DEF 14A 1 ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.      )

 

 

 

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¨  Soliciting Material Pursuant to §240.14a-12

 

 

 

Corning Incorporated

 

(Name of Registrant as Specified In Its Charter)

 

 

 

  

 

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

 

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Corning Incorporated

One Riverfront Plaza

Corning, New York 14831

Notice of 2011 Annual Meeting of Shareholders

To Shareholders of Corning Incorporated:

You are cordially invited to attend the 2011 Annual Meeting of Shareholders of Corning Incorporated which will be held in The Corning Museum of Glass Auditorium, Corning, New York, on Thursday, April 28, 2011 at 11:00 a.m. Eastern Time. The Annual Meeting is open to all shareholders of record as of the close of business on February 24, 2011, the record date for the meeting.

The principal business of the meeting will be:

 

  1. To elect six directors for a one-year term;

 

  2. To hold an advisory vote on executive compensation;

 

  3. To hold an advisory vote on the frequency of holding an advisory vote on executive compensation;

 

  4. To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011;

 

  5. To consider the non-binding shareholder proposal described on page 66 in the accompanying proxy statement, if presented at the meeting; and

 

  6. Any other matter, if any, as may properly come before the meeting and any adjournment or postponement of the Annual Meeting.

Our Board recommends that you vote for Items 1, 2, 3, 4 and against the shareholder proposal.

 

YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE PROMPTLY SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS BY INTERNET, TELEPHONE OR MAIL IN ORDER TO ENSURE THE PRESENCE OF A QUORUM.

Registered shareholders may vote:

 

   

By Internet at www.investorvote.com/glw. This will require your 6-digit control number.

 

   

By telephone (from the United States and Canada only) at (800) 652-VOTE (8683).

 

   

By mail by completing, signing, dating and returning the enclosed proxy card in the postage paid envelope provided (see instructions on proxy card).

Beneficial owners: If your shares are held in the account of or name of a bank, broker or other holder of record, follow the instructions you receive from the holder of record to vote your shares held in that account.

By order of the Board of Directors,

Denise A. Hauselt

Vice President, Secretary and Assistant General Counsel

March 14, 2011

Important Notice Regarding the Availability of Proxy Materials for the Shareholder

Meeting to Be Held on April 28, 2011

Our Proxy Statement and 2010 Annual Report to Shareholders

are available at www.corning.com/2011_proxy


About the Meeting

Why Did You Send Me This Proxy Statement?

We sent this proxy statement and the enclosed proxy card to you because our Board of Directors is soliciting your proxy to vote at the 2011 Annual Meeting of Shareholders. This proxy statement summarizes information concerning the matters to be presented at the meeting and related information that will help you make an informed vote. This proxy statement and the accompanying proxy card are first being mailed to shareholders on or about March 14, 2011.

When Is The Annual Meeting?

The Annual Meeting will be held on Thursday, April 28, 2011, at 11:00 a.m., Eastern Time, at The Corning Museum of Glass Auditorium, Corning, New York.

Who May Attend The Annual Meeting?

The Annual Meeting is open to all holders of our common shares. To attend the meeting, you will need to register upon arrival. We may check for your name on our shareholders’ list and ask you to produce valid photo ID. If your shares are held in street name by your broker or bank, you should bring your most recent brokerage account statement or other evidence of your share ownership. If we cannot verify that you own Corning shares, it is possible that you will not be admitted to the meeting.

What Am I Voting On?

At the Annual Meeting, you will be voting:

 

   

To elect six directors for a one-year term (Proposal 1);

 

   

To hold an advisory vote on executive compensation (Proposal 2);

 

   

To hold an advisory vote on the frequency of holding an advisory vote on executive compensation (Proposal 3);

 

   

To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011 (Proposal 4);

 

   

To consider the non-binding shareholder proposal described on page 66, if presented at the meeting (Proposal 5); and

 

   

Any other matter, if any, as may properly come before the meeting and any adjournment or postponement of the Annual Meeting.

How Do You Recommend That I Vote On These Items?

The Board of Directors recommends that you vote your shares:

 

   

FOR each of the director nominees (Proposal 1);

 

   

FOR the approval of the compensation of the Company’s named executive officers, as such information is disclosed in the Compensation Discussion and Analysis, the compensation tables and the accompanying disclosure beginning on page 66 (commonly referred to as “say-on-pay”) (Proposal 2);

 

   

FOR the approval of an annual advisory vote on executive compensation (Proposal 3);

 

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FOR ratification of the Board’s appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011 (Proposal 4); and

 

   

AGAINST the shareholder proposal (Proposal 5).

Who Is Entitled To Vote?

You may vote if you owned our common shares as of the close of business on February 24, 2011, the record date for the Annual Meeting.

How Many Votes Do I Have?

You are entitled to one vote for each common share you own. As of the close of business on February 2, 2011, we had 1,565,794,881 common shares outstanding. The shares held in our treasury are not considered outstanding and will not be voted or considered present at the meeting.

How Do I Vote By Proxy Before The Annual Meeting?

Before the meeting, registered shareholders may vote shares in one of the following three ways:

 

   

By Internet at www.investorvote.com/glw;

 

   

By telephone (from the United States and Canada only) at 1(800) 652-VOTE (8683); and

 

   

By mail by completing, signing, dating and returning the enclosed proxy card in the postage paid envelope provided (see instructions on proxy card).

Please refer to the proxy card for further instructions on voting by Internet or telephone.

Please use only one of the three ways to vote.

If you hold shares in the account of or name of a broker, your ability to vote those shares by Internet and telephone depends on the voting procedures used by your broker, as explained below under “How Do I Vote If My Broker Holds My Shares In “Street Name”?”

May I Vote My Shares In Person At The Annual Meeting?

Yes. You may vote your shares at the meeting if you attend in person, even if you previously submitted a proxy card or voted by Internet or telephone. Whether or not you plan to attend the meeting, however, we strongly encourage you to vote your shares by proxy before the meeting.

May I Change My Mind After I Vote?

Yes. You may change your vote or revoke your proxy at any time before the polls close at the meeting. You may change your vote by:

 

   

signing another proxy card with a later date and returning it to Corning’s Corporate Secretary at One Riverfront Plaza, Corning, NY 14831, prior to the meeting;

 

   

voting again by Internet or telephone prior to the meeting; or

 

   

voting again at the meeting.

You also may revoke your proxy prior to the meeting without submitting any new vote by sending a written notice that you are withdrawing your vote to our Corporate Secretary at the address listed above.

 

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What Shares Are Included On My Proxy Card?

Your proxy card includes shares held in your own name and shares held in any Corning plan. You may vote these shares by Internet, telephone or mail, as described on the enclosed proxy card. Your proxy card does not include any shares held in a brokerage account in the name of your bank or broker (such shares are said to be held in “street name”).

How Do I Vote If I Participate In The Corning Investment Plan?

If you hold shares in the Corning Investment Plan, which includes shares held in the Corning Stock Fund in the 401(k) plan, these shares have been added to your other holdings on your proxy card. Your completed proxy card serves as voting instructions to the trustee of the plan. You may direct the trustee how to vote your plan shares by submitting your proxy vote for those shares, along with the rest of your shares, by Internet, telephone or mail, all as described on the enclosed proxy card. If you do not instruct the trustee how to vote, your plan shares will be voted by the trustee in the same proportion that it votes shares in other plan accounts for which it did receive timely voting instructions.

How Do I Vote If My Broker Holds My Shares In “Street Name”?

If your shares are held in a brokerage account in the name of your bank or broker (this is called “street name”), those shares are not included in the total number of shares listed as owned by you on the enclosed proxy card. Instead, your bank or broker will send you directions on how to vote those shares.

What Is A “Broker Non-Vote”?

If you own shares through a bank or broker in street name, you may instruct your bank or broker how to vote your shares. A “broker non-vote” occurs when you fail to provide your bank or broker with voting instructions and the bank or broker does not have the discretionary authority to vote your shares on a particular proposal because the proposal is not a routine matter under the New York Stock Exchange rules. As explained under the question “Will My Shares Held In Street Name Be Voted If I Do Not Provide My Proxy?,” Proposals 1, 2, 3, and 5 are not considered routine matters under the current New York Stock Exchange rules, so your bank or broker will not have discretionary authority to vote your shares held in street name on those items. Abstentions and broker non-votes count for quorum purposes, but not for the voting of these proposals. A broker non-vote may also occur if your broker fails to vote your shares for any reason. Proposal 4 (ratification of the appointment of our independent registered public accounting firm) is considered a routine matter under the New York Stock Exchange rules, so your bank or broker will have discretionary authority to vote your shares held in street name on that item.

Will My Shares Held In Street Name Be Voted If I Do Not Provide My Proxy?

Under the New York Stock Exchange rules, if you own shares in “street name” through a broker and do not vote, your broker may not vote your shares on proposals determined to be “non-routine.” In such cases, the absence of voting instructions results in a “broker non-vote.” Broker non-voted shares count toward achieving a quorum requirement for the Annual Meeting, but they do not affect the determination of whether the non-routine matter is approved or rejected. The proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm is the only matter in this proxy statement considered to be a routine matter for which brokers will be permitted to vote on behalf of their clients, if no voting instructions are furnished. Since Proposals 1, 2, 3 and 5 are non-routine matters, broker non-voted shares will not count as votes cast to affect the determination of whether those proposals are approved or rejected. Therefore, it is important that you provide voting instructions to your broker.

 

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What If I Return My Proxy Card Or Vote By Internet Or Telephone But Do Not Specify How I Want To Vote?

If you sign and return your proxy card or complete the Internet or telephone voting procedures, but do not specify how you want to vote your shares, we will vote them as follows:

 

   

FOR each of the director nominees (Proposal 1);

 

   

FOR the approval, on an advisory basis, of the compensation of our named executive officers (Proposal 2);

 

   

FOR the approval, on an advisory basis, of an annual advisory vote on executive compensation (Proposal 3);

 

   

FOR ratification of the Board’s appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011 (Proposal 4); and

 

   

AGAINST the non-binding shareholder proposal (Proposal 5).

If you participate in the Corning Investment Plan and do not submit timely voting instructions, the trustee of the plan will vote the shares in your plan account in the same proportion that it votes shares in other plan accounts for which it did receive timely voting instructions, as explained above under the question “How Do I Vote If I Participate In The Corning Investment Plan?

What Does It Mean If I Receive More Than One Proxy Card?

If you received more than one proxy card, you have multiple accounts with your brokers or our transfer agent. Please vote all of these shares. We recommend that you contact your broker or our transfer agent to consolidate as many accounts as possible under the same name and address. You may contact our transfer agent, Computershare Trust Company, N.A., at 1-800-255-0461.

May Shareholders Ask Questions At The Annual Meeting?

Yes. Our representatives will answer your questions of general interest to shareholders at the end of the meeting. In order to give a greater number of shareholders the opportunity to ask questions, we may impose certain procedural requirements, such as limiting repetitive or follow-up questions, or those of a personal nature.

How Many Shares Must Be Present To Hold The Meeting?

In order for us to conduct our meeting, a majority of our outstanding common shares as of February 24, 2011, the record date for the meeting, must be present in person or by proxy at the meeting. This is called a quorum. Your shares are counted as present at the meeting if you attend the meeting and vote in person or if you properly return a proxy by Internet, telephone or mail.

 

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What Is The Vote Required For Each Proposal?

 

Proposal

  

Affirmative Vote Required

   Broker
Discretionary
Voting Allowed
Proposal 1—Election of six directors    Plurality of votes cast at the meeting in person or by proxy, subject to our majority vote policy described below    No
Proposal 2—Advisory vote on executive compensation    Majority of votes cast at the meeting in person or by proxy    No
Proposal 3—Advisory vote on frequency of advisory vote on executive compensation    Majority of votes cast at the meeting in person or by proxy    No
Proposal 4—Ratification of auditors for Fiscal Year 2011    Majority of votes cast at the meeting in person or by proxy    Yes
Proposal 5—Adoption of the non-binding shareholder proposal    Majority of votes cast at the meeting in person or by proxy. Shareholder approval of this non-binding shareholder proposal would not automatically allow holders of 10% of our outstanding common stock the power to call a special shareholder meeting. Under New York law, to change these meeting requirements would first require the Board to authorize amendments to the Company’s Restated Certificate of Incorporation and By-Laws.    No

With respect to Proposals 1, 2, 4 and 5, you may vote “FOR”, “AGAINST” or “ABSTAIN”. If you “ABSTAIN” from voting on any of these Proposals, the abstention will not constitute a vote cast. With respect to Proposal 3, you may vote to hold a say-on-pay vote once every “ONE”, “TWO” or “THREE” years, or you may “ABSTAIN.”

We have a majority-vote policy for the election of directors in our Corporate Governance Guidelines. The policy provides that in an uncontested election, any nominee for director who receives a greater number of votes “withheld” (i.e., “ABSTAIN”) from his or her election than votes “FOR” such election is required to tender his or her resignation following certification of the shareholder vote. The Nominating and Corporate Governance Committee is required to make a recommendation to the Board whether to accept such a letter of resignation. The Board will determine whether to accept or reject the letter of resignation and disclose its decision-making process. Details of the majority-vote policy are set out in our Corporate Governance Guidelines and under “Proposal 1—Election of Directors” in this proxy statement.

How Will Broker Non-Votes Be Treated?

Except for Proposal 4, broker non-votes will be treated as shares present for quorum purposes, but not entitled to vote, so they will have no effect on the outcome of any election or proposal.

How Will Voting On “Any Other Business” Be Conducted?

We have not received proper notice of, and are not aware of, any business to be transacted at the meeting other than as indicated in this proxy statement. If any other item or proposal properly comes before the meeting, the proxies received will be voted on those matters in accordance with the discretion of the proxy holders.

 

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Who Pays For The Solicitation Of Proxies?

Our Board of Directors is making this solicitation of proxies on our behalf. We will pay the costs of the solicitation, including the costs for preparing, printing and mailing this proxy statement. We have hired Georgeson Inc. to assist us in soliciting proxies. It may do so by telephone, in person or by other electronic communications. We anticipate paying Georgeson a fee of $15,000 plus expenses for these services. We also will reimburse brokers, nominees and fiduciaries for their costs in sending proxies and proxy materials to our shareholders so that you may vote your shares. Our directors, officers and regular employees may supplement Georgeson’s proxy solicitation efforts by contacting you by telephone or electronic communication or in person. We will not pay directors, officers or other regular employees any additional compensation for their proxy solicitation efforts.

How Can I Find The Voting Results Of The Annual Meeting?

Following the conclusion of the Annual Meeting, we will include the voting results in a Form 8-K, which we expect to file with the Securities and Exchange Commission (the “SEC”) on or before May 4, 2011.

How Do I Submit A Shareholder Proposal For, Or Nominate A Director For Election At Next Year’s Annual Meeting?

If you wish to submit a proposal to be included in our proxy statement for our 2012 Annual Meeting of Shareholders, we must receive it at our principal office on or before November 15, 2011. Please address your proposal to: Corporate Secretary, Corning Incorporated, One Riverfront Plaza, Corning, New York 14831.

We will not be required to include in our proxy statement a shareholder proposal that is received after that date or that otherwise does not meet the requirements for shareholder proposals established by the SEC or as set forth in our By-Laws.

If you miss the deadline for including a proposal in our printed proxy statement, or would like to nominate a director or bring other business before the 2012 Annual Meeting of Shareholders, under our current By-Laws (which are subject to amendment at any time), you must notify our Corporate Secretary in writing not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s Annual Meeting. For our 2012 Annual Meeting of Shareholders, we must receive notice on or after December 30, 2011, and on or before January 30, 2012.

Can I Receive Electronic Delivery of Proxy Materials And Annual Reports?

Yes. This proxy statement and Corning’s 2010 Annual Report are available on Corning’s website at www.corning.com. Instead of receiving paper copies of next year’s proxy statement and Annual Report in the mail, shareholders can elect to receive an e-mail message that will provide a link to these documents on the website. By opting to access your proxy materials online, you will save us the cost of producing and mailing documents to you, reduce the amount of mail you receive, and help preserve environmental resources. Corning’s shareholders who have enrolled in the electronic proxy delivery service previously will receive their materials online this year. Shareholders of record may enroll in the electronic proxy statement and Annual Report access service for future Annual Meetings by registering online at www.computershare.com. Beneficial or “street name” shareholders who wish to enroll in electronic access service may do so at www.icsdelivery.com. We may, at some point, use the SEC’s “Notice and Access” method of proxy distribution. If we were to utilize the “Notice and Access” method, you would receive a notice in the mail about how to access electronic copies of the proxy materials or how to have paper copies mailed to you.

Are You “Householding” For Shareholders Sharing The Same Address?

Yes. The SEC’s rules regarding the delivery to shareholders of proxy statements, annual reports, prospectuses and information statements permit us to deliver a single copy of these documents to an address

 

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shared by two or more of our shareholders. This method of delivery is referred to as “householding,” and can significantly reduce our printing and mailing costs. It also reduces the volume of mail you receive. This year, we are delivering only one proxy statement and 2010 Annual Report to multiple registered shareholders sharing an address, unless we receive instructions to the contrary from one or more of the shareholders. We will still be required, however, to send you and each other shareholder at your address an individual proxy voting card. If you would like to receive more than one copy of this proxy statement and our 2010 Annual Report, we will promptly send you additional copies upon written or oral request directed to our transfer agent, Computershare Trust Company, N.A., toll free at 1-800-255-0461. The same phone number may be used to notify us that you wish to receive a separate proxy statement or Annual Report in the future, or to request delivery of a single copy of a proxy statement of Annual Report if you are receiving multiple copies.

PROPOSAL 1—Election of Directors

In April 2010, the Company’s shareholders approved the Board of Directors’ proposal to amend the Certificate of Incorporation to declassify the Board of Directors by the 2013 Annual Meeting of Shareholders and provide for the annual election of all directors upon the expiration of their current terms. The Board of Directors presently has six directors whose terms expire at the 2011 Annual Meeting of Shareholders, and are being nominated for election to a one-year term to serve until the 2012 Annual Meeting of Shareholders.

Each of Messrs. Brown, Gund, Landgraf, and Ruding were elected by Corning’s shareholders on April 24, 2008, and their terms expire at the 2011 Annual Meeting. Mr. Canning was appointed by Corning’s Board of Directors on June 6, 2010. Mr. Tilton was appointed by Corning’s Board of Directors on November 30, 2010. Messrs. Canning and Tilton are standing for election by shareholders for the first time. Mr. O’Connor whose term expires this year, has met the Board’s mandatory retirement age and will not be standing for re-election.

Each of Messrs. Brown, Canning, Gund, Landgraf, Ruding, and Tilton is standing for election for a one-year term.

Majority-Vote Policy. A plurality of votes cast is required for the election of directors. However, under our Corporate Governance Guidelines, any nominee for director who does not receive the affirmative vote of a majority of the votes cast in any uncontested election will promptly, following certification of the election results, tender his or her resignation to the Board. A director nominee will have failed to receive the affirmative vote of a majority of votes cast if the number of “withhold” votes in respect of such nominee’s election exceeds the number of votes “for” such director nominee’s election (excluding abstentions). An election will be deemed to be “uncontested” if the number of director candidates does not exceed the number of directors to be elected.

The Board, acting on the recommendation of the Nominating and Corporate Governance Committee, will decide whether to accept or reject the tendered resignation. The Nominating and Corporate Governance Committee in making its recommendation, and the Board in making its decision, may each consider any factors or other information that it considers relevant. Within 90 days of the certification of the election results, the Board will decide whether to accept or reject the tendered resignation. The Board will promptly disclose its decision in a press release or SEC filing. If the Board rejects the tendered resignation, such press release or SEC filing will include an explanation of the Board’s reasons for its rejection of the resignation.

Any director who tenders his or her resignation pursuant to this policy will recuse himself or herself from the deliberations, recommendation, or decision, as applicable, of the Nominating and Corporate Governance Committee and the Board regarding whether to accept such resignation. However, if a majority of the members of the Nominating and Corporate Governance Committee or Board, as applicable, are required to tender resignations in accordance with the director resignation policy, then the independent directors who are not required to tender resignations will appoint a committee from amongst themselves to consider the resignations and, in the event there are fewer than three such independent directors, the entire Nominating and Corporate Governance Committee or Board, as applicable, may participate in the deliberations, recommendation, or decision, as applicable.

 

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Declassification of the Board. At our 2010 Annual Meeting of Shareholders, our shareholders voted to declassify our Board by the 2013 Annual Meeting of Shareholders and provide for the annual election of all directors upon the expiration of their current terms. The Board of Directors presently has six directors whose terms expire at the 2011 Annual Meeting of Shareholders, and who are being nominated for election to one-year terms to serve until the 2012 Annual Meeting of Shareholders.

 

   

The continuing directors whose current terms will expire at the 2012 or 2013 Annual Meetings of Shareholders, respectively, will serve the remainder of their terms, and the term of office for director nominees elected at the 2012 or 2013 Annual Meeting of Shareholders will expire at the following Annual Meeting of Shareholders.

 

   

Any director appointed to the Board because of an increase in the size of the Board, or to fill a vacancy, will hold office until the next Annual Meeting of Shareholders, at which the director will be eligible to stand for re-election for a term expiring at the following Annual Meeting of Shareholders.

Beginning with the 2013 Annual Meeting of Shareholders all directors will stand for election for terms expiring at the next Annual Meeting of Shareholders.

Each of the nominees has consented to being named in this proxy statement and to serve as a director if elected. If a nominee is not able to serve, proxy holders will vote your shares for the substitute nominee, unless you have withheld authority. No nominee now owns beneficially any of the securities (other than directors’ qualifying shares) of any of Corning’s subsidiary companies. We have included below certain information about the nominees for election as directors and the directors who will continue in office after the Annual Meeting. The Board of Directors has concluded that the skills, qualifications and experience of each of the director nominees and continuing directors supports such nominee or director’s continued membership on the Company’s Board of Directors.

Nominees for Election as Directors

Nominees for Election for Terms Expiring in 2012

 

LOGO  

John Seely Brown
Retired Chief Scientist
Xerox Corporation

 

Dr. Brown served Xerox Corporation in various scientific research positions from 1978, until his retirement in 2002. In 1986, he was elected vice president in charge of advanced research and was director of the Palo Alto Research Center from 1990 to 2000. Dr. Brown was named chief scientist of Xerox in 1992, retiring in 2002. He is a visiting scholar and advisor to the Provost at the University of Southern California. He is also the independent co-chairman of Deloitte’s Center for the Edge. Dr. Brown is a director of Amazon.com, Inc. and Varian Medical Systems, Inc. He is a former director of Polycom, Inc. Corning director since 1996. Age 70.

 

Formerly the chief scientist of a large scale technology-based company (Xerox), Dr. Brown brings significant experience in the areas of research and development, technology and innovation to our Board. His additional areas of specialized knowledge include organizational learning, complex adaptive systems, micro electrical mechanical system (MEMS) and nanotechnology. Dr. Brown also has significant expertise in business strategies in Asia. His current work includes advising on international corporate strategies in the digital age.

 

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LOGO  

John A. Canning, Jr.
Co-founder and Chairman
Madison Dearborn Partners, LLC

 

Mr. Canning co-founded Madison Dearborn Partners, LLC in 1992, serving as its chief executive officer until he became chairman in 2007. He previously spent 24 years with First Chicago Corporation, most recently as executive vice president of The First National Bank of Chicago and president of First Chicago Venture Capital. Mr. Canning is trustee and chairman of several Chicago-area non-profit organizations. He is a commissioner of the Irish Reserve Fund and a former director and chairman of the Federal Reserve Bank of Chicago. Mr. Canning is a director of Exelon Corporation. He is a former director of Jefferson Smurfit Group plc. Corning director since 2010. Age 66.

 

Mr. Canning brings thirty years’ of experience in private equity investing, including reviewing financial statements and audit results and making investment and acquisition decisions. As a former director and Chairman of the Federal Reserve Bank of Chicago, he has insight into economic trends important to our business. In addition to his business experience, he also has a law degree and is a recognized leader in the Chicago business community. Mr. Canning’s business experience and service on the boards of other companies and organizations enable him to contribute to Corning’s board. Mr. Canning’s experience in banking and managing investments, and his experience on the audit committees of other organizations, make him a valued member of our audit and finance committees.

LOGO  

Gordon Gund
Chairman and Chief Executive Officer
Gund Investment Corporation

 

Besides being the chairman and CEO of Gund Investment Corporation, which was founded in 1968, Mr. Gund is co-founder and chairman of The Foundation Fighting Blindness. The Foundation Fighting Blindness is a national, non-profit organization dedicated to finding the causes, treatments and/or cures for retinitis pigmentosa, age-related macular degeneration, and allied retinal degenerative diseases. He is a director of the Kellogg Company. Corning director since 1990. Age 71.

 

Mr. Gund brings to the Board his many years of experience as an entrepreneur, chief executive officer, investment professional and public company director. His business ventures covered finance and investment banking, sports, consumer products, philanthropy and medical research. Mr. Gund has significant experience as a public company lead director and has provided leadership to the Corning Board for over 21 years, from which he has developed additional expertise in the areas of compensation and corporate governance.

 

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LOGO  

Kurt M. Landgraf
President and Chief Executive Officer
Educational Testing Service

 

Mr. Landgraf is president and chief executive officer of Educational Testing Service, a private non-profit educational testing and measurement organization, and joined ETS in that position in 2000. Prior to that, he was executive vice president and chief operating officer of E.I. Du Pont de Nemours and Company, where he previously held a number of senior leadership positions, including chief financial officer. He is a director of Louisiana-Pacific Corporation. Mr. Landgraf is a former director of IKON Office Solutions Inc. Corning director since 2007. Age 64.

 

Mr. Landgraf was selected for his wealth of executive management experience in public companies, non-profit entities, higher education, and government. He brings to the Board his financial expertise and operations skills and experience, represented by his positions as the chief financial officer and chief operating officer of E.I. DuPont de Nemours & Company. Mr. Landgraf’s other areas of specialized knowledge include technology, transportation, education, pharmaceuticals, health care, energy, materials, and mergers and acquisitions.

 

LOGO  

H. Onno Ruding
Retired Vice Chairman
Citicorp and Citibank, N.A.

 

Dr. Ruding has served private firms and the public (serving as Minister of Finance of The Netherlands from 1982-1989) in various financial positions, serving as a director of Citicorp and Citibank, N.A. from 1990 and 1998, respectively, to September 30, 2003 and vice chairman of Citicorp and Citibank, N.A. from 1992 to September 30, 2003. He retired from active employment from Citicorp and Citibank, N.A. on September 30, 2003. He was a member of the international advisory committee of Citigroup until February 2010. Dr. Ruding is also a director of BNG (Bank for the Netherlands Municipalities) and RTL Group, and a member of UNIAPAC, the Committee for European Monetary Union, the Pontifical Council Justice and Peace, the European Advisory Board of the American-European Community Association, the International Bureau of Fiscal Documentation and the Trilateral Commission. Dr. Ruding is the chairman of the Center for European Policy Studies (CEPS), the chairman of the Netherlands National Museum Palace Het Loo and the chairman of the Advisory Council of the Amsterdam Institute of Finance. Dr. Ruding is a former director of Alcan Inc. and Holcim Ltd. Corning director since 1995. Age 71.

 

Dr. Ruding is a finance expert and economist. As a former Minister of Finance in The Netherlands, executive board member of the International Monetary Fund, vice chairman and director of Citibank in New York, and chairman of the board of the CEPS in Brussels, he provides a wealth of knowledge in international finance and investment, markets, trade and development, and risk analysis.

 

10


LOGO  

Glenn F. Tilton
Chairman of the Board
United Continental Holdings, Inc.

 

Mr. Tilton is Chairman of the Board of Directors of United Continental Holdings, Inc. and immediate past chairman, president, and chief executive officer of UAL Corporation, the parent company of United Airlines where Mr. Tilton served as chairman and chief executive officer. He previously spent more than 30 years with Texaco, Inc. progressing through leadership roles in marketing, corporate planning and operations. Mr. Tilton is chairman of the Air Transport Association, the industry trade organization representing the leading U.S. airlines. Mr. Tilton was named by President Obama to the Presidential Export Council and by U.S. Transportation Secretary Ray LaHood to the Future of Aviation Advisory Committee. He is also a director of United Continental Holdings, Inc. and Abbott Laboratories. Corning director since 2010. Age 62.

 

Mr. Tilton brings a deep understanding of strategic planning and operational management from his many years of business, management, and financial experience. At Texaco, Inc., Mr. Tilton spent 30 years building business expertise in a variety of roles such as marketing and corporate planning. He later gained significant leadership and management experience as a key executive at Texaco, Inc., UAL Corporation and United Air Lines, Inc., as well as international business operations experience. Through his various professional roles, Mr. Tilton also has experience in a number of industries including aviation, energy, and pharmaceuticals.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF

EACH OF THE DIRECTOR NOMINEES.

Directors Continuing in Office

Directors Whose Terms Expire in 2012

 

LOGO  

James B. Flaws
Vice Chairman and Chief Financial Officer
Corning Incorporated

 

Mr. Flaws joined Corning in 1973 and served in a variety of controller and business management positions. He was elected assistant treasurer of Corning in 1993; vice president and controller in 1997 and vice president of finance and treasurer in May 1997; senior vice president and chief financial officer in December 1997; executive vice president and chief financial officer in 1999; and to his current position in 2002. Mr. Flaws is a director of Dow Corning Corporation. He has been a member of Corning’s Board of Directors since 2000. Age 62.

 

Since joining Corning in 1973, Mr. Flaws has held a wide range of management positions across its control, financial, treasury, and business development functions in specific line business units, as well as at corporate-wide levels. As a result of his diverse responsibilities over more than 30 years, he has very broad experience in many financial, investor relations, and supervisory roles within the company, including leading the spinoff of Corning’s health care businesses into two separate publicly-traded companies in 1996, and overseeing many mergers and acquisitions by the company, as well as the sale of numerous business units and restructuring efforts.

 

11


LOGO  

Deborah D. Rieman
Managing Director
Equus Management Company

 

Dr. Rieman has more than 25 years of experience in the software industry. Currently, she is Managing Director of Equus Management Company, a private investment fund. From 1995 to 1999, she served as president and chief executive officer of Check Point Software Technologies, Incorporated. She is a director of Keynote Systems. Dr. Rieman is a former director of Tumbleweed Communications Corp, Kintera Inc., and Arbinet Corp. Corning director since 1999. Age 61.

 

Dr. Rieman brings significant expertise in information technology, innovation and entrepreneurial endeavors to the Board, and skills related to her Ph.D. in mathematics. She is also the former president and chief executive officer of a publicly listed software company specializing in security, and has experience in technology development, marketing, business development and support, investor relations, and investing.

LOGO  

Mark S. Wrighton
Chancellor and Professor of Chemistry
Washington University in St. Louis

 

Since 1995, Dr, Wrighton has been Chancellor and Professor of Chemistry at Washington University in St. Louis, and serves as its chief executive officer. Before joining Washington University, he was a researcher and professor at the Massachusetts Institute of Technology, where he was Head of the Department of Chemistry from 1987 to 1990, and then Provost from 1990 to 1995. Dr. Wrighton served as a Presidential appointee to the National Science Board from 2000 to 2006, and chaired that Board’s audit and oversight committee during that time. He also is a past chair of the Association of American Universities, The Business Higher Education Forum, and the Consortium on Financing Higher Education, and continues as a member of these organizations. He also serves as a director of Cabot Corporation and Brooks Automation, Inc. Dr. Wrighton is a former director of A.G. Edwards, Inc. Corning director since 2009. Age 61.

 

Dr. Wrighton is a professor, chemist and research scientist with expertise in materials, with research interests including photochemistry and metal catalysts. He is also the chief executive officer of a major research university, which since his appointment in 1995, has grown significantly in academic stature, research, infrastructure, and fiscal management. Dr. Wrighton brings to the Board his vast scientific knowledge and understanding of complex research and development issues, and executive leadership.

 

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Directors Whose Terms Expire in 2013

 

LOGO  

Robert F. Cummings, Jr.
Vice Chairman of Investment Banking
JPMorgan Chase & Co.

 

Mr. Cummings was appointed Vice Chairman of Investment Banking at JPMorgan Chase & Co. on December 2, 2010, where he advises on client opportunities across sectors and industry groups. From 2002 to 2009, he served as a senior managing director at GSC Group, Inc., a privately held money management firm. Mr. Cummings began his business career in the investment banking division of Goldman, Sachs & Co. in 1973, and was a partner of the firm from 1986 until his retirement in 1998. He served as an advisory director at Goldman Sachs until 2002. Mr. Cummings is a director of Viasystems Group, Inc., and a former director of RR Donnelley & Sons Co. and GSC Investment Corp. Corning director since 2006. Age 61.

 

Mr. Cummings’ Board qualifications include over 27 years of investment banking experience at Goldman Sachs, where he advised corporate clients on financings, business development, mergers and acquisitions and other strategic financial issues. Additionally, he brings knowledge in the areas of technology, telecommunications, private equity, and real estate to the Board.

LOGO  

William D. Smithburg
Retired Chairman, President and Chief Executive Officer
The Quaker Oats Company

 

Mr. Smithburg joined Quaker Oats in 1966, being elected president in 1979, chief executive officer in 1981 and chairman in 1983. He also served as president from November 1990 to January 1993 and from November 1995 to November 1997 when he retired. Mr. Smithburg is a director of Abbott Laboratories and Northern Trust Corporation. He is a former director of Smurfit-Stone Container Corporation. Corning director since 1987. Age 72.

 

Mr. Smithburg brings significant executive experience in corporate governance, operations, corporate strategy, acquisitions and divestitures, advertising, and supply chain management. He is the former chairman and chief executive officer of a $6 billion public company and has long served on several public company boards. Mr. Smithburg’s industry expertise includes consumer products, transportation, pharmaceuticals, finance and banking, and education.

LOGO  

Hansel E. Tookes II
Retired Chairman and Chief Executive Officer
Raytheon Aircraft Company

 

Mr. Tookes retired from Raytheon Company in December 2002. He joined Raytheon in 1999 and served as president of Raytheon International, chairman and chief executive officer of Raytheon Aircraft and executive vice president of Raytheon Company. From 1980 to 1999, Mr. Tookes served United Technologies Corporation as president of Pratt and Whitney’s Large Military Engines Group and in a variety of other leadership positions. He is a director of Ryder Systems Inc., BBA Aviation plc, FPL Group, Inc. and Harris Corporation. Corning director since 2001. Age 63.

 

Mr. Tookes provides extensive experience in operations, manufacturing, performance excellence, business development, technology-driven business environments, and military and government contracting. He also brings his science and engineering education, training and knowledge to the Board. Mr. Tookes’ industry expertise includes aviation, aerospace and defense, transportation, and technology.

 

13


LOGO  

Wendell P. Weeks
Chairman, Chief Executive Officer and President
Corning Incorporated

 

Mr. Weeks joined Corning in 1983 and was named a vice president and deputy general manager of the Telecommunications Products division in 1995; vice president and general manager in 1996; senior vice president in 1997; senior vice president of Opto-Electronics in 1998; executive vice president in 1999; president, Corning Optical Communications in 2001; president and chief operating officer of Corning in 2002; and president and chief executive officer in 2005. Mr. Weeks became chairman and chief executive officer on April 26, 2007, and president on December 31, 2010. He is a director of Merck & Co. Inc. Mr. Weeks has been a member of Corning’s Board of Directors since 2000. Age 51.

 

Mr. Weeks brings deep and broad knowledge of the company based on his long career across a wide range of Corning’s staff groups and major businesses. Mr. Weeks has 28 years of Corning experience including financial management, business development, commercial leadership, and general management. His experiences in many of Corning’s businesses and technologies, and more than five years as chief executive officer, have given him a unique understanding of Corning’s diverse business operations and innovations.

 

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Meetings and Committees of The Board

Board Meetings

The Board of Directors held 16 regularly scheduled meetings and one special meeting during 2010. All directors attended 75% or more of the meetings of the Board of Directors and of the Committees on which they serve, with the exception of Mr. Smithburg, who attended 57% of the Executive Committee meetings. Mr. Smithburg attended 100% of the meetings of the Compensation Committee, as well as of the Nominating and Corporate Governance Committee, and 94% of the Board Meetings. He missed 3 of 7 Executive Committee meetings due to previous commitments for which he was out of the country in remote locations where suitable, secure telephone service at the time of the Executive Committee meeting was not available. Such commitments will not affect Mr. Smithburg’s ability to attend Executive Committee meetings in the future.

Board Committees

In addition to an Executive Committee, which acts by delegation, Corning has five standing Board committees: Audit, Compensation, Corporate Relations, Finance, and Nominating and Corporate Governance Committees. Each committee’s written charter, as reviewed annually and adopted by the Board of Directors, is available on Corning’s website at www.corning.com/investor_relations/corporate_governance/board_download_library.aspx. Copies of each of the charters are also attached to this proxy statement as Appendix A, B, C, D, and E, respectively.

The Audit Committee met eight times during 2010. The current members of the Audit Committee are Messrs. Landgraf (Chair), Canning, Cummings, Ruding, Tilton, Wrighton and Ms. Rieman. The Audit Committee:

 

   

Assists the Board of Directors in its oversight of (i) the integrity of Corning’s financial statements, (ii) the internal auditors’ performance, and (iii) Corning’s compliance with legal and regulatory requirements;

 

   

Meets in executive sessions with the independent registered public accounting firm, internal auditors and management;

 

   

Approves the appointment of Corning’s independent registered public accounting firm;

 

   

Reviews and discusses with the independent registered public accounting firm and the internal auditors the effectiveness of Corning’s internal control over financial reporting, including disclosure controls;

 

   

Reviews and discusses with management, the independent registered public accounting firm and the internal auditors the scope of the annual audit;

 

   

Reviews the quarterly and annual financial statements and other reports provided to shareholders with management and the independent registered public accounting firm;

 

   

Discusses company policies with respect to risk assessment and risk management, and reviews contingent liabilities and risks that may be material to Corning, as well as major legislative and regulatory developments which could materially impact Corning’s contingent liabilities and risks;

 

   

Oversees the independent registered public accounting firm’s qualifications, independence and performance;

 

   

Reviews transactions between Corning and related persons that are required to be disclosed in our filings with the SEC; and

 

   

Determines the appropriateness of and approves the fees for audit and permissible non-audit services to be provided by the independent registered public accounting firm.

 

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The Compensation Committee met seven times during 2010. The current members of the Compensation Committee are Messrs. Smithburg (Chair), Brown, Gund and O’Connor. The Compensation Committee:

 

   

Reviews Corning’s goals and objectives with respect to executive compensation;

 

   

Evaluates the CEO’s performance in light of Corning’s goals and objectives;

 

   

Determines and approves compensation for the CEO and other officers of Corning;

 

   

Reviews and approves employment, severance and change in control agreements for the CEO and other officers of Corning;

 

   

Recommends to the Board the compensation arrangements with independent directors;

 

   

Oversees Corning’s equity compensation plans; and

 

   

Makes recommendations to the Board regarding non-equity incentive and equity incentive plans.

Compensation decisions for executives, including the “Named Executive Officers,” the five executive officers of the Company listed in this proxy statement, and the directors are reviewed and approved by the Compensation Committee. The Compensation Committee has administrative and/or oversight responsibility to compensate key executives effectively and in a manner consistent with our stated compensation strategy. The Compensation Committee has engaged an independent executive compensation expert from Aon Hewitt, an outside global human resources consulting firm, to conduct an annual review of its total compensation program for executives. The independent expert supports the Committee by providing data regarding market practices and makes recommendations for changes to plan designs and policies that are consistent with the Company’s compensation philosophy.

The agenda for meetings of the Compensation Committee is determined by its Chairman, with the assistance of the Chief Administrative Officer and the Senior Vice President Global Compensation and Benefits. The Chief Executive Officer and the Chief Administrative Officer are invited to attend the Compensation Committee meetings, though they leave the room during discussions and deliberations of individual compensation actions affecting them personally. The Compensation Committee Chairman reports the Committee’s recommendations on executive compensation to the Board. The Company’s Global Compensation and Benefits department supports the Compensation Committee in its duties and, along with the Chief Executive Officer, may be delegated authority to fulfill certain administrative duties regarding the compensation programs. The Compensation Committee has authority under its charter to retain, approve fees for and terminate advisors, consultants and agents as it deems necessary to assist in the fulfillment of its responsibilities. The Compensation Committee reviews the total fees paid to Aon Hewitt by the Company to ensure that the independent compensation expert maintains his objectivity and independence when rendering advice to the Committee. For more information on the Compensation Committee, see “Compensation Discussion and Analysis” beginning on page 26.

The Corporate Relations Committee met five times during 2010. The current members of the Corporate Relations Committee are Ms. Rieman (Chair) and Messrs. Landgraf, Tilton and Wrighton. The Corporate Relations Committee focuses on the areas of employment policy, public policy and community relations in the context of the business strategy of Corning.

The Executive Committee met seven times during 2010. The current members of the Executive Committee are Messrs. Weeks (Chair), Flaws, Gund, O’Connor and Smithburg. All other directors are alternate members of the Executive Committee. The Executive Committee serves primarily as a means of taking action requiring Board approval between regularly scheduled meetings of the Board. The Executive Committee is authorized to act for the full Board on matters other than those specifically reserved by New York law to the Board. In practice, the Executive Committee’s actions are generally limited to matters such as the authorization of corporate credit facilities, borrowings and pricing of Corning’s public offering of securities, and specific transactions for which the Board delegates its authority.

 

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The Finance Committee met seven times during 2010. The current members of the Finance Committee are Messrs. Ruding (Chair), Canning, Cummings, Flaws, and Tookes. The Finance Committee:

 

   

Monitors present and future capital requirements of Corning;

 

   

Reviews all material transactions prior to execution;

 

   

Reviews potentials mergers, acquisitions, divestitures and investments in third parties;

 

   

Reviews Corning’s exposure to financial, economic and hazard risks;

 

   

Monitors Corning’s cash management plans and activities;

 

   

Reviews Corning’s tax position and strategy;

 

   

Reviews and monitors Corning’s credit rating;

 

   

Reviews funding actions for Corning’s pension programs; and

 

   

Reviews Corning’s financial plans and other financial information that Corning uses in its analysis of internal decisions.

The Nominating and Corporate Governance Committee met five times during 2010. The current members of the Nominating and Corporate Governance Committee are Messrs. O’Connor (Chair), Brown, Gund, Smithburg, and Tookes. The Nominating and Corporate Governance Committee:

 

   

Identifies individuals qualified to become Board members;

 

   

Reviews candidates recommended by shareholders;

 

   

Determines the criteria for selecting director nominees;

 

   

Conducts inquiries into the background of director nominees;

 

   

Recommends to the Board, director nominees to be proposed for election at the Annual Meeting of Shareholders;

 

   

Reviews and recommends to the Board, whether to accept or reject the resignation of an incumbent director who failed to receive a majority of the votes cast in an election that is not a result of a contested election pursuant to the Company’s Majority Voting Policy;

 

   

Monitors significant developments in the regulation and practice of corporate governance;

 

   

Develops and recommends to the Board corporate governance guidelines;

 

   

Assists the Board in assessing the independence of Board members;

 

   

Identifies Board members to be assigned to the various committees;

 

   

Oversees and assists the Board in the review of the Board’s performance;

 

   

Establishes director retirement policies;

 

   

Reviews, approves and ratifies transactions between Corning and related persons; and

 

   

Reviews activities of Board members and senior executives for potential conflict of interest.

The process for electing director nominees entails making a preliminary assessment of each candidate based upon his/her résumé and other biographical and background information, as well as his/her willingness to serve. This information is then evaluated against the criteria set forth below, as well as the specific needs of Corning at that time. Based upon this preliminary assessment, candidates who appear to be the best fit are invited to participate in a series of interviews. At the conclusion of the process, if it is determined that the candidate will be a good fit, the Nominating and Corporate Governance Committee recommends the candidate to the Board for election at the next Annual Meeting. If the director nominee is a current Board member, the Nominating and

 

17


Corporate Governance Committee also considers prior Corning Board performance and contributions. The Nominating and Corporate Governance Committee uses the same process for evaluating all candidates regardless of the source of the nomination.

The minimum qualifications and attributes that the Nominating and Corporate Governance Committee believes must be possessed by a director nominee may include:

 

   

Character and the ability to apply good business judgment;

 

   

The ability to exercise his/her duties of loyalty and care;

 

   

Proven leadership skills;

 

   

Diversity of experience;

 

   

High integrity and ethics;

 

   

The ability to understand complex principles of business and finance;

 

   

Scientific expertise; and

 

   

Familiarity with national and international issues affecting businesses.

Our Board is comprised of accomplished professionals who represent diverse and key areas of expertise including, national and international business, operations, manufacturing, finance and investing, energy, management, entrepreneurship, government, higher education and science, research and technology. While Corning does not have a formal diversity policy with respect to director nominations, we believe that the diversity of skills, knowledge, opinions and fields of expertise represented on our Board is one of its core strengths. When identifying and selecting director nominees, the Nominating and Corporate Governance Committee considers the impact a nominee would have in terms of increasing the diversity of the Board with respect to professional experience, background, viewpoints, skills and areas of expertise. We believe that the resulting diversity of directors allows the Board to engage in honest and challenging discussions, in service of the best decisions for the Company and its shareholders. The diversity of our directors’ skills allows each director an opportunity to provide specific leadership in his or her respective areas of expertise. In the context of the Board’s needs, the appropriate mix of director competencies and experiences evolves for Corning over time. In an effort to increase diversity, the Nominating and Corporate Governance Committee in working with the Board also considers diversity of race, gender and national origin of potential director candidates. We believe our directors’ wide range of professional experiences and backgrounds, education and skills has proven invaluable to the Company and we intend to continue leveraging this strength.

All of the director nominees are elected members of the Board of Directors, except for Messrs. Canning and Tilton who were identified by the Nominating and Corporate Governance Committee, and appointed by the Board of Directors in 2010. The Nominating and Corporate Governance Committee retains the assistance of a third-party recruiting firm to assist in identifying and evaluating potential director nominees, as it deems appropriate.

The Nominating and Corporate Governance Committee will consider candidates recommended by shareholders. If you wish to nominate a candidate, please forward the candidate’s name and a detailed description of the candidate’s qualifications, skills and experience, a document indicating the candidate’s willingness to serve and evidence of the nominating shareholder’s ownership of Corning’s shares to: Corporate Secretary, Corning Incorporated, One Riverfront Plaza, Corning, New York 14831. A shareholder wishing to nominate a candidate must also comply with the notice requirements described above under the question “How Do I Submit A Shareholder Proposal For, Or Nominate A Director For Election At Next Year’s Annual Meeting?

 

18


Corporate Governance Matters

Corporate Governance Guidelines

Our business, property and affairs are managed by or, are under the direction of, the Board of Directors pursuant to New York Business Corporation Law and our By-Laws. Members of the Board of Directors are kept informed of Corning’s business through discussions with the Chairman, Chief Executive Officer and President, the Vice Chairman and Chief Financial Officer and other key members of management, by reviewing materials provided to them and by participating in meetings of the Board of Directors and its committees.

The Board has adopted a set of Corporate Governance Guidelines that address the make-up and functioning of the Board. A copy of these guidelines is attached to this proxy statement as Appendix F and can also be found on website at www.corning.com/investor_relations/corporate_governance/board_download_library.aspx.

Board Leadership Structure

Corning has a board leadership structure under which our Chief Executive Officer also serves as Chairman of the Board of Directors. As stated in our Corporate Governance Guidelines, we believe that having one person serve as both Chief Executive Officer and Chairman demonstrates to our employees, suppliers, customers and other stakeholders that the Company is under strong leadership, with a single person setting the tone and having primary responsibility for managing our operations. This unity of leadership eliminates the potential for confusion or duplication of efforts, and provides clear leadership for the Company. We believe that the Company has been well-served by this structure.

Our Board of Directors is comprised of 12 independent directors, plus two management directors. All of our independent directors are highly accomplished and experienced business people in their respective fields, who have demonstrated leadership in significant enterprises and are familiar with board processes. For additional information about the backgrounds and qualifications of our directors, see “Nominees for Election as Directors” and “Directors Continuing in Office” in this proxy statement.

Our Board has six standing committees—Audit, Compensation, Corporate Relations, Executive, Finance, and Nominating and Corporate Governance. Three of the committees are comprised solely of independent directors, five of the committees have a separate, independent chair, and the Executive Committee has three independent plus two employee directors as members. The chair of each of these committees is responsible for directing the work of the committee in fulfilling its responsibilities, see “Meetings and Committees of the Board” in this proxy statement.

Under our Corporate Governance Guidelines, the Board designates and utilizes a Lead Director, currently James J. O’Connor. The Lead Director plays an important role in our corporate governance structure. The Lead Director’s responsibilities include: presiding at meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors; serving as liaison between the Chairman and the independent directors; convening meetings of the independent directors; consulting with the Chairman on matters relating to Board performance and corporate governance; and, if requested by major shareholders, ensuring that he is available for consultation and direct communication. The Chairman consults with the Lead Director in advance of each Board meeting to obtain his comments, suggestions, and approval for the meeting schedule and timing, for each agenda, and for the types of information to be sent to the Board.

We believe that, in addition to fulfilling our Lead Director responsibilities, Mr. James J. O’Connor, has made valuable contributions to the Company through his abilities to build Board consensus, effectively coordinate Board agendas and activities with the Chairman, and by his judgment and decision-making for the Company. Mr. O’Connor, whose term as director expires at the 2011 Annual Meeting of Shareholders, has reached the Board’s mandatory retirement age and will no longer serve as Lead Director. At the first meeting of the Board of Directors following the 2011 Annual Meeting of Shareholders, the Board will designate a new Lead Director.

 

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In February 2011, as part of our review of corporate governance and succession planning, the Board (led by the Nominating and Corporate Governance Committee) re-evaluated our Board leadership structure, to ensure that it remains optimal for the Company and its shareholders. The Board determined that the current Board leadership structure continues to serve the Company well, provides strong leadership and facilitates effective communication, oversight and governance of the Company, while allowing for independent decision making as required. We recognize that different board leadership structures may be appropriate for companies with different histories and cultures, as well as companies with varying sizes and performance characteristics. We believe our current leadership structure—under which our Chief Executive Officer serves as Chairman of the Board, five of the six Board committees are chaired by independent directors and our Lead Director assumes specified responsibilities on behalf of the independent directors—remains the optimal board leadership structure for our Company and our shareholders.

Executive Sessions of Independent Directors

Independent Board members meet without management present at each regularly scheduled Board meeting. Additional meetings may be called by the Lead Director in his discretion or at the request of the Board. The Lead Director presides over meetings of the independent directors.

Board Risk Oversight

Corning has a comprehensive risk management program that engages the Company’s management/leadership and Board. Since 2005, the Company has employed an Enterprise Risk Management program (“ERM”) that was modeled on the COSO II framework. “COSO” is the Committee of Sponsoring Organizations of the Treadway Commission, a voluntary private-sector organization, established in the United States, dedicated to providing guidance to executive management and governance entities on critical aspects of organizational governance, business ethics, internal control, enterprise risk management, fraud, and financial reporting. Corning’s ERM is a company-wide effort that involves the Board, management and Corning staff in an integrated effort to identify, assess and manage risks that may potentially affect the Company. A “Risk Council,” chaired by our Vice Chairman and Chief Financial Officer, Mr. Flaws, and composed of Corning management and staff, is a core governance element of the ERM.

The Risk Council’s activities include aggregating, prioritizing and assessing risks including, financial, operational, business, reputational, governance, and managerial risks. The Risk Council assigns the management of identified risks to a local team that can best manage the risks, and then evaluates the specific risk mitigation plans created by the local team. Corning believes central oversight and assistance of these local teams is the most effective way to manage the risks. The Risk Council reports directly to the management committee of the Company.

Additionally, our Compliance Council, chaired by the Senior Vice President and General Counsel, provides the Risk Council with the results of its review of the Company’s compliance with laws and regulations of the countries in which we conduct business. The Compliance Council reports directly to each of the Audit Committee and Corporate Relations Committee.

We also perform a comprehensive risk assessment related to our internal controls. This assessment includes interviews with senior management, and financial leaders as well as evaluation of Risk Council findings, audit results, current business priorities and the economic environment. The results of this assessment are shared annually with the Audit Committee.

The Audit Committee annually reviews a comprehensive report on the Company’s ERM processes. In accordance with NYSE requirements, our Audit Committee is responsible for company policies with respect to risk assessment and risk management, and to review contingent liabilities and risks that may be material to Corning, as well as major legislative and regulatory developments that could materially impact Corning’s

 

20


contingent liabilities and risks. Regularly, the Audit Committee reviews and discusses risks facing the Company, including legal issues, employee matters, information technology security and governmental regulation and legislation, among other things. Our Finance Committee, pursuant to its charter, reviews regularly the top risks identified by the ERM process and strategies for managing exposure to specific financial, economic, and hazard risks. Each of the Audit and Finance Committee’s chairman reports to the entire Board of Directors regarding their risk management review and any significant items identified. In addition, each of our Board committees considers the risk exposures within its areas of responsibility. For example, our Corporate Relations Committee reviews potential risk exposures in the environmental, health, safety, employment, and product liability areas.

The full Board provides additional risk oversight in numerous ways, including the following:

 

   

Annually, prior to its approval of the annual budget and long-term plan, the Board reviews the potential risks which could negatively impact the proposed budget and plan. This review includes the types of risks, as well as pessimistic and worst case scenarios should the identified risks be realized.

 

   

The Board frequently reviews the Company’s Strategic Framework and any risks which might negatively impact it.

 

   

Prior to approving any significant investment or divestiture actions by the Company, the Board reviews a detailed proposal identifying the rationale and risks involved in such action.

 

   

The Board regularly receives written reports covering environmental, safety and health, and human resources matters.

 

   

At least four times each year, the Board attends “Technology with the Board” sessions, which allow the directors to review and discuss current research and development projects and thereby assess risks related to the Company’s technology and intellectual property developments.

 

   

The full Board also engages in periodic discussions regarding risks with our Chief Executive Officer, Chief Financial Officer, and other company officers, as it deems appropriate.

We endeavor to keep the Board fully apprised of risks facing the Company and believe that our directors provide effective oversight of the risk management function. We believe the Board’s risk oversight function allows our directors to make well-informed decisions and increases the effectiveness of the Company’s leadership structure.

Director Independence

Our Corporate Governance Guidelines require that the Board of Directors make an annual determination regarding the independence of each of Corning’s directors. The Board made these determinations on February 2, 2011, based on an annual evaluation performed by and recommendations made by the Nominating and Corporate Governance Committee. The Board of Directors has determined that Messrs. Brown, Canning, Cummings, Gund, Landgraf, O’Connor, Ruding, Smithburg, Tilton, Tookes and Wrighton, and Ms. Rieman are “independent” within the meaning of the rules of the New York Stock Exchange, based on its application of the standards set forth in our Corporate Governance Guidelines. Specifically, the Board determined that they were independent because no relationship was identified that would automatically bar them from being characterized as independent, and any relationships identified were not so material as to impair their independence.

In making this determination, the Board considered, among other things, the following relationships, each of which it determined were not material:

 

   

Mr. Brown is a director of Varian Medical Systems, Inc., which in the last three fiscal years has purchased and sold less than $1,000 with Corning.

 

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Mr. Cummings became an employee of JPMorgan Chase & Co (“JPM”) as of December 2010. JPM and its affiliates provide various investment banking services including underwriting, commercial lending and banking and other financial advisory services, including provision of credit facilities to Corning and its affiliates. Corning’s fees to JPM were approximately $4,200,000, $1,600,000 and $780,000 for each 2010, 2009 and 2008, respectively. Mr. Cummings is not a JPM executive officer under SEC rules, and will have no personal involvement in any JPM services provided to Corning.

 

   

Mr. Smithburg is a director of Abbott Laboratories, to which Corning has sold products in an aggregate amount of approximately $6,000 in the last three fiscal years.

 

   

Mr. Tookes is a director of BBA Aviation plc, the parent company of Signature Flight Support (“SFS”), a company that provides aviation support services to Corning. In the last three fiscal years, SFS has provided services in an aggregate amount of approximately $230,000. Mr. Tookes is also a director of Harris Corporation and Ryder Systems, each of which have transacted less than $15,000 of business with Corning in the each of the last three fiscal years.

 

   

Mr. Wrighton is a director of Cabot Corporation, a company which sold products to Corning in an aggregate amount of approximately $676,000 in 2008, 2009 and 2010; and Brooks Automation, a company which sold an aggregate of approximately $90,000 in products to Corning in the last three fiscal years. Both Cabot Corporation’s sales to and purchases from Dow Corning Corporation (“DCC”) were below $61,000,000 for each of the last three fiscal years. DCC, which is 50% owned by each of Corning and The Dow Chemical Company, is not controlled by Corning, and has a separate board of directors.

In determining that each of the above relationships were not material, the Board considered the fact that each of Messrs. Brown, Cummings, Smithburg, Tookes, and Wrighton’s relationships arise only from their positions as a employee or director of the respective companies, that such director has no material interest in any of the transactions between Corning or DCC, as the case may be, and the respective company, that none is an executive officer of these companies, that such director had no role or financial interest in any decisions about any of these transactions, and that such a relationship would not bar independence under the NYSE Listing Standards or Corning’s Director Qualification Standards.

The Board concluded that based on all of the relevant facts and circumstances, none of the above relationships constituted a material relationship with Corning that represents a potential conflict of interest, or otherwise interferes with the exercise by any of these directors of his or her independent judgment from management of Corning.

Messrs. Flaws and Weeks are not independent because they are each executive officers of Corning.

Each member of the Board’s Audit, Compensation, and Nominating and Corporate Governance Committees is independent within the meaning of the NYSE Listing Standards, Securities Exchange Act Rule 10A-3 and Corning’s Director Qualification Standards.

Communications with Directors

Shareholders and interested parties may communicate concerns to any director, committee member or the Board by writing to the following address: Corning Incorporated Board of Directors, Corning Incorporated, One Riverfront Plaza, MP HQ E2 10, Corning, New York 14831 Attention: Corporate Secretary. Please specify to whom your correspondence should be directed. The Corporate Secretary has been instructed by the Board to promptly forward all correspondence (except advertising, spam, junk mail and other mass mailings, product inquiries and suggestions, resumes, surveys or any unduly hostile, threatening or illegal materials) to the relevant director, committee member or the full Board, as indicated in the correspondence.

 

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Audit Committee Financial Expert

The Board of Directors has determined that three members of the Audit Committee: Messrs. Cummings, Landgraf, and Ruding, qualify as Audit Committee Financial Experts.

Policy Regarding Directors Attendance at Annual Meetings

Our Corporate Governance Guidelines provide that each director will make every effort to attend the Annual Meeting of Shareholders. All of our incumbent Board Members attended the 2010 Annual Meeting of Shareholders, with the exception of Messrs. Tookes, Landgraf, Canning who was appointed to the Board on June 2, 2010, and Tilton who was appointed to the Board on November 20, 2010.

Related Party Policy and Procedures

Corning has adopted a written policy that addresses related party transactions. A “related party” of Corning includes:

 

   

a director;

 

   

a senior officer;

 

   

an immediate family member of a director or senior officer;

 

   

a shareholder who owns more than 5% of Corning’s voting securities; or

 

   

an entity in which a director, senior officer or a more than 5% shareholder has a substantial ownership interest.

Under the policy, all related party transactions must be reviewed by the General Counsel or other disinterested officer. Any transaction involving a director is also reviewed, approved or ratified by the Nominating and Corporate Governance Committee. Any transaction involving an executive officer is also reviewed, approved or ratified by the Audit Committee. In order for any such transaction to be approved or ratified, the transaction must be shown to further the interest of the Company and have appropriate safeguards established.

All approved or ratified related party transactions shall be reported to the Audit Committee and the Nominating and Corporate Governance Committee (in those instances where such committee did not participate in the review, approval or ratification process).

Other Matters

Corning is headquartered in a small community in upstate New York. The Company routinely makes contributions to a number of civic, charitable and cultural institutions that improve the quality of life and increase the resources of that community making it more attractive to employees. In a small community, inevitably employees, including executives and their spouses, serve on non-profit organizations that receive such contributions from the Company.

In 2010, Corning contributed approximately $950,000 to the Alternative School for Math and Science (ASMS), a private middle school in Corning, NY, for scholarships, administrative and facility support. ASMS has an advanced curriculum with a focus on science and math. The school is open to the public. Children of Corning employees usually represent approximately 50% of the enrollment. Pamela Schneider (Executive Vice President), Mark Rogus (Senior Vice President and Treasurer), Curt Weinstein (Vice President), Kim Frock Weeks (spouse of Chairman and CEO Wendell Weeks) and Patti Hinman (spouse of Tom Hinman, Senior Vice President) serve on the ASMS board. Ms. Frock Weeks also serves as Administrative Head of School at ASMS, but receives no salary or benefits in this role. Corning expects to increase its contributions to ASMS in the future, as the school expands.

 

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Code of Ethics

Our Board of Directors has adopted the Code of Ethics for the Chief Executive Officer and Financial Executives and the Code of Conduct for Directors and Executive Officers, which supplements the Code of Conduct governing all employees and directors. A copy of the Code of Ethics is attached to this proxy statement as Appendix G and is available on our website at http://www.corning.com/investor_relations/corporate_governance/board_download_library.aspx. We will disclose any amendments to, or waivers from, the Code of Ethics on our website within four business days of such determination. During 2010, no amendments to or waivers of the provisions of the Code of Ethics were made with respect to any of our directors or executive officers.

Security Ownership of Certain Beneficial Owners

Paragraphs (a) and (b) below set forth information about the beneficial ownership of Corning’s Common Stock as of December 31, 2010. Unless otherwise indicated, the persons named have sole voting and investment power with respect to the shares listed.

(a) To the knowledge of management, the following owned 5% or more of Corning’s outstanding shares of Common Stock:

 

Name and Address of Beneficial Owner

   Amount and Nature
of Beneficial Ownership
    Percent of
Class
 

BlackRock, Inc.

     94,546,414 (1)      6.05

40 East 52nd Street

    

New York, NY 10022

    

Capital Research Global Investors

     119,953,620 (2)      7.7

333 South Hope Street

    

Los Angeles, CA 90071

    

Capital World Investors

     122,830,800 (3)      7.9

333 South Hope Street

    

Los Angeles, CA 90071

    

The Growth Fund of America, Inc.

     91,530,000 (4)      5.9

333 South Hope Street

    

Los Angeles, CA 90071

    

 

(1) Reflects shares beneficially owned by BlackRock, Inc. (“BlackRock”), according to a Schedule 13G/A filed by BlackRock with the SEC on February 3, 2011, reflecting ownership of shares as of December 31, 2010. BlackRock has sole voting power and sole dispositive power with respect to 94,546,414 shares. According to the Schedule 13G/A, BlackRock beneficially owned 6.05% of our common stock as of December 31, 2010.
(2) Reflects shares beneficially owned by Capital Research Global Investors (“CRGI”), a division of Capital Research and Management Company, according to a Schedule 13G filed by CRGI with the SEC on February 11, 2011, reflecting ownership of shares as of December 31, 2010. CRGI, an investment advisor, has sole voting power and sole dispositive power with respect to 119,953,620 shares. According to the Schedule 13G, CRGI beneficially owned 7.7% of our common stock as of December 31, 2010. CRGI disclaims beneficial ownership of these shares.
(3) Reflects shares beneficially owned by Capital World Investors (“CWI”), a division of Capital Research and Management Company, according to a Schedule 13G/A filed by CWI with the SEC on February 14, 2011, reflecting ownership of shares as of December 31, 2010. CWI, an investment advisor, has sole voting power and sole dispositive power with respect to 122,830,000 shares. According to the Schedule 13G/A, CWI beneficially owned 7.9% of our common stock as of December 31, 2010. CWI disclaims beneficial ownership of these shares.

 

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(4) Reflects shares beneficially owned by The Growth Fund of America, Inc. (“GFA”), an investment company which is advised by Capital Research and Management Company, according to a Schedule 13G/A filed by GFA with the SEC on February 14, 2011, reflecting ownership of shares as of December 31, 2010. GFA has sole voting power with respect to 91,530,000 shares. According to the Schedule 13G/A, GFA beneficially owned 5.9% of our common stock as of December 31, 2010. GFA’s Schedule 13G/A also notes that some of these shares may also be reflected in the filings made by Capital Research Global Investors and/or Capital World Investors.

(b) The number of shares of Corning Common Stock owned by the directors and nominees for directors, by the chief executive officer, the chief financial officer and the three other most highly compensated executive officers (the “Named Executive Officers”) and by all directors and executive officers as a group, as of December 31, 2010, is as follows:

 

Name

   Amount and Nature
of Beneficial Ownership(1)(2)(3)
    Percent of
Class
 

Directors

    

John S. Brown

     139,167        —     

John A. Canning, Jr.

     32,827        —     

Robert F. Cummings, Jr.

     77,194        —     

Gordon Gund

     3,292,477 (4)      —     

Carlos M. Gutierrez(5)

     8,631        —     

Kurt M. Landgraf

     23,461        —     

James J. O’Connor

     140,491        —     

Deborah D. Rieman

     120,880        —     

H. Onno Ruding

     133,188        —     

William D. Smithburg

     159,917        —     

Glenn F. Tilton

     439        —     

Hansel E. Tookes II

     76,130        —     

Mark S. Wrighton

     16,724        —     

Named Executive Officers

    

Wendell P. Weeks*

     2,069,073        —     

Peter F. Volanakis**

     1,591,980        —     

James B. Flaws*

     862,770        —     

Joseph A. Miller, Jr.

     770,177        —     

Kirk P. Gregg

     857,945        —     

All Directors and Executive Officers as a Group (22 persons)

     11,045,783 (6)(7)      .71
*also serves as director.
**Mr. Volanakis retired from the Board for Directors on December 1 and as President on January 1, 2011.

 

(1) Includes shares of common stock, subject to forfeiture and restrictions on transfer, granted under Corning’s Incentive Stock Plans as well as options to purchase shares of common stock exercisable within 60 days under Corning’s Stock Option Plans. Messrs. Brown, Canning, Cummings, Gund, Gutierrez, Landgraf, O’Connor, Ruding, Smithburg, Tilton, Tookes, Wrighton, Weeks, Volanakis, Flaws, Miller and Gregg, and Ms. Rieman have the right to purchase 25,590; 0; 8,831; 68,500; 1,276; 6,827; 21,468; 66,390; 32,340; 0; 25,590; 3,734; 1,564,997; 1,323,118; 633,258; 579,666; 742,281; and 66,390 shares, respectively, pursuant to such options. All directors and executive officers as a group hold options to purchase 6,117,374 such shares.

 

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(2) Includes shares of common stock, subject to forfeiture and restrictions on transfer, issued under Corning’s Restricted Stock Plans for Independent Directors.
(3) Includes shares of common stock held by JPMorgan Chase & Co. as the trustee of Corning’s Investment Plans for the benefit of the members of the group, who may instruct the trustee as to the voting of such shares. If no instructions are received, the trustee votes the shares in the same proportion as it votes the shares for which instructions were received. The power to dispose of shares of common stock is also restricted by the provisions of the Plans. The trustee holds for the benefit of Messrs. Weeks, Volanakis, Flaws, Miller and Gregg, and all directors and executive officers as a group the equivalent of 10,505; 0; 0; 1,426; 8,784; and 27,022 shares of common stock, respectively. It also holds for the benefit of all employees who participate in the Plans the equivalent of 23,451,997 shares of common stock (being 1.50% of the Class).
(4) Includes 1,650,000 shares held by an irrevocable trust in which Mr. Gund has no pecuniary interest, but for which he is a trustee.
(5) Mr. Gutierrez resigned from the Board on December 31, 2010.
(6) Does not include 671,848 shares owned by the spouses and minor children of certain executive officers and directors as to which such officers and directors disclaim beneficial ownership.
(7) As of December 31, 2010, none of our directors or executive officers had pledged any such shares.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires Corning’s directors and certain of its officers to file reports of their ownership of Corning Common Stock and of changes in such ownership with the SEC and the New York Stock Exchange. Regulations also require Corning to identify in this proxy statement any person subject to this requirement who failed to file any such report on a timely basis.

To Corning’s knowledge, based solely on its review of the copies of such reports furnished to Corning and written representations from certain reporting persons, we believe that all of our officers, directors and greater than 10% shareholders complied with all Section 16(a) filing requirements applicable to them during the fiscal year ended December 31, 2010.

Compensation Discussion and Analysis

The Compensation Committee of the Board of Directors (the “Committee”), composed entirely of independent directors, is responsible to the Board of Directors for executive compensation at Corning (“we”, “us”, “Corning” or the “Company”). The Committee sets the principles guiding the Company’s compensation philosophy, reviews and approves executive compensation levels for executive officers (including cash compensation, equity incentives, benefits and perquisites) and reports its actions to the Board of Directors for review and, as necessary, approval.

Executive Summary

Background

Corning has been in existence for over 160 years; with patient investment over many years, management continuity, and a collaborative culture of teamwork across varied businesses each being critical to our long-term success. This means that our management must balance near-term results with long-term success and continue to build long-term value through innovation.

Compensation Program Reflects Good Governance

Our executive compensation program has changed over time to reflect evolving governance practices:

 

   

We adjust our pay practices as necessary to reflect economic conditions, as evidenced by our decision to suspend annual salary reviews in 2009.

 

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Our equity plan prohibits the repricing of stock options without shareholder approval.

 

   

Our named executive officers (and outside directors) are subject to stock ownership guidelines; each exceeded the guideline amount in 2010.

 

   

A clawback policy was adopted in 2007, allowing the Committee to recoup payments based upon financial results subsequently subject to restatement.

 

   

A hedging policy prohibits officers and directors from trading in options or any Corning stock derivatives or otherwise profiting from short-term speculative swings in the value of Corning stock.

 

   

Benefits under all executive severance and change-in-control agreements entered into after 2004 are limited to 2.99 times the sum of base salary and target bonus.

 

   

Reload stock options were discontinued in 2003.

 

   

We capped the percentage of cash compensation earned as a retirement benefit under our Executive Supplemental Pension Plan in 2006.

 

   

We do not provide tax assistance or tax gross-ups on perquisites.

 

   

The Company regularly reviews internal equity among the Company’s top executives.

2010 Performance and Results

Our Annual Operating Priorities for 2010 were: protect our financial health; invest in the future; and live our values. These annual objectives are measured by financial performance metrics calculated on a non-GAAP basis (such as adjusted net profit after tax and adjusted earnings per share), financial stability metrics (such as adjusted operating cash flow) and progress towards advancing the innovation portfolio and other key milestones.

In 2010, our reported financial performance was improved over 2009:

 

   

Net profit after tax (“NPAT”) of $3,558 million compared to $2,008 million for 2009, a 77% increase;

 

   

Earnings per share of $2.25 compared to $1.28 per share for 2009, a 76% increase;

 

   

Operating cash flow of $3,835 million compared to $2,077 million for 2009, a 85% increase; and

 

   

Revenue of $6.6 billion compared to $5.4 billion for 2009; a 23% increase.

Further, we strengthened our balance sheet. We ended 2010 with cash in excess of debt of $4.0 billion vs. $1.6 billion in 2009.

The “Adjustments to 2010 Reported Results” on which 2010 performance-based compensation are based are described starting on page 30 below. A reconciliation of our non-GAAP financial measures to GAAP financial measures can be found in Appendix H to this Proxy Statement.

 

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Target Compensation

For 2010, the Committee approved target total direct compensation for the Named Executive Officers with variable pay representing 84% (on average); total direct compensation consists of long-term and short-term incentives and base salary, and excludes benefits and perquisites. Two compensation elements, annual incentive compensation and cash performance units, are earned only if the corporate financial performance goals for the year are met. The value of the remaining long-term incentive components, stock options and restricted stock units, depend directly on our stock price performance.

LOGO

Actual Compensation and Related Performance

Our compensation program is designed to pay for performance. Actual compensation earned by the Named Executive Officers varies from target from year to year based on the Company’s financial performance and stock price. Actual total direct compensation for our Named Executive Officers and our performance during 2008 through 2010 based on Total Shareholder Return (calculated as the annual change in stock price assuming reinvestment of dividend). Adjusted Net Profit After Taxes and Adjusted Operating Cash Flow are summarized below. Stock option values are included in the total direct compensation at their fair values. The actual value of these stock options is yet to be determined – such values are subject to vesting and future stock prices that are not possible to predict.

 

    1-Year Total Shareholder Return    

 

Adjusted Net Profit After Taxes ($ in millions)

 

Adjusted Operating Cash Flow ($ in millions)

2010   2009   2008   2010   2009   2008   2010   2009   2008
1.2%   105.6%   -59.8%   $2,883   $2,061   $2,251   $2,723   $2,029   $2,056

LOGO

 

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Notes Regarding Actual Compensation compared to Target Compensation:

 

2010

  

2009

  

2008

•  Base Salaries not subject to performance criteria

 

•  2010 PIP earned at 200% of target

 

•  2010 GoalSharing earned at 7.72% of base salary

 

•  2010 Performance Cash Units earned at 150% of target

 

•  2010 Time-based Restricted Stock Units (“RSUs”) not subject to performance

 

•  Stock Options indicated at Fair Values (which far exceed current actual values)

  

•  Base Salaries not subject to performance criteria

 

•  2009 PIP earned at 170% of target

 

•  2009 GoalSharing earned at 7.16% of base salary

 

•  2009 Performance Share Units earned at 143% of target

 

•  Time-based RSUs N/A in 2009

 

•  Stock Options indicated at Fair Values (which are less than current actual values)

  

•  Base Salaries not subject to performance criteria

 

•  2008 PIP earned at 25% of target

 

•  2008 GoalSharing earned at 4.28% of base salary

 

•  2008 Performance Share Units earned at 16% of target

 

•  Time-based RSUs N/A in 2008

 

•  Stock Options indicated at Fair Values (which far exceed current actual values)

In 2010, adjusted Net Profit After Tax (“Adjusted NPAT”) was the financial metric used for annual cash bonuses and adjusted Earnings Per Share (“Adjusted EPS”), and adjusted Operating Cash Flow (“Adjusted Operating Cash Flow”) were the financial metrics for cash performance unit awards earned by the Named Executive Officers. Our 2010 financial results were significantly above the goals established for Corning’s 2010 Performance Incentive Plan (annual cash bonus) and cash performance units awarded under the Corporate Performance Plan. As a result of the strong financial performance, compared to the goals established, actual awards earned by the Named Executive Officers for 2010 were above the target awards established at the start of the year.

Information concerning 2010 short-term and long-term incentives for our Named Executive Officers are summarized below:

 

2010 Compensation Element

  

2010 Award Opportunity for
Named Executive Officers

  

2010 Performance Metrics and
Results

  

2010 Award Earned by Named
Executive Officers

Annual Cash Bonus —Performance Incentive Plan   

Target awards range from 75% to 100% of base salary

 

Opportunity can range from 0% to 200% of target awards

  

Adjusted Net Profit After Tax of $2,883 million exceeded maximum (200%) goal of

$2,500 million

 

2010 target was

$2,260 million

  

Maximum 200% of target opportunity earned, resulting in actual awards ranging from 150% to 200% of base salary for the 5 Named Executive Officers

 

To be paid March 2011

Annual Cash Bonus —GoalSharing   

Target is 5% of base salary

 

Opportunity can range from 0% to 10% of salary

   Weighted average of over 100 GoalSharing Plans in place at Corning—all employees eligible   

7.72% of base salary

 

To be paid February 2011

Corporate Performance Plan

Cash Performance Units
(represents 50% of

annual long-term

incentive opportunity)

  

Cash performance unit target awards range from $1 to

$3 million

 

Opportunity can range from 0% to 150% of target awards

  

Adjusted EPS of $1.82;

2010 target was $1.43 and maximum (150%) goal

was $1.58

 

Adjusted Operating Cash Flow of $2,723 million; 2010 target was $2,127 million and maximum (150%) goal was $2,232 million

  

Maximum 150% of target opportunity earned, resulting in actual awards ranging from $1.5 to $4.5 million for the 5 Named Executive Officers

 

Subject to vesting and to be paid February 2013

Corporate Performance Plan

Stock Options

(represents 25% of

annual long-term

incentive opportunity)

  

Target grant date fair value of stock option guideline awards range from $500,000 to

$1.5 million

  

Actual value ultimately realized depends on future market performance of Corning stock and cannot be accurately

assessed now

  

Actual grant date fair value of stock options granted for 2010 performance year ranged from $600,000 to $1.7 million

 

Vest ratably over a three-year period (1/3 each year)

Corporate Performance Plan

Restricted

Stock Units

(represents 25%

of annual long-term

incentive opportunity)

  

Target grant date fair value of restricted stock units range from $500,000 to $1.5 million

 

Realized value based, in part, on market performance of stock

  

Actual value ultimately realized depends on future market performance of Corning stock and cannot be accurately

assessed now

  

Actual grant date fair value ranged from $600,000 to

$1.6 million

 

Vest in February 2013

 

29


Executive Compensation Philosophy—Key Principles

The goal of the Company’s compensation program is to provide competitive and motivational compensation to ensure our success in attracting, developing and retaining our key executive, managerial and technical talent. Having and retaining the right talent is critical to supporting and achieving our Annual Operating Priorities.

The Committee’s key compensation principles are as follows:

 

   

Provide a Competitive Base Salary:  The Committee does not believe that all of a Named Executive Officer’s annual compensation should be at risk. As a result, the Company pays a competitive base salary to each Named Executive Officer as discussed below.

 

   

Variable Compensation Should Relate to Corporate Performance:  Executive compensation should reward performance and contribution to both short-term and long-term corporate financial performance and shareholder value.

 

   

Team-Based Management Approach:  Corning uses a team-based management approach, so 100% of incentives awarded to Named Executive Officers are contingent on achieving a common set of shared goals for Corning’s consolidated financial performance or the performance of Corning stock. The Committee does not establish personal objectives for the CEO or the other Named Executive Officers.

 

   

Incentive Compensation Should be a Greater Part of Total Compensation For More Senior Positions:  As our employees assume more responsibilities and have greater opportunity to enhance Company performance and shareholder value, an increasing share of their total compensation package is derived from variable incentive compensation.

 

   

The Interests of Our Executive Group Should be Aligned with Shareholders:  Through the use of stock options and restricted stock units, as well as stock ownership guidelines, we align the long-term interests of our Named Executive Officers with those of our shareholders.

Adjustments to 2010 Reported Results

In 2010, Adjusted NPAT is the financial metric used for annual cash bonuses and Adjusted EPS and Adjusted Operating Cash Flow are the financial metrics for cash performance unit awards earned by the Named Executive Officers. The adjustments made to reported earnings in order to determine Adjusted NPAT, Adjusted EPS, and Adjusted Operating Cash Flow for 2010 were approved by the Committee in advance and were similar to the adjustments approved in prior years. These adjustments are intended to eliminate potential windfalls or penalties for non-recurring (and often non-cash) charges and gains. This allows the employees and executives of the Company to focus on improving operational performance, while taking appropriate special actions whenever necessary to benefit the Company and its shareholders.

 

30


Upon the Committee’s review and approval at the beginning of the year, the following special items were to be excluded from reported results to calculate incentives for 2010: (i) one-time charges from financing activities, (ii) gains/losses on debt buybacks, (iii) fluctuations in foreign exchange rates for Japanese yen and Korean won outside a range around budget, (iv) restructuring or impairment charges and credits, (v) non-operating gains and losses, (vi) bankruptcy-related charges at Dow Corning, (vii) asbestos settlement charges, (viii) accounting changes, (ix) discontinued operations, and (x) extraordinary gains/losses. Corning had special adjustments in several of these areas in 2010.

 

     NPAT
($ in  millions)
    EPS     Operating Cash Flow
($ in millions)
 

Reported 2010 Results

   $ 3,558      $ 2.25      $ 3,835   

Adjustments:

  

Debt transaction

     19        0.01     

Equity earnings charges

     (120     (0.08  

Insurance proceeds

     (206     (0.13     (259

Deferred Tax Asset valuation allowance release

     56        0.04     

Pittsburgh Corning settlement charges

     (30     (0.02  

Fluctuations in foreign exchange rates for Japanese Yen and Korean Won outside a range +/- 5% of budget*

     (128     (0.08     (50

Restructuring or impairment charges and credits

     (1       65   

Tax credit from repatriation

     (265     (0.17     (868

Adjusted 2010 Results

   $ 2,883      $ 1.82      $ 2,723   

* 92 to 102 Yen per U.S. dollar and 1140 to 1260 Korean won per U.S. dollar in 2010.

As a result of these adjustments for 2010, Corning’s Adjusted NPAT of $2,883 million was $675 million lower than Corning’s reported GAAP NPAT of $3,558 million. Corning’s Adjusted EPS of $1.82 was $0.43 lower than Corning’s reported GAAP EPS of $2.25. Corning’s Adjusted Operating Cash Flow of $2,723 million was $1,112 million lower than the Company’s GAAP Operating Cash Flow of $3,835 million.

Executive Compensation Program–Elements of Compensation

Base Salary

The Committee does not believe that all of a Named Executive Officer’s annual compensation should be at risk. As a result, the Company pays a competitive base salary to each Named Executive Officer. Annual salary reviews were reinstated for all salaried employees in 2010, after suspension in 2009. Accordingly in 2010, each of our Named Executive Officers received a 4% base salary increase, equal to the 2010 merit budget for U.S. salaried employees. In 2010, for the CEO, base salary was established below the median of the market of the various executive compensation surveys that the Committee reviews. However, his total direct compensation was positioned around the median of the market. Beginning in 2011, the CEO’s base salary will be positioned between the median and 75th percentile of the benchmarks (discussed below). The Committee views internal equity compared to the CEO for the non-CEO Named Executive Officers as a more important consideration in establishing a base salary for these individuals than the external market. As a result of deliberately positioning these base salaries closer to the CEO than do many other companies, the base salaries of the non-CEO Named Executive Officers are positioned within the top quartile when reference is made to the various executive compensation surveys.

Annual Incentive / Bonus

Performance Incentive Plan (PIP):  The Performance Incentive Plan is used to ensure that the Company’s Named Executive Officers and other eligible employees have the opportunity to receive variable cash awards tied to the Company’s annual financial performance. Bonuses will be higher than target when the Company does well compared to the established financial goals and, bonuses will not be paid when the Company and/or individual fail to achieve the minimum goals. For the Named Executive Officers, receipt of any cash bonus under the PIP is based solely on corporate financial performance. Awards under the PIP were based on Adjusted NPAT for 2010.

Each year, the Committee reviews and approves an annual cash bonus target award for each of our Named Executive Officers, expressed as a percentage of the executive’s base salary. The annual bonus targets for the

 

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Named Executive Officers in 2010 range from 75% to 100% of the Named Executive Officers’ base salaries (see footnote (3) to the Summary Compensation Table). These target award percentages were not changed in 2010. The Named Executive Officers may earn from 0% to 200% of their individual bonus target awards depending on actual corporate financial performance.

The individual Named Executive Officer’s cash bonus targets are determined by looking at (1) external equity by referring to the total cash opportunities in various external executive compensation surveys for the CEO and (2) internal equity compared to the CEO and each other within the Company for the non-CEO Named Executive Officers based on a subjective determination that considers factors such as the position, scope of responsibility, experience, skills and sustained results the executive delivers over time.

The range of 2010 Performance Incentive Plan goals for Adjusted NPAT were established with the following considerations:

 

   

The minimum goal (0% of target payout) was established at 95% of 2009 actual results. If Adjusted NPAT did not exceed $1,877 million in 2010, or 83% of the 2010 budget, the Named Executive Officers would earn nothing (0%) under the Performance Incentive Plan.

 

   

The target goal (100% of target payout) was established at 2010 budget for Adjusted NPAT of $2,260 million, equal to a 12.5% improvement over 2009 actual results. If Adjusted NPAT met this goal for 2010, the Named Executive Officers would earn 100% of their target award under the Performance Incentive Plan.

 

   

The maximum goal (200% of target payout) was established at 111% of budget, or $2,500 million Adjusted NPAT for 2010, equal to a 24.5% improvement over 2009 actual results. If Adjusted NPAT met or exceeded this goal for 2010, the Named Executive Officers would earn 200% of their target award under the Performance Incentive Plan.

 

   

A “flat spot” concept has been used by the Company for many years. The “flat spot” is intended to avoid cliffs in the annual bonus plan; in this way, participants are not incented to drive bad behavior in order to achieve a cliff goal. We find this helps avoid unintended shortfalls or windfalls in actual bonus payouts to plan participants due solely to the uncertainty in establishing a budget and accurately forecasting expected results. In 2010, we returned the width of the “flat spot” applicable to Adjusted NPAT goals to more historical levels of ± 5% of budget, compared to the wider range of ± 10% of budget used in 2009, when the global recession made it more difficult to accurately budget Corning’s results.

The actual scale of Adjusted NPAT used in 2010 is shown below. The “flat spot” concept can be seen in the following chart for payout goals between 90% and 110% of target; for example, a significant change of $222 million in Adjusted NPAT would result in relatively small bonus payout adjustments of 90% to 110% of the 2010 target bonus opportunities.

LOGO

For 2010, Actual Adjusted NPAT of $2,883 million significantly exceeded the maximum NPAT goal, resulting in maximum payouts of 200% of target awards for each Named Executive Officer.

 

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GoalSharing Plan:  Almost all of our global employees (hourly and salaried) are eligible to participate in an annual GoalSharing Plan. This variable pay plan generally provides eligible employees an opportunity to earn from 0% to 10% of their annual base salary, based on the actual achievement of specified business performance objectives established annually for these plans. This common program design reinforces our team-based culture and provides an incentive for driving continuous improvement across all of our businesses.

 

   

As for other eligible employees, our Named Executive Officers are eligible for awards of 0% to 10% of base salary under the GoalSharing Plan.

 

   

The Named Executive Officers receive cash bonuses equal to the weighted average percentage of all plan payout percentages (the maximum payout being 10%) earned by employees under the GoalSharing plans multiplied by the Named Executive Officer’s base salary.

 

   

The corporate average payout for 2010 was 7.72% of salary.

 

   

Amounts earned under this plan are reported along with the Performance Incentive Plan bonus in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.

Discretionary Bonus:  Effective January 1, 2011, Peter F. Volanakis, our President and Chief Operating Officer, retired after 28 years of distinguished service. In July, the Committee approved a discretionary bonus of $1,000,000 in recognition of Mr. Volanakis’ long service to the Company and for the retention of his services through year end.

Long-Term Incentives

Corporate Performance Plan:  We award long-term incentives annually to the Executive Group under our Corporate Performance Plan. For the 2010 performance year, we implemented a new plan design composed of a mix of 50% cash performance units, 25% stock options and 25% time-based restricted stock units (previously the mix was 50% stock options and 50% performance shares). This new plan design was implemented to reduce the number of stock options in the long-term incentive plan design and to reduce the total number of shares used in the plan, by balancing cash with equity incentives.

The targeted long-term incentive value for the CEO was determined by applying Committee judgment after referring to the median target total direct compensation (base salary + target bonuses + target long-term incentives) of the various executive compensation surveys we look at and subtracting our CEO’s base salary and target bonuses from that total. Targeted long-term incentive values for the non-CEO Named Executive Officers are then established by using judgment to establish the desired internal pay equity in comparison to the CEO, subject to the Company achieving the required targeted financial performance.

Cash Performance Units:  Awards of cash performance units may range from 0% to 150% of the target award provided to each executive based on the Company’s actual annual results compared to the predetermined annual financial goals set by the Committee.

 

   

Given the high level of uncertainty associated with growing through innovation and the volatility of the markets we operate in, we have difficulty setting multi-year goals in advance.

 

   

As a result, we use a one-year performance period for calculating the number of performance units that can be earned under the Corporate Performance Plan.

 

   

After the one-year performance period, awards are subject to an additional 2-year vesting period extending to February 1, 2013.

 

   

In total, this three-year timeframe from the start of the performance period assists the Company in retaining its critical talent, since the cash performance units are subject to forfeiture provisions during the vesting period (except for termination of employment resulting from situations such as death, disability or retirement).

 

   

Cash performance units are payable in cash (or at the Committee’s discretion, in stock) at the end of the vesting period.

 

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For the 2010 performance year, cash performance unit awards under the Corporate Performance Plan were based upon two equally weighted goals: (1) Adjusted EPS and (2) Adjusted Operating Cash Flow. The minimum (0%), target (100%), and maximum (150%) levels for Adjusted EPS and Adjusted Operating Cash Flow for the 2010 Corporate Performance Plan were as follows:

LOGO

Two goals were selected because it is important to the long-term success of the Company to focus attention on generating cash, in addition to improving Adjusted EPS. Both the Company and the Committee believe that these metrics are appropriate for motivating and rewarding behavior that leads to improvement in operating performance and supports shareholder value over time.

Actual results for 2010, at $1.82 of Adjusted EPS (150% of target) and $2,723 million of Adjusted Operating Cash Flow (150% of target), were significantly above target expectations under the Plan. As a result, the maximum 150% of the target performance unit awards were earned for 2010 performance (subject to an additional two-year vesting period).

Time-Based Restricted Stock Units:  The 2010 Corporate Performance Plan incorporates time-based restricted share units that vest 100% after three years (in February 2013). The use of stock options in the plan design was correspondingly reduced.

Awards under this plan for the 2010 performance year were approved and made in December 2009 and are reported in 2009 as Stock Awards in the Summary Compensation Table. Beginning in 2011, the annual grant date of restricted stock units will be moved forward to coincide with and occur in the performance year.

In addition, we occasionally grant restricted stock units for purposes of recognition or for special retention situations. While the Named Executive Officers did not receive any time based restricted stock awards for these purposes in 2009 or 2010, shares were awarded to three of the Named Executive Officers in 2008.

Stock Options:  At its December 2009 meeting, the Committee approved annual awards of stock options to the Named Executive Officers under the Corporate Performance Plan. The stock option awards have staggered grant dates: 1/3 of the total option grant awarded at the December 2009 Committee meeting, 1/3 of the total option grant awarded on the first day the New York Stock Exchange is open in January 2010 and 1/3 of the total option grant awarded on the first day the New York Stock Exchange is open in February 2010. These stock options vest ratably over a three-year period (1/3 each year).

For the past eight years, the Committee has staggered the grants of stock options to avoid basing awards on a single grant date; the Committee believes that this practice is fair and equitable given the historical volatility of Corning’s stock price. However, this approach results in the value of stock option grants granted for the 2010 performance year being reported in the Summary Compensation Table in 2009 and 2010.

Beginning in 2011, Corning will change the timing of stock option grants to align the Committee’s intended grants with disclosure requirements; staggered grant dates will be moved forward to January, February and March 2011 so that all stock option grants will occur in the performance year.

We use the New York Stock Exchange closing price of Corning stock on the date of grant as the grant price of the stock options.

 

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In addition to stock options granted during the year, there were 19,351,282 stock options originally awarded during the telecom boom in 2000 (with exercise prices significantly above Corning’s current stock price) that expired and were forfeited and canceled during 2010. The forfeiture of these compensation awards further reinforces the strong link between pay and performance, in that incentive pay awards are not earned or paid if the Company does not perform.

Other Benefit and Plans

Employee Benefits:  Our Named Executive Officers are eligible for the same employee benefit plans in which all other eligible U.S. salaried employees participate. These plans include medical, dental, life insurance, disability, matching gifts and qualified defined benefit and defined contribution retirement plans. We also maintain nonqualified defined benefit and defined contribution retirement plans with the same general plan features and benefits as our qualified retirement plans for all U.S. salaried employees affected by tax law compensation, contribution and/or deduction limits.

Perquisites and Other Benefits:  In addition to the standard benefits available to all eligible U.S. salaried employees, the Named Executive Officers are eligible for the following additional perquisites and other benefits:

Executive Supplemental Pension Plan (“ESPP”):  We maintain a nonqualified executive supplemental pension plan for approximately 30 active participants, including all of the Named Executive Officers. In 2006, we capped the percentage of cash compensation earned as a retirement benefit under our ESPP at a maximum 50% of Final Average Pay for 25 years of service or more. The definition of pay used to determine benefits includes base salary and annual cash bonuses. Long-term cash or equity incentives are not included and do not impact retirement benefits. For additional details of the benefits and plan features of the ESPP, please refer to the section entitled “Retirement Plans” in this proxy statement.

We maintain an ESPP to:

 

   

Reward and retain the long-service individuals that are critical to executing Corning’s growing through innovation strategy. Most participants under the plan retire from Corning with more than 20 to 30 years of service, and the Company believes that long service with the Company is a vital ingredient that will continue to contribute to Corning’s long-term success.

 

   

Provide a reliable and competitive retirement benefit that is independent of other forms of compensation. Given the inherent volatility of performance-based awards and equity incentives, the Company believes that providing a reliable, competitive form of retirement income (independent of other elements of compensation) to participants under this plan is consistent with its focus of balancing short and long-term interests while growing through innovation.

While we seek to maintain well-funded qualified retirement plans, we do not fund our nonqualified benefit plans.

Executive Allowance Program:  In 2010, we provided the Named Executive Officers with an annual executive allowance that could be used only for limited personal aircraft rights on corporate aircraft, and home security. Each Named Executive Officer is responsible for all taxes on any imputed income resulting from this program.

We closely monitor total business and personal usage on our planes and seek to keep all personal usage at a low percentage of total usage. The Committee believes that a well-managed program of limited personal aircraft rights, particularly given the limited commercial flight options available in the Corning, New York area, provides an extremely important benefit at a reasonable cost to the Company. The Committee believes this helps Corning attract and retain its senior executive talent while also enabling our Named Executive Officers to continue to conveniently and safely conduct and discuss business operations even while travelling for personal reasons. For additional details, refer to footnotes relating to “All Other Compensation” included with the Summary Compensation Table.

 

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Executive Physical:  Members of the Executive Group in the U.S., including the Named Executive Officers, are eligible for an annual physical exam.

Executive Severance Agreements:  We have entered into severance agreements with each Named Executive Officer. The severance agreements provide clarity for both the Company and the executive if the executive is fired. By having an agreement in place, we intend to avoid the uncertainty, negotiations and potential litigation that may otherwise occur at the time of termination. The agreements are competitive with market practices at many other large companies and are helpful in retaining senior executives. Additional details can be found under “Arrangements with Named Executive Officers”.

Executive Change-in-Control Agreement:  The Committee believes that it is in the best interests of shareholders, employees and the communities in which the Company operates to ensure an orderly process if a change in control of the Company were to occur. The Committee believes that it is important to prevent the loss of key management personnel (who would be difficult to replace) that may occur in connection with a potential or actual change in control of the Company. We have thus provided each Named Executive Officer with change in control agreements (separate from the severance agreements described above). The change in control agreements generally have a double trigger severance provision (i.e. the executive’s employment must be terminated following a change in control). Additional details about the specific agreements can be found under “Arrangements with Named Executive Officers”.

These severance and change-in-control agreements are intended to provide stability to the Company and the Named Executive Officers at critical times. The Company considers these agreements necessary to attract and retain senior executives, and the terms of these agreements are not a part of the annual compensation determination for our Named Executive Officers. Effective for all executive severance agreements and change in control agreements entered into after July 21, 2004, the Committee and the Board of Directors approved a policy to limit benefits that may be provided to an executive under any new agreement to 2.99 times the executive’s annual compensation of base salary plus target bonus (the “Overall Limit”). All of the Named Executive Officers executed severance and change in control agreements prior to July 21, 2004 and, are not affected by the Overall Limit. However, all agreements entered into with new officers since July 2004 are subject to the Overall Limit.

Consulting Agreement with Mr. Volanakis:  Effective January 1, 2011, Corning entered into a two-year consulting agreement with Mr. Volanakis, our former President and COO. For his continued advice and assistance through December 31, 2012, Mr. Volanakis will receive compensation of $903,000, to be paid in eight quarterly installments of $112,875 each, beginning March 31, 2011, and be reimbursed for reasonable travel and business expenses incurred at Corning’s request. The transition agreement requires Mr. Volanakis to adhere to certain confidentiality, non-compete and non-solicitation requirements.

Role of Compensation Consultants

The Committee has the authority to retain and terminate a compensation consultant, and to approve the consultant’s fees and all other terms of the engagement. The Committee currently retains an executive compensation expert from Hewitt Associates as its independent consultant; this selection was made without the input or influence of management.

 

   

During 2010, Hewitt Associates provided other human resource services to the Company, but the Hewitt executive compensation expert does not provide any other services to the Company. We do not believe that limited services provided by separate groups within Hewitt Associates, on discreet non-recurring projects, (e.g. Leadership Development in China) for the benefit of Corning’s general employee population, affect the independent advice that the Committee receives from its consultant related to executive compensation.

 

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During 2010, Aon Corp., which also does work for Corning, acquired Hewitt Associates. In 2010, fees for Aon/Hewitt totaled $190,690, of which $25,847 was related to compensation consulting services provided to the Committee by its independent consultant.

The consultant advises the Committee on all matters related to the compensation of the named executive officers and assists the Committee in interpreting the Consultant’s data as well as data received from the Company. Specifically, the Compensation Committee requested the Compensation Consultant provide it with the following assistance in 2010:

 

   

Review and provide feedback on the executive compensation proposals and any short- or long-term incentive compensation plan design changes, as applicable, developed by the Company for review and consideration.

 

   

Attend Compensation Committee meetings, including the December meeting when annual compensation decisions are reviewed regarding the Named Executive Officers and the other 180+ members of the Executive Group.

 

   

Provide feedback to the Compensation Committee regarding market trends and practices and provide informed opinions regarding Corning’s compensation practices, policies and executive pay levels based on the Compensation Consultant’s experience.

 

   

Review and provide feedback to recommendations developed by Corning’s Senior Vice President, Global Compensation & Benefits, and provide the Compensation Consultant’s opinion on the annual pay levels established for Corning’s CEO and other Named Executive Officers.

 

   

Review and provide feedback to any changes proposed to any Corning plan or agreement that affects any member of Corning’s Executive Group.

 

   

Recommend changes in compensation paid to independent directors.

 

   

When requested by the Compensation Committee Chairman, attend the Executive Session of independent directors to explain any compensation plan or program changes, or provide his opinion on executive pay levels.

Role of Executive Management in the Executive Compensation Process

Corning’s Senior Vice President (“SVP”), Global Compensation and Benefits, working closely with other members of Corning’s Human Resources, Legal and Finance departments, is responsible for designing and implementing executive compensation and discussing significant proposals or topics impacting executive compensation at the Company with the Committee. The SVP, Global Compensation and Benefits formulates each element of the targeted total compensation recommendations for all of the Named Executive Officers and reviews the recommendations for each of the non-CEO Named Executive Officers with the CEO. The Named Executive Officers do not recommend or suggest individual compensation actions that benefit them personally.

 

   

The CEO may propose any adjustments he thinks appropriate prior to submission to the Committee.

 

   

The recommendation for the CEO’s compensation is not discussed or reviewed with the CEO prior to the Committee’s review and the CEO is not present when the SVP, Global Compensation and Benefits reviews the CEO compensation recommendation with the Committee.

 

   

The Committee receives management’s recommendations for the compensation plan performance metrics and sets the final targets for the year.

The CEO and Chief Administrative Officer are invited to attend Committee meetings, although they leave the room during discussions and deliberations of individual compensation actions affecting them personally. The Chief Financial Officer has only attended the annual Committee meeting to review the CD&A; he is provided

 

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with a copy of the Committee meeting materials that are mailed in advance to all Committee members as well as a copy of the minutes prepared after the meeting. The SVP, Human Resources began attending Committee meetings in October 2010.

Comparator Companies for 2010 Compensation Review Conducted in December 2010

The Company currently participates in and uses three general executive compensation surveys for Named Executive Officer positions.

 

   

Mercer S&P 500 Executive Survey;

 

   

Towers Watson Executive Survey; and

 

   

Radford (Aon) Executive Survey.

In addition to the three general surveys, we also use proxy data obtained from service providers, such as Equilar, Inc., to review the actual compensation levels of named executive officers at companies in a variety of manufacturing and service industries that are similar in size or have similar characteristics to corning (the “Comparator Companies”). The Comparator Companies used to establish 2010 compensation were reviewed by the Committee in December 2009 and can be found in Corning’s prior year CD&A.

Internal equity compared to the CEO for the non-CEO Named Executive Officers is a more important consideration in establishing a base salary and total direct compensation for these individuals than the external market. As a result of deliberately positioning these base salaries and total direct compensation closer to that of the CEO than do many other companies, the total pay of the non-CEO Named Executive Officers continue to be positioned within the top quartile when reference is made to the various executive compensation surveys.

Given our diversified businesses, the history of unique innovations behind our product offerings, and the global nature of our operations, we lack any pure peer companies against which the Committee is able to benchmark. As a result, external survey data cannot take the place of sound business judgment based on specific knowledge of Corning and its leaders. Part of Corning’s success is derived from its investments in several equity companies. For example, Corning’s share of the revenues from these equity companies (greater than $5.0 billion in 2010) is not consolidated into Corning’s net sales. However, Corning’s share of the equity earnings from these companies is included in Corning’s net income. Net income from the equity companies is as critical to Corning’s long-term success as the net income from Corning’s wholly-owned companies. Thus, net sales alone do not completely reflect the size and complexity of Corning when compared to other companies. We look at general compensation surveys and proxy data from companies in a variety of manufacturing and service industries that are similar in size or have similar financial characteristics to Corning (the “Comparator Companies” found below). However, the information gleaned from these surveys and proxy data is used only as a reference point in the Committee’s determination of establishing the targeted total pay of the Named Executive Officers. Such data is not used as a specific benchmark or to target a specific percentile of the market in establishing our non-CEO Named Executive Officer’s compensation.

In developing the list of 31 Comparator Companies for the December 2010 Committee review of compensation, the Company identified publicly-traded manufacturing and service companies that met the following general screening criteria:

 

   

Revenues in the range of $5 billion to $12 billion, with median revenues of approximately $9 billion.

 

   

More than 15,000 employees.

 

   

Market capitalization above $6 billion.

 

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Excluded all companies in industries markedly different from Corning such as banking, financial services, airlines, railroads and retail.

 

Air Products & Chemicals Inc.   Monsanto Co
Alcon Inc.   Paccar Inc
Baker Hughes Inc.   Parker Hannifin Corp.
Becton Dickinson & Co.   Praxair Inc
Boston Scientific Corp.   Precision Castparts Corp.
Campbell Soup Co   Qualcomm Inc
Covidien Ltd.   Quest Diagnostics Inc.
Cummins Inc.   Rogers Communications Inc
Danaher Corp   Sara Lee Corp
Dover Corp.   Sherwin Williams Co.
Eaton Corp   Stryker Corp.
Ecolab Inc.   Symantec Corp.
Goodrich Corp.   Texas Instruments Inc
H. J. Heinz Company   Thermo Fisher Scientific Inc.
ITT Corp   Tyco Electronics Ltd
Mattel Inc.  

The latest information reviewed by the Committee in December 2010 was based on proxy data filed with calendar year-end 2009 or fiscal year-ends in early 2010 and was used to establish target pay levels for 2011.

 

Peer Group

   Revenues
($Millions)
     Net
Income
($Millions)
    Total
Assets
($Millions)
     Fiscal
Year-End
Market
Capitalization
($Millions)
     Number
of Full-
Time
Employees
 

50th Percentile

   $ 8,956       $ 714      $ 11,129       $ 13,525         27,000   

75th Percentile

   $ 10,461       $ 1,130      $ 15,563       $ 19,789         35,150   

MINIMUM

   $ 5,431       $ (3,100   $ 4,324       $ 6,755         15,200   

MAXIMUM

   $ 11,873       $ 2,098      $ 27,445       $ 75,131         78,000   

Focus Company

             

CORNING - 2010

   $ 6,632       $ 3,276      $ 25,833       $ 30,541         26,200   

Anticipated Changes in Compensation Practices for 2011

The current compensation programs have been in place for several years. Our programs are reviewed and assessed regularly and changes are made as necessary to meet Company objectives or satisfy changing legal and/or regulatory requirements.

Starting in 2010, Corning modified its long-term incentive program to award performance units for 50% of the target value, stock options for 25% of the target value and time-based restricted stock units for 25% of the target value. Further the performance units were denominated and will be payable in cash, rather than in share units. These plan design changes and the actual plan awards for 2010 were approved at the December 2009 Committee meeting.

Mr. Weeks’ 2010 target direct compensation was established by the Committee in December, 2009 at approximately $8.2 million. The three surveys and the proxy data reviewed by the Committee at that time indicated that median total direct compensation for Mr. Weeks’ position was $8.2 million, on average. In December 2010, the Committee reassessed the desired pay positioning of the CEO given the pending retirement of our COO (which became effective on January 1, 2011). Commencing in July 2010, operational leaders began

 

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to report directly to the CEO. In addition, Mr. Weeks has been instrumental in successfully gaining new commercial opportunities for Corning’s new businesses, such as Corning® Gorilla® glass. As a result, the Committee, after consultations with its independent consultant and the other members of the Board of Directors, decided to increase our CEO’s 2011 pay opportunity. Effective with the 2011 performance year, Mr. Weeks’ target total direct compensation, excluding benefits and perquisites, was increased as follows:

 

Elements of CEO Compensation

   2010 Target    2011 Target

Base Salary

   $1,071,000    $1,171,000

Performance Incentive Plan Target

   100% of Base Salary
$1,071,000
   140% of Base Salary
$1,639,400

GoalSharing Target

   $53,550    $58,550

Long-Term Incentive Award Target

   $6,000,000    $7,000,000

Total Direct Compensation

   $8,195,550    $9,868,950

Mr. Weeks’ new target total direct compensation of approximately $9.9 million provides a balance between fixed and variable pay, as well as short-term and long-term goals, and was positioned between the median and 75th percentile of the various benchmarks the Committee reviews. On average, median total direct compensation reported in the surveys and the proxies was $8.2 million and 75th percentile total direct compensation was $10.3 million. The remaining Named Executive Officer target total direct compensation remains positioned in the top quartile, consistent with past practice.

Currently, we do not anticipate making other significant changes to our total executive compensation program in 2011.

Additional Information

Compensation Risk Analysis

Corning does not use compensation policies or practices that create risks that are reasonably likely to have a material adverse effect on the Company. The Compensation Discussion and Analysis describes generally the compensation policies and practices that apply to executive and management employees throughout the Company. A cross-functional team with representatives from Human Resources, Legal, Finance and Risk Management assessed Corning’s compensation policies and practices from a risk-taking perspective, and reviewed its conclusions with the Compensation Committee. This assessment considered, among other things:

 

   

The mix of cash and equity payouts tied to both short-term financial performance and long-term value creation.

 

   

The time vesting requirements in our long-term incentive plans, which help align the interests of employees to long-term shareholders.

 

   

The use of financial performance metrics that are readily monitored and reviewed.

 

   

The use of common performance metrics for incentives across Corning’s management team and all eligible employees, with corporate results impacting the compensation of all Corning employees.

 

   

The use of a “flat spot” in our annual incentive plan that is intended to avoid incenting cliff goals and to prevent unintended shortfall or windfalls due to the difficulty in accurately forecasting financial results.

 

   

Capped payout levels for both annual incentives and performance unit awards.

 

   

Our stock ownership requirements for Named Executive Officers.

 

   

The Company’s clawback and hedging policies.

 

   

Multiple levels of review and approval of awards.

 

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“Reload” Stock Options

The reload feature is no longer included in any Corning stock option grants made on or after February 28, 2003.

“Clawback” Policy

In 2007, the Board adopted a policy that gives the Compensation Committee the sole and absolute discretion to make retroactive adjustments to any cash or equity based incentive compensation paid to certain Executive Officers and other key employees where such payment was based upon the achievement of certain financial results that were subsequently the subject of a restatement. Based on its review and judgment, the Committee may seek to recover any amount that it determines was received inappropriately by these individuals.

Stock Ownership Guidelines

The Named Executive Officers and independent directors are subject to stock ownership guidelines. The ownership guidelines are as follows:

 

Chief Executive Officer   5x Base Salary
Named Executive Officers other than the CEO   3x Base Salary
Independent Directors   5x Annual Cash Retainer

Hedging Policy

We have established a policy that no member of the Officer Group or director may sell or buy publicly traded options on Corning securities, or trade in any Corning stock derivatives. Additionally, these individuals may not engage in transactions in which he or she may profit from short-term speculative swings in the value of Corning stock utilizing “short sales” or “put” or “call” options.

Restatement of 2009 Compensation for Named Executive Officers

In the 2010 Summary Compensation Table, we restated 2009 total compensation by correcting the approach used to disclose the value of cash performance units. Last year the target value of cash performance units awarded to Named Executive Officers in December 2009 for the 2010 performance year was included in the Non-Equity Incentive Plan column as part of 2009 compensation (as described in Footnote (3) to that Summary Compensation Table). This led to an overstatement of 2009 reported compensation. This year, we replaced the target values previously disclosed in 2009 with the actual values earned for the 2010 performance year to reflect current disclosure requirements and report earned values in the performance year.

Compensation Deductibility

As a matter of practice, the Committee intends to set performance-based goals annually under the Company’s various variable compensation plans and to deduct compensation paid under these plans and gains realized from stock options to the extent consistent with the provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended. However, the Committee may conclude that paying non-deductible compensation (such as some time-based restricted stock) is consistent with our shareholder’s best interests. Corning’s current performance-based incentive plans (including the annual cash bonuses paid under the Performance Incentive Plan and stock options and cash performance units awarded under the Corporate Performance Plan) are operated in compliance with Section 162(m) to ensure that compensation paid under those programs is deductible.

Accounting Implications

In designing our total compensation and benefit programs, we review the accounting implications of our decisions. We seek to deliver cost-effective compensation and benefit programs that meet both the needs of the

 

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Company and our employees. The Committee and the Company, while always cognizant of the accounting expense ascribed to various forms of cash compensation, benefits and equity awards, do not determine the respective amounts of awards to various executives and employees solely on the basis of the schedule of accounting expense recognition of such awards. The disclosed values of cash and equity long-term incentive awards are based on the accounting cost of awards covering multiple performance periods and historical grant prices that could be higher or lower than current stock prices. In addition, actual performance and the vesting/exercise dates of various awards have a dramatic impact on the actual value of awards received by plan participants.

Compensation Committee Report

The Compensation Committee of the Board of Directors (the “Committee”), composed entirely of independent directors, is responsible to the Board of Directors and our shareholders for executive compensation at Corning (“we”, “us”, “Corning” or the “Company”). The Committee sets the principles guiding the Company’s compensation philosophy, reviews and approves executive compensation levels (including cash compensation, equity incentives, benefits and perquisites for executive officers) and reports its actions to the Board of Directors for review and, as necessary, approval. The Committee is responsible for interpreting Corning’s executive compensation plans and programs. In the event of any questions or disputes, the Committee may use its judgment and/or discretion to make final administrative decisions regarding these plans and programs. It is our practice that all compensation decisions affecting the Officer Group must be reviewed and approved by the Committee. Additional details regarding the role and responsibilities of the Committee are defined in the Committee Charter, located within the Corporate Governance section of the Company’s website.

The Committee has reviewed and discussed the foregoing CD&A with management. Based on our review and discussions with management, we recommended to the Board of Directors that the CD&A be included in this proxy statement and in our Annual Report on Form 10-K for the year ended December 31, 2010.

The Compensation Committee:

William D. Smithburg, Chairman

John Seely Brown

Gordon Gund

James J. O’Connor

 

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Executive Compensation

The following tables and charts show, for 2010, the compensation paid by Corning to the Named Executive Officers. Based on the historical fair value of equity awards granted to Named Executive Officers and the base salary of the Named Executive Officers, “Salary” accounted for approximately 13% to 18% of the total direct target compensation of the Named Executive Officers while incentive compensation accounted for approximately 82% to 87% of the total direct target compensation of the Named Executive Officers.

Mr. Volanakis, our President and Chief Operating Officer, retired from the Company on January 1, 2011. As a result, Mr. Volanakis forfeited 3,638 stock options granted on February 1, 2010 under the Corporate Performance Plan and 255,102 shares of restricted stock granted pursuant to a special retention award on March 12, 2008. The grant date fair value of these stock options (2010) and shares of restricted stock (2008) are included in the tables below, because they were forfeited after December 31, 2010. Mr. Weeks was elected President, upon Mr. Volanakis’ resignation as President.

Summary Compensation Table

 

(a)   (b)     (c)     (d)     (e)(1)     (f)(2)     (g)(3)     (h)(4)     (i)(5)     (j)  

Named Executive

Officer

  Year     Salary
($)
    Bonus
($)
    Stock
Awards
($)
    Option
Awards
($)
    Non-Equity
Incentive Plan
Compensation
($)
    Change in
Pension Value
And
Nonqualified
Deferred
Compensation
Earnings
($)
    All Other
Compensation
($)
    Total
($)
 

Wendell P. Weeks

    2010      $ 1,069,423      $ 0      $ 0      $ 1,130,269      $ 6,724,681      $ 2,012,201      $ 429,114      $ 11,365,689   

Chairman and Chief

Executive Officer

    2009        1,030,000        0        1,572,615        3,007,447        1,824,748        1,233,110        382,471        9,050,391   
    2008        1,030,000        0        3,060,510        2,752,745        301,584        3,072,230        397,905        10,614,974   

Peter F. Volanakis

    2010        901,654        1,000,000        0        755,439        4,604,812        1,224,689        242,226        8,728,820   

President and Chief

Operating Officer

    2009        868,000        0        1,046,925        2,008,831        1,316,409        1,072,068        137,350        6,449,583   
    2008        868,000        0        8,037,450        1,838,285        221,600        2,760,512        209,027        13,934,874   

James B. Flaws

    2010        852,731        0        0        530,539        3,532,329        1,126,535        238,876        6,281,010   

Vice Chairman and

Chief Financial Officer

    2009        821,000        0        730,620        1,402,059        1,175,344        498,364        155,931        4,783,318   
    2008        821,000        0        4,430,550        1,286,648        199,339        3,007,546        198,747        9,943,830   

Joseph A. Miller, Jr.

    2010        633,558        0        0        432,500        2,725,733        346,651        137,037        4,275,479   

Executive Vice President

    2009        610,000        0        605,880        1,155,407        821,426        276,988        95,154        3,564,855   

and Chief Technology

Officer

    2008        610,000        0        4,170,450        1,063,092        140,483        569,997        91,277        6,645,299   

Kirk P. Gregg

    2010        600,115        0        0        374,839        2,447,897        983,105        161,458        4,567,415   

Executive Vice President

    2009        578,000        0        525,690        1,397,465        778,335        772,150        125,373        4,177,012   

and Chief Administrative

Officer

    2008        578,000        0        1,023,060        1,241,320        133,113        1,466,114        113,782        4,555,389   

 

(1) The amounts in column (e) reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of awards of restricted stock units (2009) and performance shares (2008) granted pursuant to the Corning Corporate Performance Plan. Assumptions used in the calculation of these amounts are included in Note 19 to the Company’s audited financial statements for the fiscal year ended December 31, 2010 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 10, 2011. This same method was used for the fiscal years ended December 31, 2009 and 2008. There can be no assurance that the grant date fair value amounts will ever be realized. The following table reflects the grant date fair value of awards of performance shares made in December 2008 for the 2009 performance year, computed in accordance with FASB ACS Topic 718, assuming the minimum, target and maximum level of performance conditions in 2009 based on the original grant date fair values of the awards.

 

     December 2008 Grant for 2009
Performance Year
 

Named Executive Officer

   Target
       (100%)      
     Maximum
       (150%)      
 

Wendell P. Weeks

   $ 3,060,510       $ 4,590,765   

Peter F. Volanakis

     2,037,450         3,056,175   

James B. Flaws

     1,430,550         2,145,825   

Joseph A. Miller, Jr.

     1,170,450         1,755,675   

Kirk P. Gregg

     1,023,060         1,534,590   

As described in “Compensation Discussion and Analysis”, beginning in 2011, Corning changed its practice of approving long-term incentive awards in December to approving such awards in January, so that all long-term equity incentives are awarded in the performance year. As a result of this change, time-based restricted stock units for 2011 were awarded in January 2011, resulting in a zero value for such awards in 2010.

 

43


(2) The amounts in column (f) reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of stock option awards granted pursuant to the Corning Corporate Performance Plan. Assumptions used in the calculation of these amounts are included in Note 19 to the Company’s audited financial statements for the fiscal year ended December 31, 2010 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 10, 2011. This same method was used for the fiscal years ended December 31, 2009 and 2008. There can be no assurance that the grant date fair value amounts will ever be realized.
(3) All of the annual cash bonuses paid to the Named Executive Officers are performance-based. Cash bonuses are paid annually through two plans: (i) GoalSharing; and (ii) the Performance Incentive Plan. Awards earned under the 2010 GoalSharing plan were 7.72% of each Named Executive Officer’s year-end base salary and were paid in February 2011. Awards earned under the 2010 Performance Incentive Plan were based on actual corporate performance compared to the Adjusted NPAT goals established for the plans in February 2010. Based on actual performance, each of the Named Executive Officers earned Performance Incentive Plan awards equal to 200% of their annual target bonus opportunities (established as a percentage of annual base salary). Cash awards earned under the Performance Incentive Plan for 2010 will be paid in March 2011. The following table indicates awards earned under the GoalSharing Plan and the Performance Incentive Plan reflected in column (g) above:

 

Named Executive
Officer

   Base
Salary
     2010 PIP
Target %
    Actual
2010 PIP
Performance
Results %
    2010 PIP
$ Award
     Actual
2010
GoalSharing
Performance %
    2010
GoalSharing
$ Award
 

Wendell P. Weeks

   $ 1,071,000         100     200   $ 2,142,000         7.72   $ 82,681   

Peter F. Volanakis

     903,000         85     200     1,535,100         7.72     69,712   

James B. Flaws

     854,000         80     200     1,366,400         7.72     65,929   

Joseph A. Miller, Jr.

     634,500         75     200     951,750         7.72     48,983   

Kirk P. Gregg

     601,000         75     200     901,500         7.72     46,397   

 

  Awards under the 2010 Corporate Performance Plan were based on actual corporate performance compared to the Adjusted EPS and Adjusted Operating Cash Flow goals established for the plans in February 2010. Based on actual performance, each of the Named Executive Officers earned cash performance units under the Corporate Performance Plan equal to 150% of their annual target bonus opportunities (established as a percentage of annual base salary). Once earned, these cash performance units are subject to an additional 2-year vesting period and will be paid in February 2013. The following table reflects the target amount of cash performance units and the awards earned under the 2010 Corporate Performance Plan reflected in column (g) above:

 

Named Executive Officer

   2010 CPP
Target %
    2010 CPP
$ Target  Award
     Actual
2010 CPP
Performance
Results %
    2010 CPP
$ Award
 

Wendell P. Weeks

     100   $ 3,000,000         150   $ 4,500,000   

Peter F. Volanakis

     100     2,000,000         150     3,000,000   

James B. Flaws

     100     1,400,000         150     2,100,000   

Joseph A. Miller, Jr.

     100     1,150,000         150     1,725,000   

Kirk P. Gregg

     100     1,000,000         150     1,500,000   

 

  In the 2009 Summary Compensation Table, amounts awarded under the 2010 Corporate Performance Plan, but not earned, were mistakenly included in column (g) and column (j). In the Summary Compensation Table above, those amounts have been excluded from the 2009 numbers, and the earned amounts are included in columns (g) and (j) for 2010.

 

(4) The amounts in column (h) reflect the actuarial increase in the present value of the Named Executive Officer’s benefits under all pension plans established by the Company determined using interest rate and mortality rate assumptions consistent with those used in the Company’s financial statements. Column (h) also includes amounts which the Named Executive Officer may not currently be entitled to receive because such amounts are not vested. Although column (h) is also used to report the amount of above market earnings on compensation that is deferred under the nonqualified deferred compensation plans, Corning does not have any above market earnings under its nonqualified deferred compensation plan, also referred to as the Supplemental Investment Plan.

 

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(5) The following table shows “All Other Compensation” amounts provided to the Named Executive Officers. Personal aircraft rights and home security are the only eligible services offered to the Named Executive Officers under the Executive Allowance Program. The value of the personal aircraft rights in the table below was calculated using the incremental cost of providing such perquisites and is calculated based on the average variable operating costs to the Company. Hourly rates are developed using variable operating costs that include fuel costs, mileage, maintenance, crew travel expenses, catering and other miscellaneous variable costs. The fixed costs that do not change based on usage, such as pilot salaries, hanger expense and general taxes and insurance are excluded.

 

Named Executive Officer

   Year      Company Match
on Qualified
401(k) Plan
     Company Match
on Supplemental
Investment Plan
     Value of
Personal
Aircraft Rights
(i)
     Other
Perquisites
(i),(ii)
    Total  

Wendell P. Weeks

     2010       $ 9,057       $ 169,658       $ 85,241       $ 165,158 (iii)    $ 429,114   
     2009         9,057         73,168         65,022         235,224 (iv)      382,471   
     2008         6,381         183,730         51,711         156,083        397,905   

Peter F. Volanakis

     2010         3,396         133,569         64,339         40,922        242,226   
     2009         3,396         63,887         60,445         9,622        137,350   
     2008         11,508         130,674         54,469         12,376        209,027   

James B. Flaws

     2010         13,585         111,649         77,657         35,985        238,876   
     2009         13,585         49,421         81,140         11,785        155,931   
     2008         12,659         119,373         54,489         12,226        198,747   

Joseph A. Miller, Jr.

     2010         8,800         20,499         74,174         33,564        137,037   
     2009         8,800         21,220         53,001         12,133        95,154   
     2008         8,200         19,708         51,497         11,872        91,277   

Kirk P. Gregg

     2010         9,778         45,360         75,335         30,985        161,458   
     2009         9,778         18,667         89,405         7,523        125,373   
     2008         6,889         51,135         51,031         4,727        113,782   

 

  (i) The “Executive Allowance Program” is tracked on a December 1 to November 30 year.

 

  (ii) The amounts include:
   

cost attributable to home security;

   

cost attributable to executive physicals;

   

cost attributable to service awards; and

   

contributions to charities made under the Corning Foundation Matching Gift Program.

 

  (iii) This amount includes $149,296 of company-paid expenses relating to personal and residential security benefitting Mr. Weeks and his family members in 2010 under a Board-authorized security program. Mr. Weeks’ personal safety and security are of vital importance to the company’s business and prospects. These costs are appropriate corporate business expenses. However, because these costs can be viewed as conveying some personal benefits to Mr. Weeks, they are reported as perquisites in this column.

 

  (iv) This amount includes $232,239 of company-paid expenses relating to personal and residential security benefitting Mr. Weeks and his family members in 2009 under a Board-authorized security program.

 

45


Grants of Plan-Based Awards

 

                Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards
    Estimated Future Payouts
Under Equity Incentive
Plan Awards
                               

(a)

  (b)     (c)     (d)(1)     (e)(1)     (f)(1)     (g)     (h)     (i)     (j)     (k)     (l)     (m)     (n)  

Named Executive
Officer

  Grant
Date
    Date of
Committee
Action
    Threshold
($)
    Target
($)
    Maxi-
mum
($)
    Threshold
(#)
    Target
(#)
    Maxi-
mum
(#)
    All
Other
Stock

Awards:
Number
of
Shares
of
Stock
or
Units
(#)
    All  Other
Option

Awards:
Number of
Securities
Underlying
Options
(#)
    Exercise
or Base
Price of
Option
Awards
($/Sh)
    Closing
Market
Price on
Date of
Grant
    Grant
Date Fair
Value
of Stock
and
Option
Awards
 

Wendell P. Weeks

    n/a        $ 0      $ 1,071,000      $ 2,142,000                   
    n/a          0        53,550        107,100                   
    12/02/09        12/02/09        0        3,000,000 (2)      4,500,000 (3)                 
    01/04/10        12/02/09                      65,333      $ 19.56      $ 19.56      $ 586,037   
    02/01/10        12/02/09                      65,334        18.16        18.16        544,232   
                               
                            1,130,269 (4) 
                               

Peter F. Volanakis

    n/a          0        767,550        1,535,100                   
    n/a          0        45,150        90,300                   
    12/02/09        12/02/09        0        2,000,000 (2)      3,000,000 (3)                 
    01/04/10        12/02/09                      43,667        19.56        19.56        391,693   
    02/01/10        12/02/09                      43,667        18.16        18.16        363,746   
                               
                            755,439 (4) 
                               

James B. Flaws

    n/a          0        683,200        1,366,400                   
    n/a          0        42,700        85,400                   
    12/02/09        12/02/09        0        1,400,000 (2)      2,100,000 (3)                 
    01/04/10        12/02/09                      30,667        19.56        19.56        275,083   
    02/01/10        12/02/09                      30,667        18.16        18.16        255,456   
                               
                            530,539 (4) 
                               

Joseph A. Miller, Jr.

    n/a          0        475,875        951,750                   
    n/a          0        31,725        63,450                   
    12/02/09        12/02/09        0        1,150,000 (2)      1,725,000 (3)                 
    01/04/10        12/02/09                      25,000        19.56        19.56        224,250   
    02/01/10        12/02/09                      25,000        18.16        18.16        208,250   
                               
                            432,500 (4) 
                               

Kirk P. Gregg

    n/a          0        450,750        901,500                   
    n/a          0        30,050        60,100                   
    12/02/09        12/02/09        0        1,000,000 (2)      1,500,000 (3)                 
    01/04/10        12/02/09                      21,667        19.56        19.56        194,353   
    02/01/10        12/02/09                      21,667        18.16        18.16        180,486   
                               
                            374,839 (4) 
                               

 

(1) The amounts shown in columns (d), (e) and (f) reflect the payment levels under (i) the Company’s 2010 Performance Incentive Plan (ii) 2010 GoalSharing Plan and (iii) the cash units under the 2010 Corporate Performance Plan. Opportunities under these plans are cash payments. If the threshold level of performance is not met then payout will be 0%. If the target amount of performance is met for GoalSharing and PIP, then payout is 100% of the target award. If the maximum level of performance is met then payout is 200% of the target award. These amounts are based on the individual’s 2010 base salary and bonus targets.
(2) This amount reflects target amount of cash performance units that were approved for such Named Executive Officer on December 2, 2009 under the 2010 Corporate Performance Plan. Actual awards granted for these cash units may range from 0% to 150% of the target award.
(3) This amount reflects maximum (150% of target) amount of cash performance units that were approved for such Named Executive Officer on December 2, 2009 under the 2010 Corporate Performance Plan. Actual awards granted for these cash units may range from 0% to 150% of the target award.
(4) This amount reflects the total grant date fair value computed in accordance with FASB ASC Topic 718 of stock option awards granted in calendar year 2010 pursuant to the Corning 2010 Corporate Performance Plans, and corresponds to the amount set forth in column (f) for 2010 of the Summary Compensation Table.

 

46


Outstanding Equity Awards at Fiscal Year-End

The following table shows outstanding stock option awards classified as exercisable and unexercisable as of December 31, 2010. The table also shows unvested restricted stock awards assuming a market value of $19.32 a share (the NYSE closing price of the Company’s stock on December 31, 2010).

 

(a)               (b)     (c)     (d)     (e)     (f)     (g)(2)     (h)(3)     (i)     (j)  

Named Executive
Officer

  Grant
Date
    Vesting
Schedule
Code(1)
    Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
    Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
    Equity
Incentive
Plan

Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
    Option
Exercise
Price
($)
    Option
Expiration
Date
    Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
    Market
Value of
Shares or
Units
of Stock
That Have
Not Vested
($)
    Equity
Incentive
Plan

Awards:
Number
of
Unearned
Shares
That
Have Not
Vested
(#)
    Equity
Incentive
Plan
Awards:
Market
Value of
Unearned
Shares
That
Have Not
Vested
($)
 

Wendell P. Weeks

    04/28/05        G        130,000        0        0      $ 13.68        04/27/15        613,680 (2)    $ 11,856,298        0      $ 0   
    12/07/05        B        161,500        0        0        21.08        12/06/15           
    01/02/06        C        80,750        0        0        19.68        01/01/16           
    02/01/06        D        80,750        0        0        24.72        01/31/16           
    12/06/06        B        136,500        0        0        21.89        12/05/16           
    01/02/07        C        68,250        0        0        18.85        01/01/17           
    02/01/07        D        68,250        0        0        20.86        01/31/17           
    12/05/07        B        153,500        0        0        24.92        12/04/17           
    01/02/08        C        76,750        0        0        23.37        01/01/18           
    02/01/08        D        0        76,750        0        24.61        01/31/18           
    12/03/08        G        93,333        93,334        0        8.67        12/02/18           
    01/02/09        G        93,333        186,667        0        10.05        01/01/19           
    02/02/09        G        93,333        186,667        0        10.25        02/01/19           
    12/02/09        G        21,777        43,556        0        17.82        12/02/19           
    01/04/10        G        0        65,333        0        19.56        01/04/20           
    02/01/10        G        0        65,334        0        18.16        02/01/20           
    Total          1,258,026        717,641                 

Peter F. Volanakis

    02/02/04        D        52,500        0        0        12.79        02/01/14        663,662 (2)      12,821,950        0        0   
    12/01/04        B        115,000        0        0        12.70        11/30/14           
    01/03/05        C        57,500        0        0        11.84        01/02/15           
    04/28/05        G        125,000        0        0        13.68        04/27/15           
    12/07/05        B        111,000        0        0        21.08        12/06/15           
    01/02/06        C        55,500        0        0        19.68        01/01/16           
    02/01/06        D        55,500        0        0        24.72        01/31/16           
    12/06/06        B        96,000        0        0        21.89        12/05/16           
    01/02/07        C        48,000        0        0        18.85        01/01/17           
    02/01/07        D        48,000        0        0        20.86        01/31/17           
    12/05/07        B        102,500        0        0        24.92        12/04/17           
    01/02/08        C        51,250        0        0        23.37        01/01/18           
    02/01/08        D        0        51,250        0        24.61        01/31/18           
    12/03/08        G        62,333        62,334        0        8.67        12/02/18           
    01/02/09        G        62,333        124,667        0        10.05        01/01/19           
    02/02/09        G        62,333        124,667        0        10.25        02/01/19           
    12/02/09        G        14,555        29,111        0        17.82        12/02/19           
    01/04/10        G        0        43,667        0        19.56        01/04/20           
    02/01/10        G        0        43,667        0        18.16        02/01/20           
    Total          1,119,304        479,363                 

 

47


(a)               (b)     (c)     (d)     (e)     (f)     (g)(2)     (h)(3)     (i)     (j)  

Named Executive
Officer

  Grant
Date
    Vesting
Schedule
Code(1)
    Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
    Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
    Equity
Incentive
Plan

Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
    Option
Exercise
Price
($)
    Option
Expiration
Date
    Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
    Market
Value of
Shares or
Units
of Stock
That
Have
Not
Vested
($)
    Equity
Incentive
Plan

Awards:
Number
of
Unearned
Shares
That
Have Not
Vested
(#)
    Equity
Incentive
Plan
Awards:
Market
Value of
Unearned
Shares
That
Have Not
Vested
($)
 

James B. Flaws

    12/07/05        B        77,000        0        0      $ 21.08        12/06/15        329,067 (2)    $ 6,357,574        0      $ 0   
    01/02/06        C        38,500        0        0        19.68        01/01/16           
    02/01/06        D        38,500        0        0        24.72        01/31/16           
    12/06/06        B        66,000        0        0        21.89        12/05/16           
    01/02/07        C        33,000        0        0        18.85        01/01/17           
    02/01/07        D        33,000        0        0        20.86        01/31/17           
    02/13/07        A        18,932        0        0        21.92        02/02/13           
    04/30/07        A        23,327        0        0        23.72        02/02/13           
    12/05/07        B        72,000        0        0        24.92        12/04/17           
    01/02/08        C        36,000        0        0        23.37        01/01/18           
    02/01/08        D        0        36,000        0        24.61        01/31/18           
    12/03/08        G        43,444        43,445        0        8.67        12/02/18           
    01/02/09        G        0        86,889        0        10.05        01/01/19           
    02/02/09        G        0        86,890        0        10.25        02/01/19           
    12/02/09        G        10,222        20,444        0        17.82        12/02/19           
    01/04/10        G        0        30,667        0        19.56        01/04/20           
    02/01/10        G        0        30,667        0        18.16        02/01/20           
    Total          489,925        335,002                 

Joseph A. Miller, Jr.

    07/31/01        G        100,000        0        0        15.87        07/30/11        319,924 (2)      6,180,932        0        0   
    12/07/05        B        58,500        0        0        21.08        12/06/15           
    01/02/06        C        29,250        0        0        19.68        01/01/16           
    02/01/06        D        29,250        0        0        24.72        01/31/16           
    12/06/06        B        55,500        0        0        21.89        12/05/16           
    01/02/07        C        27,750        0        0        18.85        01/01/17           
    02/01/07        D        27,750        0        0        20.86        01/31/17           
    12/05/07        B        59,500        0        0        24.92        12/04/17           
    01/02/08        C        29,750        0        0        23.37        01/01/18           
    02/01/08        D        0        29,750        0        24.61        01/31/18           
    12/03/08        G        35,889        35,889        0        8.67        12/02/18           
    01/02/09        G        0        71,778        0        10.05        01/01/19           
    02/02/09        G        0        71,778        0        10.25        02/01/19           
    12/02/09        G        8,333        16,667        0        17.82        12/02/19           
    01/04/10        G        0        25,000        0        19.56        01/04/20           
    02/01/10        G        0        25,000        0        18.16        02/01/20           
    Total          461,472        275,862                 

 

48


(a)               (b)     (c)     (d)     (e)     (f)     (g)(2)     (h)(3)     (i)     (j)  

Named Executive
Officer

  Grant
Date
    Vesting
Schedule
Code(1)
    Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
    Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
    Equity
Incentive
Plan

Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
    Option
Exercise
Price
($)
    Option
Expiration
Date
    Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
    Market
Value of
Shares or
Units
of Stock
That
Have
Not
Vested
($)
    Equity
Incentive
Plan

Awards:
Number
of
Unearned
Shares
That
Have Not
Vested
(#)
    Equity
Incentive
Plan
Awards:
Market
Value of
Unearned
Shares
That
Have Not
Vested
($)
 

Kirk P. Gregg

    02/02/04        D        39,500        0        0      $ 12.79        02/01/14        205,120 (2)    $ 3,962,918        0      $ 0   
    05/10/05        A        15,369        0        0        14.84        01/02/13           
    12/07/05        B        58,500        0        0        21.08        12/06/15           
    01/02/06        C        29,250        0        0        19.68        01/01/16           
    02/01/06        D        29,250        0        0        24.72        01/31/16           
    08/07/06        A        20,396        0        0        18.32        01/02/13           
    10/27/06        A        14,520        0        0        20.59        12/03/12           
    11/03/06        A        16,495        0        0        20.51        12/03/12           
    12/06/06        B        48,000        0        0        21.89        12/05/16           
    01/02/07        C        24,000        0        0        18.85        01/01/17           
    02/01/07        D        24,000        0        0        20.86        01/31/17           
    02/12/07        A        19,212        0        0        21.60        02/02/13           
    08/03/07        A        10,284        0        0        23.54        02/02/13           
    08/03/07        A        13,152        0        0        23.54        01/31/12           
    10/29/07        A        28,467        0        0        23.79        01/31/12           
    12/05/07        B        51,000        0        0        24.92        12/04/17           
    01/02/08        C        25,500        0        0        23.37        01/01/18           
    02/01/08        D        0        25,500        0        24.61        01/31/18           
    02/12/08        A        9,338        0        0        23.31        01/31/12           
    02/12/08        A        14,568        0        0        23.31        01/31/12           
    05/01/08        A        5,428        0        0        27.03        01/31/12           
    05/01/08        A        18,421        0        0        27.03        12/04/11           
    12/03/08        G        31,000        31,000        0        8.67        12/02/18           
    01/02/09        G        0        62,000        0        10.05        01/01/19           
    02/02/09        G        0        62,000        0        10.25        02/01/19           
    07/29/09        A        5,959        0        0        16.78        01/31/12           
    07/29/09        A        5,962        0        0        16.78        12/04/11           
    07/29/09        A        75,544        0        0        16.78        12/04/11           
    12/02/09        G        7,222        14,444        0        17.82        12/02/19           
    01/04/10        G        0        21,667        0        19.56        01/04/20           
    02/01/10        G        0        21,667        0        18.16        02/01/20           
    Total          640,337        238,278                 

 

(1) The Company uses the following vesting codes:

 

  A Reload Option—100% vesting 1 year after grant date. The reload feature was eliminated from all stock options granted on or after February 28, 2003, but still exists for options granted before that date.
  B 100% vesting 1 year after grant date
  C 100% vesting 2 years after grant date
  D 100% vesting 3 years after grant date
  E 50% vesting February 1, 2001, 50% vesting February 2, 2002
  F 50% vesting 4 years after grant date, 50% vesting 5 years after grant date
  G 1/3 vesting 1 year after grant date, 1/3 vesting 2 years after grant date and 1/3 vesting 3 years after grant date
  H 1/3 vesting 3 years after grant date, 1/3 vesting 4 years after grant date and 1/3 vesting 5 years after grant date
(2) Amounts include:

 

   

504,790; 336,050; 235,950; 193,050; and 168,740 performance share units granted to Messrs. Weeks, Volanakis, Flaws, Miller and Gregg, respectively, on December 3, 2008 and February 3, 2010, which vest on February 1, 2012.

   

88,250; 58,750; 41,000; 34,000; and 29,500 restricted share units granted to Messrs. Weeks, Volanakis, Flaws, Miller and Gregg, respectively, on December 2, 2009, which vest on February 15, 2013.

   

20,640; 13,760; 9,600; 7,840; and 6,880 restricted shares of our common stock granted to Messrs. Weeks, Volanakis, Flaws, Miller and Gregg, respectively, on December 5, 2007, which vest on February 1, 2011.

   

255,102 restricted shares of our common stock granted to Mr. Volanakis on March 12, 2008, which would have vested 1/3 on each April 1 of 2011, 2012 and 2013. Mr. Volanakis retired on January 1, 2011 and forfeited these restricted shares.

   

42,517 restricted shares of our common stock granted to Mr. Flaws on March 12, 2008, which vest on April 1, 2011.

   

85,034 restricted shares of our common stock granted to Mr. Miller on March 12, 2008, which vest 1/2 on each April 1 of 2011 and 2012.

(3) Year-end market price is based on the December 31, 2010 NYSE closing price of $19.32.

 

49


Option Exercises and Stock Vested

The following table sets forth certain information regarding options exercised and restricted stock that vested during 2010 for the Named Executive Officers.

 

     Option Awards      Stock Awards  
(a)    (b)      (c)      (d)      (e)  

Named Executive Officer

   Number of Shares
Acquired on Exercise
(#)
     Value
Realized on
Exercise
($)
     Number of Shares
Acquired on Vesting
(#)
     Value Realized
on Vesting
($)
 

Wendell P. Weeks

     733,333       $ 5,185,115         184,500       $ 3,350,520   

Peter F. Volanakis

     172,333         1,436,467         129,000         2,342,640   

James B. Flaws

     143,457         1,253,943         132,517         2,500,896   

Joseph A. Miller, Jr.

     193,666         1,345,610         116,017         2,201,256   

Kirk P. Gregg

     93,000         765,675         66,000         1,198,560   

There were no deferrals of amounts received pursuant to these awards.

Retirement Plans

Qualified Pension Plan

Corning sponsors a qualified defined benefit Pension Plan to provide retirement income to Corning’s U.S.-based employees. The plan pays benefits for salaried employees based upon career average plan compensation, where plan compensation is defined as base pay, annual bonus and awards that are paid (including GoalSharing awards, division cash awards, individual outstanding contributor awards and other cash bonuses) and years of credited service. Salaried employees are required to contribute 2% of compensation in excess of the Social Security wage base up to the compensation limit imposed by the Internal Revenue Code. Salaried and nonunion hourly employees may also contribute 2% of pay up to the Social Security wage base on a voluntary basis.

Corning amended its pension plan effective July 1, 2000 to include a cash balance component. All salaried and non-union hourly employees as of July 1, 2000 were given a choice to prospectively accrue benefits under the career average earnings formula or a cash balance formula, if so elected. Employees hired subsequent to July 1, 2000 earn benefits under the cash balance formula.

Benefits earned under the career average earnings formula are equal to 1.5% of plan compensation plus 0.5% of plan compensation on which employee contributions have been made. Under the career average earnings formula, participants may retire as early age 55 with 5 years of service. Unreduced benefits are available when a participant attains the earlier of age 60 with 5 years of service or age 55 with 30 years of service. Otherwise, benefits are reduced 4% for each year by which retirement precedes the attainment of age 60. Pension benefits earned under the career average earnings formula are distributed in the form of a lifetime annuity with six years of payments guaranteed.

Benefits earned under the cash balance formula are expressed in the form of a hypothetical account balance. Each month a participant’s cash balance account is increased by (1) pay credits based on the participant’s plan compensation for that month and (2) interest credits based on the participant’s hypothetical account balance at the end of the prior month. Pay credits vary between 3% and 8% based on the participant’s age plus service at the end of the year. Interest credits are based on 10-year Treasury bond yields, subject to a minimum credit of 3.80%. Pension benefits under the cash balance formula may be distributed as either a lump sum of the participant’s hypothetical account balance or an actuarial equivalent life annuity.

Mr. Weeks, Mr. Flaws and Mr. Volanakis are earning benefits under the career average earnings formula. Mr. Gregg earned benefits under the career average earnings formula up to December 31, 2000 and subsequently earned benefits under the cash balance formula. Mr. Miller is earning benefits under the cash balance formula. Mr. Flaws and Mr. Miller are currently eligible to retire under the plan. Mr. Volanakis retired on January 1, 2011.

 

50


Corning’s contributions to the plan are determined by the plan’s actuaries and are not determined on an individual basis. The amount of benefits payable under the plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended.

Supplemental Pension Plan and Executive Supplemental Pension Plan

Corning also maintains nonqualified pension plans to attract and retain a highly-motivated executive workforce by providing eligible employees with retirement benefits in excess of those permitted under the qualified plan. The benefits provided under the Supplemental Pension Plan (SPP) will be approximately equal to the difference between the benefits provided under the Corning Incorporated Pension Plan and benefits that would have been provided thereunder if not for the limitations of the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended.

Certain employees, including each of the Named Executive Officers, participate in the Corning Incorporated Executive Supplemental Pension Plan (ESPP). Participants in the ESPP receive no benefits from the SPP. Executives fully vest in their ESPP benefit upon attainment of age fifty with ten years of service. Participants terminating prior to fully vesting in their ESPP benefit, but with five years of service will be entitled to ESPP benefits equivalent to the SPP formula. ESPP participants also maintain the right to take any benefits earned under the cash balance formula of the SPP prior to their participation in the ESPP as a lump sum payment from the ESPP.

Under the Executive Supplemental Pension Plan, participants earn benefits based on the highest sixty consecutive months of average plan compensation over the last one hundred twenty months immediately preceding the date of termination of employment. Plan compensation is defined as base pay plus bonuses paid, including cash payments of GoalSharing awards, Performance Incentive Plan awards, division cash awards, individual outstanding contributor awards and other cash bonuses.

A change in the benefits provided under the ESPP formula was approved in December 2006. Subsequent to the change, gross benefits determined under this plan are equal to one of two benefit formulas:

Formula A: 2.0% of average plan compensation multiplied by years of service up to 25 years.

Formula B: 1.5% of average plan compensation multiplied by years of service with no cap on years of service.

Prior to the approval of the change in benefit formula in December 2006, ESPP benefits were provided under the following formula:

 

   

Sum of (i) 1.0% of average plan compensation up to the Social Security covered compensation limit and (ii) 1.5% of average plan compensation over Social Security covered compensation.

 

   

Multiplied by years of service through the December 31 of the year prior to termination of employment.

In addition, benefits earned in the year of termination of employment are based on the career average earnings formula or cash balance formula of the Corning Incorporated Pension Plan without regard to compensation limits. Under this formula, average plan compensation was based on the highest five consecutive calendar years of average plan compensation over the ten years immediately preceding the year of termination of employment.

Subsequent to the December 2006 change in formula, benefits are determined under Formula B for Mr. Flaws and Formula A for all other Named Executive Officers.

Benefits earned under the Corning Incorporated Pension Plan and the cash balance formula of the SPP prior to ESPP participation will offset benefits earned under the preceding formulas.

 

51


Participants may retire as early age 55 with ten years of service. Unreduced benefits under Formula A are available when a participant attains the earlier of age 60 with 10 years of service or age 55 with 25 years of service. Unreduced benefits under Formula B are available at the earlier of age 60 with 5 years of service or age 55 with 30 years of service. Otherwise, benefits from both formulas and the career average earnings formula from the SPP are reduced 4% for each year by which retirement precedes the attainment of age 60.

Benefits earned under the Executive Supplemental Pension Plan are distributed in the form of a lifetime annuity, with six years of payments guaranteed except for benefits earned under the cash balance formula of the SPP prior to becoming a participant in the ESPP, which is distributed as a lump sum of the participant’s hypothetical account balance.

Under Mr. Flaws’ employment agreement, Corning will purchase a life annuity from an insurance company to pay benefits due under this plan. Mr. Flaws and Mr. Miller are currently eligible to retire under the plan. Mr. Volanakis retired on January 1, 2011.

Pension Benefits

The table below shows the actuarial present value of accumulated benefits payable to each of the Named Executive Officers, including the number of years of service credited to each such Named Executive Officer, under each of the qualified pension plan and the ESPP. These amounts were determined using interest rate and mortality rate assumptions consistent with those used in the Company’s financial statements with the exception of the assumed retirement age and the assumed probabilities of leaving employment prior to retirement. Retirement was assumed to occur at the earliest possible unreduced retirement age for each plan in which the executive participates. For purposes of determining the earliest unreduced retirement age, service was assumed to be granted until the actual date of retirement. For example, an executive under the ESPP formula who is age 50 with 20 years of service would be assumed to retire at age 55 due to eligibility of unreduced benefits at 25 years of service. No termination, disability or death was assumed to occur prior to retirement. Otherwise, the assumptions used are described in Note 13 to our Financial Statements for the year ended December 31, 2010 of our Annual Report on Form 10-K filed with the SEC on February 10, 2011. Information regarding the qualified pension plan can be found under the heading “Qualified Pension Plan” on page 50.

 

(a)    (b)    (c)    (d)      (e)

Named Executive Officer

   Plan Name    Number of years
Credited Service
(#)
   Present Value of
Accumulated Benefit
($)
     Payments During
Last Fiscal Year
($)

Wendell P. Weeks

   Qualified Pension Plan      28       $ 1,104,606       $0
   ESPP      25(1)      14,654,710         0

Peter F. Volanakis

   Qualified Pension Plan      29         988,250         0
   ESPP      25(1)      13,380,714         0

James B. Flaws

   Qualified Pension Plan    38         1,665,221         0
   ESPP    38         16,739,265         0

Joseph A. Miller, Jr.

   Qualified Pension Plan    10         167,798         0
   ESPP    10         2,680,545         0

Kirk P. Gregg

   Qualified Pension Plan    17         369,738         0
   ESPP    25(2)      7,556,914         0

 

(1) Under Formula A, years of service are capped at 25 years, in determining benefits under the ESPP.
(2)

Mr. Gregg’s 1993 employment letter, as amended in 2002, provides for nine extra years of benefit service under the ESPP for retirement on or after age 55. The additional value generated by these extra nine years of service is currently approximately $2,510,000. Because of the 25-year cap on service under Formula A, implemented after Mr. Gregg was hired, some or all of these additional years of benefit service will not enhance Mr. Gregg’s total pension benefit, depending on his actual retirement date. For example, at age 55, Mr. Gregg will have 21 actual years of service so that only four of the nine additional years of service will

 

52


 

have any impact on his pension. At age 60, Mr. Gregg would have 26 actual years of service so that those additional years of service would not provide any incremental pension value. Additional years of service credit have not been provided to senior executives since this adjustment in 2002.

The compensation covered by the qualified pension plan and the ESPP for the Named Executive Officers is the “Salary” and GoalSharing and Performance Incentive Plan cash bonuses set forth in the “Summary Compensation Table”. Bonuses are included as compensation in the calendar year paid. For the 2010 calendar year, the Named Executive Officers’ eligible earnings were $2,894,171 for Mr. Weeks; $2,218,063 for Mr. Volanakis; $2,028,075 for Mr. Flaws; $1,454,984 for Dr. Miller; and $1,378,450 for Mr. Gregg. Final average compensation is used to determine benefits under the ESPP. As of December 31, 2010, final average compensation was $2,588,249 for Mr. Weeks; $1,974,005 for Mr. Volanakis; $1,841,465 for Mr. Flaws; $1,321,421 for Dr. Miller; and $1,253,663 for Mr. Gregg. Long-term cash or equity incentives are not (and have never been) considered as eligible earnings for determining retirement benefits under this plan.

Nonqualified Deferred Compensation

The table below shows the contributions, earnings and account balances for the Named Executive Officers in the Supplemental Investment Plan. Pursuant to the Company’s Supplemental Investment Plan, certain executives, including the Named Executive Officers, may choose to defer up to 75% of annual base salary and up to 75% of non-equity incentive compensation. The participant chooses from the same funds available under our Company Investment Plan (401(k)) in which to “invest” the deferred amounts. No cash is actually invested in the unfunded accounts under the Supplemental Investment Plan. Deferred amounts incur gains and losses based on the performance of the individual participant’s investment fund selections. Participants may change their elections among these fund options. All of our current Named Executive Officers have more than three years with the Company, so each of the Named Executive Officer’s contributions from the Company match are fully vested. Participants cannot withdraw any amounts from their deferred compensation balances until retirement from the Company at or after age 55 with five years of service. Participants may elect to receive distributions as a lump sum payment or two to five annual installments. If a Named Executive Officer leaves the Company, prior to retirement, the account balance is distributed in a lump sum, six-months following the executive’s departure.

No Named Executive Officer withdrawals or distributions were made in 2010.

 

(a)           (b)(1)      (c)(2)      (d)(3)      (e)      (f)  

Named Executive Officer

   Aggregate
Balance at
January 1,
2010
($)
     Executive
Contributions
in 2010
($)
     Registrant
Contributions
in 2010
($)
     Aggregate
Earnings
in 2010
($)
     Aggregate
Withdrawals/
Distributions
in 2010
($)
     Aggregate
Balance as of
December 31,
2010
($)
 

Wendell P. Weeks

   $ 1,758,742       $ 164,850       $ 169,658       $ 188,949       $ 0       $ 2,282,199   

Peter F. Volanakis

     3,346,272         432,612