DEF 14A 1 d111044ddef14a.htm DEF 14A DEF 14A

 

 

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

(Name of Registrant as Specified In Its Charter)

 

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

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The Dow Chemical Company

Midland, Michigan 48674

NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS

 

Dear Stockholder of The Dow Chemical Company:

At the 2016 Meeting, stockholders will vote on the following matters either by proxy or in person:

 

1.

Election of the 13 Directors named in the attached Proxy Statement.

 

2.

Ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2016.

 

3.

Advisory resolution to approve executive compensation.

 

4.

One proposal submitted by a stockholder, if properly presented.

 

5.

Transaction of any other business as may properly come before the 2016 Meeting.

Your Board of Directors has set the close of business on March 14, 2016, as the record date for determining stockholders who are entitled to receive notice of the 2016 Meeting and any adjournment, or postponement, and who are entitled to vote. A list of stockholders of record entitled to vote shall be open to any stockholder for any purpose relevant to the 2016 Meeting for ten days before the 2016 Meeting, during normal business hours, at the Office of the Corporate Secretary, 2030 Dow Center, Midland, Michigan.

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. A ticket of admission or proof of stock ownership is necessary to attend the 2016 Meeting, as described in this Proxy Statement under “Voting and Attendance Procedures.”

If you are unable to attend the 2016 Meeting, please listen to the live webcast at the time of the 2016 Meeting, or the replay after the event, at www.DowGovernance.com.

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

 

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Amy E. Wilson

Corporate Secretary and Assistant General Counsel

April 1, 2016

MEETING INFORMATION

 

DATE: Thursday, May 12, 2016

 

TIME: 10:00 a.m. (EDT)

 

PLACE: Midland Center for the Arts

1801 West St. Andrews

Midland, Michigan 48640

A map is printed on the back page of this Proxy Statement and is also included on your ticket of admission.

HOW TO VOTE

Your vote is important. Whether or not you plan on attending the 2016 Meeting, please vote your shares as soon as possible on the Internet, by telephone or by mail. 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.

 

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BY PHONE

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PROXY STATEMENT SUMMARY

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

 

Date and Time   Place   Record Date
May 12, 2016, 10:00 a.m. EDT   Midland Center for the Arts, 1801 West St. Andrews, Midland, MI 48640   March 14, 2016

Meeting Agenda and Voting Recommendations

 

Item    Agenda Item   Board Recommendation   Page  

1

  Election of 13 Directors   FOR EACH NOMINEE     3   

2

  Ratification of the Appointment of Deloitte & Touche LLP as the Company’s Independent Registered Public Accounting Firm   FOR     53   

3

  Advisory Resolution to Approve Executive Compensation   FOR     55   

4

  Stockholder Proposal on Proxy Access   AGAINST     56   

2015 Company Performance Highlights

Dow’s focus on executing against its priorities has delivered significant milestones and performance records in 2015:

 

¡

The Company delivered to stockholders $4.6 billion through declared dividends and share repurchases1 – including raising the annualized dividend to a new record of $1.84 per share.

 

¡

The Company announced a series of significant portfolio management milestones including: the signing of a definitive agreement with DuPont to combine the companies in a merger of equals transaction that is intended to subsequently create three leading, independent science-based companies; the signing of a definitive agreement to restructure ownership of Dow Corning Corporation’s Silicones business; the sale of the Company’s direct ownership interest in MEGlobal; and the successful closing of the split-off of Dow Chlorine Products to Olin Corporation.

 

¡

In addition to the significant transactions listed above, Dow’s ongoing portfolio management actions in the year included the consolidation of its Univation Technologies LLC joint venture through a step acquisition in the second quarter, and the sale of ANGUS Chemical Company and AgroFresh, Dow’s post-harvest specialty chemical business. Divestitures, since 2013, have delivered more than $13.5 billion in pre-tax value.2

 

¡

Dow achieved significant milestones with the startup of the first units of operations with polyethylene production in Saudi Arabia at its Sadara Chemical Company joint venture and the Company’s PDH unit in the U.S. Gulf Coast. These investments further enhance the Company’s industry-leading, low-cost feedstock position.

 

¡

Dow delivered year-over-year growth for three consecutive years against its key financial measures, which are aligned to executive compensation, and set an all time record for Cash Flow from Operations when excluding the K-Dow arbitration award received in 2013.

 

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1 

Includes $1.5 billion in non-cash share repurchases related to the Dow Chlorine Products transaction.

2 

Assumes a 37% tax rate.

3 

“Operating Net Income” is defined as Net Income Available for Common Shareholders excluding the impact of “Certain Items.” See Appendix A on pages A-1 – A-2 for a reconciliation to the most directly comparable U.S. GAAP measures.

 



 

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PROXY STATEMENT SUMMARY (continued)

 

 

4 

“Operating ROC” is defined as Adjusted Net Operating Profit After Tax divided by Average Total Capital. “Adjusted Net Operating Profit After Tax” is defined as Adjusted Net Income plus Preferred Stock Dividends plus Net Income Attributable to Noncontrolling Interests plus gross interest expense less tax on gross interest expense. “Adjusted Net Income” is defined as Net Income excluding the impact of “Certain Items.” “Total Capital” is defined as Total Debt plus The Dow Chemical Company’s Stockholders’ Equity plus Redeemable Noncontrolling Interest plus Non-redeemable Noncontrolling Interests. See Appendix A on pages A-1 – A-2 for a reconciliation to the most directly comparable U.S. GAAP measures.

5 

Cash Flow from Operations value excludes the K-Dow arbitration award of $1,647 million received in 2013.

6 

Total shareholder return illustrated in this chart utilizes the 30 trading day averaging method for both beginning and ending period. Source = Capital IQ

Stockholder Outreach and Engagement in 2015

Following the Company’s 2015 Annual Meeting of Stockholders, we continued our extensive outreach to stockholders, engaging with large investors who collectively held approximately 35% of our outstanding shares. In these meetings, we updated investors on our business strategy, corporate governance practices and compensation program, and learned about the various concerns of each investor. Stockholders reaffirmed that our current program structure and the changes we made in recent years to our compensation program continue to be well received. The Board and management team carefully consider the feedback from these meetings when reviewing our business, corporate governance and executive compensation profiles.

Changes Based on Stockholder Outreach

As a result of our ongoing engagement and communication with our stockholders, we have taken a number of actions in recent years.

 

Executive

Compensation
Program Item

 

 

What We Heard From Stockholders

 

 

Actions We Took to Address Feedback

   

Long-Term

Incentive (LTI)

Mix

  Strong preference for performance based equity   Effective January 1, 2014, we increased the Performance Share weighting in our LTI mix from 35% to 45% (continuing the trend that was started in 2012 when the Performance Share weighting was moved from 25% to 35%).
   
    Support for Relative Total Shareholder Return (“TSR”) and Return on Capital (“ROC”) as metrics in our Performance Share Program   Relative TSR and Return on Capital* continue to be equally weighted measures in the Performance Share Program. Relative TSR was first used in 2011 and continued each year thereafter.
   
Annual Performance Award   Preference for greater weighting toward Net Income and Management Operating Cash Flow in the annual incentive program   The 2015 Performance Award design has 100% of the award linked to two critical measures for Dow — Net Income* (60%) and Management Operating Cash Flow* (40%). Individual factor linked to financial metrics and personal achievements.
   
Share Usage   Concern about share usage in our LTI program  

In addition to the Performance Share weighting noted above, starting in 2014 we also modified our LTI mix at all levels which has significantly reduced our annual share usage. We have continued with this mix in 2015.

 

•  Share usage for 2015 totaled 7.5 million shares versus 7.9 million shares in 2014 and 21.8 million shares in 2013.

•  Our annual burn rate for shares decreased to 0.24% in 2015 compared to 0.43% in 2014 and 1.65% in 2013 using a 1:1 counting method (resulting in a three-year average of 0.75%).

*

These measures are non-GAAP financial measures. For additional information on the use of these financial performance measures, please see the “Annual Performance Award” and “Return on Capital” sections of “Section II – The 2015 Executive Compensation Program in Detail” beginning on Page 24 and Appendix A.

 



 

2016 Proxy Statement    LOGO    ii


PROXY STATEMENT SUMMARY (continued)

 

 

Executive Compensation Structures and Outcomes are Aligned with Performance

The objectives of Dow’s compensation program, set by the Compensation and Leadership Development Committee of the Board of Directors, are to align executives’ compensation with Dow’s short-term and long-term financial and operational performance and to provide the compensation framework to attract, retain and motivate key executives who are critical to achieving Dow’s vision, strategy and our longer-term success. The following table describes the primary objectives of Dow’s executive compensation program and how each is achieved.

 

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PROXY STATEMENT SUMMARY (continued)

 

 

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

 

 

Independent

 

 

Committees

Ajay Banga     56        2013      President and Chief Executive Officer, MasterCard Incorporated   ü   Compensation
Jacqueline K. Barton     63        1993      Arthur and Marian Hanisch Memorial Professor of Chemistry; Chair, Division of Chemistry & Chemical Engineering, California Institute of Technology   ü   EHS&T (Chair)
James A. Bell     67        2005      Former Executive Vice President, Corporate President and CFO, The Boeing Company   ü  

Audit (Chair)

Governance

Richard K. Davis     57        2015      Chairman and Chief Executive Officer, U.S. Bancorp   ü   Audit

Jeff M. Fettig

(Lead Director)

    58        2003      Chairman and Chief Executive Officer, Whirlpool Corporation   ü  

Compensation

Governance (Chair)

Andrew N. Liveris     61        2004      Chief Executive Officer and Chairman, The Dow Chemical Company    
Mark Loughridge     62        2015      Former Chief Financial Officer, International Business Machines Corporation   ü   Audit
Raymond J. Milchovich     66        2015      Lead Director, Nucor Corporation and Former Chairman and Chief Executive Officer, Foster Wheeler AG   ü   Compensation
Robert S. (Steve) Miller     74        2015      President and Chief Executive Officer, International Automotive (AIG) Components Group   ü  

EHS&T

Governance

Paul Polman     59        2010      Chief Executive Officer, Unilever PLC and Unilever N.V.   ü   EHS&T
Dennis H. Reilley     62        2007      Non-Executive Chairman, Marathon Oil Corporation   ü  

Compensation (Chair)

Governance

James M. Ringler     70        2001      Chairman, Teradata Corporation   ü   Audit
Ruth G. Shaw     67        2005     

Former Group Executive, Public Policy and President,

Duke Nuclear

  ü   EHS&T

Corporate Governance Highlights

As part of Dow’s commitment to high ethical standards, the Board follows sound governance practices. These practices are described in more detail beginning on page 10 and our website: www.DowGovernance.com.

 

Board Independence  

ü 12 of 13 Director nominees are independent

 

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

Director Elections  

ü Annual Board elections

 

ü Directors are elected by a majority of votes cast

 

ü Directors not elected by a majority of votes cast are subject to the Company’s resignation policy

Board Practices  

ü Non-management Board members meet in executive session without management at each regularly scheduled Board meeting

 

ü Annual Board and Committee evaluations

 

ü Board member orientation and education program

Stock Ownership Requirements  

ü Our non-employee Directors are expected to own Company common stock equal in value to at least five times the annual Board retainer fee within five years after joining the Board

 

ü Board members must hold all restricted shares until retirement

 

ü We prohibit executives and directors from hedging or pledging Company stock

Stockholder Rights  

ü Stockholder right to call special meetings (with a 25% ownership threshold)

 

ü No super-majority stockholder voting requirements

 



 

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2016 ANNUAL MEETING OF STOCKHOLDERS

THE DOW CHEMICAL COMPANY

Table of Contents

 

Notice of the Annual Meeting

  

Proxy Statement Summary

     i   

Voting and Attendance Procedures

     1   

Agenda Item 1: Election of Directors

     3   

Corporate Governance

     10   

Compensation and Leadership Development Committee Report

     17   

Compensation Information

  

Compensation Discussion and Analysis

     19   

Compensation Tables and Narratives

     40   

Equity Compensation Plan Information

  

Beneficial Ownership of Company Stock

     52   

Agenda Item 2: Ratification of the Appointment of the Independent Registered Public Accounting Firm

     53   

Agenda Item 3: Advisory Resolution to Approve Executive Compensation

     55   

Agenda Item 4: Stockholder Proposal on Proxy Access

     56   

Audit Committee Report

     58   

Other Governance Matters

     59   

Appendix A: Supplemental Information

     A-1   

Map to Annual Meeting of Stockholders

  

This Proxy Statement is issued in connection with the 2016 Annual Meeting of Stockholders of The Dow Chemical Company to be held on May 12, 2016. 

 

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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF

PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON

THURSDAY, MAY 12, 2016 AT 10:00 A.M. EDT

The 2016 Proxy Statement and 2015 Annual Report (with Form 10-K)

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

VOTING AND ATTENDANCE 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 three other agenda items to be voted upon at the 2016 Annual Meeting of Stockholders (the “2016 Meeting”) and any adjournment or postponement of the 2016 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 April 1, 2016.

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 proxy or voting form is properly executed and received by the independent Inspector of Election prior to the 2016 Meeting. Except as provided below with respect to shares held in employee savings plans, if no specific instructions are given 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 proxy or voting instructions at any time before their use at the 2016 Meeting by sending a written revocation, by submitting another proxy or voting form on a later date, or by attending the 2016 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 employee savings plans, and requires the appointment of an independent tabulator and Inspector of Election for the 2016 Meeting.

Dividend Reinvestment Plan Shares and Employee Savings Plans Shares

If you are enrolled in the dividend reinvestment plan (“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 Trust Company, N.A., 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 employee 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. EDT on May 9, 2016.

 

2016 Proxy Statement    LOGO    1


VOTING AND ATTENDANCE PROCEDURES (continued)

 

 

Dow Shares Outstanding and Quorum

At the close of business on the record date, March 14, 2016, there were 1,121,830,068 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. The holders of at least 50% of the issued and outstanding shares of common stock entitled to vote that are present in person or represented by proxy constitute a quorum for the transaction of business at the 2016 Meeting. Abstentions and broker non-votes will be included in determining the presence of a quorum at the 2016 Meeting. Broker non-votes occur when a person holding shares in “street name,” meaning that their shares are held in a nominee name or beneficially through a bank or brokerage firm, does not provide instructions as to how to vote their shares and the broker is not permitted to exercise voting discretion. Under New York Stock Exchange rules, your broker may vote shares held in street name on the Ratification of the Appointment of the Independent Registered Public Accounting Firm without instruction from you, but may not vote on any other matter to be voted on at the 2016 Meeting without instruction from you.

Proxy Solicitation on Behalf of the Dow Board

Your Board of Directors is soliciting proxies to provide an opportunity to all stockholders to vote on agenda items, whether or not the stockholders are able to attend the 2016 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 by Dow on request. The cost of solicitation will be borne by the Company.

Attending the 2016 Meeting

A ticket of admission or proof of stock ownership is necessary to attend the 2016 Meeting. A ticket of admission is included with your proxy materials. Stockholders with registered accounts (meaning that your shares are represented by certificates or book entries in your name so that you appear as a stockholder on the records of our stock transfer agent) or who are participants in the Dividend Reinvestment Program or employee savings plans should check the box on the voting form if attending in person. Other stockholders holding stock in street name should bring their ticket of admission. Street name holders without tickets of admission will need proof of record date ownership for admission to the 2016 Meeting, such as a letter from the bank or broker. In addition, street name holders who wish to vote in person at the 2016 Meeting must obtain a “legal proxy” from the bank, broker or other holder of record that holds their shares in order to be entitled to vote at the 2016 Meeting. All stockholders wishing to attend the meeting should also bring and present a government issued photo identification for admittance to the 2016 Meeting.

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 2016 Meeting begins. If you are unable to attend the 2016 Meeting, please listen to the live webcast at the time of the 2016 Meeting, or the replay after the event, at www.DowGovernance.com.

 

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AGENDA ITEM 1

ELECTION OF DIRECTORS

In accordance with the recommendation of the Governance Committee, the Board of Directors has nominated Ajay Banga, Jacqueline K. Barton, James A. Bell, Richard K. Davis, Jeff M. Fettig, Andrew N. Liveris, Mark Loughridge, Raymond J. Milchovich, Robert S. Miller, 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 2017, and until their successors are elected and qualified.

Each nominee is currently serving as a Director and each has consented to serve if elected 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 15, 2016.

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 counted in determining whether a nominee is elected. 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 contrary voting instructions are provided. If something unanticipated should occur prior to the 2016 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.

 

 

 

 

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Ajay Banga

 

Age: 56

Director since 2013

 

Committees:

Compensation and

Leadership Development

 

President and Chief Executive Officer, MasterCard Incorporated

 

Biographical Data: MasterCard Incorporated (a technology company in the global payments industry). Mr. Banga joined MasterCard Incorporated in 2009 and subsequently held various executive positions including President and Chief Executive Officer, July 2010 to date; Board Member, April 2010 to date; and President and Chief Operating Officer, MasterCard Incorporated and MasterCard International Incorporated, August 2009 to July 2010.

 

Other Directorships: MasterCard Incorporated. Former director of Kraft Foods Group, Inc. (2007-2012).

 

Skills and Expertise

• global business and leadership experience as Chief Executive Officer of MasterCard Incorporated

 

• extensive experience and knowledge of international business operations and financial services which is particularly important given the global presence and financial aspects of the Company

 

• active involvement with major business and public policy organizations including the U.S.-India Business Council, the Business Roundtable, the International Business Committee of the World Economic Forum, the Council on Foreign Relations, and the Foreign Policy Association which contributes to understanding and addressing issues at the Company

 

 

 

 

2016 Proxy Statement    LOGO    3


AGENDA ITEM 1 (continued)

 

 

 

 

 

 

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Jacqueline K. Barton

 

Age: 63

Director since 1993

 

Committees:

Environment, Health, Safety and Technology (Chair)

  

Arthur and Marian Hanisch Memorial Professor of Chemistry; Chair, Division of Chemistry and Chemical Engineering, California Institute of Technology

 

Biographical Data: California Institute of Technology – Professor of Chemistry 1989 to date; Arthur and Marian Hanisch Memorial Professor of Chemistry 1997 to date; and Chair, Division of Chemistry and Chemical Engineering 2009 to date.

 

Other Directorships: None

 

Skills and Expertise

•  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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James A. Bell

 

Age: 67

Director since 2005

 

Committees:

Audit (Chair)

Governance

  

Former Executive Vice President, Corporate President and Chief Financial Officer, The Boeing Company

 

Biographical Data: The Boeing Company (an aerospace company and manufacturer of commercial jetliners and military aircraft). Mr. Bell joined Rockwell International, a predecessor of The Boeing Company in 1972 and subsequently held various executive positions including Executive Vice President, Corporate President and Chief Financial Officer 2008 to 2012.

 

Other Directorships: Apple Inc., CDW Corporation and J.P. Morgan Chase & Co.

 

Skills and Expertise

•  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

 

•  additional public company board experience as a director of Apple Inc., CDW Corporation and J.P. Morgan Chase & Co. which provides additional corporate governance and financial expertise

 

 

 

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AGENDA ITEM 1 (continued)

 

 

 

 

 

 

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Richard K. Davis

 

Age: 57

Director since 2015

 

Committees:

Audit

  

Chairman and Chief Executive Officer, U.S. Bancorp

 

Biographical Data: U.S. Bancorp (a financial services holding company). Mr. Davis joined Star Banc, a predecessor of U.S. Bancorp, in 1993 and subsequently held various executive positions including Chairman 2007 to date; Chief Executive Officer 2006 to date; President 2004 to date.

 

Other Directorships: U.S. Bancorp and Xcel Energy

 

Skills and Expertise

•  global business and leadership experience as Chairman and Chief Executive Officer of U.S. Bancorp

 

•  extensive experience and knowledge of international business operations, financial services and capital allocation which is particularly important given the global presence and financial aspects of the Company

 

•  additional public company board experience including current service as Lead Director of Xcel Energy, which provides additional corporate governance and compensation experience, financial expertise and board leadership experience

 

 

 

 

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Jeff M. Fettig

 

Age: 58

Director since 2003

Lead Director since 2011

 

Committees:

Compensation and

Leadership Development

Governance (Chair)

  

Chairman and Chief Executive Officer, Whirlpool Corporation

 

Biographical Data: Whirlpool Corporation (a manufacturer of home appliances). Mr. Fettig joined Whirlpool in 1981 and subsequently held various executive positions including Chairman and Chief Executive Officer 2004 to date.

 

Other Directorships: Whirlpool Corporation

 

Skills and Expertise

•  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

 

 

 

2016 Proxy Statement    LOGO    5


AGENDA ITEM 1 (continued)

 

 

 

 

 

 

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Andrew N. Liveris

 

Age: 61

Director since 2004

  

Chief Executive Officer and Chairman, The Dow Chemical Company

 

Biographical Data: Mr. Liveris joined The Dow Chemical Company in 1976 and subsequently held various executive positions including President 2004 to February 2016, and Chief Executive Officer 2004 to date and Chairman 2006 to date.

 

Other Directorships: International Business Machines Corporation. Former director of Citigroup, Inc. (2005-2011).

 

Skills and Expertise

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

 

• involvement with major business, public policy, and international organizations including the Business Roundtable, U.S. Business Council, the President’s Advanced Manufacturing Partnership, 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 the California Institute of Technology which provides additional corporate governance and compensation experience and financial expertise

 

 

 

 

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Mark Loughridge

 

Age: 62

Director since 2015

 

Committees:

Audit

  

Former Chief Financial Officer, International Business Machines Corporation

 

Biographical Data: International Business Machines Corporation (a manufacturer of computer hardware and software and IT consulting services). Mr. Loughridge joined International Business Machines Corporation in 1977 and subsequently held various executive positions including Chief Financial Officer May 2004 to December 2013.

 

Other Directorships: The Vanguard Group (non-public company)

 

Skills and Expertise

• global business and leadership experience as Chief Financial Officer of International Business Machines Corporation

 

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

 

• experience as lead director of The Vanguard Group which provides additional corporate governance and financial expertise

 

 

 

 

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AGENDA ITEM 1 (continued)

 

 

 

 

 

 

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Raymond J. Milchovich

 

Age: 66

Director since 2015

 

Committees:

Compensation and Leadership Development

  

Lead Director, Nucor Corporation and Former Chairman and Chief Executive Officer, Foster Wheeler AG

 

Biographical Data: Nucor Corporation (a producer of steel and iron) – Director 2002 to 2007 and 2012 to date; Lead director September 2013 to date. Foster Wheeler AG (a company that engineers and constructs facilities for oil and gas, liquid natural gas, refining, chemical, pharmaceutical and power industries) – Chief Executive Officer 2001 to 2010; Non-Executive Chairman of the Board and Consultant 2010 to November 2011.

 

Other Directorships: Nucor Corporation. Former director of Foster Wheeler AG (2001-2011).

 

Skills and Expertise

•  global business and leadership experience as lead director of Nucor Corporation and former Chief Executive Officer of Foster Wheeler AG

 

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

 

•  additional public company board experience as director of Nucor Corporation and former director of Foster Wheeler AG which provides additional corporate governance and compensation experience and financial expertise

 

 

 

 

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Robert S. Miller

 

Age: 74

Director since 2015

 

Committees:

Environment, Health,

Safety and Technology

Governance

  

President and Chief Executive Officer, International Automotive Components (IAC) Group

 

Biographical Data: President and Chief Executive Officer, International Automotive Components (IAC) Group (a provider of automotive interiors technology) August 2015 to date. American International Group Inc. (a provider of insurance and financial services) – Non-Executive Chairman of the Board May 2009 to July 2015. Hawker Beechcraft, Inc. (a manufacturer of aircraft) – Chief Executive Officer February 2012 to February 2013.

 

Other Directorships: International Automotive Components (IAC) Group (non-public company), American International Group, Inc. and Symantec Corporation. Former director of Hawker Beechcraft, Inc. 2012 to 2013.

 

Mr. Miller was Chief Executive Officer of Hawker Beechcraft, Inc. when it filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code in May 2012.

 

Skills and Expertise

•  global business and leadership experience in various executive capacities and industries

 

•  finance and accounting expertise including experience with and direct involvement and supervision in the preparation of financial statements and risk management as former CFO of Chrysler Corporation

 

•  additional public company board experience as a director of American International Group and Symantec and former director of Delphi Corporation and Hawker Beechcraft which provides additional corporate governance and compensation experience and financial expertise

 

 

 

 

2016 Proxy Statement    LOGO    7


AGENDA ITEM 1 (continued)

 

 

 

 

 

 

LOGO

 

Paul Polman

 

Age: 59

Director since 2010

 

Committees:

Environment, Health, Safety and Technology

  

Chief Executive Officer, Unilever PLC and Unilever N.V.

 

Biographical Data: Unilever PLC and Unilever N.V. (a provider of nutrition, hygiene and personal care products). Mr. Polman joined Unilever PLC and Unilever N.V. in October 2008 and became Chief Executive Officer January 2009 to date.

 

Other Directorships: Unilever PLC and Unilever N.V.

 

Skills and Expertise:

•  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, public policy and international organizations including the International Business Council of the World Economic Forum, UN Global Compact, and World Business Council for Sustainable Development, all which contributes to understanding and addressing issues at the Company

 

 

 

 

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Dennis H. Reilley

 

Age: 62

Director since 2007

 

Committees:

Compensation and

Leadership Development (Chair)

Governance

  

Non-Executive Chairman, Marathon Oil Corporation

 

Biographical Data: Marathon Oil Corporation (an oil and natural gas exploration and production company) – Non-Executive Chairman January 2014 to date. Trian Advisory Partners – Member 2015 to date.

 

Other Directorships: Marathon Oil Corporation. Former director of Covidien public limited company 2007 to 2015 and H.J. Heinz Company 2005 to 2013.

 

Skills and Expertise:

•  global business and leadership experience in multiple major corporations including Marathon Oil Corporation (Non-Executive Chairman), Covidien public limited company (former Non-Executive Chairman), Praxair, Inc. (former Chairman, President and Chief Executive Officer), E.I. du Pont 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 Marathon Oil Corporation and former director of Covidien public limited company and H.J. Heinz which provides additional corporate governance and compensation experience and financial expertise

 

 

 

 

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AGENDA ITEM 1 (continued)

 

 

 

 

 

 

LOGO

 

James M. Ringler

 

Age: 70

Director since 2001

 

Committees:

Audit

  

Chairman, Teradata Corporation

 

Biographical Data: Teradata Corporation (a provider of database software, data warehousing and analytics) – Chairman October 2007 to date.

 

Other Directorships: Teradata Corporation, Autoliv Inc., John Bean Technologies Corporation and FMC Technologies, Inc. (John Bean Technologies Corporation was spun-off from FMC Technologies, Inc. in 2008.) Former director of Ingredion Incorporated 2001 to 2014.

 

Skills and Expertise:

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

 

 

 

 

LOGO

 

Ruth G. Shaw

 

Age: 67

Director since 2005

 

Committees:

Environment, Health,

Safety and Technology

  

Former Group Executive, Public Policy and President, Duke Nuclear

 

Biographical Data: Duke Energy Corporation (a provider of electricity and natural gas) – Executive Advisor October 2006 to May 2008; Group Executive, Public Policy and President, Duke Nuclear April 2006 to October 2006.

 

Other Directorships: DTE Energy Company and SPX Corporation

 

Skills and Expertise:

•  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 Company and SPX Corporation which provides additional corporate governance and compensation experience and financial expertise

 

 

 

 

2016 Proxy Statement    LOGO    9


 

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 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 members of the Board are independent: Directors Banga, Barton, Bell, Davis, Fettig, Loughridge, Milchovich, Miller, Polman, Reilley, Ringler and Shaw. 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, among other things, 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. Davis, Fettig, Loughridge, Miller and Polman served as executive officers during all or a portion of the past three years of entities with which Dow made purchases or sales. All such purchases and sales were made at arms-length, on 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 consolidated gross revenues in each of the last three fiscal years. In fact, in all cases the amounts were below 0.45%. With respect to U.S. Bancorp there were no sales or purchases in 2015, with respect to International Automotive Components Group there were purchases from Dow in 2015, while with respect to Whirlpool, International Business Machines and Unilever there were sales to and purchases from each entity which in all cases were below the 0.45% amount referenced above.

Board Leadership Structure

Since 2006, Andrew N. Liveris has served as the Chairman and Chief Executive Officer 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.

 

*

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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CORPORATE GOVERNANCE (continued)

 

 

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 and the only Director who is not independent.

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. The independent Directors annually elect one independent Director (who has served at least one full year on the Board) to serve as Lead Director. Mr. Fettig currently serves as Lead Director. Among other responsibilities, the Lead Director works with the Chairman to call Board meetings and set the Board schedule and agenda, and determines 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, serves as a liaison between the Chairman and 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. These responsibilities are detailed in the Corporate Governance Guidelines that are available at www.DowGovernance.com. 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 independent 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, compliance program 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 58, 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.

The Committees undertake numerous risk oversight activities related to their charter responsibilities. For example, 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 39 of this Proxy Statement). As another example, 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.

 

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CORPORATE GOVERNANCE (continued)

 

 

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 the Board of Directors” 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”; 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 16 Board meetings and 23 Board Committee meetings in 2015. 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. The Directors are encouraged to attend all Annual Meetings of Stockholders, and in 2015 twelve of the thirteen Directors then serving attended, with the exception of Mr. Milchovich who was unable to attend due to a conflict with the annual meeting of Nucor Corporation (the entity for which he serves as Lead Director).

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 2015, there were 15 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 14, 2016, the record date for the 2016 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, including the heightened standards applicable to members of the Audit Committee and the Compensation and Leadership Development Committee. Further, the Board has determined, in accordance with applicable requirements of the New York Stock Exchange, that the simultaneous service of Mr. Bell on the audit committees of more than three public companies does not impair his ability to effectively serve on the Audit Committee.

 

 

*

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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CORPORATE GOVERNANCE (continued)

 

 

Committee Assignments

The following table sets forth the current members of each of the Committees and the number of meetings held during 2015:

 

         
Director   Audit   Compensation and
Leadership
Development
  Environment, Health,
Safety & Technology
1
  Governance

Ajay Banga

    LOGO      

Jacqueline K. Barton

     

Chair

   

James M. Bell

  Chair       LOGO

Richard K. Davis

  LOGO        

Jeff M. Fettig

    LOGO     Chair

Andrew N. Liveris

         

Mark Loughridge

  LOGO        

Raymond J. Milchovich

    LOGO      

Robert S. Miller

      LOGO   LOGO

Paul Polman

      LOGO    

Dennis H. Reilley

    Chair     LOGO

James M. Ringler

  LOGO        

Ruth G. Shaw

      LOGO    

2015 MEETINGS

  9   5   5   4

 

1

Mr. Allemang served on the Environment, Health, Safety and Technology Committee until his retirement from the Board in May 2015.

Standing Committee and Function

Audit: 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.

Compensation and Leadership Development Committee: 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.

Environment, Health, Safety and Technology Committee: Assists the Board in fulfilling its oversight responsibilities by assessing the effectiveness of 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.

Governance Committee: 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 recommending to the Board 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, including the Company’s Corporate Governance Guidelines and self-evaluations.

Board of Directors’ Terms

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

The Company’s Corporate Governance Guidelines provide that non-employee Directors should not be nominated for election to the Board following their 72nd birthday. Mr. Miller is a current Director who is being nominated for election to the Board at the 2016 Meeting, although he has already reached age 72. Mr. Miller was appointed to the Board and nominated for election for the 2015 Annual Meeting of Stockholders pursuant to an agreement dated November 20, 2014, between the Company and

 

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CORPORATE GOVERNANCE (continued)

 

 

certain investment funds (Third Point LLC, Third Point Partners Qualified L.P., Third Point Partners L.P., Third Point Offshore Master Fund L.P., Third Point Ultra Master Fund L.P. and Third Point Reinsurance Co. Ltd. (collectively “Third Point”)). Following his first full year of service and based on its own evaluation as to the ongoing needs of the Board, the Governance Committee and the Board has determined that the current needs of the Board warrant the nomination of Mr. Miller to stand for re-election as a Director for the 2016 Meeting.

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, and that candidates are evaluated to provide for a diverse and highly qualified Board. 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, experience and attributes set forth above for all Directors and for each of the Directors in their biographies, 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 above, 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 above. Please see the nominees’ biographies on pages 3 to 9 which include several of these key attributes as they apply to the individual Directors to support the conclusion that these individuals are highly qualified to serve on the Company’s Board of Directors.

Recommendations and Nominations for Director

Among the Governance Committee’s most important functions is the selection of Directors who are recommended to the Board as candidates for election. 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.*

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 to assist in identifying and evaluating potential candidates, 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.

 

*

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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CORPORATE GOVERNANCE (continued)

 

 

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 the Company’s 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.

Certain Transactions and Relationships

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 long maintained procedures to monitor related person transactions. 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 referenced 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 in which related persons are not deemed to have a material interest under SEC rules shall be deemed to be preapproved by the Committee even if the amount involved will exceed $100,000.

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

 

*

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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CORPORATE GOVERNANCE (continued)

 

 

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.

From time to time, the Company may have employees who are related to our executive officers and directors. An adult child of Charles J. Kalil (General Counsel and Executive Vice President) is employed by the Company in a non-executive position. In 2015 she received compensation in the approximate amount of $125,000, which amount and other terms of her employment is commensurate with that of her peers and determined on a basis consistent with the Company’s human resources policies.

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 2015.

 

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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, 2015 (“2015 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

A. Banga

J. M. Fettig

R. J. Milchovich

 

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COMPENSATION INFORMATION (continued)

 

 

COMPENSATION DISCUSSION AND ANALYSIS

CD&A Table of Contents

 

Section I – Executive Summary

     19   

Business Overview

     19   

2015 Company Performance Highlights

     19   

Objectives of Dow’s Executive Compensation Program

     20   

Principle Elements of Pay

     21   

Pay at Risk

     21   

Performance Metric Aligned to Company’s Strategy

     22   

NEO Pay at a Glance

     22   

2015 SOP Vote Results and Stockholder Outreach Overview

     23   

Changes Based on Stockholder Outreach

     23   

Section II – The 2015 Executive Compensation Program in Detail

     24   

Base Salary

     24   

Annual Performance Award

     24   

Long-Term Incentive Awards

     29   

2015 Long-Term Incentive Award Decisions

     29   

Performance Share Program Results and Design

     30   

Return on Capital

     31   

Relative Total Shareholder Return and TSR Peer Group

     31   

Benefits

     32   

Perquisites

     32   

Section III – Executive Compensation Process and Past Program Changes

     33   

Peer Group and Survey Pay Data

     33   

Factors and Steps in Setting Pay

     34   

Committee Resources in Setting Pay

     35   

Program Changes in Recent Years

     36   

Section IV – Executive Compensation Governance

     37   

Best Practices in Executive Compensation

     37   

Stock Ownership Guidelines

     37   

LTI Grant Practices and Holding Requirements

     38   

Change-in-Control and Severance Arrangements

     38   

Executive Compensation Recovery (Clawback) Policy

     38   

Tax Deductibility of Executive Compensation

     38   

Trading, Hedging and Pledging Restrictions

     39   

Compensation Program Risk Analysis

     39   

Compensation Tables and Narratives

     40   

 

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COMPENSATION INFORMATION (continued)

 

 

COMPENSATION DISCUSSION AND ANALYSIS

Section I – Executive Summary

Business Overview

Dow is strengthening its competitive advantage by accelerating its market-driven strategy, narrowing and deepening focus on select, high-growth end-markets, and the strategic integration of our manufacturing operations with new sources of cost-advantaged feedstocks. We remain focused on execution, controlling the levers within the Company’s control, driving productivity measures and positioning Dow for growth and delivery against our clear financial priorities – ultimately enabling higher value and return for our stockholders.

2015 Company Performance Highlights

2015 was a defining year for Dow. The Company continued to demonstrate the discipline and agility needed to deliver consistent earnings and margin growth as well as strong cash flow. Investments in innovative products and technologies continued to drive margin expansion amidst ongoing macroeconomic uncertainty. Dow further advanced its targeted portfolio management actions, reducing exposure to non-strategic assets and businesses, as well as the ongoing progress in key growth investments on the U.S. Gulf Coast and in Saudi Arabia. Self-help productivity actions continued to enhance financial results and underpin the Company’s ability to return increasing value to stockholders.

Dow’s focus on executing against its priorities has delivered significant milestones and performance records in 2015:

 

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The Company delivered to stockholders $4.6 billion through declared dividends and share repurchases1 – including raising the annualized dividend to a new record of $1.84 per share.

 

¡

The Company announced a series of significant portfolio management milestones including: the signing of a definitive agreement with DuPont to combine the companies in a merger of equals transaction that is intended to subsequently create three leading, independent science-based companies; the signing of a definitive agreement to restructure ownership of Dow Corning Corporation’s Silicones business; the sale of the Company’s direct ownership interest in MEGlobal; and the successful closing of the split-off of Dow Chlorine Products to Olin Corporation.

 

¡

In addition to the significant transactions listed above, Dow’s ongoing portfolio management actions in the year included the consolidation of its Univation Technologies LLC joint venture through a step acquisition in the second quarter, and the sale of ANGUS Chemical Company and AgroFresh, Dow’s post-harvest specialty chemical business. Divestitures, since 2013, have delivered more than $13.5 billion in pre-tax value2.

 

¡

Dow achieved significant milestones with the startup of the first units of operations with polyethylene production in Saudi Arabia at its Sadara Chemical Company joint venture and the Company’s PDH unit in the U.S. Gulf Coast. These investments further enhance the Company’s industry-leading, low-cost feedstock position.

 

¡

Dow delivered year-over-year growth for three consecutive years against its key financial measures, which are aligned to executive compensation, and set an all-time record for Cash Flow from Operations when excluding the K-Dow arbitration award received in 2013.

 

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1

Includes $1.5 billion in non-cash share repurchases related to the Dow Chlorine Products transaction.

2 

Assumes a 37% tax rate.

 



 

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COMPENSATION INFORMATION (continued)

 

 

3 

“Operating Net Income” is defined as Net Income Available for Common Stockholders excluding the impact of “Certain Items.” See Appendix A on pages A-1 – A-2 for a reconciliation to the most directly comparable U.S. GAAP measures.

4 

“Operating ROC” is defined as Adjusted Net Operating Profit After Tax divided by Average Total Capital. “Adjusted Net Operating Profit After Tax” is defined as Adjusted Net Income plus Preferred Stock Dividends plus Net Income Attributable to Noncontrolling Interests plus gross interest expense less tax on gross interest expense. “Adjusted Net Income” is defined as Net Income excluding the impact of “Certain Items.” “Total Capital” is defined as Total Debt plus The Dow Chemical Company’s Stockholders’ Equity plus Redeemable Noncontrolling Interest plus Non-redeemable Noncontrolling Interests. See Appendix A on pages A-1 – A-2 for a reconciliation to the most directly comparable U.S. GAAP measures.

5 

Cash Flow from Operations value excludes the K-Dow arbitration award of $1,647 million received in 2013.

6 

Total shareholder return illustrated in this chart utilizes the 30 trading day averaging method for both beginning and ending period. Source = Capital IQ

Objectives of Dow’s Executive Compensation Program

The objectives of Dow’s compensation program, set by the Compensation and Leadership Development Committee of the Board of Directors, are to align executives’ compensation with Dow’s short-term and long-term financial and operational performance and to provide the compensation framework to attract, retain and motivate key executives who are critical to achieving Dow’s vision, strategy and our longer-term success. The following table describes the primary objectives of Dow’s executive compensation program and how each is achieved.

 

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COMPENSATION INFORMATION (continued)

 

 

Principal Elements of Pay

The elements of the Company’s executive compensation program are presented below in summary format.

 

Component        Form        Purpose
       
Base Salary     Cash     Provide a competitive fixed rate of pay recognizing different levels of responsibility and performance within the Company.
       

Annual

Incentive

   

Performance

Cash Award

    Reward employees for achieving critical financial and operational Company goals.
       

Long-Term

Incentive

   

Performance

Shares (45%)

    Motivate employees and reward the achievement of specified financial goals and superior TSR performance over a three-year period.
       
    Stock Options (30%)     Provide incentive for long-term creation of stockholder value.
       
    Deferred Stock (25%)     Help the Company retain its NEOs and other key employees.
       
Other     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.
       
    Perquisites     Limited perquisites are provided to executives to facilitate strong performance on the job and enhance their personal security and productivity.

Pay at Risk

The mix of the total direct compensation elements for the CEO and other NEOs are shown below. The charts outline the size, in percentage terms, of each element of targeted direct compensation at the date of grant. The red section of the charts reflects the incentive or at-risk performance-based components of compensation (e.g., 71% of the CEO’s compensation is at-risk performance based).

 

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COMPENSATION INFORMATION (continued)

 

 

Performance Metrics Aligned to Company’s Strategy

The Company’s strategy defines clear financial priorities to underpin increasing returns and value for our stockholders. These financial and operational performance metrics are utilized in our annual Performance Award incentive plan and Performance Share program. The following graphics show for each program the performance metrics, their weighting and the target metrics. For additional details associated with each program and their respective performance, reference “Annual Performance Award” on page 24 and “Performance Share Program Results and Design” on page 30.

 

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NEO Pay at a Glance

Consistent with our pay-for-performance philosophy, a significant portion of our NEO’s 2015 compensation consisted of variable performance-based annual and long-term incentives. The Committee assessed each NEO’s performance in the context of our stated 2015 operational and financial goals.

For 2015, the major Committee actions regarding our NEOs’ compensation were as follows:

 

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Salaries generally were increased based on peer group alignment.

 

¡

Annual incentives under our Performance Award Program paid out at between 163% and 179% of target.

 

¡

Grant date fair values of long-term equity awards granted in 2015 increased over prior year awards based on peer group alignment.

 

¡

2012-2014 Performance Share awards vested in February 2015 at 63.7% of target, as reported in the “Option Exercises and Stock Vested for 2015” table on page 44 reflecting Return on Capital and Relative TSR results below the target level.

 

¡

2013-2015 Performance Share awards vested in February 2016 at 173% of target, which will be reported in the 2017 proxy statement reflecting Return on Capital and Relative TSR results above the target level

 


 

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COMPENSATION INFORMATION (continued)

 

 

2015 SOP Vote Results and Stockholder Outreach Overview

At the Company’s 2015 Annual Meeting of Stockholders, more than 88% of the votes cast by our stockholders approved our Say-on-Pay proposal, a significant increase over the 79% approval at our 2014 Annual Meeting. We believe this improvement reflects the implementation of feedback from our stockholders in regards to the changes to our LTI mix, share usage, and additional disclosures on our plan metrics and peer groups.

Following the Company’s 2015 Annual Meeting of Stockholders, we continued our extensive outreach to stockholders, engaging with large investors who collectively held approximately 35% of our outstanding shares. In these meetings, we updated investors on our business strategy, corporate governance practices and compensation program, and learned about the perspectives and any concerns of each investor. Stockholders reaffirmed our current program structure and the changes we made in recent years to our compensation program continue to be well received. The Board and management team carefully considers the feedback from these meetings, as well as stockholder support for our most recent Say-on-Pay proposal, when reviewing the business, corporate governance and executive compensation profiles. Based on our most recent Say-on-Pay vote and our subsequent engagement with our stockholders, we did not make any changes to our executive compensation programs other than the change addressed below.

Changes Based on Stockholder Outreach

In 2015, to address the preference for greater weighting toward Net Income and Management Operating Cash Flow in the annual cash incentive program, the Performance Award design had 100% of the award linked to these two critical measures. Net Income was weighted at 60% and Management Operating Cash Flow was weighted at 40%. An individual factor acted as a modifier and is linked to other financial metrics (ie: EBITDA vs. plan and cost management) as well as personal achievements.

In recent years, other key feedback included concern about share usage in our LTI program. Starting in 2014, we modified our LTI mix at all levels which significantly reduced annual share usage compared to 2013 levels. A contributing component to this reduction was the increased Performance Share weighting in our LTI mix from 35% to 45%. We have continued with these changes with our 2015 LTI programs, which translated to a burn rate in 2015 of 0.24% and a three year average of 0.75%, using the 1:1 counting method.

Reference the tables in “Program Changes in Recent Years” on page 36 for additional information on recent changes to the Company’s compensation program.

 


 

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COMPENSATION INFORMATION (continued)

 

 

Section II – The 2015 Executive Compensation Program in Detail

Base Salary

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 Peer Group after adjusting for Dow’s revenue size. Actual salaries reflect an individual’s responsibilities, as well as 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.

2015 Base Salary Decisions: Salary levels for the NEOs are reflective of their respective market measurement and any adjustments were made effective as of March 1, 2015. Salary adjustments of 3% were consistent with the salary adjustments provided to Dow’s salaried employee population. There were no material differences between base salaries of the Survey Peer Group and the base salary for any of the NEOs.

 

Name   2014 Base
Salary ($)
       2015 Base
Salary ($)
       Percent
Increase
 

Andrew Liveris

    1,930,800           1,930,800           0

Howard Ungerleider

    976,968           1,006,277           3

James Fitterling

    976,968           1,006,277           3

Joe Harlan

    976,968           1,006,277           3

Charles Kalil

    1,029,659           1,029,659           0

Annual Performance Award

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 be eligible 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).

Actual award payouts are determined each February following completion of the plan year by measuring the performance against each award component for the Company Component of the plan. The Committee reviews individual performance and contributions of the NEOs to determine the individual performance factor which can range from 0-125%.

2015 Performance Award Metrics and Design: The 2015 Performance Award Program focused participants on critical financial and operational goals. At the beginning of 2015, the Committee and the Board approved the financial and operational goals for the Company. In setting the goals for each measure listed below, the Committee considered the following:

 

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2014 actual business results, the 2015 business plan and expected global macroeconomic conditions. The target goal is typically set at a level consistent with our expected business plan with thresholds and maximums representing a reasonable risk/reward profile around that target based upon global macroeconomic business conditions and stretch embedded in the business plan, and with adjustments for significant M&A activities closed during the calendar year.

 

¡

The Performance Award program covers nearly all ~49,500 Dow employees globally including the NEOs

 

¡

The Committee may use discretion to adjust the earned award for all employees or executive management when all year-end results are known. If discretion is used to adjust awards, it will be clearly explained.

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 level for comparable positions within the Survey Peer Group. There were no material differences between Dow’s Survey Peer Group median range of annual bonus targets and the target Performance Award for any of the NEOs.

The amount earned is equal to a participant’s target award times the Company performance results, and modified by the individual performance factor assessment. The actual results for each financial performance measure can range from 0-200%

 

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COMPENSATION INFORMATION (continued)

 

 

of target, and are weighted as indicated in the graphic below. Even when including the impact of the individual performance factor the Performance Award is capped at a maximum payout of 200%.

The 2015 Performance Award corporate target goals and 2015 results are shown below. Net Income excluding certain items is a non-GAAP measure used by the Company in presentations to investors and is the primary financial metric in our plan. We exclude the impact of certain items from both our presentations to investors and our executive compensation performance calculations because they are not reflective of our underlying operations for the particular period in which they are recorded and, therefore, could mask our underlying operating trends. See Appendix A on pages A-1 – A-2 for a reconciliation and explanation of the items we exclude. Management Operating Cash Flow is a non-GAAP measure of cash from operations defined as net income excluding certain items plus depreciation and amortization minus capital spending and plus the change in adjusted trade working capital.

 

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As detailed on page 24 and in the graphic above, the 2015 Performance Award resulted in an earned base award equal to 163% (reflecting the 83% weighted result for net income and the 80% weighted result for management operating cash flow) of the target award opportunity for employees. As allowed by the plan, the Committee determines the individual component payout level for each NEO to reflect their personal contributions (shown in the table below).

 

Name   Year End
Base
Salary (a)
    PA Target
Percent (b)
    PA Target
Amount (c)
    Company
Component (d)
   

Individual Factor -
Committee

Assessment (e)

    Total PA
Payment
Percent (f)
    Total PA
Payout
Amount
 
Formulas               (a * b)                 (d * e)     (c * f)  

Andrew Liveris

    1,930,800        165     3,185,820        163     110     179     5,712,175   

Howard Ungerleider

    1,006,277        120     1,207,532        163     110     179     2,165,106   

James Fitterling

    1,006,277        120     1,207,532        163     110     179     2,165,106   

Joe Harlan

    1,006,277        120     1,207,532        163     100     163     1,968,278   

Charles Kalil

    1,029,659        105     1,081,142        163     105     171     1,850,374   

 

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COMPENSATION INFORMATION (continued)

 

 

In approving the foregoing amounts, the Committee took into account the following individual performance considerations. Titles, roles and responsibilities are as of December 31, 2015.

2015 NEO Individual Accomplishments

 

   

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Andrew N. Liveris

 

President, Chief Executive Officer and Chairman

  

Responsibilities: executive oversight for the strategic and operational direction of the Company. Drives the organization and facilitates decision making to maximize stockholder returns.

 

•  Exceeded all key financial targets

 

•  Delivered records in Operating EBITDA1 and Cash Flow From Operations2

 

•  Delivered 13 consecutive quarters of year-over-year Operating EPS and Operating EBITDA margin growth

 

•  Delivered Operating ROC of 12.1% (increased 130 BPS over prior year)

 

•  Delivered on all key growth catalysts and historic portfolio management actions

 

•  Completed various transactions including the Dow Chlorine Products carve-out and the first tranche to restructure the Kuwait joint ventures

 

•  Signed definitive agreement to restructure ownership of the Dow Corning joint venture

 

•  Signed definitive agreement to combine with DuPont in all-stock merger of equals and with the intent to subsequently pursue a separation into three independent, publicly traded companies

 

•  Start-up of first production at Sadara Chemical Company and the PDH unit in the U.S. Gulf Coast

 

•  Closed out the 2013 three-year strategic plan one year early hitting most strategic and financial milestones

 

•  Increased annual dividend to new historical high of $1.84/share and delivered $2.7B in share buybacks

 

•  Delivered top quartile TSR performance vs. our peer group on a 1, 2 and 3 year basis

 

•  Best ever EH&S performance, successfully closing out the 2015 Sustainability Goals and launching the 2025 Sustainability Goals

 

•  Utilized leadership platform to ensure that employees understand Dow’s commitment to maintaining the highest ethical standards remains absolute

 

 

 

1 

Operating EBITDA is defined as EBITDA excluding the impact of “Certain Items.” See Appendix A on pages A-1 – A-2 for a reconciliation and explanation of the items we exclude.

2 

Cash Flow from Operations is a record in 2015 when excluding the impact of K-Dow award of $1,647 million in 2013.

 

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COMPENSATION INFORMATION (continued)

 

 

   

 

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Howard I. Ungerleider

 

Vice Chairman,

Chief Financial Officer

  

 

Responsibilities: executive oversight for Dow’s Corporate Strategy Development, Corporate Planning, Finance, as well as Dow AgroSciences and Information Technology & Business Services. Prior to October 2015, Ungerleider’s primary oversight was the Company’s financial management and the integrity of its internal controls.

 

•  Exceeded all key financial targets

 

•  Delivered record Operating EBITDA1 and Cash Flow From Operations2

 

•  Delivered 13 consecutive quarters of year-over-year Operating EPS and Operating EBITDA margin growth

 

•  Delivered Operating ROC of 12.1% (increased 130 BPS over prior year)

 

•  Monetized non-strategic assets – delivered approximately $11B in pre-tax value from divestitures in 2015

 

•  Completed multiple key strategic assessments, resulting in signing of two historical agreements – the restructure of Dow Corning ownership and the merger of equals with DuPont – which are expected to create significant stockholder value

 

•  Increased annual dividend to new historical high of $1.84/share and delivered $2.7B in share buybacks

 

•  Maintained strong internal controls – particularly notable given the significant number of transactions that were announced and completed in 2015

 

•  Active role in the operations of Dow Corning and Dow AgroSciences

 

 

 

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James R. Fitterling

 

Vice Chairman,

Chief Operating Officer

  

 

Responsibilities: executive accountability for all of Dow’s businesses, excluding Dow AgroSciences. Fitterling also oversees operations including Environment, Health & Safety and Sustainability, Manufacturing and Engineering, and Supply Chain, as well as Research & Development. Prior to October 2015, his primary business oversight was Performance Plastics and Performance Materials & Chemicals.

 

•  Drove companywide efforts for productivity and working capital management; achieving ~$1 billion in working capital reductions

 

•  Delivered year-over-year growth in Operating EBITDA Margins of 280 BPS in Performance Materials & Chemicals and a new record Operating EBITDA of $4.8 billion in Performance Plastics

 

•  Provided integral executive leadership for key strategic projects within the Company

 

•  Dow Chlorine Products – completed the most complex deal in the chemical industry and Dow’s first Reverse Morris Trust (RMT) structure to capture maximum value for stockholders

•  MEGlobal – received $1.5B in pre-tax proceeds for Dow’s direct ownership interest in MEGlobal

•  PDH – successful start-up in the U.S. Gulf Coast which is the largest on-purpose propylene facility ever built

 

 

 

 

1 

Operating EBITDA is defined as EBITDA excluding the impact of “Certain Items.” See Appendix A on pages A-1 – A-2 for a reconciliation and explanation of the items we exclude.

2 

Cash Flow from Operations is a record in 2015 when excluding the impact of the K-Dow award of $1,647 million in 2013.

 

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COMPENSATION INFORMATION (continued)

 

 

   

 

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Joe E. Harlan

 

Vice Chairman,

Chief Commercial Officer

  

 

Responsibilities: executive accountability for Dow’s global Marketing and Sales strategy and organization. Harlan also has executive oversight of the Company’s presence in North America, Latin America, and Asia Pacific. Prior to October 2015, he had oversight for the Company’s Infrastructure Solutions, Consumer Solutions and Agricultural Sciences operating segments

 

•  Drove full year volume growth in all segments, except Agricultural Sciences, and all geographic areas when excluding the impact of divestitures and acquisitions.

 

•  Accelerated new “go-to-market” structure and leveraged the commercial excellence collaboration globally

 

•  Drove accountability and established new tools for the geographic leadership

 

•  Aggressively managed the portfolio. Ensured resources were allocated to highest near-term return in the portfolio in an effort to offset weakness in certain end markets

 

 

 

 

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Charles J. Kalil

 

General Counsel and Executive Vice President

  

 

Responsibilities: executive accountability for the Company’s strategic and tactical legal initiatives, provide counsel to Management on the Company’s strategic objectives and leading its Legal function.

 

•  Integral to the negotiation of the restructuring agreement for Dow Corning

 

•  Played a key role in the creation of the merger of equals agreement with DuPont

 

•  Provided strategic counsel for all other key projects within the Company

 

•  Dow Chlorine Products – completed most complex deal in the chemical industry and Dow’s first Reverse Morris Trust (RMT) structure to capture maximum value for stockholders

 

•  MEGlobal – received $1.5B in pre-tax proceeds for Dow’s direct ownership interest in MEGlobal

 

•  Managed Dow’s legal support for the implementation of Sadara and all of the U.S. Gulf Coast growth projects

 

•  Managed Dow’s successful year in litigation and corporate transactions legal support

 

•  Provided counsel to the Board of Directors with respect to onboarding of four new Directors and other matters related to corporate governance and ethics and compliance

 

 

 

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COMPENSATION INFORMATION (continued)

 

 

Long-Term Incentive Awards

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 and the attainment of Company performance goals, retain top talent and create an ownership alignment with stockholders. As with Dow’s approach for all elements of compensation, LTI grant levels are targeted at the median of the Survey Peer Group for comparable positions. Performance metrics and stock price determine the actual payout of LTI grants.

2015 Long-Term Incentive Award Decisions

As part of our response to stockholder feedback, the Committee made two substantive changes to our LTI program that took effect for LTI programs beginning in 2014. The weighting for Performance Shares was increased to 45% – making it the largest component of our LTI mix. The Committee made this change in response to stockholder feedback and to align a greater portion of our executives’ earned compensation to Dow’s relative TSR and ROC performance. In 2014, the Committee also reduced the maximum payout of the Performance Share programs to 200% from 250% reflecting best practices.

 

LTI Vehicle   2015
Weighting
    Vesting Terms and Other Conditions
Performance Shares     45  

 

Performance Shares can be earned at between 0 and 200% (250% for awards granted prior to 2014) of the target award opportunity after a three-year performance period based on an equal weighting of two goals:

 

• Dow’s TSR versus a pre-established 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.

 

Stock Options     30  

 

The exercise price equals the closing price on the date of grant. Options vest in three equal annual installments and expire after ten years.

 

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.

 

In February 2015, the Committee approved the LTI grant for each NEO as shown in the Summary Compensation Table based upon Dow’s Survey Peer Group median LTI values and reflective of the mix of equity vehicles described above. There were no material differences between the Survey Peer Group median LTI target values and the target LTI award values for any of the NEOs. The Committee also approved the 2015-2017 Performance Share Program design and metrics and the results of the 2013-2015 Performance Share Program which delivered earned shares in February 2016.

 

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COMPENSATION INFORMATION (continued)

 

 

Performance Share Program Results and Design

All three of the Company’s Performance Share programs focus participants on Relative TSR and ROC. The following graphic illustrates each program’s metric goals and the payout result for the 2013-2015 program.

 

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COMPENSATION INFORMATION (continued)

 

 

Return on Capital

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. Net Operating Profit after Tax (excluding certain items) is a net income measure the Company uses in presentations to investors that excludes preferred stock dividends, net income attributable to non-controlling interests, and interest expense, exclusive of the certain items identified on pages A-1 – A-2, and as presented in the reconciliations available at www.dow.com/investor/earnings. To achieve a target payout on the ROC portion, Dow’s ROC must equal or exceed pre-established ROC goals for the same period.

The target goal represents our expected level of ROC over the three-year performance period while the threshold goal represents the minimum level of performance that would warrant any payout and the maximum goal represents stretch performance that would warrant a maximum payout. Dow’s ROC target is 10% across the industry cycle and as a result the target for Performance Share Programs ranges from 10% to 12.2% on current outstanding grants.

Relative Total Shareholder Return and TSR Peer Group

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.

Dow competes with a wide variety of both industry and non-industry specific companies for executive talent and investor assets. In order to ensure our executive pay program is competitive and has a strong link to relative stock price performance, we maintain two peer groups to evaluate and determine executive compensation: the Total Shareholder Return (“TSR”) Peer Group and the Survey Peer Group (discussed on page 33).

The TSR peer group is comprised predominately of companies selected from the S&P 500 Chemical Index and several companies from Dow’s Survey Peer Group that are technology-based and manufacturing-based global companies. The table below shows the 16 company TSR peer group used for performance share programs prior to 2015. Sigma-Aldrich Corporation was dropped from this peer group following its acquisition by Merck KGaA in 2015.

 

 

TSR Peer Group

3M Company

  Air Products and Chemicals Inc.   BASF SE

CF Industries Holdings, Inc.

  E.I. du Pont de Nemours and Company   Eastman Chemical Company

Ecolab Inc.

  FMC Corporation   Honeywell International Inc.

International Flavors & Fragrances Inc

  Johnson Controls, Inc.   Monsanto Company

PPG Industries, Inc.

  Praxair, Inc.   The Procter & Gamble Company

United Technologies Corporation

   

 

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COMPENSATION INFORMATION (continued)

 

 

In 2014, after a thorough review of prevalent and emerging market practices, the Committee decided that beginning with the 2015-2017 Performance Share Program and until further notice, the TSR peer group will be the S&P 500 Index. The Committee believes the S&P 500 Index represents the broadest and most reliable measurement to assess TSR.

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.

Benefits

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.

Perquisites

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. In 2012, the Committee eliminated the company car perquisite for all executives except the CEO, effective January 1, 2013. The Committee determined that the other current perquisites are within an appropriate range of competitive compensation practices. 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. The Company provides the NEOs and other selected executives the following limited perquisites:

 

¡

Financial and Tax Planning Support

 

¡

Executive Physical Examination

 

¡

Executive Excess Umbrella Liability Insurance

 

¡

Home Security Alarm System

In addition, the CEO is provided a company car and is required by the Board of Directors for security and immediate availability reasons to use corporate aircraft for personal travel.

 

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COMPENSATION INFORMATION (continued)

 

 

SECTION III: Executive Compensation Process and Past Program Changes

Peer Group and Survey Pay Data

Dow competes with a wide variety of both industry and non-industry specific companies for executive talent and investor assets. In order to ensure our executive pay program is competitive and has a strong link to stock price performance, we maintain two peer groups to evaluate and determine executive compensation: the Survey Peer Group (discussed below) and the Total Shareholder Return (“TSR”) Peer Group (discussed on page 31).

The Committee considers relevant market pay practices as one of several factors when establishing executive compensation levels and evaluating compensation programs including base salary, annual incentives and long-term incentives. In order to maintain the competitiveness of our compensation programs, Dow compares its executive compensation programs against a Survey Peer Group of 20 companies. These companies provide a relevant comparison based on their similarity to Dow in size and complexity taking into account factors such as revenues, market capitalization, global scope of operations and diversified product portfolios. The Committee believes that a mix of both industry and non-industry peers provides a balanced and realistic perspective on the competition for the pool of potential executive talent. Market pay data for the Survey Peer Group is gathered through compensation surveys conducted by Willis Towers Watson, Mercer and Equilar. Dow targets the median of the Survey Peer Group for all compensation elements in order to attract, motivate, develop and retain top level executive talent. Annual Performance Award targets and long-term incentive grants reflect market median values while actual payouts are dependent on performance.

The Survey Peer Group is periodically evaluated and updated to ensure the companies in the group remain relevant. The Survey Peer Group was last modified in 2012 when Tyco International and Kraft Foods were eliminated since both companies split into two companies and the resulting company size and profile no longer met the peer group criteria.

Lockheed Martin and Coca-Cola were selected as replacements based upon an assessment of companies within our industry and in adjacent industries, companies with profiles similar to Dow’s based upon business complexity, innovation and/or technology, industries and markets served, as well as companies with similar revenue size, market capitalization, geographic footprint, and those companies we compete with for talent.

 

 

Survey Peer Group

3M Company

  Alcoa Inc.   Archer Daniels Midland Company

The Boeing Company

  Caterpillar Inc.   The Coca-Cola Company

E.I. du Pont de Nemours and Company

  Eli Lilly and Company   Emerson Electric Co.

General Electric Company

  Honeywell International Inc.   Johnson & Johnson

Johnson Controls Inc.

  Lockheed Martin Corporation   Monsanto Company

PepsiCo, Inc.

  Pfizer Inc.   PPG Industries, Inc.

The Procter & Gamble Company

  United Technologies Corporation  

 

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COMPENSATION INFORMATION (continued)

 

 

Factors and Steps in Setting Pay

Compensation for the NEOs and other executive officers is evaluated and set annually by the Committee after considering the following factors:

 

¡

Median levels of compensation for similar jobs and job levels in the market, taking into account revenue relative to the Survey Peer Group

 

¡

Company performance against financial measures including net income, earnings per share, EBITDA (i.e. Net Income, before interest, income taxes, depreciation, and amortization), ROC, relative TSR, operating cash flow, and cost management discipline

 

¡

Company performance relative to goals approved by the Committee

 

¡

Business climate, economic conditions and other factors

 

¡

Each executive’s experience, knowledge, skills and personal contributions

The CEO makes recommendations to the Committee regarding compensation for senior executives after reviewing the Company’s overall performance, each executive’s personal contributions and relevant compensation market data from Dow’s Survey Peer Group for similar jobs and job levels. 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 compensation market data from Dow’s Survey Peer 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.

As part of the review, Company management and the Committee may 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 a reference point to assist the Committee’s overall understanding of NEO compensation.

 

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COMPENSATION INFORMATION (continued)

 

 

Committee Resources in Setting Pay

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.

The Committee considers several resources, analytical tools and performance measures 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 Peer 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 Dow’s 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 Chair of the Committee. In 2015, no such approvals were requested or given as Mr. Halloran provided no services to management. Mercer has multiple safeguards and procedures in place to maintain the independence of the consultants in their executive compensation consulting practice, and the Committee has determined that the compensation consultant’s work has not raised any conflict of interest. These safeguards include a rigidly enforced code of conduct, a policy against investing in client organizations and separation between Mercer’s executive compensation consulting and its other administrative and consulting business units from a leadership, performance measurement, and compensation perspective. In 2015, Mercer and its affiliates provided approximately $1.9 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. Mercer’s aggregate fees for executive and director compensation consulting services in 2015 were approximately $181,000. The Committee has considered factors relevant to Mr. Halloran’s independence from management under SEC rules and has determined that Mr. Halloran is independent from management.

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 Peer Group

 

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

 

•    Assisting the CEO 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

 

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

 

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

 

•    Benchmarking of key compensation practices and trends in executive compensation

 

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COMPENSATION INFORMATION (continued)

 

 

Program Changes in Recent Years

 

Executive

Compensation

Program Item

  What We Heard From Stockholders   Actions We Took to Address Feedback
Long-Term Incentive (“LTI”) Mix   Strong preference for performance based equity  

Effective January 1, 2014, we increased the Performance Share weighting in our LTI mix from 35% to 45% (continuing the trend that was started in 2012 when the Performance Share weighting was moved from 25% to 35%).

  Support for Relative Total Shareholder Return (“TSR”) and Return on Capital (“ROC”) as metrics in our Performance Share Program  

Relative TSR and Return on Capital* continue to be equally weighted measures in the Performance Share Program. Relative TSR was first used in 2011 and continued each year thereafter.

Annual Performance Award   Preference for greater weighting toward Net Income and Management Operating Cash Flow in the annual incentive program  

The 2015 Performance Award design has 100% of the award linked to two critical measures for Dow — Net Income* (60%) and Management Operating Cash Flow* (40%). Individual factor linked to financial metrics and personal achievements.

Share Usage   Concern about share usage in our LTI program  

In addition to the Performance Share weighting noted above, starting in 2014 we also modified our LTI mix at all levels which has significantly reduced our annual share usage. We have continued with this mix in 2015.

 

• Share usage for 2015 totaled 7.5 million shares versus 7.9 million shares in 2014 and 21.8 million shares in 2013.

 

• Our annual burn rate for shares decreased to 0.24% in 2015 compared to 0.43% in 2014 and 1.65% in 2013 using a 1:1 counting method (resulting in a three-year average of 0.75%).

 

*

These measures are non-GAAP financial measures. For additional information on the use of these financial performance measures, please see the “Annual Performance Award” and “Return on Capital” sections of “Section II – The 2015 Executive Compensation Program in Detail” beginning on page 24 and Appendix A.

In addition to these most recent changes, over the past few years, the Committee and Board have made other changes to our compensation programs that further align our executives’ compensation with stockholder interests.

 

Executive

Compensation

Program Item

  Governance Best Practices
and Other Feedback
  Actions We Have Taken
Incentive Plan Design   Incentive program maximum payout levels  

In light of governance trends, we reduced the maximum payout level of our annual and long-term incentive programs from 250% to 200%.

Stock Ownership

Guidelines

  Rigorous stock ownership guidelines in place for both Directors and Management  

In 2013, the Board approved an increase to the stock ownership guidelines for Non-Employee Directors – to five times their annual meeting retainer fee.

 

Stock ownership guideline levels for executive management were increased in 2012.

Director

Compensation

  Appropriate mix of equity and cash  

In 2013, the Governance Committee and the Board increased the weighting of equity in the total compensation structure for Non-Employee Directors. Equity now represents 54% of the total compensation structure, up from 48%.

Perquisites   Limited perquisites for NEOs   In 2012, eliminated the car perquisite for NEOs (other than the CEO) effective January 1, 2013.
Change-in-Control Agreements   No new or modified change in control agreements  

The Board prohibits new or amended change-in-control agreements. Under legacy change-in-control agreements, an executive must be involuntarily terminated within two years of a change-in-control or must resign for good reason following a change-in-control in order to receive benefits (“double trigger”).

 

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COMPENSATION INFORMATION (continued)

 

 

Section IV – 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.

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.

 

What We Do       What We Don’t Do

ü   Engage in active stockholder engagement on compensation and governance related issues. Engage in careful consideration of the annual say-on-pay results and stockholder feedback.

   

×    Executives are prohibited from engaging in speculative transactions in Company securities and from hedging or pledging Company securities, or holding Company securities in margin accounts.

ü   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”), Management Operating Cash Flow, and cost control in our incentive programs.

   

×     The Board prohibits new or amended Change-in-Control (“CIC”) agreements.

ü   Ensure our compensation programs are designed to discourage excessive risk taking. These design features include a robust clawback policy, strong stock ownership guidelines, and multiple bottom line measures in our incentive programs.

   

×    Our legacy CIC agreements (no new or amended agreements since 2007) do not provide single trigger payments, but instead 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.

ü   Ensure our LTI mix includes significant weighting (75% of the LTI grant) toward performance-based equity vehicles (Stock Options and Performance Shares).

   

×     Our stock incentive plan prohibits stock option repricing, reloads, exchanges or options granted below market value without stockholder approval.

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

   

×     Executives do not have employment agreements.

Stock Ownership Guidelines

Dow has had stock ownership guidelines in place for its NEOs and other senior executives since 1998. The Committee regularly reviews the guidelines relative to market practice and the current value of Dow stock.

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 and remain at that level until the Committee determines that an adjustment is appropriate. The guidelines were adjusted upward in 2012, after a review of current stock ownership guidelines and relevant market data. 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 five years to achieve the initial ownership guideline for their job level following promotion to that level and must maintain these levels until retirement. 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.

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.

 

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COMPENSATION INFORMATION (continued)

 

 

The following table shows the stock ownership guideline for each NEO and their holdings as of December 31, 2015.

EXECUTIVE STOCK OWNERSHIP GUIDELINES & HOLDINGS FOR 2015

 

NEO & Guidelines      Personal Holdings  
Name   Guideline
# Shares
     Multiple of
Base Salary
     2015
Personal
Holdings
     Shares Held
In Excess
of Guideline
     Percent in
Excess
of Guideline
     Shares
Held as a
Multiple of
Base Salary
 

Andrew Liveris

    250,000         6x         999,808         749,808         300      27x   

Howard Ungerleider

    80,000         4x         134,430         54,430         68      7x   

James Fitterling

    80,000         4x         203,033         123,033         154      10x   

Joe Harlan

    80,000         4x         167,515         87,515         109      9x   

Charles Kalil

    80,000         4x         416,763         336,763         421      21x   

LTI Grant Practices and Holding Requirements

LTI awards are granted under The Dow Chemical Company 2012 Stock Incentive Plan (as amended and restated), Dow’s omnibus stockholder approved plan for equity awards to employees and directors. 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 Company does not grant discounted options, backdate options or re-price outstanding options. 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.

Executives 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.

Change-in-Control and Severance Arrangements

Under the legacy change-in-control agreements, an executive must be involuntarily terminated within two years of a change-in-control or must resign for good reason following 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.

The Committee adopted a change-in-control arrangement for senior executives, including Messrs. Liveris and Kalil, in 2007. The change-in-control arrangement provides, among other things, a “double trigger” 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. While such legacy agreements remain in existence, the Committee prohibits new or amended change-in-control agreements and no new agreements have been executed since 2007.

For more information on the benefits that may be provided under the change-in-control agreements, please see “Potential Payments Upon Termination or Change-in-Control”.

Executive Compensation Recovery (Clawback) Policy

The Company has adopted an Executive Compensation Recovery Policy for executive officers that is 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 may 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

 

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COMPENSATION INFORMATION (continued)

 

 

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.

Trading, Hedging and Pledging 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. Specifically, it is against Company policy for executive officers to trade in puts or calls in Company securities or sell Company securities short. In addition, it is against Company policy for executive officers to pledge or hedge Company securities, or hold Company securities in margin accounts.

Compensation Program Risk Analysis

The Committee periodically reviews the Company’s compensation policies and practices and has determined that our incentive compensation programs do not create risks that are reasonably likely to have a material adverse effect on our Company. In conducting the review in early 2015, the Company completed an inventory of its incentive compensation plans and policies. The evaluation covered 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, provisions in severance/change-in-control policies, use of a compensation recovery policy, and Committee oversight of compensation programs.

 

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COMPENSATION INFORMATION (continued)

 

 

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, 2015.

 

Name and Principal Position   Year     Salary ($)     Bonus
($)
    Stock
Awards
($) (a)
    Option
Awards
($) (b)
    Non-Equity
Incentive Plan
Compensation
($) (c)
    Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($) (d)
    All Other
Compensation
($) (e)
    Total
($)
    Total
Without
Change in
Pension
Value (S)
 
Andrew Liveris,     2015        1,930,800        0        9,532,305        3,630,099        5,712,175        724,735        623,496        22,153,611        21,428,875   
CEO & Chairman     2014        1,921,433        0        9,369,108        3,630,036        4,232,314        7,135,205        410,276        26,698,372        19,563,167   
    2013        1,865,500        0        8,312,228        5,324,003        4,559,027        3,212        388,907        20,452,877        20,449,665   
Howard Ungerleider,     2015        1,001,392        0        2,914,837        1,110,032        2,165,106        499,678        86,907        7,777,952        7,278,273   
Vice Chairman & Chief     2014        932,278        0        2,853,865        1,105,568        1,516,743        3,013,541        76,130        9,498,125        6,484,584   
Financial Officer                    
James Fitterling,     2015        1,001,392        0        2,914,837        1,110,032        2,165,106        506,570        71,399        7,769,336        7,262,765   
Vice Chairman & Chief     2014        965,922        0        2,853,865        1,105,568        1,539,213        2,897,381        63,598        9,425,547        6,528,166   
Operating Officer     2013        903,997        0        2,301,569        1,474,051        1,676,915        1,135        36,293        6,393,961        6,392,826   
Joe Harlan,     2015        1,001,392        0        2,914,837        1,110,032        1,968,278        118,174        116,612        7,229,324        7,111,151   
Vice Chairman & Chief     2014        972,220        0        2,723,673        1,055,357        1,505,508        165,278        114,037        6,536,073        6,370,795   
Commercial Officer     2013        943,902        0        2,301,569        1,474,051        1,663,205        91,910        65,434        6,540,071        6,448,161   
Charles Kalil,     2015        1,029,659        0        2,639,454        1,005,078        1,850,374        413,424        72,580        7,010,570        6,597,146   
General Counsel &     2014        1,024,661        0        2,594,026        1,005,030        1,427,107        2,991,336        70,200        9,112,360        6,121,024   

Executive Vice President

    2013        995,131        0        2,499,820        1,407,017        1,752,920        2,613        76,834        6,734,334        6,731,721   

Totals in the above table might not equal the summation of the columns due to rounding amounts to the nearest dollar.

Note: In order to show the effect that the year-over-year change in pension value had on total compensation, as determined under applicable SEC rules, we have included an additional column to show total compensation minus the change in pension value. The amounts reported in the Total Without Change in Pension Value column may differ substantially from the amounts reported in the Total column required under SEC rules and are not a substitute for total compensation. Total without Change in Pension Value represents total compensation, as determined under applicable SEC rules, minus the change in pension value reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column. The change in pension value is subject to many external variables, such as interest rates, that are not related to Company performance. Therefore, we do not believe a year-over-year change in pension value is helpful in evaluating compensation for comparative purposes.

 

(a)

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, FASB ASC Topic 718. If valued assuming a maximum payout on the Performance Share program, the value of the awards would be: Liveris $13,014,142; Ungerleider $3,979,630; Fitterling $3,979,630; Harlan $3,979,630; Kalil $3,603,880. A discussion of the assumptions used in calculating these values can be found in Note 21 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

(b)

Dow’s valuation for financial accounting purposes uses the widely accepted lattice-binomial model and otherwise computed in accordance with FASB ASC Topic 718. The option value calculated for the NEOs’ grants was $11.61 for the grant date of February 13, 2015. The exercise price of $49.44 is the closing Dow stock price on the date of grant. A discussion of the assumptions used in calculating these values can be found in Note 21 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

(c)

Individual results for Non-Equity Incentive Plan Compensation are detailed in the Performance Award section of the 2015 Executive Compensation Program in Detail and reflect income paid in 2016 under our annual Performance Award (PA) program for performance achieved in 2015.

(d)

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.

 

40   LOGO    2016 Proxy Statement


COMPENSATION INFORMATION (continued)

 

 

  

The amounts recorded in this column vary with a number of factors, including the discount rate applied to determine the value of future payment streams. An analysis of the Change in Pension Value for 2015 is shown below. As a result of an increase in prevailing interest rates in the credit markets in 2015, the discount rate used pursuant to pension accounting rules to calculate the present value of future payments increased from 4.10% for fiscal year 2014 to 4.44% for fiscal year 2015. The decrease in pension value resulting from the change in interest rates does not result in any decrease to the underlying benefits payable to participants under the plan. Mr. Harlan participates in the Personal Pension Account plan. The $117,171 represents the increase in his 2015 cash balance account due to the increase in annual pay and interest credits.

 

Name    Change in Discount
Interest Rate ($)
     Change in Deferral
Period, Benefits,
and Other ($)
     Total Change ($)  
Andrew Liveris      (1,634,674      2,357,126         722,452   
Howard Ungerleider      (735,062      1,233,502         498,440   
James Fitterling      (754,624      1,261,011         506,387   
Joe Harlan         117,171         117,171   
Charles Kalil      (605,316      1,016,526         411,210   

 

(e)

All Other Compensation includes the cost of Company provided automobile (which was discontinued in 2013 for the NEOs other than the CEO), 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. NEOs also are provided a tax reimbursement for taxes incurred when a spouse travels for business purposes as it is sometimes necessary for spouses to accompany NEOs to business functions. These taxes are incurred because of the Internal Revenue Service’s rules governing business travel by spouses and the Company reimburses the associated taxes. No NEO is provided a tax reimbursement for personal use of aircraft.

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

 

Liveris: Personal use of Company aircraft ($446,065), Company contributions to savings plans ($86,978), financial and tax planning ($52,349), Company provided automobile ($19,477)

 

Ungerleider: Company contributions to savings plans ($47,324), financial and tax planning ($21,301), Personal use of Company aircraft ($14,749). The reported personal use of Company aircraft for Mr. Ungerleider was solely attributable to a trip in 2015 that was permitted due to the unanticipated timing of the Dow Chlorine Products divestiture announcement. This trip also resulted in imputed taxable income and Mr. Ungerleider was not provided a tax reimbursement for this personal use.

 

Fitterling: Company contributions to savings plans ($48,899), financial and tax planning ($20,404)

 

Harlan: Company contributions to savings plans ($48,922), tax reimbursement ($34,264), financial and tax planning ($31,844)

 

Kalil: Company contributions to savings plans ($51,019), financial and tax planning ($16,550)

 

2016 Proxy Statement    LOGO    41


COMPENSATION INFORMATION (continued)

 

 

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 2015

 

  
Name       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
($/Sh)
  Grant
Date Fair
Value of
Stock
and
Option
Awards
($) (d)
  Grant
Date
    Threshold
($)
  Target
($)
  Maximum
($)
  Threshold
(#)
  Target
(#)
  Maximum
(#)
       

Andrew

Liveris

      2/11/2015         2/11/2015     0       3,185,820         6,371,640                            
      2/13/2015         2/11/2015               0       110,140         220,280                     6,507,071  
      2/13/2015         2/11/2015                             61,190                 3,025,234  
      2/13/2015         2/11/2015                                 312,670         49.44         3,630,099  
Howard Ungerleider       2/11/2015         2/11/2015     0       1,207,532         2,415,065                            
      2/13/2015         2/11/2015               0       33,680         67,360                     1,989,815  
      2/13/2015         2/11/2015                             18,710                 925,022  
      2/13/2015         2/11/2015                                 95,610         49.44         1,110,032  

James

Fitterling

      2/11/2015         2/11/2015     0       1,207,532         2,415,065                            
      2/13/2015         2/11/2015               0       33,680         67,360                     1,989,815  
      2/13/2015         2/11/2015                             18,710                 925,022  
      2/13/2015         2/11/2015                                 95,610         49.44         1,110,032  
Joe Harlan       2/11/2015         2/11/2015     0       1,207,532         2,415,065                            
      2/13/2015         2/11/2015               0       33,680         67,360                     1,989,815  
      2/13/2015         2/11/2015                             18,710                 925,022  
      2/13/2015         2/11/2015                                 95,610         49.44         1,110,032  
Charles Kalil       2/11/2015         2/11/2015     0       1,081,142         2,162,284                            
      2/13/2015         2/11/2015               0       30,500         61,000                     1,801,940  
      2/13/2015         2/11/2015                             16,940                 837,514  
        2/13/2015         2/11/2015                                                                   86,570         49.44         1,005,078  
(a)

Performance Share awards as described in the Long-Term Incentive Awards section of the Compensation Discussion and Analysis.

(b)

Deferred Stock awards as described in the Long-Term Incentive Awards section of the Compensation Discussion and Analysis.

(c)

Stock Option awards as described in the Long-Term Incentive Awards section of the Compensation Discussion and Analysis.

(d)

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 consistent with the values shown in the Summary Compensation Table.

 

42   LOGO    2016 Proxy Statement


COMPENSATION INFORMATION (continued)

 

 

Outstanding Equity Awards

The following table lists outstanding equity grants for each NEO as of December 31, 2015. The table includes outstanding equity grants from past years as well as the current year.

 

          Option Awards     Stock Awards  
Name   Grant Date     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             02/16/2007        460,000        —          43.59        02/16/2017        n/a        n/a        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        909,100        —          9.53        02/13/2019        n/a        n/a        n/a        n/a   
    02/12/2010        551,800        —          27.79        02/12/2020        n/a        n/a        n/a        n/a   
    02/11/2011        412,380        —          38.38        02/11/2021        n/a        n/a        n/a        n/a   
    02/10/2012        516,000        —          34.00        02/10/2022        n/a        n/a        n/a        n/a   
    02/15/2013        507,772        253,888        32.16        02/15/2023        103,470        5,326,636        144,860        7,457,393   
    02/14/2014        105,309        210,621        46.71        02/14/2024        64,770        3,334,360        116,580        6,001,538   
    02/13/2015        —          312,670        49.44        02/13/2025        61,190        3,150,061        110,140        5,670,007   
Howard Ungerleider     03/01/2006        12,950        —          43.68        03/01/2016        n/a        n/a        n/a        n/a   
    02/16/2007        23,510        —          43.59        02/16/2017        n/a        n/a        n/a        n/a   
    02/15/2008        30,750        —          38.62        02/18/2018        n/a        n/a        n/a        n/a   
    02/13/2009        11,288        —          9.53        02/13/2019        n/a        n/a        n/a        n/a   
    02/12/2010        22,400        —          27.79        02/12/2020        n/a        n/a        n/a        n/a   
    02/11/2011        18,600        —          38.38        02/11/2021        n/a        n/a        n/a        n/a   
    02/10/2012        82,420        —          34.00        02/10/2022        n/a        n/a        n/a        n/a   
    02/15/2013        140,586        70,294        32.16        02/15/2023        28,650        1,474,902        40,110        2,064,863   
    02/14/2014        32,073        64,147        46.71        02/14/2024        19,730        1,015,700        35,510        1,828,055   
    02/13/2015        —          95,610        49.44        02/13/2025        18,710        963,191        33,680        1,733,846   
James Fitterling             02/16/2007        39,050        —          43.59        02/16/2017        n/a        n/a        n/a        n/a   
    02/12/2010        43,700        —          27.79        02/12/2020        n/a        n/a        n/a        n/a   
    02/11/2011        118,090        —          38.38        02/11/2021        n/a        n/a        n/a        n/a   
    02/10/2012        147,130        —          34.00        02/10/2022        n/a        n/a        n/a        n/a   
    02/15/2013        140,586        70,294        32.16        02/15/2023        28,650        1,474,902        40,110        2,064,863   
    02/14/2014        32,073        64,147        46.71        02/14/2024        19,730        1,015,700        35,510        1,828,055   
    02/13/2015        —          95,610        49.44        02/13/2025        18,710        963,191        33,680        1,733,846   
Joe Harlan                 09/01/2011        128,700        —          27.60        09/01/2021        n/a        n/a        n/a        n/a   
    02/10/2012        134,330        —          34.00        02/10/2022        n/a        n/a        n/a        n/a   
    02/15/2013        140,586        70,294        32.16        02/15/2023        28,650        1,474,902        40,110        2,064,863   
    02/14/2014        30,616        61,234        46.71        02/14/2024        18,830        969,368        33,890        1,744,657   
    02/13/2015        —          95,610        49.44        02/13/2025        18,710        963,191        33,680        1,733,846   
Charles Kalil             03/01/2000        n/a        n/a        n/a        n/a        108        5,560        n/a        n/a   
    02/23/2001        n/a        n/a        n/a        n/a        55        2,831        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        n/a        n/a        n/a        n/a   
    02/10/2012        49,044        —          34.00        02/10/2022        n/a        n/a        n/a        n/a   
    02/15/2013        134,192        67,098        32.16        02/15/2023        27,350        1,407,978        38,290        1,971,169   
    02/14/2014        29,156        58,314        46.71        02/14/2024        17,930        923,036        32,280        1,661,774   
      02/13/2015        —          86,570        49.44        02/13/2025        16,940        872,071        30,500        1,570,140   
(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 12/31/15 closing stock price of $51.48 per share.

(d)

Performance Shares granted 2/15/2013, 2/14/2014 and 2/13/15 will vest and be delivered in February of the year following the end of the three-year performance period. Shares granted in February 2013-2015 are shown at the target level of performance. The actual number of shares to be delivered will be determined at the end of the three-year performance period.

 

2016 Proxy Statement    LOGO    43


COMPENSATION INFORMATION (continued)

 

 

Option Exercises and Stock Vested

The following table summarizes the value received from stock option exercises and stock grants vested during 2015.

OPTION EXERCISES AND STOCK VESTED FOR 2015

 

    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     400,000        2,973,000        168,325        8,267,704   
Howard Ungerleider     —           —          26,896        1,321,062   
James Fitterling     89,570        917,319        47,996        2,357,446   
Joe Harlan     —           —          43,828        2,152,720   
Charles Kalil     —           —          47,996        2,357,446   
(a)

Reflects delivery of shares from the 2012-2014 Performance Share program, even if elected to receive as cash, and the 2012 Deferred Stock grants with 3-year vesting. All were previously reported in the Summary Compensation Tables in the year they were granted.

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, 2015.

PENSION BENEFITS AS OF DECEMBER 31, 2015

 

Name   Plan Name   Number of Years
Credited Service
(#)
    Present Value of
Accumulated Benefit ($)
(a)
 
Andrew Liveris   Dow Employees’ Pension Plan     20.1        1,570,140   
  Dow Executives’ Supplemental Retirement Plan (b)     40.0        32,880,223   
Howard Ungerleider   Dow Employees’ Pension Plan     25.5        890,424   
  Dow Executives’ Supplemental Retirement Plan     25.5        6,612,658   
James Fitterling   Dow Employees’ Pension Plan     32.0        1,192,196   
  Dow Executives’ Supplemental Retirement Plan     32.0        9,123,322   
Joe Harlan   Dow Employees’ Pension Plan     4.4        65,728   
  Dow Executives’ Supplemental Retirement Plan     4.4        416,415   
Charles Kalil   Dow Employees’ Pension Plan     35.9        1,816,411   
    Dow Executives’ Supplemental Retirement Plan     35.9        14,126,211   
(a)

Unless otherwise noted, all present values reflect accrued age 65 benefits. The form of payment, discount rate (4.44%) 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, 2015.

(b)

Mr. Liveris was asked by the Company to permanently transfer to the United States from Australia in 1995, at which time he 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 40 years of actual service with Dow (20 years as a U.S. employee of Dow plus 20 years as an Australian employee of Dow). 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 December 31, 2015 was 876,962 AUD.

 

44   LOGO    2016 Proxy Statement


COMPENSATION INFORMATION (continued)

 

 

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, 2015. 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, 2015

 

Name   Pension Annuity
Value ($) (a)
    Replacement
Value (%) (b)
 
Andrew Liveris     2,945,232        58%   
Howard Ungerleider     379,680        17%   
James Fitterling     720,972        33%   
Joe Harlan     30,612        1%   
Charles Kalil     1,221,216        58%   
(a)

Annual pension benefit if NEO retired on December 31, 2015, stated as a single-life annuity with no survivor options.

(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. All NEOs other than Mr. Harlan participate in DEPP.

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 salary 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 the 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. Some parts of the supplemental benefit may be taken in the form of a lump sum depending upon date of hire and plan participation. All NEOs 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 2015, 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

 

2016 Proxy Statement    LOGO    45


COMPENSATION INFORMATION (continued)

 

 

contributed up to an additional 4%, Dow provided a 50% match. All NEOs 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 2015

 

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     88,495         66,457         2,777         —           2,792,030   
Howard Ungerleider     40,056         26,891         24,500         —           992,876   
James Fitterling     —           28,237         39,240         —           3,478,132   
Joe Harlan     —           28,489         16,893         —           549,894   
Charles Kalil     41,186         30,586         49,493         —           1,401,367   
(a)

Executive contributions are also reported as salary for 2015 in the Summary Compensation Table.

(b)

Company contributions are also reported as All Other Compensation for 2015 in the Summary Compensation Table.

(c)

Includes Company and executive contributions with respect to Mr. Liveris of $155,608 for 2013 and $160,492 for 2014 previously reported in the Summary Compensation Table and Company; Company and executive contributions with respect to Mr. Ungerleider of $60,817 for 2014 previously reported in the Summary Compensation Table; Company and executive contributions with respect to Mr. Fitterling of $36,160 for 2013 and $64,597 for 2014 previously reported in the Summary Compensation Table; Company and executive contributions with respect to Mr. Harlan of $37,756 for 2013 and $66,445 for 2014 previously reported in the Summary Compensation Table; and Company and executive contributions with respect to Mr. Kalil of $67,870 for 2013 and $70,591 for 2014 previously reported in the Summary Compensation Table.

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 salary 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 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 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

All of the NEOs (except Mr. Harlan & Mr. Ungerleider) are currently retirement eligible and entitled to benefits similar to most other salaried employees upon separation from the Company. All of the NEOs 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.

 

46   LOGO    2016 Proxy Statement


COMPENSATION INFORMATION (continued)

 

 

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: All NEOs (except Mr. Harlan) 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 and/or lump sum. 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: For grants made in 2013 and beyond, the following LTI treatment applies if the executive meets the age 55 and 10 years of service requirement (age 50 and 10 years of service for grants prior to 2013).

 

   

Stock Options: Vesting and expiration periods remain unchanged except that grants made in the same year as termination vest pro-rata for the portion of the year worked.

 

   

Deferred Stock: Vesting and delivery dates remain unchanged unchanged except that grants made in the same year as termination vest pro-rata for the portion of the year worked.

 

   

Performance Shares: Vesting periods and delivery dates remain unchanged unchanged except that grants made in the same year as termination vest pro-rata for the portion of the year worked.

If the executive separates before meeting the age and service requirements of a particular grant, such grant is forfeited.

Involuntary Termination With Cause:

Because all NEOs (except Mr. Harlan and Mr. Ungerleider) 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 described above for any retirement-eligible officers, all NEOs will otherwise receive the following 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.

 

 

If eligible for retiree medical, eighteen months of health and welfare benefits at employee rates.

For outstanding LTI grants not meeting the age and years of service requirements referenced above, in the event an NEO is involuntarily terminated without cause, they will receive the following:

 

 

Stock Options: Vesting and expiration periods are shortened to the earlier of the existing expiration date or one year.

 

 

Deferred Stock: Grants are prorated for the number of days worked during the vesting period. Vesting and delivery dates remain unchanged.

 

 

Performance Shares: Grants are prorated for the number of days worked during the performance period. Vesting periods and delivery dates remain unchanged.

 

2016 Proxy Statement    LOGO    47


COMPENSATION INFORMATION (continued)

 

 

Change-in-Control:

In addition to benefits received due to retirement, as described above, the non-qualified pension benefits are payable as a lump sum in the event of a change-in-control in accordance with the respective plan documents. Outstanding LTI (equity awards) granted pursuant to the Company’s equity plans have a double trigger change-in-control provision whereby the awards will become fully vested upon the holder’s involuntary termination of employment without cause within 24 months following a change-in-control.

Pursuant to agreements entered into in 2007, Messrs. Liveris and Kalil will also receive the following benefits if separated within two years of 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 or resign for good reason following 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.

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, 2015.

INVOLUNTARY TERMINATION OR CHANGE-IN-CONTROL VALUES

 

Name   Type of Benefit   Involuntary Termination
Without Cause ($)
       Change-in-
Control ($) (a)
 
Andrew Liveris   Severance     3,861,600           15,298,694   
  Double-trigger LTI Acceleration     n/a           37,487,620   
  Increase in Present Value of Pension     n/a           4,544,110   
  Health & Welfare Benefits     12,249           12,249   
  Outplacement & Financial Planning     30,000           50,000   
Howard Ungerleider   Severance     1,490,065           1,490,065   
  Double-trigger LTI Acceleration     n/a           10,939,663   
  Increase in Present Value of Pension     n/a           2,604,223   
  Health & Welfare Benefits     n/a           n/a   
  Outplacement & Financial Planning     30,000           30,000   
James Fitterling   Severance     1,741,634           1,741,634   
  Double-trigger LTI Acceleration     n/a           10,939,663   
  Increase in Present Value of Pension     n/a           2,753,402   
  Health & Welfare Benefits     6,462           6,462   
  Outplacement & Financial Planning     30,000           30,000   
Joe Harlan   Severance     673,432           673,432   
  Double-trigger LTI Acceleration     n/a           10,796,038   
  Increase in Present Value of Pension     n/a           0   
  Health & Welfare Benefits     n/a           n/a   
  Outplacement & Financial Planning     30,000           30,000   
Charles Kalil   Severance     1,936,551           4,221,602   
  Double-trigger LTI Acceleration     n/a           10,157,263   
  Increase in Present Value of Pension     n/a           300,929   
  Health & Welfare Benefits     2,619           2,619   
    Outplacement & Financial Planning     30,000           50,000   
(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. In addition, the LTI acceleration value in this table includes Performance Shares at target.

 

48   LOGO    2016 Proxy Statement


COMPENSATION INFORMATION (continued)

 

 

Director Compensation

Dow compares its non-employee Director compensation programs, designs and compensation elements to the same Survey Peer Group used for executive compensation, as described in the Peer Group and Survey Pay Data section of the Compensation Discussion and Analysis. Dow targets the median compensation of the Survey Peer Group for all Director compensation elements. The following table lists the compensation provided to Dow’s non-employee Directors in 2015.

DIRECTOR COMPENSATION FOR 2015

 

Name   Fees Earned or
Paid in Cash ($) (a)
    Stock
Awards ($) (b)
    Option
Awards ($)
    Non-Equity
Incentive Plan
Compensation ($)
    Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)  (c)
    All Other
Compensation ($)
    Total ($)  
Arnold A. Allemang     28,750        —          —          —          —          —          28,750   
Ajay Banga     115,000        135,471        —          —          —          —          250,471   
Jacqueline K. Barton     130,000        135,471        —          —          —          —          265,471   
James A. Bell     150,000        135,471        —          —          562        —          286,033   
Richard K. Davis     97,500        135,471        —          —          —          —          232,971   
Jeff M. Fettig     160,000        135,471        —          —          —          —          295,471   
Mark Loughridge     130,000        135,471        —          —          —          —          265,471   
Raymond J. Milchovich     115,000        135,471        —          —          —          —          250,471   
Robert S. Miller     115,000        135,471        —          —          —          —          250,471   
Paul Polman     115,000        135,471        —          —          —          —          250,471   
Dennis H. Reilley     135,000        135,471        —          —          —          —          270,471   
James M. Ringler     130,000        135,471        —          —          —          —          265,471   
Ruth G. Shaw     122,500        135,471        —          —          239        —          258,210   
(a)

Arnold Allemang retired effective as of the 2015 Annual Meeting. Richard Davis was elected to the Board at the 2015 Annual Meeting. Ruth Shaw served on the Audit Committee until May 14, 2015.

(b)

The May 15, 2015 full grant date fair value of Restricted Stock granted is $51.51 per share with a total value of $135,471 for each Director (2,630 shares) represented in accordance with the same standard applied for financial accounting purposes.

(c)

Consists exclusively of above-market nonqualified deferred compensation earnings.

Non-Employee Directors’ Fees Earned or Paid in Cash

2015 Directors’ fees as stated below are paid only to Directors who are not employees of the Company.

 

Fee Category   Annual Rate  
Annual Retainer   $ 115,000   
Audit and Compensation & Leadership Development Committee Chairmanships   $ 20,000   
All Other Committee Chairmanships   $ 15,000   
Audit Committee Membership   $ 15,000   
Lead Director Service   $ 30,000   

Non-Employee Directors Stock Grant

In 2015, each non-employee Director received 2,630 shares of Restricted Stock, with provisions limiting transfer while serving as a Director of the Company, and, at a minimum, for two years from the date of grant.

Non-employee Directors who join the Board of Directors after the annual grant of Restricted Stock for that year and prior to December 31 of that year are eligible to receive a one-time cash payment (“New Director Retainer”) within 30 days of the effective date of their election as a Director. The intent of this New Director Retainer is to encourage a new Director to make an initial investment in the stock of the Company. The amount of the New Director Retainer is calculated from the net present value of the cash equivalent of that year’s Restricted Stock grant, with stock values based on the then current price of Company stock. It is based on months of Board service for the first year, and is therefore pro-rated for the number of months remaining in the calendar year.

 

2016 Proxy Statement    LOGO    49


COMPENSATION INFORMATION (continued)

 

 

Non-Employee Directors’ Stock Ownership Guidelines

Non-employee Directors have a guideline of owning common stock of the Company equal in value to at least five times the amount of the annual Board retainer fee, with a five-year time period after first election to achieve this level. Directors are also required to retain all Deferred Stock and Restricted Stock grants until retirement from the Board. The following table shows the stock ownership guideline and respective holdings of the non-employee Directors as of December 31, 2015.

DIRECTOR STOCK OWNERSHIP GUIDELINES FOR 2015

 

Name   Ownership
Guideline
       2015
Holdings (a)
       Shares Held
In Excess of
Guideline
 
Ajay Banga     18,000           9,386           —     
Jacqueline K. Barton     18,000           40,936           22,936   
James A. Bell     18,000           29,780           11,780   
Richard K. Davis     18,000           2,675           —     
Jeff M. Fettig     18,000           36,240           18,240   
Mark Loughridge     18,000           4,749           —     
Raymond J. Milchovich     18,000           8,075           —     
Robert S. Miller     18,000           7,630           —     
Paul Polman     18,000           43,350           25,350   
Dennis H. Reilley     18,000           32,630           14,630   
James M. Ringler     18,000           44,639           26,639   
Ruth G. Shaw     18,000           35,054           17,054   

 

(a)

Mr. Banga joined the Board in 2013 while Mr. Davis, Mr. Loughridge, Mr. Milchovich and Mr. Miller joined the Board in 2015, each will meet the ownership guideline within the required timeframe.

Non-Employee Director Deferred Compensation Plan

Non-employee Directors may choose prior to the beginning of each year to have all or part of their fees credited to a deferred compensation account as participants in The Dow Chemical Company Voluntary Deferred Compensation Plan for Non-Employee Directors effective January 1, 2005.

At the election of the Director, fees are deferred into one of several hypothetical investment accounts that accrue investment returns according to the account selected. 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 credit spread, a phantom Dow stock account 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. These funds are identical to funds offered as part of the Elective Deferral Plan for management level employees. Such deferred amounts will be paid in installments as elected by the Director at the time of deferral commencing in July following the Director’s termination of Board service, in the following July or in July of the calendar year following the Director’s 72nd birthday. If the Director elects to receive payment in July following his or her 72nd birthday and if he or she remains on the Board beyond his or her 72nd birthday, payments shall start in the July following termination of Board service.

Business Travel Accident Insurance for Non-Employee Directors

Dow has a rider on its Business Travel Accident insurance policy covering each non-employee Director for $300,000, which will cover accidental death and dismemberment if the Director is traveling on Dow business.

Additional Compensation from Third Point LLC

In addition to the compensation described above to be paid by the Company as compensation for their service as directors, Messrs. Milchovich and Miller received additional compensation in connection with their election to the board of directors from a third party. Specifically, Messrs. Milchovich and Miller were appointed to the Board and/or nominated for election for the 2015 Annual Meeting of Stockholders (“2015 Meeting”) pursuant to an agreement dated as of November 20, 2014, between the Company and certain investment funds (Third Point LLC, Third Point Partners Qualified L.P., Third Point Partners L.P., Third Point Offshore Master Fund L.P., Third Point Ultra Master Fund L.P. and Third Point Reinsurance Co. Ltd. (collectively “Third Point”)).

 

50   LOGO    2016 Proxy Statement


COMPENSATION INFORMATION (continued)

 

 

In connection with their agreement to serve as Third Point designees, each of Messrs. Milchovich and Miller entered into an agreement with Third Point LLC (together, the “TP Agreements”). Pursuant to the TP Agreements, each of Messrs. Milchovich and Miller received from Third Point LLC:

 

 

$250,000 in cash paid upon the execution by each of Messrs. Milchovich and Miller of the TP Agreement;

 

 

$250,000 in cash paid upon the appointment of each of Messrs. Milchovich and Miller to the Board. The TP Agreements required each of Messrs. Milchovich and Miller to invest $250,000 in Dow common stock if they did not already own stock equivalent to that amount at the time of their appointment to the Board or their nomination by Third Point LLC for election to the Board. As each of them owned $250,000 worth of Dow common stock at the time of their appointment to the Board, each of them received $250,000 in cash and were not required to invest this amount in Dow common stock; and

 

 

certain stock appreciation rights (“SARs”) with respect to a total of 396,668 shares of Dow common stock as follows: (a) SARs with respect to 198,334 shares of Dow common stock payable in 2018 (the “2018 SARs”); and (b) SARs with respect to 198,334 shares of Dow common stock payable in 2020 (the “2020 SARs”). The 2018 SARs and 2020 SARs are each subject to continued service as a Director on the applicable vesting date, subject to certain exceptions. As described in two Form 3s filed with the U.S. Securities and Exchange Commission on January 9, 2015, for each of Messrs. Milchovich and Miller the appreciation amount payable by Third Point LLC, if any, will be based upon the difference between $50.42 (the closing price of the Company’s common stock on the date of execution of the TP Agreements) and the volume weighted average price of the Company’s common stock during the 30 day period prior to January 1, 2018, in the case of the 2018 SARs and January 1, 2020, in the case of the 2020 SARs.

The 2018 SARs vest as follows: 50% on January 1, 2017 and 50% on January 1, 2018 and will be settled in cash by Third Point LLC within 30 days following January 1, 2018. The 2020 SARs vest as follows: 50% on January 1, 2019 and 50% on January 1, 2020 and will be settled in cash by Third Point LLC within 30 days following January 1, 2020. The receipt by each of Messrs. Milchovich and Miller of each of the payments pursuant to the 2018 SARs and the 2020 SARs is contingent upon him agreeing to stand for election to the Board (whether or not re-nominated) and not resigning from the Board, regardless of whether Third Point LLC remains a stockholder. The payment obligations with respect to the SARs are the subject of the TP agreements. The Company is not party to the TP agreements nor is the Company responsible for any such payments.

Equity Compensation Plan Information

The table below shows the Equity Compensation Plan Information as of December 31, 2015.

 

    (1)     (2)     (3)  
Plan Category   # of securities to
be issued upon
exercise of outstanding
options,  warrants, rights
    Weighted-average exercise
price of  outstanding
options, warrants, rights ($)
    # of securities
remaining available
for future issuance
under  equity
compensation plans
(excluding securities
reflected in column (1))
 
Equity Compensation Plans Approved by Security Holders     54,836,380        37.47 (a)      85,418,999 (b) 
Equity Compensation Plans Not Approved by Security Holders (c)     —          —          —     
Total     54,836,380        37.47        85,418,999   

As of December 31, 2015

 

(a)

Calculation does not include outstanding Performance Shares that have no exercise price.

(b)

The 2012 Stock Incentive Plan was approved by stockholders on May 10, 2012 with an initial share pool of 44,500,000 shares and another 50,500,000 shares approved by stockholders on May 15, 2014. Shares available are calculated using the fungible method of counting shares which consumes 2.1 for each deferred stock and performance share awarded and 1 share for each stock option. The 2012 Plan also provides that stock awards under the prior 1988 Award and Option Plan which are forfeited or expire shall be added back into this share pool at the fungible ratios. Total includes 56,903,679 shares available under the 2012 Stock Incentive Plan, 28,237,113 shares available under the 2012 Employee Stock Purchase Plan, and 278,207 shares available under the 1994 Executive Performance Plan.

(c)

The 1994 Plan previously allowed the Company to grant up to 300,000 stock options. The Plan is limited to non-employee directors, and provided that stock options were granted pursuant to a formula and had ten-year terms. No further grants will be issued under this plan and there are no longer outstanding shares.

 

2016 Proxy Statement    LOGO    51


 

BENEFICIAL OWNERSHIP OF COMPANY STOCK

The following table presents the beneficial ownership of Dow’s Common Stock as of February 15, 2016, except as noted, for (i) each Director of the Company, (ii) each executive officer of the Company listed in the Summary Compensation Table, (iii) all Directors and executive officers as a group, and (iv) each person beneficially owning more than 5% of the outstanding shares of Dow’s Common Stock.

 

Name   Current Shares
Beneficially Owned
(a)
    Rights to Acquire
Beneficial
Ownership of
Shares (b)
    Total     Percent of Shares
Beneficially Owned
 
A. Banga     9,386.0        0.0        9,386.0        *   
J. K. Barton     40,936.0        10,950.0        51,886.0        *   
J. A. Bell     29,780.0        10,950.0        40,730.0        *   
R. K. Davis     2,704.7        0.0        2,704.7        *   
J. M. Fettig     36,240.0        10,950.0        47,190.0        *   
J. R. Fitterling     154,395.4        654,865.0        809,260.4        *   
J. E. Harlan     119,680.6        567,011.0        686,691.6        *   
C. J. Kalil     354,542.6        456,052.0        810,594.6        *   
A. N. Liveris     815,860.9        4,545,151.0        5,361,011.9        *   
M. Loughridge     4,778.7        0.0        4,778.7        *   
R. J. Milchovich     8,104.7        0.0        8,104.7        *   
R. S. Miller     7,630.0        0.0        7,630.0        *   
P. Polman     43,350.0        0.0        43,350.0        *   
D. H. Reilley     32,630.0        0.0        32,630.0        *   
J. M. Ringler     44,639.0        10,950.0        55,589.0        *   
R. G. Shaw     35,054.0        10,950.0        46,004.0        *   
H. I. Ungerleider     85,780.5        508,813.0        594,593.5        *   
Group Total     1,825,493.1        6,786,642.0        8,612,135.1        *   
All Directors and Executive Officers as a Group (23 persons)     2,710,673.6        8,135,767.0        10,846,440.6        0.97
Certain Other Owners:        
BlackRock, Inc.     66,489,992 (c)        66,489,992.0        5.95
The Vanguard Group     70,516,634 (d)        70,516,634.0        6.31
Berkshire Hathaway Inc.     0.0        72,603,000.0 (e)      72,603,000.0        6.50
(a)

Except as otherwise noted and for shares held by a spouse and other members of the person’s immediate family who share a household with the named person, the named persons have sole voting and investment power over the indicated number of shares. This column also includes all shares held in trust for the benefit of the named party in The Dow Chemical Company Employees’ Savings Plan. Beneficial ownership of some or all of the shares listed may be disclaimed.

(b)

This column includes any shares that the person could acquire through 4/15/2016, by (1) exercise of an option granted by Dow; (2) Performance Shares granted by Dow to be delivered prior to 4/15/2016; or (3) payment of any balance due under a subscription in The Dow Chemical Company 2012 Employees’ Stock Purchase Plan. To the extent that these shares have not been issued as of the record date, they cannot be voted at the Meeting.

(c)

Based on a Schedule 13G/A filed by BlackRock, Inc. on January 26, 2016 with the U.S. Securities and Exchange Commission reporting beneficial ownership as of December 31, 2015. BlackRock, Inc. has sole voting power over 57,017,715 shares and sole dispositive power over 66,489,992 shares. BlackRock, Inc.’s address is 55 East 52nd Street, New York, NY 10055.

(d)

Based on a Schedule 13G/A filed by The Vanguard Group on February 11, 2016 with the U.S. Securities and Exchange Commission reporting beneficial ownership as of December 31, 2015. The Vanguard Group has sole voting power over 2,076,418 shares, shared voting power over 114,200 shares, sole dispositive power over 68,301,325 shares and shared dispositive power over 2,215,309 shares. The Vanguard Group‘s address is 100 Vanguard Blvd, Malvern, PA 19355.

(e)

Based on a Schedule 13G filed by Berkshire Hathaway Inc. on August 14, 2014 with the U.S. Securities and Exchange Commission reporting beneficial ownership as of December 31, 2009. Berkshire Hathaway Inc., National Indemnity Company, Columbia Insurance Company, and Warren E. Buffett reported beneficial ownership of 72,603,000 shares of the Company’s stock which are held in the form of convertible preferred stock that can be converted into common stock by the holders within 60 days. Berkshire Hathaway Inc.’s address is 3555 Farnam Street, Omaha, NE 68131. To the extent that these shares have not been issued as of the record date, they cannot be voted at the Meeting.

*

Less than 0.48% of the total shares of Dow Common Stock outstanding.

 

52   LOGO    2016 Proxy Statement


 

AGENDA ITEM 2

RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

RESOLVED, that the appointment of Deloitte & Touche LLP to serve as the Company’s independent registered public accounting firm for 2016, made by the Audit Committee with the concurrence of the Board of Directors, is hereby ratified.

The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the Company’s independent registered public accounting firm. The Company Bylaws provide that the selection of the independent registered public accounting firm must be presented for stockholder ratification or rejection at each Annual Meeting. The Audit Committee has appointed, and the Board has concurred subject to your ratification, Deloitte & Touche LLP to serve as the Company’s independent registered public accounting firm for 2016. Deloitte & Touche LLP served as Dow’s independent registered public accounting firm for 2015. Deloitte & Touche LLP has offices at or near most of the locations where Dow operates in the United States and other countries. The members of the Audit Committee and the Board believe that the continued retention of Deloitte & Touche LLP is in the best interests of the Company and its investors.

Before making its determination on appointment, the Audit Committee carefully considers the qualifications and competence of candidates for the independent registered public accounting firm. For Deloitte & Touche LLP, this has included a review of its performance in prior years, its independence and processes for maintaining independence, the results of the most recent internal quality control review or Public Company Accounting Oversight Board inspection, the key members of the audit engagement team, the firm’s approach to resolving significant accounting and auditing matters including consultation with the firm’s national office, as well as its reputation for integrity and competence in the fields of accounting and auditing. The Audit Committee is responsible for the audit fee negotiations with Deloitte & Touche LLP and the Audit Committee is directly involved in the selection of the lead engagement partner in conjunction with the mandated rotation of this position. Additional information may be found in the Audit Committee Report on page 58 and Audit Committee charter available on the Company’s corporate governance website at www.DowGovernance.com.

The Audit Committee has expressed its satisfaction with Deloitte & Touche LLP. In October 2015, Deloitte & Touche LLP advised the Audit Committee that, like all other major accounting firms, it has been named as a defendant in a number of civil lawsuits, most of which are premised on allegations that financial statements issued by clients and reported on by the firm were incorrect. Deloitte & Touche LLP has further advised the Audit Committee that based on the firm’s historical experience and understanding of the circumstances giving rise to such lawsuits, the firm does not believe that they will have a significant impact on the firm’s ability to serve as the independent registered public accounting firm for the Company. The Audit Committee has concluded that the ability of Deloitte & Touche LLP to perform services for the Company is not adversely affected by such litigation.

Representatives of Deloitte & Touche LLP will attend the 2016 Meeting and may make a statement if they wish. They will be available to answer stockholder questions at the 2016 Meeting.

Approval of this proposal to ratify the appointment of Deloitte & Touche LLP requires a majority of votes actually cast on the matter. For purposes of determining the number of votes cast on the matter, only those cast “for” or “against” are included. Abstentions are not counted in determining whether this proposal is approved. In the event that the selection of Deloitte & Touche LLP is not ratified by stockholders, the Audit Committee will take that into account in connection with any future decisions as to the selection of a firm to serve as the Company’s auditors, although by law the Audit Committee has final authority over the determination of whether to retain Deloitte & Touche LLP or another firm at any time.

The Board of Directors unanimously recommends that stockholders vote FOR the proposal to ratify the selection of Deloitte & Touche LLP as the independent registered public accounting firm for Dow and its subsidiaries for 2016.

 

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AGENDA ITEM 2 (continued)

 

 

Independent Registered Public Accounting Firm Fees

For the years ended December 31, 2015 and 2014, professional services were performed by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu Limited, and their respective affiliates. Audit and audit-related fees aggregated $29,176,000 and $29,797,000 for the years ended December 31, 2015 and 2014, respectively. Total fees for the independent registered public accounting firm were:

 

Type of Fees   2015     2014  
    $ in thousands  
Audit Fees (a)   $ 22,848      $ 23,221   
Audit-Related Fees (b)     6,328        6,576   
Tax Fees (c)     9,254        9,053   
All Other Fees     0        0   
TOTAL   $ 38,430      $ 38,850   
   

 

 

   

 

 

 
(a)

The aggregate fees billed for the integrated audit of the Company’s annual financial statements and internal control over financial reporting, the reviews of the financial statements in quarterly reports on Form 10-Q, comfort letters, consents, statutory audits, and other regulatory filings.

(b)

The aggregate fees billed primarily for audits of employee benefit plans’ financial statements, assessment of controls relating to outsourced services, audits and reviews supporting divestiture activities, and agreed-upon procedures engagements.

(c)

The aggregate fees billed for preparation of expatriate employees’ tax returns and related compliance services – $8,841,000 in 2015 and $8,459,000 in 2014; international tax compliance – $389,000 in 2015 and $565,000 in 2014; and corporate tax consulting – $24,000 in 2015 and $29,000 in 2014.

 

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AGENDA ITEM 3

ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATION

We are asking stockholders to approve an advisory resolution on the Company’s executive compensation as reported in this Proxy Statement. As described in the “Compensation Discussion and Analysis” section of this Proxy Statement, the Compensation and Leadership Development Committee (the “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 urge stockholders to read the “Compensation Discussion and Analysis” beginning on page 19 of this Proxy Statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives and provides detailed information on the compensation and strategic accomplishments of our named executive officers. There is also a robust discussion of our stockholder engagement around compensation issues including detail on feedback received as part of this engagement process and actions taken by the Committee in response. The Committee and the Board of Directors believe that the policies and procedures articulated in the “ Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our named executive officers reported in this Proxy Statement reflects and supports these compensation policies and procedures.

Beginning in 2011, a “say on pay” advisory vote to approve executive compensation has been required for all U.S. public companies under Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board of Directors has adopted a policy providing for an annual “say on pay” advisory vote. Therefore, in accordance with the Exchange Act, and as a matter of good corporate governance, we are asking stockholders to approve the following advisory resolution at the 2016 Meeting:

RESOLVED, that the stockholders of The Dow Chemical Company (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in the Proxy Statement for the Company’s 2016 Annual Meeting of Stockholders.

This advisory resolution is non-binding on the Board of Directors. Although non-binding, the Board and the Committee will review and carefully consider the voting results when evaluating our executive compensation program.

Unless the Board of Directors modifies its policy on the frequency of holding “say on pay” advisory votes, the next “say on pay” advisory vote will occur at the Company’s 2017 Annual Meeting of Stockholders.

The Board of Directors unanimously recommends a vote FOR the approval of the Advisory Resolution to Approve Executive Compensation.

Vote Required

Approval of the resolution requires a majority of votes actually cast on the matter. For purposes of determining the number of votes cast on the matter, only those cast “for” and “against” are included, while abstentions and broker non-votes are not counted in determining whether this resolution is approved.

 

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AGENDA ITEM 4

STOCKHOLDER PROPOSAL ON PROXY ACCESS

A stockholder has stated that its representative intends to present the following proposal at the Annual Meeting. The Company will promptly provide the name and address of the stockholder and the number of shares owned upon request directed to the Corporate Secretary.* Dow is not responsible for the contents of the proposal. If properly presented at the Annual Meeting, your Board unanimously recommends a vote AGAINST the following proposal.

RESOLVED: Shareholders of The Dow Chemical Company (“Dow”) ask the board of directors (“Board”) to adopt, and present for shareholder approval, a “proxy access” bylaw. The bylaw should require Dow to include in proxy materials prepared for a shareholder meeting at which directors are to be elected the name, Disclosure and Statement (defined below) of any person nominated for election to the board by a shareholder or group (“Nominator”) satisfying the criteria below. It should also allow shareholders to vote on such nominee on Dow’s proxy card.

The number of shareholder-nominated candidates appearing in proxy materials should not exceed one quarter of the directors then comprising the Board. This bylaw, which would supplement existing rights, should provide that a Nominator must:

 

  a)

have beneficially owned 3% or more of Dow’s outstanding common stock continuously for at least three years;

 

  b)

give Dow, within the time period identified in its bylaws, written notice of the information required by the bylaws and any Securities and Exchange Commission rules about (i) the nominee, including consent to being named in the proxy materials and to serving as director if elected; and (ii) the Nominator, including proof it owns the required shares (information required by this subsection (b) is the “Disclosure”); and

 

  c)

certify that (i) it will assume liability stemming from any legal or regulatory violation arising out of the Nominator’s communications with Dow shareholders, including the Disclosure and Statement; (ii) it will comply with all applicable laws and regulations if it uses soliciting material other than Dow’s proxy materials; and (c) to the best of its knowledge, the required shares were acquired in the ordinary course of business and not to change or influence control at Dow.

The Nominator may submit a statement not exceeding 500 words in support of each nominee (the “Statement”). The Board shall adopt procedures for promptly resolving disputes over whether notice of a nomination was timely, whether the Disclosure and Statement satisfy the bylaw and applicable rules, and the priority to be given when nominations by multiple Nominators exceed the one-quarter limit.

Supporting Statement

We believe proxy access is a fundamental shareholder right that will make directors more accountable and enhance shareholder value. A 2014 study by the CFA Institute concluded that proxy access:

 

 

Would “benefit both the markets and corporate boardrooms, with little cost or disruption”

 

 

Has the potential to raise overall US market capitalization by up to $140.3 billion if adopted market-wide. (http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2014.n9.1)

The proposed bylaw terms enjoy strong investor support. Votes on proxy access proposals averaged approximately 55% in 2015, as of July 26 (http://corpgov.law.harvard.edu/2015/08/10/proxy-access-proposals/)—and similar bylaws have been adopted by companies of various sizes across industries, including Chesapeake Energy, Hewlett-Packard, and Verizon. The Council of Institutional Investors recently issued best practices for proxy access endorsing the 3% ownership threshold (with no limit on the number of nominating shareholders in a group) we propose. (CII, “Proxy Access: Best Practices,” at 3 (Aug. 2015))

Company’s Statement and Recommendation

Your Board of Directors unanimously recommends a vote AGAINST this proposal.

The Board is committed to being stewards of strong corporate governance practices and recognizes that proxy access is an emerging governance practice important to many investors. As part of our ongoing stockholder engagement efforts, Dow’s management and Board conducted outreach to a significant percentage of stockholders over the past year to discuss the

 

*

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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AGENDA ITEM 4 (continued)

 

 

Company’s business strategy, Board and corporate governance practices and executive compensation program. In many cases these discussions included the topic of proxy access. During our engagements, we learned that the views of investors vary, without consensus on a common set of best practices. We found this engagement extremely helpful and believe it is important that we continue dialogue with stockholders and monitor developments so that any proxy access terms considered are in the best interests of the Company and its stockholders.

In addition to ongoing engagement around specific terms for proxy access, we are also interested in monitoring and understanding how proxy access will be used in practice or what unintended consequences may result from implementing particular proxy access provisions. We are also evaluating the interplay proxy access would have with the existing thoughtful and deliberate method of director candidate selection and nomination process that the Governance Committee currently follows. This process is designed to ensure each candidate is qualified with a robust combination of skills, professional experience, diversity of backgrounds and high ethical standards that meet the current needs of the Board and represent the best interest of our stockholders and the Company. Continuous Board evaluation and refreshment is a clear priority—in fact, six of the Company’s twelve independent directors joined the Board in the last three years.

Dow’s Board highly values stockholder viewpoints and has considered feedback received over the years in establishing strong Board and governance practices that provide stockholders with important rights and abilities, including:

 

 

All directors are elected annually

 

 

Directors are elected by majority vote standard

 

 

Stockholders are able to call a special meeting

 

 

Stockholders are able to suggest director candidates through the Governance Committee’s director nomination process

 

 

Stockholders are able to submit proposals for consideration at the annual meeting

The Board adopted these best practices in a deliberate manner to ensure all stockholder interests are represented and protected, and to minimize potential long-term negative consequences to the sound governance of the Company.

We will continue to assess proxy access developments in order to gain a clear understanding of how proxy access would impact our corporate governance (particularly in the context of the announced pending merger of equals with DuPont) and, ultimately, the creation of long-term stockholder value.

For these reasons, the Board believes this proposal would not serve the best interests of our stockholders at this time.

Accordingly, your Board unanimously recommends a vote AGAINST this proposal.

Vote Required

Approval of the resolution requires a majority of votes actually cast on the matter. For purposes of determining the number of votes cast on the matter, only those cast “for” and “against” are included, while abstentions and broker non-votes are not counted in determining whether this resolution is approved.

 

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AUDIT COMMITTEE REPORT

The Audit Committee (the “Committee”) of the Board of Directors is comprised entirely of independent Directors who meet the independence, experience and other qualification requirements of the New York Stock Exchange (“NYSE”) and the Company that are available on the Company’s corporate governance website at www.DowGovernance.com. The Committee operates pursuant to a charter that is also available at www.DowGovernance.com.

The Board has determined that Committee members James A. Bell, Richard K. Davis, Mark Loughridge, and James M. Ringler are financially literate and are audit committee financial experts as defined by the applicable standards.

The Committee had nine meetings during 2015, five of which were regularly scheduled meetings that included separate executive sessions of the Committee with the lead client service partner of the independent registered public accounting firm, the internal auditor, the general counsel, management and among the Committee members themselves. Four of the meetings were conference calls related to the Company’s earnings announcements and periodic filings. Numerous other informal meetings and communications among the Chair, various Committee members, the independent registered public accounting firm, the internal auditor and/or members of the Company’s management also occurred.

On behalf of the Board of Directors, the Committee oversees the Company’s financial reporting process and its internal control over financial reporting, areas for which management has the primary responsibility. The independent registered public accounting firm is responsible for expressing an opinion on the conformity of the Company’s audited financial statements with accounting principles generally accepted in the United States and for issuing its report on the Company’s internal control over financial reporting.

In this context, the Committee has reviewed and discussed with management and the independent registered public accounting firm the audited financial statements and the quarterly unaudited financial statements, matters relating to the Company’s internal control over financial reporting and the processes that support certifications of the financial statements by the Company’s Chief Executive Officer and Chief Financial Officer.

Among other items, the Committee has discussed with the independent registered public accounting firm the matters required to be discussed by the standards of the Public Company Accounting Oversight Board. The Committee has received from the independent registered public accounting firm the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence and discussed with them their independence from the Company and its management. In addition, the Committee has received written materials addressing Deloitte & Touche LLP‘s internal quality control procedures and other matters as required by the NYSE listing standards.

Further, the Committee pre-approves and reviews audit, audit-related and permitted non-audit services provided by the independent registered public accounting firm to the Company and the related fees for such services. The Committee has pre-approved all services provided and fees charged by the independent registered public accounting firm to the Company, and has concluded that such services are compatible with the auditors’ independence. The Committee’s charter allows delegation of the authority to pre-approve audit, audit-related and permitted non-audit services by the independent registered public accounting firm to a subcommittee consisting of one or more Committee members, provided that such subcommittee decisions be presented to the full Committee at its next scheduled meeting.

Relying on the reviews and discussions referred to above, the Committee recommended to the Board of Directors, and the Board approved, that the audited financial statements and management’s report on internal control over financial reporting be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, for filing with the U.S. Securities and Exchange Commission. The Committee has also selected Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the Company and its subsidiaries for 2016. The Board of Directors has concurred with that selection and has presented the matter to the stockholders of the Company for ratification.

Audit Committee

James A. Bell, Chair

Richard K. Davis

Mark Loughridge

James M. Ringler

 

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OTHER GOVERNANCE MATTERS

Future Stockholder Proposals

If you satisfy the requirements of the U.S. Securities and Exchange Commission (the “SEC”) and wish to submit a proposal to be considered for inclusion in the Company’s proxy material for the 2017 Annual Meeting pursuant to Rule 14a-8, please send it to the Corporate Secretary.* Under SEC Exchange Act Rule 14a-8, these proposals must be received no later than the close of business on December 2, 2016.

Future Annual Meeting Business

Under the Company’s Bylaws, if you wish to raise items of proper business, including Director nominations, directly at an Annual Meeting, other than stockholder proposals presented under Rule 14a-8 for inclusion in the Company’s proxy materials, you must give advance written notification to the Corporate Secretary.* For the 2017 Annual Meeting, written notice must be received by the Corporate Secretary between the close of business on December 2, 2016, and the close of business on January 31, 2017. However, as provided in the Bylaws, different deadlines apply if the 2017 Annual Meeting is called for a date that is not within 30 days before or after the anniversary of the 2016 Meeting; in that event, written notice must be received by the Corporate Secretary no earlier than the close of business on the 120th day prior to the 2017 Annual Meeting and no later than the close of business on the later of the 90th day prior to the 2017 Annual Meeting or the 10th day following the date on which public disclosure of the date of such meeting is first made by the Company. Such notices must comply with the procedural and content requirements of the Bylaws. If notice of a matter is not received within the applicable deadlines or does not comply with the Bylaws, the chairman of the Annual Meeting may refuse to introduce such matter. If a stockholder does not meet these deadlines or, does not satisfy the requirements of Rule 14a-4 of the Exchange Act, the persons named as proxies will be allowed to use their discretionary voting authority when and if the matter is raised at the Annual Meeting. A copy of the Bylaws may be found on the Company’s website at www.DowGovernance.com. Alternatively, a copy will be sent without charge to any stockholder who sends a written request to the Corporate Secretary.*

Multiple Stockholders with the Same Address

In accordance with a notice sent previously to stockholders with the same surname who share a single address, only one Proxy Statement and accompanying Annual Meeting materials will be sent to an address unless contrary instructions were received from any stockholder at that address. This practice, known as “householding,” is designed to reduce printing and postage costs. If you did not respond that you did not want to participate in householding, you were deemed to have consented to the practice. If you are a registered stockholder, you may revoke your consent at any time by sending your name and your holder identification number to the Corporate Secretary.* If you hold your stock in street name, you may revoke your consent to householding at any time by contacting Broadridge Financial Solutions Inc., 51 Mercedes Way, Edgewood, NY 11717, or by calling 800-542-1061. If you are a registered stockholder receiving multiple copies of these materials at the same address or if you have a number of accounts at a single brokerage firm, you may submit a request to receive a single copy of materials in the future by contacting the Corporate Secretary.* If you hold your stock in street name, contact Broadridge Financial Solutions Inc. at the address and telephone number provided above. The Company will promptly deliver to a stockholder who received one copy of the proxy materials as the result of householding, a separate copy of the materials upon the stockholder’s written or oral request to the Corporate Secretary.*

Copies of Proxy Materials and Annual Report

Dow’s Proxy Statement and Annual Report (with Form 10-K) are posted on Dow’s website at www.dow.com/investors/reports or https://materials.proxyvote.com/260543. Stockholders may receive printed copies of each of these documents without charge by contacting the Company’s Investor Relations Office at 800-422-8193 or 989-636-1463, or 2030 Dow Center, Midland, MI 48674.

Internet Delivery of Proxy Materials

Stockholders may consent to receive their Proxy Statement and other Annual Meeting materials in electronic form rather than in printed form. This results in faster delivery of the documents and significant savings to the Company by reducing printing and mailing costs. To enroll for electronic delivery, visit http://www.dow.com/en-us/investor-relations/financial-reporting/proxy-statements/ then select “Register for Online Delivery of Proxy Materials” under the Online Proxy Delivery Enrollment section and follow the instructions to register.

 

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