DEF 14A 1 d806796ddef14a.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)

 

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March 6, 2020

Dear Fellow Goodyear Shareholder,

 


I, and the rest of the Board of Directors, would like to thank you for your continued investment in Goodyear and invite you to attend the 2020 Annual Meeting of Shareholders.

TODAY’S REALITY

In 2019, we continued to face a challenging global environment, including recessionary demand trends in many international markets. Our accomplishments were tempered by the underlying cyclicality of our business and continued macroeconomic headwinds, including lower light vehicle production, higher raw material costs, foreign currency headwinds due to a strong U.S. dollar, softening consumer replacement demand in Europe, deteriorating OE demand for commercial truck tires, weak market conditions in China, and economic volatility in Latin America, particularly in Brazil. The challenging industry environment in Europe was exacerbated by poor performance in our distribution channels. Collectively, these challenges negatively impacted our financial results, and consequently our stock price, in 2019.

To address these challenges, we must remain focused on factors that we can control, including further improving our cost structure and working capital management. We must also align our distribution in Europe to ensure that we are in a position to capture the full benefits of the investments we are making in the region when the market turns.

EXECUTING ON LONG-TERM STRATEGY

As we navigate through this difficult phase of the industry cycle, we remain focused on executing our long-term strategy and had many notable accomplishments last year:

First, our U.S. consumer replacement business gained share during the year, driven by growth in the high-margin, premium segments of the market. Shipments of large rim diameter tires increased 10 percent, significantly outpacing the industry. This is a testament of the strength of our brand and the vitality of our products. Our new product lines are among the industry’s best, with both consumers and trade magazines praising the innovation that we are bringing to market.

Our industry leading innovation is also helping to significantly increase our OE win rates. Last year, we grew our OE pipeline at a faster than anticipated pace, with 25 percent of the fitments won planned for electric or hybrid vehicles.

Second, we continued advancing our new mobility capabilities. At the 2020 Consumer Electronics Show, we introduced our intelligent tire, which is now operational in pilot fleet programs. This technology allows us to continuously monitor and record tire temperature, pressure and wear. By using the power of cloud computing and proprietary predictive algorithms, we can turn the data we capture into valuable insights and real-time performance enhancements to maximize fleet uptime – a perfect solution for future driverless vehicles.

Third, our U.S. commercial replacement business outperformed the market. This speaks volumes about the value commercial truck operators see in our fleet solutions, our product offerings and our people. To build upon this momentum, we’re launching Goodyear CheckPoint, an in-ground device that scans passing tires to measure pressure, tread depth and load, and TPMS Plus, which leverages on-vehicle sensors to monitor tire conditions in real time. These tools are designed to minimize downtime and support increased safety for our fleet customers.

Fourth, the working capital initiatives we implemented earlier in the year helped drive more than a 30 percent increase in our cash flow from operations during the year. This performance was ahead of our expectations and helped us to fund our capital expenditures and dividend and reduce our debt levels.

Fifth, we announced, and began executing, plans to lower our manufacturing costs through restructuring actions in Germany and the United States. These actions will improve the competitiveness of our manufacturing footprint and positively impact our earnings and cash flow.

Lastly, our price-versus-raw materials equation turned positive in the second half of the year, representing an important inflection. The improving trends reflect the actions we have taken to capture more value in the market, especially in the U.S., as well as moderating raw material costs.

 

  

 


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NEW MOBILITY

As we execute on these priorities, it is important that we continue adapting our business model for the secular trends in the auto industry, including the electrification and automation of the car parc, and the transition to shared mobility and consumer fleets.

Tomorrow’s challenges cannot be solved with yesterday’s solutions, so we need to reinvest in our business in ways that are different than what we have done during the past several decades, even though the benefits will not be immediately realized. This will ensure that we’ll be ready for inevitable disruption and able to continue supplying the right products and tools to help keep fleets on the road.

Collaboration will be critical to the success and longevity of our business going forward as the emerging mobility ecosystem opens the door to new innovative partnerships. Last year, we announced several partnerships with companies that didn’t even exist at the start of the decade.

I am convinced that by combining our legacy manufacturing assets, retail and distribution facilities, strong brand, leading technology position, relationships with the OEMs and mobility partnerships, we will remain an industry leader as the new mobility ecosystem emerges and deliver long-term shareholder value.

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

Sincerely,

 

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Richard J. Kramer

Chairman of the Board,

Chief Executive Officer and President

 

  

 


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March 6, 2020

Dear Fellow Goodyear Shareholder,

 


I was honored to be elected by my colleagues to serve as Goodyear’s independent Lead Director in June 2019. I want to thank my predecessor, Alan McCollough, for his service as Lead Director for the past eight years. I aspire to continue Alan’s commitment to acting with honesty, integrity and respect and to representing your interests by providing appropriate oversight and delivering on our long-term strategy in order to achieve profitable growth and build long-term shareholder value.

BOARD CONTRIBUTION TO STRATEGY AND PERFORMANCE

Our Board of Directors is comprised of committed, qualified and diverse individuals who bring a wealth of experience and perspectives to their roles as the stewards of our Company and your investment in Goodyear. I am particularly pleased with the recent addition of Hera Siu to the Board. Hera is currently Chief Executive Officer, Greater China, for Cisco Systems and has had a long and successful career of leadership in China in fields that include technology, telecommunications, enterprise software and education. She is an outstanding addition to our directors’ deep and diverse skill sets. We look forward to her contributions as the Board and the Goodyear management team work collaboratively to execute our business strategy. 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.

COMMITMENT TO CONTINUED ENGAGEMENT WITH OUR SHAREHOLDERS

In 2019, I met with several of our largest shareholders to introduce myself and to discuss the Board’s role in overseeing our strategy, the Board’s independent oversight of management, how the Board thinks about its composition and refreshment, our commitment to aligning pay with performance, our corporate responsibility strategy, and our sound corporate governance practices. We remain committed to including our shareholders’ perspectives in boardroom discussions, and we believe that regular engagement with our shareholders is necessary to ensure thoughtful and informed consideration of your views on matters of importance to our business.

ENVIRONMENTAL AND SOCIAL STEWARDSHIP

One topic that is top-of-mind with many of our shareholders is our corporate responsibility strategy, known as Goodyear Better Future, which is focused on four pillars:

 

    Sustainable Sourcing: Managing sourcing in a way that reduces environmental and social impacts and improves our global risk management.

 

    Responsible Operations: Safeguarding our people, monitoring and managing our environmental impacts, and ensuring product quality and business continuity.

 

    Advanced Mobility: Providing optimal mobility performance for the needs of today and shaping the sustainable mobility opportunities of the future.

 

    Inspiring Culture: Promoting ethical behavior and an engaged culture through wellness, diversity and inclusion, talent development, and community involvement.

We are proud of the significant progress we’ve made on our sustainable business practices, including implementing smart technologies and new product offerings, and pursuing innovative research ideas. As one example of sustainable sourcing, Goodyear scientists and engineers developed a soy-based compound that replaces petroleum-derived oils in the tire-making process and improves flexibility through changing temperatures, a key factor in superior traction on roadways. This innovative soybean-based technology underscores how R&D in sustainable materials can benefit both the environment and tire performance, and help us further differentiate our product offerings.

Goodyear has the greatest opportunity to influence fuel efficiency through our tires’ rolling resistance and weight. A tire with low rolling resistance and a vehicle with less weight will consume less fuel and emit fewer greenhouse gases. As part of our commitment to improving vehicle fuel efficiency, we have established goals for our global consumer tire portfolio to reduce rolling resistance by 40% and tire weight by 9% by 2025 from a 2005 baseline.

 

  

 


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Our Board and management team are also deeply focused on human capital management, including monitoring Goodyear’s corporate culture and safety practices, and ensuring we have a diverse and inclusive work environment. The Board reviews the results of associate engagement and quarterly pulse surveys to stay abreast of trends within the Company’s culture. The Board also receives regular updates on talent management, succession planning, and diversity and inclusion initiatives. We believe strong human capital management helps drive value creation over the long-term for our employees, our customers, our communities and our shareholders.

Recognizing the growing importance of these topics to our shareholders and other stakeholders, we are enhancing our sustainability-related disclosures, including through our refreshed corporate responsibility report.

EXECUTIVE COMPENSATION

We remain committed to maintaining a strong alignment between company performance and our executive compensation program. As you read the Compensation Discussion and Analysis section of this Proxy Statement, we believe you will see the alignment of our incentive compensation plans with the Company’s performance.

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  

 

Laurette T. Koellner

Independent Lead Director

 

  

 


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NOTICE OF 2020 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT

 

To the shareholders:

 

The 2020 Annual Meeting of Shareholders of The Goodyear Tire & Rubber Company, an Ohio corporation (“Goodyear,” “Company,” “we,” “our” or “us”) will be held at the Hilton Akron/Fairlawn, 3180 West Market Street, Akron, Ohio, on Monday, April 6, 2020 at 4:30 p.m., Akron Time, for the following purposes (the “Annual Meeting”):

 

 

LOGO    To elect the twelve members of the Board of Directors named in the Proxy Statement to serve one-year terms expiring at the 2021 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 approve a proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2020 (Proposal 3);

 

LOGO   To consider and vote upon a shareholder proposal (Proposal 4), 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 6, 2020 at 4:30 p.m.,

Akron Time

 

The Board of Directors fixed the close of business on February 11, 2020 as the record date for determining shareholders entitled to notice of, and to vote at, the 2020 Annual Meeting. Only holders of record of shares of common stock, without par value, of Goodyear (“Common Stock”) at the close of business on February 11, 2020 will be entitled to vote at the 2020 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 6, 2020

By order of the Board of Directors

 

 

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Daniel T. Young, Secretary

  

 

 

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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. This proxy statement and the form of proxy are first being sent to shareholders on or about March 6, 2020.

Proposals and Board Recommendations

 

Proposal

 

                      

Board’s Voting Recommendation

 

  

Page Reference

 

 
1.   Election of Directors                            FOR each Nominee      13  
2.   Advisory Vote on Executive Compensation                            FOR      20  
3.  

Ratification of Appointment of Independent

Registered Public Accounting Firm

                           FOR      76  
4.  

Shareholder Proposal regarding Shareholder Vote on

Bylaw and Charter Amendments

               AGAINST      78  

 

Business Overview

Goodyear is one of the world’s leading manufacturers of tires, engaging in operations in most regions of the world. In 2019, our net sales were $14.7 billion and Goodyear’s net loss was $311 million. We develop, manufacture, distribute and sell tires for most applications through our strong portfolio of brands, led by the Goodyear brand, one of the most recognizable brand names in the world, as well as the Dunlop, Kelly, Debica, Sava and Fulda brands.

We are one of the world’s largest operators of commercial truck service and tire retreading centers, and we operate approximately 1,000 retail outlets where we offer our products for sale to consumer and commercial customers and provide repair and other services. We have a pervasive distribution network that is focused on making the tire buying process easier —with over 13,000 retail touch points, a concentrated network of aligned third-party distributors, approximately 190 company-owned warehouse distribution facilities, and a leading business-to-consumer e-commerce platform.

We manufacture our products in 47 manufacturing facilities in 21 countries, including the United States, and we have marketing operations in almost every country around the world. We employ approximately 63,000 full-time and temporary associates worldwide.

 


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PROXY SUMMARY

 

  

 

2019 Business Performance Highlights

 

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* As defined for purposes of our compensation plans in 2019

In 2019, challenging macroeconomic industry conditions persisted throughout much of the year, including higher raw material costs, foreign currency headwinds due to a strong U.S. dollar, lower original equipment, or OE, industry volumes, softening demand in Europe, weak market conditions in China, and economic volatility in Latin America, particularly in Brazil. The challenging industry environment in Europe was exacerbated by poor performance in our distribution channels. These factors more than offset the benefits of increased demand for our consumer replacement tires in the United States, driven by sales of 17-inch and above rim size tires that outperformed the industry.

Our overall performance in 2019 was mixed, and we are not satisfied with our stock price performance. We will intensify our efforts to improve execution in the areas of our business that are largely within our control. The restructuring plans that we announced in 2019 in Germany and the United States will underpin the next wave of our cost savings and strengthen our long-term competitive position. We also have announced plans to better align our European distribution network in order to capture the full value of our products and brands in the marketplace.

Globally, we continued to add to our OE pipeline by securing numerous new fitments, with many on electric vehicles. These fitments will begin adding to our tire unit volume in 2021 and 2022. We also expect to continue to see benefits from pricing actions that we implemented to recover raw material cost increases and continued strong performance in our sales of 17-inch and above consumer replacement tires.

We remain committed to our strategy 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.

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

 

   

Developing great 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

   

Relentlessly improving our quality and efficiency to deliver the right tire, to the right place, at the right time for the right cost.

Our strategy is designed to take advantage of the long-term trends shaping our industry, particularly in the larger rim size segment of the market.

In 2019, we once again demonstrated our commitment to shareholder returns through our quarterly cash dividend on our Common Stock of $0.16 per share.

 


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PROXY SUMMARY

 

  

 

Shareholder Engagement

We believe that it is important for us to communicate regularly with shareholders regarding areas of interest or concern. We have a robust shareholder engagement program that includes an annual outreach that is focused on our long-term business strategy, corporate governance, executive compensation, corporate responsibility 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. The following chart demonstrates our long-standing commitment to a robust shareholder engagement program:

 

 

Commitment to Shareholder Engagement (as a % of outstanding Common Stock)

 

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As part of our 2019 annual outreach (based on our outstanding Common Stock as of September 30, 2019):

 

   

We requested the opportunity to meet with many of our shareholders;

   

We ultimately engaged with shareholders representing over 50% of our Common Stock; and

   

Both our outgoing and incoming independent Lead Director met with several of our largest shareholders (representing approximately 15% of our Common Stock) to ensure a smooth transition of the independent Lead Director role and to continue to provide a direct line of communication between our shareholders and the Board of Directors.

Specifically, our outreach meetings this year gave us the chance to discuss:

 

   

the Board’s role in overseeing our strategy,

   

the transition to a new independent Lead Director,

   

the Lead Director’s and Board’s independent oversight of management,

   

how the Board thinks about its composition and refreshment, including the addition of two new directors in 2019,

   

our commitment to aligning pay with performance,

   

an update on our corporate responsibility strategy, known as Goodyear Better Future, and

   

our sound executive compensation, corporate governance and corporate responsibility practices.

 


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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 by focusing management on driving increased shareholder value.

The payouts under our incentive compensation plans this year were strongly aligned with our financial performance — demonstrating our commitment to structure an executive compensation program that pays for performance. The payouts under those plans reflected our strong free cash flow performance that was driven by the success of our working capital initiatives and allowed us to fund our dividend and reduce our net debt levels despite the challenging industry conditions we continued to face in 2019. Those challenging industry conditions adversely affected our performance on our EBIT and net income metrics.

During 2019, we launched a Working Capital Excellence initiative focused on sustainable improvement to working capital efficiency. The Company’s focus on reducing working capital included structural enhancement of internal business processes related to how we procure and pay for goods and services and how we bill and collect from customers. Solid execution on these programs allowed us to lower our days sales outstanding and increase our payable leverage, effectively reducing our cash conversion cycle on a year-over-year basis and relative to our plan target. At the same time, we constrained production levels throughout the year in order to maintain an appropriate level of inventory in a declining industry environment.

For 2019, the payout for overall company performance under our annual incentive plan was 131% of target, driven by our strong free cash flow performance, and the payout under our long-term awards for the 2017-2019 performance cycle was 22% of target, reflecting our performance over the entire three-year performance cycle, as well as the impact of our relative total shareholder return, or TSR, modifier that further reduced the payouts for our 2017-2019 performance cycle by 20%.

For 2019, our financial metrics were:

 

          

Incentive Program

 

 

Financial Metrics

 

  

Weighting

 

       
 

ANNUAL  

INCENTIVES  

    

Annual Performance Plan

 

EBIT

  

 

40

 
      

Free Cash Flow from Operations

  

 

40

 
      

Individual Performance Goals

  

 

20

 
                     
 

LONG-TERM  

AWARDS  

    

Performance-Based Awards  

(Paid out in Equity and Cash)

 

 

Net Income

  

 

50

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Cash Flow Return on Capital

  

 

50

    

Restricted Stock Units

              

 


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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 and director compensation and evaluating program design

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

Directors who have served in senior leadership roles at large organizations provide us with a practical understanding of organizations, processes, strategy, risk management and other factors that promote growth.

 

•  Global perspective

As a global company, we benefit from our directors who have experience with multinational companies or in international markets to help direct our global business plans and navigate challenges that we may encounter in our international operations.

 

•  Marketing and branded consumer product experience

Marketing and branding initiatives are essential to our growth strategy to increase market share in a competitive industry.

 

•  Operational and manufacturing experience

Directors with operational and manufacturing experience provide valuable insight to management on the development and execution of our strategy.

  

•  Finance, accounting and financial reporting expertise

An understanding of finance and accounting assists our directors in overseeing our financial reporting and internal controls to ensure they are accurate and transparent.

 

•  Leadership development expertise

Having directors who can help advise management on how to motivate and develop leaders within the Company helps ensure our success is sustainable.

 

•  Legal, regulatory and government experience

Directors with knowledge of the legal and regulatory framework in which we operate help evaluate risks and how our business may be impacted by governmental actions and public policy.

 

•  Corporate governance, responsibility and compliance experience

Directors with experience in these areas support our goals of strong independent Board oversight, accountability and protection of shareholder interests.

 

These collective attributes enable the Board to exercise appropriate independent 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.

 


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

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Spotlight on Board Refreshment

Our well-qualified and diverse group of directors brings an important mix of leadership, boardroom and operating experience to Goodyear. Our Directors provide us with critical insights on many important issues facing our business. In 2019, we continued to refresh the Board of Directors and its leadership. We added two new directors, Tom Williams in February 2019 and Hera Siu in December 2019, and elected Laurette Koellner as independent Lead Director effective on June 30, 2019, succeeding Alan McCollough, who served ably in that role for eight years.

Ms. Koellner was first elected to the Board in February 2015, and has significant board leadership experience on other public company boards, which provides her with the necessary skills to be our independent Lead Director. She also has significant senior executive management experience, including extensive international, financial and human resources experience.

Ms. Siu is currently Chief Executive Officer, Greater China, for Cisco Systems and has had a long and successful career of leadership in China in fields that include technology, telecommunications, enterprise software and education. We believe that her extensive technology background and deep knowledge of the China marketplace will be extremely valuable to Goodyear and its shareholders.

Mr. Williams is currently Chairman and Chief Executive Officer of Parker-Hannifin Corporation. He has more than 30 years of international operations experience and particular expertise on complex and cyclical businesses. His extensive knowledge of manufacturing, distribution, logistics and innovation, along with a track record of focusing on safety and sustainability, will be tremendous assets to the Board.

These changes clearly demonstrate the Board’s commitment to creating a board that is strongly independent and diverse. Our Board also seeks to have well-balanced tenures, with longer-serving directors who provide knowledge of our business through industry cycles and newer directors with fresh perspectives.

 


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Corporate Governance Highlights

 

 

 

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, including periodic use of a third-party facilitator

 

  

•  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

 

 


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TABLE OF CONTENTS

 

    Notice Of 2020 Annual Meeting of Shareholders and Proxy Statement
    Proxy Statement Summary
1   Corporate Governance Principles and Board Matters
2   Board Leadership Structure
3   Board’s Role in Risk Oversight
5   Consideration of Director Nominees
5   Director Selection Guidelines
5   Identifying and Evaluating Nominees for Director
6   Board Structure and Committee Composition
7   Audit Committee
7   Compensation Committee
8   Committee on Corporate Responsibility and Compliance
9   Finance Committee
9   Governance Committee
9   Executive Committee
10   Corporate Responsibility
12   Communications with the Board
12   Board Independence
13   Proposal 1 – Election of Directors
20   Proposal 2 – Advisory Vote to Approve the Compensation of Our Named Executive Officers
21   Compensation Discussion and Analysis
21   Introduction
21   CD&A Table of Contents
22   Executive Summary
28   Compensation Philosophy
28   Components of Executive Compensation
30   Compensation Decision-Making
32   Role of Compensation Consultant
32   Peer Group Benchmarking of Primary Compensation
33   Target Setting
35   Annual Compensation
40   Long-Term Compensation
46   Retirement and Other Benefits
49   Compensation Policies and Practices
51   Compensation Committee Report
52   Executive Compensation
52   Summary Compensation Table
54   Summary of Realized Pay Earned by Our Chief Executive Officer for 2017, 2018 and 2019
55   Grants of Plan-Based Awards
56   Outstanding Equity Awards at Fiscal Year-End
58   Option Exercises and Stock Vested
58   Defined Contribution Plan Benefits
58   Pension Benefits
61   Nonqualified Deferred Compensation
62   Potential Payments Upon Termination or Change-in-Control
68   Director Compensation Table
70   Risks Related to Compensation Policies and Practices
70   Pay Ratio
71   Beneficial Ownership of Common Stock
73   Related Person Transactions
74   Principal Accountant Fees and Services
75   Report of the Audit Committee
76   Proposal 3 – Ratification of Appointment of Independent Registered Public Accounting Firm
78   Proposal 4 – Shareholder Proposal
81   General Information
81   Shares Voting
81   Vote Required
82   Adjourned Meeting
82   Voting Shares Held in Street Name
83   Savings Plan Shares
83   Voting of Proxy
83   Revocability of Proxy
84   Confidentiality
84   Shareholders Sharing The Same Address
84   Form 10-K
85   Costs of Solicitation
85   Submission of Shareholder Proposals and Nominations
86   Other Business
 

 

USE OF NON-GAAP FINANCIAL MEASURES

For additional information regarding segment operating income, a non-GAAP financial measure, including reconciliations to the most directly comparable GAAP financial measure, see Exhibit A to this Proxy Statement.


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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 2019

 

    Committees
  Independent Audit Compensation

Corporate
Responsibility

& Compliance

Finance Governance Executive
           

Mr. Firestone

LOGO

 

MEMBER

      CHAIR      

MEMBER

           

Mr. Geissler

LOGO

 

MEMBER

      CHAIR      

MEMBER

           

Mr. Hellman

LOGO

 

      CHAIR      

MEMBER

MEMBER

           

Ms. Koellner, Lead Director

LOGO

 

MEMBER

MEMBER

      CHAIR      

           

Mr. Kramer

MEMBER

           

Mr. McCollough

LOGO

 

MEMBER

MEMBER

           

Mr. McGlade

LOGO

 

      CHAIR      

MEMBER

MEMBER

           

Mr. Palmore

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MEMBER

      CHAIR      

MEMBER

           

Ms. Siu

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MEMBER

MEMBER

           

Ms. Streeter

LOGO

 

MEMBER

MEMBER

           

Mr. Weidemeyer

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MEMBER

MEMBER

           

Mr. Wessel

MEMBER

           

Mr. Williams

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MEMBER

MEMBER

               

Number of Meetings in 2019

6 5 3 4 4 1

 

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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 Ms. Koellner was elected by the independent members of the Board to serve as our independent Lead Director, effective June 30, 2019. The Board believes that the current Board leadership structure is the most appropriate for the Company and its shareholders at this time. The Board periodically reviews the Board leadership structure and the roles of the Chairman and independent Lead Director, taking into consideration the views expressed by our shareholders.

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 20 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 Ms. Koellner is highly qualified to serve as our Lead Director and that she provides strong leadership of the independent and non-management directors and diligently fulfills her 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 and develop the agenda for 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

 

  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 and effective independent oversight of management:

 

 

83% of the Company’s director nominees 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, strategic, operational, financial (accounting, liquidity and tax), legal, regulatory, and environmental, social and governance 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;

 

  Significant acquisitions and divestitures;

 

  Diversity and inclusion; and

 

  Management succession planning.

 

Audit Committee   

  Risks associated with financial matters, particularly financial reporting and disclosure, accounting, and internal controls, as well as risks associated with 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), tax strategies, currency and interest rate exposures, and insurance strategies.

 

Committee on Corporate
Responsibility and Compliance
  

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

 

 

 

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Consideration of Director Nominees

 

  

 

Consideration of Director Nominees

The Governance Committee will consider properly submitted shareholder nominations of candidates for membership on the Board as described below under “Identifying and Evaluating Nominees for Director.” In evaluating 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 the 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 also retains 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. Ms. Siu was initially identified as a potential candidate for Board membership by a third-party search firm.

 

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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 nominated for election to the Board, and the Board makes its decision after considering the recommendation and report of the Committee.

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 2019, 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.

 

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Audit Committee

 

  

 

 

Audit Committee

 

MEMBERS:

 

Mr. Firestone

 

Mr. Geissler

 

Mr. Hellman (Chairman)

 

Mr. Weidemeyer

 

Mr. Williams

 

MEETINGS IN 2019: 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 Mr. Hellman and Mr. Williams are audit committee financial experts.

      

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. The Audit Committee 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; reviews policies and guidelines with respect to risk assessment and risk management, including Goodyear’s major financial risk exposures; oversees Goodyear’s information technology and cybersecurity strategy; prepares the Audit Committee report for inclusion in the annual proxy statement; and annually reviews the Audit Committee charter and the Committee’s performance. 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 75 of this Proxy Statement.

 

 

Compensation Committee

 

MEMBERS:

 

Ms. Koellner

 

Mr. McCollough

 

Mr. McGlade (Chairman)

 

Ms. Streeter

 

MEETINGS IN 2019: 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. The Compensation Committee also prepares a report on executive compensation for inclusion in the annual proxy statement, reviews and discusses the Compensation Discussion and Analysis with management and recommends its inclusion in the annual proxy statement, and periodically reviews our talent management strategies and progress. The report of the Compensation Committee is on page 51 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 other significant decisions related to the administration of its duties. The Compensation

 

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Compensation Committee

 

  

 

 

Compensation Committee (continued)

 

      

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)

 

Ms. Siu

 

Mr. Weidemeyer

 

Mr. Wessel

 

Mr. Williams

 

MEETINGS IN 2019: 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

 

Ms. Siu

 

MEETINGS IN 2019: 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, insurance strategies, banking arrangements and lines of credit, pension plan funding, and significant mergers and acquisitions and other business development activities. 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. McCollough

 

Mr. McGlade

 

Mr. Palmore (Chairman)

 

Ms. Streeter

 

MEETINGS IN 2019: 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

 

Ms. Koellner (Chairwoman)

 

Mr. Kramer

 

Mr. McGlade

 

Mr. Palmore

 

MEETINGS IN 2019: 1

 

      

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 Chairwoman 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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Corporate Responsibility

 

  

 

Corporate Responsibility

Goodyear has a longstanding commitment to corporate responsibility. We listen and respond to market trends; customer needs; supplier and partner capabilities; and investor interests and are focusing on expanding our corporate responsibility transparency in response to stakeholder requests. Our corporate responsibility framework, Goodyear Better Future, illustrates our high-priority environmental, social and governance topics.

Goodyear’s Board Committee on Corporate Responsibility and Compliance oversees our corporate responsibility objectives and regularly monitors our progress towards achieving them. Our Vice President, Global Environmental, Health, Safety and Sustainability meets with the Committee annually to align and review our strategy, goals and progress.

We recently launched our Goodyear Better Future corporate responsibility governance structure to better enhance transparency, alignment and communication on high-priority topics, corporate strategy and stakeholder interests at all levels of the organization.

The Better Future Steering Committee is responsible for ensuring functional goals are established and aligned with corporate strategy for Goodyear’s high-priority topics and for advancing our communications to external stakeholders.

The Better Future Working Group is made up of the program managers of each of our high-priority topics. Members are responsible for developing goals and targets for each topic, ensuring leadership alignment to commitments, and regularly sharing updates to enhance cross-functional collaboration.

The Better Future Associate Council is a cross-functional group of associates that identify and implement location-specific initiatives aligned to our high-priority topics. We recently launched the Akron council and plan to expand to other Goodyear locations globally in coming years.

Collectively, this governance structure is helping to grow internal awareness and engagement around Goodyear Better Future initiatives while enhancing our communication to key stakeholders.

 

LOGO

In Goodyear’s Strategy Roadmap, we address the importance of developing great products and services that anticipate and respond to the needs of customers and consumers while building the value of our brand and focusing on our quality and efficiency. Our Goodyear Better Future framework supports our Strategy Roadmap, summarizing what we believe and where we will focus. The pillars of our Better Future framework are highlighted below, along with key metrics and updates for each pillar.

 

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Corporate Responsibility

 

  

 

LOGO

 

Pillar  

LOGO

 

 

LOGO

 

 

LOGO

 

 

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Topic  

Sustainable Raw Materials & Sourcing

Supply Chain Management

 

Safety & Health

Operational Impacts
Product Quality

End-of-Life Tires (“ELT”)

Business Continuity

  Advancing Tire Performance Shaping the Mobility Revolution  

Ethics & Compliance

Health & Wellness

Community Engagement Diversity & Inclusion

Talent Development

Focus

Areas

 

• Source sustainable natural rubber

• Increase sustainable material usage

• Pursue raw material traceability

• Remove materials of concern

• Manage supply chain ESG risks

 

• Culture of safety and health

• Reduce environmental impacts

• Produce high-quality products

• Drive ELT to beneficial reuse

• Risk analysis and mitigation

 

• Fuel efficiency, safety, longevity, and comfort

• Fleets, autonomous, connected and electric vehicles

 

• Demonstrate ethical values

• Healthy and well workforce

• Global community engagement

• Diverse and inclusive culture

• Robust talent development

 

Sustainable Sourcing

  

Over the last two years we’ve audited 99% of our sourced natural rubber for compliance with our Natural Rubber Procurement Policy, part of our commitment to responsibly sourcing our raw materials and aligning with our policy to audit all active natural rubber suppliers every two years.

 

Our soybean oil technology has now replaced petroleum-derived oil in the tread compounds of four tires – the new Assurance ComfortDrive, the Assurance WeatherReady, the Eagle Enforcer All Weather, and the Eagle Exhilarate, which has been ranked by a leading consumer magazine as #1 in the Ultra High-Performance All-Season tire category.

 

Responsible

Operations

  

In 2019, we launched a brand-new learning experience around Isolation and Control of Hazardous Energy (I-CHE), and rolled it out to more than 6,300 associates at 25 sites globally. We are also leveraging state-of-the-art sensor technology to conduct ergonomic assessments in our manufacturing facilities. This system helps us to identify and address potential injury risks, which will help reduce the number of injuries in our facilities:

 

  2019 Serious Injury Rate: 0.02

 

  2019 Total Incident Rate: 1.86

 

We continue to work toward reducing our environmental impacts. Since 2010, we have reduced:

 

  Greenhouse Gas (GHG) emissions by 19%

 

  Water use by 14%

 

  Energy use by 18%

 

  Solvent use by 40%

Advanced Mobility

  

Our biggest opportunity to reduce GHGs throughout the life cycle of our tires comes from the use phase. We’ve set goals to reduce rolling resistance by 40% and tire weight by 9% by 2025 (from a 2005 baseline) in our global consumer tire portfolio. To date, we’ve reduced:

 

  Rolling resistance by 29%

 

  Weight by 6%

 

 

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Corporate Responsibility

 

  

 

Inspiring Culture

  

Our Employee Resource Groups (ERGs) support our diversity and inclusion initiatives and provide associates access to coaching, mentoring and professional development. In 2019, we added a seventh ERG to our Akron campus: Asia, India, Middle East (AIM). We’ve also launched 14 additional ERG chapters globally for a total of 24. Collectively, membership has grown 80% year-over-year and we’ve offered more than 75 professional development opportunities for ERG members.

 

We also held our third annual Global Week of Volunteering in 2019. With 32 Goodyear locations participating, our associates provided more than 9,200 hours of volunteer service to more than 78 community organizations around the world. Throughout the year, associates provided approximately 33,000 hours of volunteer service to 200 community organizations.

 

In 2019, the Goodyear Blimps and U.S. Marine Corps “Toys for Tots” program raised almost $120,000 and generated over 17,000 toys for families during the holiday season, bringing the combined total since 2010 to more than 150,000 toys and nearly $500,000. Additionally, in 2019, Goodyear provided over 265 blimp ride certificates, which generated over $400,000 to benefit the recipient nonprofits’ missions and work in the community.

 

 

Our Corporate Responsibility Report is typically published in the second quarter of each year. 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.

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.

Board Independence

The Board has determined that ten of the twelve 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 Parker-Hannifin Corporation and between Goodyear and Cisco Systems, Inc. did not impair the independence of Mr. Williams or Ms. Siu, respectively. The relationships were de minimis, constituting less than three one-hundredths of one percent (0.03%) of either Goodyear’s or Parker-Hannifin’s consolidated gross revenues in the most recent fiscal year and constituting less than one one-hundredth of one percent (0.01%) of either Goodyear’s or Cisco Systems’ consolidated gross revenues in the most recent fiscal year.

 

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LOGO

     

 

PROPOSAL 1 – ELECTION OF DIRECTORS

The Board of Directors has selected the following twelve 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.

Mr. Thomas H. Weidemeyer was not nominated for re-election to the Board of Directors due to the retirement age provisions of Goodyear’s Corporate Governance Guidelines. Mr. Weidemeyer will be retiring from the Board at the Annual Meeting after 15 years of distinguished service. Goodyear and the Board of Directors are deeply grateful to Mr. Weidemeyer for his leadership and guidance during his tenure on the Board.

James A. Firestone

 

         

 

 

 

 

 

    

  LOGO

 

Director Since:

December 3, 2007

 

 

Committees:

Audit

Finance (Chairman)

Executive

 

 

Age: 65

 

 

    

 

 

 

 

 

 

  

 

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, 2015:

None

 

 

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.

 

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LOGO

  

ELECTION OF DIRECTORS

 

  

 

Werner Geissler

 

         

 

 

 

 

 

 

    

  LOGO

 

Director Since:

February 21, 2011

 

 

Committees:

Audit

Corporate Responsibility

and Compliance

(Chairman)

Executive

 

 

Age: 66

 

 

  

 

    

 

 

 

 

 

 

  

 

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, 2015:

 

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.

Peter S. Hellman

 

         

 

 

 

 

 

    

 

  LOGO

 

Director Since:

October 5, 2010

 

 

Committees:

Audit (Chairman)

Finance

Executive

 

 

Age: 70

 

 

    

 

 

 

 

 

 

  

 

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, 2015:

 

Baxter International Inc. (2005 – present)

O-I Glass, 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.

 

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ELECTION OF DIRECTORS

 

  

 

Laurette T. Koellner

 

         

 

 

 

 

 

    

 

 

 

LOGO


Director Since:

February 23, 2015

 

 

Lead Director

 

 

Committees:

Compensation

Finance

Executive (Chairwoman)

 

 

Age: 65

 

 

    

 

 

  

 

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, 2015:

 

Celestica Inc. (2009 – present)

Nucor Corporation (2015 – present)

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

 

 

Ms. Koellner has significant senior executive management experience, including extensive international business experience, as well as financial and human resources experience. Her service in leadership positions on several public company boards of directors provides her with the necessary skills to be Lead Director and also provide us with important insights on business practices in a variety of industries.

Richard J. Kramer

 

         

 

 

 

 

    

 

 

LOGO


Director Since:

February 22, 2010

 

 

Committees:

Executive

 

 

Age: 56

 

 

 

    

 

 

 

 

  

 

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, 2015:

 

The Sherwin-Williams Company (2012 – present)

 

Mr. Kramer has been an executive officer of Goodyear for 20 years and has 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.

 

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LOGO

  

ELECTION OF DIRECTORS

 

  

 

W. Alan McCollough

 

         

    

 

 

 

 

 

 

 

 

  LOGO

 

Director Since:

April 10, 2007

 

 

Committees:

Compensation

Governance

 

 

Age: 70

 

 

    

 

 

 

 

 

 

 

 

  

 

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. Prior to joining Circuit City, Mr. McCollough held several positions of increasing responsibility with Milliken & Company.

  

 

OTHER PUBLIC COMPANY DIRECTORSHIPS

HELD SINCE JANUARY 1, 2015:

 

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. 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.

John E. McGlade

 

         

 

    

 

 

  LOGO

 

Director Since:

December 5, 2012

 

 

Committees:

Compensation (Chairman)

Governance

Executive

 

 

Age: 66

 

 

 

 

    

 

 

 

 

 

 

  

 

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, 2015:

 

Bunge Limited (2014 – December 2019)

 

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.

 

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LOGO

  

ELECTION OF DIRECTORS

 

  

 

Roderick A. Palmore

 

         

 

    

  LOGO

 

Director Since:

August 7, 2012

 

 

Committees:

Finance

Governance (Chairman)

Executive

 

 

Age: 68

 

 

 

    

  

 

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, 2015:

 

Cboe Global Markets, Inc. (2000 – present)

Express Scripts Holding Co. (2014 – 2018)

 

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.

Hera K. Siu

 

         

    

 

 

 

 

 

 

 

 

LOGO

 

Director Since:

December 4, 2019

 

 

Committees:

Corporate Responsibility
and Compliance

Finance

 

 

Age: 60

 

  

    

 

 

 

 

 

 

  

 

CURRENT PRINCIPAL OCCUPATION:

 

Corporate Vice President and Chief Executive Officer, Greater China, of Cisco Systems, Inc.

 

DESCRIPTION OF BUSINESS EXPERIENCE:

 

Ms. Siu is Chief Executive Officer, Greater China, for Cisco Systems, Inc., a leading global technology company that designs, manufactures and sells internet protocol-based networking and other products related to the communications and information technology industries, a position she has held since July 2017. She previously served as Chief Operating Officer, Greater China, of Cisco from November 2016 until June 2017.

 

From February 2014 to June 2016, she served as Senior Vice President and Managing Director, Greater China, for Pearson, LLC, a global education company that leverages technology to enhance teaching and learning. Ms. Siu was employed by SAP, a global software and data processing firm, as Senior Vice President, and then President, of

  

 

OTHER PUBLIC COMPANY DIRECTORSHIPS

HELD SINCE JANUARY 1, 2015:

 

None

 

 

China and Hong Kong from April 2010 to June 2013, and as Senior Vice President, e-Commerce, Asia Pacific Region, from July 2013 to January 2014. Ms. Siu also previously held positions of increasing responsibility and leadership for companies including Nortel, Inc., Hong Kong Telecom, Ltd., Computer Associates, Inc., and Nokia Telecommunications, Ltd.

 

Ms. Siu possesses more than 30 years of management experience, with a strong understanding of outcome-based solutions and emerging business models. Her extensive technology background and deep knowledge of the China marketplace will be extremely valuable to Goodyear and its shareholders as Goodyear continues to focus on the future of mobility.

 

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LOGO

  

ELECTION OF DIRECTORS

 

  

 

Stephanie A. Streeter

 

         

    

 

 

 

 

 

 

  LOGO

 

Director Since:

October 7, 2008

 

 

Committees:

Compensation

Governance

 

 

Age: 62

 

  

    

 

 

 

 

 

 

  

 

CURRENT PRINCIPAL OCCUPATION:

 

Retired. 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, 2015:

 

Kohl’s Corporation (2007 – present)

Western Digital Corporation (2018 – present)

Libbey Inc. (2011 – 2016)

Olin Corporation (2018 – January 2019)

 

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.

Michael R. Wessel

 

         

    

 

 

 

 

 

 

  LOGO

 

Director Since:

December 6, 2005

 

 

Committees:

Corporate Responsibility

and Compliance

 

 

Age: 60

 

  

    

 

 

 

 

 

 

  

 

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, 2015:

 

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.

 

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LOGO

  

ELECTION OF DIRECTORS

 

  

 

Thomas L. Williams

 

         

    

 

 

 

 

 

 

  LOGO

 

Director Since:

February 26, 2019

 

 

Committees:

Audit

Corporate Responsibility

and Compliance

 

 

Age: 61

 

  

    

 

 

 

 

 

 

  

 

CURRENT PRINCIPAL OCCUPATION:

 

Chairman of the Board and Chief Executive Officer of Parker-Hannifin Corporation

 

DESCRIPTION OF BUSINESS EXPERIENCE:

 

Mr. Williams is the Chairman of the Board and Chief Executive Officer of Parker-Hannifin Corporation, a leading worldwide diversified manufacturer of motion and control technologies and systems. He has served as Chief Executive Officer of Parker since February 2015 and Chairman of the Board of Parker since January 2016. From August 2008 to February 2015, Mr. Williams was Executive Vice President and Operating Officer of Parker. Mr. Williams joined Parker in 2003 as Vice President of Operations – Hydraulics Group and became President – Instrumentation Group in 2005 and Senior Vice President – Operating Officer in 2006. Prior to joining Parker, Mr. Williams was employed by General Electric Company for 22 years, where he held various executive operating positions for four different business groups: GE Capital, Aviation, Lighting and Transportation.

  

 

OTHER PUBLIC COMPANY DIRECTORSHIPS

HELD SINCE JANUARY 1, 2015:

 

Parker-Hannifin Corporation (2015 – present)

Chart Industries, Inc. (2008 – May 2019)

 

Mr. Williams has over 30 years of international operations experience and particular expertise on complex and cyclical businesses, as well as extensive knowledge of manufacturing, distribution, logistics and innovation, through his service in executive-level positions at both Parker and General Electric. He also has a track record of focusing on safety and sustainability. As a global manufacturer, we believe that Mr. Williams will provide valuable perspectives in these areas as a director of Goodyear. Mr. Williams’ service as a sitting Chief Executive Officer of a publicly traded company will also enhance the knowledge and functioning of the Board and qualifies him to be an “audit committee financial expert.”

 

 

 

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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LOGO

  

    

 

  

 

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 22, 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 those 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 2020 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. The Board of Directors has determined, consistent with the shareholders’ vote on the matter in 2017, to hold an advisory vote regarding the compensation of our named executive officers every year until the next vote on the frequency of such advisory votes, which is currently expected to occur at the 2023 Annual Meeting of Shareholders.

 

 

 

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).

 

 

 

    20  


Table of Contents
     

LOGO

     

 

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 2019.

OUR NEOS FOR 2019 ARE:

 

   

 

 

Richard J. Kramer

 

 

 

Chairman, Chief Executive Officer and President

 

 

Darren R. Wells

 

 

 

Executive Vice President and Chief Financial Officer

 

 

Stephen R. McClellan

 

 

 

President, Americas

 

 

Christopher R. Delaney

 

 

 

President, Europe, Middle East and Africa

 

 

Ryan G. Patterson

 

 

 

President, Asia Pacific

Table of Contents

 

 

 

USE OF NON-GAAP FINANCIAL MEASURES

For additional information regarding segment operating income, a non-GAAP financial measure, including reconciliations to the most directly comparable GAAP financial measure, see Exhibit A to this Proxy Statement.

 

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LOGO

     

 

COMPENSATION

DISCUSSION AND ANALYSIS

Executive Summary

2019 OPERATING RESULTS AND OUR STRONG PAY AND PERFORMANCE ALIGNMENT

In 2019, challenging macroeconomic industry conditions persisted throughout much of the year, including higher raw material costs, foreign currency headwinds due to a strong U.S. dollar, lower original equipment, or OE, industry volumes, softening demand in Europe, weak market conditions in China, and economic volatility in Latin America, particularly in Brazil. The challenging industry environment in Europe was exacerbated by poor performance in our distribution channels. These headwinds were partially offset by continued strength in U.S. consumer replacement sales.

The payouts under our incentive compensation plans were strongly aligned with our financial performance — demonstrating our commitment to structure an executive compensation program that pays for performance. The payouts under those plans reflected our strong free cash flow performance that was driven by the success of our working capital initiatives and allowed us to fund our dividend and reduce our net debt levels despite the challenging industry conditions we continued to face in 2019. Those challenging industry conditions adversely affected our performance on our EBIT and net income metrics.

During 2019, we launched a Working Capital Excellence initiative focused on sustainable improvement to working capital efficiency. The Company’s focus on reducing working capital included structural enhancement of internal business processes related to how we procure and pay for goods and services and how we bill and collect from customers. Solid execution on these programs allowed us to lower our days sales outstanding and increase our payable leverage, effectively reducing our cash conversion cycle on a year-over-year basis and relative to our plan target. At the same time, we constrained production levels throughout the year in order to maintain an appropriate level of inventory in a declining industry environment.

 

    22  

 


Table of Contents
    

 

COMPENSATION DISCUSSION AND ANALYSIS

  
 

LOGO

  

Executive Summary

 

  

 

The following summarizes key elements of the Company’s performance in 2019.

 

LOGO    LOGO

 

LOGO

* As defined for purposes of our compensation plans in 2019

In the face of challenging global industry conditions, we remain committed to our strategy 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.

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

 

 

Developing great 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

 

 

Relentlessly improving our quality and efficiency to deliver the right tire, to the right place, at the right time for the right cost.

Our strategy is designed to take advantage of the long-term trends shaping our industry, particularly in the larger rim size segment of the market.

In 2019, we once again demonstrated our commitment to shareholder returns through our quarterly cash dividend on our Common Stock of $0.16 per share.

 

    23  

 


Table of Contents
    

 

COMPENSATION DISCUSSION AND ANALYSIS

  
 

LOGO

  

Executive Summary

 

  

 

KEY ACCOMPLISHMENTS IN 2019

 

 

Success In ³ 17-Inch Tires  

  We significantly outperformed the industry in sales of 17-inch and above consumer replacement tires in the United States.

 

Working Capital Excellence  

  Our working capital initiatives contributed to our strong cash flow performance during the year and helped us fund our dividend and reduce our debt levels despite the challenging industry conditions we continued to face.

 

Manufacturing Cost Savings  

  We announced, and began executing, plans to lower our manufacturing costs through restructuring actions in Germany and the United States. Separately, we exceeded our target for manufacturing conversion cost savings.

 

Building Strong OE Pipeline  

  Globally, we continued to add to our OE pipeline by securing numerous new fitments, with many on electric vehicles. These fitments will begin adding to our tire unit volume in 2021 and 2022.

 

Future Mobility  

  We launched several pilot programs using our proprietary predictive tire servicing solution that forecasts and automatically schedules needed tire maintenance and replacement for connected commercial truck and passenger car fleets.

 

For 2019, the payout for overall company performance under our annual incentive plan was 131% of target, driven by our strong free cash flow performance. As a result of our operating performance, earnings for the 2019 performance periods under our 2017-2019, 2018-2020 and 2019-2021 long-term awards of 32%, 41% and 142%, respectively, 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 “TSR modifier” and which is described in more detail on page 40). Our stock was in the bottom quartile of companies in the S&P 500 during the three-year period ending December 31, 2019, resulting in a TSR modifier of 0.8 times, which reduced the payout for the 2017-2019 performance cycle by 20%.

2019 SHAREHOLDER ENGAGEMENT

We believe that it is important for us to communicate regularly with shareholders regarding areas of interest or concern. We have a robust shareholder engagement program that includes an annual outreach that is focused on our long-term business strategy, corporate governance, executive compensation, corporate responsibility 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 2019 annual outreach, we requested the opportunity to meet with many of our shareholders, and we ultimately engaged with shareholders representing over 50% of our outstanding Common Stock as of September 30, 2019.

In 2019, our outgoing and incoming independent Lead Directors met with several of our largest shareholders to provide a direct line of communication between our shareholders and the Board of Directors. Our outreach meetings gave us the chance to discuss the challenging industry dynamics we faced in 2019. Specifically, we discussed:

 

 

Our thorough process for setting challenging targets and aligning pay and performance;

 

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COMPENSATION DISCUSSION AND ANALYSIS

  
 

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Executive Summary

 

  

 

 

Our commitment to sound executive compensation practices; and

 

 

Changes to our 2019 compensation program, including the substitution of individual performance goals for operating drivers in our annual incentive plan.

We received positive feedback on the structure of our executive compensation program, specifically the metrics in our annual and long-term incentive plans. This feedback was consistent with the success of last year’s say on pay proposal, which was approved by 91% of our voting shareholders at our 2019 annual meeting.

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

ELEMENTS OF EXECUTIVE COMPENSATION

Compensation for named executive officers is comprised of a mix of variable and fixed compensation that is strongly linked to company performance and targeted in the aggregate to the median of the benchmark data that we use.

For 2019, 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

 
      

Individual Performance Goals

  

 

20

 
                     
 

LONG-TERM  

AWARDS  

    

Performance-Based Awards  

(Paid out in Equity and Cash)

 

 

Net Income

  

 

50

    LOGO  
    

Cash Flow Return on Capital

  

 

50

    

Restricted Stock Units

              

In 2019, we changed our executive compensation program by replacing operating drivers with individual performance goals in our annual incentive plan. Those individual performance goals are clearly defined, measurable and relevant to the achievement of our strategic objectives. In some cases, the individual performance goals use metrics similar to those used for the former operating drivers.

We believe that our individual performance goals make a stronger and more meaningful connection between individual performance and compensation by providing a direct correlation between goal achievement in each plan participant’s area of responsibility and their compensation, rather than their compensation only being driven by corporate or business unit metrics. The establishment of individual performance goals drove more rigor in our goal setting, while also building accountability for non-financial objectives such as building talent and teams, innovation, and process improvements.

 

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Executive Summary

 

  

 

Strategic Objective    Financial Metric
Improved Results of Operations and Profitability    EBIT and Net Income
Cash Generation    Free Cash Flow from Operations
Return Generated on Investments in Business    Cash Flow Return on Capital
Specific Drivers of Success of Business    Individual Performance Goals (see also pages 36-39)
Superior Shareholder Returns    Relative TSR Modifier

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.

 

 

Over 90% of our CEO’s pay opportunity is at-risk and almost 70% is performance-based

 

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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

Plan

  Annual cash incentive based on corporate 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

 

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

Restricted Stock Units

  Restricted stock units that generally vest and convert into shares of Common Stock three years from the grant date.  

  Link realized compensation over long-term to stock price

 

  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 plans. 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:

 

 

LOGO

Long-term compensation is delivered through grants of restricted stock units 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 restricted stock units 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 7.

 

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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 2019, 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 and retention activities, the design and establishment of performance goals under our variable incentive plans, the terms and conditions of the leveraged performance share grant made to Mr. Wells, and reviewing our compensation risk analysis and this Compensation Discussion and 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 21 peer companies; and

 

   

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

 

FOR 2019 COMPENSATION DECISIONS, THE PEER GROUP NOTED ABOVE CONSISTED OF:

 

3M Company

 

       

   

Eaton Corporation plc

 

       

   

PACCAR Inc.

   

Adient plc

     

Emerson Electric Co.

     

Parker-Hannifin Corporation

   

Air Products and Chemicals, Inc.

     

Honeywell International Inc.

     

PPG Industries, Inc.

   

Aptiv PLC

     

Illinois Tool Works Inc.

     

Stanley Black & Decker, Inc.

   

Caterpillar Inc.

     

Ingersoll-Rand plc

     

Tenneco Inc.

   

Cummins Inc.

     

Kimberly-Clark Corporation

     

Textron Inc.

   

Deere & Company

     

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 2018, prior to analyzing competitive compensation data to help inform 2019 compensation decisions, the Compensation Committee reviewed the composition of the peer group using the following criteria:

 

(1)

size, including revenue, operating income, total assets, market capitalization and enterprise value;

 

(2)

global manufacturing focus;

 

(3)

industry focus, particularly companies in the automotive industry;

 

(4)

consumer branded product companies;

 

(5)

companies with which we compete for executive talent; and

 

(6)

number of employees.

Our peer group had 2018 annual revenues – the size criteria most strongly correlated to compensation – ranging from $8.7 billion to $48.5 billion and median revenues of $16.5 billion (for 2018, we had revenues of $15.5 billion), and had 48% and 71%, respectively, of our selected peer companies in common with the peer groups constructed by two leading proxy advisory firms.

Following its review of the criteria described above, the Compensation Committee did not make any changes to our peer group for 2019 compensation decisions. The Compensation Committee may make 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 2019 executive compensation program in February 2019. The Compensation Committee believes that the performance targets it established were rigorous, while providing meaningful motivational value to our executives. The performance targets required us to generate significant consumer replacement volume growth, price and product mix improvements and increased manufacturing cost savings, while effectively managing working capital, volatility in raw material prices, a continued weak OE market, increasing inflationary pressures and the competitive environment. The achievement of the performance targets would mean we had successfully met the significant challenges we faced, 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

 

 

Macroeconomic and tire industry environment

 

 

Annual and long-term operating plans

 

 

Performance history

 

 

Input from F.W. Cook and management

 

 

Difficulty of the targets in light of the above factors

The performance targets would be achieved, at the target performance level, if we successfully executed our operating plan for 2019 and the 2019-2021 performance cycle. The minimum level of performance was consistent with the known risks inherent in our 2019 operating plan, particularly with respect to our plan to out-perform the industry’s volume growth and to achieve significant price and product mix improvements given the competitive pricing environment in the tire industry and continued volatility in raw material prices. The maximum level of performance would be achieved if we more than offset raw material costs and inflationary headwinds through a combination of increased volume, pricing actions, product mix improvements and cost saving actions.

ANNUAL COMPENSATION TARGETS

The 2019 Corporate EBIT target was a 17% decrease from our 2018 actual results. Our 2019 Corporate EBIT target reflected the underlying cyclicality of our business given slowing global industry conditions, including an uncertain global OE industry environment, coupled with expected declines in the United States, our largest market, due to our OE selectivity strategy; recessionary consumer replacement industry conditions in Brazil; and foreign currency headwinds due to a strong U.S. dollar. Our Corporate EBIT expectation was also negatively impacted by the continuation of a severe contraction in industry demand in China during the first half of 2019. Against this backdrop, our plan required significant price increases to recover approximately $300 million of higher raw material costs in an increasingly competitive market, above-industry volume growth in our consumer replacement business, and over 50% higher manufacturing conversion cost savings than we achieved in 2018. Our goal was to remain positioned to take advantage of improvements in macroeconomic conditions when they occurred and to reap the benefits of the strategic actions we are taking to improve our business.

The 2019 free cash flow from operations target was a 36% decrease from our 2018 actual results. Our 2019 free cash flow from operations target reflected the macroeconomic conditions that were adversely impacting Corporate EBIT, as described above, as well as increased capital expenditures and interest expense, which would be partially offset by improvements in working capital. The increase in capital expenditures included planned investments in a transformational modernization project in Germany that would enhance our capability to manufacture ³17-inch tires that, when combined with a concurrent restructuring program, would lower our overall manufacturing costs once completed. Our goal was to have sufficient free cash flow from operations to continue to fund our Common Stock dividend and maintain the strength of our balance sheet during the current industry down cycle, which would position us to achieve our long-term goals when macroeconomic conditions ultimately improve.

 

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Annual Compensation

 

  

 

LONG-TERM COMPENSATION TARGETS

The 2019 net income target was a 38% decrease from our 2018 actual results and was driven by the same factors that impacted Corporate EBIT, as described above. The 2019 target for cash flow return on capital reflected the decrease in free cash flow from operations described above.

Annual Compensation

2019 BASE SALARY DECISIONS

 

Mr. Wells, Mr. McClellan, Mr. Delaney and Mr. Patterson received base
salary increases to recognize their experience, expertise, level of
responsibility, continuity of leadership, leadership qualities, individual
accomplishments and other significant contributions to the execution of
our long-term strategy, and to retain and motivate the highly-talented
individuals we need to advance the Company’s goals. We do not expect to
increase the named executive officers’ base salaries in 2020.
      Name    Annual Base Salary1      % Increase  
 

Kramer

  

 

$1,300,000

 

  

 

0%

 

 

Wells

  

 

800,000

 

  

 

14.3

 

 

McClellan

  

 

750,000

 

  

 

10.3

 

 

Delaney

  

 

750,000

 

  

 

15.4

 

 

Patterson

  

 

600,000

 

  

 

14.3

 

 

 

1  Base salary increases were effective January 1, 2019.

   

2019 ANNUAL CASH INCENTIVE PAYOUTS

For 2019, the performance objectives under our annual incentive plan 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, debt

 

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Annual Compensation

 

  

 

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 plan, means the Company’s net sales, less cost of goods sold and selling, administrative and general expense, excluding the effects of restructuring charges, accelerated depreciation, 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 plan, means cash flow from operating activities before pension contributions and direct payments and rationalization payments, less capital expenditures. In 2019, EBIT and free cash flow from operations were adjusted to reflect the impacts of (1) foreign currency exchange beyond what was provided for in our annual operating plan, (2) a settlement of a tax-related audit in Turkey, (3) a strike at a major OE customer, and (4) flooding at our Beaumont, Texas chemical facility.

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, EMEA’s performance is relevant for determining the annual incentive payment for Mr. Delaney and Asia Pacific’s performance is relevant for determining the annual incentive payment for Mr. Patterson. In February 2020, the Compensation Committee reviewed actual results for 2019 with respect to achievement of the company-wide and operating unit performance objectives. The table below shows the performance objectives, actual results for 2019 and corresponding payout percentages under our annual incentive plan.

 

    

Payout Under Annual Incentive Plan

               
     

50%

     100%      200%      Actual Results      Payout Percentage  

  Overall Company Performance (2019):

           

  Corporate EBIT

  

$

800 million

 

  

$

1,050 million

 

  

$

1,300 million

 

  

 

$919 million

 

  

 

77%

 

  Free cash flow from operations

  

$

100 million

 

  

$

250 million

 

  

$

375 million

 

  

 

$662 million

 

  

 

200%

 

The table below shows the payout percentages under our annual incentive plan for each of our operating units.

 

    

Payout Percentage

 
     

EBIT

 

    

Free Cash Flow
From Operations

 

 

Americas

  

 

97

  

 

200

EMEA

  

 

0

  

 

0

   

Asia Pacific

  

 

0

  

 

200

Individual performance goals, which replaced operating drivers in our annual incentive plan in 2019 in order to more closely evaluate individual contributions to our strategic objectives, are established annually and include goals tied to strategic initiatives as well as financial and non-financial metrics. The establishment of individual performance goals drove more rigor in our goal setting, while also building accountability for non-financial objectives such as building talent and teams, innovation, and process improvements.

The Compensation Committee evaluated the CEO’s performance against his individual performance goals, and the CEO evaluated each other named executive officer’s performance against their individual performance goals and made a

 

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Annual Compensation

 

  

 

recommendation to the Compensation Committee for its consideration. Based on its evaluation of the CEO, and its consideration of the CEO’s recommendation for the other named executive officers, the Compensation Committee determined that each of the named executive officers would receive a payout at 100% of target for their performance against their individual goals.

The 2019 performance against the individual performance goals for each named executive officer was:

Richard J. Kramer

 

2019 Goals    2019 Performance

Executive Leadership Development and Succession Planning

   Successfully implemented a new leadership assessment process and developed succession plans for the senior leadership team.

Working Capital Excellence

   Trade working capital, net of capital expenditure accounts payable, was a source of $112 million of cash versus a goal of trade working capital being neither a source nor use of cash.

Forecast Accuracy

   Met forecast accuracy objectives for the year.

Total Delivered Cost Savings

   Total delivered cost savings of $210 million versus a goal of $200 million.

Innovation Excellence

   Successfully established a number of new, meaningful relationships that advanced our presence in the emerging mobility ecosystem of fleets, autonomous, connected and electric vehicles.

Darren R. Wells

 

2019 Goals    2019 Performance

Team Development and Succession Planning

   Successfully recruited several new key finance leaders and developed succession plans for the finance leadership team.

Working Capital Excellence

   Trade working capital, net of capital expenditure accounts payable, was a source of $112 million of cash versus a goal of trade working capital being neither a source nor use of cash.

Forecast Accuracy

   Met forecast accuracy objectives for the year.

Total Delivered Cost Savings

   Total delivered cost savings of $210 million versus a goal of $200 million.

TireHub Start-Up

   Successfully worked with TireHub and our joint venture partner to develop a suitable capital structure, including a stand-alone revolving credit facility.

 

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Annual Compensation

 

  

 

Stephen R. McClellan

 

2019 Goals    2019 Performance

Team Development and Succession Planning

  

Successfully recruited new key leaders and developed succession plans for his leadership team.

Working Capital Excellence

  

Trade working capital, net of capital expenditure accounts payable, for Americas was a source of $91 million of cash versus a goal of trade working capital being neither a source nor use of cash.

Forecast Accuracy

  

Met forecast accuracy objectives for the year.

Total Delivered Cost Savings

  

Total delivered cost savings for Americas of $93 million versus a goal of $86 million.

Connected Business Model

  

Successfully advanced several key initiatives, including aligned distribution, retail, and Roll by Goodyear concept.

Christopher R. Delaney

 

2019 Goals    2019 Performance

Team Development and Succession Planning

  

Successfully developed succession plans for his leadership team.

Working Capital Excellence

  

Trade working capital, net of capital expenditure accounts payable, for EMEA was a use of $12 million of cash versus a goal of trade working capital being neither a source nor use of cash.

Forecast Accuracy

  

Did not meet forecast accuracy objectives for the year.

Total Delivered Cost Savings

  

Total net cost savings for EMEA of $6 million above target.

Connected Business Model

  

Successfully advanced several key initiatives, including OE fitments, new product development and industrialization, and aligned distribution.

 

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Annual Compensation

 

  

 

Ryan G. Patterson

 

2019 Goals    2019 Performance

Team Development and Succession Planning

  

Successfully recruited new key leaders and developed succession plans for his leadership team.

Working Capital Excellence

  

Trade working capital, net of capital expenditure accounts payable, for Asia Pacific was a source of $29 million of cash versus a goal of trade working capital being neither a source nor use of cash.

Forecast Accuracy

  

Did not meet forecast accuracy objectives for the year.

Plant Optimization

  

Successfully achieved organizational engagement and machine replication goals at the region’s manufacturing facilities.

Connected Business Model

  

Successfully advanced several key initiatives, including OE fitments and aligned distribution.

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 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 incentive pool for the overall company was funded at 131% of the target incentive amount (and the operating unit pools were funded at 75% to 135% of the target incentive amount). The Compensation Committee approved the following awards for our named executive officers under our annual incentive plan:

 

 Name

 

  

Target Award
($)

 

    

Actual Award
($)

 

    

Actual Award
as a %
of Target Award

 

 

 Kramer

  

$

2,080,000

 

  

$

2,724,800

 

  

 

131%

 

 Wells

  

 

800,000

 

  

 

1,048,000

 

  

 

131%

 

 McClellan

  

 

787,500

 

  

 

1,063,125

 

  

 

135%

 

 Delaney

  

 

750,000

 

  

 

562,500

 

  

 

75%

 

     

 Patterson

  

 

540,000

 

  

 

621,000

 

  

 

115%

 

 

    39  


Table of Contents
    

 

COMPENSATION DISCUSSION AND ANALYSIS

  
 

LOGO

  

Long-Term Compensation

 

  

 

Long-Term Compensation

2019 GRANTS OF PERFORMANCE-BASED INCENTIVES

In February 2019, 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 approximately 30% in shares of Common Stock and approximately 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 2019-2021 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, 2021.

The performance criteria for the 2019, 2020 and 2021 performance periods for the 2019-2021 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 plan 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.

 

    40  


Table of Contents
    

 

COMPENSATION DISCUSSION AND ANALYSIS

  
 

LOGO

  

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 2019-2021 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

  

 

$7,455,000

 

  

 

$2,130,000

 

  

 

$5,325,000

 

 Wells

  

 

2,030,000

 

  

 

580,000

 

  

 

1,450,000

 

 McClellan

  

 

1,890,000

 

  

 

540,000

 

  

 

1,350,000

 

 Delaney

  

 

1,890,000

 

  

 

540,000

 

  

 

1,350,000

 

     

 Patterson

  

 

1,050,000

 

  

 

300,000

 

  

 

750,000

 

 

1

See the “Grants of Plan-Based Awards” Table at page 55 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 respective date of grant.

PERFORMANCE FOR THE 2019 PERFORMANCE PERIOD

The table below shows the performance goals, actual results and payout percentages for the 2019 performance period applicable to the 2017-2019, 2018-2020 and 2019-2021 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

 

 
         

 2017-2019

  

$

1,050 million

 

  

$

1,295 million

 

  

$

1,460 million

 

  

$

287 million

 

  

 

0

         

 2018-2020

  

 

795 million

 

  

 

990 million

 

  

 

1,040 million

 

  

 

287 million

 

  

 

0

         

 2019-2021

  

 

180 million

 

  

 

355 million

 

  

 

530 million

 

  

 

287 million

 

  

 

85

“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, charges relating to the refinancing of debt, changes in tax valuation allowances, and the cumulative effect of accounting changes. Our 2019 “net income” also excluded the impact of certain other items noted in the table below. Our 2019 “net income” for purposes of our long-term incentive plans was calculated as follows:

 

 ($ in millions)   

2019

 

 

 Goodyear net income (loss) (as reported)

  

$

(311

 Changes in tax valuation allowances and other discrete tax items

  

 

391

 

 Restructuring and accelerated depreciation charges

  

 

178

 

 Flooding in Texas

  

 

29

 

 Strike at a major OE customer

  

 

13

 

 Pension curtailment and settlement charges

  

 

4

 

 Net gains on asset sales and acquisitions

  

 

(17

 

 Net income

  

$

 287

 

 

    41  


Table of Contents
    

 

COMPENSATION DISCUSSION AND ANALYSIS

  
 

LOGO

  

Long-Term Compensation

 

  

 

    

Cash Flow Return on Capital

 

 

 Performance Cycle

 

  

Threshold

 

    

Target

 

    

Maximum

 

    

Actual

Results

 

    

Payout

Percentage

 

 
         

 2017-2019

  

 

6.0

  

 

8.1

  

 

10.9

  

 

6.5

  

 

64

         

 2018-2020

  

 

5.8

  

 

7.1

  

 

7.6

  

 

6.5

  

 

82

         

 2019-2021

  

 

1.0

  

 

2.6

  

 

3.9

  

 

6.5

  

 

200

“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 2019 cash flow return on capital calculation for each of the performance cycles excluded the impact on free cash flow from operations of (1) a settlement of a tax-related audit in Turkey, (2) a strike at a major OE customer, and (3) flooding at our Beaumont, Texas chemical facility.

In 2019, we faced a number of challenges, which are discussed in detail above in the “Executive Summary” to this Compensation Discussion and Analysis. The earnings on the long-term incentive awards reflected our solid cash flow return on capital performance that was driven by the success of our working capital initiatives. Our net income performance for 2019 was adversely affected by Corporate EBIT that fell short of our annual operating plan. The earnings for the 2019 performance period were greater for the 2019-2021 performance cycle than for the 2017-2019 and 2018-2020 performance cycles since our targets, which are set at the beginning of each three-year performance cycle, reflected deteriorating automotive and tire industry conditions over the past three years.

Based on the results during the 2019 performance period, the Compensation Committee approved earnings on the long-term incentive awards for that period in an amount equal to 32% of the target amount for 2017-2019 awards, 41% for 2018-2020 awards and 142% for 2019-2021 awards.

The table below shows amounts earned by each of the named executive officers in respect of their long-term incentive grants for the 2019 performance period with respect to their 2017-2019 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

  

 

$2,515,602

 

  

 

$568,000

 

  

 

6,443

 

     

 Wells

  

 

 

  

 

 

  

 

 

     

 McClellan

  

 

507,811

 

  

 

114,700

 

  

 

1,300

 

     

 Delaney

  

 

434,586

 

  

 

97,600

 

  

 

1,127

 

     

 Patterson

  

 

229,774

 

  

 

66,380

 

  

 

195

 

 

1

Payable subject to a three-year relative total shareholder return modifier. See “Impact of TSR Modifier and Payout of 2017-2019 Long-Term Incentive Awards” below.

 

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Table of Contents
    

 

COMPENSATION DISCUSSION AND ANALYSIS

  
 

LOGO

  

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 2019 performance period with respect to their 2018-2020 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

  

 

$2,466,413

 

  

 

$727,800

 

  

 

9,761

 

     

 Wells

  

 

539,546

 

  

 

150,300

 

  

 

2,440

 

     

 McClellan

  

 

526,897

 

  

 

155,500

 

  

 

2,085

 

     

 Delaney

  

 

452,734

 

  

 

133,600

 

  

 

1,792

 

     

 Patterson

  

 

231,604

 

  

 

68,300

 

  

 

916

 

 

1

Payable contingent on continued service through December 31, 2020 and 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 2019 performance period with respect to their 2019-2021 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

  

 

$2,426,666

 

  

 

$2,520,500

 

  

 

50,209

 

     

 Wells

  

 

660,844

 

  

 

686,400

 

  

 

13,671

 

     

 McClellan

  

 

615,207

 

  

 

639,000

 

  

 

12,728

 

     

 Delaney

  

 

615,207

 

  

 

639,000

 

  

 

12,728

 

     

 Patterson

  

 

341,781

 

  

 

355,000

 

  

 

7,071

 

 

1

Payable contingent on continued service through December 31, 2021 and subject to a three-year relative total shareholder return modifier.

 

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Table of Contents
    

 

COMPENSATION DISCUSSION AND ANALYSIS

  
 

LOGO

  

Long-Term Compensation

 

  

 

IMPACT OF TSR MODIFIER AND PAYOUT OF 2017 – 2019 LONG-TERM INCENTIVE AWARDS

Our stock was in the bottom quartile of companies in the S&P 500 during the three-year period ending December 31, 2019, resulting in a TSR modifier of 0.8 times. See page 40 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 2017-2019 performance cycle as follows.

 

    

Cash Payout

 

 

 Name

 

  

2017
Performance
Period1

 

    

2018
Performance
Period2

 

    

2019
Performance
Period

 

    

Impact of TSR
Modifier

 

    

Total Payout of
2017-2019
Awards

 

 
         

 Kramer

  

 

$923,000

 

  

 

$0

 

  

 

$568,000

 

  

          $

(298,200

  

 

$1,192,800

 

         

 Wells

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

         

 McClellan

  

 

186,368

 

  

 

0

 

  

 

114,700

 

  

 

(60,268

  

 

240,800

 

         

 Delaney

  

 

158,652

 

  

 

0

 

  

 

97,600

 

  

 

(51,352

  

 

204,900

 

         

 Patterson

  

 

107,881

 

  

 

0

 

  

 

66,380

 

  

 

(34,933

  

 

139,328

 

 

    

Shares Payout

 

 

 Name

 

  

2017
Performance
Period1

(# of Shares)

 

    

2018
Performance
Period2

(# of Shares)

 

    

2019

Performance

Period

(# of Shares)

 

    

Impact of TSR

Modifier

(# of Shares)

 

    

Total Payout of
2017-2019
Awards

(# of Shares)

 

 
         

 Kramer

  

 

10,470

 

  

 

0

 

  

 

6,443

 

  

 

(3,383

  

 

13,530

 

         

 Wells

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

         

 McClellan

  

 

2,113

 

  

 

0

 

  

 

1,300

 

  

 

(682

  

 

2,731

 

         

 Delaney

  

 

1,834

 

  

 

0

 

  

 

1,127

 

  

 

(593

  

 

2,368

 

         

 Patterson

  

 

317

 

  

 

0

 

  

 

195

 

  

 

(102

  

 

410

 

 

1

Previously reported, to the extent applicable, in the Proxy Statement dated March 9, 2018.

 

2

Previously reported, to the extent applicable, in the Proxy Statement dated March 8, 2019.

2019 RESTRICTED STOCK UNIT GRANTS

In February 2019, the Compensation Committee granted 30% of total long-term compensation in the form of restricted stock units. Restricted stock units granted in 2019 have the following terms:

 

 

restricted stock units vest and convert into shares of Common Stock three years from the grant date; and

 

 

restricted stock units accrue dividend equivalents that are subject to the same vesting requirements as the underlying restricted stock units.

The portion of long-term compensation provided in the form of restricted stock units grants each year is determined based on the availability of Common Stock under our equity compensation plans, as well as market data on long-term compensation.

 

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Table of Contents
    

 

COMPENSATION DISCUSSION AND ANALYSIS

  
 

LOGO

  

Long-Term Compensation

 

  

 

The table below shows the aggregate grant date fair value and the number of restricted stock units granted to each of our named executive officers in 2019.

 

 Name

 

  

Aggregate

Grant Date
Fair Value ($)

 

    

Number of

Restricted Stock Units (#)

 

 
   

 Kramer

  

 

$3,194,989

 

  

 

159,113

 

   

 Wells

  

 

869,986

 

  

 

43,326

 

   

 McClellan

  

 

809,987

 

  

 

40,338

 

   

 Delaney

  

 

809,987

 

  

 

40,338

 

   

 Patterson

  

 

449,993

 

  

 

22,410

 

LEVERAGED PERFORMANCE SHARE GRANT

In February 2019, the Compensation Committee granted 173,110 performance shares with a grant date fair value of approximately $3,000,000 to Mr. Wells. The number of performance shares ultimately earned, which can range from 0% to 200% of the performance shares granted, will be based on the appreciation of our Common Stock from a base price of $19.99 during any 45 calendar day period in a three-year performance period ending February 24, 2022, as follows:

 

 Payout of Leveraged Performance Shares

 

  

Compound

Annual
Growth Rate

 

    

Share Price

 

 
   

 Threshold (50%)

  

 

7

  

$

24.49

 

   

 Target (100%)

  

 

13

  

 

28.84

 

   

 Maximum (200%)

  

 

24

  

 

38.11

 

Performance shares earned during the performance period will vest and convert into shares of Common Stock on February 24, 2022. Unvested performance shares are not entitled to receive dividend equivalents.

The Compensation Committee believes that this performance share grant was appropriate to reward Mr. Wells upon his return to Goodyear, provide for his retention over a three-year period, and incentivize him to drive significant increases in our share price. The performance goals chosen represent amounts that will drive significant value to shareholders. The compound annual growth rates would translate into share price appreciation over the base price of $19.99 of 23% at threshold, 44% at target and 91% at maximum, with no payout earned for share price appreciation of less than threshold. Attainment of the share price performance goals will be measured based on the average share price over a period of 45 consecutive calendar days in order to eliminate short-term market volatility. As a result, the award would only be earned if we experienced sustained share price performance over that 45-day period.

TIREHUB INCENTIVE PLAN

During 2018, we formed a 50/50 joint venture with Bridgestone Americas, Inc. that combined our company-owned wholesale distribution business and Bridgestone’s tire wholesale warehouse business to create TireHub, LLC (“TireHub”), our sole authorized national tire distributor in the United States.

 

    45  


Table of Contents
    

 

COMPENSATION DISCUSSION AND ANALYSIS

  
 

LOGO

  

Long-Term Compensation

 

  

 

In June 2018, the Compensation Committee established an incentive plan for Mr. McClellan and certain other key employees related to the launch of TireHub. Payments under the TireHub incentive plan are based on performance against the following performance objectives:

 

 

Launching TireHub on or before August 31, 2018 (payable at either 0% or 100% of target),

 

 

Successfully managing the potential loss of volume due to the transition of business to TireHub during 2018 (payable from 0% to 150% of target),

 

 

Achieving net segment operating income improvements due to the TireHub transaction in 2019 (payable from 0% to 150% of target), and

 

 

Achieving certain other operational objectives for TireHub by December 31, 2019 (payable at either 0% or 100% of target).

Mr. McClellan’s total target TireHub incentive award is $600,000 and his total maximum incentive award is $800,000. In 2018, Mr. McClellan received total payments of $425,000 under the TireHub incentive plan.

The Compensation Committee considered our performance against the performance objectives for 2019 and found that (1) the TireHub transaction provided a net benefit of $41.6 million to segment operating income in 2019, resulting in a payout at 104% of target for that performance objective and (2) we successfully achieved key operational objectives for TireHub by December 31, 2019, resulting in a payout at 100% of target for that performance objective. As a result, Mr. McClellan received total payments of $283,000 under the TireHub incentive plan in 2019.

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 a defined benefit plan, the Goodyear Supplementary Pension Plan (the “Supplementary Plan”). We also maintain a non-qualified 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.

Mr. Kramer and Mr. McClellan are currently eligible to receive a benefit under the Supplementary Plan. Mr. Kramer, Mr. McClellan and Mr. Patterson will receive benefits from the frozen Salaried Plan.

Mr. Wells and Mr. Delaney 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.

 

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Table of Contents
    

 

COMPENSATION DISCUSSION AND ANALYSIS

  
 

LOGO

  

Retirement and Other Benefits

 

  

 

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 help us compete for and retain 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 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 named executive officer’s pension value in 2019. Changes in pension value are caused largely by two factors: (1) additional pension benefits accrued by the named executive officers 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 2019 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 an increase in accrued benefits due to the growth in pension value from the passage of time and an additional year of credited service.

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 58 and “Pension Benefits” at page 58.

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.

 

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Table of Contents
    

 

COMPENSATION DISCUSSION AND ANALYSIS

  
 

LOGO

  

Retirement and Other Benefits

 

  

 

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.

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 62.

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 53. 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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COMPENSATION DISCUSSION AND ANALYSIS

  
 

LOGO

  

Retirement and Other Benefits

 

  

 

EXECUTIVE DEFERRED COMPENSATION PLAN

The Goodyear Deferred Compensation Plan for Executives (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 2019, none of the named executive officers 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 61.

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 six 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 six times his annual base salary and for Mr. Wells, Mr. McClellan, Mr. Delaney and Mr. Patterson 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. Unearned performance shares and unexercised stock options 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 vested shares of Common Stock or any exercised options for at least one year from the date of vesting or exercise 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 vested shares of Common Stock or any exercised options, 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 approximately nine times his annual base salary, well in excess of his minimum stockholding requirement. Mr. McClellan has also met his stockholding requirement, and Mr. Wells, Mr. Delaney and Mr. Patterson are making progress towards satisfying their stockholding requirement.

 

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COMPENSATION DISCUSSION AND ANALYSIS

  
 

LOGO

  

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 (CLAW-BACK 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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Table of Contents
       
 

LOGO

     

 

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, 2019.

THE COMPENSATION COMMITTEE

John E. McGlade, Chairman

Laurette T. Koellner

W. Alan McCollough

Stephanie A. Streeter

 

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LOGO

     

 

EXECUTIVE COMPENSATION

Summary Compensation Table

The table below sets forth information regarding the compensation of the CEO, the Chief Financial Officer of Goodyear (the “CFO”), the persons who were, at December 31, 2019, 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 2017, 2018 and 2019.

 

 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

 

 

 

 

2019

 

 

 

 

$

 

1,300,000

 

 

 

 

$

 

0

 

 

 

 

$

 

5,149,951

 

 

 

 

$

 

0

 

 

 

 

 

 

$6,242,900

 

 

 

 

 

 

$4,102,650

 

 

 

 

 

 

$175,154

 

 

 

 

$

 

16,970,655

 

 

Chairman of the Board,

    2018       1,300,000       0       5,269,243       0       (497,915     0       141,772       6,213,100  

Chief Executive Officer

    2017       1,300,000       0       2,221,806       3,194,991       1,305,598       2,678,203       145,161       10,845,759  

and President

 

                 

 

Darren R. Wells6

 

 

 

 

2019

 

 

 

 

 

 

800,000

 

 

 

 

 

 

0

 

 

 

 

 

 

4,402,314

 

 

 

 

 

 

0

 

 

 

 

 

 

1,884,700

 

 

 

 

 

 

204,581

 

 

   
103,985
 
   
7,395,580
 

Executive Vice President

    2018       195,417       500,000       1,478,541       0       0       38,722       28,233       2,240,913  

and Chief Financial Officer

 

                 

 

Stephen R. McClellan

 

 

 

 

2019

 

 

 

 

 

 

750,000

 

 

 

 

 

 

0

 

 

 

 

 

 

1,305,607

 

 

 

 

 

 

0

 

 

 

 

 

 

2,195,057

 

 

 

 

 

 

1,516,536

 

 

 

 

 

 

47,604

 

 

 

 

 

 

5,814,804

 

 

President, Americas

    2018       663,333       0       1,125,582       0       325,835       0       48,472       2,163,222  
   

 

2017

 

 

 

   

 

623,333

 

 

 

   

 

0

 

 

 

   

 

448,532

 

 

 

   

 

645,000

 

 

 

   

 

260,672

 

 

 

   

 

973,956

 

 

 

   

 

44,447

 

 

 

   

 

2,995,940

 

 

 

 

Christopher R. Delaney

 

 

 

 

2019

 

 

 

 

 

 

750,000

 

 

 

 

 

 

0

 

 

 

 

 

 

1,305,607

 

 

 

 

 

 

0

 

 

 

 

 

 

1,381,348

 

 

 

 

 

 

290,995

 

 

 

 

 

 

28,410

 

 

 

 

 

 

3,756,360

 

 

President, Europe, Middle

    2018       633,333       0       967,272       0       56,773       37,069       23,298       1,717,745  

East and Africa

   

 

2017

 

 

 

   

 

555,000

 

 

 

   

 

0

 

 

 

   

 

889,126

 

 

 

   

 

548,989

 

 

 

   

 

214,854

 

 

 

   

 

289,281

 

 

 

   

 

25,133

 

 

 

   

 

2,522,383

 

 

 

 

Ryan G. Patterson

 

 

 

 

2019

 

 

 

 

 

 

600,000

 

 

 

 

 

 

0

 

 

 

 

 

 

725,337

 

 

 

 

 

 

0

 

 

 

 

 

 

1,075,747

 

 

 

 

 

 

557,435

 

 

 

 

 

 

25,645

 

 

 

 

 

 

2,984,164

 

 

                 

President, Asia Pacific

 

                                                                       

 

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, 2019. For additional information regarding such grants, see “Compensation Discussion and Analysis — Long-Term Compensation — 2019 Grants of Performance-Based Incentives,” “— 2019 Restricted Stock Unit Grants” and “— Leveraged Performance Share Grant.” 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, 2019. No stock options were granted to any of the named executive officers in 2018 or 2019.

 

3

Represents amounts awarded under our annual and long-term incentive compensation plans. For additional information regarding annual cash incentive awards in 2019, see “Compensation Discussion and Analysis — Annual Compensation — 2019 Annual Cash Incentive Payouts.”

 

    

Amounts awarded under our long-term incentive compensation plans are, for 2019, in respect of the one-year performance period ended December 31, 2019 for the 2017-2019 awards, the 2018-2020 awards and the 2019-2021 awards. The 2018-2020 awards and the 2019-2021 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 — 2019 Grants of Performance-Based Incentives,” “— Performance for the 2019 Performance Period,” and “— Impact of TSR Modifier and Payout of 2017-2019 Long-Term Incentive Awards.”

 

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EXECUTIVE COMPENSATION

  
 

LOGO

  

Summary Compensation Table

 

  

 

    

The following table provides further information on the amounts payable, or earned but not yet payable, for performance periods ending on December 31, 2019:

 

       

2019

Annual Incentive

(Currently Payable)

      

2019 Period;

2017-2019 Long-

Term Incentive

(Currently Payable)

      

2017-2019

Impact of TSR

Modifier

(Currently

Payable)

    

2019 Period;

2018-2020 Long-

Term Incentive

(Not Yet Payable)

      

2019 Period;

2019-2021 Long-

Term Incentive

(Not Yet Payable)

 

Kramer

    

 

$2,724,800

 

    

 

$568,000

 

    

 

$(298,200

  

 

$727,800

 

    

 

$2,520,500

 

Wells

    

 

1,048,000

 

    

 

 

    

 

 

  

 

150,300

 

    

 

686,400

 

McClellan

    

 

1,063,125

 

    

 

114,700

 

    

 

(60,268

  

 

155,500

 

    

 

639,000

 

Delaney

    

 

562,500

 

    

 

97,600

 

    

 

(51,352

  

 

133,600

 

    

 

639,000

 

Patterson

    

 

621,000

 

    

 

66,380

 

    

 

(34,933

  

 

68,300

 

    

 

355,000

 

 

    

Mr. McClellan also received a TireHub Incentive Plan award that was earned and paid out in the amount of $425,000 for the year ending December 31, 2018 and $283,000 for the year ending December 31, 2019. For additional information regarding the TireHub Incentive Plan, see “Compensation Discussion and Analysis — Long-Term Compensation — TireHub Incentive Plan.”

 

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 4.04% at December 31, 2018 to 2.93% at December 31, 2019. Also, the interest rate used to determine the lump sum value of the Supplementary Plan benefit decreased from 1.75% to 1.00%. 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 Change in

Pension Value

 

Kramer

      

 

$1,014,137

 

  

 

$3,088,513

 

  

 

$4,102,650

 

Wells

      

 

167,099

 

  

 

37,482

 

  

 

204,581

 

McClellan

      

 

312,476

 

  

 

1,204,060

 

  

 

1,516,536

 

Delaney

      

 

182,887

 

  

 

108,108

 

  

 

290,995

 

Patterson

      

 

148,352

 

  

 

409,083

 

  

 

557,435

 

 

    

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. From time to time, certain of the named executive officers may receive tickets to sporting and other events for their personal use, typically when those tickets would not otherwise be used for business purposes, which use resulted in no incremental cost to the Company. Mr. Kramer’s total also includes amounts for the personal use of company aircraft of $55,068 and the annual dues for a club membership. Mr. Wells’ total also includes amounts for the personal use of company aircraft of $69,779. Mr. McClellan’s total also includes amounts for the annual dues for a club membership. The value of the total perquisites in 2019 was $78,119 for Mr. Kramer, $89,985 for Mr. Wells, $19,604 for Mr. McClellan, $14,410 for Mr. Delaney, and $6,028 for Mr. Patterson. The aggregate incremental cost to the Company for the personal use of company aircraft is determined based on the average direct operating costs of the aircraft allocable to personal use.

 

    

Company contributions to qualified defined contribution plans in 2019 were $30,800 for Mr. Kramer, $14,000 for Mr. Wells, $28,000 for Mr. McClellan, $14,000 for Mr. Delaney, and $19,600 for Mr. Patterson. The value of dividends on shares of restricted stock that were not included in prior years’ grant date fair value for those awards were $66,235 for Mr. Kramer. Mr. Patterson is eligible to receive retiree medical benefits at age 62; the present value of those accumulated retiree medical benefits increased by $17.

 

6

Mr. Wells re-joined Goodyear on September 20, 2018.

 

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EXECUTIVE COMPENSATION

  
 

LOGO

  

Summary of Realized Pay Earned by

Our Chief Executive Officer for 2017, 2018 and 2019

 

  

 

Summary of Realized Pay Earned by Our Chief Executive Officer for 2017, 2018 and 2019

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
($)