DEF 14A 1 d285045ddef14a.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)

 

 

 

 

  

 

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LOGO

 

 

Notice of 2012 Annual Meeting of Shareholders

 

Thursday, April 26, 2012

11 a.m. Eastern Time

The Corning Museum of Glass Auditorium, Corning, New York

To Shareholders of Corning Incorporated:

You are cordially invited to attend the 2012 Annual Meeting of Shareholders of Corning Incorporated which will be held in The Corning Museum of Glass Auditorium, Corning, New York on Thursday, April 26, 2012 at 11 a.m. Eastern Time. The Annual Meeting is open to shareholders of record as of the close of business on February 23, 2012, the record date for the meeting.

The principal business of the meeting will be:

 

  1.

To elect 10 directors for a one-year term;

  2.

To approve the Company’s executive compensation;

  3.

To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2012;

  4.

To approve the adoption of the 2012 Long-Term Incentive Plan;

  5.

To approve the amendment and restatement of the Company’s Restated Certificate of Incorporation to remove the provisions currently requiring a supermajority vote of the Company’s shareholders; 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 5.

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 13, 2012

Important Notice Regarding the Availability of Proxy Materials for the Shareholder

Meeting to Be Held on April 26, 2012

Our 2012 Proxy Statement and 2011 Annual Report to Shareholders

are available at www.corning.com/2012_proxy


2012 Proxy Summary

To assist you in reviewing the Company’s proxy statement in advance of the 2012 Annual Meeting of Shareholders, we would like to call your attention to its key elements. The following description is only a summary. For additional information about these topics, please review the complete proxy statement and the Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commissions (SEC) on February 13, 2012. This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider, and you should read the entire proxy statement carefully before voting.

Annual Meeting of Shareholders

 

•     Date and Time

    

Thursday, April 26, 2012 at 11 a.m. Eastern Time

•     Place

    

The Corning Museum of Glass Auditorium

Corning, New York

•     Record Date

    

February 23, 2012

•     Voting

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

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.

Meeting Agenda

At the Annual Meeting, you will be voting on the following matters:

 

   

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

 

   

To approve the Company’s executive compensation (Proposal 2);

 

   

To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2012 (Proposal 3);

 

   

To approve the adoption of the 2012 Long-Term Incentive Plan (Proposal 4);

 

   

To approve the amendment and restatement of the Company’s Restated Certificate of Incorporation to remove the provisions currently requiring a supermajority vote of the Company’s shareholders (Proposal 5); and

 

   

Any other matter, if any, as may properly come before the meeting.

 

i


Board Recommendations on Voting

The Board of Directors recommends that you vote your shares as follows:

 

Proposal

 

Matter

 

Board Voting Recommendation

  Page Reference
             

1

  Election of Directors   FOR each Nominee   7

2

  Approval of the Company’s Executive Compensation   FOR   62

3

  Ratification of Appointment of Independent Registered Public Accounting Firm   FOR   64

4

  Approval of Corning Incorporated 2012 Long-Term Incentive Plan   FOR   64

5

  Approval of the amendment and restatement of the Company’s Restated Certificate of Incorporation to remove the provisions currently requiring a supermajority vote of the Company’s shareholders   FOR   69

PROPOSAL 1: Election of Directors

The following 10 directors are being nominated for election to a one year term: Messrs. Brown; Canning; Clark; Flaws; Gund; Landgraf; Ruding and Wrighton; and Drs. Burns and Rieman.

Each of Messrs. Brown, Canning, Gund, Landgraf, and Ruding were elected by Corning’s shareholders on April 28, 2011, and their terms expire at the 2012 Annual Meeting. Each of Messrs. Flaws and Wrighton, and Dr. Rieman were elected by Corning’s shareholders on April 30, 2009, and their terms expire at the 2012 Annual Meeting. Mr. Clark was appointed by Corning’s Board of Directors on December 6, 2011. Dr. Burns was appointed by Corning’s Board of Directors on January 31, 2012. Mr. Clark and Dr. Burns are standing for election by shareholders for the first time. Each of Messrs. Cummings, Tookes and Weeks were elected by Corning’s shareholders on April 29, 2010 and their terms expire at the 2013 Annual Meeting. Mr. Smithburg, whose term expires this year, has met the Board’s mandatory retirement age and will not be standing for re-election. Mr. Tilton’s term also expires this year and he is not standing for re-election. Beginning with our 2013 Annual Meeting, all directors will stand for election for terms expiring at the next Annual Meeting.

On February 1, 2012, our Board of Directors approved and adopted an amendment to our By-Laws to provide that the vote required for the election of a director at our annual meeting will, except in a contested election, be the affirmative vote of a majority of the votes cast in favor of or against such nominee. See “Majority Voting Standard” on page 7. 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 UNANIMOUSLY RECOMMENDS A VOTE FOR ELECTION OF EACH OF THE DIRECTOR NOMINEES.

See page 7 – “PROPOSAL 1 – Election of Directors” for more information.

 

ii


PROPOSAL 2: Approval of the Company’s Executive Compensation

In 2011, our shareholders supported an annual vote on executive compensation that we have implemented. Accordingly, our Board of Directors is requesting that shareholders approve the compensation of our Named Executive Officers (“NEOs”), as disclosed, pursuant to Item 402 of Regulation S-K of the Securities Act of 1933, in the Executive Compensation section of this proxy statement, beginning on page 41. This includes the Compensation Discussion and Analysis, the Summary Compensation Table and the supporting tabular and narrative disclosure on executive compensation.

Most Recent Say on Pay Vote Result

Last year, Corning received 96% shareholder support from the non-binding Say on Pay vote. We view this as an affirmation of our current pay practices and, as a result, no significant changes were made to our executive compensation pay practices in 2011.

Company Performance and Pay Alignment

While fiscal year 2011 proved to be a challenging year, Corning’s executive pay program aligned with financial and stock performance by paying out amounts significantly below target.

In 2011, our reported results were as follows:

 

   

Revenue of $7.9 billion compared to $6.6 billion for 2010; a 19% increase and a record year;

   

Net profit after tax (“NPAT”) of $2,805 million compared to $3,558 million for 2010, a 21% decrease;

   

Earnings per share of $1.77 compared to $2.25 per share for 2010, a 21% decrease; and

   

Operating cash flow of $3,189 million compared to $3,835 million for 2010, a 17% decrease.

In 2011 our financial results fell significantly below target. Since we set rigorous performance goals for 2011, our incentive payouts were sharply reduced. As a result:

 

   

2011 annual bonus earned at 10% of target for NEOs;

   

2011 GoalSharing earned at 5.05% of base salary;

   

2011 Cash Performance Units earned at 60% of target;

   

2011 Stock Option grants are underwater; and

   

Value of 2011 time-based restricted stock units declined approximately 30% during the year.

Compensation Program

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 being critical to our long-term success. This means that our management must balance near-term results with long-term success while continuing to build long-term value through innovation. To fulfill this mission, Corning’s “pay-for-performance” philosophy forms the foundation for all decisions regarding executive compensation made by the Committee.

Highlights of our executive compensation program include:

 

   

On average, 82% of the target total direct compensation of our ongoing Named Executive Officers, excluding benefits and perquisites, is delivered in annual and long-term incentives that vary based on achievement of our annual financial targets or the price of our stock.

   

Annual incentives awarded to our Named Executive Officers under our Performance Incentive Plan depend solely on Corning’s consolidated financial performance.

   

Our long-term incentive program is composed of a balanced portfolio of cash performance units, stock options, and time-based restricted stock units. These components comprise 50%, 25% and 25% of the target long-term incentive value, respectively, and vest over 3 years.

   

Annual dilution associated with grants of stock options and restricted stock totaled significantly less than 1% in 2011.

In addition, our executive compensation program has evolved over time to reflect changing governance standards; details can be found in the Compensation Discussion and Analysis section.

 

iii


THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

See page 41 – “Executive Compensation” and page 62 – “PROPOSAL 2 – Approval of the Company’s Executive Compensation” for more information.

PROPOSAL 3: Ratification of Appointment of Independent Registered Public Accounting Firm

At the meeting of the Audit Committee of the Board of Directors held on February 1, 2011, the Audit Committee appointed PricewaterhouseCoopers LLP as the independent registered public accounting firm for the 2012 fiscal year. Although shareholder approval for this appointment is not required, the Audit Committee and the Board of Directors are submitting the selection of PricewaterhouseCoopers LLP for ratification to obtain the views of shareholders. If the appointment is not ratified, the Audit Committee will consider the shareholders’ views in the future selection of Corning’s auditors.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2012.

See page 64 – “PROPOSAL 3 – Ratification of Appointment of Independent Registered Public Accounting Firm” for more information.

PROPOSAL 4: Approval of the Corning Incorporated 2012 Long-Term Incentive Plan

In 2012, Corning proposes adopting the Corning Incorporated 2012 Long-Term Incentive Plan (the “2012 Plan”), which is a continuation of similar long-term incentive plans first adopted in 1974. The 2012 Plan is designed to provide a flexible mechanism to permit employees to obtain equity ownership in Corning, thereby increasing their proprietary interest in Corning’s growth and success. The Board of Directors believes that the long-term incentives are a critical element in Corning’s plans for future growth and Corning’s total compensation program and should be continued.

Our Board of Directors recommends that you vote in favor of the 2012 Plan. The 2012 Plan will enable Corning to continue to offer long-term performance-based and time-based compensation through the grant of a variety of awards. Awards available under the 2012 Plan include stock options, restricted stock, restricted stock units, stock appreciation rights, performance stock, performance units or other awards granted by the Compensation Committee.

 

   

Approval of the 2012 Plan will coincide with the termination of the 2005 Program, allowing for the retirement of approximately 40 million unused shares under the 2005 Program.

   

After factoring in the 85 million share reserve under the 2012 Plan and the retirement of remaining shares under the 2005 Program, Corning’s overhang from equity plans and outstanding stock options is less than 10 % on a diluted basis.

   

The 2012 Plan prohibits repricing options and stock appreciation rights without shareholder approval.

   

The 2012 Plan includes a recoupment policy where gains may be subject to clawback if appropriate or required.

   

The 2012 Plan includes minimum vesting of three years on time-based awards of restricted stock and restricted stock units and minimum vesting of one year on performance-based awards.

   

The 2012 Plan does not allow for the cancellation of options in exchange for cash or other property.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE CORNING INCORPORATED 2012 LONG-TERM INCENTIVE PLAN

 

iv


See page 64 – “PROPOSAL 4 – Approval of Corning Incorporated 2012 Long-Term Incentive Plan” for more information.

PROPOSAL 5: Approval of the amendment and restatement of the Company’s Restated Certificate of Incorporation to remove the provisions currently requiring a supermajority vote of the Company’s shareholders

The Company’s Restated Certificate of Incorporation (“Certificate”) currently requires the affirmative vote of 80% of the total number of shares outstanding and entitled to vote to amend, alter or repeal Section 5 of the Certificate, which deals with the Board of Directors of the Company, including the general powers of the Board, the number of directors, their term of office, their removal and the Board’s authority to fill vacancies on the Board (unless such amendment, alteration or repeal has been approved by two-thirds of the entire Board). In addition, the Company’s Certificate provides that the affirmative vote of 80% of the total number of shares outstanding and entitled to vote is required for certain business combination transactions with interested shareholders and to amend, alter or repeal those provisions (unless such business combination transactions or amendment, alteration or repeal has been approved by the affirmative vote of two-thirds of the entire Board and a majority of the continuing directors). On February 1, 2012, the Board voted to approve, and recommended that the Company’s shareholders approve at the 2012 Annual Meeting of shareholders, an amendment to the Company’s Certificate to delete the provisions in the Certificate that currently require a supermajority vote of the Company’s shareholders.

The Board recognizes that supermajority voting requirements provide several advantages. However, the Board also recognizes that many investors and commentators believe that supermajority voting requirements limit a board’s accountability to shareholders and the ability of shareholders to participate in corporate governance. In this regard, the Board acknowledges the growing sentiment among shareholders in favor of eliminating such requirements. If the proposed amendment and restatement of the Company’s Certificate is approved by the requisite vote of the Company’s shareholders, Sections 5(f) and 6 will be eliminated in their entirety and subsequent paragraphs will be renumbered for continuity.

This description is qualified in its entirety by the actual text set forth in Appendix B, which contains the proposed amendments to the Certificate.

If the amendment and restatement of the Company’s Certificate is approved by the requisite vote of the shareholders, it will become effective upon the filing of an appropriate restated certificate of incorporation with the New York Department of State. The Company would make such filing promptly after the 2012 Annual Meeting of Shareholders.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE RESTATED CERTIFICATE OF INCORPORATION TO REMOVE THE PROVISIONS CURRENTLY REQUIRING A SUPERMAJORITY VOTE OF THE COMPANY’S SHAREHOLDERS.

See page 69 – “PROPOSAL 5 – To Approve Amendment and Restatement of the Restated Certificate of Incorporation to Remove the Provisions Currently Requiring a Supermajority Vote of the Company’s Shareholders” for more information.

Conduct of Other Business at 2012 Annual Meeting

We have not received notice of, and are not aware of, any other business to be transacted at the meeting other than indicated above. 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.

 

v


CORNING INCORPORATED

One Riverfront Plaza

Corning, New York 14831

Corning is providing these proxy materials in connection with its 2012 Annual Meeting of Shareholders. This proxy statement, the accompanying proxy card and Corning’s 2011 Annual Report were first mailed to shareholders on or about March 13, 2012. As used in this proxy statement, “Corning,” the “Company” and “we” may refer to Corning Incorporated itself, one or more of its subsidiaries, or Corning Incorporated and its consolidated subsidiaries.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE

ANNUAL SHAREHOLDER MEETING TO BE HELD ON APRIL 26, 2012:

This proxy statement and Corning’s Annual Report to shareholders are available at

www.corning.com/2012_proxy

ABOUT THE ANNUAL 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 2012 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 13, 2012.

When and Where Is The Annual Meeting?

 

 

The Annual Meeting will be held on Thursday, April 26, 2012, 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 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 10 directors for a one-year term;

   

To approve the Company’s executive compensation;

   

To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2012;

   

To approve the adoption of the 2012 Long-Term Incentive Plan;

   

To approve the amendment and restatement of the Company’s Restated Certificate of Incorporation to remove the provisions currently requiring a supermajority vote of the Company’s shareholders; and

   

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

 

1


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 24 (commonly referred to as “say-on-pay”) (Proposal 2);

   

FOR ratification of the Board’s appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2012 (Proposal 3);

   

FOR the adoption of the 2012 Long-Term Incentive Plan (Proposal 4); and

   

FOR the approval of the amendment and restatement of the Company’s Restated Certificate of Incorporation to remove the provisions currently requiring a supermajority vote of the Company’s shareholders (Proposal 5).

Who Is Entitled To Vote?

 

 

You may vote if you owned our common shares as of the close of business on February 23, 2012, 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 1, 2012, we had 1,521,874,563 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:

 

  Ÿ  

By Internet at www.investorvote.com/glw;

 

  Ÿ  

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

 

  Ÿ  

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:

 

  Ÿ  

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;

 

  Ÿ  

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

 

  Ÿ  

voting again at the meeting.

 

2


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.

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, 4 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 3 (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, 4 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.

 

3


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 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 24 (commonly referred to as “say-on-pay”) (Proposal 2);

   

FOR ratification of the Board’s appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2012 (Proposal 3);

   

FOR the adoption of the 2012 Long-Term Incentive Plan (Proposal 4); and

   

FOR the approval of the amendment and restatement of the Company’s Restated Certificate of Incorporation to remove the provisions currently requiring a supermajority vote of the Company’s shareholders. (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 23, 2012, 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.

 

4


What Is The Vote Required For Each Proposal?

 

 

 

Proposal

       

Affirmative Vote Required

  Broker
Discretionary
Voting Allowed
Proposal 1—Election of 10 directors      Majority of votes cast at the meeting in person or by proxy   No
Proposal 2—Approval of the Company’s executive compensation      Majority of votes cast at the meeting in person or by proxy   No
Proposal 3—Ratification of auditors for fiscal year 2012      Majority of votes cast at the meeting in person or by proxy   Yes
Proposal 4—Adoption of the 2012 Long-Term Incentive Plan      Majority of votes cast at the meeting in person or by proxy   No
Proposal 5— Approval of the amendment and restatement of the Company’s Restated Certificate of Incorporation to remove the provisions currently requiring a supermajority vote of the Company’s shareholders      Majority of the total shares outstanding and entitled to vote   No

With respect to each Proposal, 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.

How Will Broker Non-Votes Be Treated?

 

 

Except for Proposal 3, 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.

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 $15,500 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 2, 2012.

 

5


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 2013 Annual Meeting of Shareholders, we must receive it at our principal office on or before November 13, 2012. 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 2013 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 2013 Annual Meeting of Shareholders, we must receive notice on or after December 27, 2012, and on or before January 26, 2013.

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

 

 

Yes. This proxy statement and Corning’s 2011 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 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 2011 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 2011 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 or Annual Report if you are receiving multiple copies.

 

6


PROPOSAL 1

Election of Directors

The following ten directors are being nominated for election to a one year term: Messrs. Brown, Canning, Clark, Flaws, Gund, Landgraf, Ruding, and Wrighton and Drs. Burns and Rieman.

Each of Messrs. Brown, Canning, Gund, Landgraf, and Ruding were elected by Corning’s shareholders on April 28, 2011, and their terms expire at the 2012 Annual Meeting. Each of Messrs. Flaws and Drs. Rieman and Wrighton were elected by Corning’s shareholders on April 30, 2009, and their terms expire at the 2012 Annual Meeting. Mr. Clark was appointed by Corning’s Board of Directors on December 6, 2011. Dr. Burns was appointed by Corning’s Board of Directors on January 31, 2012. Mr. Clark and Dr. Burns are standing for election by shareholders for the first time. Each of Messrs. Cummings, Tookes and Weeks were elected by Corning’s shareholders on April 29, 2010 and their terms expire at the 2013 Annual Meeting. Mr. Smithburg, whose term expires this year, has met the Board’s mandatory retirement age and will not be standing for re-election. Mr. Tilton’s term also expires this year and he is not standing for re-election. Beginning with our 2013 Annual Meeting, all directors will stand for election for terms expiring at the next Annual Meeting.

Majority Voting Standard. On February 1, 2012, our Board of Directors approved and adopted an amendment to our By-Laws to provide that at each meeting of the shareholders for the election of directors, the vote required for election of a director will, except in a contested election, be the affirmative vote of a majority of the votes cast in favor of or against such nominee. In a contested election, a nominee receiving a plurality of the votes cast at such election shall be elected. An election is considered to be contested if there are more nominees for election than positions on the Board of Directors to be filled by election at the meeting. The amendment took effect on February 1, 2012.

The By-Laws also provide that in an uncontested election, once the election results are certified, an incumbent director nominee who does not receive the required votes for re-election will promptly tender his or her resignation to the Board. 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. The foregoing description of the amendment to our By-Laws is qualified in its entirety by reference to the full text of the amendment, a copy of which was filed with the SEC on a Form 8-K on February 2, 2012.

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 status of the declassification is as follows:

 

  Ÿ  

The Board of Directors presently has eight continuing directors whose terms expire at the 2012 Annual Meeting of Shareholders, all of whom are being nominated for election to one-year terms.

 

7


  Ÿ  

Two newly appointed directors are standing for election for the first time and are being nominated for election to one-year terms.

 

  Ÿ  

The three continuing directors whose current terms will expire at the 2013 Annual Meetings of Shareholders, will serve the remainder of their terms.

 

  Ÿ  

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

 

  Ÿ  

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.

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 2013

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 71.

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 and cloud computing. His current work includes advising on international corporate strategies in the digital age.

LOGO

Stephanie A. Burns

Retired Chairman and

Chief Executive Officer

Dow Corning Corporation

Dr. Burns has nearly 30 years of global innovation and business leadership experience. Dr. Burns joined Dow Corning in 1983 as a researcher and specialist in organosilicon chemistry. In 1994, she became the company’s first director of women’s health. She was elected to the Dow Corning Board of Directors in 2001 and elected as president in 2003. She served as Dow Corning’s chief executive officer from 2004 until May 2011 and served as chairman from 2006 through 2011. Currently, she is an honorary president of the Society of Chemical Industry and was appointed by President Obama to the President’s Export Council. Dr. Burns is a former chairman of the American Chemistry Council. She is a director of GlaxoSmithKline plc. Corning director since 2012. Age 57.

Dr. Burns brings significant expertise in scientific research, issues management, science and technology leadership and business management to the Board, as well as skills related to her Ph.D. in organic chemistry.

 

 

8


 

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 and TransUnion Corp. He is a former director of Jefferson Smurfit Group plc. Corning director since 2010. Age 67.

Mr. Canning brings 31 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 finance committee.

 

 

LOGO

Richard T. Clark

Retired Chairman, President and

Chief Executive Officer

Merck & Co., Inc.

Mr. Clark joined Merck in 1972, and held a broad range of senior management positions. He became president and chief executive officer of Merck in May 2005, and chairman of the board in April 2007. He transitioned from the chief executive officer role in January 2011, and served as Merck board chairman through November 2011. He was president of the Merck Manufacturing Division (June 2003 to May 2005) of Merck Sharp & Dohme Corp. (formerly known as Merck & Co., Inc.) He is a director of Automatic Data Processing, Inc. (ADP) and serves on the advisory board of American Securities. He is chairman of the board of Project Hope and a trustee of several charitable non-profit organizations. Corning director since 2011. Age 66.

As the former chairman, president and chief executive officer of a Fortune 100 company, Mr. Clark brings to Corning broad managerial expertise, operational expertise and deep business knowledge, as well as a track record of achievement.

 

 

 

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 63.

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.

 

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 72.

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 22 years, from which he has developed additional expertise in the areas of compensation and corporate governance.

 

 

9


 

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 65.

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

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 and Kintera Inc. Corning director since 1999. Age 62.

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.

 

 

10


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 Chairman of BNG (Bank for the Netherlands Municipalities) 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., RTL Group and Holcim Ltd. Corning director since 1995. Age 72.

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.

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, a major research university. 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 was elected to membership in the American Academy of Arts and Sciences and the American Philosophical Society and he is a Fellow of the American Association for the Advancement of Science. 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 62.

Dr. Wrighton is a professor, chemist and research scientist with expertise in materials and research interests in the areas of transition metal catalysis, photochemistry, surface chemistry, molecular electronics, and in photoprocesses at electrodes. Under Chancellor Wrighton’s leadership, Washington University has grown significantly in academic stature, research enterprise, infrastructure, student quality, curriculum and international reputation. In addition to his executive leadership, Dr. Wrighton brings to the Board his vast scientific knowledge and understanding of complex research and development issues.

 

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

EACH OF THE DIRECTOR NOMINEES.

 

11


Directors Continuing in Office

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. in December 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 62.

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

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., NextEra Energy, Inc. and Harris Corporation. Corning director since 2001. Age 64.

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.

 

 

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 52.

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 29 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 six years as chief executive officer, have given him a unique understanding of Corning’s diverse business operations and innovations.

 

 

12


Meetings and Committees of the Board

Board Meetings

 

 

The Board of Directors held 18 regularly scheduled meetings during 2011. All directors attended 75% or more of the meetings of the Board of Directors and of the Committees on which they serve.

Board Committees

 

 

In addition to an Executive Committee, which is specified in the By-Laws and acts by delegation, Corning has five standing Board committees: Audit, Compensation, Corporate Relations, Finance, and the 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 C, D, E, F, and G, respectively.

 

 

Audit

The Audit Committee met 10 times during 2011. The current members of the Audit Committee are Messrs. Landgraf (Chair), Clark, Cummings, Ruding, Tilton and Wrighton and Dr. Rieman. The Audit Committee:

 

  Ÿ  

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;

 

  Ÿ  

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

 

  Ÿ  

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

 

  Ÿ  

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;

 

  Ÿ  

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

 

  Ÿ  

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

 

  Ÿ  

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 that could materially impact Corning’s contingent liabilities and risks;

 

  Ÿ  

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

 

  Ÿ  

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

 

  Ÿ  

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.

 

 

 

13


Compensation

The Compensation Committee met eight times during 2011. The current members of the Compensation Committee are Messrs. Smithburg (Chair), Brown, Clark and Gund, and Dr. Rieman. The Compensation Committee:

 

  Ÿ  

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

 

  Ÿ  

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

 

  Ÿ  

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

 

  Ÿ  

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

 

  Ÿ  

Recommends to the Board the compensation arrangements with non-employee directors;

 

  Ÿ  

Oversees Corning’s equity compensation plans; and

 

  Ÿ  

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

Compensation decisions for executives, including the “Named Executive Officers,” the six 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 Senior Vice President Human Resources and also 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 Administrative 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”.

 

 

Corporate Relations

The Corporate Relations Committee met five times during 2011. The current members of the Corporate Relations Committee are Messrs. Wrighton (Chair), Landgraf and Tilton and Dr. Burns. 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.

 

 

 

14


Executive

The Executive Committee met eight times during 2011. The current members of the Executive Committee are Messrs. Weeks (Chair), Cummings, Flaws, Gund, 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.

 

 

Finance

The Finance Committee met seven times during 2011. The current members of the Finance Committee are Messrs. Ruding (Chair), Canning, Cummings, Flaws and Tookes. The Finance Committee:

 

  Ÿ  

Monitors present and future capital requirements of Corning;

 

  Ÿ  

Reviews all material transactions prior to execution;

 

  Ÿ  

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

 

  Ÿ  

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

 

  Ÿ  

Monitors Corning’s cash management plans and activities;

 

  Ÿ  

Reviews Corning’s tax position and strategy;

 

  Ÿ  

Reviews and monitors Corning’s credit rating;

 

  Ÿ  

Reviews funding actions for Corning’s pension programs; and

 

  Ÿ  

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

 

 

Nominating and Corporate Governance

The Nominating and Corporate Governance Committee met five times during 2011. The current members of the Nominating and Corporate Governance Committee are Messrs. Gund (Chair), Brown, Canning, Smithburg and Tookes. The Nominating and Corporate Governance Committee:

 

  Ÿ  

Identifies individuals qualified to become Board members;

 

  Ÿ  

Reviews candidates recommended by shareholders;

 

  Ÿ  

Determines the criteria for selecting director nominees;

 

  Ÿ  

Conducts inquiries into the background of director nominees;

 

  Ÿ  

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

 

  Ÿ  

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;

 

  Ÿ  

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

 

  Ÿ  

Develops and recommends to the Board corporate governance guidelines;

 

  Ÿ  

Assists the Board in assessing the independence of Board members;

 

15


  Ÿ  

Identifies Board members to be assigned to the various committees;

 

  Ÿ  

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

 

  Ÿ  

Establishes director retirement policies;

 

  Ÿ  

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

 

  Ÿ  

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 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:

 

  Ÿ  

Character and the ability to apply good business judgment;

 

  Ÿ  

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

 

  Ÿ  

Proven leadership skills;

 

  Ÿ  

Diversity of experience;

 

  Ÿ  

High integrity and ethics;

 

  Ÿ  

The ability to understand complex principles of business and finance;

 

  Ÿ  

Scientific expertise; and

 

  Ÿ  

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 Dr. Burns and Mr. Clark who were identified by the Nominating and Corporate Governance Committee, and appointed by the Board of

 

16


Directors in January 2012 and December 2011, respectively. 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?“

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 H and can also be found on our 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 directors who are independent under the New York Stock Exchange listing requirements, one non-independent director, plus two management directors. All of our directors are highly accomplished and experienced people in the fields of business, technology or academics, 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 management 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 Mr. William Smithburg. The Lead Director plays an important role in our corporate governance structure. The

 

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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 non-employee directors; convening meetings of the non-employee 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.

Mr. Smithburg, whose term as director expires at the 2012 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 2012 Annual Meeting of Shareholders, the Board will designate a new Lead Director.

In February 2012, 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 is working well, 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 other directors—remains the optimal board leadership structure for our Company and our shareholders.

Executive Sessions of Independent Directors

 

 

Non-management Board members meet without management present at each regularly scheduled Board meeting. Independent Board members also meet separately at least once a year. Additional meetings may be called by the Lead Director in his discretion or at the request of the Board. The Lead Director, Mr. Smithburg, presides over these meetings.

Board Risk Oversight

 

 

Corning has a comprehensive risk management program that engages the Company’s management/leadership and Board. Since 2004, 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 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 assists each of our businesses in identifying its applicable risks, and determines whether such risks are material at the Company level. While each business is responsible for managing its identified risks – as we believe the local business teams are in the best position to identify and manage their risks – the Risk Council works with each business on its mitigation plans for any material risks. We believe this central oversight of and assistance to the business teams is the most effective way to manage the Company’s risks. The Risk Council reports directly to the management committee of the Company.

 

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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 assessment results are used to establish our internal audit plan, conduct internal audits and perform any resulting remedial actions. The assessment and internal audit results are a key part of our Sarbanes-Oxley compliance program for internal controls. The Audit Committee reviews the results of the risk assessment annually and the results of our internal audits quarterly.

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 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:

 

  Ÿ  

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.

 

  Ÿ  

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

 

  Ÿ  

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.

 

  Ÿ  

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

 

  Ÿ  

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.

 

  Ÿ  

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 1,

 

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2012, 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, Clark, Cummings, Gund, Landgraf, Ruding, Smithburg, Tilton, Tookes and Wrighton, and Dr. 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 these 12 Directors 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:

 

  Ÿ  

Dr. 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.

 

  Ÿ  

Mr. Cummings became an employee of JPMorgan Chase & Co (“JPM”) in December 2010. Mr. Tilton became an employee of JPM in June 2011. 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 $2,600,000, $4,200,000 and $1,600,000 and for each 2011, 2010 and 2009, respectively. Neither Mr. Cummings nor Mr. Tilton are JPM section 16 executive officers under SEC or NYSE rules, and neither has any personal involvement in JPM services provided to or fees paid by Corning.

 

  Ÿ  

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 to Corning in an aggregate amount of approximately $88,000.

 

  Ÿ  

Dr. Wrighton is a director of Cabot Corporation, a company which sold products to Corning in an aggregate amount of approximately $650,000 in 2009, 2010 and 2011; and Brooks Automation, a company which sold an aggregate of approximately $123,000 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 each of Messrs. Brown, Cummings, Tilton, Tookes and Wrighton’s above relationships are not material, the Board considered: the fact that such relationships arise only from their position as an employee or director of the respective companies; that such director has no direct or indirect material interest in any of the transactions between Corning or its affiliate, as the case may be, and the respective company; that none is a Section 16 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. Dr. Burns was an executive officer of Dow Corning Corporation (which is 50% owned by Corning) until her December 31, 2011 retirement, and so is not an independent director.

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.

 

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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.

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 2011 Annual Meeting of Shareholders, with the exception of Mr. Landgraf who was unable to attend, Mr. Clark who was appointed to the Board on December 6, 2011, and Dr. Burns who was appointed to the Board on January 31, 2012.

Related Party Policy and Procedures

 

 

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

 

  Ÿ  

a director;

  Ÿ  

a senior officer;

  Ÿ  

an immediate family member of a director or senior officer;

  Ÿ  

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

  Ÿ  

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 the community making it more attractive to employees. In a small community, inevitably employees, including executives and their spouses, have relationships with the non-profit organizations that receive such contributions from the Company.

In February 2011, Corning agreed to construct and lease a new building for the Alternative School for Math and Science (ASMS), a private middle school with an advanced curriculum focusing on science and math, located in Corning, New York. The cost for the design, engineering and construction of the new facilities is approximately

 

21


$21 million to be incurred over several years. The school is open to the public. Children of Corning employees usually represent approximately 50% of the enrollment. Mark Rogus (Senior Vice President and Treasurer), Christine Pambianchi, (Senior Vice President, Human Resources), 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 of trustees. Ms. Frock Weeks also serves as Administrative Head of School at ASMS, but receives no salary or benefits in this role. Corning may make additional contributions to ASMS in the future.

In 2011, Corning also agreed to contribute up to $9.7 million to the Southern Tier Network (STN), a not-for-profit, local development corporation established to build and manage a $12.2 million regional fiber optic network that will create a new high speed broadband infrastructure in Chemung, Schuyler and Steuben Counties of New York. The project will also be funded with $2.2 million coming from the three local counties. This network will offer significant benefits to the region, including connecting public safety towers and 911 centers, providing state-of-the-art telecommunications technology, enhanced broadband offerings to area residents and service to underserved areas of the community, and creating a catalyst for future economic development in the region. Marcia Weber (spouse of James Flaws, Vice Chairman and Chief Financial Officer) and Mark Rogus (Senior Vice President and Treasurer) are on the STN board of directors. Ms. Weber also serves as the STN Board Chair.

Subject to receipt of appropriate reporting and documentation, the Corning Incorporated Foundation authorized a $4.2 million grant to the Corning-Painted Post Area School District to assist the District in meeting its 2011-2012 budget priorities and to maintain existing educational programs and services across the District. The Corning Incorporated Foundation may make additional contributions in the future to support education in the District over the longer term.

Corning makes annual contributions to the Corning Museum of Glass (CMoG) and the Rockwell Museum of Western Art (Rockwell). Both are located in Corning, New York. In 2011, Corning provided monetary contributions and contributions of services to CMoG and the Rockwell of approximately $26.2 million and $2.3 million, respectively. Wendell Weeks (Chairman, Chief Executive Officer and President), James Flaws (Vice Chairman and Chief Financial Officer), Jeffrey W. Evenson (Senior Vice President and Operations Chief of Staff), and Mark Rogus (Senior Vice President and Treasurer) serve on the CMoG board of trustees. Denise Hauselt (Vice President, Secretary and Assistant General Counsel) is on the Rockwell board of trustees. Additionally, Corning has approved up to $104 million for expansion and improvement of CMoG facilities, owned by Corning. The expansion funding will take place over three years.

In 2011, Corning made a $500,000 contribution to the Clemens Center (CC), a performing arts center located in Elmira, New York. The funds were used to assist CC with recent renovations to its main theater. Gary Calabrese (Senior Vice President, New Business Development) is on the CC board of trustees.

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 I 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 2011, 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.

 

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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, 2011. 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.

     112,251,581 (1)     7.14 %

40 East 52nd Street

    

New York, NY 10022

    

 

 

(1) Reflects shares beneficially owned by BlackRock, Inc. (“BlackRock”), according to a Schedule 13G/A filed by BlackRock with the SEC on February 13, 2012, reflecting ownership of shares as of December 31, 2011. BlackRock has sole voting power and sole dispositive power with respect to 112,251,581 shares. According to the Schedule 13G/A, BlackRock beneficially owned 7.14% of our common stock as of December 31, 2011.

(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, 2011, is as follows:

 

Name

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

Directors

   

John S. Brown

    146,472        —         

Stephanie A. Burns

    0               

John A. Canning, Jr.

    68,314        —         

Richard T. Clark

    685           

Robert F. Cummings, Jr.

    84,499        —         

Gordon Gund

    3,293,250 (4)      —         

Kurt M. Landgraf

    30,766        —         

Deborah D. Rieman

    121,435        —         

H. Onno Ruding

    109,825        —         

William D. Smithburg

    160,472        —         

Glenn F. Tilton

    5,553        —         

Hansel E. Tookes II

    83,435        —         

Mark S. Wrighton

    24,029        —         

Named Executive Officers

           

Wendell P. Weeks*

    2,150,510 (5)      —         

James B. Flaws*

    953,306        —         

Joseph A. Miller, Jr.

    631,318        —         

Kirk P. Gregg

    866,719        —         

Lawrence D. McRae

    20,256        —         

Jeffrey Evenson

    8,765        —         

All Directors and Executive Officers as a Group (21 persons)

    9,332,672 (6)(7)      .62%   

*also serves as director.

 

23


 

(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, Clark, Cummings, Gund, Landgraf, Ruding, Smithburg, Tilton, Tookes, Wrighton, Weeks, Flaws, Miller, Gregg, McRae and Evenson, and Drs. Burns and Rieman have the right to purchase 27,849; 441; 0; 11,090; 27,849; 9,086; 37,849; 27,849; 68; 27,849; 5,993; 1,758,560; 682,924; 491,164; 762,935; 246,056; 0; 0; and 37,849 shares, respectively, pursuant to such options. All directors and executive officers as a group hold options to purchase 4,670,227 such shares.

(2)

Includes shares of common stock, subject to forfeiture and restrictions on transfer, issued under Corning’s Restricted Stock Plans for Non-Employee 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, Flaws, Miller, Gregg, McRae and Evenson, and all executive officers as a group the equivalent of 10,504; 0; 1,426; 8,784; 5,631; 0; and 26,345 shares of common stock, respectively. It also holds for the benefit of all employees who participate in the Plans the equivalent of 21,581,072 shares of common stock (being 1.42% 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)

Includes 381,446 shares held by a revocable trust of which Mr. Weeks is the beneficiary, and he currently has no voting authority over these shares.

(6)

Does not include 670,082 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, 2011, 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 any greater than 10% shareholders complied with all Section 16(a) filing requirements applicable to them during the fiscal year ended December 31, 2011 except that, due to administrative oversight by a third party financial advisor, Mr. Vincent P. Hatton, an officer, filed one late Form 4 on March 29, 2011 with respect to 1,000 shares acquired on August 19, 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.

What’s New in 2011?

 

 

At the 2011 annual shareholders meeting, more than 96% of votes cast supported Corning’s executive compensation program. Both management and the Committee reviewed the advisory vote result for the 2011

 

24


Say on Pay proposal and found it to be a strong show of support for Corning’s current executive compensation program. In addition, the Company annually reviews compensation-related voting policies of our largest investors to fully understand their preferences and to gauge the level of support for our executive compensation program. As a result, the Company did not make any material changes to the executive compensation program for 2011.

As described in the 2011 proxy statement, the Committee increased the target pay opportunity for the CEO last year, increasing the target market position of Mr. Weeks’ pay from market median to between market median and 75th percentile.

Compensation for six executives is disclosed in the Summary Compensation Table this year, instead of compensation paid to the required five executives. Compensation to Dr. Evenson, a newly hired Senior Vice President, exceeds the compensation to select Executive Vice Presidents because of fixed cash retention and sign on payments to Dr. Evenson negotiated as part of his new hire package designed to replace amounts forfeited when he left his previous employer. As a result of fixed payments under his new hire package, Dr. Evenson’s compensation is not as variable and is not as representative of Corning’s annual ongoing executive compensation program for Named Executive Officers (“NEOs”). We determined that the best approach was to expand the group of executives to achieve more consistency in the composition of our NEOs.

In 2011 our financial results fell significantly below target. Since we set rigorous performance goals for 2011, our incentive payouts were sharply reduced:

 

   

2011 annual bonus earned at 10% of target for NEOs;

   

2011 GoalSharing earned at 5.05% of base salary for NEOs;

   

2011 Cash Performance Units earned at 60% of target;

   

2011 Stock Option grants are underwater; and

   

Value of 2011 time-based restricted stock units declined approximately 30% during the year.

Therefore, executive pay aligned with performance. Given that fiscal 2011 was a challenging year for Corning in terms of financial and stock performance, actual 2011 compensation for our NEOs was significantly lower than the prior year. Actual 2011 compensation for our ongoing NEOs was 73% of target (27% below). This compares to 2010 actual compensation for our NEOs of 139% of target (39% above). See pages 27-29 for additional detail.

Executive Summary

 

 

Compensation Program Reflects Good Governance

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 being critical to our long-term success. This means that our management must balance near-term results with long-term success while continuing to build long-term value through innovation. To fulfill this mission, Corning’s “pay-for-performance” philosophy forms the foundation for all decisions regarding executive compensation made by the Committee.

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;

   

Our equity plan prohibits the repricing of stock options in any form without shareholder approval;

   

Our NEOs (and outside directors) are subject to stock ownership guidelines; each exceeded the guideline requirements in 2011;

   

A clawback policy was adopted in 2007 allowing the Committee to recoup payments based on financial results subsequently subject to restatement;

   

An anti-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;

 

25


   

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 eliminated in 2003, as of 2009 no prior stock options granted with a reload feature remained outstanding;

   

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; and

   

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

 

 

2011 Performance and Results

Our Annual Operating Priorities for 2011 were consistent with prior year themes: 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 2011, we reported strong revenue growth, but our profitability was lower than in 2010 due to an increase in the tax rate and the underperformance of our Display business and two of our equity companies, Dow Corning and Samsung Corning. Reported results were as follows:

   

Revenue of $7.9 billion compared to $6.6 billion for 2010; a 19% increase and a record year;

   

Net profit after tax (“NPAT”) of $2,805 million compared to $3,558 million for 2010, a 21% decrease;

   

Earnings per share of $1.77 compared to $2.25 per share for 2010, a 21% decrease; and

   

Operating cash flow of $3,189 million compared to $3,835 million for 2010, a 17% decrease

Additional considerations when evaluating 2011 performance include:

   

Tax rates increased significantly, making year-over-year comparisons of after-tax results difficult.

   

Foreign exchange (“FX”) rates in 2011 positively impacted our GAAP earnings. However, the impact on our incentive plans was limited by the collar we have placed on certain FX rates that eliminates potential windfalls or penalties for large FX changes.

   

Many of our line business units exceeded financial goals.

   

We increased our global employee headcount by almost 10% (adding approximately 2,600 net employees during the last year) indicating continued investment in Corning’s long-term success.

   

We continued to have a strong balance sheet, ending 2011 with cash in excess of debt by $3.4 billion, vs. $4.0 billion in 2010 and $1.6 billion in 2009 while at the same time significantly investing in growth through innovation, expansions and acquisitions.

 

 

Importance of Equity Companies to Corning

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. Under GAAP, Corning’s share of the revenues from these equity companies, totaling more than $5.8 billion in 2011, 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, thus also impacting Corning’s market value. 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.

 

 

 

26


Target Compensation

For 2011, variable pay represented 82% of target total direct compensation for the Named Executive Officers (on average). Total direct compensation consists of base salary and short-term and long-term incentives, 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

Note that the chart above excludes Dr. Evenson. As described earlier, Dr. Evenson is a proxy officer this year based on fixed (non-variable) cash payments negotiated as part of his new hire package. Because Dr. Evenson received a fixed cash payment to replace amounts forfeited when he left his previous employer, his compensation is not representative of the variability in the annual ongoing pay program for NEOs.

 

 

Actual Compensation and Related Performance

Our compensation program is designed to pay for performance. Actual compensation earned by the NEOs varies from target from year to year based on the Company’s financial performance and stock price. Actual Total Direct Compensation for our NEOs and our performance during 2009 through 2011 based on Total Shareholder Return (calculated as the annual change in stock price assuming reinvestment of dividends), Adjusted Net Profit After Taxes and Adjusted Operating Cash Flow are summarized below.

The “Adjustments to 2011 Reported Results” on which 2011 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 J to this Proxy Statement.

 

   

On average, actual total direct compensation for our ongoing NEOs in fiscal year 2011 was far below target (approx. 73% of target), primarily due to the final annual bonus (PIP) paying out at only 10% of target and the long-term cash performance units being earned at 60% of target.

 

   

Given that 2011 was a challenging year for Corning, the executive pay program aligned with financial and stock performance by paying out at significantly lower amounts.

 

27


Note that stock option values are included in the total direct compensation at their fair values on the date of grant. These stock options are currently underwater and have no intrinsic value (i.e. the current price of Corning stock is less than the exercise price of the options) at year end. 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

($ millions)

 

Adjusted Operating Cash Flow

($ millions)

2011    2010    2009   2011    2010    2009   2011    2010    2009

-31.9%

   1.2%    105.6%   $2,636    $2,883    $2,061   $3,582    $2,723    $2,029

 

LOGO

Notes Regarding Actual Compensation compared to Target Compensation:

 

2011

 

2010

 

2009

•Base Salaries not subject to performance criteria

•2011 PIP earned at 10% of target

•2011 GoalSharing earned at 5.05% of base salary

•2011 Cash Performance Units earned at 60% of target

•2011 Time-based Restricted Stock Units (“RSUs”) not subject to performance (current actual values approximately 30% below grant date value)

•Stock Options indicated at Fair Values (which far exceed current actual values of $0)

 

•Base Salaries not subject to performance criteria

•2010 PIP earned at 200% of target

•2010 GoalSharing earned at 7.72% of base salary

•2010 Cash Performance Units earned at 150% of target

•2010 Time-based RSUs not subject to performance

•Stock Options indicated at Fair Values (which far exceed current actual values of $0)

 

•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

 

28


Information concerning 2011 short-term and long-term incentives for our NEOs is summarized below:

 

2011 Compensation Element

 

2011 Award

Opportunity for NEOs

 

2011 Performance

Metrics and Results

 

2011 Award Earned

by NEOs

Annual Cash Bonus—Performance Incentive Plan

 

Target awards range from 65% to 90% of base salary for NEOs other than the CEO; target is 140% for the CEO

 

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

 

Adjusted Net Profit After Tax of
$2,636 million

 

2011 target was $2,990 million

 

10% of target opportunity earned

 

To be paid March 2012

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  

5.05% of base salary

 

To be paid February 2012

Corporate Performance Plan—Cash Performance Units
(represents 50% of
annual long-term
incentive opportunity)

 

Cash performance unit target awards range from $875,000 to $3.5 million (Dr. Evenson part-year cash value target of $325,000)

 

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

 

Adjusted EPS of $1.67; 2011 target
was $1.87

 

Adjusted Operating Cash Flow of $3,582 million; 2011 target was $3,504 million

 

60% of target opportunity earned, resulting in actual awards ranging from $195,000 to $2.1 million for the 6 NEOs

 

Subject to vesting and to be paid February 2014

Corporate Performance Plan—Stock Options

(represents 25% of
annual long-term
incentive opportunity)

  Target grant date fair value of stock option awards range from $437,500 to $1.75 million (Dr. Evenson part-year value of $162,500)   Actual value realized depends on future market performance of Corning stock and cannot be assessed until exercised  

Actual grant date fair value of stock options granted for 2011 performance year ranged from approximately $155,000 to $1.71 million

 

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

 

Stock option awards are currently underwater and, thus, have no current value

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 $437,500 to $1.75 million (Dr. Evenson part-year 2011 value at $162,500)

 

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

  Actual value realized depends on future market performance of Corning stock and cannot be accurately assessed
until vested
 

Actual grant date fair value ranged from approximately $162,500 to

$1.75 million

 

Vest in February 2014

 

Values at December 31, 2011 range from $113,800 to $1.18 million due to decline in stock price during the year

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. Attracting 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 an NEO’s annual compensation should be at risk. As a result, the Company pays a competitive base salary to each Named Executive Officer.

 

   

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.

 

29


   

Team-Based Management Approach:  Corning uses a team-based management approach, so 100% of incentives awarded to NEOs 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 NEOs.

 

   

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 NEOs with those of our shareholders.

 

 

Adjustments to 2011 Reported Results

In 2011, Adjusted NPAT was the financial metric used for annual cash bonuses. Adjusted EPS and Adjusted Operating Cash Flow were 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 2011 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 our employees and executives to focus on improving operational performance, while taking appropriate special actions whenever necessary to benefit the Company and its shareholders. The financial metrics we use for determining annual cash bonuses and cash performance awards are non-GAAP financial measures. Throughout this CD&A, we refer to our adjusted EPS, adjusted NPAT and adjusted operating cash flow, which are non-GAAP financial measures. Appendix J to this proxy statement contains an explanation of how we calculate these measures.

Upon the Committee’s review and approval at the beginning of the year, the following special items were excluded from reported results to calculate incentives for 2011: (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 specified range, (iv) restructuring or impairment charges and credits, (v) non-operating gains and losses, (vi) bankruptcy-related charges at Dow Corning, (vii) any impact of Pittsburgh Corning settlements, (viii) tax/accounting changes, (ix) discontinued operations, (x) extraordinary gains/losses; (xi) special dividends from equity ventures; (xii) impact from significant acquisitions or equity ventures; and (xiii) impact of release of valuation allowance on deferred tax assets. Corning had adjustments in several of these areas in 2011.

 

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

Reported 2011 Results

   $                 2,805      $ 1.77      $ 3,189   

Impairment Charges

     83        0.05     

Equity earnings credit

     (74     (0.04  

Contingent liability

     (27     (0.02  

Special Dividends not received (but assumed in approved scale)

         384   

Deferred Tax Asset valuation allowance release

     (26     (0.02  

Pittsburgh Corning settlement charges

     15        0.01     

Fluctuations in foreign exchange rates for Japanese Yen and Korean Won outside a range +/- 4% of budget*

     (153     (0.09     (61

FX at Corning Treasury Services

         70   

Tax law changes

     13        0.01     

Adjusted 2011 Results

   $ 2,636      $         1.67      $             3,582   

* 86 to 94 Yen per U.S. dollar and 1140 to 1260 Korean won per U.S. dollar in 2011 (narrowed from 5% in 2010 to 4% in 2011).

 

30


As a result of these adjustments for 2011, Corning’s Adjusted NPAT of $2,636 million was $169 million lower than Corning’s reported GAAP NPAT of $2,805 million. Corning’s Adjusted EPS of $1.67 was $0.10 lower than Corning’s reported GAAP EPS of $1.77. Corning’s Adjusted Operating Cash Flow of $3,582 million was $393 million higher than the Company’s GAAP Operating Cash Flow of $3,189 million. A reconciliation of our non-GAAP financial measures to GAAP financial measures can be found in Appendix J to this proxy statement.

Executive Compensation Program–Elements of Compensation

 

 

Base Salary

The Committee does not believe that all of a NEO’s annual compensation should be at risk. As a result, the Company pays a competitive base salary to each Named Executive Officer. In 2011, the CEO received a 9% base salary increase, positioning his salary slightly above the median of the external compensation benchmarks. The other on-going NEOs received a 3.28% base salary increase, consistent with the corporate salary increase budget applicable to all U.S. employees.

 

 

Annual Incentive / Bonus

Performance Incentive Plan (PIP): The Performance Incentive Plan pays variable cash bonus awards tied to the Company’s annual financial performance. Bonuses are higher than target when the Company does well compared to the established financial goals and bonuses are not paid when the Company fails to achieve the minimum financial goals. For the NEOs, 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 2011.

Each year, the Committee reviews and approves an annual cash bonus target award for each of our NEOs, expressed as a percentage of the executive’s base salary. The annual bonus target for the CEO is 140% (see footnote (3) to the Summary Compensation Table). The annual bonus targets for the remaining NEOs range from 65% to 90%. The Named Executive Officers may earn from 0% to 200% of their individual bonus target awards depending on actual corporate financial performance.

The individual NEO’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 NEOs 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 2011 Performance Incentive Plan goals for Adjusted NPAT were established with the following considerations:

 

   

The minimum performance goal (0% of target payout) was established at 88% of 2010 actual results. If Adjusted NPAT did not exceed $2,550 million in 2011, or 90% of the 2011 budget, the NEOs would earn nothing (0%) under the PIP.

 

   

The target performance goal (100% of target payout) was established at 2011 budget for Adjusted NPAT of $2,990 million, equal to a 4% improvement over 2010 actual results. (Note: An increase in Corning’s tax rate in 2011 compared to 2010 was an important factor in setting this scale.) If Adjusted NPAT met this goal for 2011, the NEOs would earn 100% of their target award under the PIP.

 

   

The maximum performance goal (200% of target payout) was established at 110% of budget, or $3,289 million Adjusted NPAT for 2011, equal to 14% improvement over 2010 actual results. If Adjusted NPAT met or exceeded this goal for 2011, the NEOs would earn 200% of their target award under the PIP.

 

31


   

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 engage in inappropriate behaviors 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 2011, the width of the flat spot applicable to Adjusted NPAT goals was ±3% of budget, compared to the wider range of ±5% of budget used in 2010, and ±26% 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 2011 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 $180 million in Adjusted NPAT would result in relatively small bonus payout adjustments of 90% to 110% of the 2011 target bonus opportunities.

 

LOGO

For 2011, Actual Adjusted NPAT of $2,636 million fell well below the NPAT goal, resulting in payouts of 10% of target awards for each Named Executive Officer.

 

 

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 specific 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.

 

  Ÿ  

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

 

  Ÿ  

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

 

  Ÿ  

The corporate average payout for 2011 GoalSharing was 5.05% of salary.

 

  Ÿ  

Amounts earned under the GoalSharing 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: Dr. Evenson joined Corning in June 2011. As part of his offer to join Corning, Dr. Evenson is eligible for cash sign on and retention payments of $1.6 million in 2011, $0.8 million in 2012 and $0.8 million in 2013. These fixed cash payments replace unvested long-term incentives forfeited by Dr. Evenson as a result of accepting Corning’s offer of employment. The $1.6 million cash payment in 2011 and future payments in 2012 and 2013 are not tied to any performance, but are tied to Dr. Evenson’s continued employment with Corning, as future payments are forfeited if he voluntarily leaves Corning prior to the vesting dates.

 

 

 

32


Long-Term Incentives

Corporate Performance Plan: We award long-term incentives annually to the Executive Group (approximately 200 employees) under our Corporate Performance Plan. For the 2011 performance year, we provided a target mix of 50% cash performance units, 25% stock options and 25% time-based restricted stock units. This 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.

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.

 

  Ÿ  

Given the high level of uncertainty associated with growing through innovation and the volatility of the markets we operate in, it is difficult for the Company to set certain multi-year goals.

 

  Ÿ  

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

 

  Ÿ  

After the one-year performance period, 2011 awards are subject to an additional two-year vesting period extending to February 1, 2014.

 

  Ÿ  

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).

 

  Ÿ  

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

For the 2011 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 2011 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 2011, at $1.67 of Adjusted EPS (13% of target) and $3,582 million of Adjusted Operating Cash Flow (107% of target), resulted in awards being earned at only 60% of target for 2011 performance (subject to an additional two-year vesting period).

Time-Based Restricted Stock Units: The 2011 Corporate Performance Plan incorporates time-based restricted share units that vest 100% after three years (in February 2014). At its January 3, 2011 meeting, the Committee approved annual awards of restricted stock units to the Named Executive Officers under the Corporate Performance Plan. Dr. Evenson received his prorated time-based restricted stock units after his start date on July 1, 2011.

 

33


In addition, we occasionally grant restricted stock units for purposes of recognition or for special retention situations. The NEOs did not receive any time-based restricted stock awards for these purposes in 2009, 2010 or 2011.

Stock Options: At its January 3, 2011 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 on January 3, 2011, 1/3 of the total option grant awarded on February 1, 2011, and 1/3 of the total option grant awarded on March 1, 2011. These stock options vest ratably over a three-year period (1/3 each year). Dr. Evenson received his prorated stock options after his start date on July 1, 2011.

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. 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.

 

 

Other Benefit and Plans

Employee Benefits: Our NEOs 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 NEOs 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 NEOs. 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. Executives must have 10 or more years of service to be vested under this plan. All of the NEOs except for Dr. Evenson are currently vested under this plan. 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:

 

  Ÿ  

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 contributes to Corning’s long-term success.

 

  Ÿ  

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 on 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 2011, 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 NEO is responsible for all taxes on any imputed income resulting from this program.

 

34


We closely monitor 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. For additional details, refer to footnotes relating to “All Other Compensation” included with the Summary Compensation Table.

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

Executive Severance Agreements: We have entered into severance agreements, or have committed to enter into a severance agreement in the case of Dr. Evenson, with each NEO. The severance agreements provide clarity for both the Company and the executive if the executive’s employment terminates. 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 NEO, and have committed to do so with Dr. Evenson, 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 NEOs 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 NEOs except Dr. Evenson 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.

 

 

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 Aon Hewitt Associates as its independent consultant; this selection was made without the input or influence of management.

 

  Ÿ  

During 2011, Aon Hewitt provided other human resource services to the Company, but the Aon 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 Aon Hewitt, on discrete 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

 

  Ÿ  

In 2011, fees for Aon Hewitt totaled $466,283 of which $34,790 was related to compensation consulting services provided to the Committee by its independent consultant. Of the remaining $431,493 fees, $175,078 related to Aon brokerage services related to insurance and $256,415 related to services provided in China for discreet projects such as Leadership Development.

 

35


The consultant advises the Committee on all matters related to the compensation of the NEOs 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 2011:

 

  Ÿ  

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;

 

  Ÿ  

Attend Compensation Committee meetings, including the December meeting when annual compensation decisions are reviewed regarding the NEOs and the other 200+ members of the Executive Group;

 

  Ÿ  

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;

 

  Ÿ  

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 NEOs;

 

  Ÿ  

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

 

  Ÿ  

Recommend changes in compensation paid to non-employee directors; and

 

  Ÿ  

When requested by the Compensation Committee Chair, 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 NEOs and reviews the recommendations for each of the non-CEO Named Executive Officers with the CEO. The NEOs do not recommend or suggest individual compensation actions that benefit them personally.

 

  Ÿ  

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

 

  Ÿ  

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.

 

  Ÿ  

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; however, he is provided with copies of Committee meeting materials that are mailed in advance to all Committee members as well as a copy of the minutes prepared after the meetings. The SVP, Human Resources also attends Committee meetings.

 

 

 

36


Comparator Companies for 2011 Compensation Review Conducted in December 2011

The Company currently participates in and uses three general executive compensation surveys for NEO positions.

 

  Ÿ  

Mercer S&P 500 Executive Survey;

 

  Ÿ  

Towers Watson Executive Survey; and

 

  Ÿ  

Equilar Top 25 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 2011 compensation were reviewed by the Committee in December 2010 and can be found in Corning’s prior year CD&A.

Internal equity compared to the CEO for the non-CEO NEOs 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 NEOs continue to be positioned within the top quartile when reference is made to the various executive compensation surveys.

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 NEO’s compensation.

In developing the list of 32 Comparator Companies for the December 2011 Committee review of compensation, the Company identified publicly-traded manufacturing and service companies that met the following general screening criteria:

 

  Ÿ  

Revenues in the range of $5 billion to $12 billion, with median revenues of approximately $10 billion;

 

  Ÿ  

More than 15,000 employees;

 

  Ÿ  

Market capitalization above $6 billion; and

 

  Ÿ  

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

 

Air Products & Chemicals Inc.

   Motorola Mobility Holdings Inc.

Applied Materials Inc.

   Parker Hannifin Corp.

Becton Dickinson & Co.

   PPG Industries

Boston Scientific Corp.

   Praxair Inc

Campbell Soup Co.

   Qualcomm Inc

CenturyLink Inc.

   Quest Diagnostics Inc.

Covidien Ltd.

   Qwest Communications Int’l Inc.

Cummins Inc.

   Sara Lee Corp

Danaher Corp

   Seagate Technology

Dover Corp.

   Sherwin Williams Co.

Eaton Corp

   Stanley Black & Decker Inc.

Ecolab Inc.

   TE Connectivity Ltd.

Goodrich Corp.

   Texas Instruments Inc

H. J. Heinz Company

   Textron Inc.

Micron Technology Inc.

   Thermo Fischer Scientific

Monsanto Co

   Western Digital Corp.

 

37


The latest information reviewed by the Committee in December 2011 was based on proxy data filed with calendar year-end 2010 or fiscal year-ends in early 2011 and was used to establish target pay levels for 2012.

 

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

50th Percentile

   $ 10,273       $ 933      $ 13,453       $ 13,814         30,401   

75th Percentile

     11,528         1,071        17,228         20,069         39,775   

MINIMUM

     6,090         (1,065     4,872         6,499         13,000   

MAXIMUM

     13,966         3,247        30,572         80,061         89,000   

CORNING – 2011

   $ 7,890       $ 2,805      $ 27,848       $ 19,693         28,800   

Mr. Weeks’ 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 reviewed. On average, median total direct compensation reported in the surveys and the proxies was $8.5 million and 75th percentile total direct compensation was $11 million. The other Named Executive Officers’ target total direct compensation remains positioned in the top quartile, consistent with past practice.

Anticipated Changes in Compensation Practices for 2012

 

 

Due to an uncertain economic outlook, Corning decided to delay the effective date for executive merit salary reviews by 3 months from January 1, 2012 to around April 1, 2012. Also, beginning in January 2012, grants of stock options will cliff vest 100% after three years, rather than ratably over three years. Currently, we do not anticipate making any other significant changes to our total executive compensation program in 2012.

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 Committee. This assessment considered, among other things:

 

  Ÿ  

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

  Ÿ  

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

  Ÿ  

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

  Ÿ  

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;

  Ÿ  

The use of a “flat spot” in our annual incentive plan that is intended to avoid potential bad behavior around achieving cliff goals;

  Ÿ  

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

  Ÿ  

Our stock ownership requirements for NEOs;

  Ÿ  

The Company’s clawback and anti-hedging policies; and

  Ÿ  

Multiple levels of review and approval of awards.

 

 

 

38


“Reload” Stock Options

The reload feature is no longer included in any Corning stock option grants made on or after February 28, 2003. No prior stock options granted with a reload feature remain outstanding.

 

 

“Clawback” Policy

In 2007, the Board adopted a policy that gives the 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 NEOs and directors are subject to stock ownership guidelines. All NEOs or directors in their role for at least 5 years meet or exceed the ownership requirement. The ownership guidelines are as follows:

 

Chief Executive Officer

NEOs other than the CEO Non-employee Directors

  

5x Base Salary

3x Base Salary

5x Annual Cash Retainer

 

 

Hedging Policy

We have a policy that prohibits any member of the Officer Group or any director from selling or buying publicly traded options on Corning stock, or trading 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.

 

 

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 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.

 

39


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. In December 2011, the Committee added a new member, Richard T. Clark.

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, 2011.

The Compensation Committee:

William D. Smithburg, Chairman

John Seely Brown

Richard T. Clark

Gordon Gund

Deborah D. Rieman

 

40


Executive Compensation

 

 

The following tables and charts show, for 2011, the compensation paid by Corning to the Named Executive Officers. Compensation for six executives is disclosed in the Summary Compensation Table this year, instead of compensation paid to the required five executives. Compensation to Dr. Evenson, a newly hired Senior Vice President, exceeds the compensation to select Executive Vice Presidents because of fixed cash retention and sign on payments to Dr. Evenson negotiated as part of his new hire package designed to replace amounts forfeited when he left his previous employer. As a result of fixed payments under his new hire package, Dr. Evenson’s compensation is not as variable and is not as representative of Corning’s annual ongoing executive compensation program for Named Executive Officers. We determined that the best approach was to expand the group of executives to achieve more consistency in the composition of our NEOs.

Summary Compensation Table

 

(a)   (b)     (c)     (d)     (e)(1)     (f)(2)     (g)(3)     (h)(4)     (i)(5)     (j)  
          Salary     Bonus     Stock
Awards
    Option
Awards
    Non-Equity
Incentive Plan
Compensation
   

Change in

Pension Value

And

Nonqualified

Deferred

Compensation

Earnings

    All Other
Compensation
    Total  
Named Executive Officer   Year     ($)     ($)     ($)     ($)     ($)     ($)     ($)     ($)  

Wendell P. Weeks

    2011      $ 1,167,154      $ 0      $ 1,749,994      $ 1,707,225      $ 2,323,076      $ 2,913,618      $ 472,465      $ 10,333,531   

Chairman, Chief

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

Executive Officer

    2009        1,030,000        0        1,572,615        3,007,447        1,824,748        1,233,110        382,471        9,050,391   

James B. Flaws

    2011        880,923        0        799,993        780,440        1,083,921        928,884        250,896        4,725,056   

Vice Chairman and

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

Chief Financial Officer

    2009        821,000        0        730,620        1,402,059        1,175,344        498,364        155,931        4,783,318   

Joseph A. Miller, Jr.

    2011        654,212        0        599,995        585,339        802,203        317,553        155,893        3,115,195   

Executive Vice President and

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

Chief Technology Officer

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

Kirk P. Gregg

    2011        620,231        0        499,995        487,775        677,936        992,443        168,805        3,447,184   

Executive Vice President and

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

Chief Administrative Officer

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

Lawrence D. McRae

    2011        598,269        0        437,494        426,816        597,180        1,619,219        70,530        3,749,508   

Executive Vice President,

                 

Strategy and Development

                 

Jeffrey W. Evenson

    2011        220,673        1,600,000(6)        162,503        154,986        221,590        27,254        482,535        2,869,541   

Senior Vice President and

                 

Operations Chief of Staff

                 

 

(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 (2011) 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, 2011 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 13, 2012. This same method was used for the fiscal years ended December 31, 2010 and 2009. There can be no assurance that the grant date fair value amounts will ever be realized. 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.

(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, 2011 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 13, 2012. This same method was used for the fiscal years ended December 31, 2010 and 2009. There can be no assurance that the grant date fair value amounts will ever be realized.

 

41


(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 2011 GoalSharing plan were 5.05% of each Named Executive Officer’s year-end base salary and paid in February 2012. Awards earned under the 2011 Performance Incentive Plan were based on actual corporate performance compared to the Adjusted NPAT goals established for the plans in February 2011. Based on actual performance, each of the Named Executive Officers earned Performance Incentive Plan awards equal to 10% of their annual target bonus opportunities (established as a percentage of annual base salary). Cash awards earned under the Performance Incentive Plan for 2011 will be paid in March 2012. 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
    2011 PIP
Target %
   

Actual

2011 PIP

Performance

Results (% Tgt.)

    2011 PIP
$ Award
   

Actual

2011

GoalSharing

Performance %

   

2011

GoalSharing

$ Award

 

Wendell P. Weeks

  $ 1,171,000        140     10   $ 163,940        5.05   $ 59,136   

James B. Flaws

    882,000        90     10     79,380        5.05     44,541   

Joseph A. Miller, Jr.

    655,000        75     10     49,125        5.05     33,078   

Kirk P. Gregg

    621,000        75     10     46,575        5.05     31,361   

Lawrence D. McRae

    599,000        70     10     41,930        5.05     30,250   

Jeffrey W. Evenson

    425,000        65     10     14,964(a)        5.05     11,626(a)   

 

  (a)

Prorated for time worked during 2011.

 

    

Awards under the 2011 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 2011. Based on actual performance, each of the Named Executive Officers earned cash performance units under the Corporate Performance Plan equal to 60% 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 2014. The following table reflects the target amount of cash performance units and the awards earned under the 2011 Corporate Performance Plan reflected in column (g) above:

 

Named Executive Officer   2011 CPP
      $ Target Award      
    

Actual 2011 CPP

Performance

        Results %        

    2011 CPP
        $ Award        
 

Wendell P. Weeks

  $ 3,500,000         60   $ 2,100,000   

James B. Flaws

    1,600,000         60     960,000   

Joseph A. Miller, Jr.

    1,200,000         60     720,000   

Kirk P. Gregg

    1,000,000         60     600,000   

Lawrence D. McRae

    875,000         60     525,000   

Jeffrey W. Evenson

    325,000         60     195,000   

 

(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. The significant increase in many of the pension present values in 2011 was due primarily to a significant decrease in the actual discount rate used to value these amounts during 2011.

 

42


(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)

    

Value of

Security

Costs (iii)

     Relocation      Other
Perquisites (ii)
     TOTALS  

  Wendell P. Weeks

     2011       $ 9,057       $ 200,390       $ 81,550       $ 172,946(iv)         $0       $ 8,523       $ 472,465   
     2010         9,057         169,658         85,241         159,843(iv)         0         5,315         429,114   
     2009         9,057         73,168         65,022         232,239(iv)         0         2,985         382,471   

  James B. Flaws

     2011         13,585         129,258         78,272         23,759         0         6,022         250,896   
     2010         13,585         111,649         77,657         30,670         0         5,315         238,876   
     2009         13,585         49,421         81,140         4,184         0         7,601         155,931   

  Joseph A. Miller, Jr.

     2011         8,800         57,398         63,246         23,759         0         2,691         155,893   
     2010         8,800         20,499         74,174         30,670         0         2,894         137,037   
     2009         8,800         21,220         53,001         4,184         0         7,949         95,154   

  Kirk P. Gregg

     2011         9,778         52,947         81,960         23,759         0         361         168,805   
     2010         9,778         45,360         75,335         30,670         0         315         161,458   
     2009         9,778         18,667         89,405         4,184         0         3,339         125,373   

  Lawrence D. McRae

     2011         15,129         0         31,281         23,759         0         361         70,530   

  Jeffrey W. Evenson

     2011         8,827         0         23,768         13,291         436,289(v)         361         482,535   

 

  (i)

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

  (ii)

These amounts include:

  Ÿ  

cost attributable to executive physicals;

  Ÿ  

cost attributable to service awards; and

  Ÿ  

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

  (iii)

These amounts include costs attributable to home security.

  (iv)

This reflects company-paid expenses relating to personal and residential security benefitting Mr. Weeks and his family members. 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 personal benefit to Mr. Weeks, they are reported as perquisites in this column.

  (v)

Includes payments made to Dr. Evenson, as part of his offer to join Corning, to facilitate the sale of his prior home and to relocate to Corning, NY.

 

(6)

As part of his offer to join Corning, Dr. Evenson was paid a cash sign on and retention payment of $1.6 million in 2011.

 

43


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
  Award   Grant
Date
    Date of
Committee
Action
    Threshold
($)
   

Target

($)

    Maximum
($)
    Threshold
(#)
  Target
(#)
  Maximum
(#)
  All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
    Exercise
or Base
Price of
Option
Awards
($/Sh)
    Closing
Market
Price on
Date of
Grant
    Grant
Date Fair
Value
of Stock
and
Option
Awards
 
   

Wendell P. Weeks

  Performance Incentive Plan     n/a          $0        $1,639,400        $3,278,800                     
    GoalSharing Plan     n/a          0        58,550        117,100                     
    Cash Performance Units     1/3/11        1/3/11        0        3,500,000(2)        5,250,000(3)                     
    Time-Based Restricted Stock Units     1/3/11        1/3/11                    91,193            $19.19        1,749,994(4)   
    Stock Options     1/3/11        1/3/11                      67,551        $19.19        19.19        $569,077   
    Stock Options     2/1/11        1/3/11                      57,131        22.69        22.69        569,077   
    Stock Options     3/1/11        1/3/11                      58,842        22.03        22.03        569,071   
   

James B. Flaws

  Performance Incentive Plan     n/a          0        793,800        1,587,600                     
    GoalSharing Plan     n/a          0        44,100        88,200                     
    Cash Performance Units     1/3/11        1/3/11        0        1,600,000(2)        2,400,000(3)                     
    Time-Based Restricted Stock Units     1/3/11        1/3/11                    41,688            19.19        799,993(4)   
    Stock Options     1/3/11        1/3/11                      30,880        19.19        19.19        260,146   
    Stock Options     2/1/11        1/3/11                      26,117        22.69        22.69        260,149   
    Stock Options     3/1/11        1/3/11                      26,899        22.03        22.03        260,145   
   

Joseph A. Miller, Jr.

  Performance Incentive Plan     n/a          0        491,250        982,500                     
    GoalSharing Plan     n/a          0        32,750        65,500                     
    Cash Performance Units     1/3/11        1/3/11        0        1,200,000(2)        1,800,000(3)                     
    Time-Based Restricted Stock Units     1/3/11        1/3/11                    31,266            19.19        599,995(4)   
    Stock Options     1/3/11        1/3/11                      23,160        19.19        19.19        195,109   
    Stock Options     2/1/11        1/3/11                      19,588        22.69        22.69        195,114   
    Stock Options     3/1/11        1/3/11                      20,175        22.03        22.03        195,116   
   

Kirk P. Gregg

  Performance Incentive Plan     n/a          0        465,750        931,500                     
    GoalSharing Plan     n/a          0        31,050        62,100                     
    Cash Performance Units     1/3/11        1/3/11        0        1,000,000(2)        1,500,000(3)                     
    Time-Based Restricted Stock Units     1/3/11        1/3/11                    26,055            19.19        499,995(4)   
    Stock Options     1/3/11        1/3/11                      19,300        19.19        19.19        162,591   
    Stock Options     2/1/11        1/3/11                      16,323        22.69        22.69        162,592   
   

Stock Options

 

    3/1/11        1/3/11                                                    16,812        22.03        22.03        162,592   

 

44


                        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
  Award   Grant
Date
    Date of
Committee
Action
    Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
  Target
(#)
  Maximum
(#)
  All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
    Exercise
or Base
Price of
Option
Awards
($/Sh)
    Closing
Market
Price on
Date of
Grant
    Grant Date
Fair Value
of Stock
and Option
Awards
 
   

Lawrence D. McRae

  Performance Incentive Plan     n/a          0        419,300        838,600                     
    GoalSharing Plan     n/a          0        29,950        59,900                     
    Cash Performance Units     1/3/11        1/3/11        0        875,000(2)        1,312,500(3)                     
    Time-Based Restricted Stock Units     1/3/11        1/3/11                    22,798            19.19        437,494(4)   
    Stock Options     1/3/11        1/3/11                      16,888        19.19        19.19        142,271   
    Stock Options     2/1/11        1/3/11                      14,283        22.69        22.69        142,272   
    Stock Options     3/1/11        1/3/11                      14,711        22.03        22.03        142,273   
   

Jeffrey W. Evenson

  Performance Incentive
Plan (5)
    n/a          0        149,635        299,271                     
    GoalSharing Plan(5)     n/a          0        11,510        23,021                     
    Cash Performance Units(5)     7/1/11        3/8/11        0        325,000(2)        487,500(3)                     
    Time-Based Restricted Stock Units(5)     7/1/11        3/8/11                    8,765            18.54        162,503(4)   
   

Stock Options(5)

 

    7/1/11        3/8/11                                                    19,477        18.54        18.54        154,986   

 

(1)

The amounts shown in columns (d), (e) and (f) reflect the payment levels under (i) the Company’s 2011 Performance Incentive Plan (ii) 2011 GoalSharing Plan and (iii) the cash units under the 2011 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 2011 base salary and bonus targets.

(2)

This amount reflects target amount of cash performance units that were approved for such Named Executive Officer on January 3, 2011 under the 2011 Corporate Performance Plan. Actual awards granted for these cash units may range from 0% to 150% of the target award. For Dr. Evenson, this amount reflects target amount of cash performance units that were approved for on July 1, 2011 under the 2011 Corporate Performance Plan.

(3)

This amount reflects maximum (150% of target) amount of cash performance units that were approved for such Named Executive Officer on January 3, 2011 under the 2011 Corporate Performance Plan. Actual awards granted for these cash units may range from 0% to 150% of the target award. For Dr. Evenson, this amount reflects maximum (150% of target) amount of cash performance units that were approved for on July 1, 2011 under the 2011 Corporate Performance Plan.

(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 2011 pursuant to the Corning 2011 Corporate Performance Plans, and corresponds to the amount set forth in column (f) for 2011 of the Summary Compensation Table.

(5)

Pro-rated for time worked in 2011.

 

45


Outstanding Equity Awards at Fiscal Year-End

The following table shows outstanding stock option awards classified as exercisable and unexercisable as of December 31, 2011. The table also shows unvested restricted stock awards assuming a market value of $12.98 a share (the NYSE closing price of the Company’s stock on December 30, 2011).

 

Option Awards     Stock Awards  
(a)             (b)     (c)     (d)     (e)     (f)     (g)(2)     (h)(3)     (i)     (j)  
Named Executive Officer   Grant
Date
   

Vesting

Code(1)

 

Number of
Securities
Underlying
Unexercised
Options

9#)

(#)

    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      E     130,000        0        0      $ 13.68        4/27/2015        684,233      $ 8,881,344        0      $ 0   
      12/07/05      B     161,500        0        0      $ 21.08        12/6/2015             
      01/02/06      C     80,750        0        0      $ 19.68        1/1/2016             
      02/01/06      D     80,750        0        0      $ 24.72        1/31/2016             
      12/06/06      B     136,500        0        0      $ 21.89        12/5/2016             
      01/02/07      C     68,250        0        0      $ 18.85        1/1/2017             
      02/01/07      D     68,250        0        0      $ 20.86        1/31/2017             
      12/05/07      B     153,500        0        0      $ 24.92        12/4/2017             
      01/02/08      C     76,750        0        0      $ 23.37        1/1/2018             
      02/01/08      D     76,750        0        0      $ 24.61        1/31/2018             
      12/03/08      E     93,334        0        0        $8.67        12/2/2018             
      01/02/09      E     86,666        93,334        0      $ 10.05        1/1/2019             
      02/02/09      E     186,666        93,334        0      $ 10.25        2/1/2019             
      12/02/09      E     43,555        21,778        0      $ 17.82        12/2/2019             
      01/04/10      E     21,777        43,556        0      $ 19.56        1/4/2020             
      02/01/10      E     21,778        43,556        0      $ 18.16        2/1/2020             
      01/03/11      E     0        67,551        0      $ 19.19        1/3/2021             
      02/01/11      E     0        57,131        0      $ 22.69        2/1/2021             
      03/01/11      E     0        58,842        0      $ 22.03        3/1/2021             
      Total          1,486,776        479,082                   
   

James B. Flaws

    12/07/05      B     77,000        0        0      $ 21.08        12/6/2015        317,453      $ 4,120,540        0      $ 0   
      01/02/06      C     38,500        0        0      $ 19.68        1/1/2016             
      02/01/06      D     38,500        0        0      $ 24.72        1/31/2016             
      12/06/06      B     66,000        0        0      $ 21.89        12/5/2016             
      01/02/07      C     33,000        0        0      $ 18.85        1/1/2017             
      02/01/07      D     33,000        0        0      $ 20.86        1/31/2017             
      02/13/07      A     18,932        0        0      $ 21.92        2/2/2013             
      04/30/07      A     23,327        0        0      $ 23.72        2/2/2013             
      12/05/07      B     72,000        0        0      $ 24.92        12/4/2017             
      01/02/08      C     36,000        0        0      $ 23.37        1/1/2018             
      02/01/08      D     36,000        0        0      $ 24.61        1/31/2018             
      12/03/08      E     43,445        0        0        $8.67        12/2/2018             
      01/02/09      E     0        43,445        0      $ 10.05        1/1/2019             
      02/02/09      E     0        43,445        0      $ 10.25        2/1/2019             
      12/02/09      E     20,444        10,222        0      $ 17.82        12/2/2019             
      01/04/10      E     10,222        20,445        0      $ 19.56        1/4/2020             
      02/01/10      E     10,222        20,445        0      $ 18.16        2/1/2020             
      01/03/11      E     0        30,880        0      $ 19.19        1/3/2021             
      02/01/11      E     0        26,117        0      $ 22.69        2/1/2021             
      03/01/11      E     0        26,899        0      $ 22.03        3/1/2021             
      Total            556,592        221,898                                                           

 

46


Option Awards     Stock Awards  
(a)             (b)     (c)     (d)     (e)     (f)     (g)(2)     (h)(3)     (i)     (j)  
Named Executive Officer   Grant
Date
   

Vesting

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
($)
 

Joseph A. Miller, Jr.

    12/07/05      B     58,500        0        0      $ 21.08        12/6/2015        299,779      $ 3,891,131        0      $ 0   
      01/02/06      C     29,250        0        0      $ 19.68        1/1/2016             
      02/01/06      D     29,250        0        0      $ 24.72        1/31/2016             
      12/06/06      B     55,500        0        0      $ 21.89        12/5/2016             
      02/01/07      D     27,750        0        0      $ 20.86        1/31/2017             
      12/05/07      B     59,500        0        0      $ 24.92        12/4/2017             
      01/02/08      C     29,750        0        0      $ 23.37        1/1/2018             
      02/01/08      D     29,750        0        0      $ 24.61        1/31/2018             
      12/03/08      E     35,889        0        0        $8.67        12/2/2018             
      01/02/09      E     0        35,889        0      $ 10.05        1/1/2019             
      02/02/09      E     0        35,889        0      $ 10.25        2/1/2019             
      12/02/09      E     16,666        8,334        0      $ 17.82        12/2/2019             
      01/04/10      E     8,333        16,667        0      $ 19.56        1/4/2020             
      02/01/10      E     8,333        16,667        0      $ 18.16        2/1/2020             
      01/03/11      E     0        23,160        0      $ 19.19        1/3/2021             
      02/01/11      E     0        19,588        0      $ 22.69        2/1/2021             
      03/01/11      E     0        20,175        0      $ 22.03        3/1/2021             
      Total          388,471        176,369                   
   

Kirk P. Gregg

    02/02/04      D     39,500        0        0      $ 12.79        2/1/2014        224,295      $ 2,911,349        0      $ 0   
      05/10/05      A     15,369        0        0      $ 14.84        1/2/2013             
      12/07/05      B     58,500        0        0      $ 21.08        12/6/2015             
      01/02/06      C     29,250        0        0      $ 19.68        1/1/2016             
      02/01/06      D     29,250        0        0      $ 24.72        1/31/2016             
      08/07/06      A     20,396        0        0      $ 18.32        1/2/2013             
      10/27/06      A     14,520        0        0      $ 20.59        12/3/2012             
      11/03/06      A     16,495        0        0      $ 20.51        12/3/2012             
      12/06/06      B     48,000        0        0      $ 21.89        12/5/2016             
      01/02/07      C     24,000        0        0      $ 18.85        1/1/2017             
      02/01/07      D     24,000        0        0      $ 20.86        1/31/2017             
      02/12/07      A     19,212        0        0      $ 21.60        2/2/2013             
      08/03/07      A     10,284        0        0      $ 23.54        2/2/2013             
      08/03/07      A     13,152        0        0      $ 23.54        1/31/2012             
      10/29/07      A     28,467        0        0      $ 23.79        1/31/2012             
      12/05/07      B     51,000        0        0      $ 24.92        12/4/2017             
      01/02/08      C     25,500        0        0      $ 23.37        1/1/2018             
      02/01/08      D     25,500        0        0      $ 24.61        1/31/2018             
      02/12/08      A     9,338        0        0      $ 23.31        1/31/2012             
      02/12/08      A     14,568        0        0      $ 23.31        1/31/2012             
      05/01/08      A     5,428        0        0      $ 27.03        1/31/2012