DEF 14A 1 px-def14a_20190726.htm DEF 14A px-def14a_20190726.htm

 

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

(Amendment No. )

 

Filed by the Registrant

Filed by a Party other than the Registrant

     

 

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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 Under Rule 14a-12

Linde plc

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

 

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A Message from

Our Chairman

 

Dear fellow shareholders,

On behalf of Linde’s entire Board of Directors, I am pleased to invite you to the first Annual General Meeting of Shareholders of Linde plc (“Linde” or the “Company”).  Linde is the new public company that resulted from the merger of equals between Linde AG and Praxair, Inc. that closed on October 31, 2018.

Our New Company

Linde is the leading industrial gases and engineering company in the world with 2018 pro forma revenues of USD 28 billion, a current stock market value of approximately USD 90 billion, and 80,000 employees worldwide.  Our merged company has strong, complementary positions in key geographies, creating a more diverse and balanced end-market portfolio.  We are already making progress on integration by bringing our employees, business and customers together under One Linde.

A Clear Vision

We are working towards a single vision: “To be the best performing global industrial gases and engineering company, where our people deliver innovative and sustainable solutions for our customers in a connected world.”

To achieve our vision we have created a set of core values that include:

Safety – we will continuously improve safety for our employees, customers and communities.

Integrity – we will achieve our goals ethically, transparently and respectfully, in our dealings with everyone.

Community – we commit to minimizing our environmental impact and improving the communities in which we live and work.

Inclusion – we embrace diversity of thought and inclusion proactively.

Accountability – we are individually and collectively responsible for achieving our goals.

Our New Management Team

Our senior executive team is led by Chief Executive Officer Steve Angel, who is the former Chairman and Chief Executive Officer of Praxair.  Reporting to Steve are the following six executive officers who were formerly executives of Praxair and Linde AG: Christian Bruch, Executive Vice President & CEO Linde Engineering; Bernd Eulitz, Executive Vice President Americas; Sanjiv Lamba, Executive Vice President APAC; Eduardo Menezes, Executive Vice President EMEA; Anne Roby, Executive Vice President Global Functions; and Matt White, Executive Vice President & Chief Financial Officer.

Our New Board of Directors: Diverse, Qualified, Independent and Engaged

I am proud to be the Chairman of your new Board of Directors, comprised of twelve members.  These members bring a diverse range of experiences, competencies, backgrounds and perspectives that are well-suited for oversight of Linde’s business and its management.  Each director has executive management and oversight experience in most, if not all, of the areas that are critical to the conduct of Linde’s business.  All directors are independent of management except for the CEO, and more detailed background information is available in the accompanying proxy statement.

Strong Corporate Governance Structure

The Board has adopted Corporate Governance Guidelines, policies and international best practice to build a strong governance architecture.  As a result, Linde compares favorably to the standards of recognized governance organizations and the expectations of our shareholders.  More detail of these policies and practices is available in the accompanying proxy statement.

Environmental and Social Responsibility

Our mission of “Making our world more productive” reflects our deep commitment to Linde’s Sustainable Development program.  Through our high-quality solutions, technologies and services we are making our customers more productive while simultaneously helping to sustain and protect our planet.  You can learn more about our approach at: www.linde.com/en/about-linde/sustainable-development.

The Board thanks you for your support and confidence in Linde, as we capture the full value of the merger – creating value for our investors and all our stakeholders.

Regards,

Prof. Dr. Wolfgang H. Reitzle

Chairman of the Board

 

 

 

 


 

Table of Contents

 

 

 

 

 

 

 

 

 

 

Notice of 2019 Annual General Meeting of Shareholders

 

 

 

Proxy Statement Highlights

1

 

 

Proposals

1

 

 

Board and Governance Highlights

3

 

 

Compensation Highlights

5

 

 

Corporate Governance and Board Matters

6

 

 

Linde’s Corporate Governance Framework

6

 

 

Board Committees

14

 

 

Director Compensation

17

 

 

Director Nominees

19

 

 

Proposal 1: Re-appointment of Directors

32

 

 

Audit Matters

33

 

 

Independent Auditor Selection Process

33

 

 

Auditor Independence

34

 

 

Fees Paid to the Independent Auditor

35

 

 

Audit Committee Report

36

 

 

Proposal 2a: Non-Binding Ratification of the Appointment of the Independent Auditor

37

 

 

Proposal 2b: Authorization of the Board to Determine the Auditor’s Remuneration

37

 

 

Proposal 3: Determination of Price Range for Re-allotment of Treasury Shares

38

 

 

Executive Compensation Matters

39

 

 

Report of the Compensation Committee

39

 

 

Compensation Discussion and Analysis

39

 

 

Linde plc 2019 Executive Compensation Program

41

 

 

Executive Compensation Tables

54

 

 

Table 1: Summary Compensation

54

 

 

Table 2: Grants of Plan-Based Awards

56

 

 

Table 3: Outstanding Equity Awards at Fiscal Year-End

57

 

 

Table 4: Option Exercises and Stock Vested

58

 

 

Table 5: Pension Benefits

59

 

 

Table 6: Nonqualified Deferred Compensation

63

 

 

Severance and Other Change-In Control Benefits

64

 

 

Table 7: Amounts Potentially Payable upon Termination

67

 

 

CEO Pay Ratio

71

 

 

Proposal 4: Advisory and Non-Binding Vote on Named Executive Officer Compensation

72

 

 

Proposal 5: Advisory and Non-Binding Vote on the Frequency of Future Advisory Shareholder Votes on Named Executive Officer Compensation

73

 

 

Information on Share Ownership

74

 

 

Information About the Annual General Meeting and Voting

75

 

 

General Information

75

 

 

Miscellaneous

78

 

 

 


 

 

Notice of 2019 Annual General Meeting of Shareholders

Dear Shareholder:

The Annual General Meeting of Shareholders of Linde plc (“Linde” or the “Company”) will be held at 11:00 a.m. local time on Friday, July 26, 2019 at the Corinthia Hotel, Whitehall Place, Westminster, London, SW1A 2BD, U.K., for the following purposes:

 

1.

By separate resolutions, to re-appoint the twelve director nominees described in the proxy statement.

 

2.

To (a) ratify, on an advisory and non-binding basis, the appointment of PricewaterhouseCoopers (“PwC”) as independent auditor of the Company and (b) to authorize the Board, acting through the Audit Committee, to determine PwC’s remuneration.

 

3.

To determine the price range at which the Company can re-allot shares that it acquires as treasury shares under Irish law.

 

4.

To approve, on an advisory and non-binding basis, the compensation of the Company’s named executive officers.

 

5.

To recommend, on an advisory and non-binding basis, the frequency of holding future advisory shareholder votes on the compensation of the Company’s named executed officers.

 

6.

To conduct such other business as may properly come before the meeting.

Shareholders may, by technological means, participate in the 2019 Annual General Meeting in Ireland in accordance with section 176 of the Irish Companies Act 2014 by attending the offices of Arthur Cox, Ten Earlsfort Terrace, Dublin 2, D02 T380, Ireland at the time of the meeting.

This Proxy Statement and a form of proxy are being distributed to shareholders on April 30, 2019.  Only holders of record of Linde ordinary shares at the close of business on April 29, 2019 will be entitled to notice of the meeting or any adjournment or postponement thereof.  Pursuant to section 1105(2) of the Irish Companies Act 2014, only holders of record of Linde ordinary shares at 11:00 a.m. local time on July 24, 2019 will be entitled to attend, speak, ask questions and vote at the meeting in respect of the number of shares registered in their name at that time.

It is important that your shares be represented and voted at the meeting.  Any shareholder entitled to attend, speak, ask questions and vote at the meeting, may exercise his or her right to vote by appointing a proxy or proxies to attend and vote on his or her behalf.  A shareholder may appoint the persons named in the proxy card provided or another person, who need not be a shareholder in the Company, as a proxy, by electronic means or in writing, to vote some or all of their shares.  Appointment of a proxy does not preclude members from attending, speaking and asking questions at the meeting should they subsequently wish to do so.  Please note that proxies may be required to provide identification to attend the meeting.

Whether or not you expect to attend the annual general meeting in person, please promptly provide your proxy by either using the Internet or telephone, as further explained in the accompanying proxy statement, or by filling in, signing, dating and promptly mailing a proxy card.  

 


 

We recommend that you review the further information on the process for, and deadlines applicable to, voting, attending the meeting and appointing a proxy under “Information About the Annual General Meeting and Voting” on page 75 of the proxy statement.

Please be aware that, if you own shares in a brokerage account, you must instruct your broker on how to vote your shares.  Without your instructions, New York Stock Exchange rules do not allow your broker to vote your shares on any of the proposals except the ratification of the appointment of the independent auditor.  Please exercise your right as a shareholder to vote on all proposals, including the re-appointment of the director nominees, by instructing your broker by proxy.

 

 

By Order of The Board of Directors

 

 

Prof. Dr. Wolfgang H. Reitzle,

 

Chairman of the Board

 

April 30, 2019

 

 


Proxy Statement Highlights

 

 

Proxy Statement Highlights

This summary highlights selected information in this Proxy Statement.  Please review the entire document before voting.

Annual General Meeting of Shareholders of Linde plc

 

Date

Time

Location

Admission

Friday, July 26, 2019

11:00 a.m. local time

Corinthia Hotel

See page 77 for instructions

 

 

Whitehall Place

 

 

 

Westminster

 

 

 

London,

 

 

 

SW1A 2BD

 

 

 

United Kingdom

 

Shareholders may, by technological means, participate in the 2019 Annual General Meeting in Ireland in accordance with section 176 of the Irish Companies Act 2014 by attending the offices of Arthur Cox, Ten Earlsfort Terrace, Dublin 2, D02 T380, Ireland at the time of the meeting.

 

Proposals

 

 Proposal

Board Voting

Recommendation

Explanation of Proposal and Reason(s) for Board Recommendations

Further

Information

(page)

 1.

By separate resolutions, to re-appoint the twelve director nominees described in the proxy statement

FOR each

nominee

Directors must be reelected to the Board annually. Our nominees are seasoned leaders who bring a mix of skills and qualifications to the Board.

32

 2.

(a) To ratify, on an advisory and non-binding basis, the appointment of PwC as the independent auditor of the Company and (b) to authorize the Board, acting through the Audit Committee, to determine PwC’s remuneration

FOR

 

FOR

Based on its recent evaluation, our Audit Committee believes that the retention of PricewaterhouseCoopers as the Auditor for 2019 is in the best interests of the Company and its shareholders.  We request shareholders’ non-binding ratification of the Auditor’s retention and the authorization for the Audit Committee to determine the Auditor’s remuneration.

37

 3.

To determine the price range at which the Company can re-allot shares that it acquires as treasury shares under Irish law

FOR

The Company has a share repurchase program authorized by the Board which believes that such a program enhances shareholder value as a means of returning capital to shareholders.  Repurchased shares are held as treasury shares until they are either cancelled or used to fund employee and Director stock compensation awards.  Irish law requires shareholder approval of the price range at which treasury shares may be re-allotted for these purposes.

38

 4.

To approve, on an advisory and non-binding basis, the compensation of the Company’s named executive officers

FOR

Shareholders must vote periodically on whether to approve the compensation paid to our five most highly compensated executive officers (“Say-On-Pay” vote).  Our executive compensation program reflects our commitment to paying for performance

72

 5.

To recommend, on an advisory and non-binding basis, the frequency of holding future advisory shareholder votes on the compensation of the Company’s named executive officers

1-YEAR

 

At least every five years, shareholders must vote on how frequently they want to provide the periodic Say-on-Pay vote.  The Board believes that shareholders should have the opportunity to provide an annual advisory Say-On-Pay vote.

73

 

 

Linde plc  |  1  


Proxy Statement Highlights

 

How to Vote

Your vote is important. You are eligible to vote if you are a shareholder of record at 11:00 a.m. local time on July 24, 2019.  Even if you plan to attend the meeting, please vote as soon as possible using one of the following methods. In all cases, you should have your proxy card in hand.

 

Your Vote is Important

Online

By Phone

By Mail

In person

 

 

www.proxyvote.com

1-800-690-6903

Fill out your proxy card
and submit via mail

Attend in person at the
above time and location. Please bring a photo ID.

 

 

 

  2  |  Linde plc


Proxy Statement Highlights

Board and Governance Highlights

 

Board and Governance Highlights

 

Corporate Governance Highlights

Linde plc has a strong corporate governance structure that compares favorably to that of other large public companies and to the standards of recognized governance organizations.  A summary of the key aspects of Linde plc’s corporate governance structure is set forth below, followed by a more detailed discussion of certain governance matters.

 

Board and Governance Information

Size of Board

12

Annual Board and Committee Evaluations

Yes

Number of Independent Directors (excludes CEO)

11

92%

Limits service on other Boards for Directors
(4 other Boards)

Limits service on other Boards for CEO

(2 other Boards)

Yes

 

Yes

Split Chairman and CEO

Yes

Succession Planning Process

Yes

Board Committees (Audit, Compensation, Nomination and Governance and Executive)

4

Board Risk Oversight

Yes

Board Meetings

5

Code of Conduct for Directors, Officers and Employees

Yes

Annual Election of Directors

Yes

Stock Ownership Guidelines for Directors and Executive Officers

Yes

Mandatory Retirement Age

72*

Anti-Hedging and Pledging Policies

Yes

Board Diversity – 3 women, one African American

Yes

Clawback Policy

Yes

Majority Voting in Director Elections

Yes

Rights Agreement (Poison Pill)

No

Proxy Access

Yes

Comprehensive Sustainability Program

Yes

 

 

Shareholders May Call Special Meetings

Yes

*

Mandatory retirement age waived during first three years after Praxair-Linde AG Business Combination closing in October, 2018 (the “Integration Phase”) to ensure continuity.

Public Company Legal and Regulatory Framework

Linde plc is incorporated in Ireland, and is subject to Irish company law pursuant to the Irish Companies Act 2014.  In addition, Linde plc ordinary shares are listed and trade on the New York Stock Exchange (“NYSE”) and the Frankfurt Stock Exchange (“FSE”).  Linde plc’s primary governance obligations arise from its designation as a domestic issuer for NYSE purposes and, as such, the Company is subject to the corporate governance rules of the NYSE, requiring it to adopt certain governance policies (which the Company has complied with), and to the reporting and other rules of the United States Securities and Exchange Commission (the “SEC) requiring it to file Forms 10-K, 10-Q, 8-K, proxy statements and other public company reports.  The Company is also subject to applicable laws of the European Union.

 

 

Linde plc  |  3  


Proxy Statement Highlights

Board and Governance Highlights

 

Board of Directors and Nominees

The following twelve persons currently serve on the Board of Directors and have been nominated for re‑appointment to serve until the 2020 annual general meeting of shareholders and the election and qualification of their successors.

 

 Name

Age

Director

Background

Independent

Current

Other Current Public

 

 

Since (1)

 

Yes

No

Committee

Memberships (2)

Company Boards

Prof. Dr. Wolfgang H. Reitzle

70

2018

Chairman of the Board; retired President and Chief Executive Officer of Linde AG and former Chairman of the Supervisory Board of Linde AG

X

 

Chairman of EX

   Axel Springer SE

   Continental AG

Stephen F. Angel

63

2018

Chief Executive Officer; former Chief Executive Officer and Chairman of the Board of Praxair, Inc.

 

X

EX

   PPG Industries, Inc.

Prof. DDr. Ann-Kristin Achleitner

53

2018

Holder of Chair for Entrepreneurial Finance, and Scientific Co-Director, Center for Entrepreneurial and Finance Studies, Technical University Munich, Germany

X

 

CC, NG

   Deutsche Börse AG

   Münchener Rückversicherungs-Gesellschaft AG

   ENGIE SA

Prof. Dr. Clemens A. H. Börsig

70

2018

Retired Executive Vice President & Chief Financial Officer and retired Chairman of the Supervisory Board of Deutsche Bank AG

X

 

Chairman of AC, NG

   Daimler AG

   Emerson Electric Company

Dr. Nance K. Dicciani

71

2018

Former President & Chief Executive Officer of Honeywell Specialty Materials

X

 

AC, CC

   AgroFresh Solutions, Inc.

   Halliburton Company

   LyondellBasell Industries

Dr. Thomas Enders

60

2018

Former Chief Executive Officer & Member of Executive Committee, Airbus SE

X

 

AC, EX

 

Franz Fehrenbach

69

2018

Managing Partner of Robert Bosch Industrietreuhand KG; Chairman of the Supervisory Board of Robert Bosch GmbH

X

 

CC, NG

   Robert Bosch GmbH

   STIHL AG

   BASF SE

Edward G. Galante

68

2018

Former Senior Vice President and a member of the Management Committee of ExxonMobil Corporation

X

 

Chairman of CC, AC

   Celanese Corporation

   Clean Harbors, Inc.

   Marathon Petroleum

Larry D. McVay

71

2018

Principal of Edgewater Energy, LLC; former Chief Operating Officer of TNK-BP Holding

X

 

AC, NG

   Callon Petroleum Company

Dr. Victoria E. Ossadnik

50

2018

Chief Executive Officer of E.ON Energie Deutschland GmbH

X

 

AC, CC

   Commerzbank AG

Prof. Dr. Martin H. Richenhagen

66

2018

Chief Executive Officer, President and Chairman of the Board of AGCO Corporation

X

 

CC, NG

   AGCO Corporation

   PPG Industries, Inc.

Robert L. Wood

65

2018

Partner, The McChrystal Group; Former Chairman, President & Chief Executive Officer of Chemtura Corporation

X

 

Chairman of NG, EX

   MRC Global Inc.

   Univar Inc.

 

(1)

Each director joined the Board in connection with the Praxair-Linde AG Business Combination in October, 2018.

(2)

Committees:    AC means Audit Committee; CC means Compensation Committee; EX means Executive Committee; NG means Nomination and Governance Committee

 

 

 

  4  |  Linde plc


Proxy Statement Highlights

Compensation Highlights

 

Compensation Highlights

Alignment of Executive Compensation Programs with Linde Business Objectives

 

 

The Compensation Committee seeks to achieve its executive compensation objectives by aligning the design of the Company’s executive compensation programs with the Company’s business objectives, ensuring a balance between financial and strategic non-financial goals.

Financial Business Objectives:

Achieve sustained growth in profitability and shareholder return resulting in a robust cash flow to fund capital investment growth opportunities, dividend payments and share repurchases.

 

Annual performance-based variable compensation earned by meeting or exceeding pre-established financial goals.

 

Annual grants of performance share units that vest based upon performance results over three years.

 

Annual grants of restricted stock units that vest in full after three years and serve as a retention incentive.

 

Annual grants of stock options, the value of which is directly linked to the growth in the Company’s stock price.

Strategic Business Objectives:

Achieve best in class performance in safety, environmental responsibility, global compliance, productivity, talent management, and financial controls.

 

Annual payout of variable compensation is impacted by non-financial performance in these areas.

Attract and retain executives who thrive in a sustainable performance-driven culture.

 

A competitive compensation and benefits program regularly benchmarked against global companies of similar size in market cap, revenue and other financial metrics and business attributes.

 

Realized compensation linked closely to Company performance, with downside risk and upside opportunity.

 

 

 

 

 

Linde plc  |  5  


Corporate Governance and Board Matters

Linde’s Corporate Governance Framework

 

 

Corporate Governance and Board Matters

Linde’s Corporate Governance Framework

 

 

Linde operates under Corporate Governance Guidelines which are posted at Linde’s public website, www.Linde.com in the About Linde/Corporate Governance section.  Consistent with those guidelines, the charters of the various Board committees and Linde’s Constitution, the Board has adopted the following policies and practices, among others:

Director Independence

 

 

The Board has adopted independence standards for service on Linde’s Board of Directors which are posted at Linde’s public website referenced above.  The Board has applied these standards to all of the non-management directors (all directors are non-management except for Mr. Angel, the Company’s Chief Executive Officer), and has

determined that each qualifies as independent.  The Board is not otherwise aware of any relationship with the Company or its management that could potentially impair the independent judgment of these directors.  See also related information in this Proxy Statement under the caption “Certain Relationships and Transactions.”

 

Board Leadership

 

 

As set forth under the Corporate Governance Guidelines, the Board believes that the best leadership model for the Company at this time is that the position of the Chairman of the Board should be separate from that of the Chief Executive Officer.  In addition, there are practices and policies designed to assure effective independence in the Board’s oversight, advice and counsel of management.  The Nomination and Governance Committee (consisting entirely of independent directors) periodically examines the Board leadership structure as well as other governance practices and conducts an annual assessment of Board and Committee effectiveness.  The Nomination and Governance Committee has determined that the present leadership structure is effective and appropriate.  The Board believes that at this time the substantive duties of the Chairman are best performed by a director other than the CEO but that the Chairman should work collaboratively with the CEO who has the day-to-day familiarity with the business issues confronting the Company and an understanding of the specific areas in which management seeks advice and counsel from the Board.  The designated responsibilities of the

Chairman are set forth in the Board’s Corporate Governance Guidelines and include:

 

serving as chairman of the meetings of the Board and all meetings of the independent directors;

 

having the authority to call meetings of the Board;

 

serving as a liaison between the Board and the CEO;

 

being available to consult with the CEO about the concerns of the Board;

 

approving the Board meeting agendas and related information sent to the Board;

 

approving the Board meeting schedules to assure that there is sufficient time for discussion of all agenda items;

 

being available for consultation and direct communication with major shareholders if requested; and

 

coordinating an annual performance review of the CEO with input from the Compensation Committee and the other independent directors.

 

 

 

 

  6  |  Linde plc


Corporate Governance and Board Matters

Linde’s Corporate Governance Framework

 

Board Role in Risk Oversight

 

 

At least annually, the Board reviews the Company’s risk identification, assessment and management processes and the guidelines and policies by which key risks are managed.  As part of that review, the Board discusses (1) the key enterprise risks that management has identified, (2) management accountability for managing or mitigating each risk, (3) the steps being taken to manage each risk, and (4) which Board Committees will oversee each risk area on an ongoing basis.

The risk factors disclosed in Item 1A of the Company’s Form 10-K and Annual Report illustrate the range of the risks faced by a global industrial company and help explain the need for strong Board Committee oversight of the management of risks in specific subject areas.  Each Committee’s calendar of recurring meeting agenda topics addresses risk areas pertinent to the Committee’s subject-matter responsibilities.  These areas include: financing and currency exchange risks (Audit Committee); compensation risks, and executive development and retention (Compensation Committee); regular

review of the Board’s governance practices (Nomination and Governance Committee); and internal controls, investigations, and integrity standards compliance (Audit Committee).  Other risk areas are regularly reviewed by the full Board.  These include: safety and environmental risk (covered at each Board meeting), economic, market and competitive risk (part of business operating reports at each Board meeting, and the annual operating and strategic reviews), cyber security, and global compliance risks (supplementing reporting within the Audit Committee).  In addition, risk identification and assessment is integrated into Board decision-making with respect to capital projects and acquisitions, entry into new markets, financings, and cash flow analysis, among other matters.  In Committee meetings and full Board deliberations, each director brings his or her particular operating, financial, management development, and other experiences and expertise to bear in assessing management’s response to specific risks and in providing advice and counsel with respect to risk mitigation and management.

 

Board Oversight of Business Strategy

 

 

Each year, the Board conducts a comprehensive long-term strategic review of the Company’s outlook and business plans and provides advice and counsel to management regarding the Company’s strategic issues.  This process involves engagement by all Board members and senior management.  The Board performs a

detailed review of management’s proposed strategy for each of the key business units, which is designed to drive profitability over the near-and long-term independent of the macro environment and drive long-term shareholder value creation.

 

 

Board Effectiveness Assessment

 

 

The Board assesses its effectiveness annually under a process determined by the Nomination and Governance Committee.  Typically, this assessment includes each non-management director completing written questionnaires that are used to evaluate the Board’s effectiveness in the areas of Performance of Core Responsibilities, Decision-Making Support, the Quality of Deliberations, Director Performance, and Committee Functions, as well as consideration of additional Board practices and policies recommended as best practices by recognized governance authorities.  Similarly, each

Committee annually assesses its effectiveness in meeting its oversight responsibilities under its charter from the Board.  The Nomination and Governance Committee reviews the results of the written assessments, provides the results to all Board members, and the Chairman conducts a discussion of the results in an executive session of the non-management directors. Subsequently, the Nomination and Governance Committee may recommend certain actions be taken to enhance the operations and effectiveness of the Board and its committees.

 

 

 

 

 

Linde plc  |  7  


Corporate Governance and Board Matters

Linde’s Corporate Governance Framework

 

Governance Practices Review

 

 

In addition to leading the annual Board and Committee effectiveness assessment referred to above, the Nomination and Governance Committee annually reviews the Company’s governance practices (which may include an outside expert), and updates those practices as it deems appropriate.  The Committee considers, among other things, the results of the Board and

Committee effectiveness assessments, developments in Irish company law, federal laws and regulations promulgated by the SEC, applicable public company and related standards of the European Union (“EU”), and the views and standards of recognized governance authorities and institutional investors.

 

Succession Planning and Personnel Development

 

 

The Compensation Committee conducts an annual Succession Planning and Personnel Development session to which all Board members are invited and at which executives are evaluated with respect to their potential for promotion into senior leadership positions, including that of the

CEO.  In addition, a wide variety of executives are introduced to the Board by way of Board and Committee presentations, and directors have unrestricted access to a broad cross-section of managers and high potential employees.

 

Mandatory Director Retirement

 

 

The Board’s policy is that a director who has attained the age of 72 may not stand for re-election at the next annual shareholders’ meeting.  However, for the three-year period following the closing of the Praxair-Linde AG business

combination on October 31, 2018 (the “Integration Phase”), this retirement requirement does not apply to the directors (including their replacements) who began to serve on the Board in October 2018 to ensure continuity.

 

Limits to Service on Other Boards

 

 

The Board’s policy is that a non-management director may not serve on more than four additional public company boards, and the CEO may not serve on more than two additional public company boards.

 

Also, a member of the Audit Committee may not serve on more than two additional public company audit committees unless the Board determines that such simultaneous service would not impair the ability of such member to effectively serve on the Audit Committee.  If the Board so determines, it will disclose such determination in the Company’s annual proxy statement.

 

Shareholder Outreach and Communications with the Board

 

 

The Company has a robust shareholder outreach program which ensures that the Board and management remain responsive to shareholder concerns.  This includes ongoing interaction between Investor Relations and major institutional investors, as well as an extensive shareholder outreach program that is conducted annually.

 

In addition, the Board has established procedures to enable a shareholder or other interested party to direct a communication to the Board of Directors.  Such communications may be confidential or anonymous and may be communicated by mail, e-mail, or telephone.  Information on how to submit communications, and how they will be handled, is included at www.Linde.com in the About Linde /Corporate Governance section.

 

 

 

 

  8  |  Linde plc


Corporate Governance and Board Matters

Linde’s Corporate Governance Framework

 

Director Attendance at Board and Committee Meetings and the Annual Shareholders Meeting

 

 

Absent extenuating circumstances, each member of the Board is expected to attend all meetings of the Board, all meetings of each Committee of which he or she is a member, and the Annual General Meeting of Shareholders.  Director meeting attendance is one of the factors that the

Nomination and Governance Committee considers in determining whether to re-nominate an incumbent director for election at the Annual General Meeting.

 

 

Business Integrity and Ethics

 

 

Linde’s Board of Directors has adopted a Code of Business Integrity that is posted on Linde’s public website, www.Linde.com, in the About Linde/Corporate Governance section and is available in print to any shareholder who requests

it.  This Code of Business Integrity applies to Linde’s directors and to all employees, including Linde’s CEO, CFO and Controller, and other officers.

 

Director Election by Majority Vote and Resignation Policy

 

 

Linde’s Constitution requires directors to be elected annually and that a director nominee must receive a majority of the votes cast at an annual general meeting in order to be elected (meaning a greater number of “for” votes than “against” votes) in an uncontested election of directors.  The Board’s Tenure and Resignation Policy requires that any director nominee who is then serving as a director must tender his or her resignation if he or she fails to receive this majority vote.  The

Nomination and Governance Committee of the Board would then consider the resignation offer and recommend to the Board whether to accept or reject the resignation, or whether other action should be taken.  The Board would take action on the Committee’s recommendation within 90 days following certification of the vote, and promptly thereafter publicly disclose its decision and the reasons therefor.

 

Proxy Access

 

 

Linde’s Constitution provides that a shareholder, or a group of up to 20 shareholders, who have owned at least 3% of the Company’s outstanding ordinary shares continually for at least three years, may nominate persons for election as directors and have these nominees included in the

Company’s proxy statement.  The shareholders or group must meet the requirements in the Company’s Constitution.  The number of nominees is generally limited to the greater of two persons or 20% of the number of directors serving on the Board.

 

Shareholder Rights Agreements

 

 

The Company does not have a Shareholder Protection Rights Agreement (sometimes referred to as a “Poison Pill”).  It is possible for Linde plc to adopt a shareholder rights agreement in certain circumstances.  As Linde plc is an Irish public company with securities admitted to trading on NYSE and the Frankfurt Stock Exchange, it is subject to the Irish Takeover Panel Act, 1997 Takeover Rules 2013, which govern certain

aspects of the manner in which a takeover offer can be made for shares in Linde plc.  If an offer has been made or is deemed to be imminent, Linde plc is prevented from engaging in frustrating action.  The adoption of a shareholder rights agreement would constitute frustrating action, meaning that it could only be adopted on a “clear day” where no such offer is anticipated.

 

 

Linde plc  |  9  


Corporate Governance and Board Matters

Linde’s Corporate Governance Framework

 

Extraordinary General Meetings of Shareholders

Shareholders of the Company holding not less than 5% of the paid up share capital of the Company may call an extraordinary general meeting of shareholders in accordance with the provisions set forth in Linde’s Constitution.

Director Stock Ownership Guidelines

 

 

The Board’s policy is that non-management directors must acquire and hold the Company’s ordinary shares equal in value to at least five times the base compensation retainer awarded in the form of equity or equity-based awards.  Directors have five years from their initial election to meet

this guideline.  All non-management directors have met this guideline or are within the five-year transition period afforded to them to do so.  See the section titled “Information on Share Ownership” in this Proxy Statement.

 

 

Executive Stock Ownership and Shareholding Policy

 

 

The Board believes that it is important for executive officers to acquire a substantial ownership position in Linde.  In this way, their interests are more closely aligned with those of shareholders.  Significant stock ownership ensures that executives manage Linde as equity owners.

 

Accordingly, a stock ownership and shareholding policy has been established for the Company’s executive officers that requires them to own a minimum number of ordinary shares equal or greater in value to a multiple of their base salary, as set forth below.  Individuals must meet the applicable ownership level within five years after first becoming subject to the guidelines by acquiring at least 20% of the required level of

stock ownership each year.  Until the stock ownership requirement is met, executive officers (i) may not sell, transfer or otherwise dispose of any of their Linde ordinary shares and (ii) must retain and hold all Linde ordinary shares acquired from all equity incentive awards, net of shares withheld for taxes and option exercise prices, including performance share unit awards, restricted stock unit awards and stock options.

Set forth below is the minimum number of shares required by the policy (expressed as a multiple of base salary) for each executive officer position.  As of the date of this Proxy Statement, all covered individuals are in compliance with this policy.  Stock ownership of the Named Executive Officers can be found in the table presented under the section titled “Information on Share Ownership.”

 

 

 

 

Minimum Shares

to be Owned (multiple of base salary)

 Chief Executive Officer

 

6X

 Chief Financial Officer

 

3X

 Other Executive Officers

 

3X

 

 

 

Hedging, Pledging and Similar Transactions Prohibited. Directors and officers may not engage in hedging transactions related to Linde’s stock that would have the effect of reducing or

eliminating the economic risk of holding Linde stock.  They also may not pledge or otherwise encumber Linde stock.

 

 

  10  |  Linde plc


Corporate Governance and Board Matters

Linde’s Corporate Governance Framework

 

Review, Approval or Ratification of Transactions with Related Persons

 

 

The Company’s Code of Business Integrity (“Ethics Policy”) prohibits employees, officers and Board members from having a personal, financial or family interest that could in any way prevent the individual from acting in the best interests of the Company (a “conflict of interest”) and provides that any conflict of interest waiver relating to Board members or executive officers may be made only after review and approval by the Board upon the recommendation of its Audit Committee.  In addition, the Board’s Corporate Governance Guidelines require that any “related party transaction” by an executive officer or director be pre-approved by a committee of independent and disinterested directors.  For this purpose, a “related party transaction” means any transaction or relationship that is reportable under Regulation S-K, Item 404, of the Securities and Exchange Commission (“SEC”) or that, in the case of a non-management director, would violate the Board’s independence standards.

Reporting and review procedures. To implement the foregoing policies, the Audit Committee has adopted a written procedure for the Handling of Potential Conflicts of Interests which specifies a process for the referral of potential conflicts of interests to the Board and standards for the Board’s evaluation of those matters.  This policy applies to any transaction or relationship involving an executive officer, a member of the Board of Directors, a nominee for election as a director of the Company, or a family member of any of the foregoing which (1) could violate the Company’s Ethics Policy provisions regarding conflicts of interest, (2) would be reportable under the SEC’s disclosure rules, or (3) in the case of a non-management director, would violate the Board’s independence standards.

 

Under this procedure, potential conflicts of interest are reported to the Corporate Secretary for preliminary analysis to determine whether referral to the Audit Committee is appropriate.  Potential conflicts of interest can be self-identified by the

director or executive officer or may arise from internal audits, the integrity hotline or other referrals, or through periodic due diligence conducted by the Corporate Secretary’s office.  The Audit Committee then examines the facts and circumstances of each matter referred to it and makes a final determination as to (1) whether the transaction or relationship would (or does) constitute a violation of the conflicts of interest provisions of the Company’s Ethics Policy, and (2) whether the transaction or relationship should be approved or ratified and the conditions, if any, of such approval or ratification.  In determining whether a transaction or relationship constitutes a violation of the conflicts of interest provisions of the Company’s Ethics Policy, the Audit Committee considers, among other factors, the materiality of the transaction or relationship to the individual’s personal interest, whether the individual’s personal interest is materially adverse to or competitive with the interests of the Company, and whether the transaction or relationship materially interferes with the proper performance of the individual’s duties or loyalty to the Company.  In determining whether to approve or ratify a transaction or relationship, the Audit Committee considers, among other factors, whether the matter would constitute a violation of the conflicts of interest provisions of the Company’s Ethics Policy, whether the matter would violate the NYSE listing standards, the expected practical impact of the transaction or relationship on the individual’s independence of judgment or ability to act in the best interests of the Company, the availability, practicality and effectiveness of mitigating controls or safeguards such as recusal, restricted access to information, reassignment etc., and the best interests of the Company and its shareholders generally.

Application of Policies & Procedures. During 2018, no actual or potential conflicts of interest were identified with respect to the executive officers and directors of the Company.

 

 

 

Linde plc  |  11  


CORPORATE GOVERNANCE AND BOARD MATTERS

Linde’s Corporate Governance Framework

 

Certain Relationships and Transactions

 

 

When determining whether any director or nominee is independent, the Board considers all facts and circumstances and any relationships that a director or nominee may have with the Company, directly or indirectly, other than in the capacity of serving as a director.  To assist the Board in making independence determinations, it also applies the independence standards which are posted at Linde’s public website, www.Linde.com in the About Linde/Corporate Governance section.  In February 2019, the Board considered the following circumstances and relationships of those directors and nominees who then had any direct or indirect relationship with the Company.  In the ordinary course of its business, Linde sells industrial gases to, and purchase certain goods or services from (1) Airbus SE, of which Dr. Thomas Enders was an executive officer; (2) E. ON Energie, of which Dr. Victoria Ossadnik is an executive officer; and (3) AGCO Corporation, of which Prof. Dr. Richenhagen is an

executive officer.  The 2018 consolidated revenues for each of Linde, Airbus SE, E.ON Energie and AGCO Corporation were $14.9 billion, €64.0 billion, €30.3 billion and $9.4 billion, respectively.  During the 2018 fiscal year, the dollar value of Linde’s sales to, or purchases from, Airbus SE were $2.8 million of sales and $66,000 of purchases; to E.ON Energie were $3.0 million in sales and $1.5 million of purchases; and AGCO Corporation were $1.7 million in sales.  Such sale and purchase transactions were well below the limits set forth in the Board’s independence standards and were significantly less than 1% of the consolidated revenues of any of Linde, Airbus SE, E.ON Energie or AGCO Corporation.  Therefore, the Board has determined that such ordinary course business relationships are not material and do not otherwise impair the ability of any of Dr. Enders, Dr. Ossadnik or Prof. Dr. Richenhagen to exercise independent judgment as a director.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

 

Based solely upon a review of SEC Forms 3, 4 and 5 furnished to the Company and written representations from the Company’s executive officers and directors, the Company believes that

those persons complied with all Section 16(a) filing requirements during 2018 with respect to transactions in the Company’s stock.

 

Director & Nominee Selection Criteria

 

 

The Board is currently comprised of twelve directors, six of whom are former Praxair directors (“Praxair Class Directors”), including Steve Angel who is also the CEO, and six of whom are former Linde AG Supervisory Board members (“Linde Class Directors”), including Wolfgang Reitzle, who is Chairman of the Board.  Under the Linde plc Constitution, until October 31, 2021 (three years after the Praxair-Linde AG Business Combination closing), the Linde plc board of directors must nominate each of the Linde Class Directors and Praxair Class Directors (or his or her replacement) for re-appointment to the Linde plc board of directors at each of Linde plc’s annual general meetings as required to ensure that each of the Linde Class Directors and each of Praxair Class Directors (or his or her replacement) serve on the Linde plc board of directors through to at least October 31, 2021.

 

In addition, the Nomination and Governance Committee will consider any candidate for election to the Board who is timely recommended by a shareholder and whose recommendation otherwise complies with the requirements under Linde’s Constitution.  Recommendations should be sent to the Corporate Secretary of Linde and should include the candidate’s name and qualifications and a statement from the candidate that he or she consents to being named in the proxy statement and will serve as a director if elected.  In order for any candidate to be considered by the Nomination and Governance Committee and, if nominated, to be included in the proxy statement, such recommendations must be received by the Corporate Secretary on or before the date specified in this Proxy Statement under the caption “Shareholder Proposals, Director Nominations and Other Business for the 2020 Annual General Meeting.”

 

 

  12  |  Linde plc


Corporate Governance and Board Matters

Linde’s Corporate Governance Framework

 

 

 

The qualities and skills sought in director nominees are governed by the projected needs of the Board at the time the Nomination and Governance Committee considers adding a new director or renominating incumbent directors. Consistent with the Board’s Corporate Governance Guidelines, the Committee seeks to build and maintain a Board that contains a range of experiences, competencies, and perspectives that is well-suited for advice and counsel to, and oversight of, the Company’s business and operations.  In doing so, the Committee takes into account a variety of factors, including:

(1)

the Company’s strategies and its market, geographic and regulatory environments, both current and projected,

(2)

the mix of experiences, competencies, and perspectives (including gender, ethnic and cultural diversity) currently represented on the Board,

(3)

the results of the Board’s annual self-assessment process,

(4)

the CEO’s views as to areas in which management would like to have additional advice and counsel from the Board, and

(5)

with respect to the incumbent directors, meeting attendance, participation and contribution, and the director’s current independence status.

The Committee also seeks in each director candidate a breadth of experience and background that (a) will allow the director to contribute to the full range of issues confronting a global industrial company and (b) will qualify the director to serve on, and contribute to, any of the Board’s standing committees, thus facilitating the Board’s committee rotation policy.  In addition, the Nomination and Governance Committee believes that every director nominee should demonstrate a

strong record of integrity and ethical conduct, an absence of conflicts that might interfere with the exercise of his or her independent judgment, and a willingness and ability to represent all shareholders of the Company.

When the need to recruit a director arises, the Nomination and Governance Committee will consult the Chairman and other directors, as well as the CEO, and may engage third party recruiting firms to identify potential candidates.  The candidate evaluation process may include inquiries as to the candidate’s reputation and background, examination of the candidate’s experiences and skills in relation to the Board’s needs at the time, consideration of the candidate’s independence as measured by the Board’s independence standards, and other considerations that the Nomination and Governance Committee deems appropriate at the time.  Prior to formal consideration by the Nomination and Governance Committee, any candidate who passes such screening would be interviewed by the Nomination and Governance Committee or its Chairman and by the Chairman of the Board and the CEO.

Additional information about the specific skills, qualifications and backgrounds of each of the director nominees is set forth in this Proxy Statement under the under caption “Director Nominees.”

Proxy Access Nominees. The foregoing description applies only to the Nomination and Governance Committee’s consideration of director nominees who may be nominated by the Committee itself.  It does not apply to persons nominated by eligible shareholders under the Company’s Proxy Access structure which has separate requirements that are set forth in Linde’s Constitution.

 

 

 

 

Linde plc  |  13  


Corporate Governance and Board Matters

Board Committees

 

Board Committees

The Board currently has four standing committees as described below and each is comprised of only independent directors except for the Executive Committee of which the CEO is a member.  The Charters for each of these committees may be found on Linde’s public website, www.linde.com, in the Our Company/Our People/Our Board of Directors section.

 

Board of Director

 

Audit

Committee

 

Compensation 

Committee

 

Executive

Committee

 

Nomination

and

Governance

Committee

Prof. Dr. Wolfgang H. Reitzle (Chairman)

 

 

 

 

 

Chairman

 

 

Stephen F. Angel (Chief Executive Officer)

 

 

 

 

 

 

 

Prof. DDr. Ann-Kristin Achleitner

 

 

 

 

 

 

Prof. Dr. Clemens A. H. Börsig

 

Chairman

 

 

 

 

 

Dr. Nance K. Dicciani

 

 

 

 

 

 

Dr. Thomas Enders

 

 

 

 

 

 

Franz Fehrenbach

 

 

 

 

 

 

Edward G. Galante

 

 

Chairman

 

 

 

 

Larry D. McVay

 

 

 

 

 

 

Dr. Victoria E. Ossadnik

 

 

 

 

 

 

Prof. Dr. Martin H. Richenhagen

 

 

 

 

 

 

Robert L. Wood

 

 

 

 

 

 

Chairman

 

Description of Key Committee Functions

 

Audit Committee

Committee Chair

 Prof. Dr. Clemens A. H.

 Börsig

Current Members:

 Dr. Nance K. Dicciani

 Dr. Thomas Enders

 Edward G. Galante

 Larry D. McVay

 Dr. Victoria E. Ossadnik

Meetings in 2018

 1

 

 

The Audit Committee assists the Board in its oversight of (a) the independence, qualifications and performance of Linde’s independent auditor, (b) the integrity of Linde’s financial statements, (c) the performance of Linde’s internal audit function, and (d) Linde’s compliance with legal and regulatory requirements.  In furtherance of these responsibilities, the Audit Committee, among other duties,

(1)  appoints the independent auditor to audit Linde’s financial statements, approves the fees and terms of such engagement, approves any non-audit engagements of the independent auditor, and meets regularly with, and receives various reports from, the independent auditor.  The independent auditor reports directly to the Audit Committee;

(2)  reviews Linde’s principal policies for accounting and financial reporting and its disclosure controls and processes, and reviews with management and the independent auditor Linde’s financial statements prior to their publication;

(3)  reviews assessments of Linde’s internal controls, the performance of the Internal Audit function, the performance evaluations of the General Auditor and the Chief Compliance Officer, and the guidelines and policies by which Linde undertakes risk assessment and risk management; and

(4)  reviews the effectiveness of Linde’s compliance with laws, business conduct, integrity and ethics programs.

 

 

  14  |  Linde plc


Corporate Governance and Board Matters

Board Committees

 

 

Compensation Committee

Committee Chair

 Edward G. Galante

Current Members:

 Prof. DDr. Ann-Kristin

 Achleitner

 Dr. Nance K. Dicciani

 Franz Fehrenbach

 Dr. Victoria E. Ossadnik

 Prof. Dr. Martin H.

 Richenhagen

Meetings in 2018

 1

 

 

The Compensation Committee assists the Board in its oversight of (a) Linde’s compensation and incentive policies and programs, and (b) management development and succession, in both cases particularly as they apply to Linde’s executive officers.  In furtherance of these responsibilities, the Compensation Committee, among other duties,

(1)  determines Linde’s policies relating to the compensation of executive officers and assesses the competitiveness and appropriateness of their compensation and benefits;

(2)  determines the salaries, performance-based variable compensation, equity awards, terms of employment, retirement or severance, benefits, and perquisites of executive officers;

(3)  establishes the corporate goals relevant to the CEO’s compensation, evaluates the CEO’s performance in light of these goals and sets the CEO’s compensation accordingly;

(4)  reviews management’s long-range planning for executive development and succession, and develops a CEO succession plan;

(5)  assesses the design, administration and risk associated with Linde’s management incentive compensation and equity compensation plans; and

(6)  evaluates periodically the Company’s diversity policies and objectives, and programs to achieve those objectives.

 

 

 

 

 

Certain Committee Processes for Determining Executive Compensation

 

 

Delegation and CEO Involvement. Except under limited circumstances, the Compensation Committee may not delegate its executive compensation authority to any other persons.  With respect to the allocation of compensation and awards to employees other than the executive officers, the Compensation Committee may, and has, delegated authority to the CEO, subject to guidelines established by the Compensation Committee.  The CEO does not determine the compensation of any of the executive officers but he does offer for the Compensation Committee’s consideration his views on relevant matters, as described in more detail in this Proxy Statement in the CD&A section.

 

Compensation Risk Analysis. In 2019, the Compensation Committee will consider whether the Company’s compensation policies and practices create incentives for risk-taking that could have a material adverse effect on the Company.  Each year, the Compensation

Committee will examine management’s review of the Company’s incentive compensation programs applicable to all employees, including executive officers, in order to evaluate whether they encourage excessive risk-taking through either the design of the executive and management incentive programs, or operational decision-making that could affect compensation payouts.  The Compensation Committee will determine if (1) there exists sufficient operational controls, checks and balances that prevent or constrain compensation-driven decision-making that is inappropriate or excessively risky including, among others, frequent risk discussions with the Board, particularly in connection with capital project or acquisition proposals, (2) the Company uses highly leveraged short-term incentives that would tend to drive high short-term risk decisions or unsustainable gains, and (3) the Company’s executive stock ownership policy and the “recapture” policy described in the CD&A also serve as disincentives for unacceptable risk-taking.

 

 

Linde plc  |  15  


Corporate Governance and Board Matters

Board Committees

 

A more detailed description of how the Compensation Committee considers and determines executive compensation is described in this Proxy Statement in the CD&A section.

 

Executive Committee

Committee Chair

 Prof. Dr. Wolfgang H.

 Reitzle

Current Members:

 Stephen F. Angel

 Dr. Thomas Enders

 Robert L. Wood

Meetings in 2018

 1

 

 

The purpose of the Executive Committee is primarily to act on behalf of the entire Board with respect to certain matters that may arise in between regularly scheduled Board meetings, and act on certain other matters from time to time.  In particular, the Executive Committee duties include, among others:

(1)  evaluating and approving any investments, acquisitions, partnerships or divestments requiring Board approval, that are within value thresholds specified by the Board;

(2)  evaluating and approving any financing or other capital markets transactions requiring Board approval, that are within value thresholds specified by the Board; and

(3)  acting upon any other such matters within the competencies of the Board, that are not reserved solely to the Board, that are within value thresholds specified by the Board and, in the opinion of the Chairman of the Board, should not be postponed until the next regularly scheduled Board meeting.

 

 

 

 

 

Nomination and Governance Committee

Committee Chair

 Robert L. Wood

Current Members:

 Prof. DDr. Ann-Kristin

 Achleitner

 Prof. Dr. Clemens A. H.

 Börsig

 Franz Fehrenbach

 Larry D. McVay

 Prof. Dr. Martin H.

 Richenhagen

Meetings in 2018

 1

 

 

The Nomination and Governance Committee assists the Board in its oversight of (a) the selection, qualifications, compensation and performance of Linde’s directors, (b) Linde’s governance, including the practices and effectiveness of the Board, and (c) various important public policy concerns that affect the Company.  In furtherance of these responsibilities, the Nomination and Governance Committee, among other duties,

(1)  recommends to the Board nominees for election as directors, and periodically reviews potential candidates, including incumbent directors;

(2)  reviews policies with respect to the composition, compensation, organization and practices of the Board, and developments in corporate governance matters generally; and

(3)  reviews Linde’s policies and responses to broad public policy issues such as social responsibility, corporate citizenship, charitable contributions, legislative issues, and important shareholder issues, including management and shareholder proposals offered for shareholder approval.

 

 

 

 

 

 

 

  16  |  Linde plc


Corporate Governance and Board Matters

Director Compensation

 

Director Compensation

 

 

Director Compensation Program

The Board adopted the Director Compensation Program based in part on an extensive director compensation study and analysis performed in 2018 by F. W. Cook, a recognized expert compensation consultant.  This report included data, analysis and advice, a report on director compensation trends and benchmarking of director compensation against groups of large U.S. and European public companies.

The Company paid the amounts reported in the 2018 Director Compensation table below pursuant to its Director Compensation Program in effect for 2018.  The Company does not pay any director who is a Company employee (Mr. Angel in 2018) for serving as a member of the Board of Directors or any committee of the Board of Directors.  The Nomination and Governance Committee of the Board determines non-management director compensation consistent with the Directors’ Compensation principles set forth in the Corporate Governance Guidelines.  The Director Compensation Program in effect for 2018 is described below.

Cash Compensation

Cash compensation comprises 60% of the entire annual Board compensation, as follows:

 

A $420,000 annual retainer paid quarterly to the Chairman of the Board.

 

A $180,000 annual retainer paid quarterly to all other directors.

 

An additional $100,000 annual retainer paid quarterly to the Chairman of the Audit Committee.

 

An additional $50,000 annual retainer paid quarterly to each chairman of the Compensation Committee and the Nomination and Governance Committee.

Equity Compensation

In addition to the cash compensation set forth above, each non-management Director receives an annual equity stock compensation grant equal to 40% of the value of the entire annual Board compensation.  No such equity grant was made in 2018; however, in 2019, an equity grant valued at $280,000 was made to the Chairman of the Board, and an equity grant valued at $120,000 was made to each other director for their services in 2019.

The Nomination and Governance Committee selected restricted stock units as the sole form of equity for the 2019 grant.  The restricted stock units are fully vested (non-forfeitable) after one-year from the date of grant, but a prorated portion will be paid out if a director’s service on the Board terminates before the one year anniversary of the grant unless the director is removed by the shareholders or is removed for cause, in which case the grant will be forfeited.  Restricted stock units will be paid out as soon as practicable after the vesting in Linde plc ordinary shares on a one-for-one basis.

Expenses

The Company pays or reimburses directors for travel, lodging and related expenses incurred in connection with attending board and committee meetings, the Annual General Meeting and other Company business-related events (including the expenses related to the attendance of spouses if they are specifically invited for appropriate business purposes), and may provide use of Company chartered aircraft.  From time to time, the Company may reimburse a director’s expenses for his or her participation in third party-supplied continuing education related to the director’s board or committee service.

 

 

 

 

 

Linde plc  |  17  


Corporate Governance and Board Matters

Director Compensation

 

The table below shows the fees that the Company’s non-management directors earned in 2018.

 

2018 Director Compensation Table

 

Name

 

Fees Earned

or

Paid in Cash

($)(1)

 

 

Stock

Awards

($)

 

 

Option

Awards

($)

 

 

Non-Equity

Incentive

Plan

Compensation

($)

 

 

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

 

 

All Other

Compensation

($)

 

 

Total

($)

 

Prof. Dr. Wolfgang H. Reitzle

 

 

81,030

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

81,030

 

Prof. DDr. Ann-Kristin Achleitner

 

 

34,728

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

34,728

 

Prof. Dr. Clemens A. H. Börsig

 

 

54,019

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

54,019

 

Dr. Nance K. Dicciani

 

 

34,728

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

34,728

 

Dr. Thomas Enders

 

 

34,728

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

34,728

 

Franz Fehrenbach

 

 

34,728

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

34,728

 

Edward G. Galante

 

 

44,374

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

44,374

 

Larry D. McVay

 

 

34,728

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

34,728

 

Dr. Victoria E. Ossadnik

 

 

34,728

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

34,728

 

Prof. Dr. Martin H. Richenhagen

 

 

34,728

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

34,728

 

Robert L. Wood

 

 

44,374

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

44,374

 

 

(1)

Prorated cash compensation paid in 2019 to non-management directors for their service from the first Board meeting in October, 2018 – December 31, 2018.

 

 

 

 

  18  |  Linde plc


Corporate Governance and Board Matters

Director Nominees

 

Director Nominees

 

 

Experience and Qualifications of
All Nominees

Twelve persons have been nominated for reelection to the Board to serve for a one-year term concluding on the later of (a) the 2020 annual general meeting or shareholders and (b) the election and qualification of his or her successor.  The Nomination and Governance Committee has nominated each current director of the Board for reelection at the Annual General Meeting.  The Nomination and Governance Committee believes that each director nominee has an established record of accomplishment in areas relevant to our business and objectives and possesses the characteristics identified in our Corporate Governance Guidelines as essential to a well-functioning and deliberative governing body, including integrity, independence and commitment.

Each of the director nominees listed below has experience as a senior executive of a public company or comparable business organization.  Each nominee also is serving or has served as a director of one or more public companies and on a variety of board committees.  As such, each has executive management and director oversight experience in most, if not all, of the following areas which are critical to the conduct of the Company’s business, including: strategy development and implementation, risk assessment and management, financial accounting and reporting, internal controls, corporate finance, capital project evaluation, the evaluation, compensation, motivation and retention of senior executive talent, public policies as they affect global industrial corporations, compliance, corporate governance, productivity management, safety management, project management, sustainable development and, in most cases, global operations.  Many of the nominees also bring particular insights into specific end-markets and foreign markets that are important to the Company.  These nominees collectively provide a range of perspectives, experiences and competencies well-suited to providing advice and counsel to management and to overseeing the Company’s business and operations.  In addition to these qualifications that are shared by all of the nominees, more specific information about each of their individual experience and qualifications is included below.

The following pages include information about those persons currently serving on Linde’s Board of Directors who have been nominated for reelection to serve for a one-year term concluding on the later of (a) the 2020 annual general meeting of shareholders and (b) election and qualification of his or her successor.  The graph below shows the number of directors who have certain of the skills, qualifications and experience in key areas that are important for the Board’s oversight of the Company’s business.

 

 

Director Meeting Attendance

During 2018, the Board held two meetings.  The nominees for reelection to the Board collectively attended 100% of all Board meetings and meetings of committees of which they are members.

 

 

 

 

 

Linde plc  |  19  


Corporate Governance and Board Matters

Director Nominees

 

 

Prof. Dr. Wolfgang H. Reitzle

Chairman of Linde plc

 

 

 

 

 

Age  

Director Since

Other Public Company

Directorships

 

70

2018

Axel Springer SE

Continental AG (Chairman)

 

Qualification Highlights

   Industry

   Linde End-Markets

   Linde Foreign Markets

   Operations

   International Business

   Technology

   Risk Management

   Public Company Board

 

Biography

Prof. Dr. Wolfgang Reitzle became the Chairman of the Board of Linde plc in October 2018, in connection with the Business Combination between Praxair, Inc. and Linde AG. He is the former President and Chief Executive Officer of Linde AG and former Chairman of the Supervisory Board of Linde AG.  In 2002, he joined the Executive Board of Linde AG and served as Chief Executive Officer from 2003 to 2014.  Prof. Dr. Reitzle began his career at BMW where, in 1986, he was appointed a regular member of the Board of Management, responsible for research and development.  In 1999, he was appointed Chief Executive Officer of the Premier Automotive Group and Vice President of United States car manufacturer, Ford Motor Company.

Prof. Dr. Wolfgang Reitzle is Chairman of the Supervisory Board of Continental AG in Hanover, Germany, Medical Park AG in Amerang, Germany, and Willy Bogner GmbH & Co. KGaA in Munich, Germany.  He is also a member of the Supervisory Board of Ivoclar Vivadent AG in Schaan, Principality of Liechtenstein, and a member of the Supervisory Board of Axel Springer SE in Berlin, Germany.  Prof. Dr. Wolfgang Reitzle served as Chairman of the Board of Directors of LafargeHolcim Ltd in Jona, Switzerland until May 2016, and as member of the Supervisory Board of Hawesko Holding AG in Hamburg, Germany until June 2017.

Experience and Qualifications

As the former President and Chief Executive Officer of Linde AG, the former Chairman of the Supervisory Board of Linde AG, and as a former senior operating executive at BMW and Ford Motor Company, Prof. Dr. Reitzle contributes the senior executive experience and skills described above.  His years of leading Linde AG provides him with substantial experience and deep insight into the industrial gases industry and the engineering business segment of Linde which is critical for the Board.  In addition, Prof. Dr. Reitzle’s prior experience as Chairman of the Linde AG Supervisory Board and the Board of Directors of LafargeHolcim, plus his current role as Chairman of the Supervisory Board of Continental AG, provides him with the skills and background necessary to lead Linde’s Board.

 

  20  |  Linde plc


Corporate Governance and Board Matters

Director Nominees

 

 

Stephen F. Angel

Chief Executive Officer of Linde plc

 

 

 

 

 

Age

Director Since

Other Public Company

Directorships

 

63

2018

PPG Industries, Inc.

 

Qualification Highlights

   Industry

   Linde End-Markets

   Linde Foreign Markets

   Operations

   International Business

   Technology

   Risk Management

   Public Company Board

 

Biography

Mr. Stephen Angel became the Chief Executive Officer of Linde plc in October, 2018, in connection with the Business Combination between Praxair, Inc. and Linde AG.  Prior to that, Mr. Angel was Chairman, President and Chief Executive Officer of Praxair, Inc. since 2007.  Mr. Angel joined Praxair in 2001 as an Executive Vice President and was named President and Chief Operating Officer in February 2006.  Prior to joining Praxair, Angel spent 22 years in a variety of management positions with General Electric.

Mr. Angel serves on the board of directors of PPG Industries, where he serves on the Officers-Directors Compensation Committee and the Technology and Environment Committee, and the board of the U.S.-China Business Council.  He is also a member of The Business Council.

Experience and Qualifications

As the Chief Executive Officer of Linde, as the former Chairman and Chief Executive Officer of Praxair, and as a former senior operating executive at General Electric, a global diversified manufacturing company, Mr. Angel brings the senior executive experience and skills described above.  He also has a deep insight into the industrial gases industry and the needs, challenges and global opportunities of Linde in particular.  Mr. Angel utilizes his deep operating experience and knowledge of the industry and the Company in performing his role as CEO to, among other things, drive capital discipline.  In collaboration with the Chairman, Mr. Angel also helps to facilitate Board discussions and keep the Board apprised of significant developments in the Company’s business.

 

Linde plc  |  21  


Corporate Governance and Board Matters

Director Nominees

 

 

Prof. DDr. Ann-Kristin Achleitner

Professor at the Technical University Munich (TUM)

 

Age

Director Since

Other Public Company

Directorships

 

53

2018

Deutsche Börse AG

Münchener Rückversicherungs-Gesellschaft AG

ENGIE SA

 

Qualification Highlights

   Linde Foreign Markets

   International Business

   Financial Expertise

   Risk Management

   Public Company Board

 

 

Biography

Prof. DDr. Ann-Kristin Achleitner has served as Holder of Chair for Entrepreneurial Finance since 2001 and, since 2003, as Scientific Co-Director of the Center for Entrepreneurial and Financial Studies at Technical University Munich, Germany.  She began her career with MS Management Service AG in St. Gallen, Switzerland in 1991.  In 1992, she began as a university lecturer in Finance and External Auditing at the University of St. Gallen (HSG) in Switzerland.  In 1994, she became a consultant at McKinsey & Company, Inc, in Frankfurt, Germany.  In 1995, she became Holder of the Endowed Chair for Banking and Finance and Chair of the Board of the Institute for Financial Management at the European Business School (International University Schloß Reichartshausen) in Oestrich-Winkel, Germany.

Prof. DDr. Achleitner is: a member of the Supervisory Board of Deutsche Börse AG in Frankfurt am Main, Germany (until May 2019); a member of the Supervisory Board of Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in Munich, Germany; and a member of the Board of Directors of ENGIE SA in Paris, France, until May 2019.  Prof. DDr. Achleitner was a member of the Supervisory Board of Linde AG from 2011-2019.  She also served as a member of the Supervisory Board of Metro AG in Düsseldorf, Germany, until February 2017, and as a member of the Board of Directors of Vontobel Holding AG and Vontobel Bank AG in Zurich, Switzerland.

Experience and Qualifications

Prof. DDr. Achleitner is a Doctor of Business Administration and a Doctor of Law.  Her educational background, along with her research and studies in the area of entrepreneurial finance, provides the Board with substantial financial expertise.  She brings experience in international public company boards, audit, ethics, environment and sustainable development committees.  Her years as a member of the Supervisory Board of Linde AG and service on the audit and nomination committees of Linde AG provides her with substantial experience and insight into the business segments of Linde and the financial performance of the Company.

 

  22  |  Linde plc


Corporate Governance and Board Matters

Director Nominees

 

 

Prof. Dr. Clemens A. H. Börsig

Former Chief Financial Officer and Chairman of the Supervisory Board of Deutsche Bank AG

 

Age

Director Since

Other Public Company

Directorships

 

70

2018

Daimler AG

Emerson Electric Company

 

Qualification Highlights

   Linde End-Markets

   Linde Foreign Markets

   Financial Expertise

   Operations

   International Business

   Risk Management

   Public Company Board

 

Biography

Prof. Dr. Clemens Börsig served as Chairman of the Supervisory Board of Deutsche Bank AG from 2006 until his retirement from that position in 2012.  In 1999, he joined Deutsche Bank AG in Frankfurt am Main, Germany, as Executive Vice President and Chief Financial Officer and, in 2001, he was appointed a member of the Executive Board.  Prof. Dr. Börsig began his career at Mannesmann Group, Düsseldorf, Germany in 1977 and, in 1984, he was appointed Chief Financial and Administrative Officer at Mannesmann-Tally.  In 1985, he joined Robert Bosch GmbH in Stuttgart, Germany, where, in 1990, he was appointed Managing Director and a member of the Board of Management.  In 1997, he joined RWE AG in Essen, Germany, where he was appointed Chief Financial Officer and a member of the Executive Board.

Prof. Dr. Börsig is also a member of the Supervisory Board of Daimler AG in Stuttgart, Germany, where he is the Chairman of the Audit Committee, and a member of the Board of Directors of Emerson Electric Company in St. Louis, Missouri, United States, where he is the Lead Director.  He was a member of the Supervisory Board of Linde AG from 2006 until 2019.

Prof. Dr. Börsig was Chairman of the Board of Directors of the Deutsche Bank Foundation in Berlin and Frankfurt am Main, Germany, until 2017.  He was also a member of the Supervisory Board of Bayer AG in Leverkusen, Germany until April 2017, and a member of the Board of Superintendence of the Istituto per le Opere Religione (IOR) in Rome, Italy until May 2016.

Experience and Qualifications

As a former senior executive and member of the management boards of Mannesman Group, Robert Bosch GmbH and RWE AG, global industrial products and energy companies, Prof. Dr. Börsig brings the senior executive experience and skills described above. As the Former Chief Financial Officer and member of the executive board of Deutsche Bank AG, and as the former Chairman of the Supervisory Board of Deutsche Bank AG, he also has a substantial financial expertise and a detailed understanding of finance, financial controls, auditing as well as risk management.  His international board experience also enables him to provide the Board with valuable insight and counsel.

 

Linde plc  |  23  


Corporate Governance and Board Matters

Director Nominees

 

 

Dr. Nance K. Dicciani

Former President & Chief Executive Officer of Honeywell Specialty Materials

 

Age

Director Since

Other Public Company

Directorships

 

71

2018

AgroFresh Solutions, Inc.

Halliburton Company

LyondellBasell Industries

 

Qualification Highlights

   Industry

   Linde End-Markets

   Linde Foreign Markets

   Operations

   International Business

   Technology

   Risk Management

   Public Company Board

 

Biography

Dr. Nance Dicciani was President & Chief Executive Officer of Honeywell Specialty Materials, a strategic business group of Honeywell International, Inc., from 2001 until her retirement in 2008.  Dr. Dicciani joined Honeywell from Rohm and Haas Company where she was Senior Vice President and Business Group Executive of Chemical Specialties and Director of the European Region.  In this role she was responsible for business strategy and worldwide operations of five business units, and for operations and infrastructure in Europe, the Middle East and Africa.  Previously, she served as Rohm and Haas’ Vice President and General Manager of the Petroleum Chemicals division and headed the company’s worldwide Monomers business.

In 2006, President George W. Bush appointed Dr. Dicciani to the President’s Council of Advisors on Science and Technology.  She has served on the Board of Directors and Executive Committee of the American Chemistry Council and chaired its Research Committee.  She currently serves on the Board of Directors of AgroFresh Solutions, Inc., where she is non-executive Chair and a member of the Compensation Committee.  Dr. Dicciani is also a member of the Board of Directors of Halliburton Company, where she sits on the Audit Committee; and is the Chairperson of the Health, Safety and Environment Committee; and LyondellBasell Industries, where she is a member of the Finance Committee and Chairperson of the Compensation Committee.  During the past five years, Dr. Dicciani served as a director of Praxair, Inc. from 2008 until the Business Combination of Praxair, Inc. and Linde AG in October, 2018.  Immediately prior to the Business Combination she was the Chairperson of the Technology, Safety and Sustainability Committee of the Praxair Board of Directors.  She has also served on the Board of Directors of Rockwood Holdings, Inc., where she was the Lead Director, a member of the Compensation Committee, and was the Chairperson of the Corporate Governance and Nominating Committee.  She is the Co-Chair of the Advisory Board of the Governance Institute of Drexel University, and has served on the Board of Trustees of Villanova University.

Experience and Qualifications

As a former senior operating executive at Honeywell, a global industrial and consumer products manufacturing company, and at Rohm and Haas, a global chemicals company, Dr. Dicciani brings the senior executive experience and skills described above.  She also has a substantial understanding of technology policy, management and markets.  Her technical expertise in the chemical industry, an important end-market for Linde, and her international operations experience, also enable her to provide the Board and management with valuable insight and counsel.

 

  24  |  Linde plc


Corporate Governance and Board Matters

Director Nominees

 

 

Dr. Thomas Enders

Former Chief Executive Officer of Airbus SE

 

Age

Director Since

Other Public Company

Directorships

 

60

2018

 

 

 

Qualification Highlights

   Linde End-Markets

   Linde Foreign Markets

   Operations

   International Business

   Technology

   Risk Management

   Public Company Board

 

Biography

Dr. Thomas Enders served as Chief Executive Officer, Member of the Board of Directors and Member of the Executive Committee of Airbus SE in Leiden, Netherlands from 2012 until April 2019.  He joined Airbus (MBB/DASA) in 1991 and, in 2000, was appointed CEO of the Defense Division.  In 2005, he was appointed Co-CEO of EADS and, in 2007, he was appointed CEO of the Commercial Aircraft Division Airbus.  Dr. Enders began his career in the German Bundestag in 1982 and, in 1985, he started working in various foreign and security policy think tanks.  In 1989, he joined the Federal Ministry of Defence as a member of the planning staff.

Dr. Enders was the Chairman of the Supervisory Board of Airbus Defence and Space GmbH (“Airbus DS”, former EADS Deutschland GmbH, “EADS-D”), and was the Chairman of the Shareholder Board of Airbus SAS, France.  Dr. Enders was a member of the Supervisory Board of Linde AG from 2017 until 2019.

On April 26, 2017, the Vienna, Austria public prosecutor’s office confirmed that Dr. Enders, as part of a group of 16 former and current Airbus Defence and Space GmbH (“Airbus DS”) and Eurofighter Jagdflugzeug GmbH (“EF GmbH”) executives, is being investigated in connection with the alleged deception relating to the Republic of Austria’s purchase of 18 Eurofighter aircraft from EF GmbH in 2003 (reduced to 15 aircraft in 2007).  The negotiations on behalf of the Eurofighter Consortium were supported by former EADS-D (now called Airbus DS).  Both Airbus DS and Dr. Enders have advised Linde plc that they are convinced these allegations are without merit and that they intend to vigorously defend themselves against any allegations or claims related to the Eurofighter sales in 2003 and 2007.

Experience and Qualifications

As the former Chief Executive Officer and member of the Executive Committee of Airbus SE, one of the largest aerospace companies in the world and a large international manufacturer, Dr. Enders contributes the senior executive experience and skills described above.  In particular, his background includes extensive international, operational and manufacturing experience.  As Airbus SE operates in many of the foreign markets in which the Company operates, Dr. Enders also brings his understanding of these large markets where the Company has a significant presence.

 

Linde plc  |  25  


Corporate Governance and Board Matters

Director Nominees

 

 

Franz Fehrenbach

Chairman of the Supervisory Board of Robert Bosch GmbH and Managing Partner of Robert Bosch Industrietreuhand KG

 

Age

Director Since

Other Public Company

Directorships

 

69

2018

Robert Bosch GmbH

STIHL AG

BASF SE

 

Qualification Highlights

   Linde End-Markets

   Linde Foreign Markets

   Operations

   International Business

   Technology

   Risk Management

   Public Company Board

 

Biography

Mr. Franz Fehrenbach has served as Managing Partner of Robert Bosch Industrietreuhand KG and Chairman of the Supervisory Board of Robert Bosch GmbH since 2012.  He began his career with the Robert Bosch Group, Germany, in 1975.  In 1999, he was appointed a member of the Board of Management of Robert Bosch GmbH and, in 2003, was appointed Chairman of the Board of Management of Robert Bosch GmbH.

Mr. Fehrenbach is Chairman of the Supervisory Board of Robert Bosch GmbH in Stuttgart, Germany. He is also Deputy Chairman of the Supervisory Board of STIHL AG in Waiblingen, Germany, and a member of the Supervisory Board of BASF SE in Ludwigshafen, Germany.  He was a member of the Board of Directors of Robert Bosch North America Corp. until July 2014.  Mr. Fehrenbach was the Second Deputy Chairman of the Supervisory Board of Linde AG and was a member of the Supervisory Board of Linde AG from 2013 until 2019.

Experience and Qualifications

As Managing Partner of Robert Bosch Industrietreuhand KG and as the former Chairman of the Board of Management of Robert Bosch GmbH, Mr. Fehrenbach brings the senior executive experience and skills described above from this international diversified manufacturer and technology and service provider.  His background includes extensive international, operational and manufacturing experience and an understanding of many of the large markets where Linde has significant operations.

 

  26  |  Linde plc


Corporate Governance and Board Matters

Director Nominees

 

 

Edward G. Galante

Former Senior Vice President of ExxonMobil Corporation

 

Age

Director Since

Other Public Company

Directorships

 

68

2018

Celanese Corporation

Clean Harbors, Inc.

Marathon Petroleum

 

Qualification Highlights

   Linde End-Markets

   Linde Foreign Markets

   Operations

   International Business

   Technology

   Risk Management

   Public Company Board

 

Biography

Mr. Edward Galante is a former Senior Vice President and was member of the Management Committee of ExxonMobil Corporation from 2001 until his retirement in 2006.  His principal responsibilities included the worldwide downstream business: refining & supply, fuels marketing, lubricants and specialties, and research and engineering.  Immediately prior to that, Mr. Galante was Executive Vice President of ExxonMobil Chemical Company.

Mr. Galante is the Lead Independent Director of Celanese Corporation, where he serves on the Compensation and Management Development Committee and the Governance and Nominating Committee, and a director of Clean Harbors, Inc., where he is Chairman of the Environmental, Safety and Health Committee and serves on the Governance Committee and the Compensation Committee.  He is also a director of Marathon Petroleum Corporation, and a member of the Compensation Committee and the Sustainability Committee.  Mr. Galante sits on the Board of the United Way Foundation of Metropolitan Dallas, and is the Vice Chairman of the Board of Trustees of Northeastern University.  During the past five years, Mr. Galante served as a director of Praxair, Inc. from 2007 until the Business Combination of Praxair, Inc. and Linde AG in October, 2018.  Immediately prior to the Business Combination he was the Chairman of the Compensation & Management Development Committee of the Board of Directors of Praxair, Inc.  Mr. Galante was also a director of Foster Wheeler Ltd., where he served on the Audit Committee and was the Chairman of the Compensation and Executive Development Committee.  He was a member of the Board of Directors of Andeavor Corporation (formerly Tesoro Corporation), where he served on the Compensation Committee and the Environmental, Health and Safety Committee until the company merged into Marathon Petroleum in October 2018.

Experience and Qualifications

As a former senior operating executive at ExxonMobil, one of the largest global energy companies, Mr. Galante brings the senior executive experience and skills described above and has significant experience in the operations and management of a large, global business.  He has substantial experience in the oil, gas, refining and chemical sectors of the energy industry, all of which are important end-markets for the Company.  He also has an in-depth understanding of engineering management, operations and technology, which are important in the execution of many of the Company’s large capital projects.

 

 

Linde plc  |  27  


Corporate Governance and Board Matters

Director Nominees

 

 

Larry D. McVay

Principal of Edgewater Energy, LLC

 

Age

Director Since

Other Public Company

Directorships

 

71

2018

Callon Petroleum

Company

 

Qualification Highlights

   Linde End-Markets

   Linde Foreign Markets

   Operations

   International Business

   Technology

   Risk Management

   Public Company Board

 

Biography

Mr. Larry McVay is a Principal of Edgewater Energy, LLC, an oil and gas industry investment firm.  Mr. McVay served as the Chief Operating Officer of TNK-BP Holding from 2003 until his retirement in 2006.  TNK-BP Holding, based in Moscow, Russia, was a vertically integrated oil company 50%-owned by BP plc.  Mr. McVay’s responsibilities at TNK-BP included executive leadership for the upstream, downstream, oil field services, technology and supply chain management.  He previously served as Technology Vice President of Operations and Vice President of Health Safety Environment for BP’s Exploration and Production operations from 2000 to 2003.  Prior to joining BP, Mr. McVay held numerous positions at Amoco, including engineering management and senior operating leadership positions.

Mr. McVay is a director of Callon Petroleum Company where he serves on the Audit Committee, the Nominating and Governance Committee and is Chairman of the Strategic Planning and Reserves Committee.  During the past five years, Mr. McVay served as a director of Praxair, Inc. from 2008 until the Business Combination of Praxair, Inc. and Linde AG in October, 2018.  Immediately prior to the Business Combination he was the Chairman of the Finance & Pension Committee of the Board of Directors of Praxair, Inc.  Mr. McVay also was a director of Chicago Bridge& Iron Company (CB&I) until the merger between CB&I and McDermott in May 2018.

Experience and Qualifications

As a former senior operating executive at BP, one of the largest global energy companies, Mr. McVay brings the senior executive experience and skills described above.  He has an in-depth understanding of engineering management and of worldwide energy markets, operations and technology, all of which are important to the Company’s operations, particularly those involving large capital project investments.  He also has practical experience in operating in Russia and the Middle East, both of which are important markets for the Company.

 

  28  |  Linde plc


Corporate Governance and Board Matters

Director Nominees

 

 

Dr. Victoria E. Ossadnik

Chief Executive Officer of E.ON Energie Deutschland GmbH and E.ON Energie Holding GmbH

 

Age

Director Since

Other Public Company Directorships

 

50

2018

Commerzbank AG

 

Qualification Highlights

   Linde Foreign Markets

   Operations

   International Business

   Technology

   Risk Management

   Public Company Board

 

Biography

Dr. Victoria Ossadnik has served as Chief Executive Officer of E.ON Energie Deutschland GmbH and E.ON Energie Deutschland Holding GmbH in Munich, Germany since April, 2018.  Prior to this, in 2011, she joined Microsoft Deutschland GmbH and was appointed as a member of the Board of Management from 2011 to 2016 and also served as Vice President, Enterprise Services Delivery from 2016 to 2018.  Dr. Ossadnik began her career with SCANLAB GmbH, Germany, in 1996.  From 1999 to 2003, she served as CEO of the CSC Ploenzke AG, Germany, joint venture CSC/Dachser.  In 2003, she joined Oracle Deutschland GmbH, serving as Head of Technology Consulting (Northern Europe) and, in 2007, was appointed a member of the Board of Management.

Dr. Ossadnik has served as a member of the Supervisory Board of Commerzbank AG since May 2018, and she was a member of the Supervisory Board of Linde AG from 2016 until 2019.

Experience and Qualifications

As the Chief Executive Officer of E.ON Energie, one of the four largest electricity supply companies in Germany, Dr. Ossadnik brings the senior executive experience and skills described above.  In addition, given her substantial senior management experience at both Microsoft and Oracle in Germany, she contributes key insights and counsel as to Linde’s use of technology and further development of digitization in its business operations.

 

Linde plc  |  29  


Corporate Governance and Board Matters

Director Nominees

 

 

Prof. Dr. Martin H. Richenhagen

Chairman, President and Chief Executive Officer of AGCO Corporation

 

Age

Director Since

Other Public Company

Directorships

 

66

2018

AGCO Corporation

PPG Industries, Inc.

 

Qualification Highlights

   Linde End-Markets

   Linde Foreign Markets

   Operations

   International Business

   Risk Management

   Public Company Board

 

Biography

Prof. Dr. Martin Richenhagen has served as the President and Chief Executive Officer of AGCO Corporation, a global manufacturer and distributor of agricultural equipment, since 2004, and Chairman of the Board of Directors since 2006.  From 2003 until 2004, Prof. Dr. Richenhagen was Executive Vice President of Forbo International SA, a flooring material company headquartered in Switzerland.  He also served as Group President for CLAAS KGaA mbH, a global agricultural equipment manufacturer and distributor headquartered in Germany, from 1998 until 2002.  Prof. Dr. Richenhagen was the Senior Executive Vice President for Schindler Deutschland Holdings GmbH, Germany, a worldwide manufacturer and distributor of elevators and escalators, from 1995 until 1998.

Prof. Dr. Richenhagen is a director of PPG Industries, a leading coatings and specialty products and services company, where he is Chairman of the Audit Committee and serves on the Officers-Directors Compensation Committee.  He was the Chairman of the German American Chambers of Commerce of the United States and he is a member of the U.S. Chamber of Commerce Board of Directors.  Prof. Dr. Richenhagen has served as Chairman of the Board of the Association of Equipment Manufacturers (AEM) and is a Life Honorary Director of AEM.  During the past five years, Prof. Dr. Richenhagen served as a director of Praxair, Inc. from 2015 until the Business Combination of Praxair, Inc. and Linde AG in October 2018.

Experience and Qualifications

As Chairman, President and Chief Executive Officer of AGCO Corporation, a large international manufacturer and distributor of agricultural equipment, Prof. Dr. Richenhagen brings the senior executive experience and skills described above.  In particular, his background includes extensive international, operational and manufacturing experience.  In addition, AGCO Corporation operates in many of the markets in which Linde operates, including Europe and South America, and Prof. Dr. Richenhagen adds his understanding of these large markets where the Company has a significant presence.

 

  30  |  Linde plc


Corporate Governance and Board Matters

Director Nominees

 

 

Robert L. Wood

Former Chairman, President & Chief Executive Officer of Chemtura Corporation

 

Age

Director Since

Other Public Company

Directorships

 

65

2018

MRC Global Inc.

Univar Inc.

 

Qualification Highlights

   Industry

   Linde End-Markets

   Operations

   Risk Management

   Public Company Board

 

Biography

Mr. Robert Wood is a Partner in the consulting firm The McChrystal Group, specializing in leadership development for business organizations.  He was also the Chairman, President & Chief Executive Officer of Chemtura Corporation, a specialty chemicals company, from 2004 until 2008.  Prior to joining Chemtura, Mr. Wood served in various senior management positions at Dow Chemical Company, most recently as business group president for Thermosets and Dow Automotive from November 2000.

Mr. Wood is a director of MRC Global Inc., where he is Chairman of the Compensation Committee and a member of the Governance Committee, and a director of Univar Inc., where he sits on the Audit Committee.  During the past five years, Mr. Wood was a director of Praxair, Inc. from 2004 until the Business Combination of Praxair, Inc. and Linde AG in October 2018.  Immediately prior to the Business Combination he was the Lead Director and the Chairman of the Nomination and Governance Committee of the Board of Directors of Praxair, Inc.  He also was a director of Jarden Corporation, where he was a member of the Nominating and Policies Committee and Chairman of the Audit Committee.  He was Chairman of the American Plastics Council and the American Chemistry Council and is a member of the United States Olympic Committee.

Experience and Qualifications

As a former Chief Executive Officer of Chemtura Corporation, a global specialty chemicals company, and a former senior executive of Dow, a global chemicals company, Mr. Wood brings the senior executive experience and skills described above.  He also has a deep understanding of the specific challenges and opportunities facing a global basic materials company.  Mr. Wood’s knowledge of the chemicals industry, an important end-market for the Company, provides valuable insight to the Board and management.

 

 

 

Linde plc  |  31  


Proposal 1: Re-appointment of Directors

 

Proposal 1: Re-appointment of Directors

 

Twelve director nominees have been nominated for re-appointment to serve for a one-year term concluding on the later of (a) the 2020 annual general meeting of shareholders and (b) the election and qualification of their respective successors.  The Nomination and Governance Committee has recommended to the Board, and the Board has approved and recommends, that Prof. Dr. Wolfgang H. Reitzle, Stephen F. Angel, Prof. DDr. Ann-Kristin Achleitner, Prof. Dr. Clemens A. H. Börsig, Dr. Nance K. Dicciani, Dr. Thomas Enders, Franz Fehrenbach, Edward G. Galante, Larry D. McVay, Dr. Victoria E. Ossadnik, Prof. Dr. Martin H. Richenhagen, and Robert L. Wood, each be re‑appointed to serve for a one-year term concluding on the later of (a) the 2020 annual general meeting of shareholders and (b) the election and qualification of their respective successors.  Each nominee has agreed to be named in this Proxy Statement and to serve if elected.  Qualifications and biographical data for each of these nominees is presented above.  If one or more of the nominees becomes unavailable for election or service as a director, the proxy holders will vote your shares for one or more substitutes designated by the Board of Directors, or the size of the Board of Directors will be reduced.

As required under Irish law, the resolution in respect of Proposal 1 is an ordinary resolution that requires the affirmative vote of a simple majority of the votes cast with respect to each director nominee (meaning that the number of shares voted “FOR” a nominee must exceed the number of shares voted “AGAINST” such nominee).

The text of the resolution in respect of Proposal 1 is as follows:

“By separate resolutions, to re-appoint the following twelve directors: Prof. Dr. Wolfgang H. Reitzle; Stephen F. Angel; Prof. DDr. Ann-Kristin Achleitner; Prof. Dr. Clemens A. H. Börsig; Dr. Nance K. Dicciani; Dr. Thomas Enders; Franz Fehrenbach; Edward G. Galante; Larry D. McVay; Dr. Victoria E. Ossadnik; Prof. Dr. Martin H. Richenhagen; and Robert L. Wood.”

 

 

 

 

The Board recommends you vote “FOR” the re-appointment of each of the Board’s director nominees listed above.

 

 

 

 

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Audit Matters

Independent Auditor Selection Process

 

Audit Matters

Independent Auditor Selection Process

The Audit Committee is directly responsible for the appointment, compensation (including approval of audit and non-audit fees), retention and oversight of the independent registered public accounting firm that audits Linde plc’s financial statements and our internal control over financial reporting.  The Audit Committee has selected PricewaterhouseCoopers (“PwC”) as Linde plc’s independent auditor for 2019.  PwC also served as Linde plc’s independent auditor in 2017 and 2018 (prior to the closing of the Praxair-Linde AG Business Combination), and served as the independent auditor of Praxair since 1992.  Representatives of PwC are expected to be present at the Annual General Meeting to be available to respond to appropriate questions and to make a statement if they desire.

The Audit Committee annually reviews the independence and performance of any potential independent auditor in deciding whether to select any given firm as the independent auditor.  In the course of these reviews, the Audit Committee considers, among other things, a firm’s:

 

     Recent performance on the Linde audit, if applicable;

     Capability and expertise in providing audit and related services to companies with the breadth and complexity of our worldwide operations;

     An analysis of the firm’s known legal risks and any significant legal or regulatory proceedings in which it is involved;

     External data on audit quality and performance, including recent Public Company Accounting Oversight Board (“PCAOB”) reports on the firm’s and its peer firms;

     The appropriateness of the firm’s proposed fees for audit and non-audit services, on both an absolute basis and as compared to the fees paid by our peer companies;

     the firm’s independence (discussed below); and

     if applicable, the firm’s tenure as our independent auditor, including the benefits of having a tenured auditor and controls and processes that help ensure the firm’s independence.

 

Tenure Benefits

 

Independence Controls

Higher audit quality.   Through its years of experience with Praxair, and since 2017 with Linde, PwC has gained institutional knowledge of, and deep experience regarding, Linde’s global operations and businesses, accounting policies and practices, and internal control over financial reporting.

 

Thorough Audit Committee oversight.   The Audit Committee’s oversight includes private meetings with PwC periodically during certain of its regularly scheduled meetings per year, and a comprehensive annual evaluation of its performance will be undertaken by the Committee in determining whether to engage PwC for future years.

Efficient fee structure.   PwC’s aggregate fees are competitive with fees paid by our peer companies in part because of PwC’s familiarity with our business and the Audit Committee’s negotiation of competitive fee engagements.

 

Rigorous limits on non-audit services.   Linde requires Audit Committee preapproval of non-audit services, limits certain types of non-audit services that otherwise would be permissible under SEC rules, and requires that PwC is engaged only when it is best-suited for the job (see discussion below).

 

 

Strong internal PwC independence process and strong regulatory framework.   PwC conducts periodic internal quality reviews of its audit work, assigns separate lead and concurring partners for Linde and rotates lead partners at least every five years.  PwC, as an independent registered public accounting firm, is subject to PCAOB inspections and oversight.

 

 

 

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Audit Matters

Auditor Independence

 

Auditor Independence

As noted in the Audit Committee Charter and in the Audit Committee Report presented below, the independent auditor reports directly to the Audit Committee and the Audit Committee is charged with evaluating its independence.  The Audit Committee has adopted the policies and procedures discussed below that are designed to ensure that PwC is independent.  Based on this evaluation and representations from PwC, the Audit Committee believes that PwC is independent and that it is in the best interest of Linde and our shareholders to retain PwC as our independent auditor for 2019.

Non-Audit Engagement Services Pre-Approval Policy

 

 

The Audit Committee has retained PwC (along with other accounting firms) to provide non-audit services in 2019.  We understand the need for PwC to maintain objectivity and independence as the auditor of our financial statements and our internal control over financial reporting.  Accordingly, the Audit Committee has established a policy whereby all non-audit fees of the independent auditor must be approved in advance by the Audit Committee or its Chairman, and has adopted a guideline that, absent special

circumstances, the aggregate cost of non-audit engagements in a year should not exceed the audit fees for that year.  The non-audit fees that are incurred are typically far less than this limit and, as noted below in the report on independent auditor fees, such non-audit fees were approximately 23.1% of audit fees in 2018.  All of the Audit-Related Fees, Tax Fees and All Other Fees disclosed below were approved by the Audit Committee.

 

 

Audit Partner and Audit Firm Rotation

 

 

The Audit Committee’s policy is that the audit engagement partner of the independent auditor must rotate off the Company’s account at least every five years.  Under Irish and EU law, as a “public interest entity,” Linde plc is required to replace its auditor at least once every ten years and is required to conduct an audit tender procedure in accordance with such applicable laws to identify the replacement auditor and submit its choice to shareholders at a general meeting.  As Linde plc appointed its existing auditor prior to becoming a public interest entity (it became a public interest entity on completion of the Business Combination), it is not required to conduct an audit tender procedure until it replaces its existing auditor or, if later, the expiry of the maximum 10 year period of consecutive appointments.  Apart from these requirements, the Audit Committee believes that it is inappropriate to establish a fixed limit on the tenure of the independent auditor.  Continuity and the resulting

in-depth knowledge of the Company strengthens the audit.  Moreover, the mandatory partner rotation policy expressed above, normal turnover of audit personnel, the Audit Committee’s policy regarding the hiring of auditor personnel as described below, and the Audit Committee’s practices restricting non-audit engagements of the independent auditor as described above, all mitigate against any loss of objectivity that theoretically could arise from a long-term relationship.  As provided in the Audit Committee’s Charter and as further described above, the Audit Committee continuously evaluates the independence and effectiveness of the independent auditor and its personnel, and the cost and quality of its audit services in order to ensure that the Audit Committee and the Company’s shareholders are receiving the best audit services available.

 

 

Hiring Policy – Auditor Employees

The Audit Committee has established a policy whereby no former employee of the independent auditor may be elected or appointed as an officer of the Company earlier than two years after termination of the engagement or employment.

 

 

 

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Audit Matters

Fees Paid to the Independent Auditor

 

Fees Paid to the Independent Auditor

The Audit Committee authorizes and oversees the fees paid to PwC for audit and non-audit services.  The aggregate fees billed by PwC in 2017 and 2018 for its services are set forth in the table below, followed by a description of the fees.  The fees include those for services rendered to Linde plc and to Praxair, Inc., which was deemed the accounting acquiror in the Praxair-Linde AG Business Combination.

Types of Fees

 

 

 

Audit

 

Audit - Related

 

Tax

 

All Other

 

Total

 

Non-Audit Fees

% of Total Audit

Fees

 

2018

 

 

16,217,000

 

 

 

 

2,011,000

 

 

 

 

2,341,000

 

 

 

 

515,000

 

 

 

 

21,084,000

 

 

 

23.1%

 

2017

 

 

7,760,000

 

 

 

 

303,000

 

 

 

 

17,000

 

 

 

 

14,000

 

 

 

 

8,094,000

 

 

 

4.1%

 

 

 

 

Audit Fees.  These are fees paid for the audit of Linde plc’s and Praxair’s annual financial statements, the reviews of the financial statements included in Linde plc’s and Praxair’s reports on Form 10-Q, the opinion regarding Linde plc’s and Praxair’s internal controls over financial reporting as required by §404 of the Sarbanes-Oxley Act of 2002, and services that are normally provided by the independent auditor in connection with statutory and regulatory filings or engagements for those fiscal years.

 

Audit-Related Fees.  These are fees paid for assurance and related services rendered that are reasonably related to the performance of the audit or review of Linde plc’s and Praxair’s financial statements other than the fees disclosed in the

foregoing paragraph.  These fees included those related to audits of financial statements related to asset dispositions required by antitrust regulators in connection with the Business Combination.

Tax Fees.  These are fees paid for professional services rendered primarily for preparation of expatriate employee tax returns.

All Other Fees.  These are fees paid for services rendered other than those described in the foregoing paragraphs.  These services related primarily to consulting and advice in regard to local country accounting issues for non-U.S. subsidiaries.

 

 

 

 

 

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Audit Matters

Audit Committee Report

 

Audit Committee Report

 

 

As set forth in the Audit Committee’s Charter, the management of the Company is responsible for: (1) the preparation, presentation and integrity of the Company’s financial statements; (2) the Company’s accounting and financial reporting principles; and (3) internal controls and procedures designed to ensure compliance with applicable laws, regulations, and standards, including internal control over financial reporting.  The independent auditor is responsible for auditing the Company’s financial statements and expressing an opinion as to their conformity with generally accepted accounting principles, and expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

A principal role of the Audit Committee is to assist the Board of Directors in its oversight of the Company’s financial reporting process.  In the performance of its oversight function, the Audit Committee has considered and discussed the audited financial statements with management and the independent auditor.  The Audit Committee has also discussed with the independent auditor the matters that are required to be discussed in accordance with Public Company Accounting Oversight Board (PCAOB) standards relating to communications with audit committees.

 

The Audit Committee has discussed with the independent auditor its independence from the Company and its management.  The Audit Committee has received the written disclosures and the letters from the independent auditor required by applicable requirements of the PCAOB.  The Audit Committee has also received written communications from management with

respect to non-audit services provided to the Company by the independent auditor in calendar year 2018 and those planned for 2019.  The Audit Committee has further considered whether the provision of such non-audit services is compatible with maintaining PricewaterhouseCoopers’ independence.

In its oversight role for these matters, the Audit Committee relies on the information and representations made by management and the independent auditor.  Accordingly, the Audit Committee’s oversight does not provide an independent basis to certify that the audit of the Company’s financial statements has been carried out in accordance with generally accepted auditing standards, that the financial statements are presented in accordance with generally accepted accounting principles or that the Company’s independent auditor is, in fact, independent.

Based upon the review and discussions described in this report, and subject to the limitations on the role and responsibilities of the Audit Committee referred to above and in the Charter, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s Form 10-K and Annual Report for the year ended December 31, 2018 filed with the SEC.

The Audit Committee

Prof. Dr. Clemens A.H. Börsig, Chairman

Dr. Nance K. Dicciani

Dr. Thomas Enders

Edward G. Galante

Larry D. McVay

Dr. Victoria E. Ossadnik

 

 

 

 

 

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Proposal 2a: Non-Binding Ratification of the Appointment of the Independent Auditor

Proposal 2b: Authorization of the Board to Determine the Auditor’s Remuneration

Proposal 2a: Non-Binding Ratification of the Appointment of the Independent Auditor

Proposal 2b: Authorization of the Board to Determine the Auditor’s Remuneration

 

 

Under New York Stock Exchange (“NYSE”) and SEC rules, selection of the Company’s independent auditor is the direct responsibility of the Audit Committee.  The Board has determined, however, to seek shareholder ratification of that selection as a good practice in order to provide shareholders an avenue to express their views on this important matter.  If shareholders fail to ratify the selection, the Audit Committee may reconsider the appointment.  Even if the current selection is ratified by shareholders, the Audit Committee reserves the right to appoint a different independent auditor at any time during the year if the Audit Committee determines that such change would be in the best interests of the Company and its shareholders.

Information concerning the independent auditor may be found under the caption “Audit Matters” above.  The Audit Committee believes the selection of PwC as the Company’s independent auditor for 2019 is in the best interest of the Company and its shareholders.

 

In addition, Irish law provides that the remuneration of the Company’s statutory auditor may be

determined by shareholders at the AGM.  At its January 2019 meeting, the Audit Committee approved PwC’s remuneration, subject to receiving the necessary shareholder approval at the 2019 AGM.

As required under Irish law, the resolutions in respect of Proposals 2a and 2b are ordinary resolutions that require the affirmative vote of a simple majority of the votes cast.

The text of the resolution in respect of Proposal 2a is as follows:

“To ratify, in a non-binding vote, the appointment of PricewaterhouseCoopers as independent auditor of the Company.”

The text of the resolution in respect of Proposal 2b is as follows:

“To authorize, in a binding vote, the Board, acting through the Audit Committee, to determine the remuneration of PricewaterhouseCoopers.”

 

 

 

 

The Board recommends that you vote “FOR” the ratification, on an advisory and non-binding basis, of the appointment of PricewaterhouseCoopers as independent auditor and “FOR” the authorization of the Board, acting through the Audit Committee, to determine the remuneration of PricewaterhouseCoopers.

 

 

 

 

 

 

 

 

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Proposal 3: Determination of Price Range for Re-allotment of Treasury Shares

 

Proposal 3: Determination of Price Range for
Re-allotment of Treasury Shares

 

 

The Companys open-market share repurchases and other share buyback activities result in some of its ordinary shares being returned and held as treasury shares.  These treasury shares are used, in part, to issue shares in connection with director and employee stock grants, such as stock options, performance share units, restricted stock and the like.

Under Irish law, the shareholders must authorise the price range at which Linde plc may re-allot any shares held in treasury as newly re-allotted shares of Linde plc.  In this proposal, that price range is expressed as a percentage of the minimum and maximum of the closing market price on the day preceding the day on which the relevant share is re-allotted.  Irish law requires that this authorisation be renewed by our shareholders every 18 months, and therefore this will continue to be proposed at subsequent annual general meetings.

The authority being sought from the shareholders provides that the minimum and maximum prices at which a treasury share may be re-allotted are 95% (or nominal value where the re-allotment of treasury shares is required to satisfy an obligation under any compensation program (including any share scheme or option scheme)) and 120%, respectively, of the closing market price of the ordinary shares on either the New York Stock Exchange or the Frankfurt Stock Exchange (whichever closing market price is the higher in the case of the maximum price and whichever closing market price is the lower in the case of the minimum price) the day preceding the day on which the relevant share is re-allotted, except as described below.  Any re-allotment of treasury shares will only be at price levels that the Company considers to be in the best interests of its shareholders.

As required under Irish law, the resolution in respect of Proposal 3 is a special resolution that requires the affirmative vote of at least 75% of the votes cast.  The text of the resolution in respect of Proposal 3 is as follows:

As a special resolution, that, for the purposes of section 1078 of the Irish Companies Act 2014 (the “Act”), the re-allotment price range at which any treasury shares (as defined by section 1078 of the Act) (“treasury shares”) for the time being held by Linde plc may be re-allotted shall be as follows:

 

(a)

the maximum price at which a treasury share may be re-allotted shall not be more than 120% of the closing price on either the New York Stock Exchange or the Frankfurt Stock Exchange (whichever is the higher) for shares of that class on the day preceding the day on which the relevant share is re-allotted by Linde plc;

 

(b)

the minimum price at which a treasury share may be re-allotted shall be the nominal value of the share where such a share is required to satisfy an obligation under any compensation program (including any share scheme or option scheme) operated by Linde plc or, in all other cases, not less than 95% of the closing price on either the New York Stock Exchange or the Frankfurt Stock Exchange (whichever is the lower) for shares of that class on the day preceding the day on which the relevant share is re-allotted by Linde plc;

 

(c)

the re-allotment price range as determined by paragraphs (a) and (b) shall expire 18 months from the date of the passing of this resolution, unless previously varied, revoked or renewed in accordance with the provisions of Section 109 and/or 1078 of the Irish Companies Act 2014.”

 

 

 

The Board recommends that you vote “FOR” the determination of the price range at which the Company can re-allot shares that it acquires as treasury shares under Irish law.

 

 

 

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Executive Compensation Matters

Compensation Discussion and Analysis

 

 

Executive Compensation Matters

Report of the Compensation Committee

The Company’s Compensation Committee reviewed and discussed with management the “Compensation Discussion and Analysis” and recommended to the Board that it be included herein.  The Compensation Committee has represented to management that, to the extent that the “Compensation Discussion and Analysis” discloses the Compensation Committee’s understanding of the deliberations and thinking of the legacy Compensation Committee of Praxair, Inc. and the Supervisory Board of Linde AG, as well as its own deliberations and thinking for the Company, in making executive compensation policies and decisions, it is accurate and materially complete.

The Compensation Committee

Edward G. Galante, Chairman

Dr. Nance K. Dicciani

Prof. DDr. Ann-Kristin Achleitner

Franz Fehrenbach

Dr. Victoria E. Ossadnik

Prof. Dr. Martin H. Richenhagen

Compensation Discussion and Analysis

 

 

This Compensation Discussion and Analysis (“CD&A”) provides context for the policies and decisions underlying the 2018 compensation reported in the executive compensation tables included herein for the Company’s Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and the three other executive officers who had the highest total compensation for 2018, as set forth in the “Summary Compensation Table” herein (these five executive officers are collectively referred to as the “Named Executive Officers” or the “NEOs”).  

This CD&A also describes the Company’s philosophy established by the Linde plc Compensation Committee following the business combination of Praxair, Inc. and Linde AG.  It provides information on key 2019 compensation decisions and the new executive compensation program.  The Compensation Committee of the Company’s Board of Directors is responsible for policies and decisions regarding the compensation and benefits for the Company’s NEOs.

 

 

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Executive Compensation Matters

Compensation Discussion and Analysis

 

Executive Compensation Introduction

Merger of Praxair, Inc. and Linde AG (the “legacy companies”)

 

 

On October 31, 2018, the business combination of Praxair, Inc. and Linde AG brought together two leading companies in the global industrial gases industry, allowing the new company, Linde plc, to leverage the proven strengths of each legacy company.  A Board of Directors for Linde plc was elected, and it formed a Compensation Committee that is comprised of six directors, with three coming from each legacy company.

The Company’s NEOs are Stephen F. Angel, CEO; Matthew J. White, Executive Vice President and CFO; and Eduardo F. Menezes, Executive Vice President, EMEA from legacy Praxair (the “legacy Praxair NEOs”) and Sanjiv Lamba, Executive Vice President, APAC and Christian Bruch, Executive Vice President & CEO Linde Engineering from legacy Linde AG (the “legacy Linde NEOs”).

Compensation of the legacy Praxair NEOs and the legacy Linde NEOs for the 2018 calendar year was established by Praxair’s Compensation Committee and Linde AG’s Supervisory Board,

respectively, based on the legacy companies’ respective executive compensation programs that were established prior to the business combination.  As discussed in this CD&A, certain provisions and adjustments were incorporated in the existing programs to take into account the effect of the merger.  Following the 2019 design discussion is disclosure of the 2018 calendar year pay for the Linde plc NEOs.  The NEOs were determined based on the full 2018 calendar year pay from the legacy companies and Linde plc for the Company’s executive officers at December 31, 2018.  The 2018 pay that is described is aligned with each legacy company’s respective executive compensation program and decisions.

In the fourth quarter of 2018 the Company’s newly formed Compensation Committee reviewed the legacy companies’ compensation programs, and subsequently established the executive compensation program for the Company.  The new designs were effective on January 1, 2019.  This CD&A provides information on these new designs.

 

Role of the Compensation Consultant

 

 

Following the business combination, the Compensation Committee engaged a third-party compensation consultant to assist in analysis to inform and support the Compensation Committee’s decisions on executive compensation.  For its consideration of 2019 executive compensation, the Compensation Committee engaged Deloitte Consulting LLP (“Deloitte Consulting”).

The scope of Deloitte Consulting’s engagement includes:

 

Review of legacy company compensation programs and preparation and presentation to the Compensation Committee of reports

 

on executive compensation trends and other various materials

 

Review of the peer group analysis and compensation benchmarking studies prepared by management and review of other independent compensation data

 

Advice on the determination of NEO’s compensation, the consultant’s view of the CEO’s recommendations for other NEO compensation, as well as input on the CEO’s compensation

 

Review of and advice on compensation program design proposals presented by management for the Compensation Committee’s consideration.

 

 

 

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Executive Compensation Matters

Compensation Discussion and Analysis

 

Linde plc 2019 Executive Compensation Program

Executive Compensation Philosophy

 

 

At the first meeting of the Company’s Compensation Committee, the Company’s compensation philosophy was established to serve as the basis for designing executive compensation programs.

Key Objectives

 

Attract and retain talented executives

 

Motivate executives to deliver strong business results in line with shareholder expectations

 

Build and support a performance-driven culture

 

Encourage executives to earn and own Company stock, aligning their interests with those of shareholders.

Markets for Executive Talent

 

Comparator groups should reflect talent markets, customer segments and investment markets and will be adjusted to meet changes in these elements

 

Executives who are the Company‘s international leaders will have compensation that is aligned with international companies traded on the U.S. stock exchanges.

Components of Pay and Competitive Positioning

 

Target total direct compensation will include a fixed base pay component plus variable short and long term incentives

 

Total target direct compensation will be focused at the median (50th percentile) of the competitive market

 

The relationship between pay and performance will be leveraged with high performance rewarded with pay above market median and low performance reducing incentive payments substantially, to as low as zero for failing to meet threshold performance levels.

Performance Standards and Measures

 

Performance considerations will balance the need for management to deliver annual

 

results and to grow and succeed in the years ahead

 

Challenging but achievable performance goals to be established with performance levels defined as “maximum” representing truly exceptional, outstanding performance and a carefully and objectively established threshold level of performance, below which no incentives will be earned

 

Financial results are most important to our shareholders and will be heavily weighted in the compensation design

 

Selected key strategic and non-financial outcomes will be included to recognize that these are also critical to measuring our businesses’ health and the potential for future success.

Equity and Stock Ownership

 

Long-term incentives should mainly be in the form of equity, which focuses executives on total Company performance in the eyes of shareholders and rewards executives when shareholders are rewarded

 

Share ownership guidelines will support the principle that executives be long-term owners of the Company, aligning their interests with those of all shareholders.

Communication

 

The executive compensation program should be fair, transparent and easily understood

 

The rationale and terms and conditions of each element of the executive compensation program should be clearly communicated to executives and shareholders to ensure they fully understand how the program works and how it aligns with the overall approach to managing the business.

 

 

 

 

 

 

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Executive Compensation Matters

Compensation Discussion and Analysis

 

2019 Compensation Peer Group

The Compensation Committee established a Compensation Peer Group to be used to assess competitive market compensation ranges for its top officers.  Elements considered by the Committee when choosing companies for peers included market capitalization, revenue, net income, industry, global operations, location of

headquarters and stock markets where publicly traded.  The Committee intends to review the peer group on an annual basis, though will only make changes when appropriate as it values year-over-year consistency going forward.  Below are the companies comprising the Compensation Peer Group to be used for making pay decisions for calendar year 2019.

 

 

Compensation Peer Group 3M Abbvie Abbott Caterpillar Coca-Cola Cummins DanaherDeere DowDuPont Eaton Gilead Sciences Halliburton Company Honeywell Intl InBev Johnson Controls Kraft Heinz LyondellBasell Medtronic Micron Technology Merck & Co. Mondelez Intl PPG Industries Raytheon Roche SAP Sherwin-Williams Thermo Fisher United Technologies

 

2019 Annual Performance-Based Variable Compensation Design

 

 

The Compensation Committee established an annual performance-based variable compensation program for the 2019 calendar year that focuses executives on the key objectives that position Linde for sustained growth, and the creation of shareholder value, without compromising long-term business objectives or encouraging excessive risk-taking.

 

As part of its design process, the Compensation Committee reviewed the short-term incentive programs of the legacy companies and discussed

design ideas with its compensation consultant as well as with management.  The resulting annual variable compensation is comprised of three main components: financial performance, strategic and non-financial performance and individual performance.  This program is designed to deliver pay commensurate with performance wherein results that are greater than target goals are rewarded with above target payout levels, and performance not meeting minimum threshold expectations reduces the payout to zero.

 

 

 

 

 

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Executive Compensation Matters

Compensation Discussion and Analysis

 

Financial Performance Goals

Awards under the annual variable compensation program will be determined based on Company performance against challenging, pre-established financial goals.  Payouts related to this component can range from zero to 150% of target variable compensation.  Top line sales growth is important to the Company and 25% of the financial performance goal will be based on sales.  Recognizing the importance of profitability and cash flow to the newly merged Company, 50% of the financial performance goal will be based on net income and the remaining 25% on operating cash flow.

To establish the goals related to the financial component of the program, the Compensation Committee considers many factors including the degree of control senior management may have over certain factors that affect financial performance.  Goals are established with the expectation that executives will be rewarded with higher payouts if actual performance exceeds targets.  Factors considered in setting the threshold, target and maximum financial performance goals for each financial measure include:

 

synergy goals and expectations,

 

management’s operating plan, including expected year-over-year challenges in performance,

 

external earnings guidance provided to shareholders,

 

macro-economic trends and outlooks in each of the countries in which the Company operates,

 

foreign exchange rate trends and outlook,

 

expected industrial gases industry peer performance and that of the broader S&P 500 and leading European companies,

 

shifts in key customer markets, and

 

expected contribution from contracts already awarded and decisions or actions already made or taken.

Strategic and Non-Financial Performance Goals

In alignment with the Company’s compensation philosophy, the design of the annual variable compensation program balances the need for management to deliver annual results with the desire to meet multi-year growth expectations.  

Selected key strategic and non-financial performance objectives are included to recognize these critical measures of the Company’s health and potential for future success.  The strategic and non-financial goals in 2018 included: performance relative to peer companies; strategic position for long term performance; industry leading project execution; safety, environmental performance and sustainability; productivity; people development; and compliance.

When establishing the 2019 program design, the Compensation Committee identified the strategic and non-financial elements that were considered most important to long-term sustainable success and established annual goals with respect to those elements.  Most of the strategic and non-financial goals are linked to quantitative and measurable objectives, although the Compensation Committee ultimately expects to use its judgment when determining the value awarded for goal achievement after a rigorous review of the results.  This component can range from zero to 50% of target variable compensation.

Individual Performance

To reinforce a culture where pay is directly linked to performance and to recognize the contributions of individuals to overall Company results, an individual performance component is included in the annual variable compensation design.  Excluding the CEO, the Compensation Committee may make a positive, negative or no adjustment to each NEO’s performance-based variable compensation based on its evaluation of his individual performance.  For the CEO, the Compensation Committee may make a negative or no adjustment to his annual variable compensation payment to reflect his performance.

In evaluating if an individual performance adjustment was appropriate, the Compensation Committee will consider various qualitative factors, such as the NEO’s:

 

performance in his or her principal area of responsibility,

 

degree of success in leading the Company to meet its strategic objectives, and

 

championing of the values and competencies that are important to the success of the Company.

 

 

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Executive Compensation Matters

Compensation Discussion and Analysis

 

2019 Equity Awards Design

 

 

Equity awards are the largest portion of each NEO’s target compensation.  This weighting helps ensure a strong alignment of NEOs’ and shareholders’ long-term interests.  Annual grants of equity awards are made to incent and reward sustained performance.

Equity awards are granted as a mix of stock options, performance share units (PSUs) and

restricted stock units (RSUs).  The mix and type of equity awards granted to the CEO and other NEOs is the same as those granted to all eligible executives of the Company.  Fully aligning the leadership team, from mid-management to officers, helps sustain the Company’s culture of incenting and rewarding all participants with the same goals and performance results.

 

 

 

 

Performance Share Units (50% of award target value)

The Compensation Committee includes PSUs in its award mix as this vehicle focuses executives on the Company’s mid-term performance objectives.  A three-year performance period is believed to be an appropriate balance between the one-year performance-based variable compensation goals and the longer-term stock option share price growth goals.  Additionally, the overlapping three-year performance periods that result from regular annual grants promote retention and encourage management to focus on sustainable growth and shareholder returns.  Key features of the PSUs include:

 

Vest if pre-established multi-year performance goals are attained and forfeited if threshold goals are not met.

 

Pay no dividends nor accumulate dividend equivalents prior to vesting.

 

Require NEOs to hold all after-tax shares derived from vested awards until their respective stock ownership requirement is met.

The Committee determined that using a Return on Capital (ROC) performance goal would be appropriate as it encourages and rewards the executive team for focusing decisions and taking actions that drive long term ROC performance.

A relative Total Shareholder Return (TSR) goal was also considered appropriate as this portion of the equity award will further strengthen alignment of management payouts with shareholder returns.  In order to align with the Company’s global shareholder base, TSR performance will be measured against a blended group of companies that is comprised of those that are listed on the S&P 500, excluding the Financial sector, plus those that are designated as Eurofirst 300 at January 1, 2019.

Stock Options (30% of award target value)

The Compensation Committee believes that stock options present an appropriate balance of risk and reward in that the options have no value unless the Company’s stock price increases above the option exercise price and that the opportunity for leveraged appreciation from

 

 

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Executive Compensation Matters

Compensation Discussion and Analysis

 

 

 

growth in shareholder value over the ten-year grant term encourages long term decision-making.  The Compensation Committee notes that the Company’s executives place a high value on stock options as a compensation vehicle.  Key features of the stock options include:

 

Exercise price is fixed at 100% of the closing market price on date of grant.

 

Vest in equal annual tranches over three years and expire after ten years.

 

No repricing without shareholder approval.

 

Require NEOs to hold all shares obtained from exercise, net of taxes and exercise price, until their respective stock ownership requirement is met.

Restricted Stock Units (20% of award target value)

The Compensation Committee recognizes that RSUs can provide appropriate rewards to executives through alignment with the Company’s stock price.  The RSUs are the smallest component of the equity award mix, and cliff vest three years after their grant date to aid NEO retention.  RSUs can also mitigate some of the impact of an economic downturn on the PSU and stock option components of the annual awards.  Key features of the RSUs include:

 

Pay no dividends nor accumulate dividend equivalents prior to vesting.

 

Require NEOs to hold all after-tax shares derived from vested awards until their respective stock ownership requirement is met.

 

Determining Compensation Opportunity for 2019

 

 

In order to align executive compensation with Company performance, the Compensation Committee considers a variety of factors, including the degree to which executive compensation is “at risk.”

At Risk Pay

Continuing the practice of the legacy companies, the Compensation Committee has established the majority of each NEOs’ target total direct compensation opportunity for 2019 in the form of performance-based variable compensation and equity grants, motivating each to deliver strong business performance and drive shareholder value.  The performance-based compensation is “at risk” and dependent upon the Company’s achievement of pre-established financial and other business goals set by the Compensation Committee and, for equity incentives, also the Company’s stock price performance.  The annual variable compensation payout and the ultimate value of the equity compensation awards could be zero if the Company does not perform.

Aggregate Compensation

In establishing the 2019 target compensation opportunity for each NEO, the Compensation Committee considered whether the value of each NEO’s aggregate compensation package was consistent with its objectives for Linde’s executive compensation program.  It evaluated the following factors when determining compensation levels for NEOs:

 

internal equity: respective role, responsibilities and reporting relationships

 

experience and time in similar roles

 

expected contribution to results, and exhibition of values, competencies and behaviors critical to the success of the Company

 

market median data of international companies traded on the U.S. stock exchanges

 

legacy company pay practices and pay opportunity

 

retention objectives

The Compensation Committee did not have a set formula for determining target compensation opportunity, however it referred to the median benchmark data during its review.  Additionally, the Compensation Committee acknowledged that its general practice will be to establish total pay opportunity towards the lower end of a

 

 

 

 

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Executive Compensation Matters

Compensation Discussion and Analysis

 

competitive market range for an executive officer who is newer to his or her role.  Conversely, a longer tenured executive officer with a history of strong performance will have target compensation levels set higher in the competitive range.

As part of the review, the Compensation Committee compared the CEO’s target pay to that of the other NEOs.  The CEO’s pay as a multiple of the next highest paid NEO was determined to be appropriate, as the organization does not have a Chief Operating Officer.

Perquisites and Personal Benefits

The Compensation Committee reviewed and approved items that could be construed as perquisites or personal benefits for each NEO for 2019 to ensure they are consistent with local country market practice or otherwise are provided for limited and specifically defined business purposes.  Some items that must be classified as perquisites relate to support provided to certain NEOs while on international assignment.  The international assignment benefits are fundamentally the same as available to other employees who are on similar international assignments.  International assignment compensation is tax equalized and no “tax gross-up” is permitted for any executive officer unless such gross-up is available to employees generally.

 

Health, Welfare and Retirement Benefits

 

 

The Company makes available to NEOs benefits that are similar to those generally provided to other employees based upon the location of their employer and provides perquisites and personal benefits consistent with local market practices.

Competitive benefits are provided to attract executive talent, promote employee health and well-being, provide opportunity for retirement income accumulation, encourage long-term service, and where allowed, to include opportunities to “invest in” Company stock.

U.S. Tax-Qualified Pension Plan

 

The Company maintains a tax-qualified pension plan for eligible U.S. employees, including the legacy Praxair NEOs.

U.S. Supplemental Retirement Income Plan

 

The plan is maintained for the primary purpose of providing retirement benefits that would otherwise be paid to employees under the tax-qualified pension plan but for certain limitations under federal tax law.

 

Incremental benefits paid are calculated in the same manner as the underlying tax-qualified pension plan.

 

Only base salary and annual variable compensation awards are considered in pension calculations.

Individual Pension Commitments for Legacy Linde NEOs

 

Each legacy Linde NEO has an individual pension agreement with the Linde AG.

U.S. 401(k) Plan

 

Contributions to the plan are voluntary and may be invested in various funds, including the Company’s stock fund.

U.S. Deferred Compensation

 

Employees eligible to participate in the Variable Compensation Plan, including the legacy Praxair NEOs, may participate in the plan.

 

Contributions to the plan are voluntary and represent compensation already earned by the participants.

 

No above-market earnings are payable.

Other Plans

 

Medical and dental plans, disability, life insurance, relocation and vacation programs are provided.

 

 

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Executive Compensation Matters

Compensation Discussion and Analysis

 

Other Compensation Policies and Considerations

 

 

Severance and Change-in-Control Arrangements

The Company provides severance benefits to eligible employees, including NEOs, consistent with the terms of its severance programs and applicable local law.  The Company has not entered into any executive severance compensation agreements with its new NEOs; however, in connection with the business combination, the Company was required to assume severance agreements for the legacy Praxair NEOs that provide double trigger benefits in the event that the legacy Praxair NEO’s employment with the Company is terminated under certain circumstances prior to October 31, 2020.  Similarly, the legacy Linde NEOs are party to agreements with Linde AG that provide severance entitlements in the event their employment ends under specified circumstances within nine months following the merger.  Additional information about these arrangements is included in the section below entitled “Severance and Other Change-In-Control Benefits.”

Stock Ownership, Retention Requirements, Hedging, and Pledging

In order to align executives’ interests with shareholder interests, the Compensation Committee has established a stock ownership policy for NEOs (see disclosure on details of this policy in the “Executive Stock Ownership and Shareholding Policy” section above).  NEOs may comply with this policy by acquiring Company stock or stock-equivalent units through equity incentive grants, as well as, if eligible, through the Company’s Compensation Deferral Program, 401(k) Plan, Dividend Reinvestment and Stock Purchase Plan and through other personal investments.  Under the Company’s Stock Ownership Policy, unless the stock ownership level is met, an executive officer may not sell any of his or her holdings of Company stock and must hold all shares acquired after tax upon vesting of PSUs or restricted stock units and shares acquired upon an option exercise net of shares used to pay taxes and/or the option exercise price.  An

executive officer may not engage in hedging transactions related to Company stock that would have the effect of reducing or eliminating the economic risk of holding Company stock.  In addition, no executive officer may pledge or otherwise encumber any of his or her Company stock.

Recapture Clawback Policy

The Board of Directors of the Company has adopted a policy for the recapture of annual performance-based variable compensation payouts, equity grants and certain equity gains in the event of a later restatement of financial results.  Specifically, if the Board, or an appropriate committee thereof, has determined that any fraud by any Section 16 officer of the Company materially contributed to the Company having to restate all or a portion of its financial statements, the Board or committee shall take, in its discretion, such action as it deems necessary to remedy the misconduct. In determining what remedies to pursue, the Board or committee will take into account all relevant factors, including consideration of fairness and equity.  Among those remedies, to the extent permitted by applicable law and not withstanding anything to the contrary in any Company equity or other compensation plan, award agreement or contract, the Board or its committee may require cancellation, forfeiture or reimbursement of any performance-based cash, stock or equity-based award paid or granted to, or gains realized by (such as through the exercise of stock options, payment or settlement of awards or sale of equity securities), by, any Section 16 officer of the Company, if and to the extent that:

 

the amount of such cash, stock or equity-based award was calculated based upon, or realized gain can reasonably be attributed to, certain financial results that were subsequently reduced due to a restatement, and

 

the amount of the cash, stock or equity-based award, or gain that would have been paid or granted or realized, would have been lower than the amount actually paid or granted or realized.

 

 

 

 

 

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Executive Compensation Matters

Compensation Discussion and Analysis

 

Tax and Accounting

The accounting treatment of the compensation program was reviewed by the Compensation Committee but did not impact the selection and

design of the annual variable compensation program or equity compensation for 2019, although all of our equity awards to the NEOs were made in such a manner as to not require liability accounting treatment.

 

2018 Direct Compensation for Executive Officers

 

 

Compensation for the 2018 calendar year was established separately by each legacy company, with executive compensation designs that pre-determined treatment upon the merger.  The pay that is described in the following sections is aligned with the legacy companies’ executive compensation programs and decisions.

2018 Salary

The salary level for each NEO was established by the Praxair Compensation Committee for the legacy Praxair NEOs and by the Linde AG Supervisory Board for the legacy Linde NEOs.  Base pay increases for legacy Praxair NEOs were effective April 1, 2018 and there were no base pay changes for 2018 for the legacy Linde NEOs.

2018 Annual Performance-Based Variable Compensation

LEGACY PRAXAIR

In December 2017, the 2018 variable compensation target for each legacy Praxair NEO (expressed as a percent of salary that would be earned for 100% achievement of the performance goals) was established by Praxair’s Compensation Committee.  The target level for each NEO ranged from 85% to 160% of base salary.

Challenging, pre-established financial goals were determined in January 2018 for sales (weighted 15%), net income (weighted 60%) and operating cash flow (weighted 25%) with payout possibilities ranging from zero to 200% of target

variable compensation.  Strategic and non-financial goals were also established at that time, and the design allowed for the Praxair Compensation Committee to make a positive or negative adjustment of up to 35 percentage points to the total financial payout earned based on its detailed review and assessment of performance against the goals.

Praxair’s Compensation Committee reviewed the design of the annual variable compensation program in anticipation of the completion of the proposed merger with Linde AG in the second half of 2018.  Due to this extraordinary corporate event, it was determined that in the event the merger was completed, business results would be measured through the merger date to determine the pro rata portion of the award earned through closing, and that the award for the remaining portion of the year would be determined at target.  It was also determined that the non-financial results for 2018 would be based on performance through the merger date and applied as an adjustment to the full year payout.  No other modifications to the design of the annual variable compensation program were made.

Financial Business Results.  The chart below shows for each financial performance measure, Praxair’s 2018 financial targets set by the Praxair Compensation Committee and the actual results achieved through the closing of the merger in October, plus target for November and December, with an adjustment to Operating Cash Flow of $24 million for merger costs.  The overall payout for financial performance was 132% of target variable compensation.

 

 

Legacy Praxair

Financial Measure*

 

Target

($ millions)

 

 

Actual

($ millions)

 

 

Weight

 

 

Achievement

 

 

Payout

 

 Sales

 

 

11,850

 

 

 

12,152

 

 

 

15

%

 

 

116

%

 

 

17.7

%

 Net Income

 

 

1,890

 

 

 

1,960

 

 

 

60

%

 

 

136

%

 

 

80.7

%

 Operating Cash Flow

 

 

3,060

 

 

 

3,261

 

 

 

25

%

 

 

133

%

 

 

33.2

%

 

*

For the Praxair annual variable compensation program, sales and net income were measured in accordance with GAAP subject to certain adjustments that the Praxair Compensation Committee approved.

 

 

 

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Compensation Discussion and Analysis

 

Strategic Non-financial Business Results. Praxair’s Compensation Committee reviewed the strategic actions taken by management that focused on fostering long-term, sustainable success.  In October 2018, management presented the degree of achievement in meeting each goal, and for each element, provided its view of the relative degree of importance to Praxair’s long term success.

Based on the results, Praxair’s Compensation Committee determined that Praxair’s performance with respect to the non-financial goals was favorable and awarded a positive 35% adjustment.  The following were noted as examples of actions that supported Praxair’s strategic objectives in determining 2018 variable compensation payouts:

 

Successfully completed merger with Linde AG

 

Maintained world class performance in safety with a 10% reduction of recordable injury rates

 

Maintained industry leading project execution with 98% first year reliability

 

Price attainment of 2% for the base business with volume growth of 4%

 

Greater than 8% year-over-year growth in resilient end-markets

 

Continued to develop a diverse pipeline of future senior leaders

 

Received Public Recognition:

 

Dow Jones Sustainability World Index for 16th year in a row

 

Consistently listed on major Environmental, Social and Governance (ESG) investment indices: FTSE4Good, STOXX and Bloomberg’s Gender Equality Index

 

Consistently named a leader in inclusion and engagement by leading external media: Fortune magazine, Thomson Reuters, Diversity Inc., and Human Rights Campaign

 

100 million pounds of waste diverted from landfill by Zero Waste program

Individual Performance.  Excluding the CEO, adjustments were made to the payouts of each legacy Praxair NEO based upon individual performance in 2018 considering performance in his principal area of responsibility, degree of success in leading Praxair to meet its strategic objectives, and championing of the values and competencies that are important to the success of the Company.  The CEO’s payout, which under the terms of the program can only be

adjusted downward, was not modified for his individual performance.  None of the other NEOs’ individual performance were material to their respective annual performance-based variable compensation payments.

LEGACY LINDE AG

The Supervisory Board of Linde AG determined that the short-term variable compensation design for 2018 would remain consistent with the shareholder approved design in place for the six previous years, with payouts contingent upon attaining preestablished return on capital employed (ROCE) and operating margin goals and subject to adjustment by an individual performance component.

Ambitious independent minimum targets for both ROCE and operating margin were established.  Performance below the minimum target for one of the measurement factors results a zero payout factor.  However, payment with respect to the other factor could still be made if the minimum performance level is attained for the other factor. If neither minimum target is reached, there is no entitlement to any payout.  The Supervisory Board of Linde AG retained the ability to adjust both performance measures for special items or the specific impact on both measurement factors of any investment or acquisition projects that were not known at the time the goals were set.

Consistent with prior years, the Linde AG Supervisory Board determined that, if earned, 60% of the 2018 award would be provided as a cash payment to the legacy Linde NEO, subject to a cap of 250% of base salary and the remaining 40%, subject to a cap of 165% of base salary, and net of taxes, would be required to be invested in Linde plc stock that must be held a minimum of four years.

ROCE.  If Linde legacy group ROCE equals or exceeds the pre-established threshold, each legacy Linde NEO receives a fixed euro amount for each 0.1 per-cent of Linde Group ROCE achieved.

Operating Margin.  The operating margin targets and payouts were set individually for each legacy Linde NEO based on the area for which the NEO was responsible.  The operating margin is calculated as the ratio of operating profit to revenue.  A fixed euro amount is paid to each legacy Linde NEO for each 0.1 percent of operating margin achieved.

 

 

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Compensation Discussion and Analysis

 

 

 

Financial Business Results.  The chart below shows for each financial performance measure, Linde legacy group 2018 financial targets set by the Linde AG Supervisory Board and the actual results achieved through year end.  The overall

payout for financial performance varied for each legacy Linde NEO based upon the operating margin performance of the portion of the organization for which he was responsible.

 

 

Legacy Linde

Financial Measure*

 

Target

 

 

Actual

 

 

Weight

 

 

Achievement

 

 ROCE

 

9.6%

 

 

10.9%

 

 

50%

 

 

113.5%

 

 Operating Margin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lamba

 

27.3%

 

 

28.5%

 

 

50%

 

 

104.4%

 

Bruch

 

8.8%

 

 

10.2%

 

 

50%

 

 

115.9%

 

 

*

ROCE and operating margin are calculated in accordance with customary definitions as disclosed on page 45 of The Linde Group Financial Report 2017.

 

 

Individual Performance.  To reflect the personal performance of the legacy Linde NEOs, the amounts calculated on the basis of the financial results are adjusted using an individual performance multiplier of between 0.8 and 1.2.  Linde AG’s Supervisory Board may exercise its discretion to reduce or increase the amounts calculated as a result of the achievement of one or both targets by up to 20 percent, to take account of the individual performance of the NEO.  In 2018, no individual adjustments were made.

2018 Equity Awards

LEGACY PRAXAIR

In December 2017, the target dollar value of 2018 equity awards for each legacy Praxair NEO was established.  The Praxair Compensation Committee examined current share usage and projections of available shares in the shareholder approved long-term incentive plan and discussed specific terms of proposed awards.  Recognizing the additional complexity in design considerations for the 2018 awards as a result of the proposed merger with Linde AG, the Praxair Compensation Committee determined that it would be appropriate to grant restricted stock units (RSUs) that vest on the third anniversary of the grant date and provide a mix of 50% stock options and 50% RSUs for the 2018 equity awards.  No performance share units were granted in 2018 due to the difficulty of establishing 3-year performance goals that would reasonably reflect post-merger financial objectives.

2015 - 2017 Performance Share Unit Payouts

In February 2018, the grants of the 2015 - 2017 PSUs were evaluated by the Praxair Compensation Committee to determine the portion of the PSUs that would vest and be distributed in shares based on actual performance compared to pre-established performance goals.  One-half of the PSUs were based on the achievement of ROC goals and the other one-half were based on the achievement of EPS growth goals.

Although Praxair’s ROC performance over the 2015 - 2017 performance cycle remained industry-leading and average annual ROC of 12.4% exceeded the performance threshold, actual performance was lower than the 13% required for a target level payout of the awards.  The Praxair Compensation Committee certified the vesting at 70% of the target number of PSUs granted.

 

Legacy Praxair ROC

 

ROC Target

 

 

Average ROC

 

 

2015 - 17 Payout*

 

13%

 

 

12.4%

 

 

70.0%

 

 

*

Payout determined based on linear interpolation from actual results to the target.

The Praxair Compensation Committee also certified that the EPS goals, which included a 20% growth target, were not met.  Therefore, the Praxair Compensation Committee determined that these PSUs would be forfeited.

 

 

 

 

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Compensation Discussion and Analysis

 

LEGACY LINDE AG

The Linde AG Supervisory Board considered the planned completion of the merger with Praxair for the second half of 2018 and determined that a squeeze-out under German law, if completed, would result in the price of shares in Linde AG having no informational value for assessing Linde AG’s performance for purposes of legacy Linde NEO compensation.  It then determined to provide a transition-year 2018 incentive award in place of its regular practice of providing awards that had four-year “earnings per share” and “relative total shareholder return” goals.  Instead, the Linde AG Supervisory Board established the transition-year program that was directly linked to the performance targets for the annual variable compensation program, described above.

In order to participate in, and to be eligible for payout from the transition program, each legacy Linde NEO was required to self-invest 20% of his target equity award value into Linde shares which were submitted for the exchange offer made by Linde plc and that must be held until June 1, 2022.  At the conclusion of this holding period, each NEO will receive a cash payment

equal to the number of self-invested shares multiplied by the average closing price of Linde plc shares on the Frankfurt stock exchange for the 60 trading days immediately prior to June 1, 2022.

The remaining 80% of each legacy Linde NEOs target equity award value was payable in cash in early 2019 based upon the attainment of the annual variable compensation goals described above, including any individual performance adjustments.  A cap of 120% of target value was imposed on this component.  Messers. Lamba and Bruch received 106% and 112%, respectively, of the target value for this component of the transition year plan.

2018 Equity Award Payouts

In March 2019, the Supervisory Board of Linde AG reviewed the performance of Linde AG against the annual variable compensation goals described above under “2018 Annual Performance-Based Variable Compensation.”  The Supervisory Board concluded that payout for this transition-year award would be made to the NEOs in cash in early 2019 utilizing the same payout formula as that of the annual plan.

 

 

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Compensation Discussion and Analysis

 

Effect of Merger on Outstanding Equity Awards

 

 

LEGACY PRAXAIR

As detailed in the Business Combination Agreement, each outstanding Praxair stock option award was converted into a stock option to purchase Company shares at the same exercise price per share as the Praxair stock option award.  Each outstanding RSU measured in Praxair shares was converted into an RSU denominated in Company shares of an equal number as the original Praxair RSU award.  Each outstanding PSU was converted into a Company RSU with the number of shares subject to the replacement award equal to the greater of (i) the target number of shares subject to the Praxair PSU or (ii) the number of shares determined based upon the achievement of the performance goals immediately prior to the effective time of the merger, as determined by the Praxair Compensation Committee.  All Company replacement awards contain substantially the same terms and conditions that were to applicable to the original Praxair awards and provide that for accelerated vesting in the

event that the legacy Praxair NEO’s employment is terminated for specified reasons prior to October 31, 2020.

In October 2018, the Praxair Compensation Committee reviewed the performance with respect to the outstanding Praxair PSU awards to determine the number of shares to be associated with the replacement RSU awards.  For the outstanding relative TSR PSU awards, it reviewed the performance to date as of October 12, 2018 and directed that actual performance on the last trading day prior to the merger would be used for the conversion to Company RSUs.  For determining the average annual ROC for the remaining outstanding PSU awards, the Praxair Compensation Committee reviewed the actual performance for the 2016 and 2017 calendar years and the forecast 2018 performance, excluding benefits anticipated from 2018 tax reform.  Based on this analysis, the Praxair Compensation Committee directed conversion rates from outstanding Praxair PSU to Company RSUs as follows.

 

 

Legacy Praxair PSU Awards

 

Target

 

 

Actual

Performance

at Merger*

 

 

Conversion

Rate

 

2016 through 2018 relative TSR

 

50%ile

 

 

73.7%ile

 

 

195%

 

2017 through 2019 relative TSR

 

50%ile

 

 

75.5%ile

 

 

200%

 

2016 to 2018 average annual ROC

 

12.5%

 

 

12.7%

 

 

120%

 

2017 to 2019 average annual ROC

 

12.5%

 

 

13.1%

 

 

160%

 

 

*

Interpolated for actual relative TSR results from threshold to maximum.  ROC payout determined based on linear interpolation from actual results to the maximum possible payout.

 

 

LEGACY LINDE AG

In accordance with the Business Combination Agreement and in line with the Linde AG LTIP 2012, the outstanding options and rights to matching shares for the legacy Linde NEOs will terminate after certain restructuring measures between the Company and Linde AG became effective on April 8, 2019 (the “Squeeze Out”).

Following the Squeeze Out, on April 24, 2019, the legacy Linde AG options and matching share rights were terminated with a prorated cash payout provided to the legacy Linde NEOs. The amount of the cash payment made for each Linde AG stock option was defined in accordance with the Linde AG LTIP 2012 taking into account (i) the extent to which the success targets set out in the plan had been reached at the time the merger was consummated, (ii) the qualifying period for the Linde LTIP tranches that

had elapsed since the grant date, and (iii) the expected market capitalization and business outlook of Linde AG (in each case without taking the merger and its completion into account).

The outstanding Linde AG stock option grants had performance targets of Earnings Per Share (EPS) and Relative Total Shareholder Return (RTSR), each weighted 50% towards the determination of the number of rights that could be exercised.

 

EPS GOALS.  The minimum EPS performance target, with payout at 12.5%, would be attained when adjusted diluted EPS for the applicable four-year measurement period reached a compounded average growth rate (CAGR) of six percent annually, and the performance matching the stretch target of 11% annual CAGR would pay out at 50%.

 

 

 

 

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Compensation Discussion and Analysis

 

 

RTSR GOALS.  The 12.5% minimum payout for the RTSR for the applicable four-year performance period would be reached if the legacy Linde TSR exceeded the median TSR for the reference group of DAX 30 companies, excluding Linde AG.  The maximum payout of 50% would be made if the legacy Linde TSR exceeded the upper quartile of the reference group.

Prior to the merger date performance of Linde AG was reviewed against the goals, and for the outstanding option rights, the following performance and qualifying periods were determined for use in calculating the prorated cash payouts for legacy Linde executives:

 

 

Legacy Linde Outstanding Awards

 

EPS

Performance

Determination

at Merger

 

 

Relative TSR

Performance

Determination

at Merger

 

 

Qualifying Period

(based on months

elapsed since

Grant Date)

 

2015 option rights

 

26.0%

 

 

38.4%

 

 

85.4%

 

2016 option rights

 

30.2%

 

 

39.7%

 

 

60.4%

 

2017 option rights

 

17.7%

 

 

3