DEF 14A 1 d287103ddef14a.htm DEF 14A DEF 14A
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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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The Dow Chemical Company

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Table of Contents

 

LOGO

 

 

The Dow Chemical Company

Midland, Michigan 48674

NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON THURSDAY, MAY 10, 2012 AT 10:00 A.M. EDT

March 30, 2012

Dear Stockholder of The Dow Chemical Company:

We are pleased to invite you to the Annual Meeting of Stockholders of The Dow Chemical Company (the “Meeting”) to be held on Thursday, May 10, 2012, at 10:00 a.m. Eastern Daylight Time, at the Midland Center for the Arts, 1801 West St. Andrews, Midland, Michigan. A map is printed on the back page of this Proxy Statement and is also included on your admittance ticket. At the Meeting, stockholders will vote on the following matters either by proxy or in person:

 

   

Election of the ten Directors named in the attached Proxy Statement.

 

   

Ratification of the appointment of Deloitte & Touche LLP as independent registered public accounting firm for 2012.

 

   

Advisory Resolution to Approve Executive Compensation.

 

   

Two management proposals regarding approval of the 2012 Stock Incentive Plan and the 2012 Employee Stock Purchase Plan.

 

   

Two proposals submitted by stockholders, if properly presented.

 

   

Transaction of any other business as may properly come before the Meeting.

Your vote is important. Whether or not you plan on attending the Meeting, please vote your shares as soon as possible on the Internet, by telephone or by mail. Your Board of Directors has set the close of business on March 19, 2012, as the record date for determining stockholders who are entitled to receive notice of the Meeting and any adjournment, and who are entitled to vote. A list of stockholders entitled to vote shall be open to any stockholder for any purpose relevant to the Meeting for ten days before the Meeting, during normal business hours, at the Office of the Corporate Secretary, 2030 Dow Center, Midland, Michigan.

A ticket of admission or proof of stock ownership is necessary to attend the Meeting. A ticket is included with your proxy materials. Stockholders with registered accounts or who are in the Dividend Reinvestment Program or employees’ savings plans should check the box on the voting form if attending in person. Other stockholders holding stock in nominee name or beneficially through a bank or broker (in “street name”) need only bring their ticket of admission. Street name holders without tickets will need proof of record date ownership for admission to the Meeting, such as a March 2012 brokerage statement or letter from the bank or broker. Questions may be directed to 877-227-3294 (a toll-free telephone number in the United States and Canada) or 989-636-1792, or faxed to 989-638-1740.

Since seating is limited, the Board has established the rule that only stockholders or one person holding a proxy for any stockholder or account (in addition to those named as Board proxies on the proxy forms) may attend. Proxy holders are asked to present their credentials in the lobby before the Meeting begins. If you are unable to attend the Meeting, please listen to the live audio webcast at the time of the Meeting, or the audio replay after the event, at www.DowGovernance.com.

Thank you for your continued support and your interest in The Dow Chemical Company.

 

LOGO

Charles J. Kalil

Executive Vice President,

General Counsel and Corporate Secretary

® Trademark of The Dow Chemical Company


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SUMMARY INFORMATION

This summary highlights information contained elsewhere in this Proxy Statement. It does not contain all information that you should consider, and you should read the entire Proxy Statement carefully before voting.

Annual Meeting of Stockholders

• Time and Date:

   10:00 am (Eastern Daylight Time) on May 10, 2012

• Place:

   Midland Center for the Arts, 1801 West St. Andrews, Midland, Michigan

• Record Date:

   March 19, 2012

Meeting Agenda and Voting Recommendations

 

Agenda Item    Board Recommendation    Page

(1)

  Election of 10 Directors    FOR EACH NOMINEE   

7

(2)

  Ratify the appointment of Deloitte & Touche LLP as the Company’s Independent Registered Public Accounting Firm    FOR   

47

(3)

  Advisory Resolution to Approve Executive Compensation    FOR   

49

(4)

  Approval of the 2012 Stock Incentive Plan    FOR   

50

(5)

  Approval of the 2012 Employee Stock Purchase Plan    FOR   

56

(6)

  Stockholder Proposal on Shareholder Action by Written Consent    AGAINST   

58

(7)

  Stockholder Proposal on Independent Board Chairman    AGAINST   

60

Board Nominees

Each director nominee is elected annually by a majority of votes cast. The following table provides summary information about each director nominee.

 

Nominee   Age   Director
Since
  Principal Occupation   Committees

Arnold A. Allemang

  69   1996  

Former Senior Advisor,

The Dow Chemical Company

  EHS&T

Jacqueline K. Barton

  59   1993  

Professor of Chemistry & Chair, Division of

Chemistry & Chemical Engineering,

California Institute of Technology

 

Compensation

EHS&T (Chair)

James A. Bell

  63   2005  

Former Executive Vice President, Corporate

President & CFO, The Boeing Company

 

Audit (Chair)

Governance

Jeff M. Fettig

(Lead Director)

  54   2003  

Chief Executive Officer and Chairman,

Whirlpool Corporation

 

Audit

Governance (Chair)

John B. Hess

  57   2006  

Chief Executive Officer and Chairman,

Hess Corporation

  Compensation

Andrew N. Liveris

  57   2004  

President, Chief Executive Officer and Chairman,

The Dow Chemical Company

  EHS&T

Paul Polman

  55   2010   Chief Executive Officer, Unilever PLC/NV  

Compensation

EHS&T

Dennis H. Reilley

  58   2007   Former Non-Executive Chairman, Covidien, Ltd.   Compensation (Chair) EHS&T

James M. Ringler

  66   2001   Chairman, Teradata Corporation  

Audit

EHS&T

Ruth G. Shaw

  63   2005  

Former Executive Advisor,

Duke Energy Corporation

 

Compensation

EHS&T

Financial Highlights

2011 was a year of significant achievements and further evolution of our transformational strategy. Even in this environment of economic uncertainty, Dow’s transformation was clearly evident, as we continued to deliver both top and bottom line growth, launch game-changing investments and partnerships, commercialize new innovations and strengthen our balance sheet.

2011 major highlights included:

   

Reported full-year 2011 earnings per share of $2.05, up 19% compared with prior-year earnings of $1.72 per share.

   

Achieved record sales of $60 billion, up 12% versus the prior year.

   

Equity earnings totaled $1.2 billion, the highest result in the Company’s history.

   

Continued to deleverage the balance sheet by achieving net debt (gross debt minus cash) to total capital ratio of 40.8%.

   

Increased the quarterly dividend by 67%.


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2012 DOW PROXY STATEMENT

 

  

 

Compensation Highlights

The Compensation and Leadership Development Committee has structured our executive compensation program to achieve the following key objectives:

 

 

attract, motivate, reward, and retain the most talented executives who can drive business performance and objectives;

 

 

pay for performance by emphasizing variable, at-risk incentive award opportunities which are payable only if specified financial and personal goals are achieved and/or the Company’s stock price appreciates; and

 

 

align pay and financial interests of our executives with stockholder value creation.

We believe that our executive compensation programs are structured to support our Company and our business objectives, as well as to support our long-term strategic and financial goals. While we achieved continued growth in key financial measures as shown above, total compensation for our executive officers declined slightly in fiscal 2011 from the previous year because actual performance was below the targets set by the Compensation and Leadership Development Committee at the beginning of the year. Set forth below is the fiscal 2011 compensation for each named executive officer. See the notes accompanying the Summary Compensation Table on page 32 for more information.

 

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

Andrew Liveris

    1,741,667        0        7,659,470        4,400,095        1,498,114        3,711,285        263,994        19,274,624   

William Weideman

    755,000        80,000        2,402,766        1,380,058        477,519        2,231,656        29,088        7,356,087   

Joe Harlan

    293,333        0        5,180,550        1,034,748        486,024        40,381        426,490        7,461,526   

Charles Kalil

    913,606        92,000        2,298,114        1,320,092        558,624        1,937,812        59,125        7,179,372   

Geoffery Merszei

    913,113        0        2,298,114        1,320,092        507,170        1,532,689        168,645        6,739,824   

 

For fiscal year 2011, our Compensation and Leadership Development Committee continued its practice of awarding a significant majority of total compensation to the named executive officers in the form of performance-based incentive compensation, with only a minority of the total potential compensation being provided in the form of base salary. In the case of our CEO, Mr. Liveris, approximately 11% of his target compensation in fiscal 2011 was paid in the form of base salary. The value of the remaining 89% was “at-risk” or linked directly to performance. For our other named executive officers, approximately 82% of their targeted compensation was “at-risk” or performance based.

We encourage you to read our Compensation Discussion and Analysis (CD&A) beginning on page 20, which describes our pay for performance philosophy.

Equity Plans

Stock Incentive Plan

In Agenda Item 4, stockholders are asked to approve the 2012 Stock Incentive Plan (see page 50 and a copy of the plan set out in Appendix A). The plan affords the Board the ability to design compensatory awards that are responsive to the Company’s needs and long-term success by encouraging stock ownership among the Company’s officers, employees, and non-employee directors and otherwise linking the compensation of such persons to share price performance or the achievement of specified corporate objectives. The Company’s burn rate and dilution rates are within industry norms and if adopted the plan will supersede and replace existing equity award plans.

Employee Stock Purchase Plan

In Agenda Item 5, stockholders are asked to approve the 2012 Employee Stock Purchase Plan (see page 56 and a copy of the plan set out in Appendix B). The plan is broad-based, providing employees the opportunity to purchase shares of Dow common stock at 85% of its fair market value. The Company has offered employees a series of annual stock purchase plans on terms very similar to this plan for several decades. A stock purchase plan was first offered to Company employees in 1948. Stockholder approval will enable continuation of the program.

Corporate Governance Highlights

Board Independence

   

  8 of 10 Directors are Independent

   

  Independent Lead Director with clearly identified roles and responsibilities (Jeff Fettig)

   

  Retirement Age (72)

Director Elections

   

  Annual Board elections

   

  Directors are elected by a majority of votes cast

Stockholder Rights

   

  Stockholder right to call special meetings

   

  No super-majority voting requirements


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2012 ANNUAL MEETING OF STOCKHOLDERS

THE DOW CHEMICAL COMPANY

Notice of the Annual Meeting and Proxy Statement

Notice of the Annual Meeting

  

Voting Procedures

     5   

Agenda Item 1: Candidates for Election as Director

     7   

Corporate Governance

     11   

Compensation and Leadership Development Committee Report

     19   

Compensation Information

  

Compensation Discussion and Analysis

     20   

Compensation Tables and Narratives

     32   

Equity Compensation Plan Information

     44   

Beneficial Ownership of Company Stock

     45   
Agenda Item 2: Ratification of the Appointment of the Independent Registered Public Accounting Firm      47   
Agenda Item 3: Advisory Resolution to Approve Executive Compensation      49   
Agenda Item 4: Approval of the 2012 Stock Incentive Plan      50   
Agenda Item 5: Approval of the 2012 Employee Stock Purchase Plan      56   

Agenda Item 6: Stockholder Proposal on Shareholder Action By Written Consent

     58   

Agenda Item 7: Stockholder Proposal on Independent Board Chairman

     60   

Audit Committee Report

     62   

Other Governance Matters

     63   

Appendix A: 2012 Stock Incentive Plan

     65   

Appendix B: 2012 Employee Stock Purchase Plan

     78   

Map to Annual Meeting of Stockholders

  

This Proxy Statement is issued in connection with the 2012 Annual Meeting of

Stockholders of The Dow Chemical Company to be held on May 10, 2012.


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2012 DOW PROXY STATEMENT

 

   5

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF

PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON

THURSDAY, MAY 10, 2012 AT 10:00 A.M. EDT

The 2012 Proxy Statement and 2011 Annual Report (with Form 10-K)

are available at https://materials.proxyvote.com/260543

VOTING PROCEDURES

 

In the following pages of this Proxy Statement, you will find information on your Board of Directors, the candidates for election to the Board, and six other agenda items to be voted upon at the Annual Meeting of Stockholders (the “Meeting”) and any adjournment or postponement of that Meeting. The background information in this Proxy Statement has been supplied to you at the request of the Board of Directors to help you decide how to vote and to provide information on the Company’s corporate governance and compensation practices. References in this document to the Company and Dow mean The Dow Chemical Company. This Proxy Statement is first being distributed to stockholders on or about March 30, 2012.

Vote Your Shares in Advance

You may vote your shares through the Internet, by telephone or by signing and returning the enclosed proxy or other voting form. Your shares will be voted if the voting form is properly executed and received by the independent Inspector of Election prior to the Meeting. If no specific choices are made by you when you execute your voting form, as explained on the form, your shares will be voted as recommended by your Board of Directors.

You may revoke your voting instructions at any time before its use at the Meeting by sending a written revocation, by submitting another proxy or voting form on a later date, or by attending the Meeting and voting in person. No matter which voting method you choose, however, you should not vote any single account more than once unless you wish to change your vote. Be sure to submit votes for each separate account in which you hold Dow shares.

Confidential Voting

The Company has a long-standing policy of vote confidentiality. Proxies and ballots of all stockholders are kept confidential from the Company’s management and Board unless disclosure is required by law and in other limited circumstances. The policy further provides that employees may confidentially vote their shares of Company stock held by the Company’s employees’ savings plans, and requires the appointment of an independent tabulator and inspector of election for the Meeting.

Dividend Reinvestment Program Shares and Employees’ Savings Plans Shares

If you are enrolled in the Dividend Reinvestment Program (“DRP”), the shares of common stock owned on the record date by you directly, plus all shares of common stock held for you in the DRP, will appear together on a single voting form. The DRP administrator, Computershare Shareowner Services LLC, will vote all shares of stock held in your DRP account as directed by you only if you return your proxy form. If no specific instruction is given on an executed proxy form, the DRP administrator will vote as recommended by your Board of Directors.

Participants in various employees’ savings plans, including The Dow Chemical Company Employees’ Savings Plan (each a “Plan” or the “Plans”), will receive, as appropriate, a confidential voting instruction form. Your executed form will provide voting instructions to the respective Plan Trustee. If no instructions are provided, the Trustees will vote the respective Plan shares according to the provisions of each Plan.

To allow sufficient time for voting by the Trustees and/or administrators of the Plans, your voting instructions must be received by 11:59 p.m. Eastern Time on May 7, 2012.

Dow Shares Outstanding and Quorum

At the close of business on the record date, March 19, 2012, there were 1,192,918,295 shares of Dow common stock outstanding and entitled to vote. Each share of common stock is entitled to one vote. There were 4,000,000 shares of Series A Cumulative Convertible Perpetual Preferred Stock outstanding; however, no such shares of preferred stock outstanding as of the record date are entitled to vote. A majority of the outstanding shares of common stock present in person or represented by proxy constitutes a quorum for the transaction of business at the Meeting. Abstentions and broker non-votes will be included in determining the presence of a quorum at the Meeting. Broker non-votes occur when a person holding shares in street name, meaning through a brokerage firm, does not provide instructions as to how to vote their shares and the broker is not permitted to exercise voting discretion.

 


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6  

2012 DOW PROXY STATEMENT

 

 

VOTING PROCEDURES (continued)

 

 

Proxies on Behalf of the Dow Board

Your Board of Directors is soliciting proxies to provide an opportunity to all stockholders of record to vote on agenda items, whether or not the stockholders are able to attend the Meeting or an adjournment or postponement thereof. Proxies may be solicited on behalf of the Board in person, by mail, by telephone or by electronic communication by Dow officers and employees. The proxy representatives of the Board of Directors will not be specially compensated for their services in this regard.

Dow has retained D. F. King & Co., Inc. to aid in the solicitation of stockholders (primarily brokers, banks and other institutional investors) for an estimated fee of $50,000, plus out-of-pocket expenses. Arrangements have been made with brokerage houses, nominees and other custodians and fiduciaries to send materials to their principals, and their reasonable expenses will be reimbursed on request. The cost of solicitation will be borne by the Company.

 


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2012 DOW PROXY STATEMENT

 

   7

 

Agenda Item 1

CANDIDATES FOR ELECTION AS DIRECTOR

 

In accordance with the recommendation of the Governance Committee, the Board of Directors has nominated Arnold A. Allemang, Jacqueline K. Barton, James A. Bell, Jeff M. Fettig, John B. Hess, Andrew N. Liveris, Paul Polman, Dennis H. Reilley, James M. Ringler and Ruth G. Shaw for election as Directors, to serve for a one-year term that expires at the Annual Meeting in 2013, and until their successors are elected and qualified.

Each nominee is currently serving as a Director and each has consented to serve for the new term. All nominees have previously been elected as Directors by the Company’s stockholders. Information in the biographies below is current as of February 17, 2012. Please see pages 15 to 17 for additional information on “Director Qualifications and Diversity.”

The Board of Directors unanimously recommends a vote FOR the election of ALL of these nominees as Directors.

The Company’s Bylaws prescribe the voting standard for election of Directors as a majority of the votes cast in an uncontested election, such as this one, where the number of nominees does not exceed the number of Directors to be elected. Under this standard, a nominee must receive more “for” than “against” votes to be elected. Abstentions and

broker non-votes are not included. Under the Company’s Corporate Governance Guidelines, if a nominee who already serves as a Director is not elected, that nominee shall offer to tender his or her resignation to the Board. The Governance Committee will then recommend to the Board whether to accept or reject the resignation, or whether other action should be taken. Within 90 days of the certification of election results, the Board will publicly disclose its decision regarding whether to accept or reject the resignation. As explained on the accompanying proxy, it is the intention of the persons named as proxies to vote executed proxies “for” the candidates nominated by the Board unless voting instructions are provided. If something unanticipated should occur prior to the Annual Meeting making it impossible for one or more of the candidates to serve as a Director, votes will be cast in the best judgment of the persons authorized as proxies.

The New York Stock Exchange rules do not permit brokers discretionary authority to vote in the election of directors. Therefore, if you hold your shares of Company common stock in street name and do not provide voting instructions to your broker, your shares will not be voted in the election of directors. We urge you to promptly provide voting instructions to your broker to ensure that your shares are voted on this matter. Please follow the instructions set forth in the voting information provided by your bank or broker.

 

 

LOGO

   Arnold A. Allemang, 69. Director since 1996.
   The Dow Chemical Company – Employee of Dow 1965-2008. Manufacturing General Manager, Dow Benelux N.V.* 1992-1993. Regional Vice President, Manufacturing and Administration, Dow Benelux N.V.* 1993. Vice President, Manufacturing Operations, Dow Europe GmbH* 1993-1995. Dow Vice President and Director of Manufacturing and Engineering 1996-1997. Dow Vice President, Operations 1997-2000. Executive Vice President 2000-2004. Senior Advisor 2004-2008. Member of the Advisory Board for RPM Ventures; the President’s Circle of Sam Houston State University; and the American Chemical Society.

 

 

* A number of Company entities are referenced in the biographies and are defined as follows. (Some of these entities have had various names over the years. The names and relationships to the Company, unless otherwise indicated, are stated in this footnote as they existed as of February 17, 2012.) Dow Benelux N.V., Dow Chemical Pacific Limited, Dow Europe GmbH and Union Carbide Corporation – all ultimately wholly owned subsidiaries of Dow. Ownership by Dow described above may be either direct or indirect.


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8  

2012 DOW PROXY STATEMENT

 

 

CANDIDATES FOR ELECTION AS DIRECTOR (continued)

 

 

LOGO

   Jacqueline K. Barton, 59. Arthur and Marian Hanisch Memorial Professor of Chemistry, Chair, Division of Chemistry and Chemical Engineering, California Institute of Technology. Director since 1993.
  

California Institute of Technology: Professor of Chemistry 1989 to date, Arthur and Marian Hanisch Memorial Professor of Chemistry 1997 to date. Chair, Division of Chemistry and Chemical Engineering, 2009 to date. Assistant Professor of Chemistry and Biochemistry, Hunter College, City University of New York 1980-1982. Columbia University: Assistant Professor 1983-1985, Associate Professor 1985-1986, Professor of Chemistry and Biological Sciences 1986-1989. Recipient of the 2010 National Medal of Science, the highest honor bestowed by the United States government on scientists. Named a MacArthur Foundation Fellow 1991, the American Academy of Arts and Sciences Fellow 1991, the American Philosophical Society Fellow 2000 and National Academy of Sciences member 2002. Named Outstanding Director 2006 by the Outstanding Director Exchange (ODX).

 

Member of the Gilead Sciences Scientific Advisory Board (1989-2008).

LOGO

   James A. Bell, 63. Former Executive Vice President, Corporate President and Chief Financial Officer, The Boeing Company. Director since 2005.
  

The Boeing Company (an aerospace company and manufacturer of commercial jetliners and military aircraft) – Executive Vice President, Corporate President and Chief Financial Officer, 2008 to February 2012; Executive Vice President, Finance and Chief Financial Officer 2003-2008; Senior Vice President of Finance and Corporate Controller 2000-2003. Previous positions include Vice President of Contracts and Pricing for Boeing Space and Communications 1996-2000; Director of Business Management of the Space Station Electric Power System at Boeing Rocketdyne unit 1992-1996. Member of the Board of Directors of The Chicago Urban League. Member of the World Business Chicago, the Chicago Economic Club, and the Commercial Club of Chicago.

 

Director of J.P. Morgan Chase & Co.

LOGO

   Jeff M. Fettig, 54. Chairman and Chief Executive Officer of Whirlpool Corporation. Director since 2003.
  

Whirlpool Corporation (a manufacturer of home appliances) – Chairman and Chief Executive Officer 2004 to date; President and Chief Operating Officer 1999-2004; Executive Vice President 1994-1999; President, Whirlpool Europe and Asia 1994-1999; Vice President, Group Marketing and Sales, North American Appliance Group 1992-1994; Vice President, Marketing, Philips Whirlpool Appliance Group of Whirlpool Europe B.V. 1990-1992; Vice President, Marketing, KitchenAid Appliance Group 1989-1990; Director, Product Development 1988-1989.

 

Director of Whirlpool Corporation.


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2012 DOW PROXY STATEMENT

 

   9

 

CANDIDATES FOR ELECTION AS DIRECTOR (continued)

 

LOGO

   John B. Hess, 57. Chairman and Chief Executive Officer of Hess Corporation. Director since 2006.
  

Hess Corporation (a global energy company) – Employee since 1977; Director 1978 to date; Chairman and Chief Executive Officer 1995 to date. Member of The Business Council, The National Petroleum Council, The Council of Foreign Relations, The Center for Strategic and International Studies, Dean’s Advisors of Harvard Business School, Board of Trustees for the Mount Sinai Hospital, Wildlife Conservation Society/NY Zoo, and The New York Public Library. Member of the Board of Directors of Lincoln Center for the Performing Arts. Former member of the Secretary of Energy Advisory Board.

 

Director of Hess Corporation and KKR Management LLC, partner of KKR & Co. L.P.

LOGO

   Andrew N. Liveris, 57. Dow President, Chief Executive Officer and Chairman. Director since 2004.
  

Employee of Dow since 1976. General manager of Dow’s Thailand operations 1989-1992. Group business director for Emulsion Polymers and New Ventures 1992-1993. General manager of Dow’s start-up businesses in Environmental Services 1993-1994. Vice President of Dow’s start-up businesses in Environmental Services 1994-1995. President of Dow Chemical Pacific Limited* 1995-1998. Vice President of Specialty Chemicals 1998-2000. Business Group President for Performance Chemicals 2000-2003. President and Chief Operating Officer 2003-2004. President and Chief Executive Officer 2004 to date and Chairman 2006 to date.

 

Chairman of the International Council of Chemical Associations; Vice Chairman of the U.S. Business Council and the Business Roundtable; Past Chairman of the U.S.-China Business Council and American Chemistry Council. Co-Chair of the President’s Advanced Manufacturing Partnership. Member of the President’s Export Council, the American Australian Association, the U.S.-India CEO Forum and the Peterson Institute for International Economics. Member of the Board of Trustees of Tufts University.

 

Director of International Business Machines Corporation. Former director of Citigroup, Inc. (2005 - April 2011).

LOGO

   Paul Polman, 55. Chief Executive Officer of Unilever PLC and Unilever N.V. Director since 2010.
  

Unilever PLC and Unilever N.V. (a provider of nutrition, hygiene and personal care products) – Chief Executive Officer January 2009 to date. Nestlé S.A. (a worldwide food company) – Executive Vice President of America, Canada, Latin America, Caribbean January 2008-September 2008; Chief Financial Officer 2006-2008. The Procter & Gamble Company (a provider of consumer, pharmaceutical cleaning, personal care and pet products) – Group President Europe 2001-2006; Vice President and Managing Director UK 1995-1998; Vice President & General Manager Iberia 1989-1995; Category Manager & Marketing Director France 1986-1989; Finance assignments leading to Associate Finance Director 1979-1986. CFO of the Year 2007, Investor Magazine; Carl Lindner Award 2006, University of Cincinnati; WSJ/CNBC European Business Leader of the Year 2003. President of the Kilimanjaro Blindtrust/Chair of Perkins International Advisory Board. Board member of Global Consumer Goods Forum. Member: European Round Table, International Business Council of WEF, Swiss American Chamber of Commerce and World Business Council for Sustainable Development. Honorary degrees from Universities of Northumbria, UK in 2000 and University of Cincinnati in 2009.

 

Director of Unilever PLC and Unilever N.V. Former director of Alcon (2006-2008).

 


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10  

2012 DOW PROXY STATEMENT

 

 

CANDIDATES FOR ELECTION AS DIRECTOR (continued)

 

LOGO

   Dennis H. Reilley, 58. Former Non-Executive Chairman of Covidien, Ltd. Director since 2007.
  

Covidien, Ltd. (a provider of healthcare products) – Non-Executive Chairman, April 2007 to November 2008; Board member, April 2007 to date. Praxair, Inc. (a provider of gases and coatings) – Chairman 2000-2007; President and Chief Executive Officer 2000-2006. E.I. duPont de Nemours & Co. – Executive Vice President and Chief Operating Officer 1999-2000; Executive Vice President 1997-1999; Vice President and general manager, Lycra business 1996-1997; Vice President and general manager, specialty chemicals business 1994-1995; Vice President and general manager, titanium dioxide business 1990-1994. Prior to 1989, held various senior executive positions with Conoco. Former Director of the Conservation Fund. Former Chairman of the American Chemistry Council.

 

Director of Covidien, Ltd., H.J. Heinz Company and Marathon Oil Company. Former director of Praxair, Inc. (2000-2007).

LOGO

   James M. Ringler, 66. Chairman of Teradata Corporation. Director since 2001.
  

Teradata Corporation (a provider of database software, data warehousing and analytics) – Chairman, October 2007 to date. NCR Corporation (a producer of automated teller machines and point of sale devices) – Director and Chairman 2005-2007. Illinois Tool Works, Inc. – (following its merger with Premark International, Inc.), Vice Chairman 1999-2004. Premark International, Inc. – Chairman 1997-1999; Director 1990-1999; Chief Executive Officer 1996-1999; President and Chief Operating Officer 1992-1996; Executive Vice-President 1990-1992. Tappan Company – President and Chief Operating Officer 1982-1986; White Consolidated Industries’ Major Appliance Group – President 1986-1990 (both subsidiaries of Electrolux AB).

 

Director of Teradata Corporation, Autoliv Inc., Corn Products International, Inc., John Bean Technologies Corporation and FMC Technologies, Inc. Former director of NCR Corporation (2005-2007).

LOGO

   Ruth G. Shaw, 63. Former Executive Advisor of Duke Energy Corporation. Director since 2005.
  

Duke Energy Corporation (a provider of electricity and natural gas) – Executive Advisor, October 2006-May 2008, Group Executive, Public Policy and President, Duke Nuclear, April 2006-October 2006; President and Chief Executive Officer, Duke Power Company 2003-2006; Executive Vice President and Chief Administrative Officer 1997-2003; President of The Duke Energy Foundation 1994-2003; Senior Vice President, Corporate Resources 1994-1997; Vice President, Corporate Communications 1992-1994. President, Central Piedmont Community College, Charlotte, NC 1986-1992. President, El Centro College, Dallas, TX 1984-1986. Chair, Foundation Board of Trustees for the University of North Carolina at Charlotte: Carolina Thread Trail Governing Board. Director, Foundation for the Carolinas. Director, ecoAmerica.

 

Director of DTE Energy. Former director of Wachovia Corporation (1990-2008).

 

* A number of Company entities are referenced in the biographies and are defined as follows. (Some of these entities have had various names over the years. The names and relationships to the Company, unless otherwise indicated, are stated in this footnote as they existed as of February 17, 2012.) Dow Benelux N.V., Dow Chemical Pacific Limited, Dow Europe GmbH and Union Carbide Corporation – all ultimately wholly owned subsidiaries of Dow. Ownership by Dow described above may be either direct or indirect.


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CORPORATE GOVERNANCE

 

Corporate Governance Guidelines

The Company has adopted Corporate Governance Guidelines that are available at www.DowGovernance.com. Stockholders may receive a printed copy of the Corporate Governance Guidelines without charge by contacting the Office of the Corporate Secretary.* These Guidelines were adopted by the Board of Directors in order to set forth key areas of importance in Dow corporate governance.

The Board of Directors

The ultimate authority to oversee the business of The Dow Chemical Company rests with the Board of Directors. The role of the Board is to effectively govern the affairs of the Company for the benefit of its stockholders and, to the extent appropriate under Delaware corporation law, other constituencies including employees, customers, suppliers and communities in which it does business. Among other duties, the Board appoints the Company’s officers, assigns to them responsibility for management of the Company’s operations, and reviews their performance.

Director Independence

The Board has assessed the independence of each non-employee Director based upon the Company’s Director independence standards listed on the Company’s corporate governance website (www.DowGovernance.com). These standards incorporate the criteria in the listing standards of the New York Stock Exchange, as currently in effect, as well as additional, more stringent criteria established by the Board. Based upon these standards, the Board has determined that the following eleven members of the Board serving during 2011 were independent: Directors Barton, Bell, Fettig, Franklin, Granholm, Hess, Polman, Reilley, Ringler, Shaw and Stern. These independent Directors constitute a substantial majority of the Board, consistent with Board policy.

When assessing independence, the Governance Committee and the Board consider all relationships between the Directors and the Company, including commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others. The Company screens for such relationships using an annual Directors and Officers Questionnaire that requires disclosure of any transactions with the Company in which the Director or executive officer, or any member of his or her immediate family, has a direct or indirect material interest. Given the

large size of our Company and its diverse commercial and geographic markets, there are times when Dow sells products to, or purchases products or services from, other companies for which Dow Directors serve as executive officers or directors. The Governance Committee and the Board took into account the fact that Messrs. Bell, Fettig, Hess and Polman served as executive officers during each of the past three years of entities with which Dow made purchases or sales. All such purchases and sales were made at arms-length, commercial terms, and the Directors did not personally benefit from such transactions. In all instances, the extent of business represented significantly less than 2% of Dow’s and the other entity’s revenues. In fact, in all cases the amounts were below 0.3%. With respect to Boeing there were no sales or purchases in 2011, while with respect to Whirlpool, Hess Corporation and Unilever, there were sales to and purchases from each entity which in all cases were below the 0.3% threshold referenced above.

Board Leadership Structure

Since 2006, Andrew N. Liveris has served as the Chairman, Chief Executive Officer, and President of the Company. Jeff M. Fettig has served as the Lead Director since May 2011.

The Board recognizes that the leadership structure and combination or separation of the CEO and Chairman roles is driven by the needs of the Company at any point in time. The leadership structure at the Company has varied over time and has included combined roles, election of a presiding or lead director, separation of roles, and other transition arrangements for succession planning. As a result, no policy exists requiring combination or separation of leadership roles and the Company’s governing documents do not mandate a particular structure. This has allowed the Board the flexibility to establish the most appropriate structure for the Company at any given time.

The Board has determined that the Company and its stockholders are currently best served by having one person serve as Chairman and CEO as it allows for a bridge between the Board and management and provides critical leadership for carrying out the Company’s strategic initiatives and confronting its challenges. Mr. Liveris’ service as Chairman facilitates the Board decision-making process because Mr. Liveris has first-hand knowledge of the Company’s operations and the major issues facing the Company, and he chairs the Board meetings where the Board discusses strategic and business issues. Mr. Liveris is the only member of executive management who is also a Director.

 

 

* Office of the Corporate Secretary, The Dow Chemical Company, 2030 Dow Center, Midland, MI 48674, 989-636-1792 (telephone), 989-638-1740 (fax).


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As part of the decision to elect Mr. Liveris as Chairman, the independent Directors on the Board elected a Lead Director with clearly defined leadership authority and responsibilities. Mr. Fettig currently serves as Lead Director. Among other responsibilities, the Lead Director works with the Chairman to call Board meetings, set the Board agenda and determine the appropriate materials to be provided to the Directors. He leads executive sessions of the Board and other meetings at which the Chairman is not present, has the authority to call meetings of the independent directors, facilitates communication between the Board and management, and serves as focal point for stockholder communications and requests for consultation addressed to independent directors. The Lead Director may retain outside professionals on behalf of the Board as the Board may determine is necessary and appropriate. Contact information for the Lead Director is shown below under “Communication with Directors.”

The election of Mr. Liveris as both Chairman and CEO promotes unified leadership and direction for the Board and executive management. The appointment of the Lead Director and the use of executive sessions of the Board, along with the Board’s strong committee system and substantial majority of independent Directors, allows the Board to maintain effective risk oversight and provides that independent Directors oversee such critical items as the Company’s financial statements, executive compensation, the selection and evaluation of Directors, and the development and implementation of our corporate governance programs.

Risk Oversight

The Board of Directors is responsible for overseeing the overall risk management process for the Company. Risk management is considered a strategic activity within the Company and responsibility for managing risk rests with executive management while the Committees of the Board and the Board as a whole participate in the oversight of the process. Specifically, the Board has responsibility for overseeing the strategic planning process and reviewing and monitoring management’s execution of the corporate and business plan and each Board Committee is responsible for oversight of specific risk areas relevant to the Committee charters.

The oversight responsibility of the Board and Committees is enabled by an enterprise risk management model and process implemented by management that is designed to identify, assess, manage and mitigate risks. The Audit Committee is responsible for overseeing that management implements and follows this risk management process and for coordinating the outcome of reviews by the other

Committees in their respective risk areas. In addition, the enterprise risk management model and process are reviewed with the Board of Directors annually and the Board recognizes that risk management and oversight comprise a dynamic and continuous process.

The strategic plan and critical issues and opportunities are presented to the Board each year by the CEO and senior management. Throughout the year, management reviews any critical issues and actual results compared to plan with the Board and relevant Committees. Members of executive management are also available to discuss the Company’s strategy, plans, results and issues with the Committees and the Board, and regularly attend such meetings to provide periodic briefings and access. In addition, as noted in the Audit Committee Report on page 62, the Audit Committee regularly meets in executive sessions and holds separate executive sessions with the lead client service partner of the independent registered public accounting firm, internal auditor, general counsel and other management as appropriate.

As a specific example of committee risk oversight activities, the Compensation and Leadership Development Committee regularly reviews any potential risks associated with the Company’s compensation policies and practices (see “Compensation Program Risk Analysis” on page 31 of this Proxy Statement). In addition, the Environment, Health, Safety and Technology Committee regularly reviews the Company’s operational risks including those risks associated with process and product safety, public policy, and reputation risks.

Communication with Directors

Stockholders and other interested parties may communicate directly with the full Board, the Lead Director, the non-management Directors as a group, or with specified individual Directors by any of several methods. These methods of communication include mail addressed to The Dow Chemical Company, 2030 Dow Center, Midland, MI 48674, and the “Contact Us” feature of Dow’s corporate governance website at www.DowGovernance.com. The Lead Director and other non-management Directors may also be contacted by email addressed to LeadDirector@Dow.com. Please specify the intended recipient(s) of your letter or electronic message. Communications will be distributed to any or all Directors as appropriate depending upon the individual communication. However, the Directors have requested that communications that do not directly relate to their duties and responsibilities as Directors of the Company be excluded from distribution and deleted from email that they access directly. Such excluded items include “spam;”

 


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advertisements; mass mailings; form letters and email campaigns that involve unduly large numbers of similar communications; solicitations for goods, services, employment or contributions; surveys; and individual product inquiries or complaints. Additionally, communications that appear to be unduly hostile, intimidating, threatening, illegal or similarly inappropriate will also be screened for omission by the Office of the Corporate Secretary. Any omitted or deleted communication will be made available to any Director upon request.

Board and Committee Meetings; Annual Meeting Attendance

There were six Board meetings in 2011 and 24 formal Board committee meetings. All of the Directors attended more than 75% of the sum of the total number of Board meetings and the total number of meetings of the Board Committees on which the Director served during the past year, and all but one had 100% attendance at the six regularly scheduled Board meetings. The Directors are encouraged to attend all Annual Meetings of Stockholders, and in 2011 eleven of the twelve Directors then serving attended. Mr. Polman was unable to attend due to a conflict with the annual general meetings of Unilever PLC and Unilever N.V. (the entities for which he serves as chief executive officer).

Executive Sessions of Directors

The non-management Directors meet in executive session, chaired by the Lead Director (currently Mr. Fettig), in connection with each regularly scheduled meeting of the Board, and at other times as they may determine appropriate. In 2011, there were six executive sessions of the Board of Directors. The Audit, Compensation and Leadership Development, and Governance Committees of the Board typically meet in executive session in connection with every Committee meeting.

Board Committees

Board Committees perform many important functions. The responsibilities of each Committee are stated in the Bylaws and in their respective Committee charters, which are available at www.DowGovernance.com. Stockholders may receive a printed copy of the Committee charters without charge by contacting the Office of the Corporate Secretary.* The Board, upon the recommendation of the Governance Committee, elects members to each Committee and has the authority to change Committee chairs, memberships and the responsibilities of any Committee. A brief description of the current standing Board Committees follows, with memberships listed as of March 19, 2012, the record date for the Meeting. The Audit Committee, Compensation and Leadership Development Committee, and Governance Committee are comprised entirely of independent Directors who meet the applicable independence requirements of the New York Stock Exchange, the U.S. Securities and Exchange Commission (as applicable) and the Company.

 

 

* Office of the Corporate Secretary, The Dow Chemical Company, 2030 Dow Center, Midland, MI 48674, 989-636-1792 (telephone), 989-638-1740 (fax).


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Standing Committee and Function   Chair and Members    Meetings 
in 2011

Audit Committee

  J. A. Bell, Chair   11
     

Oversees the quality and integrity of the financial statements of the Company; the qualifications, independence and performance of the independent auditors; and the Company’s system of disclosure controls and procedures and system of internal control over financial reporting. Has oversight responsibility for the performance of the Company’s internal audit function and compliance with legal and regulatory requirements. A more complete description of the duties of the Committee is contained in the Audit Committee charter available at www.DowGovernance.com.

 

J. M. Fettig

B. H. Franklin

 

J. M. Ringler

P. G. Stern

   

Compensation and Leadership Development Committee

  D. H. Reilley, Chair   5
     

Assists the Board in meeting its responsibilities relating to the compensation of the Company’s Chief Executive Officer and other senior executives in a manner consistent with and in support of the business objectives of the Company, competitive practice and applicable standards. A more complete description of the duties of the Committee is contained in the Compensation and Leadership Development Committee charter available at www.DowGovernance.com.

 

J. K. Barton

J. B. Hess

 

P. Polman

R. G. Shaw

   

Environment, Health, Safety and Technology Committee

  J. K. Barton, Chair   4
     

Assists the Board in fulfilling its oversight responsibilities by assessing the effectiveness of environment, health, safety and technology programs and initiatives that support the environment, health, safety, sustainability, innovation and technology policies and programs of the Company, and by advising the Board on matters impacting corporate citizenship and Dow’s public reputation. A more complete description of the duties of the Committee is contained in the Environment, Health, Safety and Technology Committee charter available at www.DowGovernance.com.

 

A. A. Allemang

A. N. Liveris

P. Polman

 

D. H. Reilley

J. M. Ringler

R. G. Shaw

   

Governance Committee

  J. M. Fettig, Chair   4
     

Assists the Board on all matters relating to the selection, qualification, and compensation of members of the Board, as well as any other matters relating to the duties of Board members. Acts as a nominating committee with respect to candidates for Directors and makes recommendations to the Board concerning the size of the Board and structure of committees of the Board. Assists the Board with oversight of governance matters. A more complete description of the duties of the Committee is contained in the Governance Committee charter available at www.DowGovernance.com.

 

J. A. Bell

B. H. Franklin

  P. G. Stern    


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Board of Directors’ Terms

Dow’s Restated Certificate of Incorporation provides that all Directors stand for election at each Annual Meeting of Stockholders.

Director Qualifications and Diversity

There are certain minimum qualifications for Board membership that Director candidates should possess, including strong values and discipline, high ethical standards, a commitment to full participation on the Board and its Committees, relevant career experience, and a commitment to ethnic, racial and gender diversity. The Governance Committee has adopted guidelines to be used in evaluating candidates for Board membership in order to ensure a diverse and highly qualified Board of Directors. In addition to the characteristics mentioned above, the guidelines provide that candidates should possess individual skills, experience and demonstrated abilities that help meet the current needs of the Board and provide for diversity of membership, such as experience or expertise in some of the following areas: the chemical industry, global business, science and technology, finance and/or economics, corporate governance, public affairs, government affairs, and experience as chief executive officer, chief operating officer or chief financial officer of a major company. Other factors that are considered include independence of thought, willingness to comply with Director stock ownership guidelines, meeting applicable Director independence standards (where independence is desired) and absence of conflicts of interest. The Governance Committee may modify the minimum qualifications and evaluation guidelines from time to time as it deems appropriate. These guidelines for Director qualifications are included in Dow’s Corporate Governance Guidelines, available at www.DowGovernance.com.

The guidelines for Director qualifications provide that a commitment to diversity is a consideration in the identification and nomination of Director candidates. The Governance Committee and the full Board implement and assess the effectiveness of these guidelines and the commitment to diversity by referring to these guidelines in the review and discussion of Board candidates when assessing the composition of the Board and by including questions regarding the diversity of the Board membership in the Board’s annual self-evaluations.

The Governance Committee and the Board believe that the qualifications, skills and attributes set forth generally above for all Directors and more specifically below for each of the Directors, support the conclusion that these individuals are qualified to serve as Directors of the Company and

collectively possess a variety of skills, professional experience, and diversity of backgrounds allowing them to effectively oversee the Company’s business. As noted below, the Directors have a diverse combination of the following background and qualifications: leadership experience (including current and former chief executive officer, chief financial officer and other senior executive management positions) at major domestic and foreign companies with global operations in a variety of relevant fields and industries; experience on other public company boards (including chair positions); board or other significant experience with academic, research and philanthropic institutions and trade and industry organizations; and prior government or public policy experience. The Governance Committee and Board have determined that all of the Directors nominated for election meet the personal and professional qualifications identified in this section and the list below highlights several of these key attributes as they apply to the individual Directors that support the conclusion that these individuals are highly qualified to serve on the Company’s Board of Directors. Please see pages 7 to 10 for the complete biographies for each of the nominees.

A.A. Allemang

 

diverse global business leadership experience in various executive management and advisory positions with The Dow Chemical Company providing first-hand knowledge of the Company

 

 

extensive experience and knowledge in chemical industry manufacturing and engineering

 

 

active involvement with major business and industry organizations including the American Chemical Society which contributes to understanding and addressing issues at the Company

J.K. Barton

 

leadership experience as Chair of the Division of Chemistry and Chemical Engineering of California Institute of Technology

 

 

leadership, research, and teaching experience through positions at leading research universities including California Institute of Technology, Columbia University, and Hunter College-City University of New York which is particularly important given the Company’s research and innovation focus

 

 

active involvement with major science and technology organizations including the National Academy of Sciences and the American Chemical Society which contributes to understanding and addressing issues at the Company

 


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J.A. Bell

 

global business and leadership experience as Chief Financial Officer of The Boeing Company

 

 

finance and accounting expertise including experience with and direct involvement and supervision in the preparation of financial statements and risk management

 

 

active involvement with major business and public policy organizations including World Business Chicago, the Chicago Economic Club, and the Commercial Club of Chicago which contributes to understanding and addressing issues at the Company

J.M. Fettig

 

global business and leadership experience as Chairman and Chief Executive Officer of Whirlpool Corporation

 

 

extensive experience and knowledge of international business operations, manufacturing, marketing, sales and distribution which is particularly important given the global presence and nature of the operations of the Company

 

 

extensive experience and knowledge of consumer dynamics, branded consumer products, and end-user markets and servicing relevant to the business operations and focus of the Company

J.B. Hess

 

global business and leadership experience as Chairman and Chief Executive Officer of Hess Corporation

 

 

extensive experience and knowledge of international business operations and energy, petroleum and petrochemical industries which is particularly important given the global presence and nature of the operations of the Company

 

 

active involvement with major business and public policy organizations including The Business Council, The National Petroleum Council and The Council of Foreign Relations which contributes to understanding and addressing issues at the Company

A.N. Liveris

 

global business and leadership experience as Chairman and Chief Executive Officer of The Dow Chemical Company

 

 

active involvement with major business, public policy, and international organizations including the President’s Advanced Manufacturing Partnership (Co-Chair), U.S.-India CEO Forum, the Business Roundtable, U.S. Business Council (Vice Chair), and the President’s Export Council which contributes to understanding and addressing issues at the Company

 

additional public company board experience as a director of International Business Machines Corporation and academic institution governance experience as a trustee of Tufts University which provides additional corporate governance and compensation experience and financial expertise

P. Polman

 

global business and leadership experience as Chief Executive Officer of Unilever PLC and Unilever N.V.

 

 

extensive experience and knowledge of international business operations and global consumer product industries and end uses which is particularly important given the global presence and nature of the operations of the Company

 

 

active involvement with major trade and public policy and international organizations including the European Round Table, The International Business Council of the World Economic Forum, Swiss American Chamber of Commerce, and the World Business Council for Sustainable Development which contributes to understanding and addressing issues at the Company

D.H. Reilley

 

global business and leadership experience in multiple major corporations including Covidien Ltd. (former non-executive Chairman), Praxair, Inc. (former Chairman, President and Chief Executive Officer), E.I. duPont de Nemours & Co. (former Chief Operating Officer), and Conoco, Inc., (various managerial and executive positions)

 

 

extensive experience and knowledge of the global oil, petrochemical and chemical industries which is particularly important given the global presence and nature of the operations of the Company

 

 

additional public company board experience as a director of Covidien Ltd., H.J. Heinz and Marathon Oil Company which provides additional corporate governance and compensation experience and financial expertise

J.M. Ringler

 

global business and leadership experience as Chairman of Teradata Corporation

 

 

extensive knowledge and experience in a variety of manufacturing industries which is particularly important given the global presence and nature of the operations of the Company

 

 

additional public company board experience as a director of Autoliv, Inc., Corn Products International, Inc., John

 


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Bean Technologies Corporation, and FMC Technologies, Inc. which provides additional corporate governance and compensation experience and financial expertise

R.G. Shaw

 

global business and leadership experience with Duke Energy Corporation (former Group Executive and Executive Advisor) and Duke Power Company (former President and Chief Executive Officer) and leadership experience at academic institutions including Central Piedmont Community College (former President) and El Centro College (former President)

 

 

extensive knowledge of and experience with energy and power industries and markets including nuclear, coal, and natural gas which is particularly important given the global presence and nature of the operations of the Company

 

 

additional public company board experience including current service as a director of DTE Energy Co. which provides additional corporate governance and compensation experience and financial expertise

Recommendations and Nominations for Director

Among the Governance Committee’s most important functions is the selection of Directors. The Committee has a long-standing practice of accepting stockholders’ suggestions of candidates to consider as potential Board members, as part of the Committee’s periodic review of the size and composition of the Board and its Committees. Such recommendations should be sent to the Governance Committee through the Corporate Secretary.*

Under the Company’s Bylaws, stockholders wishing to formally nominate a person for election as a Director at the next Annual Meeting must notify the Corporate Secretary* between the close of business on November 30, 2012, and the close of business on January 29, 2013. However, different deadlines apply if the annual meeting is called for a date that is not within 30 days before or after the anniversary of the prior year’s annual meeting. Such notices must comply with the provisions set forth in the Bylaws. A copy of the Bylaws may be found on the Company’s website at www.DowGovernance.com. Alternatively, a copy of the Bylaws will be provided without charge to any stockholder who requests it in writing. Such requests should be addressed to the Corporate Secretary.*

The Governance Committee has adopted a process for identifying new Director candidates. Recommendations may be received by the Committee from various sources, including current or former Directors, a search firm retained by the Committee, stockholders, Company executives, and by self-nomination. The Governance Committee uses the same process to evaluate Director nominees recommended by stockholders as it does to evaluate nominees identified by other sources.

The evaluation of new Director candidates involves several steps, not necessarily taken in any particular order. A preliminary analysis of a nominee involves securing a resume and other background data and comparing this data to the Director attributes outlined above, as well as to the current needs of the Board for new members including considerations to ensure diversity of membership in accordance with the guidelines identified above. References are checked and analyses are performed to identify potential conflicts of interest and appropriate independence from the Company. Candidate information is provided to all Governance Committee members for purposes of discussion and evaluation. If the Committee decides to further evaluate a candidate, interviews are conducted. Other steps may include requesting additional data from the candidate, providing Company background information to the candidate, and determining the candidate’s schedule compatibility with Dow Board and Committee meeting dates.

Code of Business Conduct

All Directors, officers and employees of Dow are expected to be familiar with the Company’s Code of Business Conduct, and to apply it in the daily performance of their Dow responsibilities. The Code of Business Conduct is intended to focus employees, officers and Directors on our corporate values of integrity and respect for people, help them recognize and make informed decisions on ethical issues, help create a culture of the highest ethical and business standards, and provide mechanisms to report unethical conduct. The full text of Dow’s Code of Business Conduct is available at www.DowGovernance.com. Stockholders may receive a printed copy of the Code of Business Conduct without charge by contacting the Office of the Corporate Secretary.* In addition, we will disclose on our website any waiver of or amendment to our Code of Business Conduct requiring disclosure under applicable rules.

 

 

* Office of the Corporate Secretary, The Dow Chemical Company, 2030 Dow Center, Midland, MI 48674, 989-636-1742 (telephone), 989-638-1740 (fax).


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Certain Transactions and Relationships

The Federal securities laws require public companies to describe any transaction, since the beginning of the last fiscal year, or any currently proposed transaction, in which the Company was or is to be a participant and the amount involved exceeds $120,000, and in which any related person had or will have a direct or indirect material interest. Related persons are directors and executive officers, nominees for director and any immediate family members of directors, executive officers or nominees for director and greater than 5% holders of Dow common stock. Companies are also required to describe their policies and procedures for the review, approval or ratification of any related person transaction.

Pursuant to Dow’s Code of Business Conduct, and annual review of Director independence, the Company has had procedures in place to monitor related person transactions for several years. Upon the recommendation of the Governance Committee, the Board of Directors adopted a formal written policy on related person transactions on February 15, 2007 (the “Policy”).

The Governance Committee is responsible for reviewing the material facts of all transactions that could potentially be “transactions with related persons.” The Policy covers any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which:

(1) the aggregate amount involved will or may be expected to exceed $100,000 in any calendar year,

(2) the Company is a participant, and

(3) any related person has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity).

The Governance Committee is responsible to either approve or disapprove of the entry into the transaction, subject to the exceptions listed below. If advance Committee approval of the transaction is not feasible, then the transaction shall be considered and, if the Committee determines it to be appropriate, ratified at the Committee’s next regularly scheduled meeting.

The Governance Committee has determined that certain types of transactions shall be deemed to be preapproved by the Committee even if the amount involved will exceed $100,000, including:

(a) employment of executive officers where the officer’s compensation is either reported in the Proxy Statement or

would have been reported in the Proxy Statement if the officer was a “named executive officer,” and the Compensation and Leadership Development Committee approved such compensation;

(b) Director compensation where such compensation is reported in the Proxy Statement;

(c) certain transactions with other companies where the related person’s only relationship with the other company is as a director, employee or beneficial owner of less than 10% of that company’s shares, and the aggregate amount

involved does not exceed the greater of $1 million or 2% of that company’s total annual revenues;

(d) certain Company charitable contributions where the related person’s only relationship is as an employee or director of the charitable entity and where the aggregate amount does not exceed the greater of $1 million or 2% of the charitable entity’s total annual receipts;

(e) transactions where all stockholders receive proportional benefits;

(f) transactions involving competitive bids; and

(g) regulated transactions.

As discussed above, the Governance Committee has responsibility for reviewing issues involving director independence and related person transactions using information obtained from Directors’ responses to a questionnaire asking about their relationships with the Company, and those of their immediate family members and primary business or charitable affiliations and other potential conflicts of interest, as well as certain data collected by the Company related to transactions, relationships or arrangements between the Company on the one hand and a Director, officer or immediate family member on the other.

As part of its annual independence assessment and review of related person transactions, the Governance Committee reviewed the fact that in 2011 the Company made purchases or sales of products or services in the ordinary course of business with certain entities for which some of our Directors are executive officers or directors. The Governance Committee reviewed such transactions and does not consider the amounts involved in such transactions to be material.

More specifically and as discussed earlier in this Proxy Statement in the section entitled “Director Independence,” the Governance Committee and the Board reviewed these transactions and the fact that Messrs. Bell, Fettig, Hess and Polman served as executive officers during each of the past

 


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three years of entities with which Dow made purchases or sales (The Boeing Company, Whirlpool Corporation, Hess Corporation, and Unilever PLC/N.V. respectively). All such purchases and sales were made at arms-length, commercial terms, and the Directors did not personally benefit from such transactions. In all instances, the extent of business represented significantly less than 2% of Dow’s and the other entity’s revenues. In fact, in all cases the amounts were below 0.3%. With respect to Boeing there were no purchases or sales in 2011, while with respect to Whirlpool, Hess Corporation and Unilever there were sales to and purchases from each entity which in all cases were below the 0.3% threshold referenced above.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires the Company’s Directors and executive officers and persons who own

more than 10% of a registered class of the Company’s equity securities (the “Reporting Persons”) to file with the U.S. Securities and Exchange Commission (“SEC”) reports on Forms 3, 4 and 5 concerning their ownership of and transactions in the common stock and other equity securities of the Company, generally within two business days of a reportable transaction. As a practical matter, the Company seeks to assist its Directors and executives by monitoring transactions and completing and filing reports on their behalf.

Based solely upon a review of SEC filings furnished to the Company and written representations that no other reports were required, we believe that all Reporting Persons complied with these reporting requirements during fiscal year 2011, with the exception of one report filed by James McIlvenny regarding a deferred stock grant of 12,000 shares of stock that was not filed on a timely basis due to administrative error. The report was subsequently filed as soon as the error was discovered.

 

 

COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE REPORT

The Compensation and Leadership Development Committee (the “Committee”) of the Board of Directors reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) with Company management. Based on this review and discussion, the Committee recommended to the Board of Directors that the CD&A be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 (“2011 Annual Report”), as incorporated by reference from this Proxy Statement.

The charter of the Committee can be found at www.DowGovernance.com.

D. H. Reilley, Chair

J. K. Barton

J. B. Hess

P. Polman

R. G. Shaw


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COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE COMPENSATION DISCLOSURE

SECTION ONE – OVERVIEW AND EXECUTIVE SUMMARY

2011 Business Highlights

2011 was a year of significant achievements and further evolution of our transformational strategy. Even in an environment of economic uncertainty, Dow’s earnings growth was clearly evident, as we have continued to reduce our cost structure, exceed our synergy targets, strengthen our balance sheet and transform our portfolio.

Although we fell short of our EPS profit plan, through hard work, focus and discipline, we achieved – and in many cases exceeded – most goals and deliverables for 2011.

2011 major highlights were:

 

 

Reported full-year 2011 earnings per share of $2.05, up 19% compared with prior-year earnings of $1.72 per share

 

 

Achieved record sales of $60 billion, up 12% versus the prior year

 

 

Equity earnings totaled $1.2 billion, the highest result in the Company’s history

 

 

Divested $600 million of non-strategic assets

 

 

Continued to deleverage the balance sheet by achieving net debt (gross debt minus cash) to total capital ratio of 40.8%

 

 

Increased the quarterly dividend by 67%

 

 

Made major progress by approving and forming Sadara Chemical Company

 

 

Hit significant milestones with key growth projects (POWERHOUSE™ Solar Shingle launch, progress with Dow Kokam joint venture, and creation of a joint venture for world’s largest biopolymers project with Mitsui in Latin America)

 

 

Dow named to the Dow Jones Sustainability Index for the 11th time

 

 

Dow honored with the Green Cross for Safety Medal from the National Safety Council

The compensation decisions made for the 2011 fiscal year reflect our Company’s performance relative to our expectations for the year along with other considerations described in Section Two “How Executive Pay is Established.”

Executive Summary of Dow’s Compensation Programs

The following provides an overview of our compensation philosophy and programs as detailed in later sections.

 

 

The compensation programs at Dow are designed primarily to support the realization of Dow’s vision of being the most profitable and respected science-driven chemical company in the world, while promoting the long-term interests of our stockholders and other stakeholders.

 

 

Our compensation programs are designed to attract, motivate, reward and retain the most talented executives who can drive business performance.

 

 

Dow believes in pay-for-performance, which we implement through an annual incentive award that includes objective performance criteria and through equity awards where the value realized is tied to our stock price performance, including shares that vest only if certain performance hurdles are satisfied. These performance components represent at least 80% of the Named Executive Officers (“NEOs”) direct compensation.

 

 

The following elements comprise the total direct compensation awarded to our NEOs: base salary, performance-based annual cash incentive award (“Performance Award”), and equity based long term incentive (LTI) awards consisting of Performance Shares, Stock Options and Deferred Stock.

 

 

We emphasize stock ownership. LTI awards are delivered as equity-based awards to senior executives. Dow executives are required to maintain, until retirement, between four and six times their annual base salary in Dow stock. This encourages managing from an owner’s perspective and better aligns their financial interests with those of Dow stockholders.

 

 

We target all elements of our compensation programs to provide a compensation opportunity at the median range of our peer group. Actual payouts under these programs can be above or below the median based on Company and personal performance.

 

 

Our executives participate in the same group benefit programs, including pension and retirement plans, on substantially the same terms as other salaried employees.


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Our executives are provided limited perquisites which are granted to facilitate strong, focused performance on their jobs.

 

 

The Compensation and Leadership Development Committee (the “Committee”) exercises discretion in determining compensation actions when necessary due to extraordinary changes in the economy, unusual events or overall Company performance.

Best Practices in Executive Compensation

In an era of increased attention to corporate governance and the link between pay and performance, the Company continues to focus on the following key governance practices for executive compensation. For more information on other governance practices, refer to Section Four “Executive Compensation Governance.”

 

 

Use of an independent compensation consultant who is engaged directly by the Committee to advise on executive compensation matters.

 

 

Maintain a strong link between financial and operational goals, stockholder value creation and executive compensation by having relative Total Stockholder Return (“TSR”), Net Income, Return on Capital (“ROC”) and cost control in our Long Term and Short Term Incentive Programs.

 

 

Ensure our Long Term Incentive (“LTI”) mix includes significant weighting toward performance equity vehicles (options and performance shares).

 

 

Balance risk through compensation programs that are designed to discourage excessive risk taking by executive officers. These design features include a robust recovery policy, strong stock ownership guidelines, multiple top line and bottom line measures in our incentive programs and prohibition on engaging in speculative transactions in Company securities.

 

 

Avoid new Change-in-Control (“CIC”) agreements, with all existing agreements having been executed before 2008. For existing CIC agreements, severance payments are equal to two times the executive’s annual base salary and target Performance Award (2.99 times for the CEO) and double triggers are in place in order for an executive to receive benefits.

 

 

Consider input of stockholders received through our active stockholder engagement initiatives and the advisory say-on-pay results. In making executive compensation determinations, the Committee considered the results of the non-binding, advisory proposal on our executive compensation set forth in our 2011 Proxy Statement. Our stockholders overwhelmingly approved our executive compensation program with 87.1% support. After considering our say-on-pay voting results, stockholder input, compensation consultant advice and other factors addressed in the following discussion, the Committee determined not to make changes to our executive compensation programs as a result of the vote. The Committee will continue to consider the results from this year’s and future advisory stockholder votes regarding our executive compensation program.

Objectives of Dow’s Executive Compensation Program

There are four primary objectives of Dow’s executive compensation program. The following table describes each objective and how it is achieved.

 

Compensation Program
Objective
   How Objective is Achieved
Designed to support the achievement of Dow’s vision and strategy   

• Incentive program metrics are tied to both annual and long-term strategic objectives of the Company.

• The compensation programs provide an incentive for executives to meet and exceed Company goals.

Motivate and reward executives when they deliver desired business results and stockholder value   

• Compensation awards are based upon performance against Company financial and operational goals and business division goals as well as personal performance.

• Relative TSR versus a peer group and ROC are equally weighted in our performance share program.

Attract and retain the most talented executives to succeed in today’s competitive marketplace   

• Compensation elements and pay opportunities are targeted at the median of the peer group that we compete with for talent.

• Executives are held accountable for results and rewarded above target levels when Company and personal goals are exceeded. When goals are not met, compensation awards will be below target levels.

Create an ownership alignment with stockholders   

• LTI awards are equity-based.

• Stock ownership requirements in place for top executives, and all NEOs exceed their ownership requirements.

• Approximately 65-70% of NEO pay is equity-based where the value is directly linked to share price appreciation and TSR.


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Elements of Dow’s Executive Compensation Program

The elements of the Company’s executive compensation program are presented below in summary format and more fully explained in the sections that follow.

 

      Program    Description & Purpose of Element
LOGO   

Base Salary

 

  

Annual Base Salary is designed to provide a competitive fixed rate of pay recognizing different levels of responsibility and performance within the Company.

 

  

Performance Award

 

  

The Performance Award is an annual cash incentive program to reward employees for achieving critical Company goals.

 

LOGO   

Stock Options

 

  

Stock Options are granted to provide incentive for long-term creation of stockholder value. Stock Options represent 40% of the annual LTI grant value.

 

 

   Performance Shares   

Performance Shares are granted to motivate employees and to reward the achievement of specified financial goals over a three-year period. Performance Shares represent 35% of the annual LTI grant value.

 

   Deferred Stock   

Deferred Stock is granted in order to help the Company retain its NEOs and other key employees. Deferred Stock represents 25% of the annual LTI grant value.

 

LOGO    Health, Welfare and Retirement Programs   

Executives participate in the same benefit programs that are offered to other salaried employees. Dow benefits are designed to provide market competitive benefits to protect employees’ and their covered dependents’ health and welfare and provide retirement benefits.

 

LOGO    Perquisites    Limited perquisites are provided to executives to facilitate strong performance on the job and enhance their personal security and productivity.

The mix of the three key compensation elements for the CEO and other NEOs are shown below. The charts outline the size, in percentage terms, of each element of targeted compensation. The gray sections of the charts reflect the incentive or performance based components of compensation (e.g., 89% of the CEO’s compensation is at risk).

 

LOGO


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Elements of Compensation: Base Salary – Detailed Information

Base salary is a fixed portion of compensation based on an individual’s skills, responsibilities, experience and sustained performance. Base salaries for executives are benchmarked against similar jobs at other companies and are targeted at the median (50th percentile) of the Survey Group after adjusting for Dow’s revenue size. Actual salaries reflect an individual’s responsibilities and more subjective factors, such as the Committee’s (and the CEO’s in the case of other NEOs) assessment of the individual NEO’s performance.

Changes in base salary for the NEOs, as well as for all Dow salaried employees, depend on compensation versus the external market for similar jobs, the individual’s current salary compared to the market, changes in job responsibilities and the employee’s contributions to Dow’s performance as determined by the Committee.

Elements of Compensation: Performance Award – Detailed Information

The Performance Award is an annual cash incentive program. Dow uses this component of compensation to reward employees for achieving critical annual Company goals. Meeting or exceeding our annual business and financial goals is important to executing our long-term business strategy and delivering long-term value to stockholders. No Performance Award is payable to NEOs or any officer of the Company unless pre-established minimum Net Income goals are achieved. The 1994 Executive Performance Plan establishes a minimum performance goal of $700 million of net income in order for NEOs to receive a payout of the Company component of the Performance Award. This requirement is part of Dow’s strategy for complying with Internal Revenue Code Section 162(m).

The 2011 Performance Award Program focused participants on critical financial and operational goals. At the beginning of 2011, the Committee and Board approved the financial and operational goals for the Company and each Business Division. The Committee also reviewed and approved the target award opportunity for each NEO which is expressed as a percentage of base pay. Individual award opportunities vary by job level and are targeted at the median of the annual bonus practices of the group of companies used for benchmarking (the “Survey Group”).

The 2011 Performance Award corporate target goals and 2011 results are shown below. The 2011 Performance Award result for Net Income (excluding certain items) reflects the results as set forth in the Company’s 2011 Annual Report.

 

Measure Used

(Weighting)

   Rationale for Measure    Target Goal    2011  Performance
Net Income (75%)    Reflects operating strength, efficiency and profitability    $3,480 MM    $2,959 MM
Cost Management (25%)    Reflects discipline in meeting corporate cost budgets    Meet Corporate
Cost Target
   Over by $275 MM

Actual award payouts are determined each February following completion of the plan year by measuring the performance against each award component (earned base award). For the 2011 program, the earned base award (before considering individual performance) was 52.6% of the target award opportunity for corporate employees. Actual awards for employees including NEOs can be adjusted up or down by 25% from the earned base award based on individual performance and contributions as determined by the Committee. The Committee used discretion to adjust each NEO’s award by up to 10% based upon the Committee’s assessment of each NEO’s accomplishments as described below under “SECTION 3 – 2011 NEO’s Achievements and Pay Actions.” The potential award payouts under the 2011 Performance Award Program are shown in the Grants of Plan-Based Awards table. The actual payouts to the NEOs are shown in the Summary Compensation Table in the column labeled “Non-Equity Incentive Plan Compensation.” Additional detail on the individual 2011 Performance Award Calculation for each NEO is set out in the table included in Footnote D to the Summary Compensation Table.

Elements of Compensation: Long-Term Incentive Awards – Detailed Information

Each year the Company grants equity-based LTI awards to leaders and other key employees who demonstrate high performance. Dow chooses this component of compensation to motivate and reward employees for long-term stockholder value creation, retain top talent and help executives meet their Executive Stock Ownership Guidelines.


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As with Dow’s approach for all elements of compensation, LTI awards are targeted to be competitive with the market median of the Survey Group for comparable positions. The size of the grant received by each NEO depends upon the median market dollar value of LTI applicable for his or her job level. In February 2011, the Committee approved a new mix of LTI grants effective beginning in 2011 with the goal of moving more of the LTI awards toward performance-based vehicles.

 

LTI
Vehicle
   Weighting   Vesting Terms & Other Conditions
Stock Options    40%   The exercise price equals the closing price on the date of grant. Options vest in three equal annual installments and expire after 10 years.
Performance Shares    35%  

The 2011-2013 performance shares can be earned after a three-year performance period based on an equal weighting of two goals:

 

•  Dow’s TSR versus a peer group

•  Dow’s ROC relative to pre-established goals

 

Accumulated dividend equivalents are paid only on earned shares after the three-year performance period has ended.

Deferred Stock    25%   Deferred stock grants vest after three years. During the vesting period, holders of outstanding deferred stock grants receive quarterly payments equal to the dividend paid on equivalent shares of Dow Common Stock.

Under Dow’s Executive Compensation Recovery Policy, the Company may recover incentive income that was based on achievement of quantitative performance targets if an executive officer engaged in grossly negligent conduct or intentional misconduct resulting in a financial restatement or in any increase in his or her incentive income. Incentive income includes income related to the annual Performance Award and LTI awards.

2011-2013 Performance Share Program – Additional Information

As noted above, performance share vesting is based on TSR and ROC performance over a three calendar year period. The relative TSR peer group is comprised of companies selected from the S&P 500 Chemical Index and several companies from Dow’s executive peer group that are technology-based and manufacturing-based global companies. The table below shows the 18 company TSR peer group.

 

Air Products and Chemicals, Inc.   BASF
CF Industries Holdings, Inc.   Eastman Chemical Company
Ecolab Inc.   E.I. du Pont de Nemours & Company
FMC Corporation   International Flavors & Fragrances Inc.
Monsanto Company   PPG Industries, Inc.
Praxair, Inc.   Sigma-Aldrich Corporation
3M Company   The Procter & Gamble Company
Honeywell International Inc.   United Technologies Corporation
Johnson Controls, Inc.   Tyco International Ltd.

TSR is defined as stock price appreciation plus dividends paid. For Dow and each company in the peer group, a beginning price using a 30 trading day averaging period at the beginning of the performance period and an ending price using a 30 trading day averaging period at the end of the performance period are calculated and used to create a percentile ranking. The TSR portion of the Performance Share Award will pay out at 100% if Dow’s TSR is at the 51st percentile of the peer group. No payout will occur if Dow’s TSR is at or below the 25th percentile. A maximum payout of 250% will occur if Dow’s TSR is at the 100th percentile.

ROC measures how effectively a company has utilized the money invested in its operations and is calculated as Net Operating Profit after Tax (excluding certain items) divided by total average capital. To achieve a target payout on the ROC portion, Dow’s ROC must equal or exceed pre-established ROC goals for the same period. Dow’s ROC target is 10% across the industry cycle and as a result the target for Performance Share Awards ranges from 8.5% to 12.0% on current outstanding grants.


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The following table illustrates the measures used, weighting and target goals for the 2011-2013 Performance Share program:

 

Measure  Used/
Weighting
   Rationale for Measure    Target Goal

ROC 

(50%)

   Reflects operating strength, effectiveness in utilizing capital and profitability    12.0%

Relative TSR (50%)

   Reflects Dow’s TSR versus a peer group of companies’ TSR    51st percentile

No dividends are paid on unearned Performance Shares. Performance Shares accrue amounts equal to the dividend paid on equivalent shares of Dow Common Stock and are paid only at the time the shares are earned and delivered. All Performance Shares earned are delivered in the year following the performance period. Instead of receiving the Performance Share Award in the form of Dow Common Stock, the NEOs and other executives subject to stock ownership requirements may elect to receive a cash payment equal to the value of the stock award on the date of delivery. Participants may only make this cash election if they meet or exceed the executive stock ownership guidelines for their job level.

2008-2010 Performance Share Program – Results

The 2008-2010 Performance Share Program focused participants on ROC as a critical financial and operational goal and reflected the legacy program that utilized one financial performance measure. With the exception of the 2009-2011 program (that delivered in 2012), the remaining outstanding three-year Performance Share programs utilize two measures - ROC and TSR as described in detail above. The payout for the 2008-2010 program that was delivered in 2011 was as follows:

 

Measure Used/
Weighting
   Rationale for Measure    Target Goal     Payout Based on
Results vs. Goal
 

ROC

(100%)

   Reflects operating strength, effectiveness in utilizing capital and profitability      10.0     86

Long-Term Incentive Awards – Grant and Vesting Practices

LTI grants are approved by the Committee and administered by Dow’s Executive Compensation Department. The annual grant date for all employees is traditionally the Friday following the Committee’s February meeting – held on the second Wednesday of February each year. The 2011 grant date was February 11, 2011. The Company does not grant discounted options, backdate options or re-price outstanding options. Officers must continue to meet their stock ownership guidelines until retirement and since LTI awards do not have provisions for accelerated vesting at retirement, NEOs continue to hold a significant portion of their compensation value in Dow stock for at least three years after retirement.

LTI awards are granted under The Dow Chemical Company 1988 Award and Option Plan, Dow’s omnibus stockholder approved plan for equity awards to employees. Dow calculates the aggregate grant date fair value of awards in the year of grant in accordance with the same standard it applies for financial accounting purposes. Consistent with the U.S. Securities and Exchange Commission regulations, the grant date fair value of 2011 LTI award equity grants for the NEOs is presented in the Summary Compensation Table and Grants of Plan-Based Awards table. Total outstanding unexercised or unvested LTI grants are shown in the Outstanding Equity Awards table.

Elements of Compensation: Benefits – Detailed Information

The Company provides a comprehensive set of benefits to eligible employees. These include medical, dental, life, disability, accident, retiree medical and life, pension and savings plans. The NEOs are eligible to participate in the same plans as most other salaried employees. In addition, because highly compensated employees are subject to U.S. tax limitations on contributions to some retirement plans, the Company has created non-qualified retirement programs intended to provide these employees with the same benefits they would have received under the qualified plans without the tax limits. The NEOs are eligible to participate in the same non-qualified retirement plans as all other highly compensated salaried employees.

Elements of Compensation: Perquisites – Detailed Information

The Company provides the NEOs and other selected executives limited perquisites in order to enhance their security and productivity. The Committee regularly reviews the perquisites provided to the NEOs as part of their overall review of executive compensation. The Committee has determined that all current perquisites are within an appropriate range of competitive compensation practices and made no changes for 2011. The Company provides the NEOs and other selected executives the following limited perquisites:

 

 

Financial Planning Support (reimbursed up to the greater of 3% of annual base salary or $5,000)


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Executive Physical Examination

 

 

Company Car

 

 

Executive Excess Umbrella Liability Insurance

 

 

Home Security Alarm System

In addition, the CEO is required by the Board of Directors for security and immediate availability reasons to use corporate aircraft for personal travel. Details about the NEOs perquisites, including the aggregate incremental cost to the Company, are shown in the Summary Compensation Table under the “All Other Compensation” column and the accompanying narrative.

SECTION TWO – HOW EXECUTIVE PAY IS ESTABLISHED

Responsibilities of the Committee

The Committee, which is comprised entirely of independent Directors, is responsible for overseeing the Company’s executive compensation policies and programs with the goal of maintaining compensation that is competitive within the markets in which Dow competes for talent and reflective of the long-term investment interests of Company stockholders. The Committee reviews and approves the compensation design, compensation levels and benefits programs for the NEOs and other senior leaders. The Committee also monitors Company processes on executive succession and work environment/culture. You can learn more about the Committee’s purpose, responsibilities, structure and other details by reading the Committee’s charter which can be found in the Corporate Governance section of the Company’s website at www.DowGovernance.com.

Committee Resources in Setting Pay

The Committee has several resources, analytical tools and performance measures they consider in determining compensation levels.

 

Committee
Resource
   Description
Committee Consultant   

The Committee has retained a compensation consultant from Mercer. The consultant, Michael Halloran, reports directly to the Committee.

 

He advises the Committee on trends and issues in executive compensation and the group of companies in the Survey Group. He consults on the competitiveness of the compensation structure and levels of Dow’s executive officers and provides advice and recommendations related to proposed compensation and the design of our compensation programs.

 

The Committee has the sole authority to retain and oversee the work of Mr. Halloran. Mr. Halloran does not provide services to Company management unless approved by the Chairman of the Committee. In 2011, no such approvals were given. Mercer has multiple safeguards and procedures in place to ensure the independence of the consultants in their executive compensation consulting practice. These safeguards include a rigidly enforced code of conduct, a policy against investing in client organizations and separation between consulting and administrative business units from a leadership, performance measurement, and compensation perspective. In 2011, Mercer and its affiliates provided approximately $5 million in unrelated human resources consulting services to Dow. The decision to engage Mercer to provide these other services was made by management and was reported to the Committee. In addition to approximately $5 million in aggregate fees for human resources consulting services, Mercer’s aggregate fees for executive and director compensation consulting services in 2011 were approximately $220,000.

Dow’s Executive Compensation Department   

Dow’s Executive Compensation Department provides additional analysis and counsel as requested by the Committee related to:

• gathering the compensation data of the Survey Group

• benchmarking compensation components (base salary, Performance Award, LTI awards) against the Survey Group

• assisting the CEO and Human Resources Executive Vice President in making preliminary recommendations of base salary structure, design and target award levels for the Performance Award and design and award levels for LTI awards

• providing scenario planning/tally sheet information

 

The Executive Compensation Department has retained the compensation consultant services of Towers Watson. Towers Watson provides the following assistance to the Executive Compensation Department:

• Survey Group compensation information for executives and non-employee Directors

• benchmarking of key compensation practices and trends in executive compensation


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Peer Group and Survey Pay Data

Dow benchmarks its executive compensation programs, designs and compensation elements against a Survey Group of 20 companies with which Dow competes for executive talent. Market pay data for the Survey Group is gathered through compensation surveys conducted by Towers Watson. Dow targets the median of the Survey Group for all compensation elements in order to attract, motivate, develop and retain top level executive talent.

The Survey Group is periodically evaluated and updated to ensure the companies in the group remain relevant. The Survey Group, last updated in 2009, was evaluated in 2011 and was not changed. The 20 companies, which are comparable to Dow in annual revenue (median of $42 billion) and market capitalization (median of $51 billion), are listed below.

 

     ($ millions)  
Company    Most Recent
FYE Revenue
     Market Value
As of 12/31/11
 

3M Company

   $ 26,662       $ 57,280   

Alcoa Inc.

   $ 24,951       $ 9,206   

Archer-Daniels-Midland Company

   $ 80,676       $ 19,104   

The Boeing Company

   $ 64,306       $ 54,516   

Caterpillar Inc.

   $ 42,588       $ 58,584   

E. I. du Pont de Nemours & Company

   $ 32,347       $ 42,297   

Emerson Electric Co.

   $ 24,222       $ 34,257   

General Electric Company

   $ 147,300       $ 189,082   

Honeywell International Inc.

   $ 33,370       $ 42,040   

Johnson & Johnson

   $ 61,587       $ 179,089   

Johnson Controls, Inc.

   $ 40,833       $ 21,269   

Kraft Foods Inc.

   $ 49,207       $ 66,006   

Eli Lilly and Company

   $ 23,076       $ 48,117   

Monsanto Company

   $ 11,822       $ 37,512   

PepsiCo, Inc.

   $ 57,838       $ 103,732   

Pfizer Inc.

   $ 67,809       $ 166,346   

PPG Industries, Inc.

   $ 14,885       $ 12,893   

The Procter & Gamble Company

   $ 82,559       $ 183,541   

Tyco International Ltd.

   $ 17,355       $ 21,579   

United Technologies Corporation

   $ 54,326       $ 66,226   
     

75th Percentile

   $ 62,267       $ 75,603   

Median

   $ 41,711       $ 51,316   

25th Percentile

   $ 24,769       $ 31,087   

Dow Chemical

   $ 53,674       $ 33,989   

Factors and Steps in Setting Pay

Compensation for the NEOs and other executive officers is evaluated and set annually by the Committee based on the latest available Survey Group compensation data along with Company, business division and individual performance data. An individual executive’s compensation is established after considering the following factors:

 

 

Median (50th percentile) range compensation for similar jobs and job levels in the market

 

 

Company’s performance against financial measures including net income, earnings per share, EBITDA (earnings before interest, income taxes, depreciation, and amortization), ROC, TSR, economic profit, cash flow management, and cost management discipline

 

 

Company’s performance relative to goals approved by the Committee

 

 

Business climate, economic conditions and other factors

As part of an annual review, Company management and the Committee also review summary total compensation scenarios for the NEOs. All aspects of compensation are modeled under various scenarios, such as stock price sensitivity and business performance. The scenario sheets present the estimated dollar value of compensation components provided to the NEOs during the most recent fiscal year. They are used as an annual reference point to assist the Committee’s overall understanding of NEO compensation.


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The CEO makes recommendations to the Committee regarding compensation for senior executives after reviewing their performance. Market median compensation values of Dow’s Survey Group for similar jobs and job levels are considered for base pay adjustments. Achievement against performance award goals and the executive’s individual contribution toward Company objectives are considered in determining the annual Performance Award payout. Market median competitive LTI values from Dow’s Survey Group are used to determine the annual LTI grant. The CEO uses discretion when making pay recommendations to the Committee. The Committee is responsible for approving NEO compensation and has broad discretion when setting compensation types and amounts.

With respect to the CEO, the Committee annually reviews and approves the corporate goals and objectives relevant to the CEO’s compensation, evaluates the CEO’s performance against those objectives and makes recommendations to the Board of Directors regarding the CEO’s compensation level based on that evaluation. The Committee considers Dow’s Survey Group median base pay, annual incentive targets and LTI values from Dow’s Survey Group and uses broad discretion when setting compensation types and amounts for the CEO. The Board of Directors is responsible for approving the CEO’s compensation types and amounts.

SECTION THREE – 2011 NEOs’ ACHIEVEMENTS AND PAY ACTIONS

The following contributions and achievements were taken into consideration by the Committee in making the 2011 compensation decisions.

Andrew Liveris: Mr. Liveris serves as President, Chief Executive Officer and Chairman. Mr. Liveris’ compensation for 2011 reflects his leadership in driving the further progress of Dow’s transformational strategy in an environment of continued global economic uncertainty. Under Mr. Liveris’ leadership, despite the ever-changing global business conditions and challenges that resulted in deteriorating global demand and industry fundamentals particularly in the second half of 2011, Dow achieved – and in many cases – exceeded most of the financial and operating goals and deliverables for 2011. Mr. Liveris led the efforts that resulted in the approval and formation of Sadara Chemical Company in October 2011. This is the world’s largest chemical complex ever to be simultaneously built at one time. Mr. Liveris drove investment in and commercialization of the Company’s innovation and growth agenda as evidenced by several major new business development projects with customers around the world. The Committee also considered Mr. Liveris’ efforts in implementing key initiatives throughout the Company to champion Dow’s commitment to sustainability through his visible and continuous support of Dow’s 2015 Sustainability Goals, his drive to advance Dow’s reputation and brand, and his pursuit of elevating employee satisfaction and engagement as measured by considerable positive progress in our Global Employee Opinion and Action Survey.

William Weideman: Mr. Weideman serves as Executive Vice President and Chief Financial Officer. He is responsible for overseeing the financial management and integrity of the internal controls for the Company and he leads Dow’s Finance function. Mr. Weideman’s compensation for 2011 reflects his contributions in meeting Dow’s financial goals. This includes increasing Dow’s dividend by 67% in the first quarter, enhancing the Company’s balance sheet and liquidity by reducing our gross debt by $2.2 billion, and achieving net debt (gross debt minus cash) to total capital of 40.8% at year-end. The Committee also considered Mr. Weideman’s contributions in supporting the successful divestiture of multiple non-strategic businesses/assets in 2011, which generated total proceeds of more than $600 million. Finally, the Committee considered the fact that under Mr. Weideman’s leadership Dow maintained and firmly secured its investment grade rating.

Joe Harlan: Mr. Harlan serves as Executive Vice President and President of the Performance Materials Division. Since joining the Company in September of 2011, Mr. Harlan developed and rolled out the Performance Materials strategy and playbook and led the division in several portfolio management actions yielding gains of over $130 million. Mr. Harlan also focused on Dow customers through visits, interactions and exploring collaboration opportunities.

Charles Kalil: Mr. Kalil serves as Executive Vice President, Law and Government Affairs, General Counsel and Corporate Secretary. Mr. Kalil’s compensation for 2011 reflects his oversight and contributions as counsel to the Company. Mr. Kalil was responsible for leading the Company’s litigation and corporate transactions. In particular, Mr. Kalil supported the execution of Dow’s transformational strategy with effective risk assessment, legal counsel and guidance which led to the Sadara joint venture formation. Mr. Kalil led the Company in the arbitration hearing against Petrochemicals Industries Company (K.S.C.) (PIC) in the International Court of Arbitration of the International Chamber of Commerce.

Geoffery Merszei: Mr. Merszei serves as Executive Vice President, President of Dow Europe, Middle East and Africa and Chairman of Dow Europe. Mr. Merszei guided the Company through the Euro crisis and sales (excluding divestitures) for the


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region increased by 22% from 2010 levels. Under Mr. Merszei’s leadership, we increased our external visibility and presence in order to support Dow’s growth initiatives. The Committee also considered Mr. Merszei’s leadership and support of EH&S goals of the region – where all key metrics saw dramatic improvement.

2011 Compensation Actions

The Committee approved the following compensation and awards for the CEO after considering Dow’s Survey Group median market data and the 2011 accomplishments of the Company and the CEO. After considering input from the CEO, the Committee approved the following pay actions for the four other NEOs in 2011.

 

Name    Base Salary ($)      Performance
Award ($)
     Stock
Awards ($)
     Option
Awards ($)
     Total
Compensation
($)
 

Andrew Liveris

     1,750,000         1,498,114         6,600,593         4,400,095         14,248,802   

William Weideman

     786,000         477,519         2,070,601         1,380,058         4,714,178   

Joe Harlan

     880,000         486,024         5,147,400         1,034,748         7,548,172   

Charles Kalil

     919,500         558,624         1,980,408         1,320,092         4,778,624   

Geoffery Merszei

     918,288         507,170         1,980,408         1,320,092         4,725,958   

 

 

Base Salary: All NEOs (with the exception of Mr. Harlan who was a new hire in 2011) were given salary adjustments in 2011 to adjust their relative position to the median range of the Dow’s Survey Group. There were no material differences between the Survey Group median survey values and actual base salary for any of the NEOs. Base salary amounts presented above differ from the amounts disclosed in the Summary Compensation Table because increases in base salary become effective in March. Therefore, the amounts reported in the Summary Compensation Table reflect two months at the 2010 base salary rate and ten months at the 2011 rate. The only exception is Mr. Harlan who only began receiving a salary as of September 2011.

 

 

Performance Award: The 2011 Performance Award resulted in an earned base award equal to 52.6% of the target award opportunity for corporate employees. This was calculated under the terms of the plan as described in the “Elements of Dow’s Executive Compensation Program.” As allowed by the plan, an individual performance factor may also be applied for each NEO to reflect their personal contributions for the year as determined by the Committee. There were no material differences between Dow’s Survey Group median annual bonus targets and the target Performance Award for any of the NEOs.

 

 

Long-Term Incentive Grants (Stock and Option Awards): The Committee approved the LTI grant for each NEO based upon Dow’s Survey Group median LTI values and reflective of the mix of equity vehicles described in the “Elements of Dow’s Executive Compensation Program.” There were no material differences between the Survey Group median LTI target values and the target LTI award values for any of the NEOs.

 

  Upon hire, Mr. Harlan was granted options, performance shares and deferred shares at a level commensurate with his responsibilities and to align his actions to stockholder interests. He was also granted additional deferred shares to compensate for a portion of LTI forfeited at his prior employer.

SECTION FOUR – EXECUTIVE COMPENSATION GOVERNANCE

In addition to adhering to the processes described in the preceding sections, the Committee has adopted several policies related to Executive Compensation as detailed below.

Stock Ownership Guidelines

Dow has had stock ownership guidelines in place for its NEOs and other senior executives since 1998. The guidelines increase with job level and are reviewed periodically to ensure relevance. Specific stock ownership requirements vary by job level and are determined by applying a multiple between four and six to the base salary midpoint. The guideline values are converted to a fixed share amount for each job level.

The CEO is required to own stock with a value of six times base salary and the other NEOs are required to own stock with a value of four times base salary. The executives are given four years to achieve the initial ownership guideline for their job level following promotion to that level and must maintain these levels until retirement. They are given one additional year to


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achieve compliance with a higher level guideline upon being promoted to that level. For purposes of these guidelines, stock ownership includes Dow Common Stock beneficially owned (including stock owned by immediate family members), Deferred Stock not yet delivered, Performance Shares vested but not yet delivered, and stock held beneficially through the Company’s savings plans.

The share guidelines are regularly reviewed by the Committee and have been determined to be appropriate relative to market practice and the current value of Dow stock. All NEOs currently hold shares significantly in excess of the guidelines providing further evidence of Dow’s philosophy of encouraging the holding of shares in excess of stock ownership guidelines until retirement.

The following table shows the stock ownership guideline for each NEO and their holdings as of December 31, 2011.

 

Name    Ownership
Guideline
     Multiple of
Base Salary
     2011
Holdings
     Shares Held
In Excess of
Guideline
     Percent in
Excess of
Guideline
 

Andrew Liveris

     220,000         6x         833,035         613,035         279

William Weideman

     70,000         4x         138,976         68,976         99

Joe Harlan

     70,000         4x         156,500         86,500         124

Charles Kalil

     70,000         4x         210,657         140,657         201

Geoffery Merszei

     70,000         4x         219,461         149,461         214

Change-in-Control and Severance Arrangements

The Committee adopted a market competitive change-in-control arrangement for its senior executives in 2007. Messrs. Liveris, Kalil and Merszei each have a change-in-control agreement. The change-in-control arrangement provides, among other things, a severance payment equal to two times the executive’s base salary and target Performance Award (2.99 times for the CEO) and tax gross-up protection in the event severance benefits exceed statutory thresholds and become subject to an excise tax. An executive must be involuntarily terminated within two years of a change-in-control in order to receive benefits. The Company believes this “double-trigger” practice is in the best interest of stockholders as it does not pay any benefits to an executive unless he or she is negatively impacted by a change-in-control event that is in the best interest of Dow stockholders. No new agreements have been executed since 2007.

Executive Compensation Recovery Policy

The Company has adopted an Executive Compensation Recovery Policy for executive officers set forth in the Company’s Corporate Governance Guidelines. Under this policy, the Company may recover incentive income that was based on achievement of quantitative performance targets if an executive officer engaged in grossly negligent conduct or intentional misconduct resulting in a financial restatement or in any increase in his or her incentive income. Incentive income includes income related to the annual Performance Award and LTI awards. The Company will also recover any awards made to an executive during the prior three years should the executive engage in activity that competes with, or is otherwise harmful to the Company or its affiliated companies.

Tax Deductibility of Executive Compensation

Section 162(m) of the U.S. Internal Revenue Code generally limits the tax deductibility of compensation paid by a public company to its CEO and certain other highly compensated executive officers to $1 million in the year the compensation becomes taxable to the executive. There is an exception to the limit on deductibility for performance based compensation meeting certain requirements. Although the Company does consider the impact of this rule when making compensation decisions, Dow policy does not require all executive compensation to be tax-deductible. In the interest of flexibility and overall benefit for the Company’s stockholders, the Committee will continue to facilitate the awarding of responsible but adequate executive compensation while taking advantage of Section 162(m) whenever feasible. Amounts paid under the compensation program, including base salary, Performance Awards and grants of Deferred Stock (Restricted Stock and Restricted Stock Units) may not qualify as performance based compensation excluded from the limitation on deductibility.


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Trading Restrictions

As set forth in the Company’s Corporate Governance Guidelines, it is against Company policy for executive officers to engage in speculative transactions in Company securities. As such, it is against Company policy for executive officers to trade in puts or calls in Company securities or sell Company securities short.

Compensation Program Risk Analysis

The Committee has reviewed the Company’s compensation policies and practices, and determined that our incentive compensation programs are not reasonably likely to have a material adverse effect on our Company. To conduct this review, the Company completes an inventory of its incentive compensation plans and policies. The evaluation covers a wide range of practices and policies including: the balanced mix between pay elements, the balanced mix between short and long term programs, caps on incentive payouts, governance controls in place to establish, review and approve goals, use of multiple performance measures, discretion on individual awards, use of stock ownership guidelines, use and provisions in severance/change-in-control policies, use of a compensation recovery policy and Committee oversight of compensation programs. Several of our incentive plans have features that mitigate risk, including the use of multiple measures in our annual and long-term incentive plans, use of reported performance measures, the Committee’s discretion in incentive payment levels, a balanced mix of long-term incentive vehicles, significant stock ownership guidelines and our Executive Compensation Recovery Policy.

Advisory Vote on Executive Compensation

The Company provided stockholders a “say-on-pay” advisory vote on its executive compensation in May 2011 under recently adopted Section 14A of the Securities Exchange Act of 1934, as amended. At the Company’s 2011 Annual Meeting of Stockholders, stockholders expressed substantial support for the compensation of the NEOs, with approximately 87.1% of the votes cast for approval of the say-on-pay advisory vote. The Committee carefully evaluated the results of the 2011 annual advisory say-on-pay vote at its October meeting. The Committee also considered numerous other factors in evaluating the Company’s executive compensation program as discussed in this CD&A. While each of these factors informed the Committee’s decisions regarding the NEOs’ compensation, the Committee did not implement changes to the Company’s executive compensation program as a result of the stockholder advisory vote. The Board of Directors has adopted a policy providing for an annual say-on-pay advisory vote. Although non-binding, the Board and the Committee will review and carefully consider the voting results when evaluating our executive compensation program.


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COMPENSATION TABLES AND NARRATIVES

Summary Compensation Table

The following table summarizes the compensation of our CEO, CFO, and our three other most highly compensated executive officers for the fiscal year ended December 31, 2011.

SUMMARY COMPENSATION TABLE FOR 2011

 

Name and Principal Position   Year     Salary ($)     Bonus
($) (a)
    Stock
Awards
($) (b)
    Option
Awards
($) (b) (c)
    Non-Equity
Incentive Plan
Compensation
($) (d)
    Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($) (e)
    All Other
Compensation
($) (f)
    Total ($)  

Andrew Liveris, CEO & Chairman

    2011        1,741,667        0        7,659,470        4,400,095        1,498,114        3,711,285        263,994        19,274,624   
    2010        1,691,667        0        5,683,729        5,060,006        5,000,000        3,644,180        297,145        21,376,727   
    2009        1,650,000        4,485,937        6,921,090        2,363,660        0        2,818,346        246,318        18,485,351   

William Weideman, Exec. VP & CFO

    2011        755,000        80,000        2,402,766        1,380,058        477,519        2,231,656        29,088        7,356,087   
    2010        575,474        0        1,191,649        1,060,969        1,215,522        1,351,143        14,894        5,409,651   
    2009        390,074        530,677        772,982        148,291        0        117,455        10,825        1,970,304   

Joe Harlan, Exec. VP

    2011        293,333        0        5,180,550        1,034,748        486,024        40,381        426,490        7,461,526   

Charles Kalil, Exec. VP

    2011        913,606        92,000        2,298,114        1,320,092        558,624        1,937,812        59,125        7,179,372   
    2010        877,116        0        2,015,197        1,791,818        1,791,139        2,240,220        46,697        8,762,187   
    2009        767,014        1,381,457        2,509,040        803,218        0        1,811,274        35,489        7,307,492   

Geoffery Merszei, Exec. VP

    2011        913,113        0        2,298,114        1,320,092        507,170        1,532,689        168,645        6,739,824   
    2010        882,931        0        1,771,876        1,576,323        1,715,728        1,685,337        143,353        7,775,548   
    2009        861,396        1,187,111        674,342        602,420        0        383,209        33,240        3,741,718   

 

(a) Bonus amounts for Messrs. Weideman and Kalil in 2011 were awarded for successful completion of activities relating to the formation of the Sadara joint venture.

 

(b) Amounts represent the aggregate grant date fair value of awards in the year of grant in accordance with the same standard applied for financial accounting purposes. A maximum payout on the Performance Share programs would result in additional value of: Liveris $4,716,546; Weideman $1,479,564; Harlan $1,208,850; Kalil $1,415,141; Merszei $1,415,151.

 

(c) Dow’s valuation for financial accounting purposes uses the widely accepted lattice-binomial model. The option value calculated for Messrs. Liveris, Weideman, Kalil and Merszei was $10.67 on the grant date of February 11, 2011. The option value calculated for Mr. Harlan was $8.40 on the grant date of September 1, 2011. The exercise price is the closing Dow stock price on the date of grant. The exercise price was $38.38 for 2011 grants for Messrs. Liveris, Weideman, Kalil and Merszei. Mr. Harlan’s options were granted on September 1, 2011 with an exercise price of $27.60.

 

(d) Individual results for Non-Equity Incentive Plan Compensation are shown in the table below reflecting income paid in 2012 under our annual Performance Award (PA) program for performance achieved in 2011. Payout includes business related performance results as well as individual performance factors that determine the incentive payout.

 

Name   2011 Year End
Base Salary
    2011 PA
Target Percent
    2011 PA
Target Amount
    2011 Company
/ Business
Funding Level
    2011
Individual
Performance
Factor
    2011 Total PA
Payment
Percent
    2011 Total PA
Payout
Amount
 

Andrew Liveris

    1,750,000        155     2,712,500        52.6     105.0     55.2     1,498,114   

William Weideman

    786,000        105     825,300        52.6     110.0     57.9     477,519   

Joe Harlan

    880,000        105     924,000        52.6     100.0     52.6     486,024   

Charles Kalil

    919,500        105     965,475        52.6     110.0     57.9     558,624   

Geoffery Merszei

    918,288        105     964,202        52.6     100.0     52.6     507,170   

 

(e) Reflects the aggregate change in the actuarial present value of accumulated pension benefits at age 65 using the actuarial assumptions included in the Company’s audited financial statements. Negative changes in pension value are included as zero in the Summary Compensation Table. An analysis of the Change in Pension Value for 2011 is shown below. The Change in Pension Values for Mr. Liveris for 2009 and 2010 have been updated to reflect revised actuarial inputs for the 2009 pension valuation.


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Name   Change in
Discount
Interest Rate
($)
    Change in
Deferral Period,
Benefits, and
Other ($)
    Total Change
($)
 

Andrew Liveris

    1,896,259        1,808,352        3,704,611   

Bill Weideman

    505,964        1,724,841        2,230,805   

Joe Harlan

    0        38,968        38,968   

Charles Kalil

    737,861        1,194,988        1,932,849   

Geoffery Merszei

    751,522        780,702        1,532,224   

Also includes 2011 above-market non-qualified deferred compensation earnings: Liveris $6,674; Weideman $851; Harlan $1,413; Kalil $4,963; Merszei $465

 

(f) All Other Compensation includes the cost of Company provided automobile, personal use of corporate aircraft by the CEO as required by Company policy for security and immediate availability purposes, Company contributions to employee savings plans, reimbursements of costs paid for financial and tax planning support, home security, executive health examinations and personal excess liability insurance premiums. The incremental cost to the Company of personal use of Company aircraft is calculated based on the variable operating costs to the Company including fuel, landing, catering, handling, aircraft maintenance and pilot travel costs. Fixed costs, which do not change based upon usage, such as pilot salaries or depreciation of the aircraft or maintenance costs not related to personal travel, are excluded.

The following other compensation items exceeded $10,000 in value:

– Liveris: Automobile ($19,739), personal use of Company aircraft ($139,994), Company contributions to savings plans ($68,007), financial and tax planning ($30,055)

– Weideman: Automobile ($17,248), Company contributions to savings plans ($10,140)

– Harlan: Relocation ($58,221), Company contribution of $350,000 to his Non-Qualified Deferred Compensation account given upon hire subject to 20% vesting per year on his hire date anniversary

– Kalil: Automobile ($12,011), Company contributions to savings plans ($35,425)

– Merszei: Automobile ($33,131), Company contributions to savings plans ($35,657), financial and tax planning ($14,351), housing expenses relating to overseas assignment ($82,500)


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Grants of Plan-Based Awards

The following table provides additional information about plan-based compensation disclosed in the Summary Compensation Table. This table includes both equity and non-equity awards.

GRANTS OF PLAN-BASED AWARDS FOR 2011

 

Name   Grant
Date
    Date of Action
by the
Compensation
Committee
    Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
    Estimated Future Payouts
Under Equity Incentive Plan
Awards (a)
    All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#) (b)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) (c)
    Exercise
or Base
Price of
Option
Awards
($/Sh)
    Grant
Date
Fair
Value of
Stock
and
Option
Awards
($)
 
      Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
         

Andrew Liveris

    2/9/2011        2/9/2011        0        2,712,500        6,781,250                                                           
    2/11/2011        2/9/2011                                0        100,320        250,800                                4,909,159   
    2/11/2011        2/9/2011                                                        71,660                        2,750,311   
    2/11/2011        2/9/2011                                                                412,380        38.38        4,400,095   

William Weideman

    2/9/2011        2/9/2011        0        825,300        2,063,250                                                           
    2/11/2011        2/9/2011                                0        31,470        78,675                                1,539,984   
    2/11/2011        2/9/2011                                                        22,480                        862,782   
    2/11/2011        2/9/2011                                                                129,340        38.38        1,380,058   

Joe Harlan

    9/1/2011        9/1/2011        0        924,000        2,310,000                                                           
    9/1/2011        9/1/2011                                0        30,000        75,000                                861,150   
    9/1/2011        9/1/2011                                                        156,500                        4,319,400   
    9/1/2011        9/1/2011                                                                128,700        27.60        1,034,748   

Charles Kalil

    2/9/2011        2/9/2011        0        965,475        2,413,688                                                           
    2/11/2011        2/9/2011                                0        30,100        75,250                                1,472,944   
    2/11/2011        2/9/2011                                                        21,500                        825,170   
    2/11/2011        2/9/2011                                                                123,720        38.38        1,320,092   

Geoffery Merszei

    2/9/2011        2/9/2011        0        964,202        2,410,506                                                           
    2/11/2011        2/9/2011                                0        30,100        75,250                                1,472,944   
    2/11/2011        2/9/2011                                                        21,500                        825,170   
    2/11/2011        2/9/2011                                                                123,720        38.38        1,320,092   

 

(a) Performance Share awards as described in the Elements of Dow’s Executive Compensation Program section of the Compensation Discussion and Analysis.

 

(b) Deferred Stock awards as described in the Elements of Dow’s Executive Compensation Program section of the Compensation Discussion and Analysis.

 

(c) Stock Option awards as described in the Elements of Dow’s Executive Compensation Program section of the Compensation Discussion and Analysis.


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Outstanding Equity Awards

The following table lists outstanding equity grants for each NEO as of December 31, 2011.

The table includes outstanding equity grants from past years as well as the current year.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

 

Name

 

Grant Date

    Option Awards     Stock Awards  
    Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(a)
    Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(a)
    Option
Exercise
Price
($)
    Option
Expiration
Date
    Number of
Shares or
Units of
Stock That
Have
Not Vested
(#) (b)
    Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested
($) (b) (c)
   

Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#)

(d)

    Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($)
(c) (d)
 

Andrew Liveris (e)

    02/15/2002        38,300               30.43        02/15/2012        n/a        n/a        n/a        n/a   
    02/14/2003        62,500               27.40        02/14/2013        n/a        n/a        n/a        n/a   
    02/13/2004        90,000               43.49        02/13/2014        n/a        n/a        n/a        n/a   
    02/18/2005        180,000               53.53        02/18/2015        n/a        n/a        n/a        n/a   
    03/01/2006        400,000               43.68        03/01/2016        n/a        n/a        n/a        n/a   
    02/16/2007        460,000               43.59        02/16/2017        60,000        1,720,200        n/a        n/a   
    02/15/2008        619,370               38.62        02/18/2018        n/a        n/a        n/a        n/a   
    02/13/2009        606,066        303,034        9.53        02/13/2019        138,820        3,979,969        138,820        3,979,969   
    02/12/2010        183,933        367,867        27.79        02/12/2020        91,100        2,611,837        91,100        2,611,837   
    02/11/2011               412,380        38.38        02/11/2021        71,660        2,054,492        100,320        2,876,174   

William Weideman (e)

    02/15/2002        7,500               30.43        02/15/2012        n/a        n/a        n/a        n/a   
    02/14/2003        12,250               27.40        02/14/2013        n/a        n/a        n/a        n/a   
    02/13/2004        11,670               43.49        02/13/2014        n/a        n/a        n/a        n/a   
    02/18/2005        13,340               53.53        02/18/2015        n/a        n/a        n/a        n/a   
    03/01/2006        16,190               43.68        03/01/2016        n/a        n/a        n/a        n/a   
    02/16/2007        36,400               43.59        02/16/2017        4,550        130,449        n/a        n/a   
    02/15/2008        41,250               38.62        02/18/2018        n/a        n/a        n/a        n/a   
    02/13/2009        38,022        19,013        9.53        02/13/2019        8,710        249,716        8,710        249,716   
    02/12/2010        38,566        77,134        27.79        02/12/2020        19,100        547,597        19,100        547,597   
    02/11/2011               129,340        38.38        02/11/2021        22,480        644,502        31,470        902,245   

Joe Harlan

    09/01/2011               128,700        27.60        09/01/2021        156,500        4,486,855        30,000        860,100   

Charles Kalil (e)

    03/01/2000        n/a        n/a        n/a        n/a        108        3,096        n/a        n/a   
    02/23/2001        n/a        n/a        n/a        n/a        55        1,577        n/a        n/a   
    02/15/2002        5,700               30.43        02/15/2012        n/a        n/a        n/a        n/a   
    02/14/2003        10,000               27.40        02/14/2013        n/a        n/a        n/a        n/a   
    02/13/2004        8,000               43.49        02/13/2014        n/a        n/a        n/a        n/a   
    02/18/2005        17,500               53.53        02/18/2015        n/a        n/a        n/a        n/a   
    03/01/2006        48,550               43.68        03/01/2016        n/a        n/a        n/a        n/a   
    02/16/2007        70,000               43.59        02/16/2017        9,100        260,897        n/a        n/a   
    02/15/2008        165,710               38.62        02/18/2018        n/a        n/a        n/a        n/a   
    02/13/2009        102,976        102,978        9.53        02/13/2019        47,180        1,352,651        47,180        1,352,651   
    02/12/2010        65,133        130,267        27.79        02/12/2020        32,300        926,041        32,300        926,041   
    02/11/2011               123,720        38.38        02/11/2021        21,500        616,405        30,100        862,967   

Geoffery Merszei

    07/01/2005        311,340               44.74        07/01/2015        n/a        n/a        n/a        n/a   
    03/01/2006        134,850               43.68        03/01/2016        n/a        n/a        n/a        n/a   
    02/16/2007        196,000               43.59        02/16/2017        25,200        722,484        n/a        n/a   
    02/15/2008        232,000               38.62        02/18/2018        n/a        n/a        n/a        n/a   
    02/13/2009        154,466        77,234        9.53        02/13/2019        35,380        1,014,345        35,380        1,014,345   
    02/12/2010        57,299        114,601        27.79        02/12/2020        28,400        814,228        28,400        814,228   
    02/11/2011               123,720        38.38        02/11/2021        21,500        616,405        30,100        862,967   

 

(a) Stock Option award grants vest in three equal installments on the first, second and third anniversaries of the grant date shown in the table.

 

(b) Deferred Shares vest and are delivered three years after the grant date.

 

(c) Market values based on the 12/31/2011 closing stock price of $28.67 per share.

 

(d) Performance Shares granted 2/13/2009, 2/12/2010 and 2/11/2011 will vest and be delivered in April of the year following the end of the performance period. Shares granted in February 2009-2011 are shown at the target level of performance. The actual number of shares to be delivered will be determined at the end of the performance period.

 

(e) In addition to the equity grants described above, Messrs. Liveris, Weideman and Kalil received dividend unit grants on 3/9/1988 of 846 shares, 846 shares and 1,125 shares, respectively, which generate a quarterly payment equal to the dividend paid on equivalent shares of Dow Common Stock. These grants will expire on 3/9/2013.


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Option Exercises and Stock Vested

The following table summarizes the value received from stock option exercises and stock grants vested during 2011.

OPTION EXERCISES AND STOCK VESTED FOR 2011

 

     Option Awards     Stock Awards
Name   Number of Shares
Acquired on
Exercise
(#)
    Value Realized
on Exercise
($)
    Number of Shares
Acquired on
Vesting (#)
(a)
    Value Realized
on Vesting
($)

Andrew Liveris

    31,700        124,581        425,807      13,177,616    

William Weideman

    6,000        23,580        45,329      1,303,378    

Joe Harlan

                       —    

Charles Kalil

    107,976        2,837,572        182,947      5,040,618    

Geoffery Merszei

                  66,157      2,488,655    

 

(a) Reflects delivery of shares from the 2008-2010 Performance Share program and the 2009 special Performance Share grant. With respect to the 2008-2010 program, Return on Capital (ROC) measurement achieved an 86% payout against a 10.0% ROC target. For the 2009 award, the EBITDA measurement achieved a 150% payout against a $9.0 billion EBITDA target.

Pension Benefits

The following table lists the pension program participation and actuarial present value of each NEO’s defined benefit pension as of December 31, 2011.

PENSION BENEFITS AS OF DECEMBER 31, 2011

 

Name    Plan Name    Number of Years
Credited
Service (#)
     Present Value of
Accumulated
Benefit ($) (a)
 

Andrew Liveris

   Dow Employees’ Pension Plan      16.1         1,099,588   
   Dow Executives’ Supplemental Retirement Plan (b)      36.0         20,883,696   
   Total               21,983,284   

William Weideman

   Dow Employees’ Pension Plan      35.6         1,274,421   
   Dow Executives’ Supplemental Retirement Plan      35.6         4,563,909   
   Total               5,838,330   

Joe Harlan (d)

   Dow Employees’ Pension Plan      0.4         12,250   
   Dow Executives’ Supplemental Retirement Plan      0.4         26,718   
   Total               38,968   

Charles Kalil

   Dow Employees’ Pension Plan      31.9         1,291,388   
   Dow Executives’ Supplemental Retirement Plan      31.9         8,838,904   
   Total               10,130,292   

Geoffery Merszei

   Dow Employees’ Pension Plan      6.6         280,747   
   Dow Executives’ Supplemental Retirement Plan (c)      34.0         10,020,102   
   Total               10,300,849   

 

(a) Unless otherwise noted, all present values reflect accrued age 65 benefits. The form of payment, discount rate (5.05%) and mortality (UP94G) are based on assumptions used to determine pension plan obligations as reflected in the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.


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(b) Mr. Liveris was asked by the Company to permanently transfer to the United States from Australia in 1995, began participation in the Dow Employees’ Pension Plan (“DEPP”) and Executives’ Supplemental Retirement Plan (“ESRP”), and ceased contributions to the Australian Superannuation Fund (“Australian Fund”). Mr. Liveris’ retirement benefit will equal the amount payable under the DEPP formula based on his years of credited service as if he were a U.S. employee his entire Dow career. The ESRP benefit will be reduced by the value of his Australian Fund at the time of retirement. The value of Mr. Liveris’ Company contributions in the Australian Fund at 12/31/11 was 904,718 AUD.

 

(c) Mr. Merszei was a participant in the Dow Personalvorsorgestiftung Schweiz (“Swiss Pension Plan”) from 1978 through 2001 and received a portable benefit upon his termination from Dow Europe. Upon his return to Dow in 2005, Mr. Merszei began participation in DEPP and ESRP. Under the terms of his employment contract, Mr. Merszei’s retirement benefit will equal the amount payable under the DEPP formula based on his years of credited service as if he were a U.S. Dow employee his entire career. The ESRP benefit will be reduced by the value of his Swiss Pension Plan portable benefit and the benefit received from his previous employer at the time of retirement. The value of Mr. Merszei’s Company contributions in the Swiss Pension Plan portable benefit at 12/31/11 was 2,029,198 CHF. The age 65 value of Mr. Merszei’s previous employer benefit is 9,611 CAD.

 

(d) While Mr. Harlan must reach one year of employment to become a participant in the DEPP and ESRP, the Pension Benefits shown above are based on the plan calculations for his four months of service in 2011 as if he were a participant as of year end.

The following table lists the U.S. pension annuity value for each participating NEO and the corresponding replacement value as a percent of total target cash compensation as of December 31, 2011. The replacement value percentages for the NEOs are comparable to most other salaried employees with similar age and years of service.

PENSION REPLACEMENT VALUE AS OF DECEMBER 31, 2011

 

Name   

Pension Annuity
Value ($)

(a)

     Replacement
Value (%)
(b)
 

Andrew Liveris

     2,108,940         47

William Weideman

     570,456         35

Joe Harlan

               

Charles Kalil

     805,704         43

Geoffery Merszei

     919,716         49

 

(a) Annual pension benefit if NEO retired on December 31, 2011, stated as a single-life annuity with no survivor options. Mr. Harlan must reach one year of employment to become a participant in the DEPP and ESRP and therefore no Pension Annuity Value is shown.

 

(b) Annual pension benefit as a percentage of annual Base Salary + Target Performance Award.

Pension Benefits – Additional Information

The Dow Employees’ Pension Plan

For employees hired prior to January 1, 2008:

The Company provides the Dow Employees’ Pension Plan (“DEPP”) for its U.S. employees and for employees of some of its wholly owned U.S. subsidiaries. Upon retirement, NEOs receive an annual pension under the DEPP formula subject to statutory limitations. The benefit is paid in the form of a monthly annuity and is calculated based on the sum of the employee’s yearly basic and supplemental accruals up to a maximum of 425% for basic accruals and 120% for supplemental accruals.

 

 

Basic accruals equal the employee’s highest consecutive three-year average compensation (“HC3A”) multiplied by a percentage ranging from 4% to 18% based on the age of the employee in the years earned.

 

 

Supplemental accruals are for compensation in excess of a rolling 36-month average of the Social Security wage base. Supplemental accruals range from 1% to 4%, based on the age of the employee in the years earned.

The sum of the basic and supplemental accruals is divided by a conversion factor to calculate an immediate monthly benefit. If the employee terminates employment before age 65 and defers payment of the benefit, the account balance calculated under this formula will be credited with interest. Messrs. Liveris, Weideman, Kalil and Merszei participate in DEPP.


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For employees hired on or after January 1, 2008:

The Personal Pension Account (“PPA”) grows annually based on Pay Credits and Interest Credits. At the end of each year, 5% of an employee’s base pay and actual variable pay is credited to the account (“Pay Credit”). Additionally, the Personal Pension Account is credited with an annual Interest Credit equal to the Interest Credit Rate multiplied by the Personal Pension Account balance as of December 31 of the previous year. The Interest Credit Rate is determined annually by the Company, and is based on the closing rate on the six-month U.S. Treasury bill on the last business day of September immediately preceding the Plan Year plus 1.5%.

When a vested employee leaves the Company, the PPA can be taken as an immediate annuity, as a deferred annuity or as a lump sum. Vesting is three years. Mr. Harlan participates in PPA.

The Executives’ Supplemental Retirement Plan:

Because the U.S. Internal Revenue Code limits the benefits otherwise provided by DEPP, the Board of Directors adopted the Executives’ Supplemental Retirement Plan (“ESRP”) to provide employees who participate in DEPP with non-qualified benefits calculated under the same formulas described above. Messrs. Liveris, Weideman, Harlan, Kalil and Merszei participate in the ESRP.

In addition, Mr. Kalil elected to have his ESRP benefit secured by enrolling in the Key Employee Insurance Program (“KEIP”) in 1997. KEIP is a life insurance program that secured benefits otherwise available under ESRP, which was offered to certain employees as an alternative to the ESRP. Dow has not offered KEIP to employees since 1999 and has no plans to reinstate this program for new participants.

Dow Employees’ Savings Plan – 401(k):

The Company provides all U.S. salaried employees the opportunity to participate in a 401(k) plan (The Dow Chemical Company Employees’ Savings Plan). In 2011, for salaried employees who contributed 2% of annual salary, Dow provided a matching contribution of 100% of the employee’s contribution. For salaried employees who contributed up to an additional 4%, Dow provided a 50% match. Messrs. Liveris, Weideman, Harlan, Kalil and Merszei participate in the 401(k) plan on the same terms as other eligible employees.

Non-Qualified Deferred Compensation

The following table provides information on compensation the NEOs have elected to defer as described in the narrative that follows.

NON-QUALIFIED DEFERRED COMPENSATION FOR 2011

 

Name   Executive
Contributions
in Last Fiscal
Year ($) (a)
    Company
Contributions
in Last Fiscal
Year ($) (b)
    Aggregate
Earnings
in Last
Fiscal
Year ($)
    Aggregate
Withdrawals /
Distributions
($)
    Aggregate
Balance at
Last Fiscal
Year-End
($) (c)
 

Andrew Liveris

    87,083        57,028        (52,589            1,743,252   

William Weideman

                  6,595               135,492   

Joe Harlan (d)

           350,000        3,314               353,314   

Charles Kalil

    45,680        24,918        30,953               899,648   

Geoffery Merszei

           25,147        3,307               73,719   

 

(a) Executive contributions are also reported as salary for 2011 in the Summary Compensation Table.

 

(b) Company contributions are also reported as All Other Compensation for 2011 in the Summary Compensation Table.

 

(c) Includes company and executive contributions with respect to Mr. Liveris of $139,968 for 2010 and $88,216 for 2009 previously reported in the Summary Compensation Table and company and executive contributions with respect to Mr. Kalil of $43,856 for 2010 and $5,433 for 2009 previously reported in the Summary Compensation Table.

 

(d) Mr. Harlan received a $350,000 contribution to his Non-Qualified Deferred Compensation account upon hire, which vests 20% per year on his hire date anniversary.


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Because the U.S. Internal Revenue Code limits contributions to The Dow Chemical Company Employees Savings Plan, the Board of Directors adopted the Elective Deferral Plan in order to further assist employees in saving for retirement. This plan allows participants to voluntarily defer the receipt of base salary (maximum deferral of 75%) and Performance Award (maximum deferral of 100%).

Each participant enrolled in the plan receives a matching contribution using the same formula authorized for salaried participants under the 401(k) plan for employer matching contributions. The current formula provides for a matching contribution on the first 6% of base pay deferred. For purposes of calculating the match under the Elective Deferral Plan, the Company will assume each participant is contributing the maximum allowable amount to the 401(k) plan and receiving a match thereon. The assumed match from the 401(k) plan will be offset from the matching contribution calculated under the Elective Deferral Plan. The NEOs’ balances consist primarily of voluntary deferrals (and related earnings), not contributions made by the Company.

Investment choices include a fund with an interest rate equal to the sum of the 60-month rolling average of ten-year U.S. Treasury Note yield plus the current five-year Dow Chemical credit spread, a phantom Dow stock fund tracking the market value of Dow Common Stock with market dividends paid and reinvested, as well as funds tracking the performance of several mutual funds.

The Elective Deferral Plan allows for distributions to commence on the January 31 after separation or after a specific future year that can be later or earlier than the separation date. Distributions may be paid either in a lump sum or in equal monthly, quarterly or annual installments up to 15 years based on the employee’s initial election as to the time and form of payment. If installments were elected, the unpaid balance will continue to accumulate gains and losses based on the employee’s investment selections.

Potential Payments Upon Termination or Change-in-Control

Messrs. Liveris, Weideman, Kalil and Merszei are currently retirement eligible and entitled to benefits similar to most other salaried employees upon separation from the Company. They are also entitled to additional benefits in the case of an involuntary termination without cause or a change-in-control event. The summary below shows the impact of various types of separation events on the different compensation elements the NEOs receive.

Retirement, Death, or Disability:

 

 

Base Salary: Paid through date of separation on the normal schedule.

 

 

Performance Award: Prorated for the portion of the year worked and paid on the normal schedule.

 

 

Benefits: Messrs. Liveris, Weideman, Kalil, and Merszei are eligible for retiree medical and life insurance coverage similar to most other salaried U.S. employees.

 

 

Retirement Plans: Participants have access, in accordance with elections and plan features, to the following retirement plan benefits:

 

   

Elective Deferral Plan benefits as shown in the Non-Qualified Deferred Compensation Table and accompanying narrative.

 

   

Pension benefits as shown in the Pension Benefits Table and described in the accompanying narrative. Participants in DEPP and ESRP are paid a monthly annuity. Participants in PPA may elect either an annuity or lump sum payout. Participants in KEIP have additional lump-sum features available.

 

   

Employee Savings Plan (defined contribution 401(k) plan).

 

 

Outstanding LTI Awards:

 

   

Stock Options: Outstanding grants are retained in full. Vesting period remains unchanged; expiration periods are shortened to the earlier of the existing expiration date or five years.

 

   

Deferred Stock: Current year grants are prorated for the portion of year worked. Other grants are retained in full. Vesting and delivery dates remain unchanged.

 

   

Performance Shares: Current year grants are prorated for the portion of year worked. Other grants are retained in full. Vesting periods and delivery dates remain unchanged.


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Involuntary Termination With Cause:

Because Messrs. Liveris, Weideman, Kalil and Merszei are currently retirement eligible, they will receive the same benefits under an Involuntary Termination with Cause as under retirement, as described above, with the exception of incentive income (including LTI), which may be recovered by the Company as described in the Executive Compensation Recovery Policy.

Involuntary Termination Without Cause:

In addition to the benefits received due to retirement, as described above, NEOs will receive the following benefits if involuntarily terminated without cause. NEOs who are not retirement eligible will receive the same treatment for outstanding LTI Awards as described above and the following additional benefits if involuntarily terminated without cause.

 

 

A lump-sum severance payment of two weeks per year of service (up to a maximum of 18 months) under the U.S. Severance Plan, plus six months base salary under the Executive Severance Supplement. The U.S. Severance Plan covers most salaried employees in the United States.

 

 

Outplacement counseling and financial/tax planning with a value of $30,000.

 

 

Eighteen months of health and welfare benefits at employee rates.

Change-in-Control:

In addition to benefits received due to retirement, as described above, Messrs. Liveris, Kalil and Merszei will receive the following benefits if separated due to a change-in-control event as referenced in the Compensation Discussion and Analysis. An executive must be involuntarily terminated within two years of a change-in-control in order to receive benefits (double-trigger).

 

 

A severance payment equal to two times the executive’s annual base salary and target Performance Award (2.99 times for the CEO).

 

 

An additional two years of credited service and age for purposes of calculating retirement benefits (three years for the CEO).

 

 

A financial, tax and outplacement allowance of $50,000.

 

 

Eighteen months of health and welfare benefits at employee rates.

 

 

Tax gross-up protection in the event severance exceeds statutory thresholds and becomes subject to an excise tax.

 

 

LTI awards in the form of Performance Shares and Deferred Stock will vest and be delivered as soon as possible after the change-in-control event. Stock Options will vest immediately.


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The following table summarizes the value of the incremental benefits to be received due to an Involuntary Termination without cause or a change-in-control event as of December 31, 2011.

INVOLUNTARY TERMINATION OR CHANGE-IN-CONTROL VALUES

 

Name   Type of Benefit   Involuntary
Termination
Without Cause ($)
    Change-in-Control ($) (a)  
Andrew Liveris   Severance     1,958,654        13,342,875   
  Increase in Present Value of Pension     n/a        3,926,576   
  Health & Welfare Benefits     6,426        6,426   
  Outplacement & Financial Planning     30,000        50,000   
  Total:      1,995,080        17,325,877   
William Weideman   Severance     1,469,215        1,469,215   
  Increase in Present Value of Pension     n/a        706,328   
  Health & Welfare Benefits     6,426        6,426   
  Outplacement & Financial Planning     30,000        30,000   
  Total:      1,505,641        2,211,969   
Joe Harlan (b)   Severance     453,538        453,538   
  Increase in Present Value of Pension     n/a        0   
  Health & Welfare Benefits     6,426        6,426   
  Outplacement & Financial Planning     30,000        30,000   
  Total:      489,964        489,964   
Charles Kalil   Severance     1,587,906        3,769,950   
  Increase in Present Value of Pension     n/a        1,870,597   
  Health & Welfare Benefits     6,426        6,426   
  Outplacement & Financial Planning     30,000        50,000   
  Total:      1,624,332        5,696,973   
Geoffery Merszei   Severance     1,659,982        3,764,981   
  Increase in Present Value of Pension     n/a        1,176,964   
  Health & Welfare Benefits     6,462        6,462   
  Outplacement & Financial Planning     30,000        50,000   
  Total:      1,696,444        4,998,407   

 

(a) An executive must meet the double trigger requirement of being involuntarily terminated within two years of a change-in-control in order to receive benefits.

 

(b) Mr. Harlan is not currently retirement eligible but as noted above would receive the same treatment for Outstanding LTI Awards described above in “Retirement, Death, or Disability” in the event of an Involuntary Termination Without Cause or Change-in-Control, resulting in his then-outstanding equity awards with a fiscal year-end intrinsic value of $5,484,664 (as set forth in the Outstanding Equity Awards at Fiscal Year-End Table) becoming subject to the retention provisions described above.


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Director Compensation

Dow benchmarks its non-employee Director compensation programs, designs and compensation elements against the same Survey Group used for executive compensation, as described in the Market Benchmarking section of the Compensation Discussion and Analysis. Dow targets the median of the Survey Group for all Director compensation elements. The following table lists the compensation provided to Dow’s Directors in 2011.

DIRECTOR COMPENSATION FOR 2011

 

Name   Fees Earned
or Paid in
Cash ($)
    Stock
Awards
($) (a)
    Option
Awards
($)
    Non-Equity
Incentive Plan
Compensation
($)
    Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings ($)
(b)
    All Other
Compensation
($)
    Total ($)  

Arnold A. Allemang

    115,000        106,191                                    221,191   

Jacqueline K. Barton

    125,000        106,191                      2,398               233,589   

James A. Bell

    141,250        106,191                      1,499               248,940   

Jeff M. Fettig

    156,250        106,191