DEF 14A 1 d651931ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(Rule 14a-101)

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

Honeywell International Inc.

(Name of Registrant as Specified In Its Charter)

 

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

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Table of Contents

LOGO

2019 PROXY STATEMENT And Notice of Annual Meeting of Shareowners honeywell


Table of Contents

LOGO


Table of Contents

LOGO

March 14, 2019

Dear Shareowners:

You are cordially invited to attend the Annual Meeting of Shareowners of Honeywell International Inc., which will be held at 10:30 a.m. on Monday, April 29, 2019, at our headquarters located at 115 Tabor Road, Morris Plains, New Jersey 07950.

The accompanying Notice of Meeting and Proxy Statement describe the matters to be voted on at the meeting. At this year’s meeting, you will be asked to elect directors, cast an advisory vote on executive compensation, approve the appointment of the independent accountants, and consider two shareowner proposals.

The Board of Directors recommends that you vote FOR Proposals 1 through 3:

 

 

Proposal 1: Election of Directors

 

 

Proposal 2: Advisory Vote to Approve Executive Compensation

 

 

Proposal 3: Approval of Independent Accountants

The Board of Directors recommends that you vote AGAINST Proposals 4 and 5:

 

 

Proposal 4: Right to Act by Written Consent

 

 

Proposal 5: Report on Lobbying Payments and Policy

 

LOGO

YOUR VOTE IS IMPORTANT. I encourage you to read the Proxy Statement and vote your shares as soon as possible. Shareowners may vote via the Internet, by telephone, by completing and returning a proxy card, or by scanning the QR code provided on the next page in the Notice of Annual Meeting of Shareowners or on the proxy card. Specific voting instructions are set forth in the Proxy Statement and on both the Notice of Internet Availability of Proxy Materials and proxy card.

On behalf of the Board of Directors, I want to thank you for your continued support of Honeywell.

Sincerely,

 

LOGO

 

Darius Adamczyk

Chairman and Chief Executive Officer

 

 

LOGO

 

|  Notice and Proxy Statement  |  2019

 


Table of Contents

LOGO

NOTICE OF ANNUAL

MEETING OF SHAREOWNERS

 

DATE   

April 29, 2019

 

TIME   

10:30 a.m. EDT

 

PLACE   

Honeywell’s Headquarters

115 Tabor Road, Morris Plains, NJ 07950

 

RECORD DATE   

Close of business on March 1, 2019

 

MEETING AGENDA   

 

  Election to the Board of Directors of the 12 nominees listed in the Proxy Statement

 

  An advisory vote to approve executive compensation

 

  Approval of the appointment of Deloitte & Touche LLP as independent accountants for 2019

 

  If properly raised, two shareowner proposals described on pages 86-91 of the Proxy Statement

 

  Transact any other business that may properly come before the meeting

Important Notice of Internet Availability of Proxy Materials

The Securities and Exchange Commission’s “Notice and Access” rule enables Honeywell to deliver a Notice of Internet Availability of Proxy Materials to shareowners in lieu of a paper copy of the Proxy Statement, related materials, and our Annual Report to Shareowners. It contains instructions on how to access our Proxy Statement and 2018 Annual Report and how to vote online.

Shares cannot be voted by marking, writing on, and/or returning the Notice of Internet Availability. Any Notices of Internet Availability that are returned will not be counted as votes.

We encourage shareowners to vote promptly as this will save the expense of additional proxy solicitation. Shareowners of record on the Record Date are entitled to vote at the meeting by telephone, by mail, online, or by scanning the QR code on your proxy card.

This Notice of Annual Meeting of Shareowners and related Proxy Materials are being distributed or made available to shareowners beginning on or about March 14, 2019.

By Order of the Board of Directors,

 

LOGO

 

Anne T. Madden

Senior Vice President, General Counsel and Corporate Secretary

 

LOGO

By Telephone

In the U.S. or Canada, you can

vote your shares by calling

+1 (800) 690-6903.

 

LOGO

By Internet

You can vote your shares online at www.proxyvote.com. You will need the 16-digit control number on the Notice of Internet Availability or proxy card.

 

LOGO

By Mail

You can vote by mail by marking, dating, and signing your proxy card or voting instruction form, and returning it in the postage-paid envelope.

 

LOGO

By Scanning

You can vote your shares online by scanning the QR code on your proxy card. You will need the 16-digit control number on the Notice of Internet Availability or proxy card. Additional software may need to be downloaded.

 

 

 

LOGO

 

|  Notice and Proxy Statement  |  2019

 


Table of Contents

TABLE OF

CONTENTS

  i     |   Proxy Summary   Pg   1
    01     |  

 

Proposal 1: Election of Directors

  Pg   7
      Director Skills and Qualifications     7
      Board Skillset Matrix     8
      Commitment to Board Integrity, Diversity, and Independence     9
      Nomination and Election Process     9
      Nominees for Election     10
    02     |   Corporate Governance   Pg   16
      Shareowner Outreach and Engagement     17
      Board Leadership Structure     19
      Director Independence     20
      Board’s Role in Risk Oversight     22
      Board Practices and Procedures     23
      Board Committees     25
    03     |   Corporate Responsibility and Sustainability   Pg   29
      Performance Culture     29
      Sustainability     31
      Honeywell Hometown Solutions     32
      Political Engagement and Contributions     33
    04     |   Director Compensation   Pg   34
      Elements of Compensation     34
      2018 Director Compensation Table     35
      Stock Ownership Guidelines     36
    05     |   Proposal 2: Advisory Vote to Approve Executive Compensation   Pg   37
    06     |   Compensation Discussion and Analysis   Pg   38
      Our Named Executive Officers     39
      Performance Summary     39
      Our Compensation Program     41
      2018 Compensation Decisions     47
      2018 Annual Incentive Compensation Plan Decisions     50
      2018 Long-Term Incentive Compensation Decisions     56
      Other Compensation and Benefit Programs     59
      Compensation Practices and Policies     60
      Risk Oversight Considerations     61
      Management Development and Compensation Committee Report     63
    07     |   Executive Compensation Tables   Pg   64
      Summary Compensation Table     64
      Other Compensation Tables     66
      CEO Pay Ratio     83
    08     |   Proposal 3: Approval of Independent Accountants   Pg   84
      Independent Accounting Firm Fees     84
      Non-Audit Services     84
      Audit Committee Report     85
    09     |   Proposal 4: Shareowner Proposal—Right to Act by Written Consent   Pg   86
      Board Recommendation     87
    10     |   Proposal 5: Shareowner Proposal—Report on Lobbying Payments and Policy   Pg   89
      Board Recommendation     90
    11     |   Additional Information   Pg   92
Reconciliation, notes, and definitions
of non-GAAP financial measures used
in the Compensation Discussion and
Analysis section and elsewhere in this
proxy statement, other than as part of
disclosure of target levels, can be found
on page 38 or in Appendix A.
      Other Business     92
      Certain Relationships and Related Transactions     92
      Stock Ownership Information     93
      Section 16(a) Beneficial Ownership Reporting Compliance     94
      Notice and Access     94
      Voting Procedures     94
      Attendance at the Annual Meeting     96
      Shareowner Proposals and Board Nominees     96
      Where Shareowners Can Find More Information     97
    A-1     |  

 

Appendix A: Reconciliation of Non-GAAP Financial Measures

  Pg   A-1

 

 

(i)

 

LOGO

 

 

|  Notice and Proxy Statement  |  2019

 

 


Table of Contents
i  |   

 

PROXY

SUMMARY

 

PROXY SUMMARY

This proxy summary is intended to provide a broad overview of our 2018 performance, corporate governance, and compensation highlights. As this is only a summary, we encourage you to read the entire Proxy Statement for more information prior to voting.

ANNUAL MEETING OF SHAREOWNERS

 

I  TIME AND DATE      April 29, 2019, 10:30 a.m. EDT
I  PLACE      Honeywell’s Headquarters, 115 Tabor Road, Morris Plains, New Jersey 07950
I  RECORD DATE      Shareowners as of March 1, 2019 are entitled to vote
I  ADMISSION      Please follow the advance registration instructions on page 96

MEETING AGENDA AND VOTING MATTERS

 

Proposal

     Board’s Voting
Recommendation
     Page
Reference

No. 1

  

Election of Directors

    

LOGO  FOR (each nominee)

    

p. 7

No. 2

  

Advisory Vote to Approve Executive Compensation

    

LOGO  FOR

    

p. 37

No. 3

  

Approval of Independent Accountants

    

LOGO  FOR

    

p. 84

No. 4

  

Shareowner Proposal-Right to Act by Written Consent

    

LOGO  AGAINST

    

p. 86

No. 5

  

Shareowner Proposal-Report on Lobbying Payments and Policy

    

LOGO  AGAINST

    

p. 89

2018 PERFORMANCE HIGHLIGHTS

LOGO   FINANCIAL RESULTS – DELIVERED ON OUR COMMITMENTS TO SHAREOWNERS

 

  Organic sales growth of 6%

 

  Adjusted earnings per share growth of 12%
  60 basis points of segment margin expansion

 

  100% adjusted free cash flow conversion
 

 

LOGO

 

Reconciliation, notes, and definitions of non-GAAP financial measures used in the Compensation Discussion and Analysis section and elsewhere in this Proxy Statement, other than as part of disclosure of target levels, can be found on page 38 or in Appendix A.

 

 

LOGO

 

|  Notice and Proxy Statement  |  2019

 

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Table of Contents
i  |   

 

PROXY

SUMMARY

 

LOGO   KEY LEADERSHIP APPOINTMENTS – DEEP LEADERSHIP BENCH SUPPORTED BY ROBUST SUCCESSION PLANNING

 

 

Gregory P. Lewis appointed as Senior Vice President and Chief Financial Officer in charge of maintaining superior financial integrity while driving key financial performance metrics such as organic sales growth, segment margin expansion, and adjusted free cash flow conversion; seamless transition enabled by robust succession planning, which was overseen by our Board of Directors and followed the process and protocols developed by the Management Development and Compensation Committee

 

 

Vimal Kapur appointed as President and CEO of Honeywell Building Technologies; Vimal has established a successful track record in his 29 years with Honeywell including leading Honeywell Process Solutions where he transformed Honeywell Connected Plant capabilities

 

 

Torsten Pilz appointed as Senior Vice President and Chief Supply Chain Officer with a focus on integrated supply chain transformation and performance, and working capital improvements

 

 

Que Dallara appointed as President and CEO of Honeywell Connected Enterprise in charge of our connected software efforts and transformation to a technology-industrial company

LOGO   PORTFOLIO TRANSFORMATION – COMPLETED TRANSPORTATION SYSTEMS AND HOMES AND GLOBAL DISTRIBUTION SPINS

 

 

Successfully spun Garrett Motion Inc. and Resideo Technologies, Inc., representing ~$8B in sales

 

 

Spun businesses better positioned to maximize shareowner value through focused strategic decision making and tailored capital allocation strategies

 

 

New Honeywell portfolio consists of high-growth businesses with strong operational and technology synergies, with the ability for all businesses to leverage our IT stack, Honeywell Sentience, as a foundation to build out customer-focused connected solutions

 

 

More focused portfolio poised for further outperformance in our core end markets:

 

LOGO

LOGO   CAPITAL DEPLOYMENT – EXECUTED SMART AND DISCIPLINED PLAN DURING VOLATILE MARKET        CONDITIONS

 

 

Announced a 10% dividend increase while completing two spins that reduced sales by nearly 20% - since 2010, we’ve increased the dividend rate nine times by 10% or more

 

 

Deployed over $0.5 billion to M&A with the addition of Transnorm and Ortloff Engineers, Ltd.

 

 

Repurchased $4.0 billion in Honeywell shares, lowering weighted average share count by more than 2%

 

 

Deployed more than $0.8 billion to high-return capital expenditures

 

 

2

 

LOGO

 

 

|  Notice and Proxy Statement  |  2019

 

 


Table of Contents
i  |   

 

PROXY

SUMMARY

 

LOGO   CREATING VALUE FOR OUR SHAREOWNERS

Cumulative Total Shareowner Return (TSR)

 

LOGO

 

             

Total Shareowner Return Percentile Rank Versus Peers

 

 

             
         

One-Year

 

 

 

Three-Year

 

 

 

Five-Year

 

 

 

Ten-Year

 

 

             
       

Multi-Industry Peers = 100th Percentile

 

Multi-Industry Peers = 100th Percentile

 

Multi-Industry Peers = 100th Percentile

 

Multi-Industry Peers = 100th Percentile

       

Compensation Peers = 82nd Percentile

 

Compensation Peers = 64th Percentile

 

Compensation Peers = 67th Percentile

 

Compensation Peers = 88th Percentile

Source: S&P Capital IQ

TSR is calculated by the growth in capital from purchasing a share in the company and assuming the dividends and share distributions received from any spins are reinvested in the applicable company at the time they are paid.

In 2018, we continued to stay the course and executed on our commitments to shareowners. We made substantial progress in advancing our strategic initiatives, transformed the Honeywell portfolio through two spins, gave back to the community, and upgraded the working experience for our employees. While our work in the community, for our customers, for our employees, and for our shareowners is not over, we are proud of the outstanding achievements we accomplished throughout the year.

 

 

LOGO

 

|  Notice and Proxy Statement  |  2019

 

3



Table of Contents
i  |   

 

PROXY

SUMMARY

 

OUR 2019 DIRECTOR NOMINEES

 

LOGO

 

                                  

Nominee

   Title      Years of
Service
     Independent      No. of Current Public
Company Boards
(including Honeywell)
     Committee
Memberships
                                  

 

Darius Adamczyk

(Chairman and CEO)

  

 

Chairman and

Chief Executive Officer

Honeywell International Inc.

 

    

 

2

    

 

No

    

 

1

    

 

—  

 

Jaime Chico Pardo

(Lead Director)

  

 

President and

Chief Executive Officer

ENESA, S.A. de C.V.

    

 

19

    

 

Yes

    

 

3

    

 

CGRC

Retirement Plans

Ex officio: Audit, MDCC

 

Duncan B. Angove

  

 

Chief Executive Officer and

Managing Partner

Warmaug Partners LLC

    

 

1

    

 

Yes

    

 

1

    

 

MDCC

Retirement Plans

 

William S. Ayer

  

 

Retired Chairman and

Chief Executive Officer

Alaska Air Group, Inc.

    

 

4

    

 

Yes

    

 

1

    

 

CGRC

MDCC

 

Kevin Burke

  

 

Retired Chairman, President

and Chief Executive Officer

Consolidated Edison, Inc.

    

 

9

    

 

Yes

    

 

1

    

 

Audit

Retirement Plans

 

D. Scott Davis

  

 

Retired Chairman and

Chief Executive Officer

United Parcel Service, Inc.

    

 

13

    

 

Yes

    

 

2

    

 

MDCC (Chair)

Audit

 

Linnet F. Deily

  

 

Former Deputy United States Trade

Representative and Ambassador

    

 

13

    

 

Yes

    

 

1

    

 

CGRC (Chair)

Audit

 

Judd Gregg

  

 

Former Governor and

U.S. Senator of New Hampshire

    

 

8

    

 

Yes

    

 

2

    

 

Audit

CGRC

 

Clive Hollick

  

 

Former Chief Executive Officer

United Business Media

    

 

15

    

 

Yes

    

 

1

    

 

MDCC

Retirement Plans

 

Grace D. Lieblein

  

 

Former Vice President-Global Quality

General Motors Corporation

    

 

6

    

 

Yes

    

 

3

    

 

CGRC

MDCC

 

George Paz

  

 

Retired Chairman and

Chief Executive Officer

Express Scripts Holding Company

    

 

10

    

 

Yes

    

 

2

    

 

Audit (Chair)

CGRC

 

Robin L. Washington

  

 

Executive Vice President and

Chief Financial Officer

Gilead Sciences, Inc.

    

 

6

    

 

Yes

    

 

2

    

 

Retirement Plans (Chair)

Audit

CGRC refers to Corporate Governance and Responsibility Committee, and MDCC refers to Management Development and Compensation Committee.

 

 

4

 

LOGO

 

 

|  Notice and Proxy Statement  |  2019

 

 


Table of Contents
i  |   

 

PROXY

SUMMARY

 

 

CORPORATE GOVERNANCE HIGHLIGHTS

 

 

SHAREOWNER

EMPOWERMENT AND

ENGAGEMENT

  

 

LOGO

 

 

15% threshold for shareowners to call a special meeting

   LOGO   Majority vote to amend Certificate of Incorporation and By-laws
   LOGO   Annual election of all directors, with majority voting in uncontested director elections
   LOGO   No poison pill – we will seek shareowner approval if a shareowner rights plan is adopted
   LOGO   Robust year-round shareowner engagement, with Lead Director participation in shareowner discussions
   LOGO  

Proxy access enabling shareowner(s) holding 3% of our stock for three years to include up to two director nominees (or nominees representing 20% of the Board) in our proxy

 

 

DIVERSE AND

INDEPENDENT BOARD

OF DIRECTORS

  

 

LOGO

 

 

All director nominees are independent, except our CEO; no nominees with disclosable related-party transactions

   LOGO   Leader in Board diversity vis-à-vis personal characteristics (3 women, 3 Hispanics, 1 African-American, 2 non-U.S. citizens) and experiences (industry, profession, public service, geography)
   LOGO   Range of tenures to facilitate effective oversight and balance between historical experience and fresh perspectives
   LOGO   Skills and background aligned to our strategic direction
   LOGO   Clear, transparent director recruitment and selection process that formally prioritizes skills and qualifications and emphasizes leadership traits, work ethic, independence, business experience, and diversity of background
   LOGO  

No director may serve on more than four public company boards (including the Honeywell Board)

 

 

BEST-IN-CLASS

BOARD STRUCTURE

AND PROCESSES

  

 

LOGO

 

 

Independent Lead Director elected by independent directors, with expanded duties and responsibilities, including formal responsibility for working with the Corporate Governance and Responsibility Committee (CGRC) to lead new director selection and joint leadership of annual Board self-evaluation process

   LOGO   Regular executive sessions of independent directors
   LOGO   All members of all committees are independent directors
   LOGO   Lead Director and Chair of the CGRC empowered to call special Board meetings at any time for any reason
   LOGO   Annual self-assessment to enable adequate Board refreshment and appropriate evolution of Board skills, experience and perspectives; results shared and discussed in executive session of independent directors
   LOGO   Annual refresh of Corporate Governance Guidelines to ensure alignment with best practices
   LOGO  

Director stock ownership guidelines require equity holdings of at least 5x annual cash retainer (actual ownership average of 29x as of December 31, 2018)

 

 

ROBUST OVERSIGHT

OF RISKS AND

OPPORTUNITIES

  

 

LOGO

 

 

Board responsible for risk oversight, with specific responsibility for key risk areas delegated to relevant Board committees

   LOGO   Robust Enterprise Risk Management (ERM) program to enable Board identification and monitoring of key risks
   LOGO   Purposeful inclusion of key risk areas on Board and/or committee agendas, enabling continuous Board oversight of risk mitigation
   LOGO   Annual engagement with business leaders to discuss both short-term plans, long-term strategic opportunities and their associated risks
   LOGO   Incentive compensation not overly leveraged and with maximum payout caps and design features intended to balance pay for performance with the appropriate level of risk-taking
   LOGO  

Clawbacks in the event of a significant restatement or violations of non-competition or non-solicitation agreements

 

 

COMMITMENT TO

SUSTAINABILITY

AND CORPORATE

RESPONSIBILITY

  

 

LOGO

 

 

Code of Business Conduct applies to all directors, officers, and employees

   LOGO   Suppliers expected to comply with published Supplier Code of Conduct, including conflict minerals, anti-human trafficking, business integrity, and health, safety, and environmental policies
   LOGO   Uncompromising adherence to foundational principles of Integrity and Ethics, Supporting Diversity, and Workplace Respect, while fostering a performance culture based on our 8 Behaviors
   LOGO   Over 50% of executive officers are diverse by ethnic background, place of birth (non-U.S.) or gender
   LOGO   No use of corporate funds for political contributions and careful oversight and transparency with respect to political lobbying activities
   LOGO   Demonstrated track record of exceeding our published greenhouse gas reduction and energy efficiency goals
   LOGO   Health, Safety, Environment, Product Stewardship, and Sustainability management operating system, with quarterly CEO reviews and regular Board oversight drive our establishment and achievement of sustainability goals
   LOGO  

Honeywell Hometown Solutions, our corporate citizenship initiative, delivers high-impact social sustainability programming around the world

 

 

 

LOGO

 

|  Notice and Proxy Statement  |  2019

 

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Table of Contents
i  |   

 

PROXY

SUMMARY

 

 

EXECUTIVE COMPENSATION SNAPSHOT

 

 

 

I  WHAT WE DO

 

 

  

 

 

I  WHAT WE DON’T DO

 

 

   LOGO

 

 

Pay for Performance. We closely align pay and performance, as a significant portion of target total direct compensation is at-risk. The Management Development and Compensation Committee (MDCC) validates this alignment annually and ensures performance-based compensation comprises a significant portion of executive compensation.

 

  

 

   LOGO

 

 

No Excessive Perks. We do not provide perquisites except in cases where there is a compelling business or security reason, nor do we provide gross-ups, except in limited cases for relocation.

 

   LOGO

 

 

Robust Performance Goals. We establish clear and measurable goals and targets and hold our executives accountable for achieving specified targets to earn a payout under our incentive plans. Performance goals are linked to operating priorities designed to create long-term shareowner value.

 

  

 

   LOGO

 

 

No Guaranteed Annual Salary Increases or Bonuses. Annual salary increases are based on evaluations of individual performance and the competitive market. In addition, we do not provide guarantees on bonus payouts.

 

   LOGO

 

 

Double Trigger in the Event of a Change-in-Control (CIC). We have double trigger vesting on equity and severance for CIC; executives will not receive cash severance nor will equity vest in the event of a CIC unless accompanied by qualifying termination of employment.

  

 

   LOGO

 

 

No New Excise Tax Gross-Ups and No Accelerated Bonus Payments Upon CIC. We eliminated gross-ups for excise taxes upon a CIC for any new officers since 2009. Plans provide that ICP awards earned in the year of a CIC would be paid at the time they would typically be paid based on business performance rather than target.

 

 

   LOGO

 

 

Maximum Payout Caps for Incentive Plans. Annual cash incentive compensation plan (ICP) and performance plan payouts are capped.

  

 

   LOGO

 

 

No Incentivizing of Short-Term Results to the Detriment of Long-Term Goals and Results. Pay mix is heavily weighted towards long-term incentives aligned with the interests of shareowners.

 

 

   LOGO

 

 

Clawback Practice. We maintain a policy that allows for recoupment of incentive compensation for any significant financial restatement or if an executive leaves the Company to join a competitor.

 

  

 

   LOGO

 

 

No Excessive Risks. Compensation practices are appropriately structured and avoid incentivizing employees to engage in excessive risk-taking.

 

   LOGO

 

 

Robust Stock Ownership Requirements. We require executives to hold meaningful amounts of stock and require them to hold 100% of net shares for one year from exercise or vesting.

 

  

 

   LOGO

 

 

No Hedging or Pledging. We do not allow hedging or pledging of our stock.

 

   LOGO

 

 

Independent Compensation Consultant. We retain an independent compensation consultant on behalf of the MDCC to review and advise the MDCC on executive compensation matters. The independent consultant attends all MDCC meetings.

  

 

   LOGO

 

 

No Consultant Conflicts. Under the MDCC’s established policy, the compensation consultant cannot provide any other services to Honeywell without the MDCC’s approval. Regular independence reviews are conducted.

I  2018 EXECUTIVE COMPENSATION

The following table reflects 2018 compensation awarded or paid to our Named Executive Officers (NEOs) from the perspective of the MDCC. See Compensation Discussion and Analysis beginning on page 38 for more details on 2018 executive compensation.

 

                                                            

NEO

   Position    Base
Salary
     Annual
Incentive
Plan (ICP)(1)
     2018-2020
Performance
Plan Units(2)
     Stock
Options(3)
     Restricted
Stock Units(4)
     Total Annual
Direct
Compensation
 
                                                            

Darius Adamczyk

   Chairman and CEO    $ 1,571,154      $ 4,100,000      $ 6,375,720      $ 3,185,655      $ 3,185,495      $ 18,418,024  

Gregory P. Lewis

   SVP and Chief Financial Officer    $ 578,981      $ 730,000      $ 525,000      $ 591,250      $ 554,742      $ 2,979,973  

Timothy O. Mahoney

   President and CEO, Aerospace    $ 992,788      $ 1,840,000      $ 3,057,076      $ 1,523,060      $ 1,522,822      $ 8,935,746  

Krishna Mikkilineni

   SVP, Engineering and IT    $ 810,673      $ 930,000      $ 2,632,028      $ 1,307,845      $ 1,305,276      $ 6,985,822  

Mark R. James

   SVP, HR, Security and Communications    $ 774,231      $ 1,080,000      $ 2,354,112      $ 1,173,040      $ 1,165,425      $ 6,546,808  

Thomas A. Szlosek(5)

   Retired Chief Financial Officer    $ 560,481      $      $ 2,713,768      $ 1,348,050      $ 1,336,354      $ 5,958,653  

 

(1)

Annual ICP payouts determined 80% based on a calculation against pre-set goals. The remaining 20% was based on individual assessments.

(2)

Grant date value of performance stock units (PSUs) issued for a new three-year performance period for all NEOs except Mr. Lewis. The amount for Mr. Lewis is the grant date value of performance cash units for the same three-year performance period, made prior to him becoming an officer of the Company.

(3)

All stock option grants awarded to NEOs vest ratably over four years, have a 10-year term, and are subject to stock ownership and post-exercise holding requirements.

(4)

Restricted stock units vest over six-year periods and are subject to stock ownership and post-vesting holding requirements. The grant to Mr. Lewis, made prior to him becoming an officer of the Company, vests in three years.

(5)

2018-2020 Performance Plan Units and Stock Options granted to Mr. Szlosek in 2018 were forfeited upon his retirement.

 

 

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Table of Contents
01  |   

 

PROPOSAL 1:

ELECTION OF DIRECTORS

 

 

PROPOSAL 1:

ELECTION OF DIRECTORS

 

Our Corporate Governance Guidelines set forth a clear vision statement for the composition of Honeywell’s Board:

“The composition of Honeywell’s Board, as well as the perspective and skills of its individual members, needs to effectively support Honeywell’s growth and commercial strategy. Collectively, the Board must also be capable of overseeing risk management, capital allocation, and leadership succession. Board composition and the members’ perspective and skills should evolve at an appropriate pace to meet the challenges of Honeywell’s changing commercial and strategic goals.”

Consistent with this vision, the Corporate Governance and Responsibility Committee (CGRC) has responsibility for identifying a slate of director nominees who collectively have the complementary experience, qualifications, skills, and attributes to guide the Company and function effectively as a Board.

The CGRC believes that each of the nominees presented in this proxy has key personal attributes that are important to an effective board: integrity, candor, analytical skills, willingness to engage management and each other in a constructive and collaborative fashion, and ability and commitment to devote significant time and energy to service on the Board and its committees. The CGRC also considered the following specific experiences, qualifications, and skills, which Honeywell believes are critical in light of our strategic priorities, and business objectives, operations, and structure.

DIRECTOR SKILLS AND QUALIFICATIONS

 

I  STRATEGIC SKILLS

Global Experience. Growing revenue outside of the United States, particularly in what we call “high growth regions” or “HGRs” such as China, India, Southeast Asia, Africa, and Latin America, is a central part of our long-term strategy for growth. Hence, exposure to markets and economies outside of the United States is an important qualification for our Board. This exposure can take many forms including government affairs, regulatory, managerial, or commercial.

Regulated Industries/Government Experience. Honeywell is subject to a broad array of government regulations, and demand for its products and services can be impacted by changes in law or regulation in areas such as aviation safety, security, and energy efficiency. Several of our directors have experience in regulated industries, providing them with insight and perspective in working constructively and proactively with governments and agencies globally.

Innovation and Technology. With Honeywell’s transformation to a software-industrial company in the digital age, expertise in combining software programming capabilities with leading-edge physical products and domain knowledge is critical to opening and securing new growth paths for all of Honeywell’s businesses.

Marketing. Developing new markets for our products and services is critical for driving growth. Our directors who have that expertise provide a much desired perspective on how to better market and brand our products and services.

Industries, End Markets, and Growth Areas. Experience in industries, end markets, and growth areas that Honeywell serves – Commercial Aerospace, Industrial Productivity, Non-Residential, Oil and Gas / Petrochemical, Defense and Space, and Specialty Chemicals – enables a better understanding of the issues facing our businesses.

I  CORE COMPETENCIES

Senior Leadership Experience. Experience serving as CEO or a senior executive as well as hands-on leadership experience in core management areas, such as strategic and operational planning, financial reporting, compliance, risk management, and leadership development, provide a practical understanding of complex organizations like Honeywell.

Public Company Board Experience. Service on the boards and board committees of other public companies provides an understanding of corporate governance practices and trends and insights into board management, relations between the board, the CEO and senior management, agenda setting, and succession planning.

Risk Management. In light of the Board’s role in risk oversight and our robust Enterprise Risk Management program, we seek directors who can help identify, manage, and mitigate key risks, including cybersecurity, regulatory compliance, competition, financial, brand integrity, human capital, and intellectual property.

Financial Expertise. We believe that an understanding of finance and financial reporting processes is important for our directors to enable them to monitor and assess the Company’s operating and strategic performance and to ensure accurate financial reporting and robust controls. We seek directors with background and experience in capital markets, corporate finance, accounting, and financial reporting as well as directors with “accounting or related financial management expertise” as defined in the New York Stock Exchange listing standards.

 

 

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Table of Contents
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PROPOSAL NO. 1:

ELECTION OF DIRECTORS

 

BOARD SKILLSET MATRIX

In 2018, we adopted a Board skills and experience matrix to facilitate the comparison of our directors’ skills versus those skills deemed necessary to oversee our current strategy. We continue to refresh the matrix, and the skills included in the matrix are evaluated against our articulated strategy so that it can serve as an effective tool for identifying director nominees who collectively have the complementary experience, qualifications, skills, and attributes to guide our Company. Our 2019 Board skillset matrix is set forth below.

 

 

 

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PROPOSAL NO. 1:

ELECTION OF DIRECTORS

 

COMMITMENT TO BOARD INTEGRITY,

DIVERSITY, AND INDEPENDENCE

In addition to ensuring that our director nominees possess the requisite skills and qualifications, the CGRC places an emphasis on ensuring that the nominees demonstrate the right leadership traits, personality, work ethic, independence, and diversity of background to align with our performance culture and our long-term strategic vision. Specifically, these criteria include:

 

 

Exemplification of the highest standards of personal and professional integrity

 

 

Potential contribution to the diversity and culture of the Board, including by virtue of age, educational background, global perspective, gender, ethnicity, and nationality

 

 

Independence from management under applicable securities law, listing regulations, and Honeywell’s Corporate Governance Guidelines

 

 

Willingness to constructively challenge management through active participation in Board and committee meetings

 

 

Ability to devote sufficient time to performing their Board and committee duties

While Honeywell’s Corporate Governance Guidelines do not prescribe a diversity policy or standards, as a matter of practice, we are committed to enhancing both the diversity of the Board itself and the perspectives and values that are discussed in Board and committee meetings. Our current Board composition reflects this approach and the Board’s commitment to diversity.

The CGRC also believes that, in addition to diversity of personal characteristics, and experiences, diversity of service tenures on the Honeywell Board also facilitates effective Board oversight. Directors with many years of service to Honeywell provide the Board with a deep knowledge of our Company, while newer directors lend fresh perspectives. Hence, careful consideration is made to achieve the appropriate balance.

 

LOGO

NOMINATION AND ELECTION PROCESS

Honeywell’s directors are elected at each Annual Meeting of Shareowners and hold office for one-year terms or until their successors are duly elected and qualified. Honeywell’s By-laws provide that in any uncontested election of directors (an election in which the number of nominees does not exceed the number of directors to be elected), any nominee who receives a greater number of votes cast “FOR” his or her election than votes cast “AGAINST” his or her election will be elected to the Board of Directors.

The Board has nominated 12 candidates for election as directors. If any nominee should become unavailable to serve prior to the Annual Meeting, the shares represented by a properly signed and returned proxy card or voted by telephone, via the Internet or by scanning the QR code will be voted for the election of such other person as may be designated by the Board. The Board may also determine to leave the vacancy temporarily unfilled or reduce the authorized number of directors in accordance with the By-laws.

 

LOGO

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE DIRECTOR NOMINEES.

 

 

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Table of Contents
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PROPOSAL NO. 1:

ELECTION OF DIRECTORS

 

 

NOMINEES FOR ELECTION

 

DARIUS

ADAMCZYK

 

Chairman and

Chief Executive Officer,

Honeywell

International Inc.

 

  

About

 

Mr. Adamczyk has been the Chairman and Chief Executive Officer of Honeywell since April 2018. Mr. Adamczyk was President and Chief Executive Officer from March 2017 to April 2018 and Chief Operating Officer from April 2016 to March 2017. From April 2014 to April 2016, Mr. Adamczyk served as President and CEO of Honeywell Performance Materials and Technologies (PMT). Prior to serving as President and CEO of PMT, Mr. Adamczyk served as President of Honeywell Process Solutions from 2012 to 2014. When he joined Honeywell in 2008, he became President of Honeywell Scanning and Mobility from 2008 to 2012. Mr. Adamczyk began at Honeywell when Metrologic, Inc., where he was the Chief Executive Officer, was acquired by Honeywell. Prior to joining Honeywell, Mr. Adamczyk held several general management assignments at Ingersoll Rand, served as a senior associate at Booz Allen Hamilton, and started his career as an electrical engineer at General Electric.

   

LOGO

 

Specific Qualifications, Attributes, Skills, and Experience

 

  Senior leadership roles in global organizations, both large and small

 

  Deep understanding of software, both technically and commercially, and a proven track record in growing software-related businesses at Honeywell

 

  Demonstrated ability to deliver financial results as a leader in a variety of different industries, with disparate business models, technologies, and customers

 

  Strategic leadership skills necessary to grow Honeywell sales organically and inorganically while meeting the challenges of a constantly changing environment across Honeywell’s diverse business portfolio

LOGO

 

   
        

DUNCAN B.

ANGOVE

 

Chief Executive Officer
and Managing Partner, Warmaug Partners LLC

 

  

About

 

Since 2018, Mr. Angove has been CEO and Managing Partner of Warmaug Partners LLC, a private equity firm focused on delivering superior financial returns through the application of financial capital and digital transformation. Previously, from 2010 to 2018, Mr. Angove was President of Infor, Inc., a privately held provider of enterprise software and a strategic technology partner for more than 90,000 organizations worldwide. Infor’s software is purpose-built for specific industries, from manufacturing to healthcare, providing complete suites that are designed to support end-to-end business processes and digital transformation. Previously, Mr. Angove served as the Senior Vice President and General Manager of the Retail Global Business Unit for Oracle Corporation, a global technology provider of enterprise software, hardware, and services, from 2005 to 2010. He joined Oracle through its acquisition of Retek Inc., then a publicly traded provider of software solutions and services to the retail industry, where he served in various roles of increasing responsibility from 1997 until 2005.

   

LOGO

 

Specific Qualifications, Attributes, Skills, and Experience

 

  Senior technology industry leader with global operating experience including in software and digital transformation

 

  Deep understanding of the trends across enterprise cloud, infrastructure software, digital, and the Internet of Things, and skilled at driving value creation

 

  Extensive experience in corporate strategy, M&A, sales, marketing, and business and product development

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Table of Contents
01  |   

 

PROPOSAL NO. 1:

ELECTION OF DIRECTORS

 

 

 

WILLIAM S.

AYER

 

Retired Chairman and
Chief Executive Officer, Alaska Air Group, Inc.

 

  

About

 

Mr. Ayer is the retired Chairman of the Board and Chief Executive Officer of Alaska Air Group, Inc. (Alaska Air Group), the parent company of Alaska Airlines and its sister carrier, Horizon Air. Mr. Ayer served as Chief Executive Officer of Alaska Air Group and its subsidiaries through 2012, and as Chairman through 2013. A veteran of more than three decades in aviation, Mr. Ayer began his career with Horizon Air in 1982 where he held a variety of marketing and operations positions. He joined Alaska Airlines in 1995 as Vice President of Marketing and Planning, and subsequently held the posts of Senior Vice President, Chief Operating Officer, and President. In 2002, he became Alaska Air Group’s Chief Executive Officer, and, in May 2003, he was appointed Chairman. Mr. Ayer was a director of Puget Sound Energy, Inc. and Puget Energy, Inc., from January 2005 until January 2015 and served as Chairman from January 2009 until January 2015.

   

LOGO

 

Specific Qualifications, Attributes, Skills, and Experience

 

 Deep aerospace industry knowledge as well as sales, marketing, and operations experience through his three decades of leadership roles at Alaska Air Group, recognized for its best-in-class operating metrics among U.S. air carriers

 

 Proven leadership skills in developing a business enterprise that can deliver long-term, sustained excellence based on a management style that includes a relentless focus on the customer, continuous improvement, and building a culture of safety, innovation, sustainability, and diversity

 

 Understanding of the U.S. public utility industry through his service as a director on the Board of Puget Energy

LOGO    
        

KEVIN

BURKE

 

Retired Chairman,

President and

Chief Executive Officer,

Consolidated Edison, Inc.

 

  

About

 

Mr. Burke joined Consolidated Edison, Inc. (Con Edison), a utility provider of electric, gas, and steam services, in 1973 and held positions of increasing responsibility in system planning, engineering, law, nuclear power, construction, and corporate planning. He served as Senior Vice President from July 1998 to July 1999, with responsibility for customer service and for Con Edison’s electric transmission and distribution systems. In 1999, Mr. Burke was elected President of Orange and Rockland Utilities, Inc., a subsidiary of Con Edison. He was elected President and Chief Operating Officer of Consolidated Edison Company of New York, Inc., in 2000 and elected Chief Executive Officer in 2005. Mr. Burke served as President and Chief Executive Officer of Con Edison from 2005 through 2013, and was elected Chairman in 2006. Mr. Burke became non-executive Chairman of Con Edison in December 2013 and served in that capacity until April 2014. Mr. Burke was a member of the Board of Directors of Con Edison and a member of the Board of Trustees of Consolidated Edison Company of New York, Inc., which is a subsidiary of Con Edison, until May 2015.

   

LOGO

 

Specific Qualifications, Attributes, Skills, and Experience

 

 Extensive management expertise gained through various executive positions, including senior leadership roles, at Con Edison

 

 Wealth of experience in energy production and distribution, energy efficiency, alternative energy sources, engineering and construction, government regulation, and development of new service offerings

 

 Significant expertise in developing clean and renewable energy infrastructure technology used in clean energy, solar generation, and other energy efficient products and services

 

 Oversaw the implementation of financial and management information systems, utility operational systems, and process simulators

 

 Deep knowledge of corporate governance and regulatory issues facing the energy, utility, and service industries

LOGO    

 

 

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Table of Contents
01  |   

 

PROPOSAL NO. 1:

ELECTION OF DIRECTORS

 

 

JAIME

CHICO PARDO

 

President and

Chief Executive Officer,

ENESA, S.A. de C.V.

 

  

About

 

Mr. Chico Pardo has been President and Chief Executive Officer of ENESA, S.A. de C.V. (ENESA), a private fund investing in the Mexican energy and health care sectors since March 2010. He previously served as Co-Chairman of the Board of Telefonos de Mexico, S.A.B. de C.V. (TELMEX), a telecommunications company based in Mexico City, from April 2009 until April 2010, as its Chairman from October 2006 to April 2009, and as its Vice Chairman and Chief Executive Officer from 1995 until 2006. Mr. Chico Pardo was Co-Chairman of the Board of Impulsora del Desarrollo y el Empleo en América Latina, S.A. de C.V., a publicly listed company in Mexico engaged in investment in and management of infrastructure assets in Latin America, from 2006 until 2010. He also was Chairman of Carso Global Telecom, S.A. de C.V. from 1996 until 2010. Prior to joining TELMEX, Mr. Chico Pardo served as President and Chief Executive Officer of Grupo Condumex, S.A. de C.V. and Euzkadi/General Tire de Mexico, manufacturers of products for the construction, automotive, and telecommunications industries. Mr. Chico Pardo also has spent a number of years in the international and investment banking business. Mr. Chico Pardo is a director of Grupo Bimbo, S.A.B. de C.V. and PROMECAP Acquisition Company, S.A.B. de C.V. He previously served as a director of AT&T (2008-2015), Grupo Carso, S.A. de C.V. and several of its affiliates (1991-2013), three mutual funds in the American Funds family of mutual funds (2011-2013) and Honeywell Inc. from September 1998 to December 1999.

   

LOGO

 

Specific Qualifications, Attributes, Skills, and Experience

 

 Broad international exposure through senior leadership roles in Latin American companies in the telecommunications, automotive, manufacturing, engineering, and construction industries

 

 Expertise in the management of infrastructure assets and international business, operations, and finance focused on Latin America

 

 Broad experience with investment strategies in innovation and technology to support the energy, healthcare, and telecommunications industries in Mexico and Latin America

 

 Enhanced perspectives on corporate governance, risk management, and other issues applicable to public companies

 

 

LOGO

   
   
   
        

D. SCOTT

DAVIS

 

Retired Chairman and

Chief Executive Officer,

United Parcel Service, Inc.

 

  

About

 

Mr. Davis joined United Parcel Service, Inc. (UPS), a leading global provider of package delivery, specialized transportation, and logistics services in 1986. He served as the non-Executive Chairman of UPS from September 2014 until May 2016. Prior to his retirement as Chief Executive Officer of UPS, Mr. Davis served as Chairman and Chief Executive Officer from January 1, 2008 to September 2014. Prior to this, he served as Vice Chairman since December 2006 and as Senior Vice President, Chief Financial Officer and Treasurer since January 2001. Previously, Mr. Davis held various leadership positions with UPS, primarily in the finance and accounting areas. During his tenure at UPS, Mr. Davis served a critical role in helping UPS to reinvent itself into a technology company. Prior to joining UPS, he was Chief Executive Officer of II Morrow Inc., a technology company and developer of general aviation and marine navigation instruments. Mr. Davis is a Certified Public Accountant. He also is a director of Johnson and Johnson. Mr. Davis previously served on the Board of the Federal Reserve Bank of Atlanta (2003-2009), serving as Chairman in 2009, and as a director of EndoChoice Holdings (2015-2016).

   

LOGO

 

Specific Qualifications, Attributes, Skills, and Experience

 

 Significant expertise in management, strategy, finance, and operations gained over 25 years at UPS including through senior leadership roles

 

 Financial management expertise, including financial reporting, accounting, and controls

 

 Strong banking experience and a deep understanding of public policy and global economic indicators

 

 Extensive experience in the transportation and logistics services industry

 

 In-depth understanding of technology and software solutions that support automated and web-based shipping, tracking, and specialized transportation logistics

 

LOGO

   

 

 

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Table of Contents
01  |   

 

PROPOSAL NO. 1:

ELECTION OF DIRECTORS

 

 

LINNET F.

DEILY

 

Former

Deputy U.S. Trade Representative and Ambassador

 

  

About

 

Ms. Deily was Deputy U.S. Trade Representative and U.S. Ambassador to the World Trade Organization from 2001 to 2005. From 2000 until 2001, she was Vice Chairman of The Charles Schwab Corp. Ms. Deily served as President of the Schwab Retail Group from 1998 until 2000 and President of Schwab Institutional-Services for Investment Managers from 1996 to 1998. Prior to joining Schwab, she was the Chairman of the Board, Chief Executive Officer, and President of First Interstate Bank of Texas from 1990 until 1996. She retired as a director of Chevron Corporation in May 2018.

   

LOGO

 

Specific Qualifications, Attributes, Skills, and Experience

 

 Unique global and governmental perspectives regarding international trade, capital markets, public policy, telecommunications, information services, corporate finance, refinery, and petrochemical industries

 

 Extensive experience leading international trade negotiations and detailed knowledge and insight into challenges and opportunities related to government relations

 

 Broad experience managing technology platforms for investment managers and retail clients

 

 Significant financial experience through senior leadership roles in banking, brokerage, and financial services companies

 

 Substantial experience as a Fortune 500 company director

 

LOGO

   
        

JUDD

GREGG

 

Former

Governor and

U.S. Senator of

New Hampshire

 

  

About

 

Senator Gregg has spent over three decades in public office, most recently serving as the United States Senator from the State of New Hampshire from January 1993 until January 2011. During his tenure in the Senate, Senator Gregg served on a number of key Senate Committees including Budget; Appropriations; Government Affairs; Banking, Housing and Urban Affairs; Commerce, Science and Transportation; Foreign Relations; and Health, Education, Labor and Pensions. He has served as the Chairman and Ranking Member of the Health, Education, Labor and Pensions Committee and the Chairman and Ranking Member of the Senate Budget Committee as well as chairman of various sub-committees. Senator Gregg served as a chief negotiator of the Emergency Economic Stabilization Act of 2008 and was the lead sponsor of the Deficit Reduction Act of 2005, and, along with the late Senator Ted Kennedy, co-authored the No Child Left Behind Act of 2001. In March 2010, Senator Gregg was appointed to President Obama’s bipartisan National Commission on Fiscal Responsibility and Reform. From 1989 to 1993, Senator Gregg was the Governor of New Hampshire and prior to that was a U.S. Representative from 1981 to 1989. Senator Gregg was named as Dartmouth College’s first distinguished fellow and he teaches at the college and its graduate schools. He also serves as a director of Evoqua Corporation. Senator Gregg previously served as a director of Intercontinental Exchange, Inc. (2011-2013).

   

LOGO

 

Specific Qualifications, Attributes, Skills, and Experience

 

 Deep understanding and experience in local, state, national, and international issues

 

 Extensive experience in government, public policy, financial regulatory reform, banking, tax, capital markets, science, renewable technology and research, environmental protection and conservation, healthcare, and foreign policy

 

 Significant insight into fiscal affairs, governmental relations, legislative, and regulatory issues

 

LOGO

 

   

 

 

 

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Table of Contents
01  |   

 

PROPOSAL NO. 1:

ELECTION OF DIRECTORS

 

 

 

CLIVE

HOLLICK

 

Former

Chief Executive Officer,

United Business Media

 

 

  

About

 

Lord Hollick was Chief Executive Officer of United Business Media and its predecessor companies from 1974 to 2005. United was a London-based, international information, broadcasting, financial services, and publishing group. From 2005 to 2010, he was a partner, managing director, and adviser to Kohlberg Kravis Roberts and Co., a private equity firm focusing on businesses in the media and financial services sectors. In addition, Lord Hollick was Chairman of the Economic Affairs Committee of the House of Lords. He previously served as a director of ProSiebenSat. 1 Media AG (2007-2014), Gogo Inc. (2013-2014), The Nielsen Company B.V. (2006-2009), Diageo plc (2001-2011), TRW Inc. (2000-2002), and BAE Systems (1992-1997).

   

LOGO

 

Specific Qualifications, Attributes, Skills, and Experience

 

 Management expertise, diverse perspective on international markets, and media experience gained through over 30 years as the leader of United Business Media

 

 Deep knowledge of public policy and trends in the UK and European markets

 

 In-depth understanding of the operating environment in the UK and Europe particularly with respect to information and financial services, broadcasting, publishing and online media, marketing and branding, technology, and innovation

 

 Substantial experience in mergers and acquisitions in the media and financial services sectors, including in a private equity context

LOGO    
        

GRACE D.

LIEBLEIN

 

Former

Vice President-Global

Quality, General

Motors Corporation

 

  

About

 

Ms. Lieblein served as Vice President, Global Quality of General Motors (GM), a company that designs, manufactures and markets cars, crossovers, trucks, and automobile parts worldwide from November 2014 to March 2016. Ms. Lieblein served as Vice President, Global Purchasing and Supply Chain from December 2012 to November 2014, the GM Brazil President and Managing Director from June 2011 until December 2012, the GM Mexico President and Managing Director from January 2009 until June 2011 and Vehicle Chief Engineer from October 2004 to January 2009. Ms. Lieblein joined GM in 1978 as a co-op student at the General Motors Assembly Division in Los Angeles and has held a variety of leadership positions at GM in engineering, product development and manufacturing. Ms. Lieblein also is a director of Southwest Airlines Co. and American Tower Corporation.

   

LOGO

 

Specific Qualifications, Attributes, Skills, and Experience

 

 Wide-ranging management and operating experience gained through various executive positions during an extensive career at GM

 

 Significant expertise in supply chain management, global manufacturing, engineering, technology, and product design and development

 

 International business, operations, and finance experience gained through senior leadership positions in Brazil and Mexico

 

LOGO

   

 

 

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Table of Contents
01  |   

 

PROPOSAL NO. 1:

ELECTION OF DIRECTORS

 

 

 

GEORGE

PAZ

 

Retired Chairman and

Chief Executive Officer,

Express Scripts

Holding Company

 

  

About

 

Mr. Paz served as Chairman of the Board of Express Scripts Holding Company (Express Scripts), a pharmacy benefit management company, from May 2006 to its acquisition by Cigna in December 2018, as Chief Executive Officer from April 2005 to May 2016, and as President from October 2003 to February 2014. He first became a director of Express Scripts in January 2004. Mr. Paz joined Express Scripts as Senior Vice President and Chief Financial Officer in January 1998 and continued to serve as its Chief Financial Officer following his election as President until April 2004. Mr. Paz is a Certified Public Accountant. He also is a director of Prudential Financial, Inc.

   

LOGO

 

Specific Qualifications Attributes Skills, and Experience

 

 Significant management and finance experience gained through senior leadership positions at Express Scripts

 

 Financial expertise, including in tax, financial reporting, accounting, and controls

 

 Information technology expertise in the healthcare and pharmaceutical industries and a strong track record of developing automated solutions in the healthcare marketplace

 

 Developed technologies for adjudication, compliance, prior authorization, and safety standards in healthcare

 

 Extensive experience in corporate finance, insurance and risk management, mergers and acquisitions, capital markets, government regulation, and employee health benefits

 

LOGO

   
        

ROBIN L.

WASHINGTON

 

Executive Vice

President and Chief Financial Officer,

Gilead Sciences, Inc.

 

  

About

 

Ms. Washington joined Gilead Sciences, Inc. (Gilead), a research-based biopharmaceutical company, as Senior Vice President and Chief Financial Officer in May 2008. In her current role as Executive Vice President and Chief Financial Officer, she oversees Gilead’s Global Finance, Investor Relations, and Information Technology organizations. From 2006-2007, Ms. Washington served as Chief Financial Officer of Hyperion Solutions, an enterprise software company that was acquired by Oracle Corporation in March 2007. Prior to that, Ms. Washington spent nearly 10 years at PeopleSoft, a provider of enterprise application software, where she served in a number of executive positions, most recently in the role of Senior Vice President and Corporate Controller. Ms. Washington is a Certified Public Accountant. She is a director of Salesforce.com Inc. and previously served as a director of Tektronix, Inc. (acquired by Danaher Corporation) (2005-2007) and MIPS Technologies, Inc. (acquired by Imagination Technologies Group PLC) (2008-2013).

   

LOGO

 

Specific Qualifications Attributes Skills, and Experience

 

 Extensive management, operational and accounting experience in the healthcare and information technology industries

 

 Financial expertise, including in tax, financial reporting, accounting and controls, corporate finance, mergers and acquisitions, and capital markets

 

 Broad experience on corporate governance issues gained through public company directorships

 

LOGO

   

 

 

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CORPORATE

GOVERNANCE

 

CORPORATE GOVERNANCE

Honeywell is committed to strong corporate governance policies, practices, and procedures designed to make the Board effective in exercising its oversight role. Our Board of Directors oversees management performance on behalf of our shareowners to ensure that the long-term interests of our shareowners are being served, to monitor adherence to Honeywell standards and policies, and to promote the exercise of responsible corporate citizenship. Our Board values and considers the feedback we receive from our shareowners, and we have taken a number of actions over the last several years to increase shareowner rights, enhance the Board’s structure, and augment our commitment to sustainability and corporate responsibility taking into account those perspectives.

The following timeline summarizes the evolution of our corporate governance practices.

 

LOGO          

 

  Created role of independent Lead Director

 

  Changed our independent auditor after a thorough, competitive vetting process to ensure delivery of value, quality and technology

 

LOGO  

 

  Proactively adopted proxy access amendment to our By-laws providing that a single shareowner or group of up to 20 shareowners who have held 3% of Honeywell stock for three years may nominate the greater of 20% of the Board or two directors

 

LOGO  

 

  Significantly increased the responsibilities of the independent Lead Director

 

 

  Published a Supplier Code of Conduct, which was incorporated as a mandatory flowdown in our supply contracts; used third-party audits to validate compliance with the Supplier Code of Conduct

 

 

  Published a Human Trafficking Policy

 

 

  Initiated significant changes to executive compensation plans in response to shareowner preference for longer-term performance awards, better visibility, and less discretion vis-à-vis award determinations, and heavier weighting toward performance-based equity rather than stock options

 

 

— Replaced two-year Growth Plan with three-year Performance Plan

 

 

— Shifted 80% of annual bonus to formulaic determination

 

 

— Shifted weight from stock options to performance stock units

 

LOGO  

 

  Amended our Corporate Governance Guidelines to improve Board refreshment

 

 

  Enhanced the Board’s self-evaluation process

 

 

  Further strengthened the role of Lead Director

 

 

  Instituted a formal Board skills and experience matrix to facilitate comparison of our director’s skills versus those skills deemed necessary to oversee our current strategy

 

 

  Increased Board retirement age to ensure Board continuity through CEO succession and portfolio realignment

 

 

  Continued evolution of executive compensation plan with further shift from stock options to performance stock units

 

 

LOGO  

 

  Relentless, unambiguous communication that Integrity and Ethics, Supporting Diversity, and Workplace Respect are foundational principles of our performance culture required of every employee globally

 

 

  Instituted enterprise-wide mandatory annual certification of compliance with our updated Code of Business Conduct

 

 

  Nominated a new director for election to the Board by our shareowners under an enhanced recruitment process

 

 

  Inaugural Board skillset matrix included in Proxy Statement

 

 

  Reduced ownership threshold to call a special meeting of shareowners from 20% to 15%

 

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  Adopted executive approval requirements to increase oversight of trade association memberships

 

  Instructed trade associations not to use our membership dues for political contributions

 

  Reduced number of public company boards (including the Honeywell Board) on which any individual director may sit from five to four

 

  Formalized equivalency of independent Lead Director and independent Chairman roles and responsibilities

 

 

 

 

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SHAREOWNER OUTREACH AND ENGAGEMENT

Understanding the issues that are important to our shareowners is critical in ensuring that we address their interests in a meaningful and effective manner. It is also foundational to good corporate governance. In that light, we engage with our shareowners on a regular basis throughout the year to discuss a range of topics, including our performance, strategy, risk management, executive compensation, and corporate governance. We recognize the value of taking our shareowners’ views into account. Dialogue and engagement with our shareowners help set goals and expectations for our performance, and facilitate identification of emerging issues that may affect our strategies, corporate governance, compensation practices, and other aspects of our operations.

Our shareowner and investor outreach and engagement take many forms. We participate in numerous investor conferences and analyst meetings, hold our own investor events, some of which focus on individual businesses held at our facilities, and meet one-on-one with our shareowners in a variety of contexts and forums. As part of our governance-focused shareowner engagement program, members of our Board, including our Lead Director, participate in many of these meetings to discuss a range of Environmental, Social, and Governance (ESG) matters, including executive compensation, corporate governance, and sustainability. In addition, our Chairman and CEO, Chief Financial Officer, Vice President of Investor Relations, and other senior management engage with our shareowners on a frequent basis, year-round, to discuss Honeywell’s strategy and our financial and business performance and to provide updates on key developments.

Shareowner engagement during 2018 was robust given the implementation of significant portfolio actions that were announced in 2017 and our CFO transition. We held 24 one-on-one meetings with shareowners during the course of 2018 (representing approximately 29% of outstanding shares) to discuss a wide range of business performance, governance, sustainability and compensation topics. In addition, our Chairman and Chief Executive Officer, Chief Financial Officer, and other executive officers hosted 56 one-on-one or small group shareowner meetings to discuss business performance and seek feedback.

I  GOVERNANCE-FOCUSED SHAREOWNER ENGAGEMENT PROGRAM

 

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SPRING Our Annual Report and Proxy Statement are distributed to our shareowners. We then extend invitations to our largest shareowners to discuss matters to be voted on at our upcoming Annual Meeting. SUMMER Management reports to the Board of Directors on the just-ended proxy season, including a discussion on the voting results and shareowner feedback. This discussion sets the agenda for our Summer/Fall shareowner engagement. ANNUAL SHAREOWNER ENGAGEMENT WINTER The Board implements governance changes, if appropriate, based on its independent judgment and the Summer/Fall shareowner feedback. SUMMER/FALL Management determines topics for upcoming shareowner discussions based on its review of new governance trends, regulatory developments, and the results of the recently concluded Annual Meeting of Shareowners. Management begins shareowner engagement with our largest shareowners. 54 shareowners received invitations to participate in one-on-one dialogue focused on ESG matters, representing 50% of our outstanding shares 24 one-on-one meetings with shareowners to discuss ESG matters, representing 29% of our outstanding shares 12 one-on-one shareowner meetings hosted by our independent Lead Director or an executive ofcer to discuss ESG matters, representing 24% of our outstanding shares

 

 

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I  YEAR-ROUND SHAREOWNER ENGAGEMENT

 

 One-on-one shareowner meetings

 

 Shareowner meetings at industry conferences

 

 Roadshows in key regions to meet face-to-face with shareowners

 

I  2018 SHAREOWNER ENGAGEMENT FOCUS AREAS

 

In 2018, our conversations with shareowners focused on the following key areas:

 

  Board oversight of long-term strategy

 

  Performance in our four strategic business groups, key end market trends, overview of our competitive landscape, and potential impacts to our businesses from changes in the regulatory environment

 

  Updates on the two spin transactions and the process by which Honeywell reached the decision to spin the Transportation Systems business (now Garrett Motion Inc. or Garrett) and the Homes and ADI global distribution businesses (now Resideo Technologies, Inc. or Resideo)

 

  Introduction to our incoming CFO, Gregory P. Lewis, when executing the CFO transition

 

  Board refreshment from a diversity and risk perspective

 

  Recombination of the Chairman and CEO role

 

  A recap of executive compensation program changes that were implemented in 2017 and 2018

 

  Overview of capital deployment strategy following 2018 spins

 

  An overview of our environmental and social policies and initiatives, such as our Inclusion and Diversity, Sustainability, Worker Safety, and New Uses of Legacy Properties programs

    39

one-on-one or small-
group shareowner
meetings hosted by
our Chairman and
CEO
to discuss
business
performance and seek
feedback, attended by
105 shareowners

   
    17

one-on-one or small-
group shareowner
meetings hosted by
our CFO or other
executive officers
to
discuss business
performance and seek
feedback, attended by
140 shareowners

   

I  SHAREOWNER FEEDBACK

Again this year, our shareowners welcomed our level of outreach and expressed appreciation for our engagement and our responsiveness to shareowner concerns. Below is a summary of the feedback we received:

 

 

Positive feedback on our 2018 financial performance, especially with regard to organic sales growth in Aerospace, defense and warehouse automation, our achievement of 100% adjusted free cash flow conversion, and our successful Intelligrated (SPS) integration and execution

 

 

Appreciation for the level of transparency and the speed with which we executed the Garrett and Resideo spins

 

 

Positive feedback regarding the changes to our executive compensation program, especially with regard to how the program has evolved in response to shareowner feedback – in 2018, approximately 92% of our shareowners voted in favor of “Say on Pay”

 

 

Continued interest in the recombination of the Chairman and CEO roles and in the Lead Director’s expanded responsibilities to strengthen the position as a counterbalance to the combined Chairman and CEO position

 

 

Increased interest in the beneficial dynamics resulting from the diversity of personal background, skills, and experiences of Honeywell’s directors

 

 

Emphasis on importance of maintaining alignment of director skillsets with Company strategy

 

 

 

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BOARD LEADERSHIP STRUCTURE

I  CHAIRMAN OF THE BOARD

Our CEO, Darius Adamczyk, became the Chairman of the Board at the 2018 Annual Meeting of Shareowners following the retirement of our former Chairman, David M. Cote. The decision to appoint Mr. Adamczyk as Chairman and recombine the Chairman and CEO roles followed careful consideration by the Board and extensive engagement with our shareowners. Understanding the importance of this leadership decision to the Company and its shareowners, the Board thoroughly explored the benefits and challenges of this appointment through an open-minded and unbiased decision-making process.

In reaching its decision to recombine the roles of Chairman and CEO under Mr. Adamczyk, the Board considered a wide range of factors as follows:

 

 

The benefits of a unified leadership structure during a period when Honeywell is in the process of a major portfolio realignment and a strategic shift designed to focus resources and management’s attention on high-growth businesses in six attractive industrial end markets where we can deploy our core technological strengths related to software, data analytics, and the industrial internet of things

 

 

An evaluation of the strength of Mr. Adamczyk’s character, the quality of his leadership, and the likelihood that Mr. Adamczyk’s service as both Chairman and CEO would enhance Company performance – the Board continues to believe that an independent Chairman would not enhance Company performance or improve governance effectiveness under Mr. Adamczyk’s leadership

 

 

Our longstanding track record of outperformance under a unified leadership structure in which the roles of Chairman and CEO were combined

 

 

The highly independent nature of our Board where there is only one non-independent director

 

 

Steps taken by Honeywell’s Board to strengthen the role of the independent Lead Director and the demonstrated ability of our Lead Director to effectively lead the Board

The Board carefully weighed the views of its shareowners as part of its deliberations leading up to our 2018 Annual Meeting of Shareowners and continued to engage with shareowners on this topic during the summer/fall shareowner engagement meetings thereafter. We heard a range of views during those meetings, with most of our shareowners expressing confidence that the Honeywell Board understands the importance of good corporate governance and has the ability to make the right decision regarding its ongoing leadership structure, specifically the determination of whether and when to separate and combine the roles of Chairman and CEO.

I  INDEPENDENT LEAD DIRECTOR

Honeywell’s independent Lead Director plays an important role in our governance structure, serving as the de facto leader of the independent directors, the single focal point charged with ensuring that the Board as a whole is providing appropriate independent oversight of management, and an ex officio member of each Board committee on which he or she does not otherwise serve. Over the past several years, the Board has continually taken action to strengthen the role of Lead Director, including amendments to our Corporate Governance Guidelines to formalize the role of the Lead Director in the recruitment and selection of new Board members and in the annual self-evaluation process.

The roles and responsibilities of the Lead Director are described in our Corporate Governance Guidelines, which the Board further amended to formalize the equivalency of independent Lead Director and independent Chairman roles and responsibilities. The guidelines now explicitly acknowledge that, in the absence of an independent Chairman, the Lead Director would assume the same roles and responsibilities. These roles and responsibilities include the following:

 

 

As and when the Board considers adding new members, work with the CEO, the CGRC and the full Board to help identify and prioritize the specific skill sets, experience, and knowledge that candidates for election to the Board must possess

 

 

Review, and when appropriate, make changes to Board meeting agendas and Board meeting schedules to ensure there is sufficient time for discussion of all agenda items

 

 

Review, and when appropriate, make changes to presentation material and other written information provided to directors for Board meetings

 

 

Preside at all meetings at which the Chairman is not present, including executive sessions of the independent directors, and apprise the Chairman of the issues considered

 

 

Serve as liaison between the Chairman and the independent directors

 

 

Be available for consultation and direct communication with the Company’s shareowners

 

 

Call meetings of the independent directors when necessary and appropriate

 

 

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Retain outside professionals on behalf of the Board

 

 

Consult with management about what information is to be sent to the Board

 

 

Identify key strategic direction and operational issues upon which the Board’s annual core agenda is based

 

 

Serve as an ex officio member of each committee on which he does not otherwise serve

The Lead Director is selected biennially by Honeywell’s independent directors, taking into account the Lead Director Selection Criteria memorialized in our Corporate Governance Guidelines. These criteria include:

 

 

Qualifies as independent, in accordance with relevant listing standards

 

 

Ability to commit the time and level of engagement required to fulfill the substantial responsibilities of the role

 

 

Effective communication skills to facilitate discussions among Board members, including between the independent directors and the Chairman and CEO, and to engage with shareowners and other key stakeholders

 

 

Strong rapport with other members of the Board

 

 

High personal integrity and ethical character

 

 

Skills and experience broadly in line with Honeywell’s corporate strategy, including, as relevant, leadership experience within a large, complex organization, international experience, exposure to a variety of markets, and expertise aligned with key growth initiatives

Our current Lead Director, Mr. Jaime Chico Pardo, was re-elected by our independent directors in 2017 to serve a second two-year term which will expire in 2020. In addition to satisfying each of the criteria listed above, Mr. Chico Pardo has worked tirelessly on behalf of Honeywell including assisting Honeywell in its efforts to increase organic sales growth in Mexico and across Latin America, meeting with shareowners, and participating in various external governance and lead director programs to stay current on best practices and investor concerns. Mr. Chico Pardo is extremely well regarded by his fellow Board members for, among other things, his encyclopedic knowledge of Honeywell, listening and communication skills, excellent judgment, and ability to build consensus for informed decision making.

DIRECTOR INDEPENDENCE

Our Corporate Governance Guidelines state that the, “Board intends that, at all times, a substantial majority of its directors will be considered independent under relevant NYSE and SEC guidelines.”

I  AFFIRMATIVE DETERMINATION OF INDEPENDENCE

To fulfill this intent, the Board regularly reviews the independence of each non-employee director to make an affirmative determination of independence. Specifically, the CGRC conducts an annual review of the independence of the directors and reports its findings to the full Board. This year, based on the report and recommendation of the CGRC, the Board has determined that each of the non-employee nominees standing for election to the Board at the Annual Meeting—Messrs. Angove, Ayer, Burke, Chico Pardo, Davis, Gregg, Hollick, and Paz and Mses. Deily, Lieblein, and Washington—satisfies the independence criteria in the applicable NYSE listing standards and SEC rules (including, where applicable, the enhanced criteria with respect to members of the Audit Committee and the MDCC). Each Board committee member qualifies as a non-employee director within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act).

I  CRITERIA FOR DIRECTOR INDEPENDENCE

For a director to be considered independent, the Board must determine that the director does not have any material relationships with Honeywell, either directly as a partner, shareowner, or officer of an organization that has a relationship with Honeywell, other than as a director and shareowner. Material relationships can include vendor, supplier, consulting, legal, banking, accounting, charitable, and family relationships, among others. The Board considered all relevant facts and circumstances in making its determinations, including the following:

 

 

No non-employee director or nominee receives any direct compensation from Honeywell other than under the director compensation program described in this Proxy Statement.

 

 

No immediate family member (within the meaning of the NYSE listing standards) of any non-employee director or nominee receives direct compensation from Honeywell other than compensation received for service as a non-executive employee.

 

 

No non-employee director or nominee is affiliated with Honeywell or any of its subsidiaries or affiliates.

 

 

No non-employee director or nominee is an employee of Honeywell’s independent accountants and no non-employee director or nominee (or any of their respective immediate family members) is a current partner of Honeywell’s independent accountants, or was within the last three years, a partner or employee of Honeywell’s independent accountants and personally worked on Honeywell’s audit.

 

 

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No non-employee director or nominee is a member, partner, or principal of any law firm, accounting firm, or investment banking firm that receives any consulting, advisory, or other fees from Honeywell.

 

 

No Honeywell executive officer is on the compensation committee of the board of directors of a company that employs any of our non-employee directors or nominees (or any of their respective immediate family members) as an executive officer.

 

 

No non-employee director or nominee (or any of their respective immediate family members) is indebted to Honeywell, nor is Honeywell indebted to any non-employee director or nominee (or any of their respective immediate family members).

 

 

No non-employee director or nominee is an executive officer of a charitable or other tax-exempt organization that received contributions from Honeywell.

 

 

Honeywell has commercial relationships (purchase and/or sale of products and services) with companies at which our directors serve or have served as officers within the past three years (Mr. Angove—Infor, Ms. Lieblein—General Motors, Mr. Paz—Express Scripts, and Ms. Washington—Gilead Sciences). In each case:

 

      —

The relevant products and services were provided on terms and conditions determined on an arm’s-length basis and consistent with those provided by or to similarly situated customers and suppliers;

 

      —

The relevant director did not initiate or negotiate the relevant transaction, each of which was in the ordinary course of business of both companies; and

 

      —

The combined amount of such purchases and sales was less than 0.05% of the consolidated gross revenue of each of Honeywell and the other company in each of the last three completed fiscal years. This level is significantly below the requirements of the NYSE listing standards for director independence, which uses a 2% of consolidated gross revenue threshold and applies it to each of purchases and sales rather than the combination of the two.

 

 

While a non-employee director’s or nominee’s service as an outside director of another company with which Honeywell does business would generally not be expected to raise independence issues, the Board also considered those relationships and confirmed the absence of any material commercial relationships with any such company. Specifically, those commercial relationships were in the ordinary course of business for Honeywell and the other companies involved and were on terms and conditions available to similarly situated customers and suppliers.

 

 

The above information was derived from Honeywell’s books and records and responses to questionnaires completed by the director nominees in connection with the preparation of this Proxy Statement.

 

 

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BOARD’S ROLE IN RISK OVERSIGHT

While senior management has primary responsibility for managing risk, the Board as a whole has responsibility for risk oversight with specific risk areas delegated to relevant Board committees who report on their deliberations to the Board. The specific risk areas of focus for the Board and each of its committees are summarized below.

 

      

Board/Committee

 

  

Primary Areas of Risk Oversight

      

 

Full Board

  

 

  Oversee the Company’s risk governance framework, including an enterprise-wide culture that supports appropriate risk awareness and the identification, escalation, and appropriate management of risk

 

  Integrity, ethics, and compliance with our Code of Business Conduct

 

  General strategic and commercial risks such as new product launch, capital spend, raw material price increases, foreign currency fluctuation, diminished customer demand, technology obsolescence, reductions to government spending, and a slowdown in economic growth

 

  Disruption, including disruptive technologies, emerging competition, and changing business models

 

  M&A integration and the M&A competitive landscape

 

  Legal risks such as those arising from litigation and intellectual property matters

 

Audit Committee

  

 

  Oversee the Company’s Enterprise Risk Management (ERM) and Crisis Incident Management programs

 

  Cybersecurity, including protection of customer and employee data, trade secrets, and other proprietary “crown jewel” information, ensuring the security of data on the cloud, persistent threats, and cyber risks associated with our own software products

 

  Accounting, controls, and financial disclosure

 

  Tax and liquidity management

 

  Product integrity and product security

 

  Vendor risk, including supply chain disruption

 

  Operational business continuity, including catastrophic risks such as natural disasters and plant accidents

 

Corporate Governance and Responsibility Committee (CGRC)

  

 

  Political contributions and lobbying

 

  Regulatory compliance, such as data privacy, sanctions and export compliance, government contracts compliance, and counterfeit parts

 

  Integrity and compliance programs and policies

 

  Geopolitical risk, including political, economic or military conflicts and tariffs

 

  Health, safety, environmental, product stewardship, and sustainability

 

Management Development and Compensation Committee (MDCC)

  

 

  Succession planning

 

  Compensation plans, programs, and arrangements and other employment practices and policies

 

  Recruitment and retention of key talent

 

  Labor compliance and progress in implementing our diversity goals and objectives

 

  Workplace respect and culture

 

  Workplace violence

 

Retirement Plans Committee

  

 

  Funding of our employee pension and saving plans

I  ENTERPRISE RISK MANAGEMENT PROGRAM

The Board uses the ERM program as a key tool for understanding the inherent risks facing Honeywell as well as assessing whether management’s processes, procedures, and practices for mitigating those risks are effective. The ERM assessment deployed by management is robust, based on both an enterprise-wide “top down” and “bottom up” view of commercial, strategic, legal, compliance, cyber, and reputational risks and strategies for mitigating those risks. In 2018, the ERM program included interviews with each director, each executive officer, and 57 risk owners across all businesses and functions.

 

 

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Both the Audit Committee and the full Board review the results of the annual ERM assessment. During the reviews, Honeywell’s CFO and General Counsel jointly present the results of the ERM assessment in a manner designed to provide full visibility into the risks facing Honeywell and how management is mitigating those risks, thereby enabling the Board to effectively exercise its oversight function. To facilitate continued monitoring and oversight by the Board, key risk areas identified during the ERM process and management’s associated mitigation activities become part of Board and/or committee meeting agendas for the following year.

Every three years, the ERM process includes one-on-one meetings with each Board member to discuss each director’s “top down” view of risks facing the enterprise, to solicit the director’s recommendations for improving the ERM process, and to ensure that the universe of risks and the metrics for identifying key risks, in terms of likelihood of occurrence and potential financial impact, is both realistic and appropriate. Feedback from the one-on-one interviews with the individual Board members is presented to the full Board and incorporated in our ERM program and risk mitigation efforts.

I  OVERSIGHT OF STRATEGY

One of the Board’s primary responsibilities is overseeing management’s establishment and execution of the Company’s strategy and the associated risks. The full Board oversees strategy and strategic risk through robust and constructive engagement with management, taking into consideration our key priorities, global trends impacting our business, regulatory developments, and disruptors in our industries. The Board’s oversight of our strategy primarily occurs through deep-dive annual reviews of the long-term strategic plans and annual operating plans of each of our businesses. During these reviews, management provides the Board with its view of the key commercial and strategic risks faced by each business unit, and the Board provides management with robust feedback on whether management has identified the key risks and is taking appropriate actions to mitigate risk. In addition to the review of each business’ strategic and annual plans, specific areas of risk and opportunity are tabled for further Board and/or committee discussion as specific risks arise or as requested by management or individual Board members to ensure additional Board engagement on the areas of risk that are most impactful to Honeywell’s strategic direction.

The Board’s oversight of strategy was prominent during the portfolio review process that ultimately led to the Garrett and Resideo spins. With the ultimate goal of achieving an outcome that would promote long-term shareowner value, the Board engaged in a rigorous, thorough, and unbiased review of our portfolio, devoting a substantial amount of time and resources to reviewing and pressure testing the financial and strategic analyses prepared by management and external advisors. The Board then monitored management’s execution of the spin transactions to ensure world-class execution.

I  OVERSIGHT OF HUMAN CAPITAL AND CULTURE

The Board and the MDCC provide oversight over human capital, with particular focus on culture, talent development and assessment as well as succession planning. Honeywell fosters a performance culture where all directors, officers, and employees are expected to uphold our foundational principles of Integrity and Ethics, Supporting Diversity, and Workplace Respect, and build meaningful careers based on our 8 Behaviors: Have a Passion for Winning, Be A Zealot for Growth, Think Big … Then Make It Happen, Act With Urgency, Be Courageous, Go Beyond, Inspire Greatness, and Become Your Best. The strength of our culture is essential to fulfilling our strategic vision, and the Board and the MDCC work with management to monitor compliance with the foundational principles and measure progress against the 8 Behaviors.

The Board also is closely engaged in the development and management of human capital. The Board’s involvement in leadership development and succession planning is systematic and ongoing, and the Board provides input on important decisions in each of these areas. The Board has primary responsibility for succession planning for the CEO and oversight over succession planning for other executive officer positions. The MDCC oversees the development of the process and protocols regarding succession plans for our executive officers, and annually reviews and updates these protocols to reflect input from Board members. To assist the Board, the CEO annually provides an assessment of senior managers and their potential to succeed to the position of CEO. In addition, the Board meets regularly with high-potential executives, both in small group and one-on-one settings.

BOARD PRACTICES AND PROCEDURES

I  BOARD AND COMMITTEE MEETINGS

 

 

Agenda. The Board and its committees perform an annual review of the agenda items to be considered for each meeting. During that review, each Board and committee member is free to raise topics that are not on the agenda at any meeting and to suggest items for inclusion on future agendas.

 

 

Number of Meetings and Attendance. In 2018, the Board held seven meetings and the committees of the Board collectively held 24 meetings. The Board had 100% meeting attendance, and the directors’ average attendance rate at meetings of the committees on which they have been appointed was 98%. Each of the directors participated in at least 75% of the aggregate of the total number of Board meetings held during the period for which he or she was a director, and the total number of meetings held by all Board committees on which he or she served (during the period that he or she served).

 

 

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Special Meetings. The Chairman, the Lead Director, the Chair of the Corporate Governance and Responsibility Committee, and at the request of two independent directors, the Corporate Secretary, are permanently empowered and authorized to call special meetings of the Board at any time and for any reason.

 

 

Board Meeting Materials. Each director is provided in advance with written material to be considered at every meeting of the Board and of the committees on which he or she is a member and has the opportunity to provide comments and suggestions.

I   SELF-EVALUATION

 

 

Objective. The Board and each of its committees conduct a comprehensive evaluation of their effectiveness throughout the year. Committee members have the opportunity to provide input directly to the Lead Director, committee chairs, or to management. A more formal self-evaluation is launched in January of each year and the feedback gleaned from the evaluation is utilized to facilitate and enable adequate Board refreshment and an appropriate evolution of Board skills, experiences, and perspectives specifically with a view toward eliciting feedback on whether our directors’ skills are matched to Honeywell’s strategic needs and its risk profile.

 

 

Process. The Lead Director, together with the Chair of the CGRC, are jointly responsible for leading the self-evaluation process – a process that includes the development and approval of the evaluation by the CGRC, its administration through a third party, summarization of the results, and its report out to the full Board on an anonymous basis.

 

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I   OTHER BEST PRACTICE BOARD PROCEDURES

 

 

Annual Shareowner Meeting Attendance. Our Corporate Governance Guidelines encourage all directors to attend our Annual Meeting of Shareowners. Generally, Board and committee meetings are held immediately preceding and following the Annual Meeting, with directors attending the Annual Meeting. All of our directors attended last year’s Annual Meeting.

 

 

Engagement with Management. The Board and its committees provide feedback to management, and management is required to answer questions raised by the directors during Board and committee meetings. Our senior management meets regularly with the Board, including yearly reviews of each business’ long-term strategic plan and annual operating plan.

 

 

Director Education. Our Board believes that director education is vital to the ability of directors to fulfill their roles and supports Board members in their continuous learning. Directors may enroll in continuing education programs at Honeywell’s expense on corporate governance and critical issues associated with a director’s service on a public company board. Our Board also hears regularly from management on numerous subjects, including investor sentiments, shareowner activism, regulatory developments, data privacy, and cybersecurity. In addition, the Board periodically participates in site visits to Honeywell’s facilities. For example, in 2018, Board members visited Honeywell’s new software center in Atlanta, Georgia, and attended its annual Technology Symposium.

 

 

Director Orientation. All new directors participate in our director orientation program during the first year on our Board. New directors receive an extensive suite of onboarding materials covering director responsibilities, corporate governance practices and policies, business strategies, leadership structure, and long-term plans. They then participate in a series of meetings over time with management representatives from all of our businesses and functional areas to review and discuss information about Honeywell’s strategic plans, financial statements, and key issues, policies, and practices. Based on feedback from our directors, we believe this graduated onboarding approach over the first year of Board service, coupled with participation in regular Board and committee meetings, provides new directors with a strong foundation for understanding our businesses, connects directors with members of management with whom they will interact, and accelerates their effectiveness to engage fully in Board deliberations. Directors have access to additional orientation and educational opportunities upon acceptance of new or additional responsibilities on the Board and in committees.

 

 

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BOARD COMMITTEES

The Board currently has four committees. All of the members of each committee are independent, non-employee directors. Each committee operates under a written charter, which is available on our website at www.honeywell.com (see “Investors/Corporate Governance/Board Committees”). The table below lists the current membership of each committee and the number of committee meetings held in 2018.

 

                     

Name

   Audit   

Corporate Governance and
Responsibility

 

  

Management Development
and Compensation

 

   Retirement Plans
                     

Mr. Angove

 

            

LOGO

 

  

LOGO

 

Mr. Ayer

 

       

LOGO

 

  

LOGO

 

    

Mr. Burke

 

  

LOGO

 

            

LOGO

 

Mr. Chico Pardo*

 

  

ex officio

 

  

LOGO

 

  

ex officio

 

  

LOGO

 

Mr. Davis

 

  

LOGO

 

       

Chair

 

    

Ms. Deily

 

  

LOGO

 

  

Chair

 

         

Mr. Gregg

 

  

LOGO

 

  

LOGO

 

         

Mr. Hollick

 

            

LOGO

 

  

LOGO

 

Ms. Lieblein

 

       

LOGO

 

  

LOGO

 

    

Mr. Paz

 

  

Chair

 

  

LOGO

 

         

Ms. Washington

 

  

LOGO

 

            

Chair

 

2018 Meetings

 

  

11

 

  

4

 

  

6

 

  

3

 

* Lead Director is an ex officio member of each committee on which he does not otherwise serve.

 

I  AUDIT COMMITTEE

  

  Appoint (subject to shareowner approval), and be directly responsible for the compensation, retention and oversight of, the firm that serves as independent accountants to audit our financial statements and to perform services related to the audit; this includes resolving disagreements between management and the independent accountants regarding financial reporting;

 

  Review the scope and results of the audit with the independent accountants;

 

  Consider the accountants’ independence;

 

  Review with management and the independent accountants, prior to filing, the annual and interim financial results (including Management’s Discussion and Analysis) to be included in Forms 10-K and 10-Q;

 

  Consider the adequacy and effectiveness of our internal control over financial reporting and auditing procedures;

 

  Review, approve, and establish procedures for the receipt, retention, and treatment of complaints received by Honeywell regarding accounting, internal control over financial reporting or auditing matters and for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters;

 

  Review material legal and compliance matters, the effectiveness of the Company’s integrity and compliance program and significant health, safety, or environmental incidents; and

 

  Together with the full Board, exercise oversight over management’s enterprise risk management (ERM) process and assess whether mitigation strategies for the risks identified through the ERM process are adequate, including for such risks as cybersecurity, import-export compliance, and foreign corrupt practices.

LOGO

LOGO   Audit committee oversight of independent accountants

The Audit Committee seeks to ensure the exercise of appropriate professional skepticism by the independent accountants by reviewing and discussing, among other things, management and auditor reports regarding significant estimates and judgments and the results of peer quality review and Public Company Accounting Oversight Board inspections of the independent accountants. The Audit Committee also reviews and pre-approves all audit and non-audit services provided to Honeywell by the independent accountants in order to determine that such services would not adversely impact auditor independence and objectivity. The Audit Committee also holds separate executive sessions at each in-person meeting with representatives of our independent accountants, and with Honeywell’s Chief Financial Officer and Vice President-Corporate Audit.

 

 

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CORPORATE

GOVERNANCE

 

 

I   CORPORATE GOVERNANCE AND

    RESPONSIBILITY COMMITTEE

    (CGRC)

 

  

  Identify and evaluate potential director candidates and recommend to the Board the nominees to be proposed by the Company for election to the Board;

 

  Review and make a recommendation to the Board regarding whether to accept a resignation tendered by a Board nominee who does not receive a majority of votes cast for his or her election in an uncontested election of directors;

 

  Review annually and recommend changes to the Corporate Governance Guidelines;

 

  Together with the Lead Director, lead the Board in its annual review of the performance of the Board and its committees;

 

  Review policies and make recommendations to the Board concerning the size and composition of the Board, the qualifications and criteria for election to the Board, retirement from the Board, compensation and benefits of non-employee directors, the conduct of business between Honeywell and any person or entity affiliated with a director, and the structure and composition of Board committees; and

 

  Review Honeywell’s policies and programs relating to health, safety, and environmental matters; sustainability; political contributions and lobbying, inclusion and diversity and such other matters, including the Company’s Code of Business Conduct, as may be brought to the attention of the committee regarding Honeywell’s role as a responsible corporate citizen.

LOGO

LOGO   Evaluation and Nomination of Director Candidates

Primary responsibility for identifying and evaluating director candidates and for recommending re-nomination of incumbent directors resides with the CGRC, which consists entirely of independent directors under applicable SEC rules and NYSE listing standards. Our independent Lead Director also is formally charged with responsibility for new director recruitment, including the responsibility of working with the Chairman and CEO, CGRC, and the full Board to help identify and prioritize the specific skill sets, experience, and knowledge that director candidates must possess. The CGRC and Lead Director then establish criteria for director nominees based on these inputs.

 

 

Nomination of New Candidates. Potential director candidates meeting the criteria established by the CGRC and Lead Director are then identified either by reputation, existing Board members, or shareowners. The CGRC is also authorized, at the expense of Honeywell, to retain search firms to identify potential director candidates, as well as other external advisors, including for purposes of performing background reviews of potential candidates. Search firms retained by the CGRC shall be provided guidance as to the particular experience, skills, or other characteristics that the Board is then seeking. The CGRC may delegate responsibility for day-to-day management and oversight of a search firm engagement to the Chairman of the Board and/or the Senior Vice President, Human Resources, Security and Communications.

 

    Candidates are interviewed multiple times by the Chairman and CEO, Lead Director, and other members of the Board to ensure that candidates not only possess the requisites skills and characteristics, but also the personality, leadership traits, work ethic, and independence of thought to effectively contribute as a member of the Board. After this process, the Board nominates the successful candidate for election to the Board at the Annual Meeting of Shareowners. Director candidates are principally identified and evaluated in anticipation of upcoming director elections and other potential or expected Board vacancies. From time to time, the Board fills vacancies in its membership which arise between annual meetings of shareowners using the same process described above.

 

 

Re-nomination of Incumbents. To ensure that the Board continues to evolve and be refreshed in a manner that serves the changing business and strategic needs of Honeywell, before recommending for re-nomination a slate of incumbent directors for an additional term, the CGRC also evaluates whether incumbent directors possess the requisite skills and perspective, both individually and collectively. This evaluation is based primarily on the results of the annual review it performs with the Board of the requisite skills and characteristics of Board members, as well as the composition of the Board as a whole, and the results of the Board’s annual self-evaluation.

 

 

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CORPORATE

GOVERNANCE

 

 

I   MANAGEMENT DEVELOPMENT

    AND COMPENSATION COMMITTEE

    (MDCC)

 

  

  Evaluate and approve executive compensation plans, policies, and programs, including review and approval of executive compensation-related corporate goals and objectives;

 

  Sole authority to retain and terminate a compensation consultant to assist in the evaluation of CEO or senior executive compensation;

 

  Review and approve the individual goals and objectives of the Company’s executive officers;

 

  Evaluate the CEO’s performance relative to established goals and objectives and, together with the other independent directors, determine and approve the CEO’s compensation level;

 

  Review and determine the annual salary and other remuneration (including incentive compensation and equity-based plans) of all other officers;

 

  Review and discuss with management, the Compensation Discussion and Analysis and other executive compensation disclosure included in this Proxy Statement;

 

  Produce the annual Committee Report included in this Proxy Statement;

 

  Form and delegate authority to subcommittees when appropriate;

 

  Review the management development program, including executive succession plans; and

 

  Review or take such other action as may be required in connection with the bonus, stock, and other benefit plans of Honeywell and its subsidiaries.

LOGO

LOGO   Compensation Committee Interlocks and Insider Participation

During fiscal year 2018, all of the members of the MDCC were independent directors, and no member was an employee or former employee of Honeywell. No MDCC member had any relationship requiring disclosure under “Certain Relationships and Related Transactions” on page 92 of this Proxy Statement. During fiscal year 2018, none of our executive officers served on the compensation committee (or its equivalent) or board of directors of another entity whose executive officer served on the MDCC.

LOGO   Administration of Executive Compensation Program

The MDCC administers the Executive Compensation Program, including determination of the elements of the program and their relative weighting, incentive compensation plan targets, and award amounts. When administering the program, the MDCC takes into account recommendations from senior management with regard to the overall executive compensation program and the individual compensation of the executive officers. As part of Honeywell’s annual planning process, the CEO, CFO, and Senior Vice President, Human Resources, Security and Communications develop targets for Honeywell’s incentive compensation programs and present them to the MDCC. These targets are reviewed by the MDCC to ensure alignment with our strategic and annual operating plans, taking into account the targeted year-over-year and multi-year improvements as well as identified opportunities and risks. The CEO recommends base salary adjustments and cash and equity incentive award levels for Honeywell’s other executive officers. These recommendations are based on performance appraisals (including an assessment of the achievement of pre-established financial and non-financial management objectives) together with a review of supplemental performance measures and prior compensation levels relative to performance.

LOGO   Retention of Independent Compensation Consultant

The MDCC has sole authority to retain a compensation consultant to assist the MDCC in the evaluation of director, CEO, or senior executive compensation, but only after considering all factors relevant to the consultant’s independence from management. In addition, the MDCC is directly responsible for approving the consultant’s compensation, evaluating its performance, and terminating its engagement. Under the MDCC’s established policy, its consultant cannot provide any other services to Honeywell without the MDCC’s approval, as delegated to the MDCC Chair. Since October 2009, the MDCC has retained Pearl Meyer (PM) as its independent compensation consultant.

The MDCC regularly reviews the services provided by its outside consultants and performs an annual assessment of the independence of its compensation consultant to determine whether the compensation consultant is independent. The MDCC conducted a specific review of its relationship with PM in 2019, and determined that PM is independent in providing Honeywell with executive compensation consulting and limited other employee benchmarking services, and that PM’s work for the MDCC did not raise any conflicts of interest, consistent with SEC rules and NYSE listing standards.

 

 

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GOVERNANCE

 

In making this determination, the MDCC reviewed information provided by PM on the following factors:

 

 

Any other services provided to Honeywell by PM;

 

 

Fees received by PM from Honeywell as a percentage of PM’s total revenue;

 

 

Policies or procedures maintained by PM to prevent a conflict of interest;

 

 

Any business or personal relationship between the individual PM consultants assigned to the Honeywell relationship and any MDCC member;

 

 

Any business or personal relationship between the individual PM consultants assigned to the Honeywell relationship, or PM itself, and Honeywell’s executive officers; and

 

 

Any Honeywell stock owned by PM or the individual PM consultants assigned to the Honeywell relationship.

In particular, the MDCC noted that PM did not provide any services to the Company or its management other than service to the MDCC and limited other employee benchmarking services. Unless approved by the MDCC Chair, it does not provide, directly or indirectly through affiliates, any non-executive compensation services, including, but not limited to, pension consulting or human resources outsourcing. The MDCC will continue to monitor the independence of its compensation consultant on a periodic basis.

PM compiles information and provides advice regarding the components and mix (short-term/long-term; fixed/variable; cash/equity) of the executive compensation programs of Honeywell and its Compensation Peer Group (see pages 43-44 of this Proxy Statement for further detail regarding the Compensation Peer Group) and analyzes the relative performance of Honeywell and the Compensation Peer Group with respect to stock performance and the financial metrics generally used in the programs. PM also provides the MDCC with information regarding emerging trends and best practices in executive compensation, as well as a specialized survey related to executive aircraft operations. In addition to information compiled by PM, the MDCC also reviews general survey data compiled and published by third parties. Neither the MDCC nor Honeywell has any input into the scope of or the companies included in these third-party surveys.

While the MDCC reviews information provided by PM regarding compensation paid by the Compensation Peer Group, as well as third-party survey data, as a general indicator of relevant market conditions, the MDCC does not target a specific competitive position relative to the market in making its compensation determination.

PM reports to the MDCC Chair, has direct access to MDCC members, attends MDCC meetings either in person or by telephone, and meets with the MDCC in executive session without management present.

 

I  RETIREMENT PLANS COMMITTEE

  

  Appoint the trustees for funds of the employee pension benefit plans of Honeywell and certain subsidiaries;

 

  Review funding strategies;

 

  Review investment policy for fund assets; and

 

  Oversee members of management that direct the investment of pension fund assets.

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CORPORATE RESPONSIBILITY

AND SUSTAINABILITY

 

CORPORATE RESPONSIBILITY AND SUSTAINABILITY

Honeywell takes seriously its commitment to corporate social responsibility, protection of our environment, and creation of sustainable opportunity everywhere it operates. This unwavering commitment underlies the principle that good business, economic growth, and social responsibility go hand-in-hand. Honeywell’s Environmental, Social, and Governance (ESG) initiatives are aligned with the Company’s long-term strategy, both informing and supporting Honeywell’s strategic plans. This alignment emerges from the inclusion of Environmental and Social (E&S) considerations in scenario planning and other strategic planning processes where E&S-related business risks and opportunities are identified and addressed.

The Board’s well-informed and proactive oversight extends to E&S initiatives in three principle ways:

 

 

The Corporate Governance and Responsibility Committee (CGRC) has primary jurisdiction for managing risks and opportunities associated with E&S, meeting at least once a year with the Corporate Vice President for Health, Safety, Environment, Product Stewardship and Sustainability (HSEPS), the Senior Vice President for Government Relations, the Senior Vice President for Human Resources, Security and Communications, and other leaders with responsibility for E&S to present and discuss various E&S topics.

 

 

Direct Audit Committee and Board engagement with E&S risk areas through a robust and comprehensive Enterprise Risk Management program.

 

 

Direct Board engagement on select E&S topics. In the past 12 months, management has presented to the Board on a variety of E&S initiatives such as employee diversity, sexual harassment compliance, safety, business continuity, and environmental matters.

PERFORMANCE CULTURE

Honeywell’s performance culture is defined by a set of 8 Behaviors. At their foundation is a commitment to Integrity and Ethics, Supporting Diversity, and Workplace Respect, fundamental values that underlie everything Honeywell does.

 

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Honeywell’s foundational principles reflect our vision and values and help our employees, representatives, contractors, consultants, and suppliers comply with a high standard of conduct globally. At their core is the Company’s Code of Business Conduct (the Code) that applies to all of our directors, officers and employees across the Company in all businesses and in all countries. The Code is a baseline set of requirements that enables employees to recognize and be aware of how to report integrity, compliance, and legal issues. In addition, the Code outlines our pledge to recognize the dignity of each individual, respect each employee, provide compensation and benefits that are competitive, promote self-development through training that broadens work-related skills, and value diversity of perspectives and ideas.

All employees are required to complete Code of Business Conduct training and certify each year that they will comply with the Code.

I  INTEGRITY AND ETHICS

The Code provides guidance and outlines expectations in a number of key integrity and compliance areas, including how employees should treat each other, conflicts of interest, Health, Safety, Environment, Product Stewardship and Sustainability (HSEPS), books and records, anti-corruption and proper business practices, trade compliance, insider trading, data privacy, respect for human rights, and the appropriate use of information technology and social media. In addition to the Code, Honeywell provides comprehensive training on key compliance topics, develops training scenarios, provides mechanisms for employees and third parties to report concerns (including anonymously), and ensures timely and fair reviews of integrity and compliance concerns through a best-in-class process to report and investigate allegations. Honeywell responds to 100% of reported allegations.

Moreover, the integrity and compliance program includes, among other elements, a Supplier Code of Conduct that flows down to Honeywell’s global supply chain to reinforce Honeywell’s expectation that its suppliers also will abide by our high standards of integrity and compliance, including our Conflict Minerals, Anti-Human Trafficking, Business Integrity, and Health, Safety, and Environmental policies. Suppliers are monitored via quality, ethics, and good manufacturing practices. When a supplier is found to be in violation of any Honeywell standard, they are either replaced or issued a corrective action plan. If the violation is related to unethical or illegal activities, the supplier is removed as a viable supply source.

Honeywell’s Code of Business Conduct applies to all directors, officers (including the Chief Executive Officer, Chief Financial Officer, and Controller) and employees. Amendments to or waivers of the Code of Business Conduct applicable or granted to any of Honeywell’s directors or executive officers will be published on our website. We foster a culture of integrity, ethics, and workplace respect by setting the tone at the top and by unambiguously and repeatedly reinforcing our expectations.

I  SUPPORTING DIVERSITY

The Board believes that its diversity (three women, three Hispanics, one African-American and two non-U.S.) and the diversity of Honeywell’s executive leadership (over 50% diverse by gender or ethnicity) supports our evolving business strategy. The Company’s commitment to inclusion and diversity enables better decision making, helps build competitive advantages, and furthers long-term success.

Honeywell has many inclusion and diversity councils and is involved in several professional organizations including the Society of Women Engineers, the National Society of Black Engineers, the Society of Hispanic Engineers, Anita Borg Institute, the Leadership Council on Legal Diversity, and NJ LEEP, a college access and success program serving students in the greater Newark, New Jersey, area. Honeywell leaders have won several prestigious diversity awards from the Society of Women Engineers, Diversity Journal, and NJ LEEP, as well as many others. The Company also introduced a new company-wide diversity program this January at our annual senior leadership meeting that focuses on the development and advancement of women leaders at Honeywell.

I  WORKPLACE RESPECT

Fostering a respectful workplace environment is a key priority for Honeywell. While the Company’s Code of Business Conduct and other policies have long prohibited harassment, in 2018, the Company issued a revised global harassment policy to reaffirm our commitment to maintain a respectful workplace for all. This new policy provides more explicit guidance on the expectations for each employee and makes clear that all employees who experience or witness harassment are expected to report such conduct. Our Chairman and CEO and our General Counsel communicated the launch of this updated policy in a video distributed to all employees, as well as through town hall meetings. The message continues to be reinforced through training programs, such as a sexual harassment training program that was developed in tandem with the revised policy and is being deployed globally.

 

 

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AND SUSTAINABILITY

 

SUSTAINABILITY

 

         

>60%

 

reduction in greenhouse gas intensity since 2013, exceeding our third public five-year goal and achieving 58 MT CO2e/$M at the end of 2018

 

>50%

 

energy efficiency improvement since 2013 to 132 MWh/$M (or 0.45 BBTU/$M) at the end of 2018

 

4,350

 

greenhouse gas and energy efficiency projects completed since 2010 saving an annualized $80M

 

127

 

million gallons of water saved in water-stressed regions since 2013 from 150 projects

 

0.42

 

total case incident rate (TCIR), a safety record over 4x better than the weighted average TCIR of the industries in which we operate

 

~3,000

 

acres remediated and restored as valuable community assets

         

Latest estimate of greenhouse gas intensity and energy efficiency pending external review.

Honeywell’s Sustainable Opportunity policy is based on the principle that by integrating health, safety, and environmental considerations into all aspects of its business, Honeywell:

 

 

Protects its people and the environment;

 

 

Drives compliance with all applicable regulations;

 

 

Achieves sustainable growth and accelerated productivity; and

 

 

Develops technologies that expand the sustainable capacity of our world.

Honeywell invents and manufactures technologies that address some of the world’s most critical challenges around energy, safety, security, productivity, and global urbanization.

The Honeywell Operating System (HOS), which drives sustainable improvements and the elimination of waste in manufacturing operations to generate exceptional performance, is a critical component in how the Company thinks about sustainability. HOS is a lean-based system with roles and ownership for all employees from the plant floor to the Board room to engage in careful planning and analysis, continuous employee engagement and improvement, and thorough follow through. Honeywell has built sustainability directly into HOS so the tools, personnel, activities, and culture are used to drive sustainability with the same focus used to drive other critical operational objectives, like quality, delivery, inventory, and cost. This ensures that sustainability is an integral part of the Honeywell work experience every day.

In addition, progress on our sustainability program is considered, along with other factors, in determining annual incentive compensation for senior leadership.

I  HEALTH, SAFETY, ENVIRONMENT, PRODUCT STEWARDSHIP, AND SUSTAINABILITY (HSEPS)

Honeywell’s HSEPS matters are managed by a global team of trained professionals with extensive knowledge and hundreds of years of collective experience in occupational health, chemistry, hydrology, geology, engineering, safety, industrial hygiene, materials management, and energy efficiency.

Honeywell’s Vice President of HSEPS reports to the Company’s Senior Vice President and General Counsel and has overall responsibility for HSEPS programs. A Corporate Energy and Sustainability Team, led by the Vice President of HSEPS, the Vice President of Global Real Estate, and the Director of Sustainability, helps drive the Company’s sustainability goals. Progress on these goals is reported to Honeywell’s CEO on a quarterly basis and is reviewed with the Board’s Corporate Governance and Responsibility Committee at least annually.

The Company utilizes a comprehensive HSEPS Management System based on recognized third-party-certified standards, including ISO 14001 and ISO 45001, and industry best practices. The system is fully integrated into HOS, the Company’s blueprint for continuous, sustainable operational improvement. Compliance with standards and regulatory requirements is monitored through a company-wide, HSEPS-led audit process. The timely development and implementation of process improvement and corrective action plans are closely monitored.

 

 

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AND SUSTAINABILITY

 

I  HIGHLIGHTS OF OUR ENVIRONMENTAL ACHIEVEMENTS

Greenhouse Gas Reduction and Energy Efficiency. Honeywell reports on its global greenhouse gas emissions publicly through CDP, various regulatory agencies, and its website, www.honeywell.com/citizenship/sustainability. A qualified third party has provided limited assurance per ISO 14064-3 of Honeywell’s 2011-2017 Scope 1 and Scope 2 greenhouse gas emissions inventories. Overall, our sustainability program has reduced our greenhouse gas intensity by more than 90%.

 

LOGO

Honeywell exceeded its first public goal to reduce global greenhouse gases by more than 30% and improve energy efficiency by more than 20% between 2004 and 2011.

 

LOGO

A second five-year goal, set to reduce greenhouse gas emissions by an additional 15% per dollar of revenue from 2011 levels, was met three years early.

 

LOGO

Honeywell exceeded its third goal to reduce greenhouse gas emissions per dollar of revenue from 2013 levels by an additional 10% by end of 2018.

Water and Waste. Honeywell has developed a global inventory of water usage in its manufacturing operations and implements water conservation projects in areas experiencing “water stress.” Since 2013, the Company has implemented 150 water conservation projects in “water stressed” areas, saving more than 127 million gallons. Each of our businesses is required to establish annual waste targets for reducing hazardous waste, as normalized by revenue, and diverting non-hazardous waste from landfills.

Safety. The safety of our employees, contractors and partners is a top priority, and we use our HOS-based approach to maintain our safety record. Our global TCIR (the number of occupational injuries and illnesses per 100 employees) was 0.42 at the end of 2018. According to the U.S. Bureau of Labor Statistics, the weighted average TCIR of the industries in which Honeywell operates is over 2.0. In other words, our safety record is four times better than the average of the industries in which we operate. Honeywell has received worker safety awards from governments and organizations around the world.

New Uses from Legacy Properties. Honeywell has legacy manufacturing operations dating back to the 19th century, like other companies with long, successful histories. The Company’s dedicated, cross-functional team resolves our cleanup responsibilities while at the same time creating shared value with our communities. Technical excellence, scientific rigor, and community engagement drive our work. We integrate site re-use with remediation to create solutions that are both protective and marketable. Over the last decade, we have made tremendous progress cleaning up and then helping to create reuse opportunities. At Honeywell, we do not believe that our cleanup is complete until the legacy property has been transformed into a valuable asset for the surrounding community. For example:

 

LOGO

Baltimore, Maryland. Former chemical plant was remediated and has become a new downtown community, Harbor Point. Harbor Point is now home to Exelon, a leading energy provider, Morgan Stanley, and Johns Hopkins Medicine.

 

LOGO

Syracuse, New York. Allied Chemical, Honeywell’s predecessor, operated on the shores of Onondaga Lake for about 100 years. At one point the lake was considered the “Most Polluted Lake” in North America. Honeywell completed the cleanup in 2017, and in 2015 was presented with an Audubon New York award for its “leadership in one of the most ambitious environmental reclamation projects in the United States.” About 1,800 acres of wetlands have already been restored and preserved and ~1.1 million native plants are being planted. More than 250 wildlife species are now calling these areas home, and more than 120 unique bird species have been identified in and around Onondaga Lake.

 

LOGO

Jersey City, New Jersey. Former 95-acre waste site in Jersey City has been cleaned up; in January 2019, the site was purchased by the City of Jersey City for Bayfront, a live-work-play development with waterfront access and 20+ acres of open space.

HONEYWELL HOMETOWN SOLUTIONS

Honeywell demonstrates its commitment to Corporate Social Responsibility and community involvement through Honeywell Hometown Solutions, our unique global corporate citizenship program that emphasizes STEM education, inclusion and diversity, sustainability, child safety, and humanitarian relief. These programs have delivered significant and meaningful results in communities around the world:

 

 

Approximately five million students have participated in Honeywell’s science, technology, engineering, and math (STEM) programs; 19 Atlanta teachers received computation and coding training at the new STEM Teacher Leadership Program at Georgia Tech, earning Georgia STEM School Certification; and Honeywell Control Labs in six universities in Turkey, Romania, and Indonesia are focused on loT technologies, serving 10,000+ students.

 

 

Students have received unique learning opportunities and educators gain valuable teaching tools to promote environmental science in the classroom through partnerships with environmental organizations in Mexico and the United States.

 

 

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About one million U.S. students have learned potentially life-saving lessons to help avoid abduction and preventable childhood injuries with KidSmartz, and about three million students have received Safe Kids at Home fire, burns, and scalds safety training in China, India, and Malaysia.

 

 

Nearly 600 homes were repaired for low-income families, the elderly, and the disabled in the U.S. and Mexico.

 

 

In 2018, Honeywell employees received financial assistance to help recover from Hurricanes Florence and Michael in the eastern United States. Honeywell also donated $1.5 million in safety products and financial relief to support emergency personnel in North and South Carolina. Over the years, relief efforts supported employees and communities after Hurricanes Harvey, Irma, Maria, Matthew, and Sandy in the U.S.; an earthquake in Central Mexico; wildfires in Fort McMurray, Alberta, Canada; flooding in Louisiana and Romania; typhoons in the Philippines; and the Great Japan Earthquake and Tsunami.

For more information about our Sustainability and Corporate Citizenship programs, please visit our website at www.honeywell.com/citizenship.

POLITICAL ENGAGEMENT AND CONTRIBUTIONS

Engagement in the political process is critical to our success. Our future growth depends on forward-thinking legislation and regulation that makes society safer and more energy efficient and improves public infrastructure. We strive always to engage responsibly in the political process and to ensure that our participation is fully consistent with all applicable laws and regulations, our principles of good governance, and our high standards of ethical conduct.

We have developed a strong team of government relations professionals based in Washington, D.C. who drive our lobbying programs and initiatives. Our government relations organization is led by the Senior Vice President, Global Government Relations. Members of the government relations organization work from a global network of offices.

I  MANAGEMENT AND BOARD OVERSIGHT

The law department oversees our political engagement. The Senior Vice President, Global Government Relations reports to the Company’s Senior Vice President and General Counsel (General Counsel) and also works closely with the Vice President, Global Compliance whose organization ensures compliance with our political spending policy. The General Counsel, Senior Vice President, Global Government Relations and Vice President, Global Compliance, meet regularly with the Chairman and Chief Executive Officer and his leadership team about legislative, regulatory, and political developments.

With respect to Board oversight, our public policy efforts, including all lobbying activities, political contributions and payments to trade associations and other tax-exempt organizations, are the responsibility of the CGRC, which consists entirely of independent, non-employee directors. Each year, the CGRC receives an annual report on the Company’s policies and practices regarding political contributions. The CGRC’s oversight of our political activities ensures compliance with applicable law and our Code of Business Conduct as well as alignment with our policies. In addition, each year the Senior Vice President, Global Government Relations reports to the CGRC on trade association political spending and to the full Board of Directors on our global lobbying and government relations program.

I  POLITICAL CONTRIBUTIONS

We have not made any political contributions using corporate funds since at least 2009 and have no present intention of making such political contributions in the future. Even before 2009, any such contributions were extremely rare and for minimal amounts of less than $5,000. Any use of corporate funds for political contributions require the prior approval of the Company’s General Counsel. In addition, membership in any 501(c)(6) trade association that receives more than $50,000 in membership dues from Honeywell in any fiscal year is subject to prior approval of the Company’s General Counsel and its Senior Vice President, Global Government Relations, and these trade associations are instructed not to use our funds for political contributions at the federal, state or local levels.

In 2013 and again in 2019, we revised and expanded our disclosure on our policy and procedures for political activity and contributions as well as for trade association membership. This disclosure is available on Honeywell’s website at www.honeywell.com (see “Investors/Corporate Governance/Political Contributions”).

In 2018, the Center for Political Accountability (CPA), a non-profit, non-partisan organization, assessed our disclosure for its annual CPA-Zicklin Index of Corporate Political Disclosure and Accountability (CPA-Zicklin Index). The CPA-Zicklin Index measures the transparency, policies, and practices of the S&P 500. Our enhanced disclosure on political lobbying and contributions ranked us in the “First Tier” of the 2018 CPA-Zicklin Index for the fifth year in a row. Our enhanced disclosure was also influenced by feedback received from our largest shareowners during our shareowner outreach initiative in which we met with shareowners to discuss their views on several topics, including Honeywell’s disclosure on lobbying and political contributions.

For additional detail on Honeywell’s policies and processes on political contributions and lobbying, please see our response to shareowner proposal number 5 on page 90.

 

 

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DIRECTOR

COMPENSATION

 

DIRECTOR COMPENSATION

The Corporate Governance and Responsibility Committee (CGRC) reviews and makes recommendations to the Board regarding the form and amount of compensation for non-employee directors. Directors who are employees of Honeywell receive no compensation for service on the Board. Honeywell’s director compensation program is designed to enable continued attraction and retention of highly qualified directors and to address the time, effort, expertise, and accountability required of active Board membership.

ELEMENTS OF COMPENSATION

In general, the CGRC and the Board believe that annual compensation for non-employee directors should consist of both a cash component, designed to compensate members for their service on the Board and its committees, and an equity component, designed to align the interests of directors and shareowners.

I  ANNUAL COMPENSATION

 

 

Board Retainer

 

  

 

 $100,000 per annum paid in quarterly installments

 

 

Lead Director Compensation

 

  

 

 $35,000 per annum - in addition to Board Retainer

 

 

Committee Membership Compensation

 

  

 

 $10,000 per annum for each committee membership ($15,000 per annum for members of the Audit Committee)

 

 

Committee Chair Compensation

 

  

 

 $20,000 per annum - in addition to committee membership compensation

 

Common Stock Equivalents

  

 

 Each year, $60,000 in Common Stock equivalents is automatically credited to each director’s account in the Deferred Compensation Plan for Non-Employee Directors. Dividend equivalents are credited with respect to these amounts.

 

 These amounts are credited annually but payment is deferred until termination of Board service. Payments are made in cash, as either a lump sum or in equal annual installments.

 

 

Annual Equity Grants

  

 

 Each non-employee director receives an annual equity grant with a target value of $100,000 consisting of 50% restricted stock units (RSUs) and 50% options to purchase shares of Common Stock at a price per share equal to the fair market value of a share of Common Stock on the date of grant, which is the date of the Annual Meeting of Shareowners.

 

 Stock options vest in equal annual installments over the four years following the grant date. The options also become fully vested at the earliest of the director’s retirement from the Board on or after the mandatory retirement age set by the Board and in effect on the date of grant (currently age 75), death, disability or change in control, as set forth in the 2016 Stock Plan for Non-Employee Directors of Honeywell (the Non-Employee Director Plan) and the relevant award agreements.

 

 The RSUs vest on the earliest of the third anniversary of the date of grant, the director’s death or disability, or change in control.

 

I  DEFERRED COMPENSATION

A non-employee director may elect to defer all or any portion of his or her annual cash retainers and fees, until a specified calendar year or termination of Board service. Compensation is credited to their account in the Deferred Compensation Plan for Non-Employee Directors. Amounts credited either accrue interest (3.38% for 2018) or are valued as if invested in a Honeywell Common Stock fund or one of the other funds available to participants in our employee savings plan as elected by the participant. The unit price of the Honeywell Common Stock fund is increased to take dividends into account. In addition to payments at the termination of Board service, upon a change of control, as defined in the Non-Employee Director Plan, a director may receive, pursuant to a prior election, a lump-sum payment for amounts deferred before 2006.

Mr. Chico Pardo participates in the legacy Honeywell Inc. Non-Employee Directors Fee and Stock Unit Plan. The last fee deferral under this plan occurred on December 1, 1999. Since that date, deferred amounts are increased only by dividend equivalents. Payment will be made to the participating director in whole shares of Common Stock following the earlier of a change in control or the director’s termination of Board service for any reason, in one payment or annual installments, as elected by the director.

 

 

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DIRECTOR

COMPENSATION

 

I  RESTRICTED STOCK UNIT GRANT UPON ELECTION TO BOARD

Upon their election to the Board, new non-employee directors receive a one-time grant of 3,000 RSUs that vest on the earliest of the fifth anniversary of continuous Board service, death, disability, or change in control. During this period, the director will receive dividend equivalents that will be automatically reinvested into additional RSUs which vest according to the same schedule as the underlying RSUs to which they relate. The director may defer the receipt of the RSUs on substantially the same terms and conditions as Honeywell officers with respect to new grants of RSUs.

I  CHARITABLE MATCH

Honeywell also matches, dollar for dollar, any charitable contribution made by a director to any qualified charity, up to an aggregate maximum of $25,000 per director, per calendar year. For 2018, matching charitable contributions were made by Honeywell in the amounts of $25,000 for each of Messrs. Ayer, Burke, Chico Pardo, Gregg, Hollick and Paz and Ms. Deily and in the amount of $15,223 for Ms. Lieblein.

I  OTHER BENEFITS

Directors may utilize available Company aircraft for travel to and from Board and committee meetings, and non-employee directors are provided with $350,000 in business travel accident insurance. In addition, they are also eligible to elect to receive $100,000 in term life insurance. Directors elected to the Board after September 2008 are responsible for paying premiums for term life insurance which they elect to receive. Mr. Hollick is also eligible to participate in a Company-provided medical plan in the UK under a legacy arrangement not available to other directors.

2018 DIRECTOR COMPENSATION TABLE

 

                                                       

Director Name

   Fees
Earned
or Paid in
Cash($)(1)
     Stock
Awards($)(2)(3)
     Option
Awards($)(2)(4)
     Change in Pension
Value and
Nonqualified Deferred
Compensation
Earnings($)(5)
     All Other
Compensation($)(6)
     Total($)  
                                                       

Duncan B. Angove

  

 

$173,434

 

  

 

$50,116

 

  

 

$50,314

 

  

 

$        

 

  

 

$         4

 

  

 

$273,868

 

William S. Ayer

  

 

$180,000

 

  

 

$50,116

 

  

 

$50,314

 

  

 

$        

 

  

 

$25,004

 

  

 

$305,434

 

Kevin Burke

  

 

$185,000

 

  

 

$50,116

 

  

 

$50,314

 

  

 

$        

 

  

 

$25,004

 

  

 

$310,434

 

Jaime Chico Pardo

  

 

$215,000

 

  

 

$50,116

 

  

 

$50,314

 

  

 

$        

 

  

 

$27,335

 

  

 

$342,765

 

D. Scott Davis

  

 

$205,000

 

  

 

$50,116

 

  

 

$50,314

 

  

 

$10,319

 

  

 

$  1,991

 

  

 

$317,740

 

Linnet F. Deily

  

 

$205,000

 

  

 

$50,116

 

  

 

$50,314

 

  

 

$        

 

  

 

$30,035

 

  

 

$335,465

 

Judd Gregg

  

 

$185,000

 

  

 

$50,116

 

  

 

$50,314

 

  

 

$        

 

  

 

$25,004

 

  

 

$310,434

 

Clive Hollick

  

 

$180,000

 

  

 

$50,116

 

  

 

$50,314

 

  

 

$11,399

 

  

 

$45,339

 

  

 

$337,168

 

Grace D. Lieblein

  

 

$180,000

 

  

 

$50,116

 

  

 

$50,314

 

  

 

$        

 

  

 

$15,227

 

  

 

$295,657

 

George Paz

  

 

$205,000

 

  

 

$50,116

 

  

 

$50,314

 

  

 

$        

 

  

 

$25,004

 

  

 

$330,434

 

Bradley Sheares(7)

  

 

$103,846

 

  

 

$        

 

  

 

$        

 

  

 

$21,695

 

  

 

$     431

 

  

 

$125,972

 

Robin L. Washington

  

 

$194,287

 

  

 

$50,116

 

  

 

$50,314

 

  

 

$        

 

  

 

$         4

 

  

 

$294,721

 

Mr. David M. Cote was an executive director until April 23, 2018, when he retired from the Board. He did not receive any additional compensation for services provided as a director.

 

(1)

Includes all fees earned, whether paid in cash or deferred under the Deferred Compensation Plan for Non-Employee Directors (including amounts treated as deferred in the Honeywell Common Stock Fund).

 

 

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DIRECTOR

COMPENSATION

 

 

(2)

The following table reflects all outstanding stock awards and option awards held at December 31, 2018 by each of the listed individuals:

 

                     
 

  Director Name

 

  

 

 

 

 

Outstanding
Stock Awards

 

 

 
 

 

    

 

Outstanding
Option Awards

 

 
 

 

                     

      

 

  Mr. Angove

  

 

3,554

 

  

 

2,297

 

 

  Mr. Ayer

  

 

4,689

 

  

 

11,744

 

 

  Mr. Burke

  

 

1,264

 

  

 

31,036

 

 

  Mr. Chico Pardo

  

 

1,264

 

  

 

31,036

 

 

  Mr. Davis

  

 

1,264

 

  

 

20,536

 

 

  Ms. Deily

  

 

1,264

 

  

 

20,536

 

 

  Mr. Gregg

  

 

1,264

 

  

 

25,786

 

 

  Mr. Hollick

  

 

1,264

 

  

 

31,036

 

 

  Ms. Lieblein

  

 

1,264

 

  

 

17,464

 

 

  Mr. Paz

  

 

1,264

 

  

 

36,286

 

 

  Dr. Sheares(7)

  

 

 

  

 

 

 

  Ms. Washington

  

 

1,264

 

  

 

17,464

 

 

(3)

The amounts set forth in this column represent the aggregate grant date fair value of stock awards computed in accordance with FASB ASC Topic 718. The fair value of each stock award is estimated on the date of grant by averaging the high and low of the Company’s stock price on the day of grant. Stock awards of 335 shares were made to non-employee directors in April 2018 with a value of $149.60 per share.

(4)

The amounts set forth in this column represent the aggregate grant date fair value of option awards computed in accordance with FASB ASC Topic 718. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. Option awards of 2,200 shares were made to non-employee directors in April 2018 with a Black-Scholes value of $22.87 per share. A more detailed discussion of the assumptions used in the valuation of option awards made in fiscal year 2018 may be found in Note 19 of the Notes to the Financial Statements in the Company’s Form 10-K for the year ended December 31, 2018.

(5)

Amounts included in this column reflect above-market earnings on deferred compensation from pre-2006 deferrals. Amounts invested in cash under the Deferred Compensation Plan for Non-Employee Directors are credited with the same rate of interest that applies to executives under the Honeywell Salary and Incentive Award Deferral Plan for Selected Employees. Deferrals for the 2006 plan year and later earn a rate of interest, compounded daily, based on the Company’s 15-year cost of borrowing. This rate is subject to change annually and was 3.38% for 2018. Deferrals for the 2005 plan year earn a rate of interest, compounded daily, which was set at an above-market rate before the beginning of the plan year and is subject to change annually. Deferrals for the 2004 plan year and prior plan years earn a rate of interest, compounded daily, that was set at an above-market rate before the beginning of each plan year. This rate is fixed until the deferral is distributed.

(6)

Includes amounts described in “Charitable Match” and “Other Benefits” above.

(7)

Dr. Sheares retired from the Board on April 23, 2018.

STOCK OWNERSHIP GUIDELINES

 

 

Director stock ownership guidelines have been adopted under which each non-employee director, while serving as a director of Honeywell, must hold Common Stock (including shares held personally, RSUs, and/or Common Stock equivalents) with a market value of at least five times the annual cash retainer (or $500,000). Directors have five years from election to the Board to attain the prescribed ownership threshold. All current directors (other than Mr. Angove who joined the Board in February 2018) have attained the prescribed ownership threshold.

 

In addition, directors must hold net gain shares from option exercises for one year. “Net gain shares” means the number of shares obtained by exercising the option, less the number of shares the director sells to cover the exercise price of the options and pay applicable taxes.

    

 

On average, Honeywell non-employee directors held, as of December 31, 2018, Common Stock with a market value of 29x the annual cash retainer, reflecting their deep commitment to shareowner value creation

 

 

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PROPOSAL NO. 2:

ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

 

PROPOSAL 2: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

Honeywell seeks a non-binding advisory vote from its shareowners to approve the compensation of its Named Executive Officers (NEOs) as described in the Compensation Discussion and Analysis section beginning on page 38 and the Executive Compensation Tables section beginning on page 64. This vote is commonly known as “Say-on-Pay,” and the Board has adopted a policy of providing for an annual Say-on-Pay vote.

We encourage you to read the Compensation Discussion and Analysis and Executive Compensation Tables section to learn more about our executive compensation programs and policies that reflect changes made over the past two years in response to shareowner feedback. The Board believes that its 2018 compensation decisions and our executive compensation programs align the interests of shareowners and executives by emphasizing variable, at-risk compensation largely tied to measurable performance goals utilizing an appropriate balance of near-term and long-term objectives.

This vote is not intended to address a specific item of compensation, but rather our overall compensation policies and procedures related to the NEOs. Because the Say-on-Pay vote is advisory, it will not be binding upon the Board. However, the Board will take into account the outcome of the vote and feedback from discussions with shareowners when considering future executive compensation arrangements.

The Board recommends that shareowners vote in favor of the following resolution:

“RESOLVED, that the Company’s shareowners approve, on an advisory basis, the compensation of the Named Executive Officers, as disclosed in the Company’s Proxy Statement for the 2019 Annual Meeting of Shareowners pursuant to the executive compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 2018 Summary Compensation Table and the other related tables and disclosure.”

 

LOGO

YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.

 

 

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COMPENSATION DISCUSSION

AND ANALYSIS

 

COMPENSATION

DISCUSSION AND ANALYSIS

 

TABLE OF

CONTENTS

 

 

|

 

 

Named Executive Officers

  

 

Pg 39

 

 

 

|

 

 

Performance Summary

  

 

Pg 39

 

 

 

|

 

 

Our Compensation Program

  

 

Pg 41

 

   

Philosophy and Approach

  

 

41

 

    Program Design and Link to Business Strategy and Performance      42  
    How Compensation Decisions are Made      42  
    Engagement with Shareowners on Compensation      43  
    Compensation Peer Group      43  
    Performance Relative to Peers      45  
    |     2018 Compensation Decisions      Pg 47  
    2018 Total Annual Direct Compensation for Each NEO      48  
    Elements of 2018 Total Annual Direct Compensation      49  
    CFO Succession      50  
    |   2018 Annual Incentive Compensation Plan Decisions      Pg 50  
    |   2018 Long-Term Incentive Compensation Decisions      Pg 56  
    |     Other Compensation and Benefit Programs      Pg 59  
    Retirement Plans      59  
    Nonqualified Deferred Compensation Plans      59  
    Benefits and Perquisites      59  
    |     Compensation Practices and Policies      Pg 60  
    |     Risk Oversight Considerations      Pg 61  
    Stock Ownership Guidelines      62  
    Recoupment/Clawback      62  
    Tax Deductibility of Executive Compensation       63  
    Pledging and Hedging Transactions in Company Securities       63  
    |     Management Development and Compensation Committee Report      Pg 63  

Non-GAAP Financial Measures

This Proxy Statement, including the Compensation Discussion and Analysis, contains financial measures presented on a non-GAAP basis. Honeywell’s non-GAAP financial measures used in this document are as follows: segment profit, on an overall Honeywell basis, a measure by which we assess operating performance, which we define as operating income adjusted for certain items as presented in Appendix A; segment margin, on an overall Honeywell basis, which we define as segment profit divided by sales; organic sales growth, which we define as sales growth less the impacts from foreign currency translation, acquisitions and divestitures for the first 12 months following transaction date, and impacts from adoption of the new accounting guidance on revenue from contracts with customers that arise solely due to non-comparable accounting treatment of contracts existing in the prior period; adjusted free cash flow, which we define as cash flow from operations less capital expenditures and which we adjust to exclude the impact of separation costs related to the Garrett and Resideo spins, if and as noted in the document; adjusted free cash flow conversion, which we define as adjusted free cash flow divided by net income attributable to Honeywell, excluding pension mark-to-market expenses, debt refinancing expenses, separation costs related to the spins, the 4Q17 U.S. tax legislation charge, and adjustments to such charge, if and as noted in Appendix A; and adjusted earnings per share, which we adjust to exclude pension mark-to-market expenses, as well as for other components, such as debt refinancing expense, separation costs related to the spins, the 4Q17 U.S. tax legislation charge, adjustments to such charge, and after-tax segment profit contribution from Garrett and Resideo in the periods noted in Appendix A, net of spin indemnification impacts assuming both indemnification agreements were effective in such periods, if and as noted in Appendix A. Other than references to reported earnings per share, all references to earnings per share in this document are so adjusted. The respective tax rates applied when adjusting earnings per share for these items are identified in the reconciliations presented in Appendix A. Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our ongoing operations and in the analysis of ongoing operating trends. These metrics should be considered in addition to, and not as replacements for, the most comparable GAAP measure. Refer to Appendix A for reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures.

Other Definitions

 

Peer Median Reflects Compensation Peer Group Median

Multi-Industry Peer Median Includes EMR, GE, MMM, and UTX.

Peer Median Net Income, EPS Reflect Adjusted (Non-GAAP) Results.

Adjusted Net Income Before Interest = Non-GAAP Net Income + After-Tax Interest

Net Investment = Book Value Of Equity + Total Debt

ROIC = Adjusted Net Income Before Interest ÷ Net Investment (2-Point Average)

ROA = Adjusted Net Income ÷ Total Assets (2-Point Average)

ROE = Adjusted Net Income ÷ Total Shareowner Equity (2-Point Average)

 

 

 

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COMPENSATION DISCUSSION

AND ANALYSIS

 

OUR NAMED EXECUTIVE OFFICERS

 

 

LOGO

Thomas A. Szlosek, our former Senior Vice President and Chief Financial Officer (retired in 2018) is also reported in this Proxy Statement as a Named Executive Officer as required by SEC rules.

PERFORMANCE SUMMARY

LOGO   DELIVERED STRONG OPERATIONAL PERFORMANCE IN 2018 WHILE EXECUTING TWO COMPLEX SPINS

In 2018, Honeywell delivered on our commitments and grew sales, segment margin, adjusted earnings per share (EPS), and adjusted free cash flow (FCF) year over year, while executing two complex spins that refocused the portfolio. We continued to build on our track record of performance as evidenced by our results versus the key metrics we use as the basis for our executive compensation programs. In 2018, we delivered:

 

 

Organic sales growth of 6%

 

 

Adjusted earnings per share growth of 12%

 

 

60 basis points of segment margin expansion

 

 

100% adjusted free cash flow conversion; 22% adjusted free cash flow growth

The table below showcases our success on these metrics over the past three years (2016-2018):

 

LOGO

 

 

Reconciliation, notes, and definitions of non-GAAP financial measures used in the Compensation Discussion and Analysis section and elsewhere in this Proxy Statement, other than as part of disclosure of target levels, can be found on page 38 or in Appendix A.

 

 

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COMPENSATION DISCUSSION

AND ANALYSIS

 

As laid out during our 2017 Investor Conference, below are our long-term financial commitments. Since then, we’ve continued to foster a culture within Honeywell of doing what we say we will do, or as we call it, the “say/do ratio.” In 2018, we over-delivered on these financial commitments to shareowners and continued to make investments in the businesses through research and development, capital expenditures, and M&A.

 

       

CEO Priority

 

 

Metric

 

 

Long-Term

Commitment

 

 

2018 Result

 

 1 

 

  

 

Accelerate    

Organic Growth    

 

Organic sales

growth

 

Low-to-mid

single digit

 

6%

 2 

 

  

 

Expand Margins /    

Improve Cash    

Conversion    

 

 

 

 

 

Basis points (bps)

expansion

 

 

 

 

30 - 50 bps

 

 

 

60 bps

 

 

 

 

 

Adjusted FCF

conversion

 

 

 

 

~100%

 

 

 

100%

 

 3 

 

  

 

Become a    

Software-    

Industrial    

Company    

 

 

 

Connected software

sales growth

  ~20%  

14%

 

 

 

 4 

  

 

 

 

More Aggressive    

Capital    

Deployment    

 

 

 

Dividend growth in line with EPS growth

Disciplined M&A

Share repurchases from residual capacity

High ROI capital expenditures

 

  $7.6B

Reconciliation, notes, and definitions of non-GAAP financial measures used in the Compensation Discussion and Analysis section and elsewhere in this Proxy Statement, other than as part of disclosure of target levels, can be found on page 38 or in Appendix A.

LOGO   STRATEGICALLY DEPLOYED CAPITAL WHILE MAINTAINING BALANCE SHEET FLEXIBILITY

Our recent financial performance and smart capital deployment decisions will benefit shareowners in the long term. Given the market environment in 2018, we continued to execute a balanced capital deployment strategy consisting of the following actions:

 

 

Announced a 10% dividend increase, our ninth consecutive double-digit increase since 2010, while completing two spins that reduced sales by nearly 20%;

 

 

Repurchased $4.0 billion in Honeywell shares, reducing the weighted average share count by over 2%;

 

 

Deployed more than $0.8 billion to high ROI capital expenditures;

 

 

Deployed over $0.5 billion to the Transnorm and Ortloff Engineers, Ltd. acquisitions; and

 

 

Paid down over $1.5 billion of long-term and net short-term debt.

 

LOGO

 

 

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COMPENSATION DISCUSSION

AND ANALYSIS

 

OUR COMPENSATION PROGRAM

I  PHILOSOPHY AND APPROACH

Our executive compensation program creates long-term shareowner value through four key objectives:

 

LOGO

Attract and Retain World-Class Leadership Talent with the skills and experience necessary to develop and execute business strategies, drive superior financial results, and nimbly adapt and react to constantly evolving end market conditions in an enterprise with our scale, breadth, complexity, and global footprint;

 

LOGO

Emphasize Variable, At-Risk Compensation with an appropriate balance of near-term and long-term objectives that align executive and shareowner interests;

 

LOGO

Pay for Superior Results and Sustainable Growth by rewarding and differentiating among executives based on the achievement of enterprise, business unit, and individual objectives as well as efforts to advance Honeywell’s long-term growth initiatives; and

 

LOGO

Manage Risk Through Oversight and Compensation Program Design Features and Practices that balance short-term and long-term incentives, are not overly leveraged, and cap maximum payments.

The key factors that shape the MDCC’s overall assessment of performance and appropriate levels of compensation include (in no particular order):

 

 

Operational and financial performance — for the entire corporation and the relevant business group;

 

 

Aggressiveness of each executive’s financial goals and targets compared to peers as well as the business/macroeconomic conditions in which our businesses operate;

 

 

Each executive’s long-term leadership potential and associated retention risk;

 

 

Execution against strategic initiatives and the impact of investments that will benefit financial performance in future years;

 

 

The senior executive succession plan;

 

 

Stock price performance and total shareowner return;

 

 

Trends and best practices in executive compensation; and

 

 

Peer group comparisons, including performance, pay levels, and related practices.

The MDCC reviews these factors over various time frames during the year to ensure a strong linkage between pay and performance. In addition, the MDCC reviews each NEO’s four-year compensation history in total and each element of total annual direct compensation. The MDCC also reviews projected benefit payments under Honeywell’s retirement and deferred compensation plans, and any previously granted awards or grants. This enables the MDCC to understand how each element of compensation interacts with the other elements and to see how current compensation decisions may affect future wealth accumulation and executive retention.

Honeywell’s senior executives are recognized as industry leaders with backgrounds, depth of experience, and management skills that are highly attractive to competitors. The MDCC prefers to address critical retention and succession risks through the existing compensation program. It reserves the right, if deemed necessary, to take appropriate compensation actions that it believes are in the best interest of the Company and its shareowners to strengthen the succession plan and guard against the loss of key talent, especially during critical transition periods.

 

 

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COMPENSATION DISCUSSION

AND ANALYSIS

 

I  PROGRAM DESIGN AND LINK TO BUSINESS STRATEGY AND PERFORMANCE

In 2018, the evolutionary changes in our compensation program, which began in 2016, were fully implemented. The following table provides an overview of our executive compensation program and demonstrates the strong link between each of our direct compensation elements and our business strategy and performance.

 

               

Pay Element

      

Description

  

Link to Strategy and Performance

               

 

Base Salary

    

 

 Base salaries are determined based on scope of responsibility, years of experience, and individual performance.

 

  

 

  To attract and compensate high-performing and experienced leaders at a competitive level of cash compensation.

 

               

 

Annual Incentive Compensation Plan (ICP)

    

 

 80% based on formulaic determination against pre-established financial metrics. 20% based on assessment of individual performance.

  

 

  To motivate and reward executives for achieving annual corporate, business, and functional goals in key areas of financial and operational performance.

 

               

 

Long-Term Incentive Compensation (LTI)

    

 

 Three-Year Performance Plan:

 

 CEO and the whole Leadership Team*: ~ 50% of annual LTI

 

 Stock-based PSUs

 

 Relative TSR along with key financial metrics

 

  

 

  Focuses executives on the achievement of specific long-term financial performance goals directly aligned with our operating and strategic plans. TSR portion pays based on three-year return from stock price appreciation and dividends vs. peers.

 

           
    

 

 Stock Options:

 

 CEO and the whole Leadership Team*: ~ 25% of annual LTI

  

 

  Directly aligns the interest of our executives with shareowners. Options only have value for executives if operating performance results in stock price appreciation.

 

           
        

 

 Restricted Stock Units:

 

 CEO and the whole Leadership Team*: ~ 25% of annual LTI

 

  

 

  Strengthens key executive retention over relevant time periods to ensure consistency and execution of long-term strategies.

* Leadership Team refers to all direct CEO staff officers at the time annual LTI awards were made in 2018. The mix of LTI awards to Mr. Gregory P. Lewis differed from those of the Leadership Team in 2018 as he was not a member of the Leadership Team at the time 2018 annual LTI awards were made. His future LTI awards will be allocated between elements based on the same mix that applies to the other Leadership Team members.

I  HOW COMPENSATION DECISIONS ARE MADE

Decision making over executive compensation rests with the MDCC, which holds six regularly scheduled meetings each year. Each meeting includes an executive session comprised solely of independent directors, and those meetings are attended by the MDCC’s independent compensation consultant. Meeting agendas contain items proposed by either management or the MDCC members.

In carrying out its responsibilities, the MDCC balances a number of important considerations, including:

 

 

The importance of aligning pay with Company and individual performance;

 

 

The need to attract, retain, and reward executives with a proven track record of delivering consistent financial results and driving “seed-planting” initiatives that will create sustainable long-term shareowner value;

 

 

The complex multi-industry and global nature of our businesses and the importance of growth outside of the United States for future success;

 

 

The positioning of pay relative to the competitive market; and

 

 

The importance of maintaining and executing on a thorough and rigorous succession planning process.

To create long-term shareowner value, the MDCC believes that Honeywell’s compensation programs must be financially competitive and structured to drive sustained performance against our strategic and financial goals and objectives. The MDCC is focused on maintaining a compensation program for Honeywell that emphasizes variable, at-risk compensation and has an appropriate balance of near-term and long-term objectives.

 

 

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COMPENSATION DISCUSSION

AND ANALYSIS

 

I  ENGAGEMENT WITH SHAREOWNERS ON COMPENSATION

The MDCC also considers shareowner feedback and the results of the annual advisory vote on executive compensation in making determinations about the structure of Honeywell’s pay program, or whether any changes to the program should be considered. We routinely engage with our shareowners to better understand their views on our governance and compensation practices. Our Lead Director and MDCC Chair often participate in these engagements. The feedback we received from shareowners enabled the Board to better understand shareowners’ perspectives on our executive compensation programs, which resulted in significant changes to our programs that have been phased in over the last two years and fully implemented in 2018. These changes led to over 92% of our shareowners voting in favor of ’Say on Pay’ in 2017 and 2018. In 2018, we extended meeting invitations to 54 of our shareowners to discuss Environmental, Social, and Governance (ESG) matters, including our executive compensation program, representing 50% of our common shares outstanding. Our invitation was accepted by 18 different shareowners (representing 29% of our common shares outstanding), and 24 separate meetings were held, many of which included the participation of our Lead Director. No additional executive compensation program modifications were made in 2018 as a result of these meetings.

I  COMPENSATION PEER GROUP

To ensure appropriate levels of executive officer compensation, and the alignment of pay and performance, the MDCC believes it is important to understand how Honeywell compares to other relevant companies. As such, the MDCC reviews executive officer compensation, and assesses Honeywell’s financial performance, against two sets of peer data: 1) a group of 16 companies that we call our “Compensation Peer Group,” and 2) a smaller subset of the Compensation Peer Group that we call our “Multi-Industry Peer Group.”

Multi-Industry Peer Group. This peer group is made up of Emerson Electric Co. (EMR), General Electric Company (GE), 3M Company (MMM), and United Technologies Corporation (UTX), companies against whom we frequently compete for investor dollars. Each of these four companies is a multi-industrial company that has broadly overlapping institutional ownership, is covered by the same set of Wall Street research analysts that cover Honeywell, and operate in a similarly diverse set of end markets on a global basis.

Compensation Peer Group. The companies included in the broader Compensation Peer Group are reviewed by the MDCC on an annual basis with a focus on companies that have one or more of the following attributes:

 

 

Business operations in the industries and markets in which Honeywell participates;

 

 

Similar revenue and/or market capitalization;

 

 

Similar breadth of portfolio and complexity;

 

 

Global scope of operations and/or diversified product lines; and

 

 

Demonstrated competitor for executive talent.

No changes were made to the Multi-Industry Peer Group or to the Compensation Peer Group companies in 2018.

 

 

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The following table lists relevant comparative information for the Compensation Peer Group companies for 2018:

 

                       
   

Mkt Cap ($M)

(12/31/2018)

    Total Assets ($M)     Sales ($M)     # Employees                      

Total Shareholder Return (12/31/2018)

 

       

Company Name

                    1 Year     3 Years     5 Years     10 Years        
                       
 

Honeywell International Inc.

 

    $  97,807       $  57,773       $  41,802       114,000             -8     43     68     437  
 

Multi-Industry Peer Group (4)

                       
 

3M Company

 

 

$110,949

 

 

 

$  36,500

 

 

 

$  32,765

 

 

 

93,516

 

       

 

-17

 

 

36

 

 

54

 

 

329

 
                                                                                     
 

Emerson Electric Co.

 

 

$  37,413

 

 

 

$  20,390

 

 

 

$  17,408

 

 

 

87,500

 

       

 

-12

 

 

38

 

 

0

 

 

122

 
                                                                                     
 

General Electric Company

 

 

$  65,845

 

 

 

$309,129

 

 

 

$121,615

 

 

 

283,000

 

       

 

-55

 

 

-73

 

 

-68

 

 

-34

 
                                                                                     
 

United Technologies Corporation

 

 

$  91,933

 

 

 

$134,211

 

 

 

$  66,501

 

 

 

240,200

 

       

 

-15

 

 

19

 

 

5

 

 

153

 
                                                                                     
 

Honeywell Percentile Rank

 

 

77

 

 

41

 

 

42

 

 

38

       

 

100

 

 

100

 

 

100

 

 

100

 
                                                                                     
 

Honeywell TSR Rank Order

 

               

 

1

 

 

 

1

 

 

 

1

 

 

 

1

 

 
 

Other Compensation Peers (12)

                       
 

The Boeing Company

 

 

$183,143

 

 

 

$117,359

 

 

 

$101,127

 

 

 

153,000

 

       

 

12

 

 

142

 

 

169

 

 

879

 
                                                                                     
 

Caterpillar Inc.

 

 

$  74,985

 

 

 

$  78,509

 

 

 

$  54,722

 

 

 

104,000

 

       

 

-18

 

 

105

 

 

63

 

 

280

 
                                                                                     
 

Deere and Company

 

 

$  47,521

 

 

 

$  70,108

 

 

 

$  37,318

 

 

 

74,413

 

       

 

-3

 

 

109

 

 

84

 

 

391

 
                                                                                     
 

Eaton Corporation plc

 

 

$  29,757

 

 

 

$  31,092

 

 

 

$  21,609

 

 

 

99,000

 

       

 

-10

 

 

46

 

 

6

 

 

281

 
                                                                                     
 

General Dynamics Corporation

 

 

$  46,558

 

 

 

$  45,408

 

 

 

$  36,193

 

 

 

105,600

 

       

 

-21

 

 

21

 

 

81

 

 

245

 
                                                                                     
 

Illinois Tool Works Inc.

 

 

$  42,036

 

 

 

$  14,870

 

 

 

$  14,768

 

 

 

48,000

 

       

 

-22

 

 

46

 

 

68

 

 

362

 
                                                                                     
 

Ingersoll-Rand Plc

 

 

$  22,411

 

 

 

$  17,915

 

 

 

$  15,668

 

 

 

49,000

 

       

 

4

 

 

75

 

 

63

 

 

680

 
                                                                                     
 

Johnson Controls International plc

 

 

$  27,398

 

 

 

$  48,797

 

 

 

$  31,400

 

 

 

122,000

 

       

 

-20

 

 

-9

 

 

-27

 

 

131

 
                                                                                     
 

Lockheed Martin Corporation

 

 

$  74,474

 

 

 

$  44,876

 

 

 

$  53,762

 

 

 

105,000

 

       

 

-16

 

 

30

 

 

103

 

 

337

 
                                                                                     
 

Phillips 66

 

 

$  39,726

 

 

 

$  54,302

 

 

 

$111,461

 

 

 

14,200

 

       

 

-12

 

 

16

 

 

29

 

 

0

 
                                                                                     
 

Raytheon Company

 

 

$  43,640

 

 

 

$  31,864

 

 

 

$  27,058

 

 

 

67,000

 

       

 

-17

 

 

31

 

 

88

 

 

293

 
                                                                                     
 

Schlumberger Limited

 

 

 

$  49,964

 

 

 

$  70,507

 

 

 

$  32,815

 

 

 

100,000

 

       

 

-45

 

 

-44

 

 

-54

 

 

4

 
 

All Compensation Peers (16)

                       
 

Honeywell Percentile Rank

    89     61     62     77           82     64     67     88  
                                                                                     
 

Honeywell TSR Rank Order

                  4       7       6       3    

Source: S&P Capital IQ

TSR is calculated by the growth in capital from purchasing a share in the company and assuming the dividends and share distributions received from any spins are reinvested in the applicable company at the time they are paid.

 

 

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COMPENSATION DISCUSSION

AND ANALYSIS

 

I  PERFORMANCE RELATIVE TO PEERS

2018 Performance

The following graphs show our performance versus the median of each of the Compensation Peer Group and the Multi-Industry Peer Group for three key metrics in 2018. Specifically, we’ve selected adjusted earnings per share and adjusted free cash flow growth because those are the primary measures used in our annual incentive plan (ICP). Adjusted earnings per share growth for the Compensation Peer Group was higher than Honeywell’s in 2018 predominately due to performance in the Aerospace, Defense, and Machinery sectors. Honeywell’s adjusted EPS growth in 2018 also was impacted by dilution from the spins of Garrett Motion Inc. (Garrett) and Resideo Technologies, Inc. (Resideo) in September and October of 2018, respectively. Excluding the after-tax segment profit contribution from Garrett in the fourth quarter of 2017 and Resideo in November and December 2017, net of spin indemnification impacts, Honeywell’s adjusted EPS growth would have been approximately 15.1% in 2018.

 

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Source: S&P Capital IQ

15.1% adjusted EPS V% is calculated by comparing our 2018 adjusted earnings per share against our adjusted 2017 earnings per share after removing the spin segment profit contribution from Garrett in the fourth quarter of 2017 and the Resideo segment profit contribution in November and December 2017, net of spin indemnification impacts, at a tax rate of 17.2% and ending weighted average share count for 2017 of 772 million (impact of $0.19).

Three-Year Cumulative Growth (2016 – 2018)

The MDCC also reviews Honeywell’s performance relative to the Compensation Peer Group and Multi-Industry Peer Group over multi-year time periods. The following graphs show our performance versus the median of each of the Compensation Peer Group and the Multi-Industry Peer Group for three key metrics over the three-year period ending in 2018 that the MDCC reviewed. Three-year reported sales growth and adjusted EPS growth for the Compensation Peer Group was high driven by 2018 performance of companies focused primarily in the Aerospace, Defense, and Machinery sectors. Likewise, Honeywell’s Aerospace segment grew sales 9% organically in 2018, with our Defense and Space sales growing 15%.

 

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Source: S&P Capital IQ

TSR is calculated by the growth in capital from purchasing a share in the company and assuming the dividends and share distributions received from any spins are reinvested in the applicable company at the time they are paid.

Reconciliation, notes, and definitions of non-GAAP financial measures used in the Compensation Discussion and Analysis section and elsewhere in this Proxy Statement, other than as part of disclosure of target levels, can be found on page 38 or in Appendix A.

 

 

 

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Three-Year Average Return (2016 – 2018)

The MDCC also carefully considers several different ratios that are important measures of Honeywell’s earnings performance compared to both the Compensation Peer Group Median and the Multi-Industry Peer Group Median. Shareowners have told us that they regard ROIC as a particularly important metric because it shows how well management is balancing delivery of short-term results against long-term sustainable growth. Honeywell’s three-year average ROIC was 17.2%, which significantly outperformed both the Multi-Industry Peer Group Median and the Compensation Peer Group Median.

 

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Source: S&P Capital IQ

Cumulative Total Shareowner Return (TSR)

 

LOGO

 

 

Total Shareowner Return Percentile Rank Versus Peers

             

One-Year

 

Three-Year

 

Five-Year

 

Ten-Year

             
       

Multi-Industry Peers = 100th Percentile

 

Multi-Industry Peers = 100th Percentile

 

Multi-Industry Peers = 100th Percentile

 

Multi-Industry Peers = 100th Percentile

       

Compensation Peers = 82nd Percentile

 

Compensation Peers = 64th Percentile

 

Compensation Peers = 67th Percentile

 

Compensation Peers = 88th Percentile

Source: S&P Capital IQ

TSR is calculated by the growth in capital from purchasing a share in a company and assuming the dividends and share distributions received from any spins are reinvested in the applicable company at the time they are paid.

 

 

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COMPENSATION DISCUSSION

AND ANALYSIS

 

2018 COMPENSATION DECISIONS

The table below summarizes the 2018 compensation actions that are consistent with our commitment to align pay with Company performance and the interests of our shareowners. Details about the compensation decisions made in 2018 are more fully discussed later in this Compensation Discussion and Analysis.

 

                         

        

                 Pay Element   CEO (Mr. Adamczyk)   Other NEOs   Comments
                         
LOGO   LOGO      

 

Base Salary

 

 

  Base salary was increased to $1,600,000 (up 6.67%).

 

 

  Merit increases averaged 2.6%.

 

  Mr. Lewis received a promotional base salary increase of 36% when he became CFO in August of 2018.

 

 

 Messrs. Lewis and James are first-year NEOs.

LOGO      

 

Annual Incentive Compensation Plan (ICP)

 

 

  ICP Target: 175% of base salary.

 

  Earned award paid at 149% of target, reflecting application of the ICP formula and strong 2018 performance.

 

 

  ICP Target: 115% of base salary for Mr. Mahoney; 100% for other NEOs.

 

  Average earned award paid to other NEOs in place at year-end was 141% of individual target awards.

 

  Mr. Szlosek was not paid an ICP award for 2018 due to his retirement.

 

 

 80% of payout based on Company performance against the two pre-established ICP metrics of adjusted EPS and adjusted free cash flow. For Mr. Mahoney, performance against Aerospace net income and adjusted free cash flow goals counted toward half of his calculated award.

 

 20% of payouts were determined based on the MDCC’s qualitative assessment of individual performance and accomplishments discussed on pages 52-55.

  LOGO      

 

Performance Plan Units

– annual grant

 

 

  Performance Stock Units (PSUs) represented 50% of 2018 annual LTI.

 

 

  PSUs represented 50% of 2018 annual LTI for other NEOs in position at the time of the annual LTI grant in February 2018.

 

  For Mr. Lewis, three-year performance cash units were awarded, which represented 31% of his 2018 annual LTI.

 

 

 PSU earned awards will be determined at the end of the three-year performance period based on four equally weighted metrics: total revenue, average return on investment (ROI), average segment margin rate and total shareowner return (TSR) relative to the Compensation Peer Group.

 

 Difference in weighting and form for Mr. Lewis was due to his award being made prior to him becoming an officer of the Company. His award will be determined at the end of the three-year performance period based on the same three financial metrics and goals that apply to the other NEOs, but without the TSR metric.

     

 

Stock Options

– annual grant

 

 

 Represented 25% of 2018 annual LTI.

 

 

  Represented 25% of 2018 annual LTI for other NEOs in position at the time of the annual LTI grant in February 2018.

 

  For Mr. Lewis, represented 35% of his 2018 annual LTI.

 

 

 2018 stock option grants were issued with a strike price of $155.39.

 

 Difference in weighting for Mr. Lewis due to award being made prior to him becoming an officer of the Company.

     

 

Restricted Stock Units (RSUs)

– annual grant

 

 

 Represented 25% of 2018 annual LTI.

 

 

  Represented 25% of 2018 annual LTI for other NEOs in position at the time of the annual LTI grant in February 2018.

 

  For Mr. Lewis, represented 33% of his 2018 annual LTI.

 

 

 RSUs issued to the CEO and Other NEOs in position at the time of the annual LTI grant vest over six years.

 

 RSUs issued to Mr. Lewis prior to him becoming an officer will vest three years from the grant date.

 

 Difference in weighting and vesting period for Mr. Lewis due to award being made prior to him becoming an officer of the Company.

 

 

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COMPENSATION DISCUSSION

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I  2018 TOTAL ANNUAL DIRECT COMPENSATION FOR EACH NAMED EXECUTIVE OFFICER (NEO)

The table below reflects each of the pay elements that the MDCC regularly considers as part of its decision-making process. This table does not replace the Summary Compensation Table shown on page 64, as required by the SEC.

 

                                                      

NEO

   Position   Base
Salary
    Annual
Incentive
Plan (ICP)(1)
    2018-2020
Performance
Plan Units(2)
    Stock
Options(3)
    Restricted
Stock
Units(4)
    Total Annual
Direct
Compensation
 
                                                      

Darius Adamczyk

  

Chairman and CEO

 

$

1,571,154

 

 

 

$4,100,000

 

 

 

$6,375,720

 

 

$

3,185,655

 

 

$

3,185,495

 

 

 

$18,418,024

 

Gregory P. Lewis

  

SVP and Chief Financial Officer

 

$

578,981

 

 

 

$   730,000

 

 

 

$   525,000

 

 

$

591,250

 

 

$

554,742

 

 

 

$  2,979,973

 

Timothy O. Mahoney

  

President and CEO, Aerospace

 

$

992,788

 

 

 

$1,840,000

 

 

 

$3,057,076

 

 

$

1,523,060

 

 

$

1,522,822

 

 

 

$  8,935,746

 

Krishna Mikkilineni

  

SVP, Engineering and IT

 

$

810,673

 

 

 

$   930,000

 

 

 

$2,632,028

 

 

$

1,307,845

 

 

$

1,305,276

 

 

 

$  6,985,822

 

Mark R. James

  

SVP, HR, Security and Communications

 

$

774,231

 

 

 

$1,080,000

 

 

 

$2,354,112

 

 

$

1,173,040

 

 

$

1,165,425

 

 

 

$  6,546,808

 

Thomas A. Szlosek(5)

  

Retired Chief Financial Officer

 

$

560,481

 

 

 

$             

 

 

 

$2,713,768

 

 

$

1,348,050

 

 

$

1,336,354

 

 

 

$  5,958,653

 

 

(1)

Annual ICP payouts determined 80% based on a calculation against pre-set goals. The remaining 20% was based on individual assessments.

(2)

Grant date value of performance stock units (PSUs) issued for a new three-year performance period for all NEOs except Mr. Lewis. The amount for Mr. Lewis is the grant date value of performance cash units for the same three-year performance period, made prior to him becoming an officer of the Company.

(3)

All stock option grants awarded to NEOs vest ratably over 4 years, have a 10-year term, and are subject to stock ownership and post-exercise holding requirements.

(4)

Restricted stock units vest over six-year periods and are subject to stock ownership and post-vesting holding requirements. The grant to Mr. Lewis, made prior to him becoming an officer of the Company, vests in three years.

(5)

2018-2020 Performance Plan Units and Stock Options granted to Mr. Szlosek in 2018 were forfeited upon his retirement.

 

 

 

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COMPENSATION DISCUSSION

AND ANALYSIS

 

I  ELEMENTS OF 2018 TOTAL ANNUAL DIRECT COMPENSATION

 

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AND ANALYSIS

 

I  CFO SUCCESSION

On August 3, 2018, Mr. Gregory P. Lewis succeeded Mr. Thomas A. Szlosek as the Company’s Senior Vice President and Chief Financial Officer (CFO). In connection with this promotion, the MDCC approved a compensation arrangement for Mr. Lewis with an initial base salary of $700,000 and target annual incentive compensation opportunity of 100% of base salary. No additional LTI was awarded at the time of his promotion beyond the regular annual executive LTI grants made to him as a non-officer executive employee in February 2018. Mr. Lewis did not enter into a formal employment contract in connection with his promotion to CFO.

Concurrent with Mr. Lewis’ promotion on August 3, 2018, Mr. Szlosek entered into a retirement agreement after 14 years of service with the Company. Under the terms of this agreement, Mr. Szlosek agreed to provide transitional services through the end of 2018 and extend the duration of his post-employment non-compete and non-solicitation agreements from one to three years. While providing transition services during this period, Mr. Szlosek agreed not to accept an outside position with another company without Honeywell’s written consent and to make himself available to Honeywell’s CEO and CFO as needed. In consideration of the expanded restrictive covenants and transitional services, Mr. Szlosek was permitted to retain restricted stock unit awards previously granted to him, which would vest in the future on their original vesting dates subject to any applicable Company performance conditions. No regular compensation or consulting fees were paid during the transition period, and all other unvested LTI awards held by Mr. Szlosek as of his retirement date were forfeited, including PSUs and stock options awarded to him in February 2018.

2018  ANNUAL INCENTIVE COMPENSATION PLAN DECISIONS

For 2018, 80% of the ICP awards earned by the NEOs were determined formulaically based on financial targets established by the MDCC. 20% of the awards were determined based on the MDCC’s qualitative assessment of individual performance against objectives for 2018 and the significant accomplishments listed on pages 52-55. The attainment percentage for both the formulaic and individual qualitative portions of the award can range from 0% to 200%.

Individual 2018 ICP Target Amounts for the NEOs were determined by multiplying their 2018 calendar year base salary by their individual ICP target award percentage. Individual ICP target percentages for 2018 were:

 

 

Mr. Adamczyk: 175%

 

 

Mr. Mahoney: 115%

 

 

Other NEOs: 100%

I  ICP FORMULAIC PORTION (80% OF TARGET AWARD)

The following table describes each of the financial ICP metrics and the relative weighting percentage for each metric that is included in the formulaic portion of the ICP payout (i.e., 80%) for each NEO.

For Messrs. Adamczyk, Lewis, Mikkilineni and James (the Corporate NEOs), the formulaic portion of their ICP award was based on Company-wide (Total Honeywell) adjusted EPS and adjusted FCF. For Mr. Mahoney (the Aerospace NEO), in addition to Total Honeywell adjusted EPS and adjusted FCF, the MDCC also established financial targets for Aerospace net income and adjusted FCF which were given equal weighting. Mr. Szlosek was not considered for a 2018 ICP award as a result of his retirement.

 

                          

Metric

   Significance    ICP Weighting (Formulaic)  
                   
       
   Corporate NEOs        Aerospace NEO  
                          

 

Adjusted EPS

  

 

 Viewed as the most important measure of near-term profitability that has a direct impact on stock price and shareowner value creation.

  

 

 

 

50%

 

 

    

 

 

 

25%

 

 

 

Aerospace

Net Income

  

 

 Business unit measure of near-term profitability and contribution to overall Company performance.

  

 

 

 

—  

 

 

    

 

 

 

25%

 

 

 

Total Honeywell

Adjusted Free Cash Flow

  

 

 Reflects quality of earnings and incremental cash generated from operations that may be reinvested in our businesses, used to make acquisitions, or returned to shareowners in the form of dividends or share repurchases.

  

 

 

 

50%

 

 

    

 

 

 

25%

 

 

 

Aerospace

Adjusted Free Cash Flow

  

 

 Business unit contribution to overall Company adjusted FCF performance.

  

 

 

 

—  

 

 

    

 

 

 

25%

 

 

Total

                                  100%                                  100%  

 

 

50

 

LOGO

 

 

|  Notice and Proxy Statement  |  2019

 

 


Table of Contents
06  |   

 

COMPENSATION DISCUSSION

AND ANALYSIS

 

For 2018, the Total Honeywell targets for adjusted EPS and adjusted FCF were based on the midpoint of the external guidance that was communicated to our shareowners during our January 2018 earnings call, as adjusted to exclude the impact of the spins for the portions of the year they were no longer a part of Honeywell (i.e., three months for Garrett and two months for Resideo).

 

                           

ICP Goal

  2017
Actual
  2018 ICP Goal
(Target)
  v. 2017
Actual
 

Basis for

2018 Goals

      2018 Threshold
(50% Payout)
  2018 Maximum
(200% Payout)
                           

 

Adjusted EPS

    

 

 

$7.15

 

 

$7.65

  +7.0%  

 Midpoint of initial guidance range communicated to investors in January 2018, adjusted for spin impact to guidance

    $6.12   $9.18
                       

 

Total Honeywell

Adjusted Free Cash Flow

  $4.935 billion   $5.366 billion   +8.7%     $4.293 billion   $6.439 billion