DEF 14A 1 d294082ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.      )

 

Filed by the Registrant ☒                            Filed by a Party other than the Registrant ☐

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to §240.14a-12

 

 

THE GOODYEAR TIRE & RUBBER COMPANY

(Name of Registrant as Specified In Its Charter)

 

 

 

  

 

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

 

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1) Title of each class of securities to which the transaction applies:

 

 

  

 

  (2) Aggregate number of securities to which the transaction applies:

 

 

  

 

  (3) Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

  

 

  (4) Proposed maximum aggregate value of the transaction:

 

 

  

 

  (5) Total fee paid:

 

 

  

 

 

Fee paid previously with preliminary materials.

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  (1) Amount Previously Paid:

 

 

  

 

  (2) Form, Schedule or Registration Statement No.:

 

 

  

 

  (3) Filing Party:

 

 

  

 

  (4) Date Filed:

 

 

  

 

 


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March 10, 2017

Dear Fellow Goodyear Shareholder,

 


Thank you for your continued investment in Goodyear. I and the rest of the Board invite you to attend the 2017 Annual Meeting of Shareholders.

This year’s proxy statement reflects our continued focus on strong performance, an engaged and effective Board, transparent corporate governance and executive compensation structures, and regular communication with our shareholders.

STRONG PERFORMANCE IN 2016

We again delivered strong financial and operational results in 2016 even as we continued to address global economic uncertainty that impacted our business. We delivered solid net income of $1.3 billion and segment operating income of $2.0 billion in 2016, driven by strong performance in our Americas and Asia Pacific consumer tire businesses. Our ability to deliver strong and consistent results in a volatile operating environment is a testament to our focus on creating long-term, sustainable value for all our shareholders. In fact, our three-year total shareholder return for the period ended December 31, 2016 places Goodyear in the 63rd percentile of S&P 500 companies over that period. We are proud of these results and of the continued exceptional performance of our teams across the globe.

2020 STRATEGIC PLAN

At our Investor Day in September 2016, we laid out our 2020 strategic plan which focuses on capturing profitable growth in attractive market segments, mastering increasing complexity and connecting effectively with consumers. As a part of our plan, we will invest $1.8 to $1.9 billion in high-return growth capital expenditures, repay $800 to $900 million of debt and, subject to our performance, return $3.5 to $4.0 billion to our shareholders through dividends and share repurchases. The combination of Goodyear’s innovation leadership, award-winning products and strong global brand creates an industry-leading value proposition and competitive advantage for us. As a result, we are confident in our strategy of capturing profitable growth in key segments of the market and in delivering on our publicly announced financial targets.

To be sure, there will be obstacles to overcome as we relentlessly pursue our objectives. For example, raw material inflation is expected to be a significant headwind in 2017. But we remain confident in our ability to address these challenges as they arise and we remain committed to creating sustainable economic value for our Company and our shareholders.

On behalf of our Board of Directors, thank you for your continued support. We look forward to welcoming you at our annual meeting.

Sincerely,

 

LOGO  

LOGO

 

Richard J. Kramer

Chairman of the Board,

Chief Executive Officer and President

 

  

 


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LOGO

March 10, 2017

Dear Fellow Goodyear Shareholder,

 


I am honored and proud to serve as Goodyear’s independent Lead Director. At Goodyear, sound corporate governance is an integral part of the way we do business.

BOARD CONTRIBUTION TO STRATEGY AND PERFORMANCE

Our Board of Directors is comprised of committed, qualified individuals who bring a wealth of operating experience and a diversity of perspectives to their roles as the stewards of our Company and your investment in Goodyear. The continued strong independent leadership and oversight capabilities of our Board of Directors have been crucial to our success over the past few years. In particular, our directors’ deep and diverse skill sets and thought leadership have been an invaluable resource to me, our Chairman and the Goodyear management team in establishing our long-term business strategy and in executing on that strategy. As your independent Lead Director, I am grateful to work with such capable and dedicated individuals in the pursuit of long-term shareholder value creation. I encourage you to support each of the Board’s nominees on this year’s ballot.

BOARD LEADERSHIP STRUCTURE

We continue to be focused on key governance practices of importance to our shareholders. Our Board leadership structure is one of those areas. The Board, after thoughtful evaluation, continues to believe that a combined Chairman-CEO role, accompanied by a strong independent Lead Director role, continues to be the leadership structure that best serves the interests of Goodyear and our shareholders. Our Board continues to exercise appropriate, independent oversight of management. In my role as independent Lead Director, I am empowered to provide independent leadership for our Board and am fully committed to fulfilling those responsibilities on your behalf.

COMMITMENT TO CONTINUED ENGAGEMENT WITH OUR SHAREHOLDERS

Our Board of Directors values the feedback and insights gained from frequent engagement with our shareholders. In 2016, in addition to interactions regarding our financial performance, Goodyear engaged

with shareholders representing almost 50% of shares outstanding on matters relating to our long-term business strategy and performance, corporate governance, executive compensation and corporate responsibility. We are committed to including our shareholders’ perspectives in boardroom discussions, and we believe that regular engagement with our shareholders is necessary in order to ensure thoughtful and informed consideration of evolving corporate governance and executive compensation practices.

PROXY ACCESS

During 2016, we carefully listened to shareholder views on proxy access, and recently adopted an amendment to our Code of Regulations that implements proxy access at Goodyear. We appreciate many of you who engaged constructively with us on this important governance issue.

I appreciate your ongoing confidence in Goodyear and the Board of Directors. We remain committed to serving your interests, and we appreciate the opportunity to serve Goodyear on your behalf.

Sincerely,

 

LOGO  

 

W. Alan McCollough

Independent Lead Director

 

  

 


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NOTICE OF 2017 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT

 


To the shareholders:

The 2017 Annual Meeting of Shareholders of The Goodyear Tire & Rubber Company, an Ohio corporation, will be held at the Hilton Akron/Fairlawn, 3180 West Market Street, Akron, Ohio, on Monday, April 10, 2017 at 4:30 p.m., Akron Time, for the following purposes:

 

 

 

  LOGO To elect the thirteen members of the Board of Directors named in the Proxy Statement to serve one-year terms expiring at the 2018 Annual Meeting of Shareholders (Proposal 1);

 

  LOGO To consider and approve an advisory resolution regarding the compensation of our named executive officers (Proposal 2);

 

  LOGO To consider and act upon an advisory vote on the frequency of future shareholder votes regarding the compensation of our named executive officers (Proposal 3);

 

  LOGO To consider and approve a proposal regarding the adoption of the 2017 Performance Plan (Proposal 4);

 

  LOGO To consider and approve a proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2017 (Proposal 5);

 

  LOGO To consider and vote upon a shareholder proposal (Proposal 6), if properly presented at the Annual Meeting; and

 

  LOGO To act upon such other matters and to transact such other business as may properly come before the meeting or any adjournments thereof.

 


Location:

Hilton Akron/Fairlawn

3180 West Market Street

Akron, Ohio

Time & Date:

Monday, April 10, 2017 at 4:30 p.m.,

Akron Time

The Board of Directors fixed the close of business on February 15, 2017 as the record date for determining shareholders entitled to notice of, and to vote at, the 2017 Annual Meeting. Only holders of record of Goodyear common stock at the close of business on February 15, 2017 will be entitled to vote at the 2017 Annual Meeting and adjournments, if any, thereof.

If you are not able to attend in person, we hope that you will vote by proxy. These proxy materials contain detailed information about the matters on which we are asking you to vote. Please read the materials thoroughly and vote in accordance with the Board’s recommendations. Your vote is very important to us.

March 10, 2017

By order of the Board of Directors

 

 

LOGO

David L. Bialosky, Secretary

 

LOGO

Please vote via the internet or by telephone or complete, date and sign your Proxy and return it promptly in the enclosed envelope

 

 



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PROXY STATEMENT SUMMARY

This summary is an overview of information that you will find elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.

Proposals and Board Recommendations

 

Proposal

 

  

Board’s Voting Recommendation

 

  

Page Reference

 

 
1.   Election of Directors    FOR each Nominee      18  
2.   Advisory Vote on Executive Compensation    FOR      25  
3.   Advisory Vote on Say-On-Pay Frequency    ONE YEAR      26  
4.   Adoption of 2017 Performance Plan    FOR      79  
5.   Ratification of Appointment of Independent
Registered Public Accounting Firm
   FOR      89  
6.   Shareholder Proposal regarding Independent Board
Chairman
   AGAINST      90  

 

 

2016 Business Performance Highlights

 

In 2016, we delivered strong net income and segment operating income despite volatile global economic conditions. We also delivered solid results across several other financial metrics.

 

LOGO

In September 2016, we laid out for investors our 2020 strategic plan which is aimed at capturing profitable growth in attractive market segments, particularly in 17 inch and above rim size tires, mastering increasing complexity and turning that into a competitive advantage, and connecting with consumers through our aligned distribution network of distributors and dealers.

 

 


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PROXY SUMMARY

 

  

 

In order to drive this future growth and address the volatile economic environment, we remain focused on:

 

    Developing innovative products and services that anticipate and respond to the needs of consumers;
    Building the value of our brand, helping our customers win in their markets, and becoming consumers’ preferred choice; and
    Improving our manufacturing efficiency and creating an advantaged supply chain focused on reducing our total delivered costs, optimizing working capital levels and delivering best in industry customer service.

As part of our 2020 strategic plan, we announced our 2017-2020 capital allocation plan that provides for growth capital expenditures of $1.8 billion to $1.9 billion, debt repayments of $800 million to $900 million, restructuring payments of $700 million to $800 million and, subject to our performance, common stock dividends and share repurchases of $3.5 billion to $4.0 billion. We also increased the quarterly cash dividend on our common stock by 43%, from $0.07 per share to $0.10 per share, beginning with the December 1, 2016 payment date. On February 2, 2017, the Board of Directors approved a $1.0 billion increase in the authorized amount of our common stock repurchase program.

Shareholder Engagement

We believe that it is important for us to communicate regularly with shareholders regarding areas of interest or concern. Over the last several years, in addition to our day-to-day interactions regarding our financial performance, we have enhanced our shareholder engagement program to include an annual outreach that is focused on our long-term business strategy, executive compensation, corporate governance and other topics suggested by our shareholders. This annual outreach helps to ensure that our shareholders are heard and able to communicate directly with us on these important matters. As part of our 2016 annual outreach, we requested the opportunity to meet with approximately 60% of our shareholders and we ultimately engaged with shareholders representing almost 50% of our outstanding Common Stock as of September 30, 2016.

Our outreach meetings gave us the chance to highlight the strong operating performance delivered by the Company over the past several years and our new four-year strategic plan, as well as our adoption of proxy access and our commitment to sound executive compensation, corporate governance and corporate responsibility practices.

Executive Compensation Highlights

Our executive compensation program is designed to support achievement of our business objectives and to serve the long-term interests of our shareholders. Our executive compensation is strongly aligned to company performance and measurable financial metrics, thereby aligning management’s interests with our shareholders’ interests and driving increased shareholder value.

 

 


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PROXY SUMMARY

 

  

 

For 2016, our financial metrics were:

 

           Incentive Program   Financial Metrics    Weighting        

ANNUAL

INCENTIVES

     Annual Performance Plan   EBIT      40  
       Free Cash Flow from Operations      40  
       Operating Drivers      20  
                     

LONG-TERM

AWARDS

    

Performance-Based Awards

(Paid out in Equity and Cash)

 

  Net Income      50     LOGO  
       Cash Flow Return on Capital      50  
     Stock Options               

 

 

THE COMPENSATION COMMITTEE HAS ADOPTED A NUMBER OF BEST PRACTICES

THAT ARE CONSISTENT WITH OUR PERFORMANCE-BASED COMPENSATION PHILOSOPHY:

 

•  Use of diversified financial metrics in our annual and long-term plans that are closely tied to our long-term strategy, along with a relative TSR modifier on all long-term performance-based awards

 

•  No dividends or dividend equivalents on unearned performance-based equity awards

 

•  No repricing of options without shareholder approval

 

•  No pension credit for newly hired executives to make up for service at prior employers

 

•  Double-trigger change-in-control provisions in our change-in-control plan and our equity compensation plans, and no walk-away rights

 

•  No tax gross-ups in our change-in-control plan or for perquisites

  

•  Robust stockholding guidelines for officers and directors, including stock retention provisions following the exercise of stock options or the vesting of other stock-based awards

 

•  Hedging and pledging of our Common Stock by officers, directors and employees is prohibited

 

•  Robust clawback policy in place

 

•  Compensation Committee consists only of independent Board members

 

•  Engaged a leading independent compensation consultant to assist the Compensation Committee and Board in determining executive compensation and evaluating program design

Corporate Governance Highlights

As part of our shareholder engagement efforts in 2016, we discussed the material terms of our proposed proxy access regulation with shareholders representing almost 50% of our outstanding Common Stock. In these discussions, shareholders were generally supportive of our proposed proxy access regulation, which was designed to be substantially similar to the majority of proxy access bylaws adopted by other companies. Following the Board’s consideration of the feedback we received, the Board approved amendments to our Code of Regulations on February 28, 2017 that implemented proxy access allowing 3% shareholders (or a group of no more than 20 shareholders) who have held their stock for 3 years to nominate candidates for up to 20% of the seats on our Board.

 

 


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PROXY SUMMARY

 

  

 

 

WE HAVE AN ABIDING COMMITMENT TO GOOD GOVERNANCE, AS ILLUSTRATED BY THE FOLLOWING PRACTICES:

 

•  Annually elected directors; no classified board

 

•  Majority voting for the election of directors with a resignation policy

 

•  Lead independent director with clear, robust responsibilities

 

•  100% independent audit, compensation and nominating committees

 

•  Regular executive sessions of the independent directors

 

•  Conduct annual Board and Committee evaluations

  

• Proxy access available to 3 year, 3% shareholders for up to 20% of Board

 

•  Overboarding policy in place for directors

 

•  No poison pill in place

 

•  Shareholders have the right to call a special meeting at 25%

 

•  Clear and robust corporate governance guidelines

 

• Maintain an industry-leading corporate responsibility program with Board oversight

Our Board of Directors

 

OUR BOARD IS COMPRISED OF COMMITTED, QUALIFIED INDIVIDUALS WITH A DIVERSE AND COMPLEMENTARY BLEND OF SKILLS, BUSINESS AND PERSONAL EXPERIENCES, BACKGROUNDS AND EXPERTISE, INCLUDING THE FOLLOWING:

 

• Senior leadership experience

 

• Global perspective

 

• Marketing and branded consumer product experience

 

• Operational and manufacturing experience

 

• Finance, accounting and financial reporting expertise

  

• Leadership development expertise

 

• Legal, regulatory and government experience

 

• Corporate governance, responsibility and compliance experience

These collective attributes enable the Board to exercise appropriate oversight of management and pursue long-term, sustainable shareholder value creation by providing strategic input on the development, and oversight of the implementation, of our long-term strategy.

Our Board is also committed to periodic and thoughtful Board refreshment.

 

LOGO

 

 


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TABLE OF CONTENTS

 

    Notice Of 2017 Annual Meeting of Shareholders and Proxy Statement
01   General Information
01   Shares Voting
01   Vote Required
02   Adjourned Meeting
02   Voting Shares Held in Street Name
03   Savings Plan Shares
03   Voting of Proxy
04   Revocability of Proxy
04   Confidentiality
04   Shareholders Sharing The Same Address
05   Form 10-K
05   Costs of Solicitation
05   Submission of Shareholder Proposals and Nominations
07   Corporate Governance Principles and Board Matters
08   Board Structure and Committee Composition
08   Communications with the Board
09   Audit Committee
09   Compensation Committee
10   Committee on Corporate Responsibility and Compliance
11   Finance Committee
11   Governance Committee
11   Executive Committee
12   Board Leadership Structure
13   Board’s Role in Risk Oversight
15   Corporate Responsibility
16   Consideration of Director Nominees
16   Director Selection Guidelines
16   Identifying and Evaluating Nominees for Director
17   Board Independence
18   Proposal 1 – Election of Directors
25   Proposal 2 – Advisory Vote to Approve the Compensation of Our Named Executive Officers
26   Proposal 3 – Advisory Vote on the Frequency of Future Say-On-Pay Advisory Votes
27   Compensation Discussion and Analysis
27   Introduction
27   CD&A Table of Contents
28   Executive Summary
34   Compensation Philosophy
34   Components of Executive Compensation
36   Compensation Decision-Making
38   Role of Compensation Consultant
38   Peer Group Benchmarking of Primary Compensation
39   Target Setting
41   Annual Compensation
45   Long-Term Compensation
51   Retirement and Other Benefits
54   Compensation Policies and Practices
56   Compensation Committee Report
57   Named Executive Officer Compensation Tables
57   Summary Compensation Table
59   Summary of Realized Pay Earned by Our Chief Executive Officer for 2014, 2015 and 2016
60   Grants of Plan-Based Awards
61   Outstanding Equity Awards at Fiscal Year-End
63   Option Exercises and Stock Vested
63   Defined Contribution Plan Benefits
63   Pension Benefits
67   Nonqualified Deferred Compensation
68   Potential Payments Upon Termination or Change-in-Control
74   Director Compensation Table
76   Risks Related to Compensation Policies and Practices
 


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USE OF NON-GAAP FINANCIAL MEASURES

For additional information regarding segment operating income and free cash flow from operations, both non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures, see Exhibit A to this Proxy Statement.

 

 


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GENERAL INFORMATION

Goodyear’s executive offices are located at:

200 Innovation Way

Akron, Ohio 44316-0001

Our telephone number is: 330-796-2121

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of The Goodyear Tire & Rubber Company, an Ohio corporation (“Goodyear,” “Company,” “we,” “our” or “us”), to be voted at the annual meeting of shareholders to be held April 10, 2017 (the “Annual Meeting”), and at any adjournments thereof, for the purposes set forth in the accompanying notice.

Our Annual Report to Shareholders for the year ended December 31, 2016 is enclosed with this Proxy Statement. The Annual Report is not considered part of the proxy solicitation materials. The approximate date on which this Proxy Statement and the related materials are first being sent to shareholders is March 10, 2017.

Shares Voting

Holders of shares of common stock, without par value, of Goodyear (“Common Stock”) at the close of business on February 15, 2017 (the “record date”) are entitled to notice of, and to vote the shares of Common Stock they hold on the record date at, the Annual Meeting. As of the close of business on the record date, there were 251,930,536 shares of Common Stock outstanding and entitled to vote at the Annual Meeting. Each share of Common Stock is entitled to one vote.

Vote Required

In accordance with Goodyear’s Articles of Incorporation, a director nominee must receive, in an uncontested election of directors, a greater number of votes cast “for” his or her election than “against” his or her election. You may not vote cumulatively in the election of directors.

Under Ohio law, an incumbent director who is not re-elected will continue in office as a “holdover” director until his or her successor is elected by a subsequent shareholder vote, or his or her earlier resignation, removal from office or death. In order to address “holdover” terms for any incumbent directors who fail to be re-elected under our majority vote standard, our Corporate Governance Guidelines provide that if a director nominee does not receive a majority affirmative vote, he or she will promptly offer his or her resignation as a director to the Board of Directors. Within 90 days, the Board will decide, after taking into account the recommendation of the Governance Committee (in each case excluding the nominee(s) in question), whether to accept the resignation. The Governance Committee and the Board may consider any relevant factors in deciding whether to accept a director’s resignation. The Board’s explanation of its decision shall be promptly disclosed in a filing with the Securities and Exchange Commission.

 

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GENERAL INFORMATION

  

 

 

 
 

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Vote Required

 

  

 

The affirmative vote of at least a majority of the shares of Common Stock outstanding on the record date is required for a management or shareholder proposal, other than an advisory vote, to be adopted at the Annual Meeting. When considering the results of advisory votes, the Board of Directors intends to consider only those votes actually cast at the Annual Meeting.

Abstentions and “broker non-votes,” which occur when your broker does not have discretionary voting authority on a matter and you do not provide voting instructions, have the same effect as votes against any proposal voted upon by shareholders but have no effect on the election of directors or advisory votes.

 

VOTE REQUIREMENTS

 

LOGO  

Quorum

 

To conduct business, at least a majority of shares entitled to vote must be represented, either in person or by proxy.

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Voting for Proposals

 

PROPOSAL 2 — Advisory Vote on Executive Compensation

Majority of votes actually cast at the meeting

 

PROPOSAL 3 — Advisory Vote on Say-On-Pay Frequency

Plurality of votes actually cast at the meeting

 

LOGO  

Voting for

Director Nominees

 

To serve on the Board, a greater number of votes must be cast for the nominee’s election than against.

   

PROPOSAL 4 — Adoption of 2017 Performance Plan

Majority of our outstanding Common Stock

 

PROPOSAL 5 — Ratification of Appointment of Independent Registered Public Accounting Firm

Majority of our outstanding Common Stock

 

PROPOSAL 6 — Shareholder Proposal

Majority of our outstanding Common Stock

Adjourned Meeting

The holders of a majority of shares represented at the meeting, whether or not a quorum is present, may adjourn the meeting. If the time and place of the adjourned meeting is announced at the time adjournment is taken, no other notice need be given.

Voting Shares Held in Street Name

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name,” and these proxy materials are being forwarded to you by your broker, bank or nominee who is considered the shareholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank or nominee on how to vote and are also invited to attend the Annual Meeting. Your broker, bank or nominee has enclosed a voting instruction card for you to use in directing the broker, bank or nominee regarding how to vote your shares. If you do not return the voting instruction card, the broker or other nominee will determine if it has the discretionary authority to vote on the particular matter. Under applicable rules, brokers have the discretion to vote only on matters deemed to be routine, such as the ratification of the selection of an accounting firm (Proposal 5). The election of directors (Proposal 1), the

 

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GENERAL INFORMATION

  

 

 

 
 

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Voting Shares Held in Street Name

 

  

 

executive compensation advisory vote (Proposal 2), the say-on-pay frequency advisory vote (Proposal 3), the adoption of the 2017 Performance Plan (Proposal 4) and the shareholder proposal (Proposal 6) are not considered to be routine matters, and your broker will not have discretion to vote on those matters unless you specifically instruct your broker to do so by returning your signed voting instruction card. If you do not provide voting instructions to your broker, your shares will not be voted for any director nominee or on any matter on which your broker does not have discretionary authority (resulting in a broker non-vote).

Savings Plan Shares

A separate “Confidential Voting Instructions” card is being sent to each employee or former employee participating in the Goodyear Common Stock fund of certain employee savings plans. Shares of Common Stock held in the trusts for these plans will be voted by the trustee as instructed by the plan participants who participate in the Goodyear Common Stock fund. Shares held in the trusts for which voting instructions are not received will be voted by the trustee in the same proportion as it votes shares for which voting instructions were received from participants in the Goodyear Common Stock fund of the applicable trust.

Voting of Proxy

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on April 10, 2017:

The Proxy Statement, Proxy Card and Annual Report to Shareholders for the year ended December 31, 2016 are available at www.proxyvote.com.

David L. Bialosky, Laura K. Thompson and Daniel T. Young have been designated as proxies to vote shares of Common Stock in accordance with your instructions. You may give your instructions using the accompanying proxy card, via the internet or by telephone.

You may vote your shares using the internet by accessing the following web site: http://www.proxyvote.com or by making a toll-free telephone call within the United States of America or Canada using a touch-tone telephone to the toll-free number provided on your proxy card, or if you hold your shares in “street name,” on the voting instruction card provided by your broker or nominee.

Your shares will be voted for the thirteen nominees identified at pages 18 through 24, unless your instructions are to vote against any one or more of the nominees.

Your Board of Directors anticipates that all of the nominees named will be available for election. In the event an unexpected vacancy occurs, your proxy may be voted for the election of a new nominee designated by the Board of Directors.

Proxies received and not revoked prior to the Annual Meeting will be voted in favor of Proposals 2, 4 and 5, in favor of an annual say-on-pay vote frequency for Proposal 3, and against Proposal 6, unless your instructions are otherwise.

 

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GENERAL INFORMATION

  

 

 

 
 

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Revocability of Proxy

 

  

 

Revocability of Proxy

You may revoke or revise your proxy (whether given by mail, via the internet or by telephone) by the delivery of a later proxy or by giving notice to Goodyear in writing or in open meeting. Your proxy revocation or revision will not affect any vote already taken. If you hold your shares in “street name” please refer to the information forwarded by your broker, bank or nominee who is considered the shareholder of record for procedures on revoking or changing your voting instructions.

Confidentiality

Your vote will be confidential except (a) as may be required by law, (b) as may be necessary for Goodyear to assert or defend claims, (c) in the case of a contested election of director(s), or (d) at your express request.

Shareholders Sharing The Same Address

Goodyear has adopted a procedure called “householding,” which has been approved by the Securities and Exchange Commission. Under this procedure, Goodyear is delivering only one copy of the Annual Report and Proxy Statement to multiple shareholders who share the same address and have the same last name, unless Goodyear has received contrary instructions from an affected shareholder. This procedure reduces Goodyear’s printing costs, mailing costs and fees. Shareholders who participate in householding will continue to receive separate proxy cards.

Goodyear will deliver promptly upon written or oral request a separate copy of the Annual Report and Proxy Statement to any shareholder at a shared address to which a single copy of either of those documents was delivered. To receive a separate copy of the Annual Report or Proxy Statement, you may write or call Goodyear’s Investor Relations Department at The Goodyear Tire & Rubber Company, 200 Innovation Way, Akron, Ohio 44316-0001, Attention: Investor Relations, telephone (330) 796-3751. You may also access Goodyear’s Annual Report and Proxy Statement on the Investor Relations section of Goodyear’s website at www.goodyear.com or at www.proxyvote.com.

If you are a holder of record and would like to revoke your householding consent and receive a separate copy of the Annual Report or Proxy Statement in the future, please contact Broadridge, either by calling toll free at (800) 542-1061 or

by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. You will be removed from the householding program within 30 days of receipt of the revocation of your consent.

Any shareholders of record who share the same address and currently receive multiple copies of Goodyear’s Annual Report and Proxy Statement who wish to receive only one copy of these materials per household in the future should contact Goodyear’s Investor Relations Department at the address or telephone number listed above to participate in the householding program.

A number of brokerage firms have instituted householding. If you hold your shares in “street name,” please contact your bank, broker or other holder of record to request information about householding.

 

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GENERAL INFORMATION

  

 

 

 
 

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Form 10-K

 

  

 

Form 10-K

Goodyear will mail without charge, upon written request, a copy of Goodyear’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, including the Consolidated Financial Statements, schedules and list of exhibits, and any particular exhibit specifically requested. Requests should be sent to: The Goodyear Tire & Rubber Company, 200 Innovation Way, Akron, Ohio 44316-0001, Attn: Investor Relations. The Annual Report on Form 10-K is also available at www.goodyear.com.

Costs of Solicitation

The costs of soliciting proxies will be borne by Goodyear. Goodyear has retained D.F. King & Co., Inc., 48 Wall Street, New York, New York 10005, to assist in distributing proxy materials and soliciting proxies for an estimated fee of $14,000, plus reimbursement of reasonable out-of-pocket expenses. D.F. King & Co. may solicit proxies from shareholders by mail, telephone or the internet. In addition, officers or other employees of Goodyear may, without additional compensation, solicit proxies in person or by telephone or the internet.

Submission of Shareholder Proposals and Nominations

If a shareholder desires to have a proposal included in the proxy materials of the Board of Directors for the 2018 Annual Meeting of Shareholders, such proposal shall conform to the applicable proxy rules of the Securities and Exchange Commission concerning the submission and content of proposals, including Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and must be received by Goodyear prior to the close of business on November 10, 2017. If an eligible shareholder, or a group of up to 20 eligible shareholders, desires to have a candidate for election as a director included in the proxy materials of the Board of Directors (a “proxy access nominee”) for the 2018 Annual Meeting of Shareholders, such nomination shall conform to the applicable requirements set forth in Article II, Section 2A of the Company’s Code of Regulations and any applicable regulations of the Securities and Exchange Commission concerning the submission and content of proxy access nominations, and must be submitted to the Secretary at the principal executive offices of the Company not earlier than October 11, 2017 and not later than the close of business on November 10, 2017. In addition, if a shareholder intends to present a proposal or other business (not including a proposal submitted for inclusion in our proxy materials pursuant to Rule 14a-8) or to nominate a candidate for election as a director (not including a proxy access nominee) at the 2018 Annual Meeting of Shareholders, the shareholder’s notice must be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Company not earlier than December 11, 2017 and not later than the close of business on January 10, 2018. If notice of a proposal or a director nomination is not received by the Company in accordance with the dates specified pursuant to Rule 14a-8 or in the Code of Regulations, as the case may be, then the proposal or director nomination will be deemed untimely and we will have the right to exclude the proposal or director nomination from consideration at the meeting and/or to exercise discretionary voting authority and vote proxies returned to us with respect to such proposal or director nomination. Shareholder proposals or director nominations should be sent to the executive offices of Goodyear, 200 Innovation Way, Akron, Ohio 44316-0001, Attention: Office of the Secretary.

 

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GENERAL INFORMATION

  

 

 

 
 

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Submission of Shareholder Proposals and Nominations

 

  

 

For a proposal or director nomination to be properly presented at an annual meeting of shareholders, a shareholder must comply with the deadlines described in the preceding paragraph, as well as all of the other requirements of the Code of Regulations. Goodyear reserves the right to reject, rule out of order, or take other appropriate action with respect to any proposal or director nomination that does not comply with these and other applicable requirements.

 

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CORPORATE GOVERNANCE

PRINCIPLES AND BOARD MATTERS

Goodyear is committed to having sound corporate governance principles. Having such principles is essential to running Goodyear’s business efficiently and to maintaining Goodyear’s integrity in the marketplace. Goodyear’s Corporate Governance Guidelines, Business Conduct Manual, Board of Directors and Executive Officers Conflict of Interest Policy and charters for each of the Audit, Compensation, Corporate Responsibility and Compliance, Finance, and Governance Committees are available at https://corporate.goodyear.com/en-US/investors/governance/documents-charters.html. Please note, however, that information contained on the website is not incorporated by reference in this Proxy Statement or considered to be a part of this document. A copy of the committee charters and corporate governance policies may also be obtained upon request to the Goodyear Investor Relations Department.

CURRENT COMMITTEE MEMBERSHIP AND MEETINGS HELD DURING 2016

 

        Committees
     Independent   Audit   Compensation  

Corporate
Responsibility

& Compliance

  Finance   Governance   Executive

Mr. Conaty

  LOGO       MEMBER           MEMBER    

Mr. Firestone

  LOGO   MEMBER           CHAIR       MEMBER

Mr. Geissler

  LOGO   MEMBER       CHAIR           MEMBER

Mr. Hellman

  LOGO   CHAIR           MEMBER       MEMBER

Ms. Koellner

  LOGO   MEMBER           MEMBER        

Mr. Kramer

                          MEMBER

Mr. McCollough Lead Director

  LOGO       MEMBER           MEMBER   CHAIR

Mr. McGlade

  LOGO       CHAIR           MEMBER   MEMBER

Mr. Morell

  LOGO   MEMBER       MEMBER            

Mr. Palmore

  LOGO               MEMBER   CHAIR   MEMBER

Ms. Streeter

  LOGO       MEMBER           MEMBER    

Mr. Weidemeyer

  LOGO           MEMBER   MEMBER        

Mr. Wessel

              MEMBER            
           

Number of Meetings in 2016

      6   5   3   4   4   0

 

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CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS

  

 

 

 
 

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Board Structure and Committee Composition

 

  

 

Board Structure and Committee Composition

As of the date of this Proxy Statement, Goodyear’s Board has thirteen directors, each elected annually, and the following six committees: (1) Audit, (2) Compensation, (3) Corporate Responsibility and Compliance, (4) Finance, (5) Governance, and (6) Executive. The current membership and the function of each of the committees are described below. Each of the committees operates under a written charter adopted by the Board, except for the Executive Committee which is provided for by our Code of Regulations. During 2016, the Board held eight meetings. Each director attended at least 75% of all Board and applicable Committee meetings. Directors are expected to attend annual meetings of Goodyear’s shareholders. All of the directors attended the last annual meeting of shareholders.

Communications with the Board

As described on Goodyear’s website at https://corporate.goodyear.com/en-US/investors/governance/contact-board.html, shareholders may communicate with the Board or any of the directors (including the Lead Director or the non-management directors as a group) by sending correspondence to the Office of the Secretary, The Goodyear Tire & Rubber Company, 200 Innovation Way, Akron, Ohio 44316-0001. All communications will be compiled by the Secretary and submitted to the Board or the individual directors on a periodic basis.

 

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Audit Committee

 

  

 

 

 

Audit Committee

 

MEMBERS:

 

Mr. Firestone

 

Mr. Geissler

 

Mr. Hellman (Chairman)

 

Ms. Koellner

 

Mr. Morell

 

MEETINGS IN 2016: 6

 

The Board has determined that each member of the Audit Committee is independent within the meaning of Goodyear’s independence standards and applicable Securities and Exchange Commission rules and regulations, and each of Mr. Hellman and Ms. Koellner is an audit committee financial expert.

  

KEY RESPONSIBILITIES:

 

The Audit Committee assists the Board in fulfilling its responsibilities for oversight of the integrity of Goodyear’s financial statements, Goodyear’s compliance with legal and regulatory requirements related to financial reporting, the independent registered public accounting firm’s qualifications and independence, and the performance of Goodyear’s internal auditors and independent registered public accounting firm. Among other things, the Audit Committee prepares the Audit Committee report for inclusion in the annual proxy statement; annually reviews the Audit Committee charter and the Committee’s performance; appoints, evaluates and determines the compensation of Goodyear’s independent registered public accounting firm; reviews and approves the scope of the annual audit plan; reviews and pre-approves all auditing services and permitted non-audit services (and related fees) to be performed by the independent registered public accounting firm; oversees investigations into complaints concerning financial matters; and reviews policies and guidelines with respect to risk assessment and risk management, including Goodyear’s major financial risk exposures. The Audit Committee works closely with management as well as Goodyear’s independent registered public accounting firm. The Audit Committee has the authority to obtain advice and assistance from, and receive appropriate funding from Goodyear for, outside legal, accounting or other advisors as the Audit Committee deems necessary to carry out its duties.

 

The report of the Audit Committee is on page 88 of this Proxy Statement.

 

 

Compensation Committee

 

MEMBERS:

 

Mr. Conaty

 

Mr. McCollough

 

Mr. McGlade (Chairman)

 

Ms. Streeter

 

MEETINGS IN 2016: 5

 

The Board has determined that each member of the Compensation Committee is independent within the meaning of Goodyear’s independence standards and applicable NASDAQ listing standards.

  

KEY RESPONSIBILITIES:

 

The Board of Directors has delegated to the Compensation Committee primary responsibility for establishing and administering Goodyear’s compensation programs for officers and other key personnel. The Compensation Committee oversees Goodyear’s compensation and benefit plans and policies for directors, officers and other key personnel, administers its incentive compensation plans (including reviewing and approving grants to officers and other key personnel), and reviews and approves annually all compensation decisions relating to officers, including the Chief Executive Officer (“CEO”). The Compensation Committee also prepares a report on executive compensation for inclusion in the annual proxy statement and reviews and discusses the Compensation Discussion and Analysis with management and recommends its inclusion in the annual proxy statement. The report of the Compensation Committee is on page 56 of this Proxy Statement.

 

In performing its duties, the Compensation Committee meets periodically with the CEO to review compensation policies and specific levels of compensation paid to officers and other key personnel, and reports and makes recommendations to the Board regarding executive compensation policies and programs. The Compensation Committee informs the non- management directors of the Board of its decisions regarding compensation for the CEO and

 

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Compensation Committee

 

  

 

 

 

Compensation Committee (continued)

 

  

other significant decisions related to the administration of its duties. The Compensation Committee also will consider the results of shareholder advisory votes on executive compensation matters and the changes, if any, to Goodyear’s executive compensation policies, practices and plans that may be warranted as a result of any such vote and reviews an annual risk assessment of Goodyear’s executive compensation policies, practices and plans as part of its role in overseeing management’s identification and management of, and planning for, compensation-related risks. Under its charter, the Compensation Committee may delegate its authority to one or more of its members as appropriate.

 

The Compensation Committee has the authority to retain outside advisors, including independent compensation consultants, to assist it in evaluating actual and proposed compensation for officers. The Compensation Committee also has the authority to approve, and receive appropriate funding from Goodyear for, any such outside advisor’s fees. Prior to retaining any such advisors, the Compensation Committee considers the independence-related factors identified in applicable securities laws and NASDAQ listing standards. The Compensation Committee has retained Frederic W. Cook & Co., Inc. (“F.W. Cook”) as its compensation consultant, and has determined that F.W. Cook is independent. The Compensation Committee solicits advice from F.W. Cook on executive compensation matters relating to the CEO and other officers.

 

This advice is described in more detail under the heading “Compensation Discussion and Analysis – Role of Compensation Consultant.”

 

 

Committee on Corporate Responsibility and Compliance

 

MEMBERS:

 

Mr. Geissler (Chairman)

 

Mr. Morell

 

Mr. Weidemeyer

 

Mr. Wessel

 

MEETINGS IN 2016: 3

 

  

KEY RESPONSIBILITIES:

 

The Committee on Corporate Responsibility and Compliance reviews Goodyear’s legal compliance programs as well as its business conduct policies and practices and its policies and practices regarding its relationships with shareholders, employees, customers, governmental agencies and the general public. The Committee also monitors Goodyear’s objectives, policies and programs with respect to sustainability, workplace health and safety, product technology and innovation, and product quality. The Committee may also recommend appropriate new policies to the Board of Directors.

 

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Finance Committee

 

  

 

 

 

Finance Committee

 

MEMBERS:

 

Mr. Firestone (Chairman)

 

Mr. Hellman

 

Ms. Koellner

 

Mr. Palmore

 

Mr. Weidemeyer

 

MEETINGS IN 2016: 4

 

  

KEY RESPONSIBILITIES:

 

The Finance Committee consults with management and makes recommendations to the Board of Directors regarding Goodyear’s capital structure, dividend policy, tax strategies, compliance with terms in financing arrangements, risk management strategies, banking arrangements and lines of credit, and pension plan funding. The Finance Committee also reviews and consults with management regarding policies with respect to interest rate and foreign exchange risk, liquidity management, counterparty risk, derivative usage, credit ratings, and investor relations activities.

 

 

Governance Committee

 

MEMBERS:

 

Mr. Conaty

 

Mr. McCollough

 

Mr. McGlade

 

Mr. Palmore (Chairman)

 

Ms. Streeter

 

MEETINGS IN 2016: 4

 

The Board has determined that each

member of the Governance Committee is independent within the meaning of Goodyear’s independence standards.

 

  

KEY RESPONSIBILITIES:

 

The Governance Committee identifies, evaluates and recommends to the Board of Directors candidates for election to the Board. The Committee also develops and recommends appropriate corporate governance guidelines, recommends policies and standards for evaluating the overall effectiveness of the Board of Directors in the governance of Goodyear and undertakes such other activities as may be delegated to it from time to time by the Board of Directors.

 

 

Executive Committee

 

MEMBERS:

 

Mr. Firestone

 

Mr. Geissler

 

Mr. Hellman

 

Mr. Kramer

 

Mr. McCollough (Chairman)

 

Mr. McGlade

 

Mr. Palmore

 

MEETINGS IN 2016: 0

 

  

KEY RESPONSIBILITIES:

 

The Executive Committee is comprised of the Chairmen of each of the Board’s other standing committees, the Chairman of the Board and the Lead Director, who serves as Chairman of the Executive Committee. The Executive Committee may transact all business and take any actions that can be done by the Board of Directors, except that it does not have authority to fill any Board or committee vacancies.

 

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Board Leadership Structure

 

  

 

Board Leadership Structure

Mr. Kramer serves as our Chairman of the Board, Chief Executive Officer and President and Mr. McCollough was elected by the independent members of the Board to serve as our independent Lead Director. The Board believes that the current Board leadership structure is the most appropriate for the Company and its shareholders at this time.

In order to ensure that the independent and non-management members of the Board maintain proper oversight of management on behalf of our shareholders, the Board has an independent Lead Director who is elected annually by the independent members of the Board. The election of a Lead Director by the independent members of the Board demonstrates the Board’s continuing commitment to strong corporate governance, Board independence and the importance of the role of Lead Director.

Currently, the Board believes that having Mr. Kramer serve as Chairman best positions the Company to compete successfully and advance our shareholders’ interests. His extensive knowledge of the Company and the tire industry, gained through 17 years of experience in positions of increasing authority including Chief Financial Officer and President, North America, is valuable to the Board in his role as Chairman. Mr. Kramer has provided strong and open leadership of the Board as the Company executes its strategy in a highly competitive industry that continues to be challenged by volatile global economic conditions. The current combination of the Chairman and CEO roles enhances the Company’s ability to coordinate the development, articulation and execution of a unified strategy at both the Board and management levels. The Board also believes that having Mr. Kramer serve as Chairman and CEO has facilitated the flow of information to, and discussion among, members of the Board regarding the Company’s business.

The Governance Committee believes that Mr. McCollough is highly qualified to serve as our Lead Director and that he provides strong leadership of the independent and non-management directors and diligently fulfills his duties as Lead Director.

 

LEAD DIRECTOR DUTIES

 

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

 

    Call meetings or executive sessions of the independent directors, and coordinate, develop the agenda for and preside at those meetings or sessions;

 

    Serve as liaison between the Chairman and the independent directors;

 

    Approve the schedule of Board meetings to ensure that there is sufficient time for discussion of all agenda items and advise the Chairman on the same;

 

    Approve all information sent to the Board, including meeting agendas, and advise the Chairman on such matters, and may specifically request the inclusion of information;
  Interview, along with the Chairman of the Governance Committee, all Board candidates and make recommendations to the Governance Committee and the Board;

 

  Discuss with the Governance Committee and the Chairman the membership of Board committees and the selection of committee chairs;

 

  Evaluate, together with the Compensation Committee, the Chairman and CEO’s performance, and meet with the Chairman and CEO to discuss that evaluation;

 

  Assist the Governance Committee in connection with the annual Board and committee evaluation process, and address any issues regarding director performance; and

 

  If requested by major shareholders, ensure that he or she is available for consultation and direct communication in appropriate circumstances.

 

 

 

 

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Board Leadership Structure

 

  

 

Additional duties of our independent Lead Director are set forth in Annex II to our Corporate Governance Guidelines.

In addition to the clearly-delineated and comprehensive oversight responsibilities of our Lead Director, the independent directors have ample opportunity to, and regularly do, assess the performance of the CEO and provide meaningful direction to him. The Board has strong, independent oversight of management:

 

  85% of the Company’s directors are independent;

 

  All members of the Audit, Compensation and Governance Committees are independent directors;

 

  Committee Chairs, all of whom are independent, approve agendas for their committee meetings;

 

  Board and Committee agendas are prepared based on discussions with all directors and recommendations from management, and all directors are encouraged to request agenda items, additional information and/or modifications to schedules as they deem appropriate; and

 

  The Board holds executive sessions of the independent directors at each Board meeting that are led by the Lead Director.

The Board’s policy is that, especially in our changing and challenging environment, it must retain the flexibility to determine the most effective Board leadership structure at any particular point in time. As a result, the Board has the responsibility to establish our leadership structure, including in connection with any CEO succession. Some of the factors that the Board has considered, and may consider in the future, in combining or separating the Chairman and CEO roles, include:

 

  The respective responsibilities of the Lead Director, the Chairman of the Board and the CEO;

 

  The effectiveness of the current Board leadership structure, including the Board’s assessment of the performance of the Chairman and CEO and the Lead Director and whether the Board is maintaining strong, independent oversight of management;

 

  Shareholder views on our Board leadership structure;

 

  The Company’s operating and financial performance, including the potential impact of particular leadership structures on the Company’s performance;

 

  The ability to attract or retain well-qualified candidates for the positions of CEO, Chairman of the Board and Lead Director;

 

  Practices at other similarly situated U.S. public companies; and

 

  Legislative and regulatory developments.

Board’s Role in Risk Oversight

Management continually monitors the material risks facing the Company, including competitive, financial (accounting, liquidity and tax), legal, regulatory, operational and strategic risks. The Board as a whole has responsibility for oversight of management’s identification and management of, and planning for, those risks. Reviews of certain areas are conducted by relevant Board Committees that report their deliberations to the Board.

 

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Board’s Role in Risk Oversight

 

  

 

The Board and its Committees oversee risks associated with their principal areas of focus, as summarized below. The Board and its Committees exercise their risk oversight function by carefully evaluating the reports they receive from management and by making inquiries of management with respect to areas of particular interest to the Board. Board oversight of risk is enhanced by the fact that the Lead Director and Chairman attend virtually all Committee meetings and that Committee reports are provided to the full Board following each Committee meeting. We believe that our leadership structure also enhances the Board’s risk oversight function since our Lead Director regularly discusses the material risks facing the Company with management. The Chairman is also expected to report candidly to his fellow directors on his assessment of the material risks we face, based upon the information he receives as part of his management responsibilities. Both the Lead Director and the Chairman are well-equipped to lead Board discussions on risk issues.

BOARD/COMMITTEE AREAS OF RISK OVERSIGHT

 

 

 

Full Board   

  Strategic, financial and execution risk associated with the annual operating plan and strategic plan (including allocation of capital investments);

 

  Major litigation and regulatory matters;

 

  Acquisitions and divestitures; and

 

  Management succession planning.

Audit Committee   

  Risks associated with financial matters, particularly financial reporting, accounting, and disclosure and internal controls, and information technology and cybersecurity.

Compensation Committee   

  Risks associated with the establishment and administration of executive compensation, incentive compensation programs, and performance management of officers.

Governance Committee   

  Risks associated with Board effectiveness and organization, corporate governance matters, and director succession planning.

Finance Committee   

  Risks associated with liquidity, pension plans (including investment performance, asset allocation and funded status), taxes, currency and interest rate exposures, and insurance strategies.

Committee on Corporate
Responsibility and Compliance
  

  Risks associated with health, safety and the environment, sustainability, and the Company’s legal and ethical compliance program.

 

 

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CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS

  

 

 

 
 

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Corporate Responsibility

 

  

 

Corporate Responsibility

At Goodyear, corporate responsibility is an integral part of our business strategy. We maintain an industry-leading corporate responsibility program that strives for constant improvement, to the benefit of our shareholders, our associates, our customers, our suppliers, our communities and our environment.

The key focus areas of our corporate responsibility program include our people, our health, safety and wellness programs, our environmental stewardship, including our sustainability and product stewardship efforts, our innovations, and our community engagement programs. The Board’s Committee on Corporate Responsibility and Compliance oversees our corporate responsibility objectives and regularly monitors our progress towards achieving them. We are also active in discussing these objectives with our shareholders and soliciting their feedback on any areas of improvement.

Our Corporate Responsibility Report is usually published in the second quarter of each year. The chart below describes several of the key aspects of our corporate responsibility program. For more information on Goodyear’s commitment to corporate responsibility, please visit www.goodyear.com/responsibility. Please note, however, that information contained on the website is not incorporated by reference in this Proxy Statement or considered to be a part of this document.

 

 

 

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Our People

 

     LOGO  

Our Environment

 

 
 

 

From supporting a team-based culture to encouraging health, safety and wellness, Goodyear strives to act with integrity, promote collaboration, be agile, energize the team and deliver results in all that we do.

 

We employ about 66,000 associates around the world.

 

We have reduced our total injury rate by 36% through 2015, compared to 2010.

 

We have sponsored the formation of Employee Resource Groups to support our diversity and inclusion initiatives.

    

 

Sharing the planet responsibly with customers, employees, shareholders, communities and suppliers is the impetus behind key sustainability objectives at Goodyear. Our sustainable activities mirror this commitment.

 

Zero waste to landfill from our manufacturing facilities.

 

Since 2010, our baseline year, through 2015, we have reduced:

 

   Greenhouse gas emissions by more than 19%, exceeding our goal

   Water use by 23%

   Energy use by 15%, achieving our goal

   Solvent use by 38%.

 
            
 
 

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Our Innovative Products

     LOGO  

 

Our Communities

 
 

 

Innovation excellence drives our technological advances and enables us to create products and services that are valued and sought out by consumers and customers. Our solutions, such as low rolling resistance tires that help enable our customers to meet fuel economy standards and greenhouse gas emission goals, respond to the needs of an increasingly complex market and help to set us apart from the competition.

 

We own approximately 5,500 patents worldwide.

 

21 Goodyear truck tire products that increase fuel efficiency and provide low rolling resistance have received SmartWay verification from the U.S. Environmental Protection Agency as of the end of 2015.

 

    

 

Goodyear has a long history of supporting its communities around the world. We strive to build and support collaborative programs that create positive outcomes for people, communities and the world around us.

 

Our Highway Hero program recognizes truck drivers who have saved lives on the road.

 

Our iconic Goodyear Blimp supports the fundraising efforts of local charities.

 

 

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Consideration of Director Nominees

 

  

 

Consideration of Director Nominees

The policy of the Governance Committee is to consider properly submitted shareholder nominations of candidates for membership on the Board as described below under “Identifying and Evaluating Nominees for Director.” In evaluating such nominations, the Governance Committee seeks to address the criteria described below under “Director Selection Guidelines.”

Any shareholder desiring to submit a proposed candidate for consideration by the Governance Committee should send the name of such proposed candidate, together with biographical data and background information concerning the candidate, to the Office of the Secretary, The Goodyear Tire & Rubber Company, 200 Innovation Way, Akron, Ohio 44316-0001.

Director Selection Guidelines

The Board of Directors has approved guidelines for selecting directors as part of our Corporate Governance Guidelines. Criteria considered in the selection of directors include:

 

  Personal qualities and characteristics, including the highest personal and professional integrity, sound judgment, and reputation in the business community or a record of public service;

 

  Substantial business experience or professional expertise and a record of accomplishments;

 

  Experience and stature necessary to be highly effective, working with other members of the Board, in serving the long-term interests of shareholders;

 

  Ability and willingness to devote sufficient time to the affairs of the Board and the Company and to carry out their duties effectively;

 

  The needs of the Company at the time of nomination to the Board and the fit of a particular individual’s skills and personality with those of the other directors in building a Board that is effective and responsive to the needs of the Company;

 

  Diverse business experience, substantive expertise, skills and background, as well as diversity in personal characteristics, such as age, gender and ethnicity; and

 

  Ability to satisfy Goodyear’s and The NASDAQ Stock Market’s independence standards.

Identifying and Evaluating Nominees for Director

The Governance Committee is responsible for identifying, screening and recommending persons for nomination to the Board. The Governance Committee considers candidates for Board membership suggested by its members and other Board members, as well as management and shareholders. On occasion, the Committee may also retain third-party executive search firms to identify candidates. In addition, under our prior master labor agreement with the United Steelworkers (the “USW”), the USW had the right to nominate a candidate for consideration for membership on the Board. Mr. Wessel, who became a director in December 2005, was identified and recommended by the USW.

 

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Identifying and Evaluating Nominees for Director

 

  

 

Once a prospective nominee has been identified, the Committee makes an initial determination on whether to conduct a full evaluation of the candidate. This initial determination is based on whatever information is provided to the Committee with the recommendation of the prospective candidate, as well as the Committee’s own knowledge of the prospective candidate, which may be supplemented by inquiries to the person making the recommendation or others. The preliminary determination is based primarily on the need for additional Board members and the likelihood that the prospective nominee can satisfy the director selection guidelines described above. If the Committee determines, in consultation with the Chairman of the Board, the Lead Director and other Board members as appropriate, that additional consideration is warranted, it may request a third-party search firm to gather additional information about the prospective nominee’s background and experience and to report its findings to the Committee. The Committee then evaluates the prospective nominee against the standards and qualifications set out in Goodyear’s director selection guidelines. The Committee also considers such other relevant factors as it deems appropriate, including the balance of management and independent directors and the evaluations of other prospective nominees. As described above under “Director Selection Guidelines,” diversity is among the many factors that the Committee considers in evaluating prospective nominees. We consider the members of our Board to have a diverse set of business and personal experiences, backgrounds and expertise, and to be diverse in terms of age, gender and ethnicity.

In connection with this evaluation, the Committee determines whether to interview the prospective nominee, and if warranted, the Lead Director, the Chairman of the Committee, one or more other members of the Committee, and others as appropriate, interview prospective nominees in person or by telephone. After completing this evaluation and interview, the Committee makes a recommendation to the full Board as to the persons who should be elected to the Board, and the Board makes its decision after considering the recommendation and report of the Committee.

Board Independence

The Board has determined that eleven of the thirteen director nominees are independent within the meaning of Goodyear’s independence standards, which are based on the criteria established by The NASDAQ Stock Market and are included as Annex I to Goodyear’s Corporate Governance Guidelines. Mr. Kramer, our Chairman of the Board, Chief Executive Officer and President, is not considered independent. In addition, in light of his relationship with the USW, Mr. Wessel is not considered independent. Further, the Board expects that Mr. Wessel will recuse himself from discussions and deliberations regarding Goodyear’s relationship with the USW. The Board also determined that the nature and size of the ordinary course commercial relationships between Goodyear and Xerox Corporation did not impair the independence of Mr. Firestone. The relationship was de minimis, constituting approximately one-tenth of one percent (0.1%) of either Goodyear’s or Xerox’s consolidated gross revenues in the current fiscal year and each of the last three completed fiscal years. Mr. Firestone retired from Xerox on October 31, 2016.

 

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PROPOSAL 1 – ELECTION OF DIRECTORS

The Board of Directors has selected the following thirteen nominees recommended by the Governance Committee for election to the Board of Directors. The directors will hold office from their election until the next Annual Meeting of Shareholders, or until their successors are elected and qualified. If any of these nominees for director becomes unavailable, the persons named in the proxy intend to vote for an alternate designated by the current Board of Directors.

William J. Conaty

 

     

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      Director Since:

      August 1, 2011

 

 

      Committees:

      Compensation

      Governance

 

 

      Age: 71

 

 

  

 

CURRENT PRINCIPAL OCCUPATION:

 

President of Conaty Consulting LLC and Advisory Partner of Clayton, Dubilier & Rice, LLC

 

DESCRIPTION OF BUSINESS EXPERIENCE:

 

Mr. Conaty served as Senior Vice President of Corporate Human Resources for General Electric Company from 1993 to 2007. He joined General Electric in 1967 and in his 40-year career, moved through a progression of leadership roles in the company’s transportation, aerospace and aircraft engines businesses. Following his retirement from General Electric, he formed Conaty Consulting LLC and joined Clayton, Dubilier & Rice as an advisory partner. He is Chairman of the Board of Trustees of Bryant University and a trustee of Dartmouth-Hitchcock Hospital.

  

 

OTHER PUBLIC COMPANY DIRECTORSHIPS

HELD SINCE JANUARY 1, 2012:

 

None

 

Mr. Conaty has extensive human resources, executive compensation and executive management experience from his long and successful tenure at General Electric. His skills in coaching and developing leaders and teams are an asset to both the Board of Directors and Goodyear, particularly with respect to talent development, succession planning, labor relations and executive compensation matters.

 

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ELECTION OF DIRECTORS

 

  

 

James A. Firestone

 

     

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      Director Since:

      December 3, 2007

 

 

      Committees:

      Audit

      Finance (Chairman)

      Executive

 

 

      Age: 62

 

  

 

CURRENT PRINCIPAL OCCUPATION:

 

Retired. Formerly Executive Vice President and President, Corporate Strategy and Asia Operations of Xerox Corporation

 

DESCRIPTION OF BUSINESS EXPERIENCE:

 

Mr. Firestone was Executive Vice President and President, Corporate Strategy and Asia Operations of Xerox Corporation from January 2014 until his retirement on October 31, 2016. Mr. Firestone was President, Corporate Operations from October 2008 to December 2013 and President of Xerox North America from October 2004 to September 2008. Before joining Xerox in 1998, Mr. Firestone worked for IBM Corporation as general manager of the Consumer Division and for Ameritech Corporation as president of Consumer Services. He began his business career in 1978 with American Express, where during his 15-year tenure he ultimately rose to President, Travelers Cheques.

  

 

OTHER PUBLIC COMPANY DIRECTORSHIPS

HELD SINCE JANUARY 1, 2012:

 

The Nomura Partners Fund (2005 – 2014)

 

Mr. Firestone has extensive executive management experience in positions of increasing responsibility, including most recently as a senior executive officer of Xerox Corporation, which is of similar size and global complexity as Goodyear. He also has over 20 years of profit and loss management responsibility, as well as significant international business experience. These experiences provide him with unique and valuable insights as a director of Goodyear, particularly with respect to operations and finance matters.

Werner Geissler

 

     

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      Director Since:

      February 21, 2011

 

 

      Committees:

      Audit

      Corporate Responsibility 

      and Compliance

      (Chairman)

      Executive

 

 

      Age: 63

 

  

 

CURRENT PRINCIPAL OCCUPATION:

 

Retired. Formerly Vice Chairman, Global Operations of

The Procter & Gamble Company

Operating Partner of Advent International

 

DESCRIPTION OF BUSINESS EXPERIENCE:

 

Mr. Geissler was Vice Chairman, Global Operations of The Procter & Gamble Company from August 2007 until his retirement on December 31, 2014, and was Group President, Central & Eastern Europe, Middle East and Africa from July 2004 to July 2007. He joined Procter & Gamble in 1979 and held positions of increasing responsibility in various brand and general management and operations roles in Europe, the Middle East, Central Asia, Japan, Africa and the United States.

  

 

OTHER PUBLIC COMPANY DIRECTORSHIPS

HELD SINCE JANUARY 1, 2012:

 

Philip Morris International Inc.

(2015 – present)

 

Mr. Geissler, a native of Germany, has deep executive management experience, including as a senior executive officer of Procter & Gamble, where he oversaw Procter & Gamble’s extensive worldwide business operations. He has significant international business experience and profit and loss management responsibility. These experiences provide him with valuable insights as a director of Goodyear, particularly with respect to consumer marketing, and international, operations and finance matters.

 

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ELECTION OF DIRECTORS

 

  

 

Peter S. Hellman

 

     

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      Director Since:

      October 5, 2010

 

 

      Committees:

      Audit (Chairman)

      Finance

      Executive

 

 

      Age: 67

 

  

 

CURRENT PRINCIPAL OCCUPATION:

 

Retired. Formerly President and Chief Financial and

Administrative Officer of Nordson Corporation

 

DESCRIPTION OF BUSINESS EXPERIENCE:

 

Mr. Hellman retired from Nordson Corporation, a designer, manufacturer and marketer of industrial equipment, in 2008 after a career of over 20 years with large, multinational companies in both financial and operating executive positions. Mr. Hellman was President and Chief Financial and Administrative Officer of Nordson Corporation from 2004 to January 2008 and Executive Vice President and Chief Financial and Administrative Officer from 2000 to 2004. Prior to joining Nordson in 2000, Mr. Hellman was with TRW Inc. for 10 years and held various positions, including President and Chief Operating Officer and Chief Financial Officer. Mr. Hellman also serves on the boards of several nonprofit organizations.

  

 

OTHER PUBLIC COMPANY DIRECTORSHIPS

HELD SINCE JANUARY 1, 2012:

 

Baxter International Inc. (2005 – present)

Owens-Illinois, Inc. (2007 – present)

 

Mr. Hellman has significant financial reporting expertise due to his service as a Chief Financial Officer at both Nordson and TRW, providing him with the necessary skills to be Chairman of our Audit Committee, where he also qualifies as an “audit committee financial expert.” He also has extensive operational experience at both companies. In addition, Mr. Hellman has served on public company boards for over 20 years. Through his board and management experience, Mr. Hellman also has significant experience with corporate governance practices and legal and regulatory compliance issues. Mr. Hellman’s financial and operating experience, business leadership skills and board experience enable him to provide valuable contributions as a Goodyear director.

Laurette T. Koellner

 

     

 

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      Director Since:

      February 23, 2015

 

 

      Committees:

      Audit

      Finance

 

 

      Age: 62

 

  

 

CURRENT PRINCIPAL OCCUPATION:

 

Retired. Formerly President of Boeing International and Executive Chairman of International Lease Finance Corporation

 

DESCRIPTION OF BUSINESS EXPERIENCE:

 

Ms. Koellner most recently served as Executive Chairman of International Lease Finance Corporation, an aircraft leasing subsidiary of American International Group, Inc., from June 2012 until its sale in May 2014. From 1978 until 2007, Ms. Koellner held positions of increasing responsibility at McDonnell Douglas Corporation and The Boeing Company, an aerospace company, including as President of Boeing International, where she oversaw Boeing’s international operations, and President of Connexion by Boeing, which provided satellite-based connectivity services to aircraft and maritime vessels. While at Boeing, Ms. Koellner also served as Vice President and General Auditor, Vice President and Corporate Controller, and Chief Human Resources Officer.

  

 

OTHER PUBLIC COMPANY DIRECTORSHIPS

HELD SINCE JANUARY 1, 2012:

 

Celestica Inc. (2009 – present)

Nucor Corporation (2015 – present)

Papa John’s International, Inc. (2014 – present)

The Hillshire Brands Company (formerly Sara Lee Corporation) (2003 – 2014)

American International Group, Inc. (2009 – 2012)

International Lease Finance Corporation (2012-2014)

 



Ms. Koellner has significant senior executive management experience, including extensive international business experience. She qualifies as an “audit committee financial expert” due to her financial leadership roles at Boeing. Her service on several public company boards of directors also provide us with important insights on business practices in a variety of industries.

 

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ELECTION OF DIRECTORS

 

  

 

Richard J. Kramer

 

     

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      Director Since:

      February 22, 2010

 

 

      Committees:

      Executive

 

 

      Age: 53

 

  

 

CURRENT PRINCIPAL OCCUPATION:

 

Chairman of the Board, Chief Executive Officer and President of Goodyear

 

DESCRIPTION OF BUSINESS EXPERIENCE:

 

Mr. Kramer joined Goodyear in March 2000 as Vice President – Corporate Finance, serving in that capacity as Goodyear’s principal accounting officer until August 2002, when he was elected Vice President, Finance – North American Tire. In August 2003, he was named Senior Vice President, Strategic Planning and Restructuring, and in June 2004 was elected Executive Vice President and Chief Financial Officer. Mr. Kramer was elected President, North American Tire in March 2007 and continued to serve as Chief Financial Officer until August 2007. In June 2009, Mr. Kramer was elected Chief Operating Officer and continued to serve as President, North American Tire until February 2010. He was elected Chief Executive Officer and President effective April 13, 2010 and Chairman effective October 1, 2010. Prior to joining Goodyear, Mr. Kramer was with PricewaterhouseCoopers LLP for 13 years, including two years as a partner.

  

 

OTHER PUBLIC COMPANY DIRECTORSHIPS

HELD SINCE JANUARY 1, 2012:

 

The Sherwin-Williams Company (2012 – present)

 

Mr. Kramer has been an executive officer of Goodyear for 17 years. Mr. Kramer has held several key positions at Goodyear and has had a critical role in creating our strategy and strengthening our leadership teams as Chief Executive Officer and previously as Chief Financial Officer and as President, North American Tire. Mr. Kramer’s deep knowledge of Goodyear, global markets, manufacturing, finance and accounting provides our Board with valuable perspectives that are necessary to advance Goodyear’s business and the interests of our shareholders.

W. Alan McCollough

 

     

 

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      Director Since:

      April 10, 2007

 

 

      Lead Director

 

 

      Committees:

      Compensation

      Governance

      Executive (Chairman)

 

 

      Age: 67

 

  

 

CURRENT PRINCIPAL OCCUPATION:

 

Retired. Formerly Chairman and Chief Executive Officer of Circuit City Stores, Inc.

 

DESCRIPTION OF BUSINESS EXPERIENCE:

 

Mr. McCollough joined Circuit City Stores, Inc., a consumer electronics retailer, in 1987 as general manager of corporate operations, and was named assistant vice president in 1989, president of central operations in 1991, and senior vice president of merchandising in 1994. He served as President and Chief Operating Officer from 1997 to 2000 and as President and Chief Executive Officer from 2000 to 2002. Mr. McCollough was elected Chairman, President and Chief Executive Officer of Circuit City in 2002 and served in those capacities until 2005. He remained Chief Executive Officer until February 2006 and Chairman until his retirement in June 2006.

  

 

OTHER PUBLIC COMPANY DIRECTORSHIPS

HELD SINCE JANUARY 1, 2012:

 

La-Z-Boy Inc. (2007 – present)

VF Corporation (2000 – present)

 

Mr. McCollough has extensive senior executive management experience, particularly in operations and consumer merchandising and marketing. His experience as Chairman and Chief Executive Officer of Circuit City provides him with the necessary skills to be Lead Director. Mr. McCollough’s past service as Chairman of Circuit City, as well as his current service on other public company boards of directors, provides us with important perspectives on corporate governance and executive compensation matters.

 

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ELECTION OF DIRECTORS

 

  

 

John E. McGlade

 

     

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      Director Since:

      December 5, 2012

 

 

      Committees:

      Compensation (Chairman)

      Governance

      Executive

 

 

      Age: 63

 

  

 

CURRENT PRINCIPAL OCCUPATION:

 

Retired. Formerly Chairman, President and

Chief Executive Officer of

Air Products and Chemicals, Inc.

 

DESCRIPTION OF BUSINESS EXPERIENCE:

 

Mr. McGlade was Chairman, President and Chief Executive Officer of Air Products and Chemicals, Inc., a global provider of atmospheric, process and specialty gases, from March 2008 until his retirement on July 1, 2014. He joined Air Products in 1976 and held various positions of increasing responsibility, including as Group Vice President, Chemicals Group, and President and Chief Operating Officer.

 

  

 

OTHER PUBLIC COMPANY DIRECTORSHIPS

HELD SINCE JANUARY 1, 2012:

 

Bunge Limited (2014 – present)

Air Products and Chemicals, Inc. (2007 – 2014)

 

Mr. McGlade has strong leadership skills and extensive management, international and operating experience, including as Chief Executive Officer of Air Products. He has also had responsibility for the environment, health, safety and quality function during his career at Air Products. These experiences provide him with unique and valuable insights as a director of Goodyear, particularly with respect to operations matters.

Michael J. Morell

 

     

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      Director Since:

      January 7, 2014

 

 

      Committees:

      Audit

      Corporate Responsibility

      and Compliance

 

 

      Age: 58

 

  

 

CURRENT PRINCIPAL OCCUPATION:

 

Chief Executive Officer and President, Morell Consulting, and Senior Counselor, Beacon Global Strategies.

Formerly Deputy Director of the Central Intelligence Agency

 

DESCRIPTION OF BUSINESS EXPERIENCE:

 

Mr. Morell retired from the Central Intelligence Agency in 2013 following a 33-year career, including serving as Deputy Director from May 2010 to August 2013 and as Director for Intelligence from May 2008 to April 2010. He also served as Acting Director on two occasions. Mr. Morell has received numerous intelligence and defense awards for his service to the United States.

  

 

OTHER PUBLIC COMPANY DIRECTORSHIPS

HELD SINCE JANUARY 1, 2012:

 

None

 

 

Mr. Morell has extensive leadership and management experience through his positions with the Central Intelligence Agency, a large and complex global government agency. He also possesses extensive knowledge of national security issues, such as cybersecurity, terrorism and political and economic instability, which directly impact global businesses. These experiences, combined with his strong critical thinking and problem solving skills, make Mr. Morell a valuable contributor to the Board of Directors.

 

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ELECTION OF DIRECTORS

 

  

 

Roderick A. Palmore

 

     

LOGO

 

      Director Since:

      August 7, 2012

 

 

      Committees:

      Finance

      Governance (Chairman)

      Executive

 

 

      Age: 65

 

  

 

CURRENT PRINCIPAL OCCUPATION:

 

Senior Counsel at Dentons US LLP

Formerly Executive Vice President, General Counsel, Chief Compliance and Risk Management Officer, and Secretary of General Mills, Inc.

 

DESCRIPTION OF BUSINESS EXPERIENCE:

 

Mr. Palmore joined General Mills, a global manufacturer and marketer of food products, as Executive Vice President, General Counsel, Chief Compliance and Risk Management Officer, and Secretary in February 2008 and served in that capacity until his retirement on February 16, 2015. Following his retirement from General Mills, he joined Dentons, an international law firm, as senior counsel. From 1996 to 2008, he worked for Sara Lee Corporation in a variety of legal leadership roles, ultimately becoming Executive Vice President, General Counsel and Secretary. Prior to 1996, he worked at the U.S. Department of Justice and in private practice.

  

 

OTHER PUBLIC COMPANY DIRECTORSHIPS

HELD SINCE JANUARY 1, 2012:

 

CBOE Holdings, Inc. (2000 – present)

Express Scripts Holding Co. (2014 – present)

 

In his role at General Mills, he was responsible for the company’s worldwide legal activities, corporate ethics, compliance, and corporate security. Through his experience as general counsel of consumer product public companies, in private practice and as an Assistant U.S. Attorney, Mr. Palmore has extensive experience in corporate governance and the legal issues facing Goodyear. In addition, his experience provides him with strong risk management skills. This broad business knowledge and public board experience, as well as his strong leadership skills, are valuable assets to the Board of Directors.

Stephanie A. Streeter

 

     

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   Director Since:

   October 7, 2008

 

 

   Committees:

   Compensation

   Governance

 

 

   Age: 59

 

  

 

CURRENT PRINCIPAL OCCUPATION:

 

Formerly Chief Executive Officer of

Libbey Inc.

 

DESCRIPTION OF BUSINESS EXPERIENCE:

 

Ms. Streeter was Chief Executive Officer of Libbey Inc., a producer of glass tableware products, from August 2011 until January 11, 2016. Previously, Ms. Streeter was with Banta Corporation, a provider of printing and supply chain management services, serving as President and Chief Operating Officer beginning in January 2001, and was elected Chief Executive Officer in 2002 and Chairman in 2004. She served as Chairman, President and Chief Executive Officer of Banta until its acquisition by R.R. Donnelley & Sons in 2007. Ms. Streeter also spent 14 years with Avery Dennison Corporation in a variety of product and business management positions, including as Group Vice President of Worldwide Office Products from 1996 to 2000.

  

 

OTHER PUBLIC COMPANY DIRECTORSHIPS

HELD SINCE JANUARY 1, 2012:

 

Kohl’s Corporation (2007 – present)

Libbey Inc. (2011 – January 11, 2016)

 

Ms. Streeter has extensive senior executive management experience. Her experiences as Chief Executive Officer of Libbey, as Chairman, President and Chief Executive Officer of Banta and at Avery Dennison provide Ms. Streeter with an understanding of the operations and performance of public companies. Ms. Streeter’s service on several public company and nonprofit boards of directors also provide us with important insights on practices across a variety of industries.

 

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ELECTION OF DIRECTORS

 

  

 

Thomas H. Weidemeyer

 

     

LOGO

 

      Director Since:

      December 9, 2004

 

 

      Committees:

      Corporate Responsibility

      and Compliance

      Finance

 

 

      Age: 69

 

  

 

CURRENT PRINCIPAL OCCUPATION:

 

Retired. Formerly Senior Vice President and

Chief Operating Officer of United Parcel Service, Inc.

 

DESCRIPTION OF BUSINESS EXPERIENCE:

 

Mr. Weidemeyer served as Senior Vice President and Chief Operating Officer of United Parcel Service, Inc., a transportation and logistics company, from January 2001, and as President and Chief Operating Officer of UPS Airlines from July 1994, until his retirement in February 2004. Mr. Weidemeyer became Manager of the Americas International Operation of UPS in 1989, and in that capacity directed the development of the UPS delivery network throughout Central and South America. In 1990, he became Vice President and Airline Manager of UPS Airlines and in 1994 was elected its President and Chief Operating Officer. Mr. Weidemeyer was a director of United Parcel Service from 1998 to 2003.

  

 

OTHER PUBLIC COMPANY DIRECTORSHIPS

HELD SINCE JANUARY 1, 2012:

 

NRG Energy, Inc. (2003 – present)

Waste Management, Inc. (2005 – present)

 

Mr. Weidemeyer has over 40 years of management and executive leadership experience. His logistics, finance and international management experience provides us with valuable insights on our supply chain and financial management practices, as well as our overall business. His service on other boards of directors also provides us with perspectives on issues facing companies in different industries.

Michael R. Wessel

 

     

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      Director Since:

      December 6, 2005

 

 

      Committees:

      Corporate Responsibility

      and Compliance

 

 

      Age: 57

 

  

 

CURRENT PRINCIPAL OCCUPATION:

 

President of The Wessel Group Incorporated

 

DESCRIPTION OF BUSINESS EXPERIENCE:

 

Mr. Wessel has served as President of The Wessel Group Incorporated, a government and political affairs consulting firm, since May 2006. Prior to founding The Wessel Group, he served as Senior Vice President of the Downey McGrath Group, a government affairs consulting firm, from March 1999 to December 2005 and as Executive Vice President from January 2006 to April 2006.

 

Mr. Wessel is an attorney with over 30 years of experience as an economic and international trade policy advisor in Washington, D.C. Mr. Wessel has acted as an advisor to Congressman Richard Gephardt, both in the U.S. House of Representatives and to his presidential campaigns in 1987-88 and 2003-04, to the Clinton/Gore Transition

  

 

OTHER PUBLIC COMPANY DIRECTORSHIPS

HELD SINCE JANUARY 1, 2012:

 

None

 

Office in 1992 and 1993, and to Senator John Kerry’s presidential campaign in 2004. Mr. Wessel also serves as a Commissioner on the U.S.-China Economic and Security Review Commission, a position he has held since April 2001.

 

Mr. Wessel’s extensive experience with public policy matters and his government service, including as an advisor to former Majority Leader Gephardt and as an appointee on government commissions, provides us with valuable perspectives on public policy matters impacting trade, international economic affairs and other matters of importance to Goodyear.

 

 

LOGO Your Board of Directors unanimously recommends that shareholders vote FOR each of the nominees for director named in this Proxy Statement (Proposal 1).

 

 

 

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PROPOSAL 2 – ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

We are seeking your vote to approve, on an advisory (or non-binding) basis, the compensation of our named executive officers as disclosed in this Proxy Statement.

Our Compensation Discussion and Analysis (“CD&A”), which starts on page 28, describes our executive compensation program. We encourage you to read the CD&A before casting your vote.

The advisory resolution below, commonly known as a “say-on-pay” proposal, gives you the opportunity to express your views on our executive compensation program for our named executive officers. The “say-on-pay” proposal is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the executive compensation policies, practices and plans described in this Proxy Statement.

The resolution is required by Section 14A of the Securities Exchange Act of 1934. The resolution is not intended to indicate your approval of the matters disclosed under the heading “Risks Related to Compensation Policies and Practices” or future “golden parachute” payments. We will seek shareholder approval of any “golden parachute” payments at the time of any transaction triggering such payments to the extent required by applicable law.

We ask you to vote “FOR” the following resolution which will be presented by the Board of Directors at the Annual Meeting:

“RESOLVED, that the shareholders of The Goodyear Tire & Rubber Company approve, on an advisory basis, the compensation of the named executive officers as disclosed in the Company’s Proxy Statement for the 2017 Annual Meeting of Shareholders.”

Although this proposal is an advisory vote that will not be binding on the Compensation Committee or the Board of Directors, the Compensation Committee will consider the results of this shareholder advisory vote and the changes, if any, to our executive compensation policies, practices and plans that may be warranted as a result of this vote.

 

 

LOGO Your Board of Directors unanimously recommends that shareholders vote FOR the advisory resolution to approve the compensation of our named executive officers (Proposal 2).

 

 

 

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PROPOSAL 3 – ADVISORY VOTE ON THE FREQUENCY OF FUTURE SAY-ON-PAY ADVISORY VOTES

We are seeking your preference, on an advisory (or non-binding) basis, with respect to the frequency of future shareholder votes regarding the compensation of our named executive officers. This advisory “frequency” vote is required at least once every six years beginning in 2011.

After careful consideration of this proposal, our Board of Directors has determined that an advisory vote regarding the compensation of our named executive officers that occurs annually is the most appropriate alternative for the Company, and therefore our Board recommends that you vote for a frequency of “One Year” for future shareholder votes regarding the compensation of our named executive officers.

We have found that an annual advisory vote on our executive compensation program has enhanced shareholder communication by encouraging our shareholders to regularly provide us with their input on our executive compensation policies, practices and plans. We believe that an annual advisory vote will continue to provide us a means to obtain regular feedback on shareholder sentiment regarding our executive compensation decisions.

You may vote for a say-on-pay vote frequency of every one, two or three years, or you may abstain from expressing a preference when you vote on the following resolution which will be presented by the Board of Directors at the Annual Meeting:

“RESOLVED, that the option of once every one year, two years or three years that receives the highest number of votes cast will be determined to be the preferred frequency with which the Company is to hold a shareholder advisory vote regarding the compensation of the Company’s named executive officers.”

The option of one year, two years or three years that receives the highest number of votes cast by shareholders will be the frequency for the shareholder advisory vote regarding the compensation of our named executive officers that will be considered to be preferred by our shareholders. However, because this vote is not binding on the Board, the Board may decide, either now or in the future, that it is in the best interests of our shareholders and the Company to hold a shareholder advisory vote regarding the compensation of our named executive officers more or less frequently than the option preferred by our shareholders.

 

 

LOGO Your Board of Directors unanimously recommends that shareholders vote for a frequency of ONE YEAR for future say-on-pay advisory votes (Proposal 3).

 

 

 

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COMPENSATION DISCUSSION AND ANALYSIS TABLE OF CONTENTS

Introduction

This Compensation Discussion and Analysis describes the Company’s executive compensation philosophy and programs, focusing in particular on the Compensation Committee’s decisions about named executive officers (“NEOs”) in 2016.

OUR NEOS FOR 2016 ARE:

 

Richard J. Kramer

  Chairman, Chief Executive Officer and President

Laura K. Thompson

  Executive Vice President and Chief Financial Officer

Stephen R. McClellan

  President, Americas

John T. Lucas

  Senior Vice President, Global Human Resources

David L. Bialosky

  Senior Vice President, General Counsel and Secretary

Table of Contents

 

 

 

USE OF NON-GAAP FINANCIAL MEASURES

For additional information regarding segment operating income and free cash flow from operations, both non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures, see Exhibit A to this Proxy Statement.

 

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COMPENSATION

DISCUSSION AND ANALYSIS

Executive Summary

ROBUST OPERATING RESULTS IN 2016

We delivered strong Goodyear net income of $1.3 billion and segment operating income of $2.0 billion in 2016. We achieved these results despite experiencing continued volatile global industry conditions in 2016, including mixed industry conditions in Americas, where we experienced weakening demand for commercial truck tires in the United States and continuing recessionary economic conditions in Brazil, and increased competition, particularly with respect to smaller rim size consumer tires, in Europe. We experienced growth in Asia Pacific driven by growth in Japan, due to the acquisition of a controlling interest in Nippon Goodyear Ltd., as well as China and India. In addition, we were impacted by the continued strengthening of the U.S. dollar against most foreign currencies. We also produced record segment operating income of $373 million in Asia Pacific in 2016.

At our Investor Day in September 2016, we laid out our 2020 strategic plan which is focused on capturing profitable growth in attractive market segments, particularly in large rim size consumer tires, mastering increasing complexity and turning that into a competitive advantage, and connecting with consumers through our aligned distribution network of distributors and dealers. As part of our 2020 strategic plan, we announced our 2017-2020 capital allocation plan that provides for additional growth capital expenditures, debt repayments, restructuring payments, and common stock dividends and share repurchases. We also increased the quarterly cash dividend on our common stock by 43% and increased the authorized amount of our common stock repurchase program by $1.0 billion. For additional information on our strategy and capital allocation plan, see “2016 Business Performance Highlights” in the Proxy Statement Summary.

 

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COMPENSATION DISCUSSION AND ANALYSIS

  

 

 

 
 

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Executive Summary

 

  

 

PERFORMANCE HIGHLIGHTS

The following summarizes key elements of the company’s performance in 2016.

 

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KEY ACCOMPLISHMENTS IN 2016

 

 

Strong Corporate EBIT Performance  

   Our 2016 Corporate EBIT of over $1.8 billion continued to be strong.

 

 

   Operating income of $373 million was at record levels for Asia Pacific.

 

Strong Cash Flow  

   We generated free cash flow from operations of $739 million in 2016.

 

Shareholder Return

Program

 

   In 2016, we returned $582 million to our shareholders, comprised of $82 million of dividends and $500 million of share repurchases. Over the lifetime of our recently completed 2014-2016 capital allocation plan, we paid dividends on our Common Stock of $222 million and repurchased 31.2 million shares of our Common Stock for $913 million.

 

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

  

 

 

 
 

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Executive Summary

 

  

 

2016 SHAREHOLDER ENGAGEMENT

We believe that it is important for us to communicate regularly with shareholders regarding areas of interest or concern. Over the last several years, in addition to our day-to-day interactions regarding our financial performance, we have enhanced our shareholder engagement program to include an annual outreach that is focused on our long-term business strategy, executive compensation, corporate governance and other topics suggested by our shareholders. This annual outreach helps to ensure that our shareholders are heard and able to communicate directly with us on these important matters. As part of our 2016 annual outreach, we requested the opportunity to meet with approximately 60% of our shareholders and we ultimately engaged with shareholders representing almost 50% of our outstanding Common Stock as of September 30, 2016.

Our outreach meetings gave us the chance to highlight the strong operating performance delivered by the Company over the past several years and our new four-year strategic plan, as well as our commitment to sound executive compensation practices, a thorough process for setting challenging targets and the alignment of pay and performance. We also took the opportunity to discuss proxy access and our ongoing commitment to strong corporate governance and corporate responsibility. We received positive feedback on our operating performance and strategy, the disclosure in our 2016 Proxy Statement, and our executive compensation program, specifically the metrics in our annual and long-term incentive plans and our proportion of performance-based pay. This feedback was consistent with the success of last year’s say on pay proposal, which was approved by 96% of our voting shareholders at our 2016 annual meeting.

All of the shareholder feedback that we received was reported to the Compensation Committee and the Board of Directors for its consideration.

ALIGNMENT OF PAY AND PERFORMANCE

Goodyear’s executive compensation is strongly aligned to company performance and measurable financial metrics, and target CEO pay is near the median of general industry survey data and our peer group.

 

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Executive Summary

 

  

 

 

 

90% of our CEO’s pay opportunity is performance based and over 75% is tied to stock price.

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Our CEO’s realized pay shows strong alignment to our stock price

 

 

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As a result of our operating performance, payouts under our annual incentive plan ranged from 63% to 75% of target for our named executive officers. In addition, the performance targets for the 2016 performance periods under our 2014-2016, 2015-2017 and 2016-2018 long-term awards were exceeded and payouts ranging from 117% to 167% of target were approved for the applicable periods, subject to continued service and a relative total shareholder return modifier (which we refer to as the

 

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Executive Summary

 

  

 

“TSR modifier” and which is described in more detail on page 45). Our stock out-performed 63% of the companies in the S&P 500 during the three-year period ending December 31, 2016, resulting in a TSR modifier of 1.1 times.

ELEMENTS OF EXECUTIVE COMPENSATION

Compensation for NEOs is comprised of a mix of variable and fixed compensation that is strongly linked to company performance and targeted to the median of general industry survey data and our peer group.

For 2016, the mix of performance metrics was as follows:

 

           Incentive Program   Financial Metrics    Weighting        

ANNUAL

INCENTIVES

     Annual Performance Plan   EBIT      40  
       Free Cash Flow from Operations      40  
       Operating Drivers      20  
                     

LONG-TERM

AWARDS

    

Performance-Based Awards

(Paid out in Equity and Cash)

 

  Net Income      50     LOGO  
       Cash Flow Return on Capital      50  
     Stock Options               

We believe that our compensation program is consistent with our performance-based compensation philosophy and serves the long-term interests of our shareholders. We will continue to seek feedback from our investors and consider ongoing enhancements to the program.

 

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Executive Summary

 

  

 

COMPENSATION BEST PRACTICES

The Compensation Committee has adopted a number of best practices that are consistent with our performance-based compensation philosophy and serve the long-term interests of our shareholders:

 

 

Strong Link to Financial

Performance

  

Use of diversified financial metrics in our annual and long-term plans that are closely tied to our long-term strategy, along with a relative TSR modifier on all long-term performance-based awards

 

Dividend Policy   

No dividends or dividend equivalents on unearned performance-based equity awards

 

No Repricing   

No repricing of options without shareholder approval

 

No Additional Service

Credit in Pension

 

  

No pension credit for newly hired executives to make up for service at prior employers

 

Double-Trigger

Change-in-Control

  

Double-trigger change-in-control provisions in our change-in-control plan and our equity compensation plans, and no walk-away rights

 

No Gross-Ups   

No tax gross-ups in our change-in-control plan or for perquisites

 

Strong Stockholding

and Retention Policies

  

Robust stockholding guidelines for officers and directors, including stock retention provisions following the exercise of stock options or the vesting of other stock-based awards

 

No Hedging or Pledging   

Hedging and pledging of our Common Stock by officers, directors and employees is prohibited

 

Clawback Policy   

Robust clawback policy in place

 

Independent

Committee

 

  

Compensation Committee consists only of independent Board members

 

Leading Independent

Consultant

  

Engaged a leading independent compensation consultant to assist the Compensation Committee and Board in determining executive compensation and evaluating program design

 

 

 

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Compensation Philosophy

 

  

 

Compensation Philosophy

The following core principles form the foundation of the compensation program for our executives, including the named executive officers:

 

 

   

FIRST, compensation programs should motivate our executives to take actions that are aligned with our short- and long-term strategic objectives, and appropriately balance risk versus potential reward.

 

   

SECOND, as executives move to a greater level of responsibility, the percentage of their pay based on performance should increase to ensure the highest level of accountability to shareholders.

 

THIRD, performance pay should offer an opportunity for above average compensation when our performance exceeds our goals balanced by the risk of below average compensation when it does not.    

FOURTH, the percentage of total compensation paid in the form of equity should also increase as executives have increasing responsibility for corporate performance, thereby more closely aligning their interests with those of our shareholders.

 

Components of Executive Compensation

We provide executive compensation and benefits that are market-competitive in which a large portion of the total opportunity is variable and tied to our performance and changes in shareholder value over a multi-year period. The key components of compensation provided to our executive officers and how each supports our compensation objectives are presented in the following table:

 

    Description   Objectives
Annual Compensation

Base Salary

  Annual cash compensation  

•  Provide an appropriate level of fixed compensation necessary to attract and retain employees

 

•  Recognize and reward skills, competencies, experience, leadership and individual contribution

 

Annual Incentive

Plans

  Annual cash incentive based on corporate performance (corporate and/or operating unit performance measures) and individual performance  

Link annual cash compensation to attainment of key short-term performance goals:

 

•  Across total company and operating units as measured primarily by achievement of annual operating goals

 

•  By the individual as measured by achievement of specific strategic goals and demonstrated leadership traits

 

 

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Components of Executive Compensation

 

  

 

    Description   Objectives
Long-Term Incentive Compensation

Stock Options

  Provides opportunity to purchase stock at the grant date fair market value over a ten-year period. Results in value only if stock price increases  

  Link realized compensation over long-term to appreciation in stock price

 

  Facilitate retention

 

  Build executive stock ownership

 

  Align interests of management with those of shareholders

 

Performance-Based

Awards

 

Long-term incentive program with award payouts tied to achievement of corporate goals over a three-year period, with performance targets for each year of the three-year period established on the grant date, subject to a relative total shareholder return modifier over that three-year period

 

Payable in shares of Common Stock and cash

 

 

  Link multi-year compensation to performance against key operational goals over a three-year period, as well as changes in share price on both an absolute and relative basis

 

  Facilitate retention

 

  Build executive stock ownership

 

  Align interests of management with those of shareholders

 

Retirement Programs

Qualified Retirement

Plans

 

  Post-retirement benefits  

•  Necessary to attract and retain employees

Supplementary

Pension Plan and

Excess Benefit Plans

  Additional retirement benefits  

•  Facilitate attraction and retention of executive officers

 

•  Provide for retirement replacement income, thereby facilitating an orderly succession of talent

 

Other Executive Benefits

Perquisites

 

Home security systems

Tire program

Financial planning and tax preparation services

Annual physical exams

Limited use of company aircraft

 

 

  Assure protection of officers

 

  Enable officers to focus on Company business with minimal disruption

Other Benefits

  Medical, welfare and other benefits  

  Necessary to attract and retain employees

 

 

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Compensation Decision-Making

 

  

 

Compensation Decision-Making

The Compensation Committee undertakes ongoing review of our executive compensation policies, practices and plans to determine whether they are consistent with our compensation philosophy and objectives, and whether they need to be modified in light of changes in our business or the markets in general. The Compensation Committee meets periodically with the CEO to review compensation policies and specific levels of compensation paid to officers and other key personnel, and reports and makes recommendations to the Board regarding executive compensation policies and programs. In addition, the CEO annually makes recommendations to the Compensation Committee regarding salary adjustments and the setting of annual and long-term incentive targets and awards for officers other than himself, including the other named executive officers. The Compensation Committee also obtains feedback, advice and recommendations on our compensation program from its independent compensation consultant, F.W. Cook. The Compensation Committee also reviews Company performance, compensation practices of its peers, compensation surveys and other materials regarding executive compensation.

In determining the compensation of a named executive officer, the Compensation Committee considers various factors, including:

 

  Company performance against corporate and operating unit objectives,

 

  The Company’s relative shareholder return,

 

  The compensation of officers with similar responsibilities at comparable companies,

 

  Individual performance,

 

  Current and future responsibilities,

 

  Retention considerations,

 

  The awards given to the named executive officer in past years, and

 

  The relationship between the compensation to be received by the officer and the compensation to be received by the other named executive officers (which we refer to as “internal pay equity”), including comparing the relationship to that found at comparable companies. In reviewing the CEO’s compensation relative to our other named executive officers, the Compensation Committee takes into account the fact that we do not currently have a president or chief operating officer between the CEO and our business unit presidents or corporate senior vice presidents as do many companies.

 

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Compensation Decision-Making

 

  

 

The Compensation Committee generally sets “primary compensation,” which we define to include salary, annual cash incentives and long-term compensation, for the CEO and the other named executive officers as follows:

 

 

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Long-term compensation is delivered through grants of stock options and long-term performance-based incentive awards that are payable in shares of Common Stock and cash. The mix of long-term compensation between cash-based long-term incentives, performance shares and stock options is based, in part, on the market value of our Common Stock, the number of shares available for grant under our shareholder-approved equity compensation plan, and considerations relating to managing the dilutive effect of share-based awards.

We generally target base salaries for our CEO and other officers below median market rates, in the aggregate, consistent with the requirements of our master labor agreement with the USW, and we target annual and long-term incentive compensation at rates that, when added to base salaries, result in median market levels of target primary compensation, on average. The actual positioning of target compensation relative to the median varies based on each executive’s experience and skill set, and generally results in executives who are new in their role being placed lower in the range and those with more experience being placed higher in the range. We emphasize variable compensation because it minimizes fixed expense associated with salary and enables total compensation to fluctuate directly with performance against operating goals and changes in share price. This approach aligns overall costs with performance and provides executives with a leveraged and attractive compensation opportunity that varies based on results.

For further information regarding the Compensation Committee and its authority and responsibilities, see “Corporate Governance Principles and Board Matters — Compensation Committee” at page 9.

 

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Role of Compensation Consultant

 

  

 

Role of Compensation Consultant

The Compensation Committee has the authority to retain outside advisors, including compensation consultants, to assist it in evaluating actual and proposed compensation for our officers. During 2016, the Compensation Committee retained F.W. Cook as its independent compensation consultant.

As part of its engagement, F.W. Cook reviewed our executive compensation peer group and conducted a competitive analysis of compensation for the named executive officers as well as our operational and stock price performance relative to the peer group. F.W. Cook also assisted the Committee with a variety of other issues, including setting CEO compensation, compensation related to leadership succession activities, the design and establishment of performance goals under our variable incentive plans, and reviewing our compensation risk analysis.

In addition, F.W. Cook reviewed and provided recommendations regarding our non-management director compensation program and made a presentation to the full Board on trends and regulatory developments in executive compensation. A representative of F.W. Cook regularly attends Compensation Committee meetings. F.W. Cook works with Goodyear management only under the direction of the Compensation Committee and does not provide any other advice or consulting services to the Company.

Peer Group Benchmarking of Primary Compensation

As noted above, the Compensation Committee generally targets primary compensation levels for officers at median market rates. For these purposes, the Compensation Committee has determined market rates by considering two sources:

 

    Proxy statements and other public filings of 18 peer companies; and

 

    Broad-based compensation surveys published from time to time by national human resources consulting firms.

 

FOR 2016 COMPENSATION DECISIONS, THE PEER GROUP NOTED ABOVE CONSISTED OF:

 

3M Company

  

Eaton Corporation plc

  

PACCAR Inc.

Caterpillar Inc.

  

Honeywell International Inc.

  

Parker-Hannifin Corporation

Cummins Inc.

  

Illinois Tool Works Inc.

  

PPG Industries, Inc.

Deere & Co.

  

Ingersoll-Rand plc

  

Stanley Black & Decker, Inc.

Delphi Automotive PLC

  

Johnson Controls, Inc.

  

TRW Automotive Holdings Corp.

E.I. du Pont de Nemours and Co.

  

Lear Corporation

  

Whirlpool Corporation

 

 

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Peer Group Benchmarking of Primary Compensation

 

  

 

This peer group was selected because the companies, as a whole, represent organizations of comparable size and complexity with which we compete for executive talent. The peer group includes companies in similar industries with comparable business models and global reach. It does not include other companies in the tire industry because no other U.S.-based tire company is similar in size and complexity to us, and non-U.S.-based tire companies do not publish comparable compensation information.

The Compensation Committee strongly believes that performance should be the primary basis on which compensation decisions are made. At the same time, the Compensation Committee believes that our peer group should reflect the fact that our executive officers are responsible for managing a larger and more complex enterprise relative to that of many other publicly traded companies with a larger market capitalization. Accordingly, in 2015, prior to analyzing competitive compensation data to help inform 2016 compensation decisions, the Compensation Committee reviewed the composition of the peer group using the following criteria:

 

(1) companies with which we compete for executive talent;

 

(2) size, including revenues, net income, total assets, market capitalization and enterprise value;

 

(3) global manufacturing focus;

 

(4) industry focus, particularly companies in the automotive industry;

 

(5) consumer branded product companies; and

 

(6) number of employees.

Our peer group had 2015 annual revenues – the size criteria most strongly correlated to compensation – ranging from $11.4 billion to $54.6 billion and median revenues of $19.5 billion (for 2015, we had revenues of $16.4 billion), and had approximately 60% to 65% of our selected peer companies in common with each of the peer groups constructed by two leading proxy advisory firms.

As a result of its review of the criteria described above, the Compensation Committee added Delphi Automotive to our peer group for 2016 compensation decisions. The Compensation Committee may make further changes in the peer group from time to time based on the criteria described above or other relevant factors.

Data with respect to comparable elements of primary compensation is compiled for the peer group of companies described above from available sources, including, in most cases, the most recently available annual proxy statements and other SEC filings that address executive compensation matters.

Target Setting

The Compensation Committee set the performance targets for our 2016 executive compensation program in February 2016. The Compensation Committee believes that the performance targets it established are rigorous and reflect a significant stretch for the Company while providing meaningful motivational value to our executives. The performance targets require us to generate significant organic earnings growth and free cash flow over the next three years. The achievement of the performance targets would enable us to fund our capital allocation plan, and would mean we had successfully met the significant challenges posed by volatile global economic conditions, were a stronger competitor and were poised for future growth.

 

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Target Setting

 

  

 

The Compensation Committee considered the following factors when establishing the performance targets, including the related threshold and maximum target levels:

 

  Corporate strategy

 

  Annual and long-term operating plans

 

  Publicly disclosed financial targets and guidance

 

  Performance history

 

  Macro-economic and tire industry environment

 

  Input from F.W. Cook and management

 

  Difficulty of the targets in light of the above factors

In September 2013, we announced an ambitious three-year strategic plan for 2014 to 2016, which set goals for segment operating income growth and cash flow generation that would enable us to execute our capital allocation plan and deliver long-term shareholder value. The chart below illustrates how our 2016 performance targets correspond with our corporate strategy, annual and long-term operating plans, publicly announced financial targets and performance history.

 

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The performance targets established under our annual and long-term incentive plans would be achieved, at the target performance level, if we successfully executed our operating plan for 2016 and the 2016-2018 performance cycle.

 

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Target Setting

 

  

 

ANNUAL COMPENSATION TARGETS

The 2016 Corporate EBIT target represented a 10% increase over our 2015 actual results, after taking into account the $119 million impact of the deconsolidation of our Venezuelan subsidiary that occurred on December 31, 2015. The target is consistent with our goal to grow segment operating income 10% to 15% annually from 2014 to 2016 in spite of continued volatile global industry conditions. The 2016 free cash flow from operations target of $900 million corresponded with our goal to generate cumulative free cash flow from operations of $2.1 to $2.3 billion from 2014 to 2016, and was essentially the same as our 2015 actual results after taking into account the $63 million impact of the deconsolidation of our Venezuelan subsidiary.

Strict currency exchange regulations and continued reductions in access to U.S. dollars through official currency exchange mechanisms, combined with other government regulations such as price and profit margin controls and strict labor laws, have significantly limited our ability to make and execute operational decisions at our Venezuelan subsidiary. Effective as of December 31, 2015, we concluded that we did not meet the accounting criteria for control over our Venezuelan subsidiary and, therefore, deconsolidated the financial results of that subsidiary.

Our 2016 target for free cash flow from operations was essentially the same as our 2015 actual results due to increased cash tax payments, capital expenditures and working capital needs, which were offset by increased earnings and reduced interest expense and financing costs. In 2016, working capital was expected to be a use of cash of approximately $100 million in order to support growth and to timely fulfill customer orders.

LONG-TERM COMPENSATION TARGETS

The 2016 net income target was an 8% increase over our 2015 actual results and was also based on our goal to grow segment operating income 10% to 15% annually from 2014 to 2016. The rate of increase in net income was expected to be slightly less than that of segment operating income due to higher forecasted U.S. tax expense due to higher earnings.

The 2016 target for cash flow return on capital reflected the increase in planned capital expenditures, including a related increase in average net fixed assets due to those expenditures, the increase in working capital and the other expected uses of cash described above.

Annual Compensation

2016 BASE SALARY DECISIONS

 

Mr. Kramer’s base salary increased by 18% to reward his leadership in

successfully developing and completing our 2014 to 2016 strategic plan,

which led to record operating results over that period, and to move him

closer to median market base salary rates given his tenure in his current

role as CEO. Ms. Thompson’s base salary increased by 15% to reward

her strong performance as chief financial officer and to bring her closer

to median market base salary rates.

      Name    2016 Base Salary1      % Increase  
   

Kramer

   $ 1,300,000        18.2%  
   

Thompson

     650,000        15.0  
   

McClellan

     610,000        0  
   

Lucas

     551,000        2.0  
   

Bialosky

     570,000        2.7  
   

 

1   Base salary increases were effective May 1, 2016.

    

 

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Annual Compensation

 

  

 

2016 ANNUAL CASH INCENTIVE PAYOUTS

For 2016, the performance objectives under our annual incentive plans were as follows:

Corporate Officers

 

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Officers of Our Three Operating Units

 

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We believe these weightings hold our operating unit executives most accountable for financial results in the areas where they have the most control and influence, but also motivate them to work cooperatively with other operating units to maximize results for the entire Company.

The Compensation Committee used Corporate EBIT and Operating Unit EBIT to measure our results of operations and free cash flow from operations to measure our ability to generate cash, which enables us to provide funding for dividends and share repurchases, debt repayments and restructuring actions. The Compensation Committee also emphasized the balance between profitability and cash generation by equally weighting EBIT and free cash flow from operations.

“EBIT,” as defined in our annual incentive plans, means the Company’s net sales, less cost of goods sold and selling, administrative and general expenses, excluding the effects of restructuring charges, accelerated depreciation, certain pension curtailment and settlement charges, discontinued operations, extraordinary items, other unusual or non-recurring items, and the cumulative effect of tax or accounting changes. “Free cash flow from operations,” as defined in our annual incentive plans, means cash flow from operating activities before pension contributions and direct payments and rationalization payments, less capital expenditures. For 2016, the Compensation Committee also excluded from free cash flow from operations $56 million of net free cash flow used for the payment of redemption premiums and other refinancing costs related to the redemption of debt. Those refinancing actions resulted in future interest expense savings of $22 million per year.

 

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Annual Compensation

 

  

 

In 2016, the Compensation Committee established the following operating drivers that were consistent with our annual operating plan and are tied to the achievement of important strategic objectives that drive the success of our business:

 

Strategic Objective    Operating Driver

Innovation Excellence

Sales & Marketing Excellence

   New Product Vitality – Meet goals for the proportion of branded replacement tire sales volume from products launched in the last four years.
Operational Excellence    Total Delivered Cost Productivity – Achieve $225 million in cost reductions from improvements in labor, overhead and utilities cost, raw material cost, and transportation and warehousing cost.
Enabling Investments    Working Capital Excellence – Achieve an average ratio of working capital to net sales of 13.5%.

 

Overall Company performance is relevant for determining the annual incentive payments for all named executive officers. Additionally, Americas’ performance is relevant for determining the annual incentive payment for Mr. McClellan. In February 2017, the Compensation Committee reviewed actual results for 2016 with respect to achievement of the company-wide and operating unit performance objectives. The table below shows the performance objectives, actual results for 2016 and corresponding payout percentages under our annual incentive plans.

 

     Payout Under Annual Incentive Plans                
      50%      100%      200%      Actual Results      Payout Percentage  

Overall Company Performance (2016):

           

Corporate EBIT

   $ 1,615 million      $ 1,900 million      $ 2,045 million      $ 1,839 million        89%  

Free cash flow from operations

   $ 700 million      $ 900 million      $ 1,050 million      $ 739 million        60%  

Americas’ Operating Unit EBIT payout percentage was 50% of target and its free cash flow from operations payout percentage was 59% of target.

The Committee also assessed whether our performance against the operating drivers was below, at or above target. The Committee determined that we met one of the three operating drivers, but failed to meet two of the operating drivers. In reaching that conclusion, the Committee considered the following results by the Company against the operating driver goals:

 

  Exceeding our goal for the proportion of branded replacement tire sales volume coming from products launched in the last four years by 17%.

 

  Achieving $194 million of total delivered cost productivity savings, versus a goal of $225 million.

 

  Achieving an average ratio of working capital to net sales of 14.0%, versus a goal of 13.5%.

Since the overall company and Americas operating unit EBIT and free cash flow from operations performance was largely consistent with our operating driver performance, the Committee determined that the operating driver performance should mirror the calculated performance using the financial performance measures. In reaching these decisions, the Committee considered whether the performance under the financial performance measures and the operating drivers were appropriately aligned, and concluded that they were.

 

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Annual Compensation

 

  

 

The Compensation Committee reviewed its assessment of the CEO’s performance and the CEO’s assessment of each of the other named executive officer’s performance during 2016, and their respective contributions to our results. In particular, the Compensation Committee considered the CEO’s contributions to the achievement of:

 

  Segment operating income of $2.0 billion, which continued to be strong.

 

  Continued strong cash flow performance.

 

  Continued strong momentum in innovation.

 

  Performance on our capital allocation plan, including direct shareholder returns of $582 million in 2016.

 

  Continued strengthening of our leadership team and pipeline.

The CEO and the Compensation Committee also considered the contributions of the other named executive officers in furthering the Company’s strategic initiatives described in the preceding bullet points.

The Compensation Committee then established an aggregate incentive pool for all officers, and determined the payout for each officer. In this process, the officer’s target incentive amount is first multiplied by the same percentage used to determine the applicable portion of the aggregate incentive pool. (For example, if the portion of the aggregate incentive pool applicable to such officer, e.g., overall company, is funded at 150% of the aggregate target incentive amount, the officer’s individual payout initially would be set at 150% of his individual incentive target.) Then, the CEO assesses the officer’s individual performance and contributions towards Company goals and makes his recommendations with respect to individual payout amounts to the Compensation Committee, which considers the CEO’s recommendations and determines the final payouts. The Compensation Committee undertakes the same process for the CEO and makes the determination as to the final payout amount for the CEO. Officers can earn between 0% and 200% of their target incentive, but the total payout for all officers may not exceed the aggregate incentive pool. The Compensation Committee did not adjust the annual incentive payout percentage for any of the named executive officers.

The Compensation Committee approved the following awards for our named executive officers under our annual incentive plans:

 

Name    Target Award
($)
     Actual Award
($)
     Actual Award
as a %
of Target Award
 

Kramer

   $ 1,950,000      $ 1,462,500        75%  

Thompson

     617,500        463,125        75%  

McClellan

     579,500        365,085        63%  

Lucas

     468,350        351,263        75%  

Bialosky

     484,500        363,375        75%  

OTHER BONUS AWARDS

The Compensation Committee also approved the payment of a $470,000 bonus to Mr. Lucas as part of his hiring package in order to compensate him for awards and benefits that he forfeited when he left his prior employer.

 

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Long-Term Compensation

 

  

 

Long-Term Compensation

2016 GRANTS OF PERFORMANCE-BASED INCENTIVES

In February 2016, the Compensation Committee granted 70% of total long-term compensation in the form of long-term performance-based incentives that have the following characteristics:

 

  The awards will be payable 30% in shares of Common Stock and 70% in cash.

 

  The payout is based on results over a three-year performance cycle, with performance targets for each year of the three-year period established on the grant date in order to provide greater accountability for long-term results, weighted one-third for each year in the three-year performance cycle.

 

  The payout can range from 0% to 200% for the 2016-2018 performance cycle based on actual results (and assuming the recipient remains continuously employed by us through the entire three-year period).

 

  The payout can increase or decrease up to 20% (up to a maximum payout of 200%) based on our total shareholder return versus the S&P 500 over the three-year period ending December 31, 2018.

The performance criteria for the 2016, 2017 and 2018 performance periods for the 2016-2018 performance cycle are, consistent with our strategic plan, based 50% on net income and 50% on cash flow return on capital, providing a balanced emphasis on profitability and capital efficiency. Results will be based on our consolidated performance, with no award tied to business unit performance. In this manner, the plan balances performance measures used under our annual incentive plans and reinforces the need for teamwork among executives. Net income is used as a measure to focus on improvement in profitability. Cash flow return on capital is an efficiency metric that measures how much return is generated in proportion to the investment in the business in terms of plant, property and equipment and working capital.

The TSR modifier measures the relative performance of our Common Stock versus the S&P 500 over the three-year performance cycle of our long-term incentive awards, and is calculated based on the trailing two-month average closing price for our Common Stock and the S&P 500 (as in existence at the end of the period), assuming the reinvestment of dividends. The TSR modifier will cause the payout of our long-term incentive awards to increase or decrease up to 20% (up to a maximum payout of 200%) as follows:

 

Goodyear Common Stock vs. S&P 5001   TSR Modifier

³ 75th Percentile

  1.2 times

= 50th Percentile

  1.0 times

£ 25th Percentile

  0.8 times

 

1 Results between these performance levels will be interpolated.

 

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COMPENSATION DISCUSSION AND ANALYSIS

  

 

 

 
 

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Long-Term Compensation

 

  

 

The table below shows the aggregate value of the long-term performance-based incentives granted to each of our named executive officers for the 2016-2018 performance cycle at the target award opportunity, as well as the amount payable in shares of Common Stock and cash.

 

Name    Aggregate Target Award
($)
    

Portion Payable in Shares

($)1

     Portion Payable in Cash
($)
 

Kramer

   $ 7,210,000      $ 2,060,000      $ 5,150,000  

Thompson

     1,610,000        460,000        1,150,000  

McClellan

     1,435,000        410,000        1,025,000  

Lucas

     1,071,000        306,000        765,000  

Bialosky

     1,085,000        310,000        775,000  

 

1 See the “Grants of Plan-Based Awards” Table at page 60 for information regarding the target number of performance shares actually granted, which was determined by dividing the amount in this column by the closing market price of our Common Stock on the date of grant ($29.90).

PERFORMANCE FOR THE 2016 PERFORMANCE PERIOD

The table below shows the performance goals, actual results and payout percentages for the 2016 performance period applicable to the 2014-2016, 2015-2017 and 2016-2018 performance cycles. With respect to each performance cycle, each year was weighted evenly (33%), goals were set on the grant date and the maximum payout was 200% of the target award opportunity.

 

     Net Income  
Performance Cycle    Threshold      Target      Maximum     

Actual

Results

    

Payout

Percentage

 

2014-2016

   $ 740 million      $ 1,055 million      $ 1,290 million      $ 1,328 million        200%  

2015-2017

     605 million        805 million        925 million        1,041 million        200%  

2016-2018

     720 million        960 million        1,100 million        1,060 million        171%  

“Net income,” as defined in our long-term incentive plans, means the Company’s net income, excluding charges for restructurings, accelerated depreciation, certain pension curtailment and settlement charges, and the cumulative effect of accounting changes. Our 2016 “net income” also excluded the impact of certain other items noted in the table below. Our 2016 “net income” for purposes of our long-term incentive plans was calculated as follows:

 

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Long-Term Compensation

 

  

 

 

($ in millions)    2014 - 2016      2015 - 2017      2016 - 2018  

Goodyear net income (as reported)

   $ 1,264      $ 1,264      $ 1,264  

Restructuring and accelerated depreciation charges

     218        218        218  

Pension curtailment and settlement charges

     16        16        16  

Impact of release of tax valuation allowances

     (61      (292      (292

Debt refinancing charges

     37        37        44  

Net gains on asset sales

     (27      (27      (27

Foreign tax credit election

     (163      (163      (163

Dissolution of global alliance with Sumitomo Rubber Industries (“SRI”)

     (20      (20       

Deconsolidation of Venezuelan subsidiary

     56                

Loss of royalty income due to licensing agreement termination

     8        8         

Net income

   $ 1,328      $ 1,041      $ 1,060  

 

     Cash Flow Return on Capital  
Performance Cycle    Threshold      Target      Maximum     

Actual

Results

    

Payout

Percentage

 

2014-2016

     6.1%        8.1%        11.1%        9.1%        133%  

2015-2017

     5.9%        7.9%        9.8%        8.5%        132%  

2016-2018

     7.5%        9.6%        11.2%        8.0%        62%  

“Cash flow return on capital,” as defined in our long-term incentive plans, means free cash flow from operations (as defined for purposes of our annual incentive plan) divided by the sum of average net fixed assets and average working capital. Our 2016 cash flow return on capital calculation for the 2014-2016 performance cycle excluded the impact on free cash flow from operations of (1) the dissolution of the global alliance with SRI, (2) the deconsolidation of our Venezuelan subsidiary, and (3) the payment of redemption premiums and other refinancing costs related to the redemption of debt. Our 2016 cash flow return on capital calculation for the 2015-2017 performance cycle excluded the impact on free cash flow from operations of (1) the dissolution of the global alliance with SRI and (2) the payment of redemption premiums and other refinancing costs related to the redemption of debt. No adjustments were made to our 2016 cash flow return on capital calculation for the 2016-2018 performance cycle.

In 2016, we faced a number of challenges and successfully addressed those challenges, as discussed above under “Executive Summary.” We exceeded our net income targets for the 2016 performance period primarily due to insurance recoveries with respect to asbestos claims, lower interest expense, a reduction in our effective tax rate, and favorable foreign currency exposure, which were partially offset by Corporate EBIT that fell short of our annual operating plan. We did not meet our cash flow return on capital target for the 2016 performance period due to an increased use of cash for inventory and lower Corporate EBIT, which reflected weakness in the U.S. commercial truck industry.

 

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Long-Term Compensation

 

  

 

Based on the results during the 2016 performance period, the Compensation Committee approved earnings on the long-term incentive awards for that period in an amount equal to 167% of the target amount for 2014-2016 awards, 166% for 2015-2017 awards and 117% for 2016-2018 awards. The payout of these amounts is contingent upon the named executive officer’s continued service during the related three-year performance cycle, except in the case of certain events, such as retirement, death, disability or severance following a change-in-control, and is subject to a three-year relative total shareholder return modifier.

The table below shows amounts earned by each of the named executive officers in respect of their long-term incentive grants for the 2016 performance period with respect to their 2014-2016 awards, which represents one-third of the three-year target award opportunity:

 

Name    Aggregate
Target Award ($)
     Portion of
Actual Award
Payable in
Cash ($)1
    

Portion of

Actual Award
Payable in Shares

(# of Shares)1

 

Kramer

   $ 2,095,889      $ 2,694,211        27,790  

Thompson

     238,139        306,111        3,157  

McClellan

     339,326        436,204        4,498  

Lucas

                    

Bialosky

     352,442        453,071        4,672  

 

1 Payable subject to a three-year relative total shareholder return modifier. See “Impact of TSR Modifier and Payout of 2014-2016 Long-Term Incentive Awards” below.

The table below shows amounts earned by each of the named executive officers in respect of their long-term incentive grants for the 2016 performance period with respect to their 2015-2017 awards, which represents one-third of the three-year target award opportunity:

 

Name    Aggregate
Target Award ($)
    

Portion of
Actual Award
Payable in

Cash ($)1

    

Portion of

Actual Award
Payable in Shares

(# of Shares)1

 

Kramer

   $ 2,317,524      $ 2,711,278        39,931  

Thompson

     354,716        415,000        6,112  

McClellan

     502,543        587,972        8,658  

Lucas

     354,716        415,000        6,112  

Bialosky

     468,218        547,800        8,067  

 

1 Payable contingent on continued service through December 31, 2017 and subject to a three-year relative total shareholder return modifier.

 

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Long-Term Compensation

 

  

 

The table below shows amounts earned by each of the named executive officers in respect of their long-term incentive grants for the 2016 performance period with respect to their 2016-2018 awards, which represents one-third of the three-year target award opportunity:

 

Name    Aggregate
Target Award ($)
     Portion of
Actual Award
Payable in
Cash ($)1
    

Portion of

Actual Award

Payable in Shares

(# of Shares)1

 

Kramer

   $ 2,427,498      $ 2,008,539        26,870  

Thompson

     542,112        448,578        5,999  

McClellan

     483,172        399,789        5,348  

Lucas

     360,601        298,350        3,992  

Bialosky

     365,363        302,328        4,043  

 

1 Payable contingent on continued service through December 31, 2018 and subject to a three-year relative total shareholder return modifier.

IMPACT OF TSR MODIFIER AND PAYOUT OF 2014 – 2016 LONG-TERM INCENTIVE AWARDS

Our stock out-performed 63% of the companies in the S&P 500 during the three-year period ending December 31, 2016, resulting in a TSR modifier of 1.1 times (up to a maximum payout of 200%). See page 45 for more information on the calculation of the TSR modifier.

The Compensation Committee approved the payout of shares of Common Stock and cash to the named executive officers with respect to the 2014-2016 performance cycle as follows.

 

     Cash Payout  
Name    2014
Performance
Period1
     2015
Performance
Period2
     2016
Performance
Period
     Impact of TSR
Modifier
     Total Payout of
2014-2016
Awards
 

Kramer

   $ 2,016,750      $ 2,920,073      $ 2,694,211      $ 790,566      $ 8,421,600  

Thompson

     229,250        331,773        306,111        89,866        957,000  

McClellan

     326,625        472,953        436,204        128,030        1,363,812  

Lucas

                                  

Bialosky

     339,250        491,053        453,071        132,986        1,416,360  

 

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Long-Term Compensation

 

  

 

 

     Shares Payout  
Name   

2014
Performance
Period1

(# of Shares)

    

2015
Performance
Period2

(# of Shares)

    

2016

Performance

Period

(# of Shares)

    

Impact of TSR

Modifier

(# of Shares)

    

Total Payout of
2014-2016
Awards

(# of Shares)

 

Kramer

     20,802        30,120        27,790        8,155        86,867  

Thompson

     2,363        3,422        3,157        929        9,870  

McClellan

     3,368        4,877        4,498        1,323        14,065  

Lucas

                                  

Bialosky

     3,498        5,066        4,672        1,373        14,608  

 

1 Previously reported, to the extent applicable, in 2014 Summary Compensation Table and Proxy Statement dated March 13, 2015.

 

2 Previously reported, to the extent applicable, in 2015 Summary Compensation Table and Proxy Statement dated March 11, 2016.

2016 STOCK OPTION GRANTS

In February 2016, the Compensation Committee granted 30% of total long-term compensation in the form of stock options. Stock options granted in 2016 have the following terms:

 

  options vest in equal, annual installments over a four-year period;

 

  options have a ten-year term; and

 

  the exercise price is equal to the closing market price of our Common Stock on the date of grant.

All options granted to named executive officers during 2016 were non-qualified stock options. The portion of long-term compensation provided in the form of stock option grants each year is determined based on the number of available options under our equity compensation plans, as well as market data on long term-compensation. We use a Black-Scholes valuation model to determine the number of stock options to be granted.

The table below shows the aggregate grant date fair value and the number of stock options granted to each of our named executive officers in 2016.

 

Name   

Aggregate

Grant Date
Fair Value ($)

    

Number of

Stock Options (#)

 

Kramer

   $ 3,089,998        259,228  

Thompson

     689,989        57,885  

McClellan

     614,989        51,593  

Lucas

     458,992        38,506  

Bialosky

     464,999        39,010  

 

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COMPENSATION DISCUSSION AND ANALYSIS

  

 

 

 
 

LOGO

  

Long-Term Compensation

 

  

 

2016 RESTRICTED STOCK AWARDS

In February 2016, the Compensation Committee granted 33,444 restricted stock units to Mr. Lucas as part of his hiring package in order to compensate him for awards and benefits that he forfeited when he left his prior employer. The restricted stock units will vest and convert into shares of Common Stock three years from the date of grant (in February 2019). The Compensation Committee believes that restricted stock links executives to the results earned by shareholders and builds executive stock ownership.

Retirement and Other Benefits

RETIREMENT BENEFITS

We provide our named executive officers with retirement benefits under both tax-qualified and non-qualified retirement plans. Tax-qualified plan benefits are pursuant to a defined benefit pension plan, the Goodyear Salaried Pension Plan (the “Salaried Plan”), which was frozen effective December 31, 2008, and a defined contribution plan, the Goodyear Employee Savings Plan for Salaried Employees (the “Savings Plan”). Non-qualified plan benefits are pursuant to an unfunded defined benefit plan, the Goodyear Supplementary Pension Plan (the “Supplementary Plan”). We also maintain a non-qualified unfunded defined benefit Excess Benefit Plan, which was also frozen effective December 31, 2008, that pays an additional pension benefit over that paid from the Salaried Plan if a participant does not meet the eligibility requirements of the Supplementary Plan. For all employees who do not meet the eligibility requirements of the Supplementary Plan, there is also a corresponding non-qualified defined contribution Excess Benefit Plan that mirrors the retirement contributions feature of the Savings Plan.

Only Mr. Kramer and Ms. Thompson are currently eligible to receive a benefit under the Supplementary Plan. Upon a termination without cause or an involuntary termination within two years of a change in control under the Executive Severance Plan described below, Mr. McClellan will become vested in his Supplementary Plan benefits. Mr. Kramer, Ms. Thompson and Mr. McClellan will receive benefits from the frozen Salaried Plan, and Mr. McClellan will receive benefits from the frozen defined benefit Excess Benefit Plan upon termination prior to retirement eligibility under the Supplementary Plan.

Mr. McClellan will also receive a benefit from the Wingfoot Commercial Tire Systems, LLC Supplemental Retirement Plan, an unfunded non-qualified defined benefit plan sponsored by Wingfoot Commercial Tire Systems, LLC, a wholly-owned subsidiary of the Company at which Mr. McClellan previously held an executive position. Effective January 1, 2017, Wingfoot Commercial Tire Systems, LLC was merged into the Company. Mr. Lucas and Mr. Bialosky are not eligible to participate in the Salaried Plan or the defined benefit Excess Benefit Plan. Participants in the Savings Plan, including all of the named executive officers, are currently eligible to receive Company matching contributions and retirement contributions.

The Supplementary Plan provides additional pension benefits to officers and certain other key individuals identified by the Compensation Committee. All of the named executive officers participate in the Supplementary Plan. The Committee believes supplemental executive retirement plans such as the Supplementary Plan are an important part of executive compensation and are utilized by many large companies that compete with the Company for executive talent. Retirement benefits, including those provided through a supplemental executive retirement plan, are essential to attracting, motivating and retaining talented executives with a history of leadership and to providing retirement replacement income. Retirement

 

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Retirement and Other Benefits

 

  

 

benefits are an important factor in an executive’s decision to accept or reject a new position. The Compensation Committee has adopted a policy prohibiting the grant of additional service credit in the Supplementary Plan for newly hired officers and other key employees.

The number reported in the “Change in Pension Value” column in the Summary Compensation Table reflects the change in each NEO’s pension value in 2016. Changes in pension value are caused largely by two factors: (1) additional pension benefits accrued by the NEOs under the Supplementary Plan when they receive higher compensation due to roles of increasing responsibility or through strong performance, and (2) changes in assumptions used for financial reporting purposes, such as changes in discount rates and updated actuarial assumptions regarding life expectancies. Mr. Kramer’s pension value increased in 2016 due to decreases in both the discount rate used to calculate the pension value and the interest rate used to determine the lump sum value of the Supplementary Plan benefit, as well as the effect of increases in his pay since 2011 due to our strong operating performance over that time frame and his tenure as CEO.

For more information regarding the terms of these plans and the named executive officers’ accrued benefits under these plans, see “Defined Contribution Plan Benefits” at page 63 and “Pension Benefits” at page 63.

SEVERANCE AND CHANGE-IN-CONTROL BENEFITS

Our Executive Severance and Change in Control Plan (the “Executive Severance Plan”) provides for the payment of severance benefits to our officers, including all of the named executive officers, if their employment is terminated under certain circumstances during certain periods before or within two years following a change-in-control of the Company. The Executive Severance Plan does not provide for any excise tax gross-ups or walk-away rights.

The Executive Severance Plan is designed to attract, retain and motivate officers, provide for stability and continuity in the event of an actual or threatened change-in-control, and ensure that our officers are able to devote their full time and attention to the Company’s operations in the event of an actual or threatened change-in-control.

The Executive Severance Plan and the related change-in-control triggers (commonly referred to as “double triggers”) generally provide for the payment of severance benefits if employment is terminated under certain circumstances during certain periods before or within two years following a change-in-control of the Company. The change-in-control triggers in our equity compensation plans are substantially similar to those in the Executive Severance Plan. We selected the specific change-in-control triggers used in the Executive Severance Plan and our equity compensation plans, such as the acquisition of 20% or more of Goodyear’s Common Stock, a significant change in the composition of the Board of Directors or the acquisition of actual control of Goodyear, based upon our review of market practices, including provisions included in similar agreements of other public companies. Based upon that review, we determined that the terms and conditions of the Executive Severance Plan, including the specific change-in-control triggers, were consistent with market practices.

The Executive Severance Plan also provides severance benefits to our officers, including each of the named executive officers, if their employment is terminated by us other than for Cause (as defined in the Executive Severance Plan), death or disability, and other than in connection with a change-in-control.

To be eligible to receive benefits under the Executive Severance Plan, an officer must execute a release and agree, among other things, to certain confidentiality, non-disparagement, non-solicitation and non-competition covenants.

 

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Retirement and Other Benefits

 

  

 

The Compensation Committee believes that our severance benefits are in the best interests of the Company and our shareholders, are a necessary component of a competitive compensation program, and are in line with severance benefits in place at other companies.

For additional information regarding the terms of the Executive Severance Plan and benefits payable under that plan, see “Potential Payments Upon Termination or Change-in-Control” at page 68.

PERQUISITES

We provide certain executive officers, including our named executive officers, with limited personal benefits and perquisites, as described below and in footnote 5 to the Summary Compensation Table at page 58. The Compensation Committee has reviewed and approved the perquisites described below. The Compensation Committee recognizes that these perquisites are an important factor in protecting our executive officers and in enabling them to focus on our business with minimal disruption. We do not provide any tax reimbursements to our executive officers for any of the perquisites we provide them.

Home Security Systems. We pay for the cost of home security systems for a limited number of executive officers in order to enhance their safety and protect our investment in them. We cover the cost of installation, monitoring and maintenance for these systems.

Use of Company Aircraft. In limited circumstances, executive officers are permitted to use our company aircraft for personal travel.

Tire Program. We offer our executive officers and Board members the opportunity to receive up to two sets of tires per year at our expense, including the cost of tires, mounting, balancing and disposal fees.

Financial Planning and Tax Preparation Services. We offer financial assistance to our executive officers to help them cover the cost of financial planning and tax preparation services. In providing this benefit, we seek to alleviate our executives’ concern regarding personal financial planning so that they may devote their full attention to our business. The maximum annual cost to the Company under this program is $9,000 per officer.

Club Memberships. We pay the annual dues for a corporate club membership that is available to Mr. Kramer and Mr. McClellan. None of the other named executive officers utilize this corporate club membership. The membership is intended to be used primarily for business purposes, although members may use the club for personal purposes so long as they pay all incremental costs, other than the annual dues, related to that personal use.

Annual Physical Exams. We strongly encourage our executive officers to have an annual comprehensive physical examination which we pay for in order to enhance their physical well-being and protect our investment in them.

 

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Retirement and Other Benefits

 

  

 

EXECUTIVE DEFERRED COMPENSATION PLAN

The Goodyear Executive Deferred Compensation Plan (the “Deferred Compensation Plan”) is a non-qualified deferred compensation plan that provides named executive officers and other highly compensated employees the opportunity to defer various forms of compensation. For participants, this offers an additional means to save for retirement on a tax-deferred basis. There is no guaranteed return associated with any deferred amounts. During 2016, Mr. Lucas made deferrals under the Deferred Compensation Plan.

For additional information regarding the terms of the Deferred Compensation Plan and participant balances, see “Nonqualified Deferred Compensation” at page 67.

Compensation Policies and Practices

STOCKHOLDING GUIDELINES

To better link the interests of management and our shareholders, the Compensation Committee has established stockholding guidelines for our officers. These guidelines specify a number of shares that our officers are expected to accumulate and hold based on a multiple of annual base salary of five times for the CEO, three times for Executive Vice Presidents, Presidents of our operating units and Senior Vice Presidents, and two times for elected Vice Presidents. Therefore, the stockholding requirement for Mr. Kramer is five times his annual base salary and for Ms. Thompson, Mr. McClellan, Mr. Lucas and Mr. Bialosky is three times their annual base salary. All shares of Common Stock owned outright by officers (or their spouses) and held by them in the Goodyear stock fund of the Savings Plan, and 60% of the shares of restricted stock, restricted stock units, earned (but unvested) performance shares awarded to officers and share equivalent units held in our deferred compensation plan, are counted as ownership in assessing compliance with the guidelines. Unexercised stock options and unearned performance shares are not counted toward compliance with the guidelines. The stock price used in assessing compliance with the guidelines as of May 1st of each year will be the average closing stock price for the prior 60-day period.

The stockholding guidelines also include stock retention provisions. If an officer has met their stockholding requirement, they are required to retain 25% of the net shares received from any exercised options or any vested shares of Common Stock for at least one year from the date of exercise or vesting and may only sell or otherwise dispose of shares to the extent they will still meet their stockholding requirement following that sale or disposition. If an officer has not met their stockholding requirement, they are required to retain all of the net shares received from any exercised options or any vested shares of Common Stock, and may not sell or otherwise dispose of shares until they have met their stockholding requirement, unless they demonstrate a need to sell shares due to a financial hardship. Net shares are the shares remaining after payment of the exercise price and/or withholding taxes.

Mr. Kramer holds shares of Common Stock worth over ten times his annual base salary, well in excess of his minimum stockholding requirement. All of the other named executive officers have also met their stockholding requirement.

 

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Compensation Policies and Practices

 

  

 

PROHIBITION ON HEDGING AND PLEDGING

We have adopted, as part of our insider trading policy, prohibitions on the short sale of our Common Stock and other securities and the issuance, purchase or sale of, or trading or dealing in, puts, calls or other options or rights relating to our Common Stock and other securities. These provisions prohibit our directors, officers and employees from hedging the risk of their ownership of our Common Stock. We also prohibit our directors, officers and employees from holding our Common Stock and other securities in a margin account or otherwise pledging them as collateral for a loan.

RECOVERY OF COMPENSATION (CLAWBACK POLICY)

If the Compensation Committee determines that an officer has engaged in conduct detrimental to the Company, the Compensation Committee may take a range of actions to remedy this conduct, prevent its recurrence and impose appropriate discipline. Discipline would vary depending on the facts and circumstances, and may include (1) termination of employment, (2) cancelling or reducing any outstanding compensatory grants or awards, (3) initiating an action for breach of fiduciary duty or fraud which could include recovery of any unjustly obtained incentive compensation, and (4) requiring reimbursement of compensation or other payments in accordance with provisions of the Sarbanes-Oxley Act of 2002, our claw-back policy described below or the terms of the relevant compensation plan. These remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities.

Beginning with awards made in 2012, the Compensation Committee adopted a claw-back policy that effectively contractually extends the claw-back provisions of the Sarbanes-Oxley Act of 2002 that apply to our Chief Executive Officer and Chief Financial Officer to the Presidents of each of our strategic business units and all of our Senior Vice Presidents. If we are required to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement as a result of misconduct, the claw-back policy would permit the Compensation Committee to require reimbursement of (1) any incentive compensation received from us during the one-year period following the publication of misstated financial statements and (2) any profits realized from the sale of our securities during that one-year period. We will make any necessary revisions to our claw-back policy once implementing rules pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 are adopted by the Securities and Exchange Commission and The NASDAQ Stock Market.

In addition, under our equity compensation plans, the Compensation Committee may require a plan participant who engages in competition with us within 18 months after their termination of employment to return or forfeit the realized value of all awards under those plans during such period of time that the Compensation Committee determines. Our Executive Severance Plan also provides for the recovery or forfeiture of severance payments if a person receiving payments pursuant to the plan violates certain confidentiality, non-disparagement, non-solicitation and non-competition covenants.

 

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COMPENSATION COMMITTEE REPORT

We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussion with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference in Goodyear’s Annual Report on Form 10-K for the year ended December 31, 2016.

THE COMPENSATION COMMITTEE

John E. McGlade, Chairman

William J. Conaty

W. Alan McCollough

Stephanie A. Streeter

 

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NAMED EXECUTIVE OFFICER COMPENSATION TABLES

Summary Compensation Table

The table below sets forth information regarding the compensation of the CEO, the Chief Financial Officer of Goodyear (the “CFO”), and the persons who were, at December 31, 2016, the other three most highly compensated executive officers of Goodyear (collectively, the “named executive officers”) for services in all capacities to Goodyear and its subsidiaries during 2014, 2015 and 2016.

 

Name and

Principal Position

  Year    

Salary

($)

   

Bonus

($)

   

Stock

Awards

($)1

   

Option

Awards

($)2

   

Non-Equity

Incentive Plan

Compensation

($)3

   

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($)4

   

All Other

Compensation

($)5

   

Total

($)

 

Richard J. Kramer

    2016     $ 1,233,333     $ 0     $ 2,132,331     $ 3,089,998     $ 9,667,094     $ 3,509,123     $ 166,225     $ 19,798,104  
Chairman of the Board,     2015       1,100,000       0       2,052,344       2,940,000       11,577,753       1,535,672       102,031       19,307,800  

Chief Executive Officer

    2014       1,083,333       0       1,447,796       2,639,994       9,471,870       3,121,153       88,951       17,853,097  

and President

                 

Laura K. Thompson

    2016       621,667       0       476,135       689,989       1,722,680       1,547,999       46,801       5,105,271  

Executive Vice President

    2015       551,667       0       314,120       449,992       2,114,933       662,960       43,791       4,137,463  

and Chief Financial Officer

    2014       508,333       0       164,517       299,993       1,312,325       793,689       35,824       3,114,681  

Stephen R. McClellan

    2016       610,000       0       424,386       614,989       1,917,080       1,504,591       46,008       5,117,054  

President, Americas

    2015       541,250       0       445,029       637,494       2,657,663       455,714       43,960       4,781,110  
    2014       523,333       0       234,436       427,500       1,698,429       1,047,172       40,230       3,971,101  

John T. Lucas

    2016       547,333       470,000       1,316,718       458,992       1,064,613       363,068       29,092       4,249,816  

Senior Vice President,

    2015       495,000       600,000       1,914,118       449,992       1,305,768       111,181       43,633       4,919,692  

Global Human Resources6

                 

David L. Bialosky

    2016       565,000       0       320,859       464,999       1,799,560       629,586       25,550       3,805,554  

Senior Vice President,

    2015       555,000       0       414,655       593,999       2,377,381       424,167       25,107       4,390,309  

General Counsel and

    2014       550,000       0       243,484       443,989       1,856,768       420,789       25,731       3,540,761  

Secretary

                                                                       

 

1 Represents the aggregate grant date fair value as of the respective grant date for each award. The maximum amount to be awarded with respect to the equity portion of our long-term incentive awards for each of the named executive officers is shown in the Grants of Plan-Based Awards Table in the column “Estimated Future Payouts Under Equity Incentive Plan Awards — Maximum.” The assumptions made in valuing stock awards reported in this column are discussed in Note to the Consolidated Financial Statements No. 1, “Accounting Policies” under “Stock-Based Compensation” and Note to the Consolidated Financial Statements No. 18, “Stock Compensation Plans” included in Goodyear’s Annual Report for the year ended December 31, 2016. For additional information regarding such grants, see “Compensation Discussion and Analysis — Long-Term Compensation — 2016 Grants of Performance-Based Incentives” and “— 2016 Restricted Stock Awards.” See also “Grants of Plan-Based Awards” below.

 

2 Represents the aggregate grant date fair value as of the respective grant date for each award. The assumptions made in valuing option awards reported in this column are discussed in Note to the Consolidated Financial Statements No. 1, “Accounting Policies” under “Stock-Based Compensation” and Note to the Consolidated Financial Statements No. 18, “Stock Compensation Plans” included in Goodyear’s Annual Report for the year ended December 31, 2016. For additional information regarding such grants, see “Compensation Discussion and Analysis — Long-Term Compensation — 2016 Stock Option Grants.” See also “Grants of Plan-Based Awards” below.

 

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NAMED EXECUTIVE OFFICER COMPENSATION TABLES

  

 

 

 
 

LOGO

  

Summary Compensation Table

 

  

 

 

3 Represents amounts awarded under our annual and long-term incentive compensation plans. For additional information regarding annual cash incentive awards in 2016, see “Compensation Discussion and Analysis — Annual Compensation — 2016 Annual Cash Incentive Payouts.”

 

     Amounts awarded under our long-term incentive compensation plans are, for 2016, in respect of the one-year performance period ended December 31, 2016 for the 2014-2016 awards, the 2015-2017 awards and the 2016-2018 awards. The 2015-2017 awards and the 2016-2018 awards remain subject to the named executive officer’s continued service and a three-year relative total shareholder return modifier. For additional information regarding long-term incentive awards, see “Compensation Discussion and Analysis — Long-Term Compensation — 2016 Grants of Performance-Based Incentives,” “— Performance for the 2016 Performance Period,” and “— Impact of TSR Modifier and Payout of 2014-2016 Long-Term Incentive Awards.”

 

     The following table provides further information on the amounts payable, or earned but not yet payable, for performance periods ending on December 31, 2016:

 

       

2016

Annual Incentive

(Currently Payable)

      

2016 Period;

2014-2016 Long-

Term Incentive

(Currently Payable)

      

2014-2016

Impact of TSR

Modifier

(Currently

Payable)

      

2016 Period;

2015-2017 Long-

Term Incentive

(Not Yet Payable)

      

2016 Period;

2016-2018 Long-

Term Incentive

(Not Yet Payable)

 

Kramer

     $ 1,462,500        $ 2,694,211        $ 790,566        $ 2,711,278        $ 2,008,539  

Thompson

       463,125          306,111          89,866          415,000          448,578  

McClellan

       365,085          436,204          128,030          587,972          399,789  

Lucas

       351,263                            415,000          298,350  

Bialosky

       363,375          453,071          132,986          547,800          302,328  

 

4 Represents total change in pension value for each named executive officer, which reflects both the accrual of additional benefits and changes in the assumptions used to value the benefits. The discount rate used to calculate the Supplementary Plan pension value decreased from 4.52% at December 31, 2015 to 4.16% at December 31, 2016. Also, the interest rate used to determine the lump sum value of the Supplementary Plan benefit decreased from 1.75% to 1.50%. These changes in assumptions accounted for a portion of the total change in pension value for each of the named executive officers. The table below allocates the total change in pension value between the actual increase in accrued benefits, including the growth in pension value due to the passage of time, and assumption changes.

 

          

Increase in Pension

Value due to

Benefit Accrual

     Increase in Pension
Value due to
Assumption Changes
    

Total Increase in

Pension Value

 

Kramer

       $ 2,530,803      $ 978,320      $ 3,509,123  

Thompson

         1,243,504        304,495        1,547,999  

McClellan

         1,105,945        398,646        1,504,591  

Lucas

         342,833        20,235        363,068  

Bialosky

         541,328        88,258        629,586  

 

     No nonqualified deferred compensation earnings are required to be reported because the Deferred Compensation Plan does not provide for “above-market” or preferential earnings as defined in applicable Securities and Exchange Commission rules and regulations.

 

5 Includes amounts for home security system installation and monitoring, personal financial planning services, annual physical exams, and the provision of up to two sets of automobile tires per year. Mr. Kramer’s total also includes amounts for the personal use of company aircraft of $52,124, home security of $37,425, and the annual dues for a club membership. Ms. Thompson’s total also includes amounts for the personal use of company aircraft. Mr. McClellan’s total also includes amounts for the annual dues for a club membership. The value of the total perquisites in 2016 was $107,642 for Mr. Kramer, $20,301 for Ms. Thompson, $19,508 for Mr. McClellan, $15,842 for Mr. Lucas, and $12,300 for Mr. Bialosky. Company contributions to qualified defined contribution plans in 2016 were $26,500 for Mr. Kramer, $26,500 for Ms. Thompson, $26,500 for Mr. McClellan, $13,250 for Mr. Lucas, and $13,250 for Mr. Bialosky. The value of dividends on shares of restricted stock that were not included in prior years’ grant date fair value for those awards were $32,083 for Mr. Kramer.

 

6 Mr. Lucas joined Goodyear on February 2, 2015. As part of his hiring package, in 2016, he received a $470,000 bonus and 33,444 restricted stock units with a grant date fair value of $999,976 in order to compensate him for awards and benefits that he forfeited when he left his prior employer.

 

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NAMED EXECUTIVE OFFICER COMPENSATION TABLES

  

 

 

 
 

LOGO

  

Summary of Realized Pay Earned by

Our Chief Executive Officer for 2014, 2015 and 2016

 

  

 

Summary of Realized Pay Earned by Our Chief Executive Officer for 2014, 2015 and 2016

Our compensation programs for Mr. Kramer and our other officers are primarily based on performance. The information shown below is intended to supplement and not be a substitute for the information in the Summary Compensation Table. The Summary Compensation Table includes several items that are driven by accounting and actuarial assumptions, which are not necessarily reflective of compensation actually realized by Mr. Kramer in a particular year. For example, the information required to be in the Summary Compensation Table combines pay actually received (base salary and annual cash incentive payments) with the accounting value of equity compensation granted, which may never be realized, and earned but unvested long term cash awards, which continue to be subject to forfeiture and a TSR modifier until the vesting date. The Summary Compensation Table is also required to include other compensation (contributions to qualified defined contribution plans and perquisites) and the change in pension values (based on actuarial assumptions), much of which is not realized in the periods presented.

The following table reports base salary, annual incentive earned, long term incentive to be paid out for the three-year performance cycle ending in each respective year and pre-tax compensation earned upon the exercise of stock options and the vesting of stock awards regardless of when they were granted.

 

Name    Year      Salary
($)1
     Annual
Incentive
($)2
     Long Term
Incentive
Cash Payout
($)3
     Stock Option
Exercises
($)4
     Long Term
Incentive
Equity
Vesting
($)5
     Total
Realized
Pay ($)
 

Kramer

     2016      $ 1,233,333      $ 1,462,500      $ 8,421,600      $      $ 2,681,584      $ 13,799,017  
     2015        1,100,000        3,168,000        10,560,000        891,929        4,429,791        20,149,720  
       2014        1,083,333        2,013,000        8,820,000        3,882,624        3,245,523        19,044,480  

 

1 Mr. Kramer’s salary was targeted below market median for 2014, 2015 and 2016.

 

2 Mr. Kramer’s individual targets were set at 150% of base salary for 2014, 2015 and 2016. The Committee assessed overall company performance at 122% of target in 2014, 192% of target in 2015 and 75% of target in 2016. Mr. Kramer’s actual awards were consistent with these assessments.

 

3 Beginning in 2015, the percentage of Mr. Kramer’s long term incentive target to be paid in cash was reduced to fifty percent. This column shows the cash payout for each of the performance cycles completed in the respective year. The 2012-2014 awards were earned at 196% of target (including the impact of the TSR modifier), the 2013-2015 awards were earned at 200% of target (including the impact of the TSR modifier), and the 2014-2016 awards were earned at 174% of target (including the impact of the TSR modifier).

 

4 Thirty percent of Mr. Kramer’s long term incentive target is granted in the form of stock options. In 2016, Mr. Kramer did not exercise any stock options. At December 31, 2016, Mr. Kramer’s vested, exercisable, in-the-money stock options had a potential value of $21,594,854, based on the difference between the closing market price of our Common Stock on December 31, 2016 ($30.87) and the exercise price of such stock options.

 

5 Beginning in 2015, the percentage of Mr. Kramer’s long term incentive target to be paid in shares of Common Stock was increased to twenty percent. This column shows the value of the shares that vested for each of the performance cycles completed in the respective year. The 2012-2014 awards were earned at 196% of target (including the impact of the TSR modifier), the 2013-2015 awards were earned at 200% of target (including the impact of the TSR modifier), and the 2014-2016 awards were earned at 174% of target (including the impact of the TSR modifier). The value of the shares earned in each year is based on the closing market price of our Common Stock on December 31 of that year.

 

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NAMED EXECUTIVE OFFICER COMPENSATION TABLES

  

 

 

 
 

LOGO

  

Grants of Plan-Based Awards

 

  

 

Grants of Plan-Based Awards

The following table summarizes grants of plan-based awards made to the named executive officers during 2016.

 

          Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards1
    Estimated Future Payouts
Under Equity Incentive Plan
Awards2
   

All Other

Stock

Awards:

Number of

Shares of

Stock or
Units
(#)3

   

All Other

Option

Awards:

Number of

Securities

Underlying
Options
(#)4

   

Exercise

or Base

Price of

Option
Awards
($/Sh)5

   

Grant

Date Fair

Value of

Stock and

Option
Awards
($)

 
Name   Grant
Date
    Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
         

Kramer

    2/22/2016     $ 2,575,000     $ 5,150,000     $ 10,300,000                                                          

Kramer

    2/22/2016             34,448       68,896       137,792           $ 2,132,331  

Kramer

    2/22/2016                     259,228     $ 29.90       3,089,998  

Thompson

    2/22/2016       575,000       1,150,000       2,300,000                

Thompson

    2/22/2016             7,692       15,384       30,768             476,135  

Thompson

    2/22/2016                     57,885       29.90       689,989  

McClellan

    2/22/2016       512,500       1,025,000       2,050,000                

McClellan

    2/22/2016             6,856       13,712       27,424             424,386  

McClellan

    2/22/2016                     51,593       29.90       614,989  

Lucas

    2/22/2016       382,500       765,000       1,530,000                

Lucas

    2/22/2016             5,117       10,234       20,468             316,742  

Lucas

    2/22/2016                     38,506       29.90       458,992  

Lucas

    2/22/2016                   33,444           999,976  

Bialosky

    2/22/2016       387,500       775,000       1,550,000                

Bialosky

    2/22/2016             5,183       10,367       20,734             320,859  

Bialosky

    2/22/2016                                                               39,010       29.90       464,999  

 

1 Grants of the cash portion of our long-term incentive awards were made under the 2013 Performance Plan. For additional information regarding such awards, see “Compensation Discussion and Analysis — Long-Term Compensation — 2016 Grants of Performance-Based Incentives.” Mr. Kramer, Ms. Thompson, Mr. McClellan, Mr. Lucas and Mr. Bialosky also received annual cash incentive awards under the Management Incentive Plan for the year ending December 31, 2016 that were earned and paid out in the amounts of $1,462,500; $463,125; $365,085; $351,263; and $363,375, respectively. For additional information regarding the awards under the Management Incentive Plan, see “Compensation Discussion and Analysis — Annual Compensation — 2016 Annual Cash Incentive Payouts.”

 

2 Grants of the equity portion of our long-term incentive awards were made under the 2013 Performance Plan. For additional information regarding such grants, see “Compensation Discussion and Analysis — Long-Term Compensation — 2016 Grants of Performance-Based Incentives.”

 

3 Grants of restricted stock units were made under the 2013 Performance Plan. For additional information regarding such grants, see “Compensation Discussion and Analysis — Long-Term Compensation — 2016 Restricted Stock Awards.”

 

4 Grants of stock options were made under the 2013 Performance Plan. Each unexercised stock option terminates automatically if the optionee ceases to be an employee of Goodyear or one of its subsidiaries for any reason, except that (a) upon retirement or disability of the optionee more than six months after the grant date, each stock option will become immediately exercisable and remain exercisable until the earlier of five years or its expiration date, (b) in the event of the death of the optionee more than six months after the grant date, each stock option will become immediately exercisable and remain exercisable until the earlier of three years after the date of death of the optionee or its expiration date, and (c) in the event of the termination of the optionee’s employment by the Company other than for cause, each vested stock option will remain exercisable for 90 days following the date of termination of their employment. For additional information regarding such grants, see “Compensation Discussion and Analysis — Long-Term Compensation — 2016 Stock Option Grants.”

 

5 The exercise price of each stock option is equal to the closing market price of the Common Stock on the date granted.

 

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NAMED EXECUTIVE OFFICER COMPENSATION TABLES

  

 

 

 
 

LOGO

  

Outstanding Equity Awards at Fiscal Year-End

 

  

 

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information about outstanding equity awards held by the named executive officers as of December 31, 2016.

 

    Option Awards     Stock Awards  
Name   Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)1
    Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
    Option
Exercise
Price
($)2
    Option
Expiration
Date
   

Number of
Shares or Units
of Stock That

Have Not Vested
(#)

    Market
Value of
Shares or Units
of Stock That
Have Not  Vested
($)3
   

Equity Incentive
Plan Awards:

Number of
Unearned Shares,
Units or Other
Rights That
Have Not Vested
(#)

   

Equity Incentive
Plan Awards:

Market or
Payout Value of
Unearned Shares,
Units or Other
Rights That
Have Not Vested
($)3

 

Kramer

            218,403 9    $ 6,742,101       69,984 14    $ 2,160,406  
    22,794       $ 18.12       8/4/2019          
    210,590         12.74       2/23/2020          
    264,833         13.91       2/22/2021          
    353,218         12.94       2/27/2022          
    331,658       110,553 4      12.98       2/28/2023          
    110,552       110,553 5      26.44       2/24/2024          
    64,248       192,745 6      27.16       2/23/2025          
      259,228 7      29.90       2/22/2026          

Thompson

            19,475 10    $ 601,193       13,937 14    $ 430,235  
    2,606       $ 26.74       2/21/2018          
    31,535         4.81       2/26/2019          
    14,297         12.74       2/23/2020          
    16,714         13.91       2/22/2021          
    18,838         12.94       2/27/2022          
    16,959       5,654 4      12.98       2/28/2023          
    12,350       4,117 8      22.62       12/13/2023          
    12,562       12,563 5      26.44       2/24/2024          
    9,833       29,502 6      27.16       2/23/2025          
      57,885 7      29.90       2/22/2026          

McClellan

            24,438 11    $ 754,401       14,357 14    $ 443,201  
    3,932       $ 26.74       2/21/2018          
    23,108         13.91       2/22/2021          
    5,357         9.88       10/4/2021          
    45,353         12.94       2/27/2022          
    49,936       16,646 4      12.98       2/28/2023          
    17,902       17,902 5      26.44       2/24/2024          
    13,931       41,794 6      27.16       2/23/2025          
      51,593 7      29.90       2/22/2026          

Lucas

            117,838 12    $ 3,637,659       10,503 14    $ 324,228  
    9,833       29,502 6    $ 27.16       2/23/2025          
      38,506 7      29.90       2/22/2026          

Bialosky

            21,830 13    $ 673,892       11,771 14    $ 363,371  
    56,439       $ 13.91       2/22/2021          
    65,781         12.94       2/27/2022          
    55,778       18,593 4      12.98       2/28/2023          
    18,592       18,593 5      26.44       2/24/2024          
    12,980       38,943 6      27.16       2/23/2025          
              39,010 7      29.90       2/22/2026                                  

 

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NAMED EXECUTIVE OFFICER COMPENSATION TABLES

  

 

 

 
 

LOGO

  

Outstanding Equity Awards at Fiscal Year-End

 

  

 

 

1 Because the options in this column were fully vested as of December 31, 2016, the vesting schedules for these options are not reported.

 

2 The exercise price of each option granted under our equity compensation plans is equal to 100% of the per share fair market value of the Common Stock on the date granted (for plans adopted prior to April 8, 2008, calculated as the average of the high and low stock price for such date, and for plans adopted on and after April 8, 2008, calculated as the closing market price for such date). The option exercise price and/or withholding tax obligations may be paid by delivery of shares of Common Stock valued at the fair market value on the date of exercise.

 

3 Calculated by multiplying $30.87, the closing market price of our Common Stock on December 31, 2016, by the number of shares of restricted stock, restricted stock units or performance share units that are not vested or are unearned at December 31, 2016.

 

4 Vests in full on February 28, 2017.

 

5 Vests as to one-half of the options on each of February 24, 2017 and February 24, 2018.

 

6 Vests as to one-third of the options on each of February 23, 2017, February 23, 2018 and February 23, 2019.

 

7 Vests as to one-fourth of the options on each of February 22, 2017, February 22, 2018, February 22, 2019 and February 22, 2020.

 

8 Vests in full on December 13, 2017.

 

9 103,492 restricted shares (which Mr. Kramer will receive when the value of the shares is deductible by the Company for federal income tax purposes), 88,041 earned performance share units vest on December 31, 2017, and 26,870 earned performance share units vest on December 31, 2018 (each subject to a three-year relative total shareholder return modifier).

 

10 13,476 earned performance share units vest on December 31, 2017 and 5,999 earned performance share units vest on December 31, 2018 (each subject to a three-year relative total shareholder return modifier).

 

11 19,090 earned performance share units vest on December 31, 2017 and 5,348 earned performance share units vest on December 31, 2018 (each subject to a three-year relative total shareholder return modifier).

 

12 13,476 earned performance share units vest on December 31, 2017 and 3,992 earned performance share units vest on December 31, 2018 (each subject to a three-year relative total shareholder return modifier), 66,684 restricted stock units vest as to one-half of the units on each of February 2, 2017 and February 2, 2018, and 33,686 restricted stock units vest on February 22, 2019.

 

13 17,787 earned performance share units vest on December 31, 2017 and 4,043 earned performance share units vest on December 31, 2018 (each subject to a three-year relative total shareholder return modifier).

 

14 Unearned performance share units that will vest on December 31, 2017 or December 31, 2018, subject to the achievement of performance goals in 2017 and 2018 and a three-year relative total shareholder return modifier.

During the restriction period for shares of restricted stock, the recipient is not entitled to delivery of the shares, restrictions are placed on the transferability of the shares, and all or a portion of the shares will be forfeited if the recipient terminates employment for reasons other than as approved by the Compensation Committee. Upon expiration of the restriction period, the appropriate number of shares of Common Stock will be delivered to the grantee free of all restrictions. During the restriction period for shares of restricted stock, the grantee shall be entitled to vote restricted shares and receive dividends. For grants made after April 2013, shares of restricted stock will be credited with notional dividends that vest and are payable in cash (without interest) at the same time and subject to the same conditions as the underlying shares of restricted stock. Restricted stock units do not have any voting rights but receive dividend equivalents that vest and are payable in shares of Common Stock at the same time and subject to the same conditions as the underlying restricted stock units. Earned and unearned, but unvested, performance share units do not have any voting rights and are not entitled to receive dividend equivalents. For additional information regarding the terms of the performance share units, see “Compensation Discussion and Analysis — Long-Term Compensation — 2016 Grants of Performance-Based Incentives.”

 

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Option Exercises and Stock Vested

 

  

 

Option Exercises and Stock Vested

The following table sets forth certain information regarding option exercises by, and the vesting of stock awards for, the named executive officers during 2016.

 

     Option Awards            Stock Awards  
Name   

Number of Shares

Acquired on Exercise

(#)

    

Value Realized On

Exercise

($)1

           

Number of Shares

Acquired on Vesting

(#)

    

Value Realized On

Vesting

($)

 

Kramer

          $          86,867      $ 2,681,584 2 

Thompson

     3,000        17,556          50,921        1,667,996 3 

McClellan

     4,500        28,600          39,722        1,286,255 4 

Lucas

                             

Bialosky

                           14,608        450,949 2 

 

1 Represents the difference between the exercise price and the fair market value of our Common Stock on the date of exercise.

 

2 Represents the total value realized upon the vesting of performance share awards for 2014-2016, which were paid 100% in shares of Common Stock.

 

3 Represents the total value realized upon the vesting of 9,870 performance share awards for 2014-2016, which were paid 100% in shares of Common Stock, and the total value realized upon the vesting of 41,051 restricted stock units.

 

4 Represents the total value realized upon the vesting of 14,065 performance share awards for 2014-2016, which were paid 100% in shares of Common Stock, and the total value realized upon the vesting of 25,657 restricted stock units.

Defined Contribution Plan Benefits

The Savings Plan is a tax-qualified defined contribution plan that permits eligible employees, including all of the named executive officers, to contribute 1% to 50% of their compensation to their Savings Plan account, subject to an annual contribution ceiling ($18,000 in 2016). Savings Plan participants who are age 50 or older and contributing at the maximum plan limits or at the annual contribution ceiling are entitled to make “catch-up” contributions annually up to a specified amount ($6,000 in 2016). Participants in the Savings Plan are eligible to receive Company matching contributions in addition to the retirement contributions described below under “Pension Benefits.” Savings Plan participants are also eligible to make after-tax contributions subject to limits imposed by the Internal Revenue Code of 1986, as amended (the “Code”). Contributions are invested, at the direction of the participant, in any one or more of the fifteen available funds and/or in mutual funds under a self-directed account.

Pension Benefits

Goodyear’s Salaried Pension Plan is a defined benefit plan qualified under the Code in which U.S.-based salaried employees hired before January 1, 2005 participate, including Mr. Kramer, Ms. Thompson and Mr. McClellan. Accruals in the Salaried Plan were frozen effective December 31, 2008. The Salaried Plan was designed to provide tax-qualified pension benefits for

 

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Pension Benefits

 

  

 

most Goodyear salaried employees. The Salaried Plan contains formulas based on age and service. These formulas are multiplied by five-year average compensation below and above a breakpoint ($51,000 in 2008, the year the Salaried Plan was frozen), with the result representing a lump sum benefit under the plan. Compensation is held to the qualified plan limit under the Code, which was $230,000 for 2008. A portion of the benefit may be paid by employee contributions. Effective December 31, 2007, all active participants in the Salaried Plan became vested and are entitled to a benefit upon any termination of employment. Benefits are available on a five-year certain and continuous annuity basis at age 65, by converting the lump sum to an annuity. Annuity benefits payable to a participant who retires prior to age 65 are subject to a reduction for each month retirement precedes age 65. Benefits under the Salaried Plan are funded by an irrevocable tax-exempt trust.

Participation in the Salaried Plan was frozen effective December 31, 2004. Subsequent hires, including Mr. Lucas and Mr. Bialosky, participate in the retirement contributions feature of the Savings Plan. Under the Savings Plan, each participant receives an allocation each pay period equal to a percentage of compensation, with compensation held to the qualified plan limit under the Code. Effective January 1, 2009, Salaried Plan participants, including Mr. Kramer, Ms. Thompson and Mr. McClellan, also began receiving allocations under the retirement contributions feature of the Savings Plan.

Goodyear also maintains the Supplementary Plan, a non-qualified, unfunded plan which provides additional retirement benefits to our officers and certain other key employees, including all of the named executive officers. The Supplementary Plan provides pension benefits to participants who retire with at least 30 years of service, retire after age 55 with at least ten years of service or retire after age 65 with at least five years of service. The formula for an annuity benefit is based on a percentage determined using credited service (22% with 10 years, 38% with 20 years, 48% with 30 years and 54% with 40 years) times five-year average compensation above the breakpoint ($59,250 in 2016), with compensation inclusive of base salary and annual incentive payments. The five-year average compensation uses the highest five calendar years, not necessarily consecutive, out of the last ten years. Benefits are offset for the Salaried Plan, the retirement contributions feature of the Savings Plan, applicable non-U.S. benefits and certain prior employer benefits. Under the Supplementary Plan, benefits payable to a participant who retires prior to age 62 are subject to a reduction of 0.4% for each month retirement precedes age 62. All benefits from the Supplementary Plan will be paid in a lump sum. For participants considered to be among the top 50 wage earners of the Company, benefits cannot be distributed prior to six months after separation of service. Mr. Kramer and Ms. Thompson are both vested in their Supplementary Plan benefits.

Mr. Kramer, Ms. Thompson and Mr. McClellan are eligible for immediate commencement of the benefit from the Salaried Plan as of December 31, 2016. Mr. Lucas and Mr. Bialosky are not participants in the Salaried Plan. The chart below indicates the date at which each named executive officer is or will be eligible to receive a benefit from the Supplementary Plan.

SUPPLEMENTARY PLAN

 

Name   Earliest Eligibility for Benefit Commencement

Kramer

  Currently eligible

Thompson

  Currently eligible

McClellan

  January 1, 2018

Lucas

  February 1, 2025

Bialosky

  October 1, 2019

 

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Pension Benefits

 

  

 

We also maintain a non-qualified unfunded defined benefit Excess Benefit Plan that pays an additional pension benefit over that paid from the Salaried Plan if a participant does not meet the eligibility requirements of the Supplementary Plan. The additional benefit is equal to the amount a participant would have received from the Salaried Plan but does not because of the limitations imposed by the Code on pension benefits under qualified plans. This plan is provided to allow the extension of benefits from the qualified plan to individuals whose compensation exceeds the Code guidelines for qualified plans. Distribution of amounts earned and vested prior to January 1, 2005 will be paid out in the same manner as the Salaried Plan unless otherwise elected by the participant at least 12 months prior to termination or severance. Distributions for amounts earned or vested on or after January 1, 2005 will be paid out in a lump sum. For participants considered to be among the top 50 wage earners of the Company, benefits vested on or after January 1, 2005 are paid out six months after termination of service. For employees hired after December 31, 2004, and for all employees as of December 31, 2008, who do not meet the eligibility requirements of the Supplementary Plan, there is a corresponding defined contribution Excess Benefit Plan that mirrors the retirement contributions feature of the Savings Plan. Like the qualified plans, effective December 31, 2008 accruals were frozen under the defined benefit Excess Benefit Plan and all affected participants began receiving defined contribution allocations under the defined contribution Excess Benefit Plan.

Mr. McClellan was an employee of Wingfoot Commercial Tires Systems, LLC, a wholly-owned subsidiary of Goodyear, from July 31, 2001 to September 1, 2003. During this period, he participated in the Wingfoot Commercial Tires Systems, LLC Supplementary Retirement Plan and he retains a frozen accrued benefit in that plan. This non-qualified unfunded defined benefit pension plan was established for management-level employees at Wingfoot Commercial Tires Systems in order to provide pension benefits that were equivalent to the combination of the Salaried Plan and the defined benefit Excess Benefit Plan pension benefits for Goodyear employees. Mr. McClellan will receive a benefit from the Wingfoot Commercial Tires Systems, LLC Supplementary Retirement Plan only if he does not meet the eligibility requirements for the Goodyear Supplementary Plan upon termination of employment with Goodyear. Distributions will be paid out in a manner similar to that of the defined benefit Excess Benefit Plan.

The Pension Benefits table below shows for the named executive officers the number of years of credited service, present value of accumulated benefit and payments during the last fiscal year, for each defined benefit plan.

The “Present Value of Accumulated Benefit” is the lump sum value as of December 31, 2016 of the expected pension benefit payable at age 62 that was earned as of December 31, 2016. That is, the benefit reflects service and compensation only through 2016, not projected for future years. The benefit payment at age 62 is assumed to be the lump sum form. The present value is measured using the same assumptions used for financial reporting purposes (and which are set forth following the Pension Benefits Table), with the exception of the commencement age. The commencement age is assumed to be 62 because that is the age at which the Supplementary Plan benefit is payable with no reduction for early retirement.

Generally, a participant’s years of credited service under the Supplementary Plan are based on years of employment with Goodyear. However, in the past, credit for service prior to employment with Goodyear was infrequently granted. Mr. Kramer received 13.6 additional years of credited service following his hiring by Goodyear in respect of service with a prior employer. The benefits paid to Mr. Kramer under the Supplementary Plan will be reduced by amounts he is entitled to receive under the pension plan maintained by his prior employer. Due to this service grant, the present value of accumulated benefit in the Pension Benefits table is $5,707,226 higher for Mr. Kramer. None of the other named executive officers have received any additional years of credited service.

 

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Pension Benefits

 

  

 

The Compensation Committee has adopted a policy prohibiting the grant of additional service credit in the Supplementary Plan for newly hired officers and other key employees.

 

Name   Plan Name    Number of Years
Credited Service
(#)
     Present Value of
Accumulated Benefit
($)1
     Payments
During Last
Fiscal Year
($)
 

Kramer

  Supplementary Pension Plan      30.42      $ 17,715,852      $  
  Salaried Pension Plan      8.83        274,892         

Thompson

  Supplementary Pension Plan      33.17        4,335,409         
  Salaried Pension Plan      25.17        354,020         

McClellan

  Supplementary Pension Plan      29.00        5,301,219         
  Salaried Pension Plan      21.00        484,162         

Lucas

  Supplementary Pension Plan      1.92        474,249         

Bialosky

  Supplementary Pension Plan      7.25        2,500,205         

 

1 All amounts shown are estimates as of December 31, 2016; the actual benefits to be paid to the named executive officers will be based on their credited service, compensation, and other factors at the time of their retirement.

The amounts set forth in the table above are based on the following assumptions:

 

  the measurement date is December 31, 2016

 

  the form of payment is a lump sum

 

  the interest rate used to calculate the Supplementary Plan lump sum payment for benefits commencing in 2017 or later: 1.50%

 

  the interest rate used to calculate the Salaried Plan lump sum payment for benefits commencing in 2017 or later: 4.10% (Mr. Kramer, Ms. Thompson and Mr. McClellan)

 

  the mortality assumptions used to calculate the lump sum are those set forth in Internal Revenue Code Section 417(e) for the Salaried Plan, and those set forth in UP-1984 Mortality for the Supplementary Plan

 

  the discount rate used to determine the present value of the accumulated benefit is 4.16% for the Supplementary Plan and 4.10% for the Salaried Plan

 

  the benefit commencement age is 62 (or, if older, age at the measurement date)

 

  the accumulated benefit is calculated based on credited service and pay as of December 31, 2016 (for the Salaried Plan, credited service and pay as of December 31, 2008).

 

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Nonqualified Deferred Compensation

 

  

 

Nonqualified Deferred Compensation

The Goodyear Executive Deferred Compensation Plan is a non-qualified deferred compensation plan that provides named executive officers and certain other highly compensated employees the opportunity to defer their base salary and annual incentive payments. Deferred amounts may be invested in one of five investment alternatives or, with respect to annual incentive payments, Goodyear stock units. Four of these investment alternatives are funds managed by The Northern Trust Company, and currently include a money market fund, a bond fund, an equity index fund and a balanced fund. The average interest rate payable with respect to funds invested in the Northern Trust money market fund was 0.01% for the year ended December 31, 2016. The fifth investment vehicle is a growth fund managed by American Century Investments. Investment elections among the five investment alternatives may be changed daily. Deferrals of annual incentive payments into Goodyear stock units will result in a 20% premium paid in stock units that will vest in one year. There is no guaranteed return associated with any deferred amounts, and deferred amounts are subject to the claims of creditors in the event of our bankruptcy. Distribution of deferred amounts may begin after separation of service or in a selected number of years ranging from one to 20. Payment of deferred amounts will be in a lump sum or up to 15 annual installments, as elected at the time of deferral. Redeferral of amounts originally deferred prior to January 1, 2005 is allowed only if elected one year prior to the scheduled payout. Any stock units are converted to shares of Common Stock and distributed to the participant in January of the fourth year following the end of the plan year under which the award was earned.

The Deferred Compensation Plan is unfunded. The following table sets forth certain information regarding nonqualified deferred compensation of the named executive officers.

 

Name   

Executive

Contributions in
Last FY
($)1

     Registrant
Contributions
in Last FY
($)
     Aggregate
Earnings in
Last FY
($)2
     Aggregate
Withdrawals/
Distributions
($)
     Aggregate
Balance at
Last FYE
($)
 

Kramer

                 $ 6,854             $ 156,595  

Thompson

                                  

McClellan

                                  

Lucas

     60,000               2,952               62,952  

Bialosky