DEF 14A 1 lcat2022_def14a.htm CATERPILLAR INC - DEF 14A CATERPILLAR - DEF 14A

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, DC 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

 

Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14A-6(E)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material under §240.14a-12

 

CATERPILLAR

 

 

(Name of Registrant as Specified in Its Charter)

 

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

 

Payment of Filing Fee (Check all boxes that apply):
No fee required.
Fee paid previously with preliminary materials.
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

 

 

“Caterpillar’s Values in Action define and unite us as one Caterpillar. They represent our shared commitment to the highest standards of business conduct, guiding us as we fulfill our purpose of helping our customers build a better, more sustainable world.”

 

D. James Umpleby III

Chairman and Chief Executive Officer

 

 

 

We are sending you these proxy materials in connection with Caterpillar’s solicitation of proxies, on behalf of its Board of Directors, for the 2022 Annual Meeting of Shareholders (Annual Meeting). Distribution of these materials is scheduled to begin on April 28, 2022. Please submit your vote or proxy by telephone, mobile device, internet or, if you received your materials by mail, you can complete and return your proxy or voting instruction form by mail.

 

 2022 PROXY STATEMENT    3

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DEAR FELLOW SHAREHOLDERS,

 

 

 

D. JAMES UMPLEBY III

Chairman and Chief Executive Officer

“WE CONTINUE TO ACT AND LEAD WITH OUR VALUES IN ACTION AS WE EXECUTE OUR STRATEGY FOR LONG-TERM PROFITABLE GROWTH, SUPPORTING THE ENDURING SUCCESS OF OUR CUSTOMERS AND CATERPILLAR.”

 

On behalf of the Board of Directors and our entire company, I cordially invite you to attend the Annual Meeting of Shareholders on June 8, 2022, at 8 a.m. Central Time. We will again conduct this year’s meeting using a virtual format.

We will provide an update on the company’s performance, and you will have the opportunity to vote on several items related to our business. Please refer to page 67 for information on participating in this year’s shareholder meeting.

We encourage you to review this proxy statement to learn more about your board of directors, our governance practices, compensation programs and philosophy, and other key items. Your vote is important. Please vote your shares by virtually attending the annual meeting, by voting online separately, via your mobile phone, by telephone, or by mail.

I would like to recognize Miles White, a director who decided to not stand for re-election. Miles has served as a director since 2011. The board of directors extends our sincere appreciation for his exemplary service.

Thank you for your ongoing investment in and support of Caterpillar as we continue to execute our enterprise strategy for long-term profitable growth and shareholder value.

 

Sincerely,

 

 

D. James Umpleby III
Chairman and Chief Executive Officer

 

 2022 PROXY STATEMENT   5

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PROXY SUMMARY

This summary does not contain all of the information you should consider when casting your vote. You should read the complete proxy statement before voting.

ANNUAL MEETING OF SHAREHOLDERS

TIME & DATE

PLACE

RECORD DATE

ADMISSION

8:00 a.m. Central Time
June 8, 2022

Virtual Meeting

www.meetnow.global/M4GARLQ

The close of business
on April 13, 2022

To attend and to register for the Virtual Meeting, please follow instructions on page 67

 

SHAREHOLDER VOTING MATTERS

Proposal

Board’s Voting

Recommendation

Page

Reference

1

Election of 10 Directors Named in this Proxy Statement

FOR Each Nominee

10

2

Ratification of our Independent Registered Public Accounting Firm

FOR

25

3

Advisory Vote to Approve Executive Compensation

FOR

28

4

Shareholder Proposal - Report on Climate Policy

FOR

52

5

Shareholder Proposal - Lobbying Disclosure

AGAINST

55

6

Shareholder Proposal - Report on Activities in Conflict-Affected Areas

AGAINST

58

7

Shareholder Proposal - Special Shareholder Meeting Improvement

AGAINST

60

 

 2022 PROXY STATEMENT    6

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OUR DIRECTOR NOMINEES

Nominee and Principal Occupation

Independent

Age

Director

Since

Other Public Company Boards

Caterpillar Committees

AC

CHRC

PPGC

Kelly A. Ayotte
Former U.S. Senator representing
New Hampshire

Yes

53

2017

The Blackstone Group Inc.
Boston Properties, Inc.
News Corporation

 

 

David L. Calhoun
Presiding Director of Caterpillar Inc.
President and CEO of The Boeing Company

Yes

64

2011

The Boeing Company

 

 

 

 

 

Daniel M. Dickinson
Managing Partner of HCI Equity Partners

Yes

60

2006

None

 

 

Gerald Johnson
Executive Vice President, Global Manufacturing and Sustainability of General Motors Company

Yes

59

2021

None

 

 

David W. MacLennan
Board Chair and CEO of
Cargill, Inc.

Yes

62

2021

Ecolab Inc.

 

 

Debra L. Reed-Klages
Former Chairman and CEO of Sempra Energy

Yes

65

2015

Chevron Corporation
Lockheed Martin Corporation

 

 

Edward B. Rust, Jr.
Former Chairman and CEO of State Farm Mutual Automobile Insurance Company

Yes

71

2003

Helmerich & Payne, Inc.
S&P Global Inc.

 

 

Susan C. Schwab
Professor Emerita at the University of Maryland School of Public Policy and Strategic Advisor for Mayer Brown LLP;
former United States Trade Representative

Yes

67

2009

FedEx Corporation
Marriott International, Inc.

 

 

 

D. James Umpleby III
Chairman and CEO of Caterpillar Inc.

No

64

2017

Chevron Corporation

 

 

 

Rayford Wilkins, Jr.
Former CEO of Diversified Businesses
at AT&T Inc.

Yes

70

2017

Morgan Stanley
Valero Energy Corporation

 

 

AC: Audit Committee   CHRC: Compensation and Human Resources Committee    PPGC: Public Policy and Governance Committee

Chair

Member

 

 2022 PROXY STATEMENT    7

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GOVERNANCE HIGHLIGHTS

Our commitment to good corporate governance stems from our belief that a strong governance framework creates long-term value for our shareholders, strengthens Board and management accountability and builds trust in the Company and its brand. Our governance framework includes, but is not limited to, the following highlights:

Board and Governance Information*

 

Board and Governance Information

 

Size of the Board

10

Code of Conduct for Directors, Officers and Employees

Yes

Number of Independent Directors

9

Supermajority Voting Threshold for Mergers

No

Average Age of Directors

64

Proxy Access

Yes

Average Director Tenure (in years)

8

Shareholder Action by Written Consent

No

Annual Election of Directors

Yes

Shareholder Ability to Call Special Meetings

Yes

Mandatory Retirement Age

74

Poison Pill

No

Women

30%

Stock Ownership Guidelines for Directors and Executive Officers

Yes

Ethnic/Racial Diversity

20%

Anti-Hedging and Pledging Policies

Yes

Majority Voting in Director Elections

Yes

Clawback Policy

Yes

Independent Presiding Director

Yes

 

 
*

The information in this table reflects only the director nominees standing for re-election.
 

2021 PERFORMANCE HIGHLIGHTS

 OPERATING PROFIT MARGIN

 PROFIT PER SHARE

 STRONG BALANCE SHEET

13.5%

$11.83

$5.0 billion

Delivered operating margin of 13.5%

and adjusted operating margin of

13.7%*, which was within our 2019

Investor Day target range.

Profit per share was $11.83 in 2021, up

from $5.46 in 2020. Adjusted profit per share** was $10.81 in 2021, compared with $6.56 in 2020.

Returned $5.0 billion to shareholders through dividends and share repurchases. The enterprise cash balance at the end of 2021 was $9.3 billion.

 

 

*

Adjusted operating margin is a non-GAAP measure and a reconciliation to the most directly comparable GAAP measure is included on page 65.

**

Adjusted Profit Per Share is a non-GAAP measure and a reconciliation to the most directly comparable GAAP measure is included on page 65.

 

 2022 PROXY STATEMENT    8

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510 Lake Cook Road, Suite 100
Deerfield, IL 60015
Phone (224) 551-4160
www.caterpillar.com

NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS

The Board of Directors, after careful consideration, has decided to hold this year’s Annual Meeting exclusively online. If you plan to participate in the virtual meeting, please see the information below as well as the attendance and registration instructions on page 67. There will be no physical location for the Annual Meeting this year.

MEETING INFORMATION

JUNE 8, 2022

8:00 a.m. Central Time

Website: www.meetnow.global/M4GARLQ

 

MEETING AGENDA

1.

Elect 10 director nominees named in this Proxy Statement

2.

Ratify our independent registered public accounting firm for 2022

3.

Approve, by non-binding vote, executive compensation

4.

Vote on shareholder proposals

5.

Address any other business that properly comes before the meeting

RECORD DATE

April 13, 2022

 

By Order of the Board of Directors

Nicole M. Puza

Corporate Secretary
April 28, 2022

PLEASE VOTE YOUR SHARES:

We encourage shareholders to vote promptly, as this will save the expense of additional proxy solicitation.

You may vote in the following ways:

BY INTERNET

BY MOBILE DEVICE

BY TELEPHONE

BY MAIL

vote online at
www.caterpillar.com/proxymaterials

scan this QR code to vote with
your mobile device

call the number included on
your proxy card or notice

mail your signed proxy or voting
instruction form

Important Notice Regarding the Availability of Proxy Materials for the Annual Shareholder meeting to be held on June 8, 2022.

A link to the list of shareholders of record will be made available to shareholders during the meeting at www.meetnow.global/M4GARLQ. This Notice of Annual Meeting and Proxy Statement and the 2021 Annual Report on Form 10-K are available at www.investorvote.com/CAT.

 

 2022 PROXY STATEMENT    9

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DIRECTORS & GOVERNANCE

PROPOSAL 1 – ELECTION OF DIRECTORS

PROPOSAL SNAPSHOT
 

What am I voting on?

Shareholders are being asked to elect the 10 director nominees named in this Proxy Statement for a one-year term.

Board Voting Recommendation:

 FOR the election of each of the Board’s director nominees.

 

OVERVIEW OF OUR BOARD

 

BOARD ATTENDANCE - 2021

  

 

 

Board

6

6

6

6

5

5

6

6

6

6

6

6

 

100%

Attendance for
incumbent directors for
2021*

 

Audit

11

 

 

11

 

8

 

11

 

 

 

 

 

Compensation &
Human Resources

5

 

 

 

 

 

5

 

 

 

5

5

 

Public Policy &
Governance

6

6

6

 

5

 

 

6

6

 

 

 

 
*

Mr. Johnson joined the Board on March 1, 2021, and Mr. MacLennan joined the board on April 14, 2021. Mr. Johnson and Mr. MacLennan attended all of the meetings of their respective committees and the Board held after they joined the Board.

 

 2022 PROXY STATEMENT    10

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The Board’s policy is to encourage and expect that all directors attend each Annual Meeting of Shareholders. All then-serving directors attended the 2021 Annual Meeting. The independent directors generally meet in an executive session as part of each regularly scheduled Board meeting. The Board’s independent Presiding Director, David L. Calhoun, presided over the Board’s executive sessions in 2021.

BOARD EVOLUTION SINCE 2016

■

Five new directors elected

■

Rotation of Board committee chairs

■

Presiding Director elected

■

Expanded qualifications and diversity represented on Board

DIVERSITY OF SKILLS AND EXPERTISE

Our Board nominees offer a diverse range of skills and experience in relevant areas.

SUMMARY OF INDIVIDUAL DIRECTOR SKILLS, CORE COMPETENCIES AND ATTRIBUTES
   

Caterpillar Board
Tenure (Years)

5

11

16

1

1

7

19

13

5

5

8 years
Average Tenure

Board of Directors Experience
(other Boards)

 

90%

Audit Committee Financial Expert

 

 

100% of
AC Members

CEO / Leadership

 

90%

Business Development and Strategy

 

90%

Government / Regulatory Affairs

 

 

 

70%

Customer and Product Support Services

 

 

 

70%

Finance & Accounting

 

 

 

70%

Risk Management

 

 

80%

Technology

 

 

80%

Global Experience

 

90%

Manufacturing / Logistics

 

 

 

 

 

50%

Women

 

 

 

 

 

 

 

30%

Racial/Ethnic Diversity

 

 

 

 

 

 

 

 

20%

Age

53

64

60

59

62

65

71

67

64

70

64 years
Average Age

 

 2022 PROXY STATEMENT    11

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DIRECTOR CONTINUOUS EDUCATION AND DEVELOPMENT

The Company places high importance on the continuous development of its Board. Directors have ongoing education and development opportunities through participation in meetings, subscriptions to relevant publications and attendance at activities and professional development training offered by associations such as the National Association of Corporate Directors and Lead Director Network. Directors receive specialized presentations from experts in the Company’s various businesses in the course of their service. Since the last annual shareholder meeting, these presentations have included updates on the COVID-19 pandemic, including the health and safety of our employees; customer value agreements, remanufacturing, technology, products, sustainability, strategic purchasing, Caterpillar Financial Services Corporation and regular updates concerning the operations of certain businesses within our operating segments; talent management; cybersecurity; and the Cat® dealer network. These opportunities allow directors to be well-informed and to expand their knowledge of trends and issues relevant to their role. Directors are also given development and education opportunities through speaking or meeting directly with members of management and other employees, Company dealers and customers to better understand the Company’s operations and business as well as through attending industry trade shows such as CONEXPO.

BOARD’S ROLE IN RISK OVERSIGHT

The Board has oversight for risk management with a focus on the most significant risks facing the Company, including strategic, operational, financial and legal compliance risks. The Board’s risk oversight process builds upon management’s risk assessment and mitigation processes, which include an enterprise risk management program, regular internal management disclosure compliance committee meetings, a code of conduct that applies to all employees, executives and directors, quality standards and processes, an ethics and compliance program and comprehensive internal audit processes. The Board’s risk oversight role also includes the selection and oversight of the independent auditors. The Board implements its risk oversight function both as a Board and through delegation to Board committees, which meet regularly and report back to the Board. The Board has delegated the oversight of specific risks to Board committees that align with their functional responsibilities.

The Audit Committee (AC) assists the Board in overseeing the enterprise risk management program and evaluates and monitors risks related to the Company’s financial reporting requirements, system of internal controls, the internal audit program, the independent auditor, the compliance program and the information security program. The AC assesses cybersecurity and information technology risks and the controls implemented to monitor and mitigate these risks. The Chief Information Officer attends all bimonthly AC meetings and provides cybersecurity updates to the AC and Board. The Compensation and Human Resources Committee (CHRC) monitors and assesses risks associated with the Company’s employment and compensation policies and practices. The Public Policy and Governance Committee (PPGC) oversees various governance matters and risks related to public policy and environmental, health and safety activities, including climate and sustainability, that affect the Company.

DIRECTOR NOMINATIONS AND EVALUATIONS

PROCESS FOR NOMINATING AND EVALUATING DIRECTORS

The PPGC solicits and receives recommendations for potential director candidates from shareholders, management, directors, professional search firms and other sources. In its assessment of each potential candidate, the PPGC considers each candidate’s professional experience, integrity, honesty, judgment, independence, accountability, willingness to express independent thought, understanding of the Company’s business and other factors that the PPGC determines are pertinent in light of the current needs of the Board. Candidates must have successful leadership experience and stature in their primary fields, with a background that demonstrates an understanding of business affairs as well as the complexities of a large, publicly-held company. In addition, candidates must have demonstrated an ability to think strategically and make decisions with a forward-looking focus and the ability to assimilate relevant information on a broad range of complex topics. In evaluating director candidates, the PPGC also considers key skills and experience related to the Company’s strategy for long-term profitable growth, which identifies services, expanded offerings and operational excellence as primary focus areas. Moreover, candidates must have the ability to devote the time necessary to meet a director’s responsibilities and serve on no more than four public company boards in addition to Caterpillar.

The Board values diversity of talents, skills, abilities and experiences and believes that Board diversity of all types enhances the performance of the Board and provides significant benefits to the Company. Accordingly, the PPGC takes into account the diversity of the Board in selecting new director candidates.

 

 2022 PROXY STATEMENT    12

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DIRECTOR RECRUITMENT PROCESS

CANDIDATE

RECOMMENDATIONS

PPGC

BOARD OF DIRECTORS

SHAREHOLDERS

from Shareholders, Management, Directors, professional search firms and other sources

 

Discusses & Reviews

Qualifications and Expertise

Enterprise Strategy

Board Needs

Diversity

Interviews

Recommends Nominees

 

Discusses PPGC Recommendations

Analyzes Independence

Selects Nominees

 

Vote on Nominees at Annual Meeting

The following table summarizes certain key characteristics of the Company’s businesses and the associated qualifications, skills and experience that the PPGC believes should be represented on the Board.

BUSINESS CHARACTERISTICS

 

QUALIFICATIONS, SKILLS AND EXPERIENCE
■

The Company is a global manufacturer with products sold around the world.

 
■

Manufacturing or logistics operations experience

■

Broad international exposure
■

Technology and customer and product support services are important.

 
■

Technology experience

■

Customer and product support experience
■

The Company’s businesses undertake numerous transactions in many countries and in many currencies.

 
■

Diversity of race, ethnicity, gender, cultural background or professional experience

■

High level of financial literacy

■

Mergers and acquisitions experience
■

Demand for many of the Company’s products is tied to conditions in the global commodity, energy, construction and transportation markets.

 
■

Experience in the evaluation of global economic conditions

■

Knowledge of commodity, energy, construction or transportation markets
■

The Company’s businesses are impacted by regulatory requirements and policies of various governmental entities around the world.

 
■

Governmental and international trade experience
■

The Board’s responsibilities include understanding and overseeing the various risks facing the Company and ensuring that appropriate policies and procedures are in place to effectively manage risk.

 
■

Risk oversight/management expertise

■

Relevant executive and leadership experience

■

Cybersecurity experience

 

 

 

 

NOMINATIONS FROM SHAREHOLDERS

The PPGC considers unsolicited inquiries and director nominees recommended by shareholders in the same manner as nominees from all other sources. Recommendations should be sent to the Corporate Secretary, 510 Lake Cook Road, Suite 100, Deerfield, IL 60015. Shareholders may nominate a director candidate to serve on the Board by following the procedures described in our bylaws. Deadlines for shareholder nominations for Caterpillar’s 2023 Annual Meeting of Shareholders are included in the “Shareholder Proposals and Director Nominations for the 2023 Annual Meeting” section on page 62.

The number of persons comprising the Caterpillar Board of Directors is currently established as 11. At the Annual Shareholder Meeting, the number of persons compromising the Board will decrease to 10. All of the Board’s nominees have consented to being named in this proxy statement and to serve if elected. If any of the Board’s nominees should become unavailable to serve as a Director prior to the Annual Meeting, the size of the Board and number of Board nominees will be reduced accordingly.

 

 2022 PROXY STATEMENT    13

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DIRECTOR CANDIDATE BIOGRAPHIES AND QUALIFICATIONS

Directors have been in their current positions for the past five years unless otherwise noted. Information is as of April 1, 2022. The Board has nominated the following individuals to stand for election for a one-year term expiring at the Annual Meeting of Shareholders in 2023.

 

 

KELLY A. AYOTTE

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS:

CATERPILLAR BOARD COMMITTEE

Former U.S. Senator representing New Hampshire

 

Age 53

Director since: 2017

INDEPENDENT
■

The Blackstone Group Inc.

■

Boston Properties, Inc.

■

News Corporation
■

Public Policy and Governance

OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS:
■

Bloom Energy Corporation

 

Former Senator Ayotte provides the Board with leadership experience and in-depth knowledge in the areas of public policy, government and law from her experience as U.S. Senator, Attorney General, Deputy Attorney General and Chief of the Homicide Prosecution Unit for New Hampshire. She offers valuable insights on important public policy issues from her service on the Senate Commerce, Science and Transportation Committee and financial experience from her service on the Senate Budget Committee. In addition to the directorships mentioned above, former Senator Ayotte currently serves on three nonprofit boards that focus on human rights and other global issues.

 

 

DAVID L. CALHOUN

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS:

CATERPILLAR BOARD COMMITTEE

President and CEO of The Boeing Company (aviation and defense)

 

Age 64

Director since: 2011

INDEPENDENT

Presiding Director
■

The Boeing Company
■

Public Policy and Governance, Chair

OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS:
■

Gates Industrial Corporation plc

■

Nielsen Holdings plc

 

Mr. Calhoun has been President and CEO of The Boeing Company since 2020. Prior to leading Boeing, Calhoun served as senior managing director and head of portfolio operations at The Blackstone Group from 2014. Previously, he also served as executive chairman of the board for Nielsen Holdings from January 2014 to January 2016 and served as Nielsen CEO for seven years beginning in 2006. Mr. Calhoun began his career at The General Electric Company (GE), where he rose to vice chairman of the company and president and chief executive officer of GE Infrastructure, its largest business unit. During his 26 years at GE, he held a number of operating, finance and marketing roles, and led multiple business units, including GE Transportation and GE Aircraft Engines. He provides valuable insight and perspective to the Board on strategic and business matters, stemming from his extensive operational, executive and management experience with Blackstone and Nielsen and his previous roles at GE. He provides valuable insight and perspective to the Board on strategic and business matters, stemming from his extensive operational, executive and management experience. The Board elected Mr. Calhoun as Presiding Director in 2018.

 

 2022 PROXY STATEMENT    14

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DANIEL M. DICKINSON

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS:

CATERPILLAR BOARD COMMITTEE

Managing Partner of HCI Equity Partners (private equity firm)

 

Age 60

Director since: 2006

INDEPENDENT
■

None
■

Audit, Chair

OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS:
■

None

 

Mr. Dickinson has served as Managing Partner of HCI Equity Partners since 2001. His experience in mergers and acquisitions, private equity business and investment banking provides important insights for evaluating investment opportunities. Mr. Dickinson’s significant financial experience, both in the U.S. and internationally, contributes to the Board’s understanding and ability to analyze complex issues. His experience as a former director of a large, publicly traded multinational corporation enables him to provide meaningful input and guidance to the Board.

 

 

GERALD JOHNSON

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS:

CATERPILLAR BOARD COMMITTEE

Executive Vice President, Global Manufacturing and Sustainability of General Motors Company (manufacturing)

 

Age 59

Director since: 2021

INDEPENDENT
■

None
■

Public Policy and Governance

OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS:
■

None

 

Mr. Johnson has served as Executive Vice President, Global Manufacturing and Sustainability of General Motors Company (GM) since April 2019. Prior to that he served as Vice President North America Manufacturing and Labor Relations from August 2017 to March 2019 and Vice President Global Operational Excellence from July 2014 to July 2017. He leads GM’s Global Manufacturing, Sustainability Manufacturing Engineering and Labor Relations organizations. He provides valuable insight and perspective to the Board on strategic and business matters stemming from his extensive knowledge of global manufacturing operations, strategy and business development, customer and product support and technology and sustainability.

 

 

DAVID W. MACLENNAN

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS:

CATERPILLAR BOARD COMMITTEE

Board Chair and CEO of
Cargill, Inc. (food and agriculture)

 

Age 62

Director since: 2021

INDEPENDENT
■

Ecolab Inc.
■

Audit

OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS:
■

None

 

Mr. MacLennan has served as Chief Executive Officer of Cargill, Inc. since December 2013 and Board Chair since September 2015. Mr. MacLennan has held several executive positions since beginning his career at Cargill in 1991. He provides valuable insight and perspective to the Board stemming from his extensive leadership in global manufacturing operations, risk management, government and regulatory affairs and technology. Mr. MacLennan was brought to the attention of the Board through his experience as a chief executive officer of a large multinational corporation with operations relevant to the Company’s business.

 

 2022 PROXY STATEMENT    15

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DEBRA L. REED-KLAGES

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS:

CATERPILLAR BOARD COMMITTEE

Former Chairman and CEO of
Sempra Energy (energy
infrastructure and utilities)

 

Age 65

Director since: 2015

INDEPENDENT
■

Chevron Corporation

■

Lockheed Martin Corporation
■

Compensation and Human Resources, Chair

OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS:
■

Halliburton Company

■

Oncor Electric Delivery Company LLC

■

Sempra Energy

 

Ms. Reed-Klages retired as Chairman of the Board and CEO of Sempra Energy in 2018, having served in these roles since 2012 and 2011, respectively. The power, oil and gas industries are key end-user markets for Caterpillar products and the Board believes Ms. Reed-Klages’ background provides valuable insights into trends in these industries. In addition, her experience as a CEO and director of other large, publicly traded corporations enables her to provide meaningful input and guidance to the Board. Ms. Reed-Klages’ areas of expertise include commodity markets, sustainability, finance and compensation.

 

 

EDWARD B. RUST, JR.

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS:

CATERPILLAR BOARD COMMITTEE

Former Chairman and CEO of State Farm Mutual Automobile Insurance Company (insurance)

 

Age 71

Director since: 2003

INDEPENDENT
■

Helmerich & Payne, Inc.

■

S&P Global Inc.
■

Audit

OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS:
■

None

 

Mr. Rust retired as Chairman in 2016 and as CEO in 2015 of State Farm Mutual Automobile Insurance Company. His financial and business experience is valuable to the Board. His role as a past Chairman of the U.S. Chamber of Commerce, CEO of a major national corporation and experience as a director of other large, publicly traded multinational corporations enables him to provide meaningful input and guidance to the Board, including with respect to public company governance and strategy. In addition, his extensive involvement in education improvement complements the Company’s culture of social responsibility.

 

 

SUSAN C. SCHWAB

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS:

CATERPILLAR BOARD COMMITTEE

Professor Emerita at the University
of Maryland School of Public Policy and Strategic Advisor for Mayer Brown LLP (global law firm)

 

Age 67

Director since: 2009

INDEPENDENT
■

FedEx Corporation

■

Marriott International, Inc.
■

Public Policy and Governance

OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS:
■

The Boeing Company

 

Ambassador Schwab has been Professor Emerita at the University of Maryland School of Public Policy since 2009 and Strategic Advisor for Mayer Brown LLP since 2010. She was a Professor at the University of Maryland, where she still teaches, between 2009 and 2020. Previously, she held various positions in government, including as U.S. Trade Representative (member of the President’s Cabinet) and as Assistant Secretary of Commerce. Ambassador Schwab brings extensive knowledge, insight and experience on international trade and commerce issues to the Board. Her educational experience and role as the U.S. Trade Representative provide important insights for the Company’s global business model and long-standing support of open trade. In addition, her experience as a director of other large, publicly traded multinational corporations enables her to provide meaningful input and guidance to the Board, including on strategy and the evaluation of global economic conditions. In 2022, she became board chair of the National Foreign Trade Council (NFTC).

 

 2022 PROXY STATEMENT    16

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D. JAMES UMPLEBY III

Chairman and CEO of
Caterpillar Inc.

 

Age 64

Director since: 2017

MANAGEMENT

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS:

CATERPILLAR BOARD COMMITTEE
■

Chevron Corporation
■

None

OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS:
■

None

 

Mr. Umpleby has been CEO of Caterpillar since January 1, 2017, and was elected Chairman of the Board in 2018. He served as a Group President of Caterpillar from 2013 to 2016 with responsibility for Caterpillar’s Energy & Transportation segment and served as a Caterpillar Vice President and President of Solar Turbines from 2010 to 2012. Mr. Umpleby developed a deep knowledge of the Company and its end markets by serving in a wide range of leadership roles. He has extensive international experience and has worked in manufacturing, engineering, marketing, sales and services. Mr. Umpleby’s strategic planning and execution skills, along with his extensive industry experience, enables him to provide effective leadership of the Company and the Board.

 

 

RAYFORD WILKINS, JR.

Former CEO of Diversified
Businesses at AT&T Inc. (telecommunications)

 

Age 70

Director since: 2017

INDEPENDENT

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS:

CATERPILLAR BOARD COMMITTEE
■

Morgan Stanley

■

Valero Energy Corporation
■

Compensation and Human Resources

OTHER DIRECTORSHIPS WITHIN THE LAST FIVE YEARS:
■

None

 

Mr. Wilkins retired as CEO of Diversified Businesses at AT&T Inc. in 2012. His expertise and oversight experience in the information technology arena is valuable to the Board. In addition, Mr. Wilkins’ experience as a CEO and director of other large, publicly traded corporations enables him to provide meaningful input and guidance to the Board, including with respect to corporate finance and customer and product support.

 

 2022 PROXY STATEMENT    17

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DIRECTOR COMPENSATION

The following table sets forth information concerning the compensation for our non-employee directors during the year ended December 31, 2021. Mr. Umpleby, who served as Chairman and CEO during 2021, did not receive separate compensation for his service on the Board.

Compensation for non-employee directors for 2021 was comprised of the following components:

 

 

 

Restricted Stock Units (1 Year Vesting)

$

150,000

Cash Retainer

$

150,000

Cash Stipends:

 

 

Presiding Director

$

50,000

Audit Committee Chair

$

30,000

Compensation and Human Resources Committee Chair

$

25,000

Public Policy and Governance Committee Chair

$

20,000

 

Directors are required to own Caterpillar common stock equal to five times their annual cash retainer. Directors have a five-year period from the date of their election or appointment to meet the target ownership guidelines. All Directors are in compliance with these guidelines. In addition, under the Company’s Directors’ Deferred Compensation Plan, directors may defer 50 percent or more of their annual cash retainer and stipend into an interest-bearing account or an account representing phantom shares of Caterpillar stock, and effective for grants made on or after January 1, 2019, directors may defer 50 percent or more of any stock-based compensation (other than options and stock appreciation rights) upon vesting into an account representing phantom shares of Caterpillar stock. Directors that joined the Board prior to April 1, 2008, also are able to participate in a Charitable Award Program, under which a donation of up to $500,000 will be made by the Company in the director’s name to charitable organizations selected by the director and a donation of up to $500,000 also will be made by the Company in the director’s name to the Caterpillar Foundation. Directors derive no financial benefit from the Charitable Award Program.

 

 2022 PROXY STATEMENT    18

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DIRECTOR COMPENSATION FOR 2021

Director

 

Fees Earned or

Paid in Cash

 

 

Restricted

Stock Units(1)

 

 

All Other

Compensation(2)

 

 

Total

Kelly A. Ayotte

$

150,000

 

$

150,096

 

$

—

 

$

300,096

David L. Calhoun

$

220,000

 

$

150,096

 

$

—

 

$

370,096

Daniel M. Dickinson

$

180,000

 

$

150,096

 

$

22,165

 

$

352,261

Juan Gallardo

$

42,857

(3) 

$

150,096

(4) 

$

164,767

(4) 

$

357,720

Gerald Johnson

$

125,000

(3) 

$

124,907

(3) 

$

—

 

$

249,907

David W. MacLennan

$

107,260

(3) 

$

107,240

(3) 

$

—

 

$

214,500

William A. Osborn

$

42,857

 

$

150,096

(4) 

$

164,767

(4) 

$

357,720

Debra L. Reed-Klages

$

167,788

(3) 

$

150,096

 

$

10,000

 

$

327,884

Edward B. Rust, Jr.

$

150,000

 

$

150,096

 

$

11,014

 

$

311,110

Susan C. Schwab

$

150,000

 

$

150,096

 

$

10,000

 

$

310,096

Miles D. White

$

157,212

(3) 

$

150,096

 

$

1,500

 

$

308,808

Rayford Wilkins, Jr.

$

150,000

 

$

150,096

 

$

—

 

$

300,096
(1)

As of December 31, 2021, the number of RSUs (including accrued dividend equivalent units) and Phantom Shares held by those serving as non-employee directors during 2021 was: Ms. Ayotte: 2,723 (which consists of 693 RSUs and 2,030 Phantom Shares); Mr. Calhoun: 22,074 (which consists of 693 RSUs and 21,381 Phantom Shares); Mr. Dickinson: 29,962 (which consists of 693 RSUs and 29,269 Phantom Shares); Mr. Gallardo: 36,732 Phantom Shares; Mr. Johnson: 567 RSUs; Mr. MacLennan: 477 RSUs; Mr. Osborn: 513 Phantom Shares; Ms. Reed-Klages: 10,564 (which consists of 693 RSUs and 9,871 Phantom Shares); Mr. Rust: 39,227 (which consists of 693 RSUs and 38,534 Phantom Shares); Ms. Schwab: 19,454 (which consists of 693 RSUs and 18,761 Phantom Shares); Mr. White: 13,314 (which consists of 693 RSUs and 12,621 Phantom Shares) and Mr. Wilkins: 693 RSUs.

Mr. Calhoun, Mr. Gallardo and Ms. Schwab elected to defer 100% of their 2021 Cash Retainer and Cash Stipend (as applicable) into Phantom Shares of Caterpillar stock in the Directors’ Deferred Compensation Plan. These deferrals, plus the accumulated value of previous retainer deferrals for each and for Ms. Ayotte, Mr. Dickinson, Ms. Reed, Mr. Rust and Mr. White, are included in the Phantom Shares totals above. Mr. Johnson elected to defer 100% of his 2021 Cash Retainer into the Interest Fund in the Directors’ Deferred Compensation Plan.

Ms. Ayotte, Mr. Calhoun, Ms. Reed-Klages and Ms. Schwab elected to defer a portion of their equity award that vested on March 5, 2021, into the Directors’ Deferred Compensation Plan. These deferrals, plus the accumulated deferrals of previous equity awards, are also included in the Phantom Share totals above. Ms. Ayotte and Mr. MacLennan elected to defer 50%, and Mr. Calhoun, Ms. Reed-Klages and Ms. Schwab elected to defer 100% of the equity award granted on March 1, 2021.

(2)

All Other Compensation represents amounts paid in connection with the Caterpillar Foundation Matching Gift Program and the Directors’ Charitable Award Program and administrative fees associated with the Director’s Charitable Award Program. All outside directors are eligible to participate in the Caterpillar Foundation Matching Gift Program. In 2021, the Caterpillar Foundation matched contributions to eligible 501(c)(3) nonprofits and accredited U.S. public/private preK-12 schools or school districts to which contributions are tax-deductible, up to a maximum of $10,000 per participant per calendar year. Additionally in 2021, the Caterpillar Foundation also provided a 2:1 match program for a period of time in support of Giving Tuesday that allowed participants to donate up to $750 to be matched at a 2:1 ratio.

The amounts listed include Charitable Foundation matching gifts as follows: Mr. Dickinson $1,500, Ms. Reed-Klages $10,000, Ms, Schwab $10,000 and Mr. White $1,500.

For directors eligible to participate in the Directors Charitable Award Program, the amounts listed include the insurance premium and administrative fees as follows: Mr. Dickinson $20,665, Mr. Gallardo $14,767, Mr. Osborn $14,767, Mr. Rust $11,014.

(3)

Total fees earned or paid in 2021 include pro-rated Cash Retainer and/or Cash Stipends for directors who commenced or ceased Board service or transitioned between committee chair positions over the course of the year. Mr. Johnson’s and Mr. MacLennan’s Cash Retainer compensation and Restricted Stock Units include pro-ration to the dates they joined the Board, March 1, 2021, and April 14, 2021, respectively. Ms. Reed-Klages’ and Mr. White’s cash compensation reflect pro-ration of the CHRC chair stipend upon the transition of roles on April 14, 2021. Mr. Gallardo’s and Mr. Osborn’s cash compensation include pro-ration to the date their Board service ceased, April 14, 2021.

(4)

Mr. Gallardo and Mr. Osborn retired from the Board effective April 14, 2021, to facilitate Board refreshment and forfeited the grant of $150,096 RSU awarded March 1, 2021; in recognition of their long-standing service the CHRC recommended, and the Board approved, a special retirement cash payment of $150,000 each which is reflected under All Other Compensation.

 

 2022 PROXY STATEMENT    19

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BOARD ELECTION AND LEADERSHIP STRUCTURE

Directors are elected at each annual meeting to serve for a one-year term. In uncontested elections, directors are elected by a majority of the votes cast for such directorship. If an incumbent director does not receive a greater number of “for” votes than “against” votes, such director must tender his or her resignation to the Board. In contested elections, directors are elected by a plurality vote.

The mandatory retirement age for directors is 74. Each director who will have reached the age of 74, on or before the date of the next shareholders’ meeting, shall not stand for re-election at that annual meeting of the shareholders without an express waiver by the Board.

Under Caterpillar’s bylaws, the directors annually elect a Chairman. The Board has no fixed policy on whether to have an executive or non-executive chairman and believes this determination should be made based on the best interests of the Company and its shareholders in light of the circumstances at the time. On the recommendation of the PPGC, in 2021, the Board elected D. James Umpleby III as its Chairman and David L. Calhoun as its Presiding Director.

In the role of Presiding Director, Mr. Calhoun has provided strong independent oversight of management and served as a liaison between the independent directors and the Chairman and CEO, as further described below. Mr. Calhoun also led the Board’s annual evaluation of Mr. Umpleby, and the independent members of the Board set Mr. Umpleby’s compensation annually based on the recommendation of the Compensation and Human Resources Committee.

DUTIES AND RESPONSIBILITIES OF PRESIDING DIRECTOR

■

Preside at all meetings of the Board at which the Chairman & CEO is not present, including executive sessions of the independent directors.

■

Serve as a liaison between the Chairman & CEO and the independent directors.

■

Approve the type of information sent to the Board.

■

Provide input and approve meeting agendas for the Board.

■

Approve meeting schedules, in consultation with the Chairman & CEO and the independent directors, to assure that there is sufficient time for discussion of all agenda items.

■

Has the authority to call meetings of the independent directors.

■

If requested by major shareholders, is available, when appropriate, for consultation and direct communication.

■

Provide the Chairman & CEO with the results of his/her annual performance review in conjunction with the chairman of the Compensation and Human Resources Committee.

 

The Board believes it is important to maintain flexibility as to the Board’s leadership structure. The Board will continue to regularly review its leadership structure and exercise its discretion in adopting an appropriate and effective framework to ensure effective governance and accountability, taking into consideration the needs of the Board and the Company.

CORPORATE GOVERNANCE GUIDELINES AND CODE OF CONDUCT

Our Board has adopted Guidelines on Corporate Governance Issues (Corporate Governance Guidelines), which are available on our website at www.caterpillar.com/governance. The guidelines reflect the Board’s commitment to oversee the effectiveness of policy and decision-making both at the Board and management level, with a view to enhance shareholder value over the long term.

Caterpillar’s Code of Conduct is called Our Values in Action. Integrity, Excellence, Teamwork, Commitment and Sustainability are the core values identified in the code. Our Values in Action apply to all members of the Board and to management and employees worldwide. These values embody the high ethical standards that Caterpillar has upheld since its formation in 1925. Our Values in Action are available on our website at www.caterpillar.com/code.

BOARD EVALUATION PROCESS

The Board conducts an annual self-evaluation to determine whether the Board and its committees are functioning effectively. In 2021, the Chairman of the Public Policy and Governance Committee interviewed each Board member to solicit their feedback. The Public Policy and Governance Committee Chairman then led a discussion during the Board’s executive session. Each of the committees of the Board followed a similar process and reported to the Board on the outcome of their self-evaluations. The self-evaluation provides the Board with actionable feedback to enhance its performance and effectiveness.

 

 2022 PROXY STATEMENT    20

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BOARD COMMITTEES

The Board currently has three standing committees: Audit, Compensation and Human Resources and Public Policy and Governance. Each committee meets regularly throughout the year, reports its actions and recommendations to the Board, receives reports from management, annually evaluates its performance and has the authority to retain outside advisors at its discretion. The current primary responsibilities of each committee are summarized below and set forth in more detail in each committee’s written charter, which can be found on Caterpillar’s website at www.caterpillar.com/governance. All committee members are independent under Company, NYSE and SEC standards applicable to Board and committee service, and the Board has determined that each member of the Audit Committee is “financially literate” and an “audit committee financial expert” as defined under SEC rules.

 

 

 

AUDIT COMMITTEE

Committee Members:
Daniel M. Dickinson, Chair
David W. MacLennan
Edward B. Rust, Jr.

Number of Meetings in 2021: 11

COMMITTEE ROLES AND RESPONSIBILITIES
■

Selects and oversees independent auditors, including annual evaluation of the lead audit partner.
■

Oversees our financial reporting activities, including our financial statements, annual report and accounting standards and principles.
■

Reviews with management the Company’s risk assessment and risk management framework.

■

Approves audit and non-audit services provided by the independent auditors.

■

Reviews the organization, scope and effectiveness of the Company’s internal audit function, disclosures and internal controls.

■

Sets parameters for and monitors the Company’s hedging and derivatives practices.

■

Provides oversight for the Company’s compliance program and Code of Conduct.

■

Monitors any significant litigation, regulatory and tax compliance matters.

■

Oversees information technology systems and related security.

■

Reviews with management cybersecurity risks and strategy to mitigate these risks.

 

COMPENSATION AND HUMAN RESOURCES COMMITTEE

Committee Members:
Debra L. Reed-Klages, Chair
Miles D. White
Rayford Wilkins, Jr.

Number of Meetings in 2021: 5

COMMITTEE ROLES AND RESPONSIBILITIES
■

Recommends the CEO’s compensation to the Board and establishes the compensation of other executive officers.
■

Establishes, approves and oversees the Company’s equity compensation and employee benefit plans.
■

Reviews incentive compensation arrangements to ensure that incentive pay does not encourage unnecessary risk-taking, and reviews and discusses the relationship between risk management policies and practices, corporate strategy and executive compensation.
■

Recommends to the Board the compensation of independent directors.

■

Provides oversight of the Company’s diversity and immigration practices and employee relations.

■

Furnishes an annual Committee Report on executive compensation and approves the Compensation Discussion and Analysis section in the Company’s proxy statement.

 

 2022 PROXY STATEMENT    21

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PUBLIC POLICY AND GOVERNANCE COMMITTEE

Committee Members:
David L. Calhoun, Chair
Kelly A. Ayotte
Gerald Johnson
Susan C. Schwab

Number of Meetings in 2021: 6

COMMITTEE ROLES AND RESPONSIBILITIES
■

Makes recommendations to the Board regarding the size and composition of the Board and its committees and the criteria to be used for the selection of candidates to serve on the Board.
■

Discusses and evaluates the qualifications of potential and incumbent directors and recommends the director candidates to be nominated for election at the Annual Meeting.
■

Leads the Board in its annual self-evaluation process.

■

Oversees the Company’s senior executive succession planning.

■

Oversees the Company’s environmental, health and safety activities, including climate and sustainability.

■

Oversees the Company’s corporate governance.

■

Reviews/advises on matters of domestic and international public policy affecting the Company’s business, such as trade policy and international trade negotiations and major global legislative and regulatory developments.

■

Annually reviews the Company’s charitable contributions to the Caterpillar Foundation and political contributions and policies.

■

Oversees investor, customer, community and government relations.

 

 

 

 

 

 

BOARD RESTRUCTURING

In accordance with our Guidelines on Corporate Governance Issues and corporate governance best practices, the Board annually reviews its approach to corporate governance and the charters of its standing committees. The Board recognizes shareholders’ increasing interest in, among other topics, environmental (E), social (S) and governance (G) (collectively, ESG) issues and believes that each of its committees has a role to play in the governance of the Company’s ESG-related responsibilities, disclosures and commitments. As a result, in April 2022, the Board decided to restructure certain of its committees to better address the changing needs of the Company and the evolving regulatory and governance landscape. The Board accordingly split the PPGC into two separate committees: the Nominating & Governance Committee (NGC) and the Sustainability & other Public Policy Committee (SPPC). This restructuring will be effective following the regular meeting of the Board scheduled for June 8, 2022.

As part of its evaluation in how best to affect this committee restructuring, the Board determined that the NGC should retain most of the nominating and corporate governance responsibilities previously exercised by the PPGC. Similarly, the Board concluded that the SPPC should retain oversight responsibilities of all public policy matters previously exercised by the PPGC. In addition, the new SPPC will have explicit oversight over sustainability, social and public policy matters, including those related to environmental, climate change, human rights and lobbying.

The members of the new NGC are expected to be Ms. Reed-Klages (Chair), Mr. Calhoun and Mses. Ayotte and Schwab. The members of the new SPPC are planned to be Ms. Ayotte (Chair), Messrs. Calhoun, Johnson and MacLennan and Ms. Schwab.

The Board believes that having separate committees to oversee these areas of focus will provide enhanced oversight of these crucial and evolving activities. Each new committee will be comprised solely of directors who have been determined to meet the definition of an independent director in accordance with the NYSE listing standards.

In addition, the Board determined to create an Executive Committee to act with the authority of the Board between regularly scheduled meetings. The Executive Committee will also have the authority to approve dividends, authorize share repurchases and authorize long term debt issuances in excess of $1 billion. The Executive Committee will also oversee future CEO succession management processes. The full Board will retain its current oversight responsibility with respect to selection, timing and method of future CEO transitions. The members of the Executive Committee are planned to be the committee chairs and the presiding director.

The Board will adopt new charters for each of the committees that set forth a more detailed statement of the respective committee’s roles and responsibilities. These charters will be posted on the Company’s website on the effective date of the restructuring.

In addition, the Board determined to appoint Ms. Reed-Klages as presiding director. This change will be effective following the annual shareholder meeting scheduled for June 8, 2022.

 

 2022 PROXY STATEMENT    22

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DIRECTOR INDEPENDENCE DETERMINATIONS

The Company’s Guidelines on Corporate Governance Issues establish that no more than two non-independent directors may serve on the Board at any point in time. A director is “independent” if he or she has no direct or indirect material relationship with the Company or with senior management of the Company and their respective affiliates. Annually, the Board makes an affirmative determination regarding the independence of each director based upon the recommendation of the PPGC and in accordance with the standards in the Company’s Guidelines on Corporate Governance Issues, which are available on our website at www.caterpillar.com/governance.

Applying these standards, the Board determined that each of the director nominees, and all other directors who served during 2021, met the independence standards except Mr. Umpleby, who is a current employee of the Company.

 

COMMUNICATION WITH THE BOARD

Shareholders, employees and all other interested parties may communicate with any of our directors individually, our Board as a group, our independent directors as a group or any Board committee as a group by email or regular mail:

BY EMAIL

BY MAIL

send an email to directors@cat.com

mail to Caterpillar Inc.
c/o Corporate Secretary
510 Lake Cook Road, Suite 100
Deerfield, IL 60015

 

CONTACTING CATERPILLAR

While the Board oversees management, it does not participate in day-to-day management functions or business operations. If you wish to submit questions or comments relating to these matters, please use the Contact Us form on our website at www.caterpillar.com/contact, which will help direct your message to the appropriate area of our Company.

All communications regarding personal grievances, administrative matters, the conduct of the Company’s ordinary business operations, billing issues, product or service related inquiries, order requests and similar issues will be directed to the appropriate individual within the Company. The Chairman of the Board has instructed the Corporate Secretary to consult with him if she is unsure who should receive the communication.

INVESTOR OUTREACH

We conduct an annual governance review and shareholder outreach throughout the year to ensure management and the Board understand and consider the issues that matter most to our shareholders and reflect the insights and perspectives of our many stakeholders.

WHO PARTICIPATES IN THE INVESTOR OUTREACH PROGRAM?

IN WHAT TYPES OF ENGAGEMENT DOES THE COMPANY PARTICIPATE?
■

Board of Directors

■

Senior Management

■

Investor Relations

■

Corporate Secretary
■

Investor conferences

■

One-on-one meetings

■

Earnings calls

■

Investor and analyst calls

 

 2022 PROXY STATEMENT    23

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POLITICAL CONTRIBUTIONS AND LOBBYING

The actions that governments take can impact the Company, our employees, customers and shareholders. It is important for government leaders to understand the impact of such actions. For this reason, the Company participates in the political process and advocates in a responsible and constructive manner on issues that advance the Company’s goals and protect shareholder value. To promote transparency and good corporate citizenship, the Company provides disclosure relating to its political contribution activities and its political action committee, its engagement in public policy issues and global issues of importance to the Company, including detailed information on the Company’s position with respect to such issues. This information is disclosed on our website at https://www.caterpillar.com/en/company/governance/political-engagement.html and includes an itemized list of organizations and individuals that received political contributions from Caterpillar or the Caterpillar Political Action Committee. It also includes a summary of some of the public policy issues important to the Company that may cause us to engage in public advocacy. Caterpillar’s political and advocacy activities at the state, federal and international levels are managed by the Vice President, Global Government & Corporate Affairs, who coordinates and reviews with senior management the legislative and regulatory priorities that are significant to the Company’s business, as well as related advocacy activities. To ensure appropriate Board oversight of political activities, the Board’s Public Policy and Governance Committee reviews the Company’s political spending and its significant political activities, including corporate political contributions, political contribution activities of the Caterpillar Political Action Committee, trade association participation and Caterpillar’s lobbying priorities.

RELATED PARTY TRANSACTIONS

Caterpillar has a written policy governing the approval of transactions with the Company that are expected to exceed $120,000 in any calendar year in which any director, executive officer or their immediate family members will have a direct or indirect material interest. Under the policy, all such transactions must be approved in advance by the PPGC.

The director or officer must submit the details of the transaction to the Company’s Chief Legal Officer & General Counsel and the Corporate Secretary, including whether the related person or his or her immediate family member has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10 percent beneficial owner of an entity involved in the transaction). The Chief Legal Officer & General Counsel and the Corporate Secretary will then submit the matter to the PPGC for its consideration.

From time to time, related persons of Caterpillar may purchase products or services of the Company and its subsidiaries. In connection with these purchases, Caterpillar may provide marketing support directly or indirectly through independent dealers, consistent with sales under similar circumstances to unaffiliated third parties.

Mr. Joseph Creed’s brother-in-law is employed by the Company as a Product Supply Network Engineer and, consistent with the Company’s compensation policies applicable to other employees of similar title and responsibility, earned aggregate annual compensation of approximately $142,000 for fiscal 2021.

 

 2022 PROXY STATEMENT    24

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AUDIT

PROPOSAL 2 – RATIFICATION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PROPOSAL SNAPSHOT

What am I voting on?

Shareholders are being asked to approve the ratification of the Audit Committee’s appointment of PricewaterhouseCoopers (PwC) as the Company’s independent auditor for 2022.

Board Voting Recommendation:

 FOR the ratification of our independent registered public accounting firm.

 

The Audit Committee (AC) is directly responsible for the appointment, compensation, retention and oversight of the Company’s independent auditor. PwC has been Caterpillar’s independent auditor since 1925. Through its extensive experience with the Company, PwC has gained institutional knowledge and a deep understanding of the Company’s operations and business, accounting policies and practices and internal control over financial reporting. The AC believes that the retention of PwC to serve as the Company’s independent auditor is in the best interests of the Company and its shareholders. If the appointment of PwC is not approved by the shareholders, the AC will consider whether it is appropriate to select another independent auditor. Even if the appointment of PwC is ratified, the AC, in its discretion, may direct the appointment of a different independent auditor at any time during the year if it determines that such a change would be in the Company’s best interests.

Representatives of PwC will be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so.

AUDIT FEES AND APPROVAL PROCESS

The AC pre-approves all audit and non-audit services to be performed by the independent auditors in compliance with the Sarbanes-Oxley Act and the Securities and Exchange Commission (SEC) rules regarding auditor independence. The policies and procedures are detailed as to the particular service and do not delegate the AC’s responsibility to management. The policies and procedures address any service provided by the independent auditors and any audit or audit-related services to be provided by any other audit service provider. The pre-approval process includes an annual and interim component.

Annually, not later than February of each year, management and the independent auditors jointly submit a service matrix of the types of audit and non-audit services that management may wish to have the independent auditor perform for the current year. The service matrix categorizes the types of services by audit, audit-related, tax and all other services. Management and the independent auditors jointly submit an annual pre-approval limits request. The request lists aggregate pre-approval limits by service category. The request also lists known or anticipated services and associated fees. The AC approves or rejects the pre-approval limits and each of the listed services on the service matrix.

During the course of the year, the AC chairman has the authority to pre-approve requests for services that were not approved in the annual pre-approval process. However, all services, regardless of fee amounts, are subject to restrictions on the services allowable under the Sarbanes-Oxley Act and SEC rules regarding auditor independence. In addition, all fees are subject to ongoing monitoring by the AC.

 

 2022 PROXY STATEMENT    25

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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEE INFORMATION

Fees for professional services provided by our independent auditor included the following (in millions):

 

 

 

2021

2020

 

Audit Fees(1)

 

$

32.5

 

38.9

 

Audit-Related Fees(2)

 

 

0.8

 

0.8

 

Tax Compliance Fees(3)

 

 

0.1

 

0.1

 

Tax Planning and Consulting Fees(4)

 

 

0.1

 

0.1

 

All Other Fees(5)

 

 

0.1

 

0.1

 

TOTAL

 

$

33.6

 

40.0

 
(1)

“Audit Fees” principally includes audit and review of financial statements (including internal control over financial reporting), statutory and subsidiary audits, SEC registration statements, comfort letters and consents.

(2)

“Audit-Related Fees” principally includes attestation services requested by management, accounting consultations, pre- or post-implementation reviews of processes or systems and audits of employee benefit plan financial statements. Total fees paid directly by the benefit plans, and not by the Company, were $0.2 million in 2021 and $0.3 million in 2020 and are not included in the amounts shown above.

(3)

“Tax Compliance Fees” includes, among other things, statutory tax return preparation and review and advice on the impact of changes in local tax laws.

(4)

“Tax Planning and Consulting Fees” includes, among other things, tax planning and advice and assistance with respect to transfer pricing issues.

(5)

“All Other Fees” consists principally of license-based services for statutory audit monitoring and accounting and reporting literature research.

ANONYMOUS REPORTING OF ACCOUNTING AND OTHER CONCERNS

The AC has established a means for the anonymous and other reporting (where permitted by law) of (i) suspected or actual violations of the code of conduct, our enterprise policies or applicable laws, including those related to accounting practices, internal controls or auditing matters and procedures; (ii) theft or fraud of any amount; (iii) insider trading; (iv) issues with respect to the performance and execution of contracts; (v) conflicts of interest; (vi) violations of securities and antitrust laws; (vii) violations of prohibited harassment policy; and (viii) violations of any applicable anti-bribery law.

Any employee, supplier, customer, shareholder or other interested party can submit a report via the following methods:

■

Toll-free Helpline (US, Canada, and US Virgin Islands): 1-800-300-7898

■

Call Collect Helpline: 770-582-5275 (language translation available)

■

Email: BusinessPractices@cat.com

■

Internet: www.caterpillar.com/obp

AUDIT COMMITTEE REPORT

The AC operates under a written charter adopted by the Board of Directors, and each of its members meets the independence and financial literacy standards contained in the NYSE Listed Company rules, SEC rules and Caterpillar’s Guidelines on Corporate Governance Issues. The Board has determined that each member of the AC qualifies as an audit committee financial expert under SEC rules and has accounting or related financial management expertise.

Management is responsible for the Company’s internal controls and the financial reporting process. PwC, acting as independent auditor, is responsible for performing an independent audit of the Company’s consolidated financial statements and internal control over financial reporting in accordance with standards established by the Public Company Accounting Oversight Board (PCAOB).

The AC has discussed with the Company’s independent auditor the overall scope and execution of the independent audit and has reviewed and discussed the audited financial statements with management. The AC also discussed with the independent auditors other matters required by PCAOB auditing standards and SEC rules.

 

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The independent auditors provided to the AC the written communications required by applicable standards of the PCAOB regarding the independent accountant’s communications with the AC concerning independence, and the AC discussed the independent auditors’ independence with management and the auditors. The AC also considered whether the provision of other non-audit services by the Company’s independent auditors to the Company is compatible with maintaining independence.

The AC concluded that the independent auditors’ independence had not been impaired.

Based on the reviews and discussion referred to above, the AC recommended to the Board that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

By the members of the Audit Committee:

 

Daniel M. Dickinson, Chairman

David W. MacLennan

Edward B. Rust, Jr.

 

 2022 PROXY STATEMENT    27

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COMPENSATION

PROPOSAL 3 – ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

 

PROPOSAL SNAPSHOT

What am I voting on?

Shareholders are being asked to approve, on an advisory basis, the compensation of named executive officers as disclosed in this proxy statement.

Board Voting Recommendation:

 FOR approval of executive compensation.

 

On an annual basis, and in compliance with Section 14A of the Securities Exchange Act of 1934, shareholders are being asked to vote on the following advisory resolution:

“RESOLVED, that the compensation of Caterpillar’s named executive officers as described under ‘Compensation Discussion and Analysis,’ the compensation tables and the narrative discussion associated with the compensation tables in Caterpillar’s proxy statement for its 2022 Annual Meeting of Shareholders is hereby APPROVED.”

At the Company’s 2017 annual meeting of shareholders our shareholders indicated their preference to hold the non-binding shareholder vote to approve the compensation of our named executive officers each year. Accordingly, the Company currently intends to hold such votes annually. The next vote to approve the compensation of our named executives is expected to be held at the Company’s 2023 Annual Meeting of Shareholders. This vote is advisory and therefore not binding on Caterpillar, the Compensation and Human Resources Committee (CHRC) or the Board. The Board and the CHRC value the opinion of Caterpillar’s shareholders, and to the extent there is any significant vote against Caterpillar’s named executive officer compensation, the Board will consider the reasons for such a vote, and the CHRC will evaluate whether any actions are necessary to address those concerns.

 

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COMPENSATION DISCUSSION & ANALYSIS

EXECUTIVE SUMMARY

GOVERNANCE AND PAY FOR PERFORMANCE PHILOSOPHY

The Compensation and Human Resources Committee (CHRC) believes the executive compensation program at Caterpillar should be structured to align the interests of executives with those of our shareholders. These interests are aligned in rewarding value creation at all stages of the business cycle and providing an increasing percentage of performance-based compensation at higher levels of executive responsibility. This performance-based compensation should be both market competitive and internally equitable.

Changes made over the years to further align pay with performance have received favorable feedback from our shareholders, and support for our 2021 “say on pay” vote of 94 percent reflects this positive response.

In 2021, we continued our shareholder outreach on environmental, social and governance (including sustainability, climate and diversity & inclusion), and executive compensation topics, with holders of approximately 46 percent of our outstanding shares. In these meetings, our shareholders generally expressed a continued positive view with respect to our executive compensation program and our diversity & inclusion disclosure.

SAY ON PAY SUPPORT

94%

93%

95%

2021

2020

2019

After considering feedback received from our shareholders through our outreach efforts and the 2021 “say on pay” results, the CHRC determined that the Company’s executive compensation philosophy, compensation objectives and compensation elements continued to be appropriate and did not make any material changes to the executive compensation program for 2021. However, as communicated in October 2021, the Board of Directors has incorporated ESG in the 2022 incentive plan for Executive Officers. More information will be disclosed in the 2023 Proxy Statement.

The CHRC conducts an ongoing review of the Company’s executive compensation program to evaluate whether the program supports the Company’s compensation philosophy and objectives and to monitor the program’s alignment with its strategic business objectives. In connection with this ongoing review, and based on feedback received through our shareholder outreach, the CHRC continues to implement and maintain what it believes are best practices for executive compensation and governance. Below is a summary of those practices:

WHAT WE DO

 

WHAT WE DON’T DO

Robust stock ownership requirements

 

No individual change-in-control agreements

Thorough annual benchmarking process

 

No tax gross-ups on change-in-control benefits

Rigorous CHRC oversight of incentive metrics, goals and pay/performance relationship

 

No backdating, repricing or granting of option awards retroactively

Clawback Policy

 

 

 

Limited executive perquisites

 

 

 

Strict anti-hedging and anti-pledging policies

 

 

 

Independent compensation consultant

 

 

 

 

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COMPENSATION PROGRAM STRUCTURE

We are committed to developing and implementing an executive compensation program that directly aligns the interests of our Named Executive Officers (NEOs) with the long-term interests of shareholders. To that end, the objectives of the Company’s executive compensation program are to attract, motivate and retain talented executive officers who will improve the Company’s performance and provide long-term strategic leadership. The majority of targeted total compensation for our NEOs is equity-based, vests over multiple years and is tied directly to long-term value creation for shareholders. NEO compensation is composed of three primary components:

BASE SALARY

ANNUAL INCENTIVE PLAN (AIP)

LONG-TERM INCENTIVE

Competitive pay to attract and retain talented executives

 

An opportunity to earn an annual cash award based on the Company’s financial performance and strategic business objectives

 

A mix of performance-based restricted stock units (PRSUs) and stock options to align management’s interests with long-term shareholders’ interests

 

Approximately 90 percent of our CEO’s 2021 total targeted compensation was variable and/or at-risk compensation, including 50 percent of long-term incentives delivered in the form of performance based PRSUs with an ROE performance metric and the other 50 percent delivered in the form of stock options.

 

2021 CEO COMPENSATION ELEMENTS

 

 

*

50% of long-term incentives have performance-based vesting conditions.

 

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BUSINESS PERFORMANCE AND RESULTS

The COVID-19 pandemic caused a global recession, and the sustainability of the economic recovery observed in 2021 remains unclear. The ultimate impact of the COVID-19 pandemic on the Company’s financial and operational results will be determined by the length of time that the pandemic continues, its effect on the demand for the Company’s products and services and the supply chain, as well as the effect of governmental regulations imposed in response to the pandemic. The overall magnitude of the COVID-19 pandemic and the continued fluidity of the situation could materially and adversely impact our business, results of operations and/or financial condition.

Despite the challenges and uncertainty associated with the COVID-19 pandemic, Caterpillar delivered solid operational performance in 2021, including a 22% increase in sales and revenues, and ended the year with our best safety performance on record for the third year in a row. We remained disciplined and focused on maintaining control of our structural costs, which helped us achieve an operating profit margin of 13.5%. Adjusted operating profit margin of 13.7% was within our 2019 Investor Day target range. We generated strong operating cash flow and were able to return $5.0 billion to shareholders through dividends and share repurchases, which represented 83% of Machinery, Energy & Transportation (ME&T) free cash flow. Our total cumulative shareholder return for the 5-year period ending December 31, 2021, continued to outperform the S&P 500 and related indexes. We also increased our dividend in 2021 and paid dividends of $2.3 billion, continuing our status as a Dividend Aristocrat.

 

Our key financial and business results for 2021 included the following:

 


 

*

Enterprise Operating Profit was used in determining performance under our Annual Incentive Plan for 2021.

**

Adjusted Profit Per Share is a non-GAAP measure and a reconciliation to the most directly comparable GAAP measure is included on page 65.

 

 

STRONG BALANCE SHEET AND CASH FLOW

Operating Cash Flow $7.2 billion

Year-end enterprise cash balance $9.3 billion


 

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IMPORTANT INFORMATION REGARDING 2020 AND 2021 COMPENSATION

FOR NAMED EXECUTIVE OFFICERS

2020

RECAP
■

Due to the potential impact of COVID-19 on the Caterpillar business, in March 2020 the CHRC recommended, and the Board approved, no annual incentive payments to the NEOs for 2020 performance and no base salary increases for the NEOs in 2020.

2021 HIGHLIGHTS
■

Despite the challenges and uncertainty associated with the COVID-19 pandemic, Caterpillar delivered solid operational performance in 2020, achieving performance targets communicated in the 2019 Investor Day. Due to this 2020 performance, the CHRC resumed the annual incentive plan for 2021 and awarded base salary increases to the NEOs.

■

In October 2021, the Board of Directors announced that it will incorporate ESG in the 2022 incentive plan for executive officers, more information will be disclosed in the 2023 Proxy Statement.

 

PAY OUTCOMES DEMONSTRATE ALIGNMENT WITH COMPANY PERFORMANCE

Consistent with the CHRC’s pay-for-performance philosophy, business results were reflected in the resulting pay decisions made for our CEO and the other NEOs in 2021. Compensation outcomes for 2021 included the following items:

BASE SALARY
■

Named Executive Officers (other than the CEO and the newly promoted Group President) received an average base salary adjustment of 3.7 percent.

ANNUAL INCENTIVE
■

Annual incentive awards for 2021 paid out, on average, at 172% percent of target.

LONG-TERM INCENTIVE
■

Based on the Company’s 1-, 3- and 5-year relative Total Shareholder Return (TSR) at the end of 2020, the 2021 equity grant to the CEO was set at 75th percentile of the compensation peer group and at or below the 80th percentile for the other NEOs.(1)
(1)

Long-Term Incentive Grant Sizing detail is provided on page 39.

 

 

 

 

CEO COMPENSATION

In 2021, the CHRC and the Board approved a 3.1% increase to Mr. Umpleby’s base salary in recognition of his strong safety, financial and operational performance, despite the unprecedented challenges and uncertainty associated with the COVID-19 pandemic, and to align his target compensation with the peer group median. The annual incentive was paid at 167% of target, which reflects Company’s strong results in 2021. Mr. Umpleby’s 2021 Long-Term Incentive grant was awarded at the 75th percentile of the Company’s peer group reflecting achievement of upper quartile relative performance for 1-year TSR (81st percentile); strong 3-year TSR (63rd percentile) and exceptional 5-year TSR (94th percentile) compared to the compensation peer group; as well as the robust strength of the Company’s three-year ROE performance and his leadership delivering strong operational, safety and financial performance despite the unprecedented challenges of the COVID-19 pandemic.

 

*

Target Value Includes: Salary of $1,650,000; annual incentive of $2,887,500 and LTI grant of $11,800,000. Total Target Value: $16,337,500

**

Actual Value Includes: Salary of $1,637,500 (due to proration); annual incentive of $4,792,980 and LTI grant of $17,500,000. Total Actual Value: $23,930,480

 

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COMPENSATION DISCUSSION & ANALYSIS

THE COMPENSATION PROCESS

THE COMPENSATION AND HUMAN RESOURCES COMMITTEE (CHRC)

The CHRC is responsible for the executive compensation program design and decision-making process for NEO compensation. Regular reviews are conducted of the Company’s executive compensation practices, including the methodologies for setting NEO total compensation, the goals of the program and the underlying compensation philosophy. Recommendations and market data are provided to the CHRC by the independent compensation consultant to make decisions, as appropriate, regarding NEO compensation based on the assessment of performance and achievement of Company goals. The CHRC also exercises its judgment as to what is in the best interests of the Company and its shareholders.

 

 

 

COMPENSATION CONSIDERATIONS

The CHRC, with the support of its independent compensation consultant and management, considers many aspects of the Company’s financial and operational performance and other factors when making executive compensation decisions including, but not limited to:

■

Long-term shareholder value creation

■

The cyclical nature of the business

■

Performance relative to financial guidance provided throughout the year

■

Enterprise and Business Unit operational performance

■

Performance relative to peers and competitors

■

Historic absolute and relative performance

■

Key areas management can influence over the short- and long-term

■

Development and retention of diverse top talent

■

Skills, experience and tenure of executive incumbents

■

Market values for comparably situated executives among our peer group as well as internal equity

INDEPENDENT COMPENSATION CONSULTANT

The CHRC retained Meridian Compensation Partners, LLC (“Meridian”) as its independent compensation consultant during 2021. Meridian provides executive and director compensation consulting services, including advice regarding the design and implementation of compensation programs, market information, regulatory updates and analyses and trends on executive compensation and benefits. Interactions between Meridian and management are generally limited to discussions on behalf of the CHRC or as required to fulfill requests at the CHRC’s direction. During 2021, Meridian did not provide any other services to the Company. Based on these factors, the CHRC’s evaluation of Meridian’s independence pursuant to the requirements approved and adopted by the SEC and NYSE, and information provided by Meridian, the CHRC determined that the work performed by Meridian did not raise any conflicts of interest.

 

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BENCHMARKING COMPENSATION TO PEERS

2021 COMPENSATION PEER GROUP

The CHRC regularly assesses the market competitiveness of the Company’s executive compensation programs based on peer group data. The 2021 Compensation Peer Group was established based on the following criteria:

■

Total sales and revenues and market capitalization of the peer companies relative to Caterpillar;

■

Competitors and industry segment;

■

Potential sources for top talent;

■

Global presence with a significant portion of revenues coming from non-U.S. operations; and

■

Geographic footprint.

2021 Compensation Peer Group

3M Company

Ford Motor Company

Archer-Daniels-Midland Company

General Electric Company

The Boeing Company

Halliburton Company

Cisco Systems, Inc.

Honeywell International Inc.

Cummins Inc.

Intel Corporation

Deere & Company

Johnson Controls, Inc.

Emerson Electric Co.

PACCAR Inc.

FedEx Corporation

Raytheon Technologies Corporation

 

BENCHMARKING METHODOLOGY

To account for differences in the size of the compensation peer group companies, market data is statistically adjusted allowing for a comparison of the compensation levels to similarly-sized companies. Market data provided by the independent consultant is sourced from the Aon Total Compensation Measurement Database, and size-adjusted to Caterpillar’s three-year average revenues using regression analysis. Each element of our NEOs’ compensation is then targeted to the median of the peer group and adjusted above or below based on performance. To the extent an NEO’s total actual compensation exceeds the peer group median, it is due to outstanding performance, critical skills and notable experience. If an NEO’s compensation is below the median, it is generally due to underperformance against relevant metrics or reflective of an individual who is newer in his or her role.

2021 COMPETITOR PEER GROUP

For 2021, the CHRC also assessed the Company’s business performance against a group of competitors that it deems to compete directly with the Company. Although the Company’s peer group described above is an appropriate benchmark for executive compensation at other similarly sized companies, the peer group data does not always provide useful comparisons to other companies that might be experiencing similar business conditions. To that end, and consistent with the Company’s pay-for-performance philosophy, the Company’s business performance is compared to its competitors by establishing a “Competitor Peer Group.”

The CHRC uses the Competitor Peer Group (along with the Compensation Peer Group and S&P 500 Industrials) to assess relative performance using TSR when awarding long-term incentive awards. However, the Competitor Peer Group is not used to benchmark compensation. The 2021 Competitor Peer Group, was established based on the following criteria:

■

Compete in the same markets as the Company;

■

Offer similar products and services as the Company; or

■

Serve the same, or similar, industries and end users as the Company.

2021 Competitor Peer Group*

 

Cummins Inc.

Komatsu Ltd.

Deere & Company

Sany Heavy Industry Co., Ltd.

Hitachi Construction Machinery Co., Ltd.

Volvo AB
*

In June 2021, the CHRC approved the removal of Sany Heavy Industry Co., Ltd. and the addition of Siemens Energy and Wabtec Corporation to the Competitor Peer Group. This change in the Competitor Peer Group improves Energy & Transportation competitor representation. Otherwise, the Competitor Peer Group remained unchanged from the prior year.

 

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CEO PERFORMANCE EVALUATION AND COMPENSATION

The Board, excluding the CEO, all of whom are independent directors, annually conducts the CEO’s performance evaluation. Prior to the Board’s evaluation of the CEO’s performance and its approval of CEO compensation, the CHRC makes a preliminary compensation recommendation to the Board based on its initial evaluation and performance review of the CEO. The Board then makes its final determination for CEO compensation.

EXECUTIVE COMPENSATION AND RISK MANAGEMENT

Each year, the CHRC assesses the Company’s risk profile relative to the executive compensation program and confirms that its compensation programs and policies do not create or encourage excessive risks that are reasonably likely to have a material adverse impact on the Company. Also, the CHRC has concluded that the total compensation structure for senior leadership does not inappropriately emphasize short-term stock price performance at the expense of longer-term value creation. In particular, long-term incentive awards, as a significant portion of total compensation, and target stock ownership guidelines which NEOs are required to maintain are structured to align management’s compensation with the principles of risk management by maintaining a focus on the long-term performance of the Company.

TARGET STOCK OWNERSHIP GUIDELINES

The target stock ownership guideline for the CEO is six times base salary and three times base salary for each of the other NEOs. NEOs have a five-year period from their first grant date after appointment to meet the target stock ownership guidelines. NEOs are required to maintain their target stock ownership for a post-employment period. All NEOs are in compliance with these guidelines.

COMPONENTS OF EXECUTIVE COMPENSATION

NEOs receive a mix of fixed and variable compensation with a focus on long-term and performance-based components:

CEO


 

BASE SALARY

Base salary is the only fixed component of NEO compensation. The CHRC targets base salaries at the size-adjusted median level of the peer group. Each NEO’s base salary is determined by the individual’s level of responsibility and historic performance with reference to the market median. Base salary increases, if any, are based on achievement of individual and Company objectives, contributions to Caterpillar’s performance and culture, leadership accomplishments and a comparison to those in comparable positions at peer companies.

In 2021, Mr. Umpleby’s salary was increased from $1.6 million to $1.65 million in recognition of his strong performance and to align his target compensation with the peer group median.

In January 2021, Mr. Creed was promoted to Group President and his salary was increased to $665,000 at that time. Salary adjustments for all other NEO’s were made effective April 1, 2021, and set at or below the peer group median.

NEO Base Salary

Name

Dec 31, 2020

Dec 31, 2021

Umpleby

$1,600,000

$1,650,000

Bonfield

$832,000

$860,000

Johnson

$820,500

$855,000

De Lange

$767,400

$795,000

Creed

$455,001

$665,000

 

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ANNUAL INCENTIVE

2021 ANNUAL INCENTIVE PLAN DESIGN

The Company’s Annual Incentive Plan (AIP) is designed to provide each NEO with the opportunity to earn an annual cash payout based on the short-term performance of the Company and each NEO’s respective businesses. The AIP places a significant percentage of each NEO’s annual cash compensation at risk and aligns the interests of executives and shareholders.

The AIP design continues to closely align pay outcomes with business performance by annually comparing the Company’s forecasted Enterprise Operating Profit to the prior year’s actual Enterprise Operating Profit. The comparison is conducted to determine whether the current year will be an “up year” (improved performance) or “down year” (weaker performance) versus the prior year’s actual Enterprise Operating Profit results. In addition, the AIP design also includes a Strategic Objective Modifier which allows the CHRC to adjust the AIP payment by +/-20% based on the NEO’s contributions. All NEOs participated in AIP in 2021.

2021 ANNUAL INCENTIVE PLAN DESIGN

 

Step 1: Determine “Up/Down Year”

 

 

 

Step 2: AIP Calculation

 

 

 

 

 

2021 ANNUAL INCENTIVE PERFORMANCE MEASURES AND RESULTS

In addition to Enterprise Operating Profit performance, a portion of each NEO’s annual incentive was based on Operating Profit After Capital Charge (OPACC) and Services Revenues, all of which were subject to the same design above. Consistent with this design process, after reviewing the Company’s 2021 business plan, the CHRC determined that 2021 would be an “up year,” as Enterprise Operating Profit was forecasted to be above 2020. As a result, there were no adjustments to the target annual incentive opportunity for NEOs. For the annual incentive, at its February 2021 meeting, the CHRC approved the performance measures described below and the strategic objective to be used for determining actual payouts.

The largest portion of financial measures (ranging from 50 percent to 70 percent) of each NEO’s 2021 annual incentive opportunity was based on Enterprise Operating Profit and the OPACC for their respective businesses, where applicable. The remaining portion of each NEO’s annual incentive award opportunity was determined by the Services Revenues metric for the enterprise or their respective businesses. Consistent with the Operating & Execution model, Services Revenues align the Company’s emphasis on the services growth strategy with variable incentive opportunity.

When establishing the performance targets for 2021, the CHRC reviewed the Company’s business plan, historical performance, management recommendations and feedback provided by the independent compensation consultant.

 

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Targets were set for each of the performance measures at levels that were designed to be reasonably achievable with strong management performance. Maximum performance levels were designed to be difficult to achieve in light of historical performance and the Company’s business forecast at the time the measures were approved. The business forecast includes consideration of market, economic and geopolitical factors. The performance measures were also weighted according to the Company’s business priorities and the responsibilities of each NEO. The CHRC identified certain objectives to further focus management’s efforts on company’s services growth strategy. These objectives, as well as the performance measures and weightings, were communicated to the NEOs at the beginning of the performance period.

The charts below and on the following page summarize the performance measures, weightings and results that the CHRC reviewed and approved for the 2021 annual incentive for each NEO.

DESCRIPTION OF PERFORMANCE MEASURES

 

PERFORMANCE MEASURE

DEFINITION

RATIONALE

ENTERPRISE OPERATING PROFIT

Enterprise Operating Profit measures the overall profitability of all of Caterpillar’s operations (including Machine, Energy & Transportation (ME&T) and Financial Products) before taxes, interest and other non-operating items. For AIP purposes, the Enterprise Operating Profit metric will be calculated as Caterpillar Consolidated Operating Profit excluding restructuring costs.

The CHRC approved Enterprise Operating Profit as a performance measure to incentivize management to enhance the overall profitability of the Company. The CHRC believes that Enterprise Operating Profit is an important corporate metric for shareholders to be able to assess the financial health of the Company.

ENTERPRISE OPERATING PROFIT AFTER CAPITAL CHARGE (OPACC)

Enterprise Operating Profit After Capital Charge (OPACC) measures how productively and efficiently Caterpillar is utilizing assets to generate shareholder value. For AIP purposes, Enterprise OPACC is calculated as ME&T adjusted operating profit excluding restructuring costs less the capital charge.

For Enterprise OPACC, the capital charge equals average quarterly ME&T net assets multiplied by a pre-tax capital charge rate of 13 percent.

OPACC is designed to measure how productively and efficiently the Company’s assets are being utilized by examining the relationship between the value of the Company’s assets and the operating profit that those assets generate. An increase in OPACC means that the Company’s management is utilizing assets more efficiently to generate shareholder value, which the CHRC views as key to Caterpillar’s long-term success.

SEGMENT OPERATING PROFIT AFTER CAPITAL CHARGE (OPACC)

For each segment, OPACC is calculated as segment profit less the capital charge. In 2021, the capital charge was calculated as the average monthly net accountable assets multiplied by a pre-tax capital charge rate of 13 percent.

OPACC is designed to measure how productively and efficiently the Company’s assets are being utilized by examining the relationship between the value of the Company’s assets and the operating profit that those assets generate. An increase in OPACC means that the Company’s management is utilizing assets more efficiently to generate shareholder value, which the CHRC views as key to Caterpillar’s long-term success.

SERVICES REVENUES

ME&T Services Revenues include, but are not limited to, aftermarket parts and other service-related revenues (excludes Cat Financial and discontinued products). Due to the competitively sensitive nature of this measure, the threshold, target and result levels have all been indexed and reported as such.

The CHRC approved Services Revenues as an important measure intended to further strengthen profitability realized by growth in aftermarket parts and services.

 

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2021 ANNUAL INCENTIVE PERFORMANCE MEASURES AND RESULTS

 

*

Adjusted for approved items

 

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2021 INCENTIVE PAYMENTS

In early 2022, the results for each performance measure noted above were converted into a performance factor, which was then multiplied by the respective weightings to determine the performance factor for each NEO. Then, the CHRC assessed the individual contributions of each NEO to the Strategic Objective, the high-priority initiative critical to deliver the enterprise strategy for long-term profitable growth, to determine the final factor and actual payments.

The following are the calculated 2021 cash incentive payments made to the NEOs:

 

Target

Opportunity

 

Salary(1)

 

Final

Factor(2)

 

Payment(3)

 

Umpleby

175%

X

$

1,637,671

X

1.67

=

$

4,792,980

 

Bonfield

115%

X

$

853,096

X

1.55

=

$

1,524,600

 

Johnson

115%

X

$

846,493

X

1.82

=

$

1,771,100

 

De Lange

115%

X

$

788,195

X

1.95

=

$

1,772,000

 

Creed

115%

X

$

665,000

X

1.60

=

$

1,227,300

 

(1)   All payments were calculated using a daily weighted average salary.

(2)   The final factor represents the calculated financial performance results adjusted by the Strategic Objective Modifier; the Strategic Objective Modifier applied to Mr. Umpleby was 13% and ranged from 5% to 18% for the other NEOs.

(3)   Payments were rounded up to the nearest thousand; may not recalculate exactly due to rounding.

LONG-TERM INCENTIVE

2021 DESIGN

In 2021, the CHRC granted one-half of each NEO’s total long-term incentive (LTI) value in Performance-based Restricted Stock Units (PRSUs) and one-half in non-qualified stock options (stock options). The stock options vest equally in one-third increments beginning on the first anniversary of the grant date and expire after ten years from grant. Dividend Equivalent Units (DEUs) accrue on unvested PRSUs, but are settled only if the vesting requirements are met. The DEUs will settle in additional shares, rounded to the nearest whole unit.

For the 2021 PRSU grants, the CHRC selected Return on Equity (ROE) as the performance measure because it aligns the interests of the NEOs with those of our shareholders by measuring and rewarding profitability relative to shareholders’ investment in the business. The use of the ROE metric and the determination of the performance hurdle for each performance cycle are calibrated with historical performance of the compensation and competitor peer groups (as well as S&P 500 Industrials more broadly) and are intended to reward for the achievement of sustained, long-term returns throughout the cycles in the Company’s business. The CHRC believes that a strong focus on ROE reinforces effective capital management along with the need to deliver returns above the cost of capital even in a highly cyclical and often challenging macro-economic operating environment, thus aligning leadership priorities with long-term shareholder interests. The Company’s ROE performance is annually reviewed including any one-time, non-operational or other special items that might impact the ROE result. Although certain items may significantly impact the Company’s reported financial results, they are not always indicative of the underlying operational performance of the Company or its management. To that end, in its evaluation of the Company’s ROE results, the CHRC may use its discretion to make adjustments to ROE to align compensation outcomes with the operating performance of the Company.

2021 GRANT SIZING

The CHRC follows a consistent process for sizing and awarding LTI grant values for NEOs, the process is described and illustrated below:

1

Benchmark the median LTI value for the Company’s Compensation Peer Group

2

Review and consider financial results: 1-, 3- and 5-year TSR (vs. the Compensation Peer Group and Competitor Peer Group and the S&P 500 Industrials); operational performance; market conditions; and strategy execution

3

Adjust award values to reflect individual performance including consistency of performance against goals, leadership contributions, time in role and other relevant factors

 

 

In determining grant sizing for 2021, the Committee was consistent with the methodology used in previous years and its pay for performance philosophy; and assessed the 1-, 3- and 5-year relative TSR performance for the period ending December 31, 2020, as well as operating performance and strategy execution during these periods.

The Company delivered strong financial and operational performance results as demonstrated by the upper quartile relative performance for 1-year TSR (81st percentile); together with strong 3-year TSR (63rd percentile) and exceptional 5-year TSR (94th percentile) of the compensation peer group. Based on the robust strength of this relative TSR performance and the three-year ROE performance, coupled with the resilience demonstrated throughout the unprecedented challenges of a global pandemic, the 2021 LTI award for the CEO was set at the 75th percentile of the benchmarked LTI values of the Company’s compensation peer group and at or below the 80th percentile for the other NEOs.

 

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RELATIVE TSR PERFORMANCE (PERCENTILE RANKING VS. PEERS)

Performance Period

Compensation

Peer Group

Competitor

Peer Group

S&P 500

Industrials

1-Year

81st

33rd

70th

3-Year

63rd

33rd

41st

5-Year

94th

67th

83rd

Grant Sizing

75th - 80th Percentile

 

 

2019 – 2021 PERFORMANCE RESTRICTED STOCK UNITS (PRSUs)

For the 2019 – 2021 performance period, adjustments were made to the ROE to exclude the impact of certain restructuring costs, pension and other post-employment benefits (OPEB) mark-to-market gains/losses resulting from plan remeasurements and U.S. tax reform in 2019. In each case, the CHRC determined that these adjustments were an appropriate use of its discretion and in the best interests of the Company and its shareholders.

For the 2019 grant, the PRSUs cliff vested based on a three-year average adjusted ROE result of 35 percent, which exceeded the goal of 18 percent. The chart below describes the Company’s ROE performance and results for the 2019 – 2021 performance period:

2019-2021 PRSUs

 

OTHER COMPENSATION, BENEFITS AND CONSIDERATIONS

POST-TERMINATION AND CHANGE IN CONTROL BENEFITS

Except for customary provisions in employee benefit plans and as required by applicable law, the NEOs do not have any pre-existing executive severance packages or contracts; however, the CHRC will consider the particular facts and circumstances of an NEO’s separation to determine whether payment of any severance or other benefit to such NEO is appropriate. Change in control benefits are provided under the Company’s long-term and annual incentive plans and represent customary provisions for these types of plans and have no direct correlation with other compensation decisions. There is no cash severance or other benefits for a termination related to change in control beyond what is provided under the long-term and annual incentive plans.

The Company’s change in control provisions are subject to a “double trigger” and, when both a change in control and involuntary termination of employment without cause occur, provide accelerated vesting and target payouts under the incentive plans, as described further below.

In the event of a qualifying termination of employment following a change in control, target payouts are provided under the incentive plans.

■

All unvested stock options, stock appreciation rights, performance-based restricted stock units and restricted stock units vest immediately.

■

Stock options and stock appreciation rights remain exercisable over the normal life of the grant.

■

The annual incentive plan allows for the target award opportunity, prorated based on the individual’s time of employment from the beginning of the performance period through the latter of: (1) the change in control or (2) termination of employment.

Additional information is disclosed in the “Potential Payments Upon Termination or Change in Control” section of this proxy statement.

 

 2022 PROXY STATEMENT    40

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RETIREMENT AND OTHER BENEFITS

In addition to the annual and long-term components of compensation, NEOs participate in health and welfare benefit plans generally available to U.S.-based management and salaried employees to provide competitive benefits.

The defined contribution and defined benefit retirement plans available to the NEOs are also available to many U.S.-based management and salaried employees. Under the defined benefit pension plans, the benefit is calculated based on years of service and final average monthly earnings. All NEOs participate in one or more of the U.S. retirement plans described below:

 

Plan Type

Title

Description

RETIREMENT INCOME PLAN (RIP)

Defined benefit pension plan under which benefit amounts are calculated based on years of service and final average monthly earnings and offer annuity payments. On December 31, 2014, the Solar Turbines Incorporated Retirement Plan merged with and into RIP and is a supplement to RIP as of January 1, 2015. As a result, all references herein to “Solar RP” shall refer to benefits accrued under the Solar Turbines Incorporated Retirement Plan supplement to RIP. Solar RP and RIP were closed to new entrants effective January 1, 2011. Benefits were frozen for most participants at that time; however, a group of “Sunset” participants accrued benefits until the earlier of their separation from service or December 31, 2019. Sunset participants were hired prior to January 1, 2003, and were age 40 or more as of December 31, 2010. Mr. Umpleby earned benefits under Solar RP through December 31, 2019; Mr. Creed earned benefits under RIP through December 31, 2010.

SOLAR MANAGERIAL RETIREMENT OBJECTIVE PLAN (MRO)

Non-qualified defined benefit pension plan that works in tandem with the Solar RP supplement to RIP. MRO pays an additional benefit that would otherwise have been paid under Solar RP if cash incentive awards were taken into account under Solar RP. MRO also provides additional pension benefits if the Solar RP benefit is limited due to certain compensation and annual benefit limits imposed on RIP by the tax code. Mr. Umpleby earned benefits under MRO through December 31, 2019.

CATERPILLAR 401(k) SAVINGS PLAN

(401(k) PLAN)

All NEOs participate in the 401(k) Plan under which the Company matches 100 percent of the first six percent of eligible pay contributed by the participant, and the Company makes an annual non-elective contribution equal to three percent, four percent or five percent of eligible pay based on the employee’s age and years of service with the Company.

SUPPLEMENTAL DEFERRED COMPENSATION PLAN (SDCP)

All NEOs also participate in SDCP, which provides the opportunity to make deferrals of base salary in excess of the limits imposed on the 401(k) Plan by the Internal Revenue Code and to elect deferrals from the AIP. Under the terms of SDCP, participants are eligible to earn matching contributions and annual non-elective contributions based on formulas applicable to them in the 401(k) Plan.

SUPPLEMENTAL (SEIP) AND DEFERRED (DEIP) EMPLOYEES’ INVESTMENT PLAN

NEOs meeting eligibility requirements prior to March 25, 2007, were previously eligible to participate in SEIP and DEIP. These plans were closed in March 2007. Compensation deferred into SEIP and DEIP prior to January 1, 2005, remains in these plans.

 

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LIMITED PERQUISITES

The Company provides NEOs a limited number of perquisites that the CHRC believes are reasonable and consistent with the overall compensation program and those commonly provided in the marketplace. These perquisites are intended to provide for the security and safety of our executives as well as to allow additional time to devote to Caterpillar business. Perquisites include executive physicals, financial planning, home and personal security and limited personal use of company aircraft and ground transportation. The costs associated with these perquisites are included in the “2021 All Other Compensation Table.”

CLAWBACK PROVISION

Under the Company’s compensation clawback provision, the Board may require reimbursement of any bonus or incentive compensation awarded to an officer or cancel unvested restricted or deferred stock awards previously granted to the officer if all the following apply:

■

The amount of the bonus, incentive compensation or stock award was calculated based on the achievement of certain financial results that were subsequently the subject of a restatement.

■

The officer engaged in intentional misconduct that caused or partially caused the need for the restatement.

■

The amount of the bonus, incentive compensation or stock award that would have been awarded to the officer had the financial results been properly reported would have been lower than the amount actually awarded.

NO HEDGING OR PLEDGING

The Company’s insider trading policy prohibits directors, officers and employees from engaging in hedging transactions, holding Company securities in a margin account or otherwise pledging Company securities.

TAX IMPLICATIONS: DEDUCTIBILITY OF NEO COMPENSATION

Under Section 162(m) of the Internal Revenue Code, generally NEO compensation over $1 million for any year is not deductible for United States income tax purposes. Historically, there was an exemption from this $1 million deduction limit for compensation payments that qualified as “performance-based” under applicable IRS regulations. With the enactment of the 2017 Tax Cuts and Jobs Act, the performance-based compensation exemption was eliminated under Section 162(m) of the Internal Revenue Code, except with respect to certain grandfathered arrangements. The CHRC believes that it must maintain flexibility in its approach to executive compensation in order to structure a program that it considers to be the most effective in attracting, motivating and retaining the Company’s key executives, and therefore, the deductibility of compensation is one of several factors considered when making executive compensation decisions.

COMPENSATION AND HUMAN RESOURCES COMMITTEE REPORT

The Compensation and Human Resources Committee (CHRC) has reviewed and discussed the Compensation Discussion & Analysis (CD&A) included in this proxy statement with management and is satisfied that the CD&A fairly and completely represents the philosophy, intent and actions of the CHRC with regard to executive compensation. Based on such review and discussion, we recommend to the Board that the CD&A be included in this proxy statement and the Company’s Annual Report on Form 10-K for filing with the SEC.

 

By the members of the Compensation and Human Resources Committee:

 

Debra L. Reed-Klages (Chair)

Miles D. White

Rayford Wilkins, Jr.

 

 2022 PROXY STATEMENT    42

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2021 SUMMARY COMPENSATION TABLE

Name and

Principal Position

Year

 

Salary

 

Bonus

 

Stock

Awards(1)

 

Option

Awards(2)

Non-equity

Incentive Plan

Compensation(3)

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings(4)

All Other

Compensation(5)

 

Total

Compensation

Total

Without

Change in

Pension

Value(6)

D. James Umpleby III
Chairman & CEO

2021

$

1,637,500

$

—

$

8,749,964

$

8,750,028

$

4,792,980

$

—

$

367,560

$

24,298,032

$

24,298,032

2020

$

1,600,000

$

—

$

5,899,969

$

5,900,000

$

—

$

—

$

276,582

$

13,676,551

$

13,676,551

2019

$

1,575,000

$

—

$

5,450,022

$

6,704,943

$

2,336,000

$

18,161,210

$

291,954

$

34,519,129

$

16,357,919

Andrew R. J. Bonfield
CFO

2021

$

853,000

$

—

$

2,599,981

$

2,599,993

$

1,524,600

$

—

$

118,062

$

7,695,636

$

7,695,636

2020

$

832,000

$

—

$

1,800,053

$

1,800,009

$

—

$

—

$

152,520

$

4,584,582

$

4,584,582

2019

$

824,000

$

—

$

1,799,934

$

2,214,477

$

730,000

$

—

$

479,732

$

6,048,143

$

6,048,143

Denise C. Johnson
Group President

2021

$

846,375

$

—

$

2,550,095

$

2,549,997

$

1,771,100

$

—

$

138,799

$

7,856,366

$

7,856,366

2020

$

820,500

$

—

$

1,849,945

$

1,849,993

$

—

$

—

$

222,421

$

4,742,859

$

4,742,859

2019

$

808,875

$

—

$

1,799,934

$

2,214,477

$

840,000

$

—

$

243,684

$

5,906,970

$

5,906,970

Bob De Lange
Group President

2021

$

788,100

$

—

$

2,499,990

$

2,500,000

$

1,772,000

$

—

$

146,620

$

7,706,710

$

7,706,710

2020

$

767,400

$

—

$

1,849,945

$

1,849,993

$

—

$

—

$

213,557

$

4,680,895

$

4,680,895

2019

$

761,800

$

—

$

1,600,018

$

1,968,433

$

820,000

$

—

$

281,928

$

5,432,179

$

5,432,179

Joseph E. Creed
Group President

2021

$

665,000

$

—

$

2,499,990

$

2,500,000

$

1,227,300

$

—

$

289,991

$

7,182,281

$

7,182,281
                                       
(1)

The amounts reported in this column represent PRSUs granted in 2021 under the Caterpillar Inc. 2014 Long-Term Incentive Plan (LTIP) and are valued based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, assuming the highest level of performance is achieved for the PRSUs, which at the time of grant reflected the probable level of achievement. Assumptions made in the calculation of these amounts are included in Note 3 “Stock-based compensation” to the Company’s consolidated financial statements for the fiscal year ended December 31, 2021, included in the Company’s Form 10-K filed with the SEC on February 16, 2022.
(2)

The amounts reported in this column represent non-qualified stock options granted under the LTIP that are valued based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. Assumptions made in the calculation of these amounts are included in Note 3 “Stock-based compensation” to the Company’s consolidated financial statements for the fiscal year ended December 31, 2021, included in the Company’s Form 10-K filed with the SEC on February 16, 2022.
(3)

The amounts in this column reflect the AIP payments for 2021, paid in 2022, for all NEOs.
(4)

No NEO receives preferential or above market earnings on nonqualified deferred compensation. Amounts above reflect the actuarial present value of the NEO's change in accrued benefit under all defined benefit pension plans year over year using the pension plan measurement dates for financial statement reporting purposes. See Retirement and Other Benefits on page 41 for descriptions of the pension plans, and the 2021 Pension Benefits table and related footnotes on page 47 for the present value of each NEO's accumulated pension benefits and information regarding actuarial assumptions used.
(5)

All Other Compensation detail for 2021 is shown in a separate table appearing on the next page.
(6)

To demonstrate how year-over-year changes in pension value impact total compensation, as determined under SEC rules, we have included this column to show total compensation without pension value changes. The amounts reported in this column are calculated by subtracting the change in pension value reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column, from the amounts reported in the Total Compensation column. The amounts reported in this column differ from, and are not a substitute for, the amounts reported in the Total Compensation column.

 

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2021 ALL OTHER COMPENSATION TABLE

Name

 

Company

Contributions

401(k)

 

Company

Contributions

SDCP

 

Corporate

Aircraft/

Transportation(1)

 

Personal

Security(2)

 

Other(3)

 

Total All

Other

Compensation

D. James Umpleby III

$

31,350

$

263,400

$

49,170

$

5,845

$

17,795

$

367,560

Andrew R. J. Bonfield

$

28,500

$

84,860

$

-

$

407

$

4,295

$

118,062

Denise C. Johnson

$

28,673

$

88,403

$

1,242

$

2,686

$

17,795

$

138,799

Bob De Lange

$

31,258

$

95,006

$

69

$

2,374

$

17,913

$

146,620

Joseph E. Creed

$

31,058

$

48,973

$

1,763

$

11,458

$

196,739

$

289,991
                         
(1)

Values in this column, except as below, include the value of personal aircraft usage based on Caterpillar’s incremental cost per flight hour, including the weighted average variable operating cost of fuel, oil, aircraft maintenance, landing and parking fees, related ground transportation, catering and other smaller variable costs. Mr. Umpleby and the Company have a time-sharing lease agreement, pursuant to which certain costs associated with personal flights are reimbursed by Mr. Umpleby to the Company in accordance with the agreement. The 2021 amount listed includes personal use of corporate aircraft as follows: Mr. Umpleby $48,750, Mr. De Lange $69 and Mr. Creed $213. Values in this column also include the value of personal use of executive ground transportation service based on Caterpillar’s incremental cost per mile and trip hour, or as invoiced by a third party service provider. The 2021 amount listed includes personal ground transportation usage as follows: Mr. Umpleby $420, Ms. Johnson $1,242 and Mr. Creed $1,550.

(2)

Amounts reported for personal security represent the cost provided by outside security providers for installation, monitoring and maintenance of home security and smart home services and for reputation and identity theft protection. The incremental cost associated with the security services is determined based upon the amounts paid to these outside service providers.

(3) 

Values in this column include the cost for executive physicals and financial planning services. The incremental cost associated with these services is determined based upon the amounts paid to the approved service providers. Mr. De Lange was previously an International Service Employee (ISE), and the amount reported also includes tax preparation fees of $1,618 (including a tax gross-up of $118) incurred in 2021 related to his ISE service in accordance with the Company's tax equalization policy for ISEs. The amount reported for Mr. Creed also includes allowances and reimbursements related to relocation expenses of $183,239 (including a tax gross-up of $37,500). Mr. Creed received the same benefits and was subject to the same relocation policy as other U.S.-based management employees.

 

 2022 PROXY STATEMENT    44

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GRANTS OF PLAN-BASED AWARDS IN 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name

Grant Date

Estimated Future Payouts Under

Non-Equity Incentive Plan Awards (1)

 

Estimated

Future

Payouts

Under Equity

Incentive Plan

Awards(2)

All Other

Stock

Awards:

Number of

Shares of

Stock or

Units

All Other

Option

Awards:

Number of

Securities

Underlying

Options(3)

 

Exercise

or Base

Price of

Option

Awards

($/Share)

 

Grant Date

Fair Value of

Stock and

Option

Awards ($)(4)

Threshold ($)

 

Target ($)

 

Maximum
($)

Target (#)

 

D. James Umpleby III

3/1/2021

 

 

 

 

39,816

—

—

$

—

$

8,749,964

3/1/2021

 

 

 

 

—

—

155,411

$

219.76

$

8,750,028

AIP(5)

1,432,962

2,865,925

5,731,849

 

 

 

 

 

 

 

 

Andrew R. J. Bonfield

3/1/2021

 

 

 

 

11,831

—

—

$

—

$

2,599,981

3/1/2021

 

 

 

 

—

—

46,179

$

219.76

$

2,599,993

AIP(5)

490,530

981,060

1,962,121

 

 

 

 

 

 

 

 

Denise C. Johnson

3/1/2021

 

 

 

 

11,604

—

—

$

—

$

2,550,095

3/1/2021

 

 

 

 

—

—

45,291

$

219.76

$

2,549,997

AIP(5)

486,734

973,467

1,946,934

 

 

 

 

 

 

 

 

Bob De Lange

3/1/2021

 

 

 

 

11,376

—

—

$

—

$

2,499,990

3/1/2021

 

 

 

 

—

—

44,403

$

219.76

$

2,500,000

AIP(5)

453,212

      906,424

1,812,847

 

 

 

 

 

 

 

 

Joseph E. Creed

3/1/2021

 

 

 

 

11,376

—

—

$

—

$

2,499,990

3/1/2021

 

 

 

 

—

—

44,403

$

219.76

$

2,500,000

AIP(5)

382,375

764,750

1,529,500

 

 

 

 

 

 

 

 
                       
(1)

The amounts reported represent estimated potential awards under the 2021 AIP.
(2)

The amounts reported in this column represent estimated potential awards under the LTIP. PRSUs were granted on March 1, 2021, under the LTIP for the 2021-2023 performance period. PRSUs vest at the end of the three-year performance period subject to the Company’s achievement of an average ROE performance hurdle during that period. There is no threshold or maximum payout opportunity with respect to these PRSUs.
(3)

Amounts reported represent stock options granted under the LTIP. The exercise price for all stock options granted to the NEOs is the closing price of Caterpillar stock on the grant date, March 1, 2021. All stock options granted to the NEOs will vest in one-third increments on March 1, 2022, March 1, 2023, and March 1, 2024.
(4)

The amounts shown do not reflect realized compensation by the NEO. As reported in this column, the value of PRSUs granted in 2021 under the LTIP are based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, assuming the highest level of performance is achieved for the PRSUs, which at the time of the grant reflected the probable level of achievement.
(5)

The 2021 AIP estimates shown are based upon each executive’s base salary for 2021. The actual payout was based on the achievement of corporate and business unit performance metrics and the Strategic Objective Modifier. Please refer to page 37 of the CD&A for a detailed explanation of the various performance metrics. Payments under AIP are limited by a plan cap set at $15 million. The cash payouts for the 2021 plan year are included in the column “Non-Equity Incentive Plan Compensation” of the “2021 Summary Compensation Table.”

 

 2022 PROXY STATEMENT    45

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OUTSTANDING EQUITY AWARDS AT 2021 FISCAL YEAR END

 

Option Awards

 

Stock Awards

 

Number of Securities Underlying

Unexercised SARs/Options

SAR / Option

Exercise Price

SAR / Option

Expiration

Date(1)

Number of

Shares or

Units of

Stock that

have not

Vested

Market Value

of Shares or

Units of Stock

that have not

Vested

Equity Incentive Plan Awards

 

Grant Date

Exercisable

Unexercisable

Number of Unearned

Shares, Units or

other Rights that

have not Vested(2)

Market or Payout Value

of Unearned Share,

Units or other Rights

that have not Vested(3)

D. James Umpleby III

3/5/2018

182,944

—

$

151.12

3/5/2028

 

—

$

—

—

 

$

—

3/4/2019

—

—

$

—

 

 

—

$

—

42,281

(4)

$

8,741,174

3/4/2019

109,077

54,538

$

138.35

3/4/2029

 

—

$

—

—

 

$

—

3/2/2020

—

—

$

—

 

 

—

$

—

48,213

(5)

$

9,967,556

3/2/2020

75,701

151,402

$

127.60

3/2/2030

 

—

$

—

—

 

$

—

3/1/2021

—

—

$

—

 

 

—

$

—

40,425

(5)

$

8,357,465

3/1/2021

—

155,411

$

219.76

3/1/2031

 

—

$

—

—

 

$

—

Andrew R. J. Bonfield

3/4/2019

—

—

$

—

 

 

—

$

—

13,964

(4)

$

2,886,917

3/4/2019

—

18,012

$

138.35

3/4/2029

 

—

$

—

—

 

$

—

3/2/2020

—

—

$

—

 

 

—

$

—

14,710

(5)

$

3,041,145

3/2/2020

—

46,190

$

127.60

3/2/2030

 

—

$

—

—

 

$

—

3/1/2021

—

—

$

—

 

 

—

$

—

12,012

(5)

$

2,483,361

3/1/2021

—

46,179

$

219.76

3/1/2031

 

—

$

—

—

 

$

—

Denise C. Johnson

3/4/2019

—

—

$

—

 

 

—

$

—

13,964

(4)

$

2,886,917

3/4/2019

—

18,012

$

138.35

3/4/2029

 

—

$

—

—

 

$

—

3/2/2020

—

—

$

—

 

 

—

$

—

15,117

(5)

$

3,125,289

3/2/2020

—

47,473

$

127.60

3/2/2030

 

—

$

—

—

 

$

—

3/1/2021

—

—

$

—

 

 

—

$

—

11,782

(5)

$

2,435,811

3/1/2021

—

45,291

$

219.76

3/1/2031

 

—

$

—

—

 

$

—

Bob De Lange

3/7/2016

46,870

—

$

74.77

3/7/2026

 

—

$

—

—

 

$

—

3/6/2017

79,834

—

$

95.66

3/6/2027

 

—

$

—

—

 

$

—

3/5/2018

60,512

—

$

151.12

3/5/2028

 

—

$

—

—

 

$

—

3/4/2019

—

—

$

—

 

 

—

$

—

12,413

(4)

$

2,566,264

3/4/2019

32,023

16,011

$

138.35

3/4/2029

 

—

$

—

—

 

$

—

3/2/2020

—

—

$

—

 

 

—

$

—

15,117

(5)

$

3,125,289

3/2/2020

23,737

47,473

$

127.60

3/2/2030

 

—

$

—

—

 

$

—

3/1/2021

—

—

$

—

 

 

—

$

—

11,550

(5)

$

2,387,847

3/1/2021

—

44,403

$

219.76

3/1/2031

 

—

$

—

—

 

$

—

Joseph E. Creed

3/5/2018

18,294

—

$

151.12

3/5/2028

 

—

$

—

—

 

$

—

3/4/2019

—

—

$

—

 

 

—

$

—

3,879

(4)

$

801,944

3/4/2019

10,008

5,003

$

138.35

3/4/2029

 

—

$

—

—

 

$

—