DEF 14A 1 d836977ddef14a.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.                 )

 

 

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  Preliminary Proxy Statement
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  Definitive Proxy Statement
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Honeywell International Inc.

(Name of Registrant as Specified In Its Charter)

 

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LOGO


Table of Contents

 

LOGO

LEAD DIRECTOR

LETTER TO SHAREOWNERS

 

 

LOGO

 

Jaime Chico Pardo

Lead Director

 

March 12, 2020

 

Dear Shareowners,

 

It has been my privilege to serve on Honeywell’s Board of Directors over the last two decades. With my tenure as a member of the Board drawing to a close on April 27, 2020, I would like to share with you some perspectives on Honeywell’s remarkable growth and why I have tremendous confidence in the Company’s future.

 

Today, Honeywell is one of the world’s largest and most admired companies. Its evolution into the premier software-industrial multinational is the result of skilled management, a willingness to make shrewd investments in the future, and an unrelenting commitment to innovation. Since 2000, Honeywell has achieved a total shareowner return in excess of 400% and stock price appreciation of more than 200%. This consistent performance over time reflects the Company’s excellent leadership – exemplified over my tenure by Dave Cote and Darius Adamczyk – augmented by sound business strategies and a culture of performance and innovation.

 

Since becoming Honeywell CEO three years ago, Darius has driven a vigorous transition of the Company into the software-industrial space that will put Honeywell in a favorable competitive position for the next several decades. At the same time, Darius has led the acceleration of organic growth while expanding margins, and he has enhanced the Company’s customer focus, breakthrough innovation, and digital business models. Darius and his leadership team work very closely with Honeywell’s Board of Directors to further the interests of all key Company stakeholders, including customers, employees, investors, and communities.

 

I am proud to have served since 2016 as Honeywell’s independent Lead Director. The Lead Director plays a crucial role in the Company’s governance structure, serving as de facto leader of the independent Directors and as a single focal point charged with ensuring the Board as a whole is providing independent oversight of management. Over the past several years, the Board has continually strengthened the role of independent Lead Director.

 

I could not be more pleased that my fellow Board member and former United Parcel Service Chairman and CEO Scott Davis is succeeding me as Honeywell’s independent Lead Director. During his tenure at UPS, Scott led the Company through its own transformation into a technology Company. He possesses significant expertise in management, strategy, finance, and operations gained over 25 years at UPS and prior positions. Scott is also currently a director of Johnson & Johnson and previously served on the Board of the Federal Reserve Bank of Atlanta – as Chairman in 2009 – and as a director of EndoChoice Holdings.

 

 

LOGO

 

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LOGO

 

 

Beyond the Lead Director position, I can assure you that the entire Honeywell Board is focused on active oversight, prudent governance, and representing your interests both today and in the future. Engaging with shareowners remains a key priority and a vital channel for Honeywell to hear what is most important to those who invest in the Company. These engagement efforts also provide a high degree of transparency and help build trust and support among shareowners for senior management’s vision for the Company’s future. I have participated in countless meetings with shareowners during my tenure on the Board, and the valuable, thought-provoking findings from these engagements have been shared with and evaluated by the entire Board.

 

Honeywell’s approach to conducting its business in a socially responsible manner includes monitoring and mitigating its environmental impact, acting with unwavering integrity and purpose, and investing in the communities in which it operates worldwide. The Board takes an active and engaged role in the design of this global framework to ensure the outcomes are both measurable and effective. In 2019, Honeywell rose 23 spots, to number 13, on Forbes’ World’s Most Reputable Companies for Corporate Responsibility list. This significant rise and welcome recognition is a reflection of the Company’s investments in people, communities, and best-in-class governance.

 

The Board is briefed at least quarterly on key corporate social responsibility initiatives, and like my peers, I have been pleased to learn how Honeywell is bringing about positive change with programs to boost STEM education, inclusion and diversity, safety, environmental stewardship, and humanitarian relief in communities throughout the world.

 

Honeywell’s employees are the Company’s biggest asset. Our employees think big about how best to help customers solve their most pressing challenges. While many technological advances over the past century have shaped the Honeywell we know, it is the innovations the Company is currently developing that will determine its fortunes in the decades to come. “The Future Is What We Make It” is more than a Company tagline. It’s the prevailing mindset inside Honeywell that empowers its employees to forge new solutions to some of the world’s most challenging and critical problems and lead at the forefront of the digital revolution.

 

Thank you for allowing me the honor to serve you and the interests of all shareowners on Honeywell’s Board of Directors over the last 20 years.

 

Sincerely,

 

 

 

LOGO

 

Jaime Chico Pardo

Lead Director

 

 

 

 

LOGO

 

 

 

 

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LOGO

NOTICE OF ANNUAL

MEETING OF SHAREOWNERS

 

DATE   

April 27, 2020

 

TIME   

10:30 a.m. EDT

 

PLACE   

Kimpton Tryon Park Hotel

303 South Church Street, Charlotte, NC 28202

 

RECORD DATE   

Close of business on February 28, 2020

 

MEETING AGENDA   

 

  Election to the Board of Directors of the 13 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 2020

 

  If properly raised, two shareowner proposals described on pages 91 and 94 of the Proxy Statement

 

  Transact any other business that may properly come before the meeting

 

LOGO

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 2019 Annual Report and how to vote online.

 

LOGO

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.

 

LOGO

If you wish to attend the Annual Meeting in person, you must call +1 (844) 318-0137 on or prior to April 9, 2020 to pre-register and obtain an admission ticket.

You will be required to present the registration confirmation and government-issued photo identification to enter the Annual Meeting. For more details, please see “Additional Information — Attendance at the Annual Meeting” on page 101 of the Proxy Statement.

We are monitoring coronavirus (COVID-19) developments and the related recommendations and protocols issued by public health authorities and federal, state, and local governments. If we determine that alternative Annual Meeting arrangements are advisable or required, then we will announce our decision and post additional information on our Investors Relations website at investor.honeywell.com. Please check this website in advance of the Annual Meeting date if you are planning to attend in person.

This Notice of Annual Meeting of Shareowners and related Proxy Materials are being distributed or made available to shareowners beginning on or about March 12, 2020.

By Order of the Board of Directors,

 

 

LOGO

Victor J. Miller

Vice President, Deputy General Counsel,

Corporate Secretary, and Chief Compliance Officer

 

 

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

In Person

You can vote your shares by attending the Annual Meeting. To attend, you must call +1 (844) 318-0137 on or prior to April 9, 2020 to pre-register and obtain an admission ticket.

 

 

 

LOGO

 

|  Notice and Proxy Statement  |  2020

 


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

     

Nominees for Election

   

10

     

Nomination and Election Process

   

16

    02     |   Corporate Governance   Pg   17
     

Shareowner Outreach and Engagement

   

18

     

Board Leadership Structure

   

20

     

Director Independence

   

22

     

Board’s Role in Risk Oversight

   

23

     

Board Practices and Procedures

   

24

     

Board Committees

   

26

    03     |   Corporate Responsibility and Sustainability   Pg   30
     

Performance Culture

   

30

     

Sustainability

   

32

     

Honeywell Hometown Solutions

   

34

     

Political Engagement and Contributions

   

35

    04     |   Director Compensation   Pg   37
     

Elements of Compensation

   

37

     

2019 Director Compensation Table

   

38

     

Stock Ownership Guidelines

   

39

    05     |   Proposal 2: Advisory Vote to Approve Executive Compensation   Pg   40
    06     |   Compensation Discussion and Analysis   Pg   41
     

Our Named Executive Officers

   

42

     

Performance Summary

   

42

     

Our Compensation Program

   

44

     

2019 Compensation Summary

   

50

     

2019 Annual Incentive Compensation Plan Decisions

   

52

     

2019 Long-Term Incentive Compensation Decisions

   

58

     

Other Compensation and Benefit Programs

   

65

     

Compensation Practices and Policies

   

66

     

Risk Oversight Considerations

   

67

     

Management Development and Compensation Committee Report

   

69

    07     |   Executive Compensation Tables   Pg   70
     

Summary Compensation Table

   

70

     

Other Compensation Tables

   

72

     

CEO Pay Ratio

   

88

    08     |   Proposal 3: Approval of Independent Accountants   Pg   89
     

Independent Accounting Firm Fees

   

89

     

Non-Audit Services

   

89

     

Audit Committee Report

   

90

    09     |   Proposal 4: Shareowner Proposal—Let Shareholders Vote on Bylaws Amendments   Pg   91
     

Board Recommendation

   

91

    10     |   Proposal 5: Shareowner Proposal—Report on Lobbying Payments and Policy   Pg   94
     

Board Recommendation

   

95

    11     |   Additional Information   Pg   97
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 41 or in Appendix A.
     

Other Business

   

97

     

Certain Relationships and Related Transactions

   

97

     

Stock Ownership Information

   

98

     

Notice and Access

   

99

     

Voting Procedures

   

99

     

Attendance at the Annual Meeting

   

101

     

Shareowner Proposals and Board Nominees

   

101

     

Where Shareowners Can Find More Information

   

102

    A-1     |  

 

Appendix A: Reconciliation of Non-GAAP Financial Measures

  Pg   A-1

 

 

LOGO

 

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i  |   

PROXY

SUMMARY

 

PROXY SUMMARY

This proxy summary is intended to provide a broad overview of our 2019 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 27, 2020, 10:30 a.m. EDT

I  PLACE     

Kimpton Tryon Park Hotel, 303 South Church Street, Charlotte, North Carolina 28202

I  RECORD DATE     

Shareowners as of February 28, 2020 are entitled to vote

I  ADMISSION     

Please follow the advance registration instructions on page 101

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. 40

No. 3

  

Approval of Independent Accountants

    

LOGO  FOR

    

p. 89

No. 4

  

Shareowner Proposal-Let Shareholders Vote on Bylaw Amendments

    

LOGO  AGAINST

    

p. 91

No. 5

  

Shareowner Proposal-Report on Lobbying Activities and Expenditures

    

LOGO  AGAINST

    

p. 94

2019 PERFORMANCE HIGHLIGHTS

LOGO FINANCIAL RESULTS – DELIVERED ON OUR COMMITMENTS TO SHAREOWNERS

In 2019, Honeywell grew organic sales, segment margin, adjusted earnings per share (EPS), and adjusted free cash flow. We continued our track record of performance on key metrics we use as the basis for our executive compensation programs as shown below.

 

  5% organic sales growth

 

  10% adjusted EPS growth excluding spins
  150 basis points of segment margin expansion

 

  17% adjusted free cash flow growth excluding spins
 

 

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 41 or in Appendix A.

 

 

1

 

LOGO

 

 

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i  |   

PROXY

SUMMARY

 

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

 

 

Tim Mahoney appointed as Senior Vice President, Enterprise Transformation. Mr. Mahoney has established a successful track record in his three decades of work in the aerospace industry, where he served 10 years as President and Chief Executive Officer of Honeywell Aerospace. In his new role, Mr. Mahoney will be responsible for driving the digitization of Honeywell’s core support functions and promoting common processes, data management, and systems to better serve customers while operating more efficiently.

 

 

Mike Madsen appointed as President and Chief Executive Officer of Honeywell Aerospace in charge of running Honeywell’s largest segment. Prior to his appointment, Mr. Madsen served as Vice President of Integrated Supply Chain for Honeywell Aerospace, where he was responsible for the global supply chain and manufacturing footprint. Mr. Madsen has over three decades of experience in the Honeywell Aerospace business.

 

 

Suresh Venkatarayalu appointed as Chief Technology Officer in charge of end-to-end new product development and introduction processes, including efforts to develop new, breakthrough technologies and software for the Industrial Internet of Things.

 

 

Jeff Kimbell appointed as Senior Vice President and Chief Commercial Officer in charge of driving organic growth by enhancing global sales and marketing capabilities.

LOGO    TRANSFORMATION INITIATIVES – HONEYWELL CONNECTED ENTERPRISE, INTEGRATED SUPPLY CHAIN, AND HONEYWELL DIGITAL

 

 

Honeywell Connected Enterprise delivered double-digit connected software growth in 2019. The transition to a software-industrial company is still in its early stages, but is off to a tremendous start as the organization launched a new suite of connected offerings, including Honeywell Forge.

 

 

Advanced our Integrated Supply Chain transformation to drive over $0.5 billion long-term, run-rate savings, through improved material productivity, streamlined manufacturing footprint, and automation of procurement processes. In 2019, we further established supply base management strategies and optimized our manufacturing and distribution footprint.

 

 

Established the Honeywell Digital initiative to drive process improvement, digitization, and efficiencies across the Company. Honeywell Digital is the foundation to running the Company with data-driven decision making. In 2019, the initiative provided enhanced digital marketing and customer contact centers, reduced our enterprise resource management (ERP) systems by 28% from 71 to 51, rationalized over 500 software applications, and cleansed 5.2 million critical master data records. We also remain on track to achieving our long-term target of ~10 ERP systems by the end of 2021.

 

 

Moved corporate headquarters to Charlotte, North Carolina, a city which will enable recruitment and retention of world-class talent to support Honeywell’s strategic focus on providing leading technology and software solutions in key end markets.

 

 

Executed a successful brand launch that enhanced our reputation as a premier technology company while reaching more customers, attracting external talent, and engaging more employees through our #futureshapers campaign.

LOGO   YEAR IN REVIEW – ANOTHER EXCITING YEAR THAT POSITIONS US WELL FOR THE FUTURE

In 2019, we again executed on our commitments to shareowners. We made substantial progress in advancing our strategic initiatives, met or exceeded all financial commitments, gave back to our communities, and upgraded the working experience for our employees. While our work in our communities, for our customers, for our employees, and for our shareowners is not over, we are proud of the outstanding achievements throughout the year.

 

LOGO

 

 

LOGO

 

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i  |   

PROXY

SUMMARY

 

LOGO   CREATING VALUE FOR OUR STAKEHOLDERS

 

LOGO

Source: S&P Capital IQ, as of December 31, 2019.

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

See page 41 for definitions of Multi-Industry Peer Group and Compensation Peer Group.

COMMITMENT TO SUSTAINABILITY

 

         
I    OUR COMMITMENT    I      ACHIEVEMENTS    I      10-10-10 GOALS FOR 2024
   LOGO   We PROTECT our people and the environment     LOGO   Over 90% improvement in Scope 1 and 2 greenhouse gas intensity since 2004     LOGO   Reduce global Scope 1 and Scope 2 greenhouse gas emissions by an additional 10% per dollar of sales from 2018 levels
   LOGO   We ACHIEVE sustainable growth and accelerated productivity     LOGO   ~70% improvement in energy efficiency since 2004
   LOGO  

We DEVELOP technologies that expand the sustainable capacity of our world

    LOGO   ~3,000 acres remediated and restored as valuable community assets     LOGO  

Deploy at least 10 renewable energy opportunities

      LOGO  

128M gallons of water saved in water-stressed areas since 2013

    LOGO  

Achieve certification to ISO 50001 Energy Management Standard at 10 facilities

      LOGO  

Safety record over 4x better than the average of the industries in which we operate

 
    LOGO   Honeywell’s Solstice® and biofuel products are helping customers avoid discharging >160 MMT of CO2e  
         

 

 

3

 

LOGO

 

 

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i  |   

PROXY

SUMMARY

 

OUR 2020 DIRECTOR NOMINEES

 

           

12 of 13

 

nominees are independent

 

4 of 13

 

nominees are women

 

5 of 13

 

nominees are ethnically or racially diverse or non-U.S. citizens

 

4 of 13

 

nominees were born outside the United States

 

2 of 3

 

committees will be chaired by women

 

9 of 13

 

nominees have CEO experience

 

7.5

 

years average tenure

           

 

           

 

Nominee

 

 

Title

  

 

Years of
Service

  

 

Independent

     No. of Current Public
Company Boards
(including Honeywell)
    

 

Committee
Memberships

(effective April 27, 2020)

                             

 

Darius Adamczyk

(Chairman and CEO)

 

 

Chairman and

Chief Executive Officer

Honeywell International Inc.

 

  

 

3

  

 

No

    

 

1

    

 

—  

 

D. Scott Davis

(Incoming Lead Director)

 

 

Retired Chairman and

Chief Executive Officer

United Parcel Service, Inc.

 

  

 

14

  

 

Yes

    

 

2

    

 

Audit

Ex officio: CGRC, MDCC

 

Duncan B. Angove

 

 

Chief Executive Officer

Arcspring LLC
    

 

  

 

2

  

 

Yes

    

 

1

    

 

MDCC

 

William S. Ayer

 

 

Retired Chairman and

Chief Executive Officer

Alaska Air Group, Inc.

 

  

 

5

  

 

Yes

    

 

1

    

 

CGRC

MDCC

 

Kevin Burke

 

 

Retired Chairman, President

and Chief Executive Officer

Consolidated Edison, Inc.

 

  

 

10

  

 

Yes

    

 

1

    

 

Audit

 

Linnet F. Deily

 

 

Former Deputy United States

Trade Representative and
Ambassador

 

  

 

14

  

 

Yes

    

 

1

    

 

CGRC (Chair)

Audit

 

Deborah Flint

 

 

President and
Chief Executive Officer

Greater Toronto Airports Authority

 

  

 

0

  

 

Yes

    

 

1

    

 

CGRC

 

Judd Gregg

 

 

Former Governor and

U.S. Senator of New Hampshire

 

  

 

9

  

 

Yes

    

 

2

    

 

Audit

MDCC

 

Clive Hollick

 

 

Former Chief Executive Officer

United Business Media

 

  

 

16

  

 

Yes

    

 

1

    

 

MDCC

 

Grace D. Lieblein

 

 

Former Vice President-Global Quality

General Motors Corporation

 

  

 

7

  

 

Yes

    

 

3

    

 

MDCC (Chair)

CGRC

 

Raymond T. Odierno

 

 

Retired Four-Star General
Former Chief of Staff
United States Army

 

  

 

0

  

 

Yes

    

 

2

    

 

CGRC

 

George Paz

 

 

Retired Chairman and

Chief Executive Officer

Express Scripts Holding Company

 

  

 

11

  

 

Yes

    

 

2

    

 

Audit (Chair)

CGRC

 

Robin L. Washington

 

 

Former Executive Vice President and

Chief Financial Officer

Gilead Sciences, Inc.

 

  

 

7

  

 

Yes

    

 

4

    

 

Audit

Lead Director, committee chair, and committee membership appointments will be effective upon each nominee’s election to the Board at the Annual Meeting of Shareowners.

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

 

 

LOGO

 

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i  |   

PROXY

SUMMARY

 

CORPORATE GOVERNANCE HIGHLIGHTS

 

 

 

SHAREOWNER

EMPOWERMENT AND

ENGAGEMENT

  

 

LOGO

 

 

15% threshold for shareowners to call a special meeting

   LOGO   Majority shareowner 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

   LOGO   Leader in Board diversity relative to personal characteristics (4 women, 2 Hispanics, 2 African American, 1 non-U.S. citizen) and experiences (industry, profession, public service, geography)
   LOGO   Range of tenures enables 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 responsibilities relative to director candidate selection and Board self-evaluation processes

   LOGO   Regular executive sessions of independent directors
   LOGO   All members of all committees are independent directors
   LOGO   Lead Director and CGRC Chair 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

 

 

ROBUST OVERSIGHT

OF RISKS AND

OPPORTUNITIES

  

 

LOGO

 

 

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

   LOGO   Robust Enterprise Risk Management (ERM) program to enable Board identification and monitoring of risk
   LOGO   Purposeful inclusion of key risk areas on Board and/or committee agendas
   LOGO   Engagement with business leaders to review short-term plans, long-term strategies, and 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 financial restatement or violations of non-competition or non-solicitation agreements
   LOGO  

Combined Corporate Secretary and Chief Compliance Officer roles to facilitate Board oversight of compliance risk

 

 

COMMITMENT TO

SUSTAINABILITY

AND CORPORATE

RESPONSIBILITY

  

 

LOGO

 

 

Code of Business Conduct applies to all directors, officers, and employees, with 100% certification by officers and employees where permitted by law

   LOGO   Suppliers expected to comply with published Supplier Code of Business 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, Inclusion and Diversity, and Workplace Respect, while fostering a performance culture based on our 9 Behaviors
   LOGO   Over 50% of executive officers are diverse by ethnic background, place of birth (non-U.S.), or gender
   LOGO   Rated a “Trendsetter” on the CPA-Zicklin Index of Corporate Political Disclosure and Accountability
   LOGO   No use of corporate funds for political contributions; robust oversight of and transparency into political activities
   LOGO   Demonstrated track record of exceeding our published greenhouse gas reduction and energy efficiency goals; our sustainability program has reduced our greenhouse gas intensity by more than 90% since 2004
   LOGO  

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

 

 

 

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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, with a significant portion of target total direct compensation 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 tax gross-ups, other than in connection with a Company-required 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

 

 

Robust Stock Ownership Requirements. We require executive officers 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

 

 

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 toward long-term incentives aligned with the interests of shareowners.

 

   LOGO

 

 

Clawback Practice. We maintain a policy that allows for recoupment of incentive compensation for a 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

 

 

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  2019 EXECUTIVE COMPENSATION

The following table reflects compensation awarded to our Named Executive Officers (NEOs) in 2019. See Compensation Discussion and Analysis beginning on page 41 for more details on 2019 executive compensation. This table does not replace the Summary Compensation Table shown on page 70, as required by the SEC, but is intended to show 2019 compensation decisions from the perspective of the MDCC.

 

               

 

NEO

  

 

Position

  

 

 

 

Base

Salary

 

 

 

  

 

 

 

Annual

Incentive

Plan (ICP)(1)

 

 

 

 

  

 

 

 

2019-2021

Performance

Plan Units(2)

 

 

 

 

  

 

 

 

Stock

Options(3)

 

 

 

  

 

 


 

Restricted

Stock
Units(4)

 

 

 
 

  

 

 

 

Total Annual

Direct

Compensation

 

 

 

 

                                                            

Darius Adamczyk

   Chairman and CEO    $ 1,600,000        $4,065,000        $6,638,490        $4,635,409        $1,974,016        $18,912,915  

Gregory P. Lewis

   SVP, Chief Financial Officer    $ 749,808        $1,056,000        $1,763,850        $1,222,904        $   524,348        $  5,316,910  

Mark R. James

   SVP, HR, Security and Communications    $ 794,231        $   996,000        $2,004,375        $1,399,450        $   586,036        $  5,780,092  

Anne T. Madden

   SVP, General Counsel    $ 757,019        $1,102,000        $1,763,850        $1,222,904        $   524,348        $  5,370,121  

Rajeev Gautam

   President and CEO,
Performance Materials and Technologies
   $ 779,231        $   976,000        $2,020,410        $1,412,368        $   601,458        $  5,789,467  

Timothy O. Mahoney

   SVP, Enterprise Transformation
(Former President and CEO, Aerospace)
   $ 1,021,346        $1,681,000        $3,050,148        $2,133,623        $   909,898        $  8,796,015  

 

(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.

(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.

 

 

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Table of Contents
01  |   

PROPOSAL NO. 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, business objectives, operations, and structure.

DIRECTOR SKILLS AND QUALIFICATIONS

 

I  STRATEGIC SKILLS

Global Experience. Growing sales 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 directors. 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
01  |   

PROPOSAL NO. 1:

ELECTION OF DIRECTORS

 

BOARD SKILLSET MATRIX

Our Board adopted a skills and experience matrix to facilitate the comparison of our directors’ skills versus those deemed necessary to oversee our current strategy. The skills included in the matrix are evaluated against our articulated strategy each year so that the matrix can serve as an up-to-date tool for identifying director nominees who collectively have the complementary experience, qualifications, skills, and attributes to guide our Company. Our 2020 Board skillset matrix reflecting the characteristics of our director nominees 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 slate of director nominees reflects this approach and the Board’s commitment to diversity.

 

 

LOGO

The CGRC 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               

 

 

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Table of Contents
01  |   

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 and as President of Honeywell Scanning and Mobility from 2008 to 2012. Mr. Adamczyk joined Honeywell in 2008 when Metrologic, Inc., where he was the Chief Executive Officer, was acquired by Honeywell. Prior to Metrologic, 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, Arcspring LLC

 

  

About

 

Since 2019, Mr. Angove has been the Chief Executive Officer of Arcspring LLC, a new-era investment management platform that creates value through powerful digital pivots. 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 of 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

 

LOGO

   

 

 

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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 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 previously served on the Board of Directors of the Seattle Branch of the Federal Reserve Bank of San Francisco and was a director of Puget Sound Energy, Inc. and Puget Energy, Inc. from January 2005 until January 2015, serving 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, a firm 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 is the retired Chairman, President, and Chief Executive Officer of Consolidated Edison, Inc. (Con Edison), a utility provider of electric, gas, and steam services. He joined Con Edisonin 1973 and held positions of increasing responsibility in system planning, engineering, law, nuclear power, construction, and corporate planning. Mr. Burke served as President and Chief Executive Officer 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. 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 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

 

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 and as Chairman and Chief Executive Officer from January 1, 2008 to September 2014. Prior to that, he served as Vice Chairman starting December 2006 and as Senior Vice President, Chief Financial Officer and Treasurer starting 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 global 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

   
        

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 previously served as a director of Chevron Corporation (2005-2018).

   

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

   

* Lead Director appointment and committee memberships will be effective upon Mr. Davis’ election to the Board at the Annual Meeting of Shareowners. Currently, Mr. Davis serves as Chair of the MDCC and a member of the Audit Committee.

 

 

LOGO

 

|  Notice and Proxy Statement  |  2020

 

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Table of Contents
01  |   

 

PROPOSAL NO. 1:

ELECTION OF DIRECTORS

 

DEBORAH

FLINT

 

President and

Chief Executive Officer,
Greater Toronto
Airports Authority

 

  

About

 

Ms. Flint is the President and Chief Executive Officer of the Greater Toronto Airports Authority (GTAA). Prior to joining GTAA, Ms. Flint served as Chief Executive Officer of Los Angeles World Airports for more than four years, and had previously held senior roles at the Port of Oakland for more than 23 years. Ms. Flint currently serves as a director on the Airport Council International World Board and is the Board Chair of the World Standing Safety and Technical Committee. Ms. Flint previously served on President Obama’s Advisory Committee on Aviation Consumer Protection and as the Chair of the Oversight Committee of the Transportation Research Board’s Airport Cooperative Research Program. She co-chaired the Blue Ribbon Task Force on UAS at Airports and served as a federal appointee to the Department of Transportation’s Drone Advisory Committee. Ms. Flint previously served on the Board of Directors of the Los Angeles Branch of the Federal Reserve Bank of San Francisco.

   

LOGO

 

Specific Qualifications, Attributes, Skills, and Experience

 

  Broad understanding of transportation networks, including aviation and rail

 

  Deep experience in critical infrastructure, connected buildings, and advanced security solutions

 

  Oversaw the fourth busiest passenger airport in the world, the largest airport police force in the United States, and the largest public works agreements in the history of Los Angeles

 

  Significant insight and experience in public and private partnerships

 

LOGO

   
        

JUDD

GREGG

 

Former

Governor and

U.S. Senator of

New Hampshire

 

  

About

 

Sen. 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, Sen. 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, the Chairman and Ranking Member of the Senate Budget Committee as well as chairman of various sub-committees. Sen. Gregg served as a chief negotiator of the Emergency Economic Stabilization Act of 2008, was the lead sponsor of the Deficit Reduction Act of 2005, and, along with the late Sen. 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, Sen. Gregg was the Governor of New Hampshire and prior to that was a U.S. Representative from 1981 to 1989. Sen. Gregg was named as Dartmouth College’s first distinguished fellow. He also serves as a director of Evoqua Corporation. Sen. 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

 

 

   

* Ms. Flint’s and Sen. Gregg’s committee membership appointments will be effective upon their election to the Board at the Annual Meeting of Shareowners. Currently, Ms. Flint is not a member of any committee, and Sen. Gregg serves as a member of the Audit Committee and the CGRC.

 

 

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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, Business Media broadcasting, financial services, and publishing group. From 2005 to 2010, he was a partner, managing director, and advisor of 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 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

   

* Ms. Lieblein’s committee chair appointment will be effective upon her election to the Board at the Annual Meeting of Shareowners.

 

 

LOGO

 

|  Notice and Proxy Statement  |  2020

 

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Table of Contents
01  |   

 

PROPOSAL NO. 1:

ELECTION OF DIRECTORS

 

RAYMOND T.

ODIERNO

 

Retired Four-Star General,

Former Chief of Staff,

U.S. Army

 

  

About

 

Gen. Odierno served nearly 40 years in the United States Army, retiring as a four-star general. Prior to his retirement, he served as the 38th Chief of Staff of the U.S. Army from September 2011 to August 2015. From October 2010 until August 2011, he was the Commander of the U.S. Joint Forces Command, and from September 2008 to September 2010, he served as the Commanding General, Multi-National Force – Iraq and subsequently as the Commanding General, United States Forces – Iraq. From December 2006 to February 2008, Gen. Odierno served as Commanding General, Multi-National Corps – Iraq (III Corps), and from April 2003 to March 2004, he commanded the 4th Infantry Division during Operation Iraqi Freedom. Over the course of his career, Gen. Odierno commanded military units worldwide at every echelon, from platoon to theater, including deployments in Europe and the Middle East. Gen. Odierno is a director of Oshkosh Corporation.

   

LOGO

 

Specific Qualifications, Attributes, Skills, and Experience

 

 Significant expertise in military operations, budgeting, planning, strategy, and national security through an extensive career with the U.S. Army

 

 Substantial leadership and congressional experience serving as Chief of Staff of the U.S., Army with responsibility for 525,000 active troops and approximately 500,000 reserves, and from such positions as Commanding General, U.S. Forces and Commanding General, Multi-National Force, Iraq

 

 Deep international, geopolitical, communications, technology, and cybersecurity experience

 

 Broad experience and insight on issues relating to global planning and country risk analysis

 

LOGO

   
        

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 and cyber 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

   

* Gen. Odierno’s committee membership appointment will be effective upon his election to the Board at the Annual Meeting of Shareowners. Currently, Gen. Odierno is not a member of any committee.

 

 

15

 

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|  Notice and Proxy Statement  |  2020

 

 


Table of Contents
01  |   

 

PROPOSAL NO. 1:

ELECTION OF DIRECTORS

 

ROBIN L.

WASHINGTON

 

Former Executive
Vice President and

Chief Financial Officer,

Gilead Sciences, Inc.

 

  

About

 

Ms. Washington served as Executive Vice President and Chief Financial Officer of Gilead Sciences, Inc. (Gilead), a research-based biopharmaceutical company, from May 2008 through October 2019. In that role, she oversaw Gilead’s Global Finance, Investor Relations, and Information Technology organizations. From 2006 through 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 Alphabet Inc., Salesforce.com Inc., and Vertiv Group Corp., and she 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, cyber, 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

   

NOMINATION AND ELECTION PROCESS

Honeywell’s directors are elected at each Annual Meeting of Shareowners and hold office for one-year terms until the next Annual Meeting of Shareowners and until their successors have been 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 13 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 LISTED ABOVE.

 

 

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CORPORATE

GOVERNANCE

 

CORPORATE GOVERNANCE

Honeywell is committed to strong corporate governance policies, practices, and procedures designed to ensure that the Board effectively exercises 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 taking into account their perspectives, we have implemented 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.

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

 

LOGO           

 

  Created independent Lead Director role

 

 

  Changed our independent auditor after a thorough, competitive vetting process

 

LOGO  

 

  Proactively adopted proxy access, which provides 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  

 

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

 

 

  Initiated significant changes to our executive compensation plans in response to shareowner preference for longer-term performance awards, better visibility, and less discretion relative to award determinations

 

 

— 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

 

 

  Instituted a formal Board skills and experience matrix to facilitate alignment of 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

 

LOGO  

 

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

 

 

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

 

 

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

 

LOGO  

 

  Adopted executive approval requirements to increase oversight of trade association memberships

 

 

  Policy adopted to instruct trade associations not to use our membership dues for political contributions

 

 

  Reduced the 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

 

 

  Received Code of Business Conduct certification from 100% of officers and employees where permitted by law (required annually)

 

 

  Amended committee charters to formalize areas of risk oversight responsibility

 

 

  Combined Corporate Secretary and Chief Compliance Officer roles to enhance Board oversight of compliance risk

 

 

  Signed the Business Roundtable Statement of Corporate Purpose

 

LOGO  

 

  Enhanced political contributions disclosure, including additional details regarding trade association memberships

 

 

  Proactive refreshment of Board composition and leadership via thoughtful succession planning, recruitment and election of new directors, and appointment of new Lead Director and new MDCC Chair

 

 

 

 

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02  |   

CORPORATE

GOVERNANCE

 

SHAREOWNER OUTREACH AND ENGAGEMENT

Understanding the issues that are important to our shareowners is critical to ensure 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, corporate governance, and sustainability. 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 Chief Executive Officer, 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 2019 was robust. We held 29 one-on-one meetings with shareowners during the course of 2019 (representing approximately 33% 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 55 one-on-one or small group shareowner meetings to discuss business performance, strategy, end-markets, and overall competitive landscape while seeking shareowner feedback.

I  GOVERNANCE-FOCUSED SHAREOWNER ENGAGEMENT PROGRAM

 

LOGO

 

 

LOGO

 

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GOVERNANCE

 

I  2019 SHAREOWNER ENGAGEMENT FOCUS AREAS

 

In 2019, our conversations with shareowners focused on the following key areas:

 

 Our strategic priorities — accelerate organic growth, expand segment margins, improve free cash flow conversion, more aggressive capital deployment, and continue on our journey to become the premier software-industrial.

 

 Our transformation into a premier software-industrial, focusing on our portfolio transformation, technology innovation, and our three key initiatives — Honeywell Connected Enterprise, Integrated Supply Chain Transformation, and Honeywell Digital.

 

 Board composition, diversity, and refreshment.

 

 Our commitment to our communities and to a sustainable future, focusing on results achieved to date, how our technology addresses the world’s toughest challenges, and the announcement of our new “10-10-10” sustainability targets for 2024.

 

  Inclusion and diversity as key drivers of our high-performance culture.

 

  Risk oversight framework driven by the Board’s diverse experiences, skills, and perspectives, and rigorous risk assessment and monitoring processes.

 

  Political engagement and our disclosure of political lobbying expenditures and trade association memberships.

 

  Executive compensation program changes implemented over the past three years.

    20

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

   
    35

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

   

I  SHAREOWNER FEEDBACK

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

 

 

Focus on Board composition, refreshment and recruitment, with continued appreciation for the diversity of personal background, skills, and experiences of Honeywell’s directors and our emphasis on the importance of maintaining alignment of director skillsets with long-term strategy.

 

 

Positive feedback on our 2019 financial performance, especially with regard to organic sales growth, segment margin expansion, our strong adjusted free cash flow conversion, and our ongoing commitment to capital deployment with a disciplined approach to M&A.

 

 

Interest in Honeywell’s decision to sign the Business Roundtable Statement of Corporate Purpose.

 

 

Appreciation for our level of engagement and transparency with shareowners over a range of topics.

 

 

Emphasis on understanding human capital risk and the Company’s performance culture, including how we foster and measure commitment to our three foundational principles — Integrity and Ethics, Inclusion and Diversity, and Workplace Respect.

 

 

Continued feedback from our largest shareowners that our lobbying activities, membership in trade associations, and level of disclosure regarding political contributions is not a source of concern.

 

 

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CORPORATE

GOVERNANCE

 

BOARD LEADERSHIP STRUCTURE

I  CHAIRMAN OF THE BOARD

Our CEO, Darius Adamczyk, has served as the Chairman of our Board since the 2018 Annual Meeting of Shareowners. The decision to appoint Mr. Adamczyk as Chairman 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.

The Board carefully weighed the views of its shareowners as part of its deliberations leading up to its decision to combine the roles and has continued to engage with shareowners on this topic during spring and summer/fall shareowner engagement meetings thereafter. We have continued to hear 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 decisions 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 continued to take 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 explicitly acknowledge that, in the absence of an independent Chairman, the Lead Director would assume the same roles and responsibilities, including:

 

 

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 Board 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.

 

 

Retain outside professionals on behalf of the Board.

 

 

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CORPORATE

GOVERNANCE

 

 

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 or she does not otherwise serve.

I  SELECTION OF D. SCOTT DAVIS AS LEAD DIRECTOR

The Lead Director is selected biennially by Honeywell’s independent directors to serve a two-year term, taking into account the Lead Director Selection Criteria memorialized in our Corporate Governance Guidelines.

The term of our current Lead Director, Mr. Jaime Chico Pardo, will end effective as of our 2020 Annual Meeting of Shareowners when he will also retire from the Board. Our independent directors have unanimously elected Mr. D. Scott Davis to succeed Mr. Chico Pardo as Lead Director for a two-year term, which will expire in 2022. The independent directors took into account each of the Lead Director Selection Criteria memorialized in our Corporate Governance Guidelines and Mr. Davis’ associated qualifications as follows:

 

 

Lead Director Selection Criteria

 

  

 

Mr. Davis’ Qualifications

 

 

Commitment

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

  

 

LOGO    Mr. Davis has excelled as MDCC Chair (a time-intensive role that he has held since 2010 and that requires frequent, proactive engagement with management and his fellow directors) while simultaneously serving on the Audit Committee

 

 

Effective Communication

Able to facilitate discussions among Board members, including between the non-management directors and the CEO/Chairman, and engage with key stakeholders

  

 

LOGO    As MDCC Chair, Mr. Davis demonstrated effective communication and engagement with directors and management while leading a large-scale transformation of Honeywell’s executive compensation program

 

LOGO    Mr. Davis proactively engaged in dialogue with our largest shareowners as we embarked on the transformation of our executive compensation program to understand their views and to explain the changes that were eventually implemented

 

 

Rapport

Strong rapport with other members of the Board

  

 

LOGO    Mr. Davis is extremely well-regarded by his fellow Board members. As one of the longest-tenured directors (14 years) who has served as MDCC Chair (2010 to present) and Audit Committee Chair (2006-2010), he has developed a strong rapport with each director

 

 

Integrity

High personal integrity and ethical character

  

 

LOGO    Mr. Davis has conducted himself in accordance with the highest ethical standards throughout his career and as a Honeywell Board member

 

LOGO    As MDCC Chair, he has been a key enabler of a culture of integrity and ethics at Honeywell by ensuring the appropriate tone at the top

 

 

Skillset

Skills and experience broadly in line with Honeywell’s corporate strategy

  

 

LOGO    Mr. Davis’ skills and experiences are well-aligned with the strategic skills and core competencies that are critical for Honeywell Board members

 

LOGO    He has led global organizations in transportation and logistics services industries aligned with Honeywell’s strategic end-markets and where innovation is a critical enabler

 

 

 

 

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CORPORATE

GOVERNANCE

 

DIRECTOR INDEPENDENCE

Our Corporate Governance Guidelines state, “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, Davis, Gregg, Hollick, Odierno, and Paz and Mses. Deily, Flint, 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 or as a partner, shareowner, or officer of an organization that has a relationship with Honeywell, other than as a director or 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.

 

 

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 outside our director charitable match program.

 

 

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. Flint—Greater Toronto Airports Authority and Los Angeles World Airports, 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 sales 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 sales 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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CORPORATE

GOVERNANCE

 

BOARD’S ROLE IN RISK OVERSIGHT

While senior management has primary responsibility for managing risk, the Board 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 transactions, execution, and integration and the M&A competitive landscape

 

 Legal risks such as those arising from litigation, environmental, 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 products and facilities

 

 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, and government contracts compliance

 

 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

 

 

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 an enterprise-wide “top down” and “bottom up” view of commercial, strategic, legal, compliance, human capital, cyber, and reputational risks and strategies for mitigating those risks. In 2019, the ERM program included interviews with each member of the leadership team, 72 interview workshops, with 98 risk owners and risk experts, to cover 49 risk areas across all businesses and functions.

 

 

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CORPORATE

GOVERNANCE

 

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 is prominent in the Company’s mergers, acquisitions, and divestitures activity. From strategy and vision to pipeline reviews, individual transaction approval, deal execution and integration, the Board is engaged in all aspects of our mergers, acquisitions, divestitures, and other corporate development activities. With the ultimate goal of achieving outcomes that promote long-term shareowner value, the Board annually engages in a rigorous, thorough, and unbiased review of our portfolio and devotes a substantial amount of time at each Board meeting to pressure test potential transactions, review deal execution, monitor integration, and assess long-term outcomes.

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, and succession planning. Honeywell fosters a performance culture where all directors, officers, and employees are expected to uphold our foundational principles of Integrity and Ethics, Inclusion and Diversity, and Workplace Respect; where employees can build meaningful careers based on our 9 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, Be Committed, 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 9 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. Annually, the full Board reviews the leadership succession plan for the CEO and his direct reports, which includes identification of ‘ready now’ successors, management’s view of potential successors that are not “ready now” but will be within a reasonable timeframe, and development actions necessary to address any gaps in the leadership succession plan. Also discussed are recent and future potential changes involving various leaders and their organizations. 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 and throughout the year, each Board and committee member is free to raise topics that are not on the agenda and to suggest items for inclusion on future agendas.

 

 

Number of Meetings and Attendance. In 2019, the Board held six meetings, and the committees of the Board collectively held 19 meetings. The Board had 100% meeting attendance, and the directors’ average attendance rate at meetings of the committees on which they have

 

 

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been appointed was 98.5%. 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).

 

 

Special Meetings. The Chairman, the Lead Director, the CGRC Chair, 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 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 CGRC Chair, are jointly responsible for leading the self-evaluation process which 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.

 

 

LOGO

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 2019, Board members visited Honeywell’s Aerospace facility in Deer Valley, Arizona, and participated in an in-depth demonstration of Honeywell Forge solutions.

 

 

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 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 three 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 investor.honeywell.com (see “Corporate Governance/Board Committees”). The table below lists the anticipated leadership and membership of each committee following the 2020 Annual Meeting of Shareowners.

 

       

Name

  

 

Audit

  

 

Corporate Governance and
Responsibility

  

 

Management Development
and Compensation

                

 

Mr. Angove

 

            

 

LOGO

 

 

Mr. Ayer

 

       

 

LOGO

 

  

 

LOGO

 

 

Mr. Burke

 

  

 

LOGO

 

         

 

Mr. Davis*

 

  

 

LOGO

 

  

 

ex officio

 

  

 

ex officio

 

 

Ms. Deily

 

  

 

LOGO

 

  

 

Chair

 

    

 

Ms. Flint

 

       

 

LOGO

 

    

 

Sen. Gregg

 

  

 

LOGO

 

       

 

LOGO

 

 

Mr. Hollick

 

            

 

LOGO

 

 

Ms. Lieblein

 

       

 

LOGO

 

  

 

Chair

 

 

Gen. Odierno

 

       

 

LOGO

 

    

 

Mr. Paz

 

  

 

Chair

 

  

 

LOGO

 

    

 

Ms. Washington

 

  

 

LOGO

 

         

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

 

I  AUDIT COMMITTEE

 

LOGO

  

  Consider the independence of, 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 the firm and management regarding financial reporting.

 

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

 

  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.

 

  Monitor and provide risk oversight with respect to focus areas assigned to the committee from time to time by the Board, including cybersecurity, tax and liquidity management, product integrity and product security, vendor risk, operational business continuity, and crisis management.

 

  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.

* Current Audit Committee membership also includes Jaime Chico Pardo (ex officio) who will retire from the Board, effective as of the 2020 Annual Meeting of Shareowners.

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 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 of Corporate Audit.

 

 

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I  CORPORATE GOVERNANCE AND

    RESPONSIBILITY COMMITTEE

    (CGRC)

 

 

LOGO

  

 Identify and evaluate potential director candidates and recommend to the Board the nominees 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 evaluation 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, qualifications and criteria for director nominees, director retirement policies, compensation and benefits of non-employee directors, conduct of business between Honeywell and any person or entity affiliated with a director, and the structure and composition of Board committees.

 

  Monitor and provide risk oversight with respect to focus areas assigned to the committee from time to time by the Board, including political contributions and lobbying, regulatory compliance matters such as data privacy, integrity and ethics, geopolitical risk, and health, safety, environmental, product stewardship and sustainability.

 

  Review Honeywell’s policies and programs relating to health, safety, and environmental matters, sustainability, political contributions and lobbying, and 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.

 

* Committee memberships will be effective upon each nominee’s election to the Board at the Annual Meeting of Shareowners. The current chair and members of the CGRC are: Linnet Deily (Chair), William S. Ayer, Jaime Chico Pardo, Judd Gregg, Grace D. Lieblein, and George Paz.

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, other members of the Board, and certain executive officers to ensure that candidates not only possess the requisite 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.

In 2019 and 2020, the CGRC nominated, and the Board subsequently elected, Ms. Deborah Flint to serve as a director, effective October 7, 2019, and Gen. Raymond T. Odierno to serve as a director, effective February 28, 2020. Ms. Flint and Gen. Odierno were identified by a third-party search firm and had not previously stood for election to the Board at an annual meeting of shareowners.

 

 

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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I  MANAGEMENT DEVELOPMENT

    AND COMPENSATION COMMITTEE

    (MDCC)

 

LOGO

  

  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 any of its authorities to subcommittees when appropriate.

 

  Review the management development program, including executive succession plans.

 

  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.

 

  Monitor and provide risk oversight with respect to focus areas assigned to the committee from time to time by the Board, including succession planning, progress implementing diversity goals and objectives, retention and recruitment of key talent, employment practices and policies, workplace respect and culture, and workplace violence.

* Committee chair and committee membership appointments will be effective upon each nominee’s election to the Board at the Annual Meeting of Shareowners. The current chair and members of the MDCC are: D. Scott Davis (Chair), Duncan B. Angove, William S. Ayer, Jaime Chico Pardo (ex officio), Clive Hollick, and Grace D. Lieblein.

LOGO   Compensation Committee Interlocks and Insider Participation

During fiscal year 2019, all 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 97 of this Proxy Statement. During fiscal year 2019, 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 CEO, officer, and other 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.

 

 

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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.

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.

 

 

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

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 46 and 47 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. 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 indicators 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.

 

 

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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 processes where E&S-related business risks and opportunities are identified and addressed.

The Board’s well-informed and proactive engagement and oversight extends to E&S initiatives in four 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 of 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.

 

 

Feedback from engagement with shareowners. The Board values our shareowners’ perspectives on corporate responsibility and sustainability, and we (oftentimes with our Lead Director or CGRC Chair) engage directly with our shareowners throughout the year to discuss the Company’s activities, goals, and achievements in these areas and to hear our shareowners’ views and suggestions so that the feedback can be provided to our directors.

PERFORMANCE CULTURE

Honeywell’s ability to succeed for our shareowners, customers, suppliers, employees, and communities requires that we foster a high-performance culture that is grounded in our foundational principles. Our performance culture is defined by a set of 9 Behaviors. At their foundation is a commitment to Integrity and Ethics, Inclusion and Diversity, and Workplace Respect, fundamental values that underlie everything we do.

 

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The 9 Behaviors reinforce our performance culture and are enabling our transformation into the world’s premier software-industrial company. They reflect the bold, entrepreneurial spirit of our leaders along with our emphasis on execution with speed and precision. Demonstrating our 9 Behaviors is important to our culture and achieving our objectives, and employees are challenged to continue developing in these areas as there is always opportunity for improvement. However, no one can be deficient in any of our three foundational principles and still work for Honeywell. These values are simply too important to everything we stand for and everything we hope to accomplish.

I  INTEGRITY AND ETHICS

At the core of Honeywell’s foundational principles is the Company’s Code of Business Conduct (the Code) that applies to all 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.

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. To reinforce 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.

Our integrity and compliance program includes, among other elements, a Supplier Code of Business Conduct that flows down to Honeywell’s global supply chain to reinforce Honeywell’s expectation that Honeywell 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 applies to all directors, officers (including the Chief Executive Officer, Chief Financial Officer, and Controller) and employees. Any amendments to or waivers of the Code applicable or granted to any of Honeywell’s directors or executive officers will be published on our website. All officers and employees are required to complete Code of Conduct training and, where permitted by law, are required to certify each year that they will comply with the Code. In 2019, we received certifications from 100% of officers and employees where permitted by law.

Honeywell fosters a culture of integrity, ethics, and workplace respect by setting the tone at the top and by unambiguously and repeatedly reinforcing our expectations. We are proud to have been recognized by Ethisphere, a global leader in defining and advancing the standards of ethical business practices, as one of the 2020 World’s Most Ethical Companies—one of only eight 8 honorees in the Industrial category.

I  INCLUSION AND DIVERSITY

The Board believes that its diversity (four women, two Hispanics, two African American, and one non-U.S.) and the diversity of Honeywell’s executive leadership (over 50% diverse by ethnic background, non-U.S. place of birth, or gender) 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. Inclusion and Diversity is one of our foundational principles and is required of all employees.

Our inclusion and diversity strategy focuses on five key pillars, and we are driving a number of strategic initiatives behind each one, as follows:

 

LOGO

Talent Acquisition. We provide training and toolkits to hiring managers to reinforce their role in bringing diverse talent into Honeywell. Our recruiting partners are required to provide a one in three diverse slate.

 

LOGO

Talent Management. In January 2019, Honeywell launched our Women’s Advancement Program, an annual, year-long program for our pipeline of strong female leaders. The program focuses on each participant’s career advancement and seeks to empower each class of women through workplace training and development opportunities and by expanding their internal networks for promotional opportunities. This year, Robin Washington, one of our Board members, participated in the program kick-off meeting, underscoring our Board’s focus and commitment to this important initiative. We also operate inclusion and diversity councils in our businesses, functions, and regions to foster this important principle throughout our global organization.

 

LOGO

Branding and Communication. To attract and retain our diverse talent, we aim to showcase our culture and values as well as our commitment to inclusion and diversity. Our #futureshapers brand launch campaign has focused on storytelling by a diverse “cast” of Honeywell employees and seeks to humanize our brand by authentically tying our innovative solutions and technologies back to our talent and their work at Honeywell.

 

 

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LOGO

Strategic Partnerships. We are involved in a range of external professional organizations, including the Society of Women Engineers, the National Society of Black Engineers, the Society of Hispanic Engineers, the Anita Borg Institute, and the Leadership Council on Legal Diversity. In 2019, we launched our partnership with the Executive Leadership Council, an organization that supports the development of global black leaders by delivering programs for black employees to develop skills for executive/C-Suite roles. Honeywell also partners with top academic institutions for their quality of programs and commitment to creating a diverse student population and future workforce.

 

LOGO

Inclusive Leadership. In 2019, our Chairman and Chief Executive Officer signed the Catalyst CEO Champions for Change Pledge. Joining Catalyst CEO Champions for Change is both a personal affirmation by Mr. Adamczyk and an organizational commitment to fostering an inclusive environment and advancing opportunities for women in the workplace. From the C-Suite to the shop floor, our leaders are expected to exemplify behaviors that promote an open and inclusive culture, and we help managers develop this skill as they do any other leadership skill though training programs, interactive learning, and real-time events.

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, the Company has also issued a revised global harassment policy to reaffirm our commitment to maintain a respectful workplace for all. This policy provides more explicit guidance on the expectations for each employee and makes clear that all employees who experience or witness harassment are encouraged to report such conduct. All new employees are required to complete a sexual harassment training program as part of the onboarding process, and the policy is reinforced on multiple occasions throughout the year, including enterprise-wide global town meetings.

For more information about Honeywell’s inclusion and diversity initiatives, please visit our website at honeywell.com (see “Company/ About Us”).

SUSTAINABILITY

 

         

>90%

 

reduction in Scope 1 and Scope 2 greenhouse gas intensity since 2004, achieving 56 MT CO2e/$M at the end of 2019

 

~70%

 

energy efficiency improvement since 2004 to 137 MWh/$M (or 0.47 BBTU/$M) at the end of 2019

 

5,200

 

greenhouse gas and energy efficiency projects completed since 2010, saving an annualized $90M

 

128

 

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

 

0.37

 

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 estimates 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.

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 in 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 integrated and 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.

 

 

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I  SUSTAINABLE OPPORTUNITY

Honeywell invents and manufactures technologies that address some of the world’s most critical energy, safety, security, productivity, and global urbanization challenges. While our internal efforts have improved our Scope 1 and Scope 2 greenhouse gas intensity by more than 90% since 2004, the positive impact of our products and services far outweigh the current footprint of Honeywell’s Scope 1 and Scope 2 carbon emissions of approximately 2 million metric tons (MMT) at the end of 2019. For example,

 

LOGO

Solstice®. Our Solstice line of low global warming products, including refrigerants and blowing agents, has helped our customers avoid discharging more than 155 MMT of CO2 equivalent (CO2e) to the atmosphere.

 

LOGO

Biofuels. Biofuels made using Honeywell technology have helped our customers avoid discharging approximately 5 MMT of fossil fuel-based CO2e to the atmosphere.

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 Corporate 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 Corporate Vice President of HSEPS, the Vice President for 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 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.

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, investor.honeywell.com (see “Corporate Governance/Sustainability”). A qualified third party has provided limited assurance per ISO 14064-3 of Honeywell’s 2011-2018 Scope 1 and Scope 2 greenhouse gas emissions inventories. Overall, our sustainability program has reduced our Scope 1 and Scope 2 greenhouse gas intensity by more than 90% since 2004.

 

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 sales from 2011 levels, was met three years early.

 

LOGO

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

In 2019, Honeywell set a new five-year “10-10-10” target to reduce global Scope 1 and Scope 2 greenhouse gas emissions by an additional 10% per dollar of sales from 2018 levels, to deploy at least 10 renewable energy opportunities, and to achieve certification to ISO’s 50001 Energy Management Standard at 10 facilities, all by 2024.

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 over 150 water conservation projects in “water-stressed” areas, saving 128 million gallons. Each of our businesses is required to establish annual waste targets for reducing hazardous waste, as normalized by sales, 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 0.37 at the end of 2019. 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. Like other companies with long, successful histories, Honeywell has legacy manufacturing operations dating back to the 19th century. 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 valuable. Over the last decade, we have made tremendous

 

 

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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:

 

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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. 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-plus acres of open space.

 

LOGO

Buffalo River, New York. Honeywell served as the private sector lead to restore the “functionally dead” Buffalo River through a unique public-private partnership. The river has now become an environmental, economic, and community resource. The river has re-emerged as an amenity and asset for landside redevelopment and renewal.

 

LOGO

El Segundo, California. A former chemical and refrigerant plant has been redeveloped as two urban shopping centers. The Honeywell team went beyond the state’s remediation requirements to facilitate the planned commercial development. Within three years of manufacturing shutdown, city officials cut the ribbon on Plaza El Segundo, a Mediterranean-style shopping center with more than 50 shops and 423,000 square feet of commercial space.

 

LOGO

Chicago, Illinois. The site was a former Celotex roofing tar and asphalt plant. As successor to Celotex, Honeywell engaged with residents in the surrounding neighborhood to convert the site into a green space envisioned by the community. The site is now a 22-acre community green space, including sports fields, basketball courts, a skate park, trails, and a large playground.

For more information about Honeywell’s revitalization of brownfields while renewing communities, please visit our website at investor.honeywell.com (see “Corporate Governance/Sustainability”)

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 science, technology, engineering and math (STEM) education, inclusion and diversity, sustainability, and humanitarian relief. our programs have delivered significant and meaningful results in communities around the world:

 

 

Approximately five million students have participated in Honeywell’s STEM programs; middle and high school teachers in the Atlanta area received computation and coding training in the new STEM Teacher Leadership Program at Georgia Institute of Technology, earning Georgia STEM School Certification; and Honeywell Control Labs in six universities in Turkey, Romania, and Indonesia are focused on loT technologies, serving over 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.

 

 

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 2019, Honeywell employees received nearly $200,000 in financial assistance to help recover from natural disasters in South Carolina, Ohio, Nebraska, and other regions. 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.

 

 

In 2019, Honeywell partnered with the Avasara Leadership Institute, a non-profit organization that provides educational opportunities for India’s brightest girls, to focus on STEM. The new school features classrooms, laboratories, and dormitories as a base for the program. In addition to 500 Avasara students, the school will enable 12,000 students from government and low-budget schools to achieve a proper education.

 

 

Through support for the Safe Water Initiative in India, Honeywell support has enabled more than 170 water stations in areas suffering from groundwater contamination, positively impacting impacts more than 600,000 people.

For more information about our Sustainability and Corporate Citizenship programs, please visit our website at honeywell.com (see “Company/About Us”).

 

 

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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.

Our top legislative and regulatory priorities include:

 

 

Policies and regulations that encourage the use of public utilities to deploy demand response technologies and smart grids to reduce electricity consumption.

 

 

Emission reduction policies that reduce the use of global warming and ozone depleting refrigerants.

 

 

Investment in the air traffic control system to make flying both safer and more energy efficient.

 

 

Commercial building, permitting, and construction codes that facilitate safer, more energy efficient construction and renovation.

 

 

High-priority U.S. Department of Defense programs that support our national security.

 

 

Tax, trade, and other policies to ensure that our nation can compete on a level playing field around the globe.

 

 

Policies that impact the deployment of Industrial Internet of Things technology and software, including data privacy and cybersecurity.

I  TRANSPARENCY

The Center for Political Accountability (CPA) has rated Honeywell as a “First Tier” company for six years in a row in its 2019 CPA-Zicklin Index of Corporate Political Disclosure and Accountability, and for the first time this year, has categorized Honeywell as “Trendsetter” among the “First Tier” companies. The CPA is a non-profit, non-partisan organization that measures and rates the transparency, policies, and practices of the S&P 500 regarding political disclosure and accountability.

This achievement reflects the enhancements made in 2013, 2019, and again in 2020 as we revised and expanded our disclosure of policy, procedures and expenditures for political activity and contributions as well as for trade association membership. Our enhancements were influenced by feedback received from our largest shareowners when we met with them to discuss our performance and their views across a range of ESG topics, including our lobbying and political contributions disclosure.

This year, we redesigned the disclosure on our website to include:

 

 

Additional disclosure related to membership in trade associations, including (i) the number of trade associations that receive $50,000 or greater in annual dues from the Corporation, (ii) the aggregate membership dues paid to those associations, and (iii) specific discussion of the strategic objectives supported by the Corporation’s membership in those associations.

 

 

User-friendly, streamlined, and direct access to available disclosure regarding the Corporation’s political activities, including direct links to federal, state, and local-level filings.

With these enhancements, our shareowners are now able to access comprehensive information regarding our domestic political expenditures at investor.honeywell.com (see “Corporate Governance/Political Contributions”).

I  MANAGEMENT AND BOARD OVERSIGHT

The Law Department oversees our lobbying activities. The Senior Vice President, Global Government Relations reports to the Senior Vice President and General Counsel and also works closely with the Corporate Secretary and Chief Compliance Officer, whose organization ensures compliance with our political spending policy. Our Senior Vice President and General Counsel, our Senior Vice President, Global Government Relations, and our Corporate Secretary and Chief Compliance Officer meet regularly with our 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. In addition, each year, the Senior Vice President, Global Government Relations reports to the CGRC on trade association memberships and to the full Board on our global lobbying and government relations program. The CGRC’s oversight of our political activities ensures compliance with applicable law and alignment with our policies, strategic priorities, and Code of Business Conduct.

 

 

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AND SUSTAINABILITY

 

I  POLITICAL CONTRIBUTIONS AND EXPENDITURES

Use of Corporate Funds. Since 2009, we have not used corporate funds to make any political contributions to candidates, political parties, 527 groups or organizations such as governors’ associations and super PACs or grassroot campaigns intended to influence the outcome of ballot measures using corporate funds, and have no intention of making such political contributions in the future. Even before 2009, any such contributions were extremely rare and for de minimis amounts of less than $5,000.

Were we to use corporate funds for any political contributions, such contributions would be made without regard to the personal partisan preferences of Company officers and executives. In addition, any such use of corporate funds would require the prior approval of the Company’s Senior Vice President and General Counsel. These policies on political contributions are embedded in our Corporate Governance Guidelines and Code of Business Conduct.

Honeywell International Political Action Committee (HIPAC). Any and all contributions made in support of federal, state, and local political candidates are through the non-partisan Honeywell International Political Action Committee. HIPAC is funded exclusively through voluntary contributions from eligible U.S.-based employees, which are not reimbursed by Honeywell. Political disbursements made through HIPAC are made without regard to the personal partisan preferences of Company officers and executives. HIPAC spending decisions are made solely to promote the strategic business interests of Honeywell and are based on the following criteria: Honeywell’s employee, supplier, and/or customer base in legislators’ districts/states; support for Honeywell’s initiatives; leadership positions in the U.S. Congress or state legislatures; and leadership positions on legislative committees that are relevant to Honeywell’s businesses. The Company retains outside auditors to conduct periodic audits of HIPAC practices and procedures.

Trade Associations. We pay membership dues to a number of 501(c)(6) trade associations that may engage in political activity. We engage with these organizations to support our commercial growth initiatives where we believe engaging in coalitions with other industry participants is likely to enable growth of end markets and promote development of our internal technical and regulatory expertise. These memberships also enable us to share our technical and regulatory expertise with other companies and assist in political advocacy and outreach, particularly related to public education efforts regarding major issues common to our industries.

Currently, the aggregate amount of dues paid to trade associations with membership dues of $50,000 or more is less than $5 million annually. Honeywell is a member of 16 U.S. trade associations with membership dues of $50,000 or more annually. Our membership in these trade associations align with our strategic objectives in the following areas: aerospace and defense, aviation regulations, chemicals, civil justice reform, climate change, codes and standards, corporate governance, cybersecurity, data privacy, energy, environmental regulation, export controls, immigration, infrastructure, labor, legal reform, oil and gas/petrochemicals, regulatory reform, safety, tax, trade, and transportation.

Honeywell’s Senior Vice President and General Counsel and Senior Vice President, Global Government Relations review trade association memberships annually to assess their performance and to determine if continued membership is appropriate. Membership in trade associations that would receive more than $50,000 in membership dues from Honeywell in any fiscal year is subject to prior approval by the Company’s Senior Vice President and General Counsel and its Senior Vice President, Global Government Relations and is reviewed at least annually with the CGRC. Honeywell instructs these organizations not to use funds received from Honeywell for any election-related activity at the federal, state, or local levels, including contributions or expenditures in support of, or opposition to, any candidate for any office, ballot initiative campaign, political party, committee, or political action committee. Honeywell informs these organizations of this policy upon becoming a member and annually thereafter.

 

 

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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 Cash Retainer

  

 

  $100,000 per annum paid in quarterly installments.

 

Lead Director Compensation

  

 

  $60,000 per annum, paid in quarterly installments (in addition to Board cash retainer).

 

Committee Membership Compensation

  

 

  $10,000 per annum (or $15,000 per annum for members of the Audit Committee) for each committee membership, paid in quarterly installments.

 

Committee Chair Compensation

  

 

  $20,000 per annum (or $40,000 per annum for the Audit Committee Chair), paid in quarterly installments (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

  

 

  Awarded on the date of the Annual Meeting of Shareowners.

 

  Each non-employee director receives an annual equity grant with a target value of $115,000, of which $65,000 is in the form of restricted stock units (RSUs) and $50,000 is the form of 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 (stock options), 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. Stock 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.

 

  Annual RSUs granted to directors vest on the earliest of the first anniversary of the date of grant, the director’s death or disability, or change in control.

 

The above table summarizes the elements of annual compensation beginning January 1, 2020. In 2019, Lead Director Compensation was $35,000 per annum, Committee Membership Compensation was $10,000 per annum, Audit Committee Chair Compensation was $20,000 per annum, Annual Equity Grants were issued with a target value of $100,000, consisting of 50% RSUs (vesting on the earliest of the third anniversary of the date of grant, the directors’ death or disability, or a change in control) and 50% stock options. Other elements were the same as described in the table above.

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 (2.76% for 2020, 4.06% for 2019) 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 a lump-sum payment for amounts deferred before 2006, pursuant to a prior election.

 

 

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COMPENSATION

 

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.

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 2019, matching charitable contributions were made by Honeywell in the amounts of $25,000 for each of Directors Ayer, Burke, Chico Pardo, Deily, Gregg, Hollick, Paz, and Washington, and in the amount of $19,000 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, directors elected to the Board prior to September 2008 are provided with $100,000 in term life insurance on a grandfathered basis (benefit eliminated prospectively). Mr. Hollick also participates in a Company-provided medical plan in the UK under a legacy arrangement not available to other directors.

I  COMPENSATION UPON ELECTION TO BOARD

Prior to 2019, new non-employee directors elected to the Board received 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. In 2019, the CRGC decided to eliminate this fixed new director sign-on award and instead will provide newly appointed directors with the regular elements of annual director compensation determined on a prorated-basis upon joining the Board. Prorated annual equity grants to new directors will be made on substantially the same terms and conditions as the annual grant made to other non-employee directors of the Company.

2019 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

  

$

113,269

 

  

$

110,011

 

  

$

50,053

 

  

$

 

  

$

4

 

  

$

273,337

 

William S. Ayer

  

$

120,000

 

  

$

110,011

 

  

$

50,053

 

  

$

 

  

$

25,004

 

  

$

305,068

 

Kevin Burke

  

$

118,269

 

  

$

110,011

 

  

$

50,053

 

  

$

 

  

$

25,004

 

  

$

303,337

 

Jaime Chico Pardo

  

$

114,167

 

  

$

110,011

 

  

$

50,053

 

  

$

 

  

$

25,520

 

  

$

299,751

 

D. Scott Davis

  

$

145,000

 

  

$

110,011

 

  

$

50,053

 

  

$

11,178

 

  

$

520

 

  

$

316,762

 

Linnet F. Deily

  

$

145,000

 

  

$

110,011

 

  

$

50,053

 

  

$

 

  

$

25,520

 

  

$

330,584

 

Deborah Flint

  

$

23,370

 

  

$

42,106

 

  

$

27,945

 

  

$

 

  

$

4

 

  

$

93,425

 

Judd Gregg

  

$

125,000

 

  

$

110,011

 

  

$

50,053

 

  

$

 

  

$

25,004

 

  

$

310,068

 

Clive Hollick

  

$

113,269

 

  

$

110,011

 

  

$

50,053

 

  

$

12,349

 

  

$

46,563

 

  

$

332,245

 

Grace D. Lieblein

  

$

120,000

 

  

$

110,011

 

  

$

50,053

 

  

$

 

  

$

19,004

 

  

$

299,068

 

George Paz

  

$

145,000

 

  

$

110,011

 

  

$

50,053

 

  

$

 

  

$

25,004

 

  

$

330,068

 

Robin L. Washington

  

$

117,190

 

  

$

110,011

 

  

$

50,053

 

  

$

 

  

$

25,004

 

  

$

302,258

 

 

(1)

Includes all cash fees earned, whether paid in cash or deferred under the Deferred Compensation Plan for Non-Employee Directors.

 

 

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COMPENSATION

 

(2)

The following table reflects all outstanding stock awards and option awards held at December 31, 2019, by each of the listed individuals:

 

                              
 

Director Name

    

Outstanding

Option Awards

 

 

    

Outstanding

Stock Awards

 

 

    

Outstanding
Deferred Comp Plan

(Non-Elective)

 
 

 

                              

      

 

Mr. Angove

  

 

4,367

 

  

 

3,920

 

  

 

1,182

 

 

Mr. Ayer

  

 

13,814

 

  

 

1,084

 

  

 

3,186

 

 

Mr. Burke

  

 

27,856

 

  

 

1,084

 

  

 

9,829

 

 

Mr. Chico Pardo

  

 

33,106

 

  

 

1,084

 

  

 

27,957

 

 

Mr. Davis

  

 

22,606

 

  

 

1,084

 

  

 

18,871

 

 

Ms. Deily

  

 

16,382

 

  

 

1,084

 

  

 

16,938

 

 

Ms. Flint

  

 

1,405

 

  

 

171

 

  

 

426

 

 

Sen. Gregg

  

 

27,856

 

  

 

1,084

 

  

 

7,310

 

 

Mr. Hollick

  

 

33,106

 

  

 

1,084

 

  

 

24,969

 

 

Ms. Lieblein

  

 

19,534

 

  

 

1,084

 

  

 

5,134

 

 

Mr. Paz

  

 

33,106

 

  

 

1,084

 

  

 

12,524

 

 

Ms. Washington

  

 

19,534

 

  

 

1,084

 

  

 

4,632

 

 

(3)

The amounts set forth in this column represent the aggregate grant date fair value of restricted stock unit awards plus $60,000 in common stock equivalents credited to each director’s account in the Deferred Compensation Plan for Non-Employee Directors. The fair value of the annual restricted stock unit award was computed in accordance with FASB ASC Topic 718 using the average of the high and low of the Company’s stock price on the day of grant. Stock awards of 290 shares were made to Non-Employee Directors in April 2019 with a value of $172.45 per share. The stock awards to Ms. Flint were made on a prorated basis from her date of appointment to the Board (October 7, 2019).

(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 2,070 shares were made to non-employee directors in April 2019 with a Black-Scholes value of $24.18 per share. A more detailed discussion of the assumptions used in the valuation of option awards made in fiscal year 2019 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, 2019. The stock option award to Ms. Flint was made on a prorated basis from her date of appointment to the Board (October 7, 2019).

(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 4.06% for 2019. 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.

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 Ms. Flint who joined the Board in October 2019 and Gen. Odierno who joined the Board on February 28, 2020) 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, 2019, common stock with a market value of 35x 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 41 and the Executive Compensation Tables section beginning on page 70. 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. The Board believes that its 2019 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 2020 Annual Meeting of Shareowners pursuant to the executive compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 2019 Summary Compensation Table and the other related tables and disclosure.”

 

LOGO

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

 

 

LOGO

 

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COMPENSATION DISCUSSION

AND ANALYSIS

 

COMPENSATION

DISCUSSION AND ANALYSIS

 

TABLE OF

CONTENTS

 

 

|

 

 

Named Executive Officers

  

 

Pg 42

 

 

 

|

 

 

Performance Summary

  

 

Pg 42

 

 

 

|

 

 

Our Compensation Program

  

 

Pg 44

 

   

Philosophy and Approach

  

 

44

 

    Program Design and Link to Business Strategy and Performance      45  
    How Compensation Decisions are Made      45  
    Engagement with Shareowners on Compensation      46  
    Compensation Peer Group      46  
    Performance Relative to Peers      48  
    |     2019 Compensation Summary      Pg 50  
    2019 Total Annual Direct Compensation for Each NEO      50  
    Elements of 2019 Total Annual Direct Compensation      51  
    |     2019 Annual Incentive Compensation Plan Decisions      Pg 52  
    |     2019 Long-Term Incentive Compensation Decisions      Pg 58  
    |     Other Compensation and Benefit Programs      Pg 65  
    |     Compensation Practices and Policies      Pg 66  
    |     Risk Oversight Considerations      Pg 67  
    Stock Ownership Guidelines      68  
    Recoupment/Clawback      68  
    Tax Deductibility of Executive Compensation      69  
    Pledging and Hedging Transactions in Company Securities      69  
    |     Management Development and Compensation Committee Report      Pg 69  

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; 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 spin-offs, if and as noted in the document; adjusted free cash flow conversion, which we define as adjusted free cash flow divided by adjusted net income attributable to Honeywell noted in Appendix A; adjusted free cash flow excluding spin-off impact, which we define as adjusted free cash flow excluding the free cash flow contributions from AdvanSix, Garrett and Resideo in the period noted in Appendix A; adjusted net income attributable to Honeywell, which we define as net income attributable to Honeywell, excluding pension mark-to-market expenses, debt refinancing expenses, separation costs related to the spin-offs, the 4Q17 U.S. tax legislation charge, and adjustments to such charge, if and as noted in Appendix A; sales excluding spin-off impact, which we define as sales excluding the sales attributable to the Garrett and Resideo spin-off businesses in the periods 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 reimbursement impacts assuming both indemnification and reimbursement 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, ITW, MMM, and UTX

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

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

Adjusted Free Cash Flow Margin = Adjusted Free Cash Flow ÷ Sales

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)

ROI = Adjusted Net Income Before Interest ÷ (Total Shareowner Equity + Net Debt)

 

 

 

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COMPENSATION DISCUSSION

AND ANALYSIS

 

OUR NAMED EXECUTIVE OFFICERS

 

 

LOGO

Mr. Mahoney is included as the sixth NEO for 2019 because he was an executive officer during 2019 while in the role of President and Chief Executive Officer, Aerospace and as a result of compensation earned in 2019.

PERFORMANCE SUMMARY

LOGO   STRONG OPERATIONAL PERFORMANCE IN 2019

In 2019, Honeywell delivered on our commitments and grew organic sales, segment margin, adjusted earnings per share (EPS), and adjusted free cash flow. 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 2019, we executed at a high “say / do” ratio, meeting or exceeding every financial commitment laid out during our initial outlook call on February 1, 2019. In the year, we delivered favorable performance on key metrics we use as the basis for our executive compensation programs as shown below:

 

 

5% organic sales growth

 

 

150 basis points of segment margin expansion

 

 

10% adjusted EPS growth excluding spins

 

 

17% adjusted free cash flow growth excluding spins

The table below illustrates our success on these metrics over the past three years (2017-2019):

 

 

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 41 or in Appendix A.

 

 

LOGO

 

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COMPENSATION DISCUSSION

AND ANALYSIS

 

LOGO   DELIVERED ON OUR COMMITMENTS IN 2019

Below are our long-term financial commitments, and in 2019 we met or exceeded these financial commitments to shareowners and continued to make investments in the businesses through research and development, capital expenditures, and M&A. In addition to our strong financial performance, we’ve executed strategic capital deployment that will continue to benefit shareowners over the long term. Given the market environment in 2019, we maintained a balanced capital deployment strategy consisting of the following actions:

 

 

Announced a 10% dividend increase, our tenth consecutive double-digit increase since 2010.

 

 

Repurchased $4.4 billion in Honeywell shares, reducing the weighted average share count by over 3%. This was the second consecutive year of deploying more than $6.0 billion of cash back to shareowners in the form of dividends and share repurchases, after spinning off ~20% of sales in 2018.

 

 

Deployed more than $800 million to high ROI capital expenditures.

 

 

Deployed approximately $100 million to M&A and Honeywell Ventures to add strategic assets and enhance our technology offerings and innovation.

 

 

Refinanced 2019 maturing debt at attractive interest rates to further strengthen our balance sheet.

 

       

CEO Priority

 

 

Metric

 

 

Long-Term

Commitment

 

 

2019 Result

 

 1 

 

  

 

Accelerate    

Organic Growth    

 

Organic Sales

Growth

 

Low-to-Mid

Single Digit

 

5%

 2 

 

  

 

Expand Margins /    

Improve Cash    

Conversion    

 

 

 

 

 

Basis Points (bps)

Expansion

 

 

 

 

 

30 - 50 bps

 

 

 

150 bps

 

 

 

 

 

Adjusted Free Cash Flow

Conversion

 

 

 

 

 

~100%

 

 

 

105%

 

 3 

 

  

 

Become a    

Software-    

Industrial    

Company    

 

 

 

 

Connected Software

Sales Growth

  Double-Digit   Double-Digit

 

 

 4 

  

 

 

More Aggressive    

Capital    

Deployment    

 

 

 

Dividend growth in-line with EPS growth

Disciplined M&A (including Honeywell Ventures)

Share repurchases from residual capacity

High ROI capital expenditures

 

  $7.8B

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 41 or in Appendix A.

 

 

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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.

 

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:

 

 

Operational and financial performance — for the entire corporation and the relevant business units.

 

 

Aggressiveness of each executive’s financial and operating 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 (TSR).

 

 

Trends and best practices in executive compensation.

 

 

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

The MDCC reviews these factors over various time frames 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. When appropriate, the MDCC may approve other 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

The following table provides an overview of our 2019 executive compensation program, which reflects shareowner responsive design changes made over the past three years and describes 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 entire 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 entire Leadership Team*: 35% of annual LTI

  

 

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

           
        

 

 Restricted Stock Units:

 

— CEO and entire Leadership Team*: 15% 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 in 2019, which includes all NEOs.

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 and operating 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.

 

 

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 over the past few years that have now been fully implemented. These changes led to over 92% of our shareowners voting in favor of “Say-on-Pay” in each of the last three years.

In 2019, we extended meeting invitations to 77 of our shareowners during proxy season and 53 during our summer/fall outreach to discuss environmental, social, and governance (ESG) matters (including our executive compensation program), representing 53% of our common stock outstanding. Our invitations were accepted by 25 different shareowners, representing 33% of our common shares outstanding, and 29 separate meetings were held, many of which included the participation of either our Lead Director or CRGC Chair. Feedback on our executive compensation program was uniformly positive in 2019. No additional executive compensation program modifications were made in 2019 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: (i) a group of 16 companies that we call our “Compensation Peer Group,” and (ii) 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), Illinois Tool Works Inc. (ITW), 3M Company (MMM), and United Technologies Corporation (UTX), companies against whom we frequently compete for investor dollars. Each of these five 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. The MDCC added ITW to the Multi-Industry Peer Group in 2019 to align the Multi-Industry Peers with the core peer group used in investor relations communications.

Compensation Peer Group. The companies included in the broader Compensation Peer Group focus on companies that have one or more of the following attributes:

 

 

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

 

 

Similar sales and/or market capitalization.

 

 

Similar breadth of portfolio and complexity.

 

 

Global scope of operations and/or diversified product lines.

 

 

Demonstrated competitor for executive talent.

The following provides a view of the multi-industry profile of the Honeywell businesses in 2019:

 

 

LOGO

The MDCC reviews the appropriateness of the Compensation Peer Group companies on an annual basis and discusses whether any changes are necessary. No changes were made to the Compensation Peer Group companies in 2019.

 

 

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COMPENSATION DISCUSSION

AND ANALYSIS

 

The following table lists relevant comparative information for the Compensation Peer Group companies for 2019:

 

                       
   

Mkt Cap ($M)

(12/31/2019)

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

Total Shareowner Return (12/31/2019)

 

       

Company Name

                    1 Year     3 Years     5 Years     10 Years        
                       
 

Honeywell International Inc.

 

    $126,472       $  58,679       $  36,709       113,000             37     69     106     493  
 

Multi-Industry Peer Group (5)

                       
 

3M Company

 

 

$101,450

 

 

 

$  44,659

 

 

 

$  32,136

 

 

 

96,163

 

       

 

-4

 

 

7

 

 

23

 

 

176

 
                                                                                     
 

Emerson Electric Co.

 

 

$  46,588

 

 

 

$  20,497

 

 

 

$  18,372

 

 

 

88,000

 

       

 

32

 

 

50

 

 

45

 

 

142

 
                                                                                     
 

General Electric Company

 

 

$  97,466

 

 

 

$266,048

 

 

 

$  95,214

 

 

 

205,000

 

       

 

54

 

 

-61

 

 

-48

 

 

3

 
                                                                                     
 

Illinois Tool Works Inc.

 

 

$  57,734

 

 

 

$  15,068

 

 

 

$  14,109

 

 

 

45,000

 

       

 

46

 

 

58

 

 

113

 

 

376

 
                                                                                     
 

United Technologies Corporation

 

 

$127,850

 

 

 

$139,716

 

 

 

$  77,046

 

 

 

243,200

 

       

 

44

 

 

46

 

 

0

 

 

173

 
                                                                                     
 

Honeywell Percentile Rank

 

 

99

 

 

54

 

 

53

 

 

54

       

 

35

 

 

100

 

 

97

 

 

100

 
                                                                                     
 

Honeywell TSR Rank Order

 

               

 

4

 

 

 

1

 

 

 

2

 

 

 

1

 

 
 

Other Comp Peers (11)

                       
 

The Boeing Company

 

 

$183,335

 

 

 

$133,625

 

 

 

$  76,559

 

 

 

161,100

 

       

 

3

 

 

124

 

 

185

 

 

668

 
                                                                                     
 

Caterpillar Inc.

 

 

$  81,617

 

 

 

$  78,453

 

 

 

$  53,800

 

 

 

102,300

 

       

 

20

 

 

72

 

 

89

 

 

241

 
                                                                                     
 

Deere & Company

 

 

$  54,278

 

 

 

$  73,011

 

 

 

$  39,233

 

 

 

73,489

 

       

 

18

 

 

78

 

 

119

 

 

301

 
                                                                                     
 

Eaton Corporation plc

 

 

$  39,157

 

 

 

$  32,805

 

 

 

$  21,390

 

 

 

101,000

 

       

 

43

 

 

56

 

 

66

 

 

308

 
                                                                                     
 

General Dynamics Corporation

 

 

$  50,898

 

 

 

$  48,841

 

 

 

$  39,350

 

 

 

102,900

 

       

 

15

 

 

8

 

 

41

 

 

226

 
                                                                                     
 

Ingersoll-Rand Plc

 

 

$  31,677

 

 

 

$  20,492

 

 

 

$  16,599

 

 

 

50,000

 

       

 

48

 

 

88

 

 

131

 

 

448

 
                                                                                     
 

Johnson Controls International plc

 

 

$  31,404

 

 

 

$  42,287

 

 

 

$  23,968

 

 

 

104,000

 

       

 

41

 

 

7

 

 

7

 

 

111

 
                                                                                     
 

Lockheed Martin Corporation

 

 

$109,833

 

 

 

$  47,528

 

 

 

$  59,812

 

 

 

110,000

 

       

 

53

 

 

68

 

 

131

 

 

621

 
                                                                                     
 

Phillips 66

 

 

$  49,506

 

 

 

$  58,720

 

 

 

$107,293

 

 

 

14,500

 

       

 

34

 

 

42

 

 

81

 

 

0

 
                                                                                     
 

Raytheon Company

 

 

$  61,193

 

 

 

$  34,566

 

 

 

$  29,176

 

 

 

70,000

 

       

 

46

 

 

63

 

 

126

 

 

452

 
                                                                                     
 

Schlumberger Limited

 

 

 

$  55,652

 

 

 

$  56,312

 

 

 

$  32,917

 

 

 

105,000

 

       

 

18

 

 

-46

 

 

-44

 

 

-21

 
 

All Compensation Peers (16)

                       
 

Honeywell Percentile Rank

    93     67     51     80           49     75     65     88  
                                                                                     
 

Honeywell TSR Rank Order

                  9       5       7       3    

Source: S&P Capital IQ

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

 

 

47

 

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|  Notice and Proxy Statement  |  2020

 

 


Table of Contents
06  |   

 

COMPENSATION DISCUSSION

AND ANALYSIS

 

I  PERFORMANCE RELATIVE TO PEERS

2019 Performance

The following graphs show our performance versus the median of each of the Compensation Peer Group and the Multi-Industry Peer Group for four key metrics in 2019. We’ve included adjusted EPS and adjusted free cash flow growth because those are the primary measures used in our annual incentive compensation plan (ICP).

 

 

LOGO

Source: S&P Capital IQ for peer data.

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 41 or in Appendix A.

Three-Year Cumulative Growth

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 four key metrics over the three-year period ending in 2019 that the MDCC reviewed.

 

 

LOGO

Source: S&P Capital IQ for peer data.

*Peer margin expansion calculated as EBIT divided by sales.

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 41 or in Appendix A.

 

 

LOGO

 

|  Notice and Proxy Statement  |  2020

 

48



Table of Contents
06  |   

 

COMPENSATION DISCUSSION

AND ANALYSIS

 

Three-Year Average Return

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 17.6%, which significantly outperformed both the Multi-Industry Peer Group Median and the Compensation Peer Group Median.

 

LOGO

Source: S&P Capital IQ for peer data.

Cumulative Total Shareowner Return (TSR)

 

LOGO

Source: S&P Capital IQ, as of December 31, 2019.

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

 

 

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Table of Contents
06  |   

 

COMPENSATION DISCUSSION

AND ANALYSIS

 

2019 COMPENSATION SUMMARY

The table below summarizes 2019 compensation actions that reflect our commitment to align pay with Company performance and the interests of our shareowners. Details 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 remained flat at $1,600,000 (no increase in 2019).

 

  Base salary for Mr. Lewis was increased by 10% inclusive of a merit increase and market adjustment. Average merit increase for all other NEOs was 3.6%.

 

  Ms. Madden is a first-year NEO.

LOGO      

 

Annual Incentive
Compensation

Plan (ICP)

 

 

  ICP Target: 175% of base salary.

 

  Earned award paid at 145% of target, reflecting application of the ICP formula and the full Board’s assessment of 2019 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 136% of individual target awards.

 

 

  80% of payout based on Company performance against the two pre-established ICP metrics of adjusted EPS and adjusted free cash flow. For Messrs. Gautam and Mahoney, performance against business unit goals of income contribution and adjusted free cash flow for PMT and Aerospace, respectively, counted toward half of their calculated award for time worked in those business units.

 

  20% of payouts were determined based on the MDCC’s qualitative assessment of individual performance and accomplishments discussed on pages 54-57.

  LOGO      

 

Performance
Plan

Stock Units
(PSUs)

(2019-2021)

 

 

  Represented 50% of annual LTI.

 

 

  Represented 50% of 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.

     

 

Stock Options

 

 

  Represented 35% of annual LTI.

 

 

  Represented 35% of annual LTI.

 

 

  2019 stock option grants were issued with a strike price of $154.22.

     

 

Restricted Stock
Units (RSUs)

 

  Represented 15% of annual LTI.

 

  Represented 15% of annual LTI.

 

  RSUs issued to the CEO and Other NEOs vest over six years.

I  2019 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 70, as required by the SEC, but is intended to show 2019 compensation decisions from the perspective of the MDCC.

 

                                                      

NEO

   Position  

Base

Salary

   

Annual

Incentive

Plan (ICP)(1)

   

2019-2021

Performance

Plan Units(2)

   

Stock

Options(3)

   

Restricted

Stock

Units(4)

   

Total Annual

Direct

Compensation

 
                                                      

Darius Adamczyk

  

Chairman and CEO

 

$

1,600,000

 

 

 

$4,065,000