis| 2017 Equity Awards: Performance-Based Restricted Share Units, Time-Based Restricted Share Units and Time-Vested Stock Options (continued)

 

 

The Company’s return on capital measure is calculated by dividing after-tax earnings by average capital base. After-tax earnings is determined as follows: Income before income taxes plus an addback for both interest expense and special items minus a deduction for interest income, the result of which is multiplied by 1 minus the U.S. federal statutory tax rate of 35%. Special items are comprised of restructuring and other charges, discrete income tax items, and other items management deems appropriate to exclude from non-GAAP performance measures such as Adjusted Income and Adjusted EBITDA (see Attachment B). Average capital base is determined as follows: Total assets less cash and cash equivalents, restricted cash, short-term investments, and current liabilities (except for current portion of long-term debt and short-term borrowings). Each of these components represents the average of such amount as of the end of each of the Company’s four quarters in a given calendar year. The Committee considered the Company’s attainment of the ROC goals to be challenging but achievable.

 

  Relative TSR (50%): Relative TSR means total shareholder return relative to the S&P 500 Index performance over the performance period (measured in basis points and determined by subtracting S&P 500 Index TSR from the Company’s TSR) with the pay-out achievement scale as follows:

 

0%    50%    100% (Target)    150%    200%

-5,000

 

   -2,500

 

   0%

 

   2,500

 

   5,000

 

Legacy Arconic Performance-Based Restricted Share Units—2017 Performance Targets

The PRSU awards granted in 2015 and 2016 were granted by the Arconic Compensation Committee and assumed by Alcoa at the time of the Separation under the 2016 Stock Incentive Plan (and administered thereafter by the Committee). The legacy Arconic PRSU awards consist of three annual tranches for which the performance goals are established for each tranche at the beginning of each year within the three-year performance period. Performance relative to the applicable goals, and therefore, the amount of shares earned for each one-year tranche of the three-year performance period, is determined annually by the Committee after the end of the one-year period. The number of shares vested and paid under each legacy PRSU award is approved by the Committee after the end of the three-year performance period. Mr. Heeter was not eligible to participate in the Arconic PRSU program in 2015 or 2016. In 2017, the 2015 and 2016 legacy PRSU awards were outstanding and our current NEOs (excluding Mr. Heeter) held such awards. The final tranche of the 2015 legacy PRSU awards was the 2017 tranche, and the final two tranches of the 2016 legacy PRSU awards were and are the 2017 and 2018 tranches, respectively. The Committee established an annual ROC improvement target for the 2017 tranches with respect to the 2015 and 2016 legacy PRSU awards which had the following formula:

 

 

 

 

Payout Based on Full-Year Performance (January 1, 2017—December 31, 2017)

         

Target Opportunity

(Number of PRSUs)

  x   

% Achievement Based on

Alcoa Performance Targets

(100%)

 

  =   Potential Payout based on
Performance

Based on performance against the ROC goals set forth in the below chart, the 2017 tranches of the legacy 2015 and 2016 PRSU awards were not earned:

 

 

Alcoa Performance Targets

(January 1, 2017—December 31, 2017)

Basis points (bps)

 

       

 

  Metric (%)

 

  

 

Minimum

 

  

 

Target

 

  

 

Maximum

 

  

 

Results

 

  

 

Weighting

 

       

 

  Return on Capital improvement(1)(2)

  

 

0 bps

  

 

67 bps

  

 

270 bps

  

 

-82 bps

  

 

100%

       

 

  Total

                      

 

100%

(1) This financial measure has not been calculated in accordance with GAAP. Please see “2017 Grants of Long-Term Incentive Awards to Each NEO” above as to how the number is calculated from Alcoa’s audited financial statements.
(2) ROC normalized for LME, API, foreign exchange rates, and 50% regional premiums.

 

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Executive Compensation | Compensation Discussion and Analysis| 2017 Equity Awards: Performance-Based Restricted Share Units, Time-Based Restricted Share Units and Time-Vested Stock Options (continued)

 

 

         

  Named Executive Officer

 

 

2017 Tranche of 2015
PRSU Grant (Target)

 

   

2017 Tranche of 2016
PRSU Grant (Target)

 

   

2017 Tranche

Total % Achievement
(Both 2017
Tranches)

 

   

2017 Tranche

Total Earned Shares for each
2015 and 2016 PRSU Grants

 

 
       

  Roy C. Harvey

 

   

 

10,531            

 

 

 

   

 

32,024            

 

 

 

   

 

0%            

 

 

 

   

 

0                   

 

 

 

       

  William F. Oplinger

 

   

 

15,318            

 

 

 

   

 

28,267            

 

 

 

   

 

0%            

 

 

 

   

 

0                   

 

 

 

       

  Tomas M. Sigurðsson

 

   

 

3,161            

 

 

 

   

 

6,686            

 

 

 

   

 

0%            

 

 

 

   

 

0                   

 

 

 

       

  Leigh Ann Fisher

 

   

 

1,583            

 

 

 

   

 

4,144            

 

 

 

   

 

0%            

 

 

 

   

 

0                   

 

 

 

Legacy Arconic Performance-Based Restricted Share Units—2015 Award Payout

The three-year performance period applicable to the legacy 2015 PRSU awards ended on December 31, 2017 and, as described above, the Committee had determined that the 2017 tranche of such awards was not earned. The Committee then reviewed the performance against the applicable goals of each of the tranches of the legacy 2015 PRSU awards and approved the following payout of the legacy 2015 PRSU awards held by the applicable NEOs:

 

       

  Named Executive Officer

 

  

2015 Performance-Based
Share Units (Target)

 

    

Cumulative Three-Year
Performance Results
(1)

 

    

2015 Performance-Based Share
Units
(Total  Earned, Vested and Paid)

 

 
     

  Roy C. Harvey

 

    

 

31,594            

 

 

 

    

 

50.2%          

 

 

 

    

 

15,851                 

 

 

 

     

  William F. Oplinger

 

    

 

45,954            

 

 

 

    

 

52.7%          

 

 

 

    

 

24,234                 

 

 

 

     

  Tomas M. Sigurðsson

 

    

 

9,484            

 

 

 

    

 

50.2%          

 

 

 

    

 

4,759                 

 

 

 

     

  Leigh Ann Fisher

 

    

 

4,750            

 

 

 

    

 

50.2%          

 

 

 

    

 

2,384                 

 

 

 

(1) Results for each one-year tranche were determined annually by the Arconic Compensation Committee or Alcoa Compensation Committee, as applicable, after the end of the one-year period. The percentage in this column reflects cumulative results over three years. The 2015 tranche was based on overall Arconic Corporate performance, and the 2016 tranche was based on performance of the Global Primary Products business of Arconic for all NEOs other than Mr. Oplinger, for whom the 2016 tranche was based on Arconic Corporate performance for 10 months and Alcoa performance for 2 months.

The 2017 PRSUs awards and the legacy Arconic 2015 and 2016 PRSU awards were designed to be fully deductible for federal income tax purposes under Section 162(m) of the Code. However, the applicable qualified performance-based tax-deductibility exception to Section 162(m) of the Code has been repealed for tax years beginning in 2018 under the Tax Cuts and Jobs Act, such that compensation paid to NEOs in excess of $1 million will not be deductible unless it qualifies for transition relief applicable for compensation paid pursuant to a written binding contract that was in effect as of November 2, 2017. Despite these awards being originally structured in a manner that was exempt from Section 162(m) of the Code and, therefore, not subject to its deduction limits, because of the ambiguities and uncertainties as to the interpretation of the scope of the application of the transition relief under the legislation repealing Section 162(m) of the Code’s exemption from the deduction limit, no assurance can be given that compensation intended to satisfy the requirements for exemption from Section 162(m) of the Code will, in fact, be fully deductible.

2018 Executive Compensation

The Committee made certain adjustments to executive compensation for 2018. With respect to the 2018 annual incentive compensation, the Committee adjusted the weighting assigned to financial and non-financial performance metrics to 70% and 30%, respectively (from 80% and 20% respectively in 2017) to drive internal performance on safety (the non-financial performance metrics cover various aspects of Company performance, including safety). In addition, to further align the NEOs’ potential IC payments with the interests of our stockholders, EBITDA, which has historically been normalized, has been separated into a normalized and non-normalized portion for 2018, weighted 25% and 20%, respectively. Also, the Committee determined our NEOs’ executive compensation, including LTI awards, after reviewing peer company benchmarking data, to closer align NEO compensation with the market median for their respective positions (noting that LTI targets for Messrs. Sigurðsson and Heeter and Ms. Fisher are still below the market median). The Committee applied each NEO’s performance multiplier, reflecting the NEO’s individual performance under the 2017 IC program as approved by the Committee, and granted LTI awards to each NEO in the following aggregate dollar amounts (at target): Mr. Harvey, $7,813,034; Mr. Oplinger, $2,000,775; Mr. Sigurdsson, $1,430,465; Mr. Heeter, $1,200,529; and Ms. Fisher, $969,314.

 

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2018 PROXY STATEMENT   

 

 

Executive Compensation | Compensation Discussion and Analysis| Other Compensation Plans and Arrangements of Alcoa

 

 

 

Other Compensation Plans and Arrangements of Alcoa

 

Change in Control Severance Plan

We maintain the Alcoa Corporation Amended and Restated 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:

  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;
  a pro-rated annual bonus;
  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;
  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;
  a cash lump sum amount representing the estimated incremental 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
  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 without cause, 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 without cause, 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

 

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Executive Compensation | Compensation Discussion and Analysis| Other Compensation Plans and Arrangements of Alcoa (continued)

 

 

 

notional investments that mirror the investment alternatives available to all salaried employees under the Alcoa Retirement Savings Plan for Salaried Employees.

Double-Trigger Termination and Change in Control Terms in Annual Incentive and LTI Awards

 

Change in Control Provisions in the Annual Incentive Plan

In the event of a change in control, officers and other key employees receiving compensation pursuant to the Annual Incentive 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.

Change in Control Provisions in the 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 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 resigns for good reason (as those terms are defined in the CIC Severance Plan) within 24 months following 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 2018 Annual Meeting of Stockholders.

The Compensation and Benefits Committee

James W. Owens, Chair

Timothy P. Flynn

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 NEOs for the years indicated below.

In reviewing the amounts shown in the 2017 row of the table for each NEO, please note that the reasons the reported values in the “Stock Awards,” “Option Awards,” “Non-Equity Incentive Plan Compensation,” and “Total” columns are significantly higher than the values set forth in the 2016 row of the table are primarily due to (i) each officer serving a full year in 2017 as an executive officer of Alcoa as a standalone public company (compared to only two months in 2016) and (ii) SEC rules requiring that the values included in the “Stock Awards” column below be determined in accordance with ASC Topic 718, which mandates that Alcoa include not only the aggregate grant date accounting fair value of the 2017 PRSU grants (with a three-year cumulative performance period) and time-based RSUs awarded by the Committee in February 2017, but also for each applicable NEO, the aggregate grant date accounting fair value of the 2017 one-year tranches of the legacy Arconic 2015 and 2016 PRSU awards for which annual performance goals are set at the commencement of each year in the three-year performance period (for the 2017 tranche, by the Committee in February 2017).

 

  Name and

  Principal Position

  (a)(1)

 

  Year  

(b)

   

  Salary  

($)

(c)(2)

   

 Bonus 

($)
(d)
(3)

   

Stock

Awards

($)
(e)
(4)

   

Option

  Awards  

($)
(f)
(4)

    Non-Equity
Incentive
Plan
Compensation
($)
(g)
(5)
    Change in
Pension Value
and Non-
Qualified
Deferred
Compensation
Earnings
($)
(h)
(6)
    All Other
Compensation
($)
(i)
(7)
    Total
($)
(j)
 

 

  Roy C. Harvey

 

 

 

 

2017  

 

 

 

 

$

 

925,000

 

 

 

 

$

 

—  

 

 

 

 

$

 

5,835,662

 

 

 

 

$

 

1,100,082

 

 

 

 

$

 

1,868,685

 

 

 

 

$

 

719,522

 

 

 

 

$

 

271,172

 

 

 

 

$

 

10,720,123

 

 

  President and

  Chief Executive Officer

 

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

 

  William F. Oplinger

 

 

 

 

2017  

 

 

 

 

$

 

595,833

 

 

 

 

$

 

—  

 

 

 

 

$

 

2,773,386

 

 

 

 

$

 

400,019

 

 

 

 

$

 

716,490

 

 

 

 

$

 

751,233

 

 

 

 

$

 

75,675

 

 

 

 

$

 

5,312,636

 

 

  Executive Vice President
  And Chief Financial Officer

 

    2016       $ 550,000     $ —       $ 1,389,794     $ 320,150     $ 865,013     $ 446,202     $ 72,453     $ 3,643,612  
    2015       $ 541,667     $ —       $ 1,600,406     $ 400,020     $ 479,375     $ 327,386     $ 37,500     $ 3,386,354  

 

  Tómas M. Sigurðsson

 

 

 

 

2017  

 

 

 

 

$

 

519,574

 

 

 

 

$

 

—  

 

 

 

 

$

 

1,208,295

 

 

 

 

$

 

220,116

 

 

 

 

$

 

549,813

 

 

 

 

$

 

—  

 

 

 

 

$

 

191,266

 

 

 

 

$

 

2,689,064

 

 

  Executive Vice President and     2016       $ 450,001     $ —       $ 568,966     $ —       $ 465,758     $ 3,758     $ 204,779     $ 1,693,262  

  Chief Operating Officer

 

    2015       $ 444,000     $ —       $ 495,423     $ 166,150     $ 340,635     $ —       $ 295,103     $ 1,741,311  

 

  Jeffrey D. Heeter

 

 

 

 

2017  

 

 

 

 

$

 

390,000

 

 

 

 

$

 

—  

 

 

 

 

$

 

680,445

 

 

 

 

$

 

150,023

 

 

 

 

$

 

422,078

 

 

 

 

$

 

384,768

 

 

 

 

$

 

30,264

 

 

 

 

$

 

2,057,578

 

 

  Executive Vice President,

  General Counsel and   Secretary

 

   
2016  
 
  $
284,017
 
  $
60,000
 
  $
250,267
 
  $
—  
 
  $
208,621
 
  $
197,450
 
  $
22,422
 
  $
1,022,777
 

 

  Leigh Ann Fisher

 

 

 

 

2017  

 

 

 

 

$

 

390,000

 

 

 

 

$

 

—  

 

 

 

 

$

 

740,984

 

 

 

 

$

 

137,573

 

 

 

 

$

 

351,731

 

 

 

 

$

 

705,551

 

 

 

 

$

 

22,790

 

 

 

 

$

 

2,348,629

 

 

  Executive Vice President and     2016       $ 353,907     $ —       $ 262,031     $ 88,569     $ 361,536     $ 370,547     $ 18,710     $ 1,455,300  

  Chief Administrative Officer

 

   

 

2015  

 

 

 

  $

 

342,657

 

 

 

  $

 

—  

 

 

 

  $

 

330,904

 

 

 

  $

 

—  

 

 

 

  $

 

230,629

 

 

 

  $

 

258,983

 

 

 

  $

 

15,900

 

 

 

  $

 

1,179,073

 

 

 

Notes to Summary Compensation Table

(1) Named Executive Officers. Mr. Sigurðsson is paid in Icelandic króna and the amount reflected in the table are US Dollar equivalents using an internal rate of .00939 Icelandic króna to US Dollars. Mr. Harvey does not receive any additional compensation in connection with his service as a director on the Alcoa Board.
(2) Salary. Amounts in this column represent the base salary earned and paid in 2017 for each NEO. Annual salary increases are typically effective March 1 of each year.
(3) Bonus. The amount in this column represents a discretionary bonus; no discretionary bonuses were paid in 2017.

 

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(4) Stock Awards and Option Awards. The value of stock awards in column (e) and stock options in column (f) equals the grant date accounting fair value, which is calculated in accordance with ASC Topic 718. Amounts reflected in column (e) of the Summary Compensation Table are comprised of the accounting value of (i) both the time-vested RSUs and PRSUs granted in 2017, as shown in the first table below, and (ii) the 2017 one-year tranche of the PRSUs granted by Arconic in 2015 and 2016, as shown in the second table below. The PRSUs granted in 2017 for the 2017-2019 performance period are reported in the Summary Compensation Table based on the grant date accounting fair value as determined using a Monte Carlo valuation, and the 2017 tranches of the legacy PRSUs granted by Arconic in 2015 and 2016 tranches are reported at 100% of target.

 

                     

 

2017 Performance RSU Award
for the 2017-2019
Performance Period
(a)

 
  Name   

Grant Date

 

    

 

2017  Time-Based
RSUs
(a)

 

    

At Target

 

    

At Maximum

 

 

 

  Roy C. Harvey

 

  

 

 

 

 

2/2/2017

 

 

 

 

  

 

$

 

 

1,100,256

 

 

 

 

  

 

$

 

 

3,885,049

 

 

 

 

  

 

$

 

 

6,600,029

 

 

 

 

 

  William F. Oplinger

 

  

 

 

 

 

2/2/2017

 

 

 

 

  

 

$

 

 

400,162

 

 

 

 

  

 

$

 

 

1,412,866

 

 

 

 

  

 

$

 

 

2,400,216

 

 

 

 

 

  Tómas M. Sigurðsson

 

  

 

 

 

 

2/2/2017

 

 

 

 

  

 

$

 

 

220,051

 

 

 

 

  

 

$

 

 

777,187

 

 

 

 

  

 

$

 

 

1,320,307

 

 

 

 

 

  Jeffrey D. Heeter

 

  

 

 

 

 

2/2/2017

 

 

 

 

  

 

$

 

 

150,343

 

 

 

 

  

 

$

 

 

530,102