DEF 14A 1 def14a.htm DEF 14A oi_Current_Folio_Proxy

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.  )

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

Preliminary Proxy Statement

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

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a‑12

 

 

OWENS‑ILLINOIS, INC.

(Name of Registrant as Specified In Its Charter)

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

 

Payment of Filing Fee (Check the appropriate box):

No fee required.

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

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

 

(3)

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

 

 

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

 

 

(5)

Total fee paid:

 

 

 

Fee paid previously with preliminary materials.

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

 

(1)

Amount Previously Paid:

 

 

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

 

 

(3)

Filing Party:

 

 

 

 

(4)

Date Filed:

 

 

 

 

 

 

 


 

 

 

 

 

Picture 2

 

NOTICE OF ANNUAL MEETING OF SHARE OWNERS

 

 

 

Thursday, May 16, 2019
9:00 a.m.

Plaza 2
O-I World Headquarters
Perrysburg, Ohio 43551

To Our Share Owner:

You are cordially invited to attend the Annual Meeting (the “Annual Meeting”) of the share owners of Owens-Illinois, Inc. (the “Company”) for the purpose of considering and voting upon the following matters:

 

 

 

 

 

Proposal

  

Board
Recommendation

  

For more
information

1.  The election of 12 directors, each to serve for a term of one year

 

FOR
all of the nominees for election to the Board of Directors

 

Page 4

2.  The ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2019

 

FOR
the ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2019

 

Page 60

3.  The approval of the Owens-Illinois, Inc. Amended and Restated 2017 Incentive Award Plan

 

FOR
the approval of the Owens-Illinois, Inc. Amended and Restated 2017 Incentive Award Plan

 

Page 61

4.  An advisory vote to approve named executive officer compensation

 

FOR
the advisory vote to approve named executive officer compensation

 

Page 69

Mail Date:

The Company intends to commence distribution of this notice and the accompanying Proxy Statement and proxy card on or about April 2, 2019.

Record Date:

The Board fixed the close of business on March 18, 2019, as the record date for the determination of share owners owning the Company’s Common Stock, par value $.01 per share, entitled to notice of, and to vote at, the Annual Meeting.

Your Vote is Important:

Enclosed is a proxy card that provides you with a convenient means of voting on the matters to be considered at the meeting, whether or not you attend the meeting in person. All you need do is mark the proxy card to indicate your vote, sign and date the card, then return it in the enclosed envelope as soon as conveniently possible. If the shares are held of record in more than one name, all holders of record should sign the proxy card. If you are a share owner of record and you submit a proxy, but you do not provide voting instructions, your shares will be voted: for each of the Board nominees, for the ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2019, for the approval of the Owens-Illinois, Inc. Amended and Restated 2017 Incentive Award Plan, and for the advisory vote to approve named executive officer compensation. As an alternative to

 


 

returning the proxy card, you may use the Internet or telephone to submit your proxy as described in the enclosed Proxy Statement and on the proxy card.

We sincerely appreciate your interest in and support of Owens-Illinois, and we hope to see you at the Annual Meeting.

By order of the Board of Directors,

 

 

 

ANDRES A. LOPEZ
Chief Executive Officer

Picture 6

 

 

 

MARY BETH WILKINSON
Corporate Secretary

image2.jpeg

 

April 2, 2019

Perrysburg, Ohio

 

 

 

 


 

TABLE OF CONTENTS

 

 

 

Page

PROXY STATEMENT FOR THE ANNUAL MEETING OF SHARE OWNERS

1

Who May Vote 

1

How to Vote 

2

Deadline 

2

Further Instructions Regarding “How to Vote” 

2

Revocability of Proxies 

3

Vote Required to Approve Matters 

3

Other Matters 

3

PROPOSAL 1 ELECTION OF DIRECTORS 

4

General 

4

Information on Nominees 

4

GOVERNANCE INFORMATION 

10

Board Leadership Structure 

10

Executive Sessions 

10

Risk Oversight 

10

General Board Responsibilities 

10

Board Independence 

10

Board Member Stock Ownership 

11

Board Size 

11

Board Meeting Attendance 

11

Corporate Governance Guidelines 

11

Board Nominees 

11

Director Experience and Skills 

12

Code of Business Conduct and Ethics 

12

Communicating with the Board 

13

BOARD AND COMMITTEE MEMBERSHIP 

14

Current Committee Membership 

14

Audit Committee 

14

Compensation and Talent Development Committee 

15

Nominating/Corporate Governance Committee 

15

Risk Oversight Committee 

15

DIRECTOR COMPENSATION AND OTHER INFORMATION 

17

Director Compensation 

17

Related Person Transactions 

18

Compensation and Talent Development Committee Interlocks and Insider Participation 

19

 

 


 

TABLE OF CONTENTS (continued)

B

 

 

Page

EXECUTIVE COMPENSATION 

20

Compensation Discussion and Analysis 

20

Compensation and Talent Development Committee Report 

41

2018 Summary Compensation Table 

41

Grants of Plan-Based Awards in 2018 

43

Outstanding Equity Awards at Fiscal Year End 2018 

44

Option Exercises and Stock Vested in 2018 

46

Pension Benefits

46

Non-Qualified Deferred Compensation 

47

Potential Payments Upon Termination or Change in Control 

48

CEO Pay Ratio

55

AUDIT COMMITTEE REPORT 

56

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

57

Fees Paid to Ernst & Young LLP 

57

Pre-Approval of Independent Registered Public Accounting Firm Services 

57

PROPOSAL 2 RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

60

PROPOSAL 3 APPROVAL OF THE COMPANY’S AMENDED AND RESTATED 2017 INCENTIVE AWARD PLAN 

61

PROPOSAL 4 ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION 

69

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 

71

Section 16(a) Beneficial Ownership Reporting Compliance 

72

2020 ANNUAL MEETING OF SHARE OWNERS 

73

FORWARD LOOKING STATEMENTS 

73

PROXY SOLICITATION 

73

APPENDIX A 

A-1

APPENDIX B 

B-1

 

 

 

 


 

PROXY STATEMENT FOR THE ANNUAL MEETING OF SHARE OWNERS To Be Held May 16, 2019

The Annual Meeting of the share owners of Owens-Illinois, Inc. (the “Company”) will be held on Thursday, May 16, 2019, at 9:00 a.m. in Plaza 2 of the O-I World Headquarters, Perrysburg, Ohio. At the Annual Meeting, share owners will: (1) vote to elect 12 directors, each to serve a term of one year; (2) consider the ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2019; (3) vote to approve the Owens-Illinois, Inc. Amended and Restated 2017 Incentive Award Plan; and (4) participate in an advisory vote to approve named executive officer compensation.

This Proxy Statement has been prepared in connection with the solicitation by the Company’s Board of Directors (the “Board”) of proxies for the Annual Meeting and provides information concerning the persons nominated by the Board for election as directors, and other information relevant to the Annual Meeting. The Company intends to commence distribution of this Proxy Statement and the accompanying proxy card on or about April 2, 2019.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHARE OWNERS TO BE HELD ON MAY 16, 2019

The Securities and Exchange Commission (“SEC”) has adopted a “Notice and Access” rule that allows companies to deliver a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”) to share owners in lieu of a paper copy of the proxy statement and related materials and the Company’s 2018 Annual Report to share owners. The Notice of Internet Availability provides instructions as to how share owners can access the proxy materials online, contains a listing of matters to be considered at the meeting, and sets forth instructions as to how shares can be voted. Shares must be voted either by telephone, on the Internet or by completing and returning a proxy card. 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. Instructions for requesting a paper copy of the proxy materials are set forth on the Notice of Internet Availability.

The Notice of Annual Meeting and Proxy Statement, the Company’s 2018 Annual Report to share owners and the Stakeholder Letter are available at www.proxyvote.com. You will need your assigned control number to vote your shares. Your control number can be found on your proxy card.

Who May Vote

You will be entitled to vote at the Annual Meeting if you are a share owner of record as of the close of business on March 18, 2019 (the “record date”). At the close of business on the record date, 155,221,763 shares of the Company’s common stock, par value $.01 per share (“Common Stock”), were outstanding. Each share of Common Stock entitles the holder of record to one vote on all matters to be voted upon at the Annual Meeting. Shares of Common Stock held by the trustee under the Company’s 401(k) plans must be voted by the trustee in accordance with written instructions from participants in such plan or, as to those shares for which no instructions are received, in a uniform manner as a single block in accordance with the instructions received with respect to the majority of shares for which instructions were received from participants. No other securities are entitled to be voted at the Annual Meeting.

 

 

 

2019 Proxy Statement    

1

 


 

How to Vote

Shares of Common Stock can be voted at the Annual Meeting only if the share owner is present in person or represented by proxy. If shares are owned of record in the share owner’s name, the share owner may cause these shares to be voted at the Annual Meeting in one of four ways.

 

 

 

 

Picture 11

Picture 10

Picture 9

Picture 8

Internet

Phone

Mail

In Person

Visit www.proxyvote.com. Be sure to have the control number found on the proxy card, follow the voting instructions and confirm that your votes have been accurately recorded.

Call the toll-free number (for residents of the U.S. and Canada) listed on the proxy card. You must enter the control number listed on the proxy card and follow the instructions.

Send your completed and signed proxy card promptly in the enclosed envelope or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

Share owners can choose to vote in person by ballot at the Annual Meeting. At the meeting, the share owner will need to request a ballot to vote their shares.

Deadline

The deadline for submitting a proxy by internet or telephone is 11:59 p.m., Eastern Time, on May 15, 2019. If a proxy is submitted by internet or telephone, the share owner does not need to return the proxy card. If the share owner chooses to submit its proxy by mail, the deadline for Broadridge to receive and count a proxy by mail is 11:59 p.m., Eastern Time, on May 15, 2019.

Householding

To reduce costs and the environmental impact of the Company’s Annual Meeting, a single copy of the Proxy Statement and 2018 Annual Report to Share Owners will be delivered to two or more share owners who share an address, unless contrary instructions have been received from an affected share owner, a practice commonly referred to as “householding.” The Company will promptly deliver, upon written or oral request, individual copies of the proxy materials to any share owner at the shared address to which single copies of those documents were delivered. To make such a request, please contact Broadridge Householding Department by phone at 1-866-540-7095 or by mail to Broadridge Householding Department, 51 Mercedes Way, Edgewood, New York 11717.  If you are a share owner of record and would like to enroll in this householding service or would like to receive individual copies of future proxy materials, please contact Broadridge Householding Department by phone at 1-866-540-7095 or by mail to Broadridge Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Share owners who hold their shares beneficially in street name should contact their bank, broker or other holder of record to request information about householding.

Further Instructions Regarding “How to Vote”

The telephonic and Internet voting procedures are designed to authenticate votes cast by use of a personal identification number. These procedures allow share owners to appoint a proxy to vote their shares and to confirm that their instructions have been properly recorded.

Share owners who hold their shares beneficially in street name through a nominee (such as a bank or broker) may be able to submit their proxy by telephone or the Internet as well as by mail. The share owner should follow the instructions received from the nominee to vote these shares. Share owners who hold their shares beneficially in street name can also choose to vote in person by ballot at the Annual Meeting, but must have a legal proxy with them executed by the nominee in order for their vote to count. At the meeting, the share owner will need to request a ballot to vote these shares.

The proxy card lists each person nominated by the Board for election as a director. Proxies duly executed and received in time for the meeting will be voted in accordance with share owners’ instructions. If no instructions are given, proxies will be voted to (a) elect each of the 12 nominated directors of the Company for a term of one year to expire at the Annual Meeting in 2020; (b) ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2019; (c) approve the Owens-Illinois, Inc. Amended and Restated 2017 Incentive Award Plan; (d) approve the compensation of the Company’s named executive officers; and (e) in the discretion of the proxy holders as to any other business that may properly come before the meeting.

 

 

 

2

    2019 Proxy Statement

 


 

Revocability of Proxies

Any proxy solicited hereby may be revoked by the person or persons giving it at any time before it has been exercised at the Annual Meeting by (a) giving notice of revocation to the Company in writing or at the 2019 Annual Meeting; (b) submitting a later dated proxy; or (c) attending the Annual Meeting in person and voting at the meeting.

Vote Required to Approve Matters

There must be a quorum for the transaction of business at the meeting. A quorum is the presence at the meeting of a number of shares that are either present or represented by proxy, constituting a majority of the outstanding shares entitled to vote at the meeting. If you submit a properly executed proxy card or a telephonic or Internet proxy, or you are present at the meeting in person, even if you abstain from voting, your shares will be considered part of the quorum. Broker non‑votes (shares held by a broker or nominee that are represented at the meeting, but with respect to which the broker or nominee is not empowered to vote on a proposal) are included in determining the presence of a quorum.

Proposal One. Each director to be elected by the share owners of the Company shall be elected by the affirmative vote of a majority of the votes cast with respect to such director by the shares represented and entitled to vote thereon at a meeting of the share owners for the election of directors at which a quorum is present (an “Election Meeting”); provided, however, that if the Board determines that the number of nominees exceeds the number of directors to be elected at such meeting (a “Contested Election”), whether or not the election becomes an uncontested election after such determination, each of the directors to be elected at the Election Meeting shall be elected by the affirmative vote of a plurality of the votes cast by the shares represented and entitled to vote at such meeting with respect to the election of such director. For purposes of electing directors, a “majority of the votes cast” means that the number of votes cast “for” a candidate for director exceeds the number of votes cast “against” that director (with “abstentions” and “broker non‑votes” not counted as votes cast as either “for” or “against” such director’s election). In an election other than a Contested Election, share owners will be given the choice to cast votes “for” or “against” the election of directors or to “abstain” from such vote and shall not have the ability to cast any other vote with respect to such election of directors. In a Contested Election, share owners will be given the choice to cast “for” or “withhold” votes for the election of directors and shall not have the ability to cast any other vote with respect to such election of directors. The Board has established procedures under which any director who is not elected shall offer to tender his or her resignation to the Board.

Proposal Two. The affirmative vote of a majority of the stock having voting power present in person or represented by proxy and entitled to vote thereon is required to ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2019. Abstentions will have the same effect as votes “against” this proposal. “Broker non‑votes” are not expected for this proposal as NYSE rules allow brokers or nominees to exercise discretionary voting authority on this “routine” proposal.

Proposal Three. The affirmative vote of a majority of the stock having voting power present in person or represented by proxy and entitled to vote thereon is required for the approval of the Owens-Illinois, Inc. Amended and Restated 2017 Incentive Award Plan. Abstentions will have the same effect as votes “against” this proposal and “broker non‑votes” will not be counted in determining whether this proposal has been approved.

Proposal Four. The affirmative vote of a majority of the stock having voting power present in person or represented by proxy and entitled to vote thereon is required for the advisory vote to approve named executive officer compensation. Abstentions will have the same effect as votes “against” this proposal and “broker non‑votes” will not be counted in determining whether this proposal has been approved.

Other Matters

Management of the Company does not know of any matter that will be presented for action at the 2019 Annual Meeting other than as described in this Proxy Statement. However, if any other matter should properly be brought to a vote at the meeting, or any adjournment or postponement thereof, all shares covered by proxies solicited hereby will be voted with respect to such matter in accordance with the proxy holders’ discretion.

 

 

 

2019 Proxy Statement    

3

 


 

PROPOSAL 1: ELECTION OF DIRECTORS

General

The Board currently consists of 12 members whose terms expire at this year’s Annual Meeting. The Board believes that refreshment is important to help ensure that Board composition is appropriately aligned with the Company’s evolving business and strategic needs. The Nominating/Corporate Governance Committee has reviewed the composition of the Board for a balance of tenure, skills and diversity on the Board and pursuant to the Nominating/Corporate Governance Committee’s Policies and Procedures Regarding the Identification and Evaluation of Candidates for Director (the “Policies and Procedures”), the qualifications, performance and circumstances of each incumbent director. After completing its review, the Nominating/Corporate Governance Committee recommended all incumbent directors for re‑election, except for John J. McMackin, Jr. Mr. McMackin’s long-term service on the Board is ending at the conclusion of the Annual Meeting. In addition, the Nominating/Corporate Governance Committee, pursuant to the Policies and Procedures, considered Dennis K. Williams’ deep understanding of the Company’s technology in recommending the re-election of Mr. Williams, age 73. The Board approved the Nominating/Corporate Governance Committee’s recommendations regarding the incumbent directors and also approved the Nominating/Corporate Governance Committee’s recommendation that one new candidate, John H. Walker, stand for election to fill the vacancy.

Information on Nominees

The Board, at the recommendation of the Nominating/Corporate Governance Committee, has nominated 12 persons for election as directors to serve for a one year term expiring at the 2020 annual meeting of share owners and until their successors have been elected. The nominees of the Board are Gordon J. Hardie, Peter S. Hellman, John Humphrey, Anastasia D. Kelly, Andres A. Lopez, Alan J. Murray, Hari N. Nair, Hugh H. Roberts, Joseph D. Rupp, John H. Walker, Carol A. Williams and Dennis K. Williams. Except for Mr. Walker, each nominee is currently serving as a director of the Company and each nominee, including Mr. Walker, has consented to being named in this Proxy Statement and has agreed to serve if elected. If for any reason any nominee should be unavailable to serve, proxies solicited hereby may be voted for a substitute as well as for the other Board nominees. The Board, however, expects all of its nominees to be available to serve.

Following is information on the persons nominated for election to the Board at the 2019 Annual Meeting:

Nominees—To be elected for terms expiring at the 2020 Annual Meeting

Gordon J. Hardie, Age 55

 

 

Picture 15

Director since 2015

Mr. Hardie currently serves as President, Food & Ingredients at Bunge Limited, a global company that operates in agribusiness, sugar and bioenergy, food and ingredients, and fertilizer. Mr. Hardie previously served as Managing Director at Bunge (2011‑2017) and currently serves as a member of the Executive Committee and has led the global Operational Excellence program for Bunge since 2013. Prior to joining Bunge, Mr. Hardie was a Managing Director at Morningside Partners, an M&A Advisory firm he established in 2009. Mr. Hardie previously held senior management positions at Goodman Fielder, including Managing Director (2004‑2009), Sales and Marketing Director and Marketing Innovation Director (2002‑2003). He was named Group General Manager, Marketing at SouthCorp Wines in 2000 and Vice President, Regional Markets, Asia Pacific at Foster’s Brewing Group in 1999. Before immigrating to Australia in 1999, Mr. Hardie was Regional Director for the Americas and Asia Pacific Regions at Pernod Ricard Irish Distillers. Mr. Hardie holds a B.A. from the University College Cork and an M.B.A. from University College Dublin’s Smurfit Graduate Business School and has completed the Advanced Management Program and the AVIRA CEO Program at INSEAD. Since 2013, Mr. Hardie has served on the board of Zaklady Tluszcowe Kruszwica. Mr. Hardie also serves on the North American Advisory Board of the Smurfit Graduate Business School. Mr. Hardie’s extensive business leadership skills, his global business experience, and broad food and spirits industry knowledge qualify him to serve on the Company’s Board.

 

 

 

 

4

    2019 Proxy Statement

 


 

Peter S. Hellman, Age 69

 

 

Picture 4

Director since 2007

Mr. Hellman retired in 2008 after a long career with large, multinational companies in both financial and operating executive positions. Mr. Hellman has over 40 years of financial analysis experience and has been involved with investor relations for over 35 years. He was an executive with Nordson Corporation from 2000 to 2008, where he served as President and Chief Financial and Administrative Officer from 2004 to 2008 and Executive Vice President and Chief Financial and Administrative Officer from 2000 to 2004. Nordson is a global leader in providing capital equipment to the packaging industry. Mr. Hellman also served as a director of Nordson from 2001 to 2008. Prior thereto, Mr. Hellman was with TRW Inc. for ten years and held various positions, the most recent of which was President and Chief Operating Officer. During his tenure as a financial executive, Mr. Hellman obtained significant reporting expertise and substantial experience in corporate transactions. Mr. Hellman also has extensive experience as a director of both public and private companies, and has been serving on public company boards for over 20 years. He is currently a director of Baxter International, Inc. (since 2005) and The Goodyear Tire and Rubber Company (since 2010). Mr. Hellman also serves on the board of the Cleveland Museum of Natural History and The Holden Arboretum. Through his significant board and management experience, Mr. Hellman has obtained extensive training in executive compensation matters and corporate governance practices. Mr. Hellman holds a B.A. from Hobart College and an M.B.A. in finance from Case Western Reserve University. Mr. Hellman’s long career and financial and operating experience, business leadership skills, extensive board experience and knowledge of executive compensation and corporate governance matters qualify him to serve on the Company’s Board.

 

John Humphrey, Age 53

 

 

Picture 7

Director since 2018

From 2011 to May 2017, Mr. Humphrey served as Executive Vice President and Chief Financial Officer of Roper Technologies, Inc., a Fortune 1000 company that designs and develops software and engineered products and solutions for healthcare, transportation, food, energy, water, education and other niche markets worldwide. He retired from Roper in December 2017. From 2006 to 2011, he served as Vice President and Chief Financial Officer of Roper. Prior to joining Roper, Mr. Humphrey served as Vice President and Chief Financial Officer of Honeywell Aerospace, the aviation segment of Honeywell International Inc., after serving in several financial positions with Honeywell International and its predecessor AlliedSignal Inc. Mr. Humphrey’s earlier career included six years with Detroit Diesel Corporation, a manufacturer of heavy-duty engines, in a variety of engineering and manufacturing management positions. Mr. Humphrey is a member of the board of directors for EnPro Industries, Inc. and Gardner Denver Holdings, Inc. Mr. Humphrey holds a B.S. in industrial engineering from Purdue University and an M.B.A. from the University of Michigan. Mr. Humphrey’s extensive executive experience leading a global business, financial reporting expertise and public company board service qualify him to serve on the Company’s Board.

 

 

 

2019 Proxy Statement    

5

 


 

Anastasia D. Kelly, Age 69

 

 

Picture 12

Director since 2002

Ms. Kelly is Managing Partner (Americas) in the law firm of DLA Piper (Partner since 2010, Co‑Managing Partner since 2013 and Managing Partner since 2018). From 2006 to 2010, she was the Vice Chairman—Legal, Human Resources, Corporate Communication and Corporate Affairs of American International Group, Inc. (‘‘AIG’’), and through that senior management position she obtained experience handling corporate issues across the enterprise. Prior to joining AIG, Ms. Kelly was an executive and general counsel of several large, publicly traded companies, including MCI, where she was the Executive Vice President and General Counsel from 2003 to 2006, Sears, Roebuck and Co., where she was the Senior Vice President and General Counsel from 1999 to 2003, and Fannie Mae, where she was the Senior Vice President from 1996 to 1999 and General Counsel and Secretary from 1995 to 1999. Ms. Kelly is currently a director of Huntington Ingalls Industries, Inc. (since 2011) and sits on the board of numerous philanthropic organizations. Ms. Kelly holds a B.A., cum laude, from Trinity University in Washington, D.C. and a J.D., magna cum laude, from George Washington University Law School. Ms. Kelly’s broad legal expertise and knowledge, extensive understanding of regulatory, compliance and securities issues involving public companies and financial institutions, significant experience in corporate governance issues and substantial business management skills qualify her to serve on the Company’s Board.

 

Andres A. Lopez, Age 56

 

 

Picture 28

Director since 2016

Mr. Lopez has served as the President and Chief Executive Officer of Owens-Illinois since January 2016. He has been with the Company since 1986 and held several positions before becoming Chief Executive Officer, most recently serving as Chief Operating Officer (2015). He has also served as President of O-I Americas (2014‑2015); President of O-I’s Latin America operations (2009‑2015); and Vice President of O-I’s global manufacturing and engineering business unit (GMEC) (2006‑2009). In 2004, he moved to the Company’s headquarters in Ohio to serve as Vice President of Finance and Administration for the North America region, becoming Vice President of Manufacturing for North America in 2005. Mr. Lopez held a number of other manufacturing assignments before 2005. In 1996, he moved to Brazil, first serving as Plant Manager for the Rio de Janeiro plant, and then for the São Paulo plant. In 1999, he was named General Manager of O-I Peru. Mr. Lopez began his career at Owens-Illinois as an Engineer at one of the Colombian plants. Mr. Lopez currently serves as a board member of Avery Dennison (since 2017). He holds a B.S. in production engineering from EAFIT University in Medellin, Colombia, and has completed the Executive Program at Stanford University. He speaks English and Portuguese, in addition to his native Spanish. Mr. Lopez’s long experience in manufacturing, leadership skills and global business experience with the Company over the past 30 years qualify him to serve on the Company’s Board.

 

Alan J. Murray, Age 65


 

 

Picture 25

Director since 2015

Mr. Murray retired as an executive in 2008 after serving as Managing Board Member for North America for HeidelbergCement AG, a German multinational building materials company. Mr. Murray took on this role after Heidelberg’s 2007 acquisition of Hanson PLC, where Mr. Murray served as Chief Executive Officer. Previously, Mr. Murray served as Chief Executive Officer of Hanson Building Materials America, where he handled a business that was 50% of Hanson’s overall operations. While at Hanson, Mr. Murray also served as Finance Director (1997‑1998), Assistant Finance Director (1995‑1997), Division Finance Director (1993‑1995), and Divisional Financial Controller (1988‑1993). Between 1978 and 1988, he held various financial roles at Chloride Group PLC and Burton Group PLC. Mr. Murray is a qualified Chartered Management Accountant and has a bachelor’s degree in Economics and Marketing from Lancaster University in the United Kingdom. Mr. Murray currently serves on the public board of Ferguson PLC (formerly Wolseley PLC) since 2013 and was on the board of HeidelbergCement AG between 2010 and 2017. Mr. Murray’s extensive business leadership skills, executive and board experience, global business and financial reporting expertise qualify him to serve on the Company’s Board.

 

 

 

 

6

    2019 Proxy Statement

 


 

Hari N. Nair, Age 59

 

 

Picture 18

Director since 2013

Mr. Nair serves as CEO of Anitar Investments LLC, a private investment company with holdings in the manufacturing and technology sectors. Previously, Mr. Nair served as the Chief Operating Officer of Tenneco Inc., a Fortune 500 company with revenues of $9 billion, from 2010 until his retirement in early 2015. He also was a member of the Tenneco Board of Directors from 2009 until his retirement. Prior to being appointed COO, Mr. Nair was President of Tenneco’s International Group, where he was responsible for managing business operations and capitalizing on growth opportunities in Europe, South America and the Asia Pacific regions. Mr. Nair joined Tenneco in 1987 and assumed positions of increasing responsibility across various functions including strategic planning, business development, quality and operations. Mr. Nair’s early career included financial and operations positions with General Motors Corporation and the American Water Company. Mr. Nair currently serves on the boards of Musashi Seimitsu Industry Co., Ltd. based in Japan, Delphi Technologies PLC based in London and as Chairman of Sintercom Limited based in India. Mr. Nair holds a B.S. in engineering from Bradley University, an M.B.A. from the University of Notre Dame, and completed the Advanced Management Program at Harvard Business School. Mr. Nair’s extensive manufacturing experience leading large business operations, global business experience, strategic planning, executive leadership skills, and financial reporting expertise qualify him to serve on the Company’s Board.

 

Hugh H. Roberts, Age 67

 

 

Picture 24

Director since 2007

Mr. Roberts retired in 2007 after working over 30 years with Kraft Foods Inc. where he obtained profit and loss management and analysis experience and global experience in sales, marketing and strategic planning. He was the President of Kraft Foods International Commercial from 2004 to 2007, President, Kraft Foods International Asia Pacific from 2001 to 2003 and, prior thereto, President, KFI Central & Eastern Europe Middle East & Africa Region from 1996 to 2001. While with Kraft, Mr. Roberts completed numerous training programs for executives and obtained substantial training in marketing, strategic analysis, corporate governance and executive compensation. Mr. Roberts holds a B.A., magna cum laude, from Harvard College and an M.B.A. from Harvard Business School. Mr. Robert’s extensive business leadership skills, his management experience overseas in emerging markets and his substantial education and experience in management and corporate governance issues qualify him to serve on the Company’s Board.

 

Joseph D. Rupp, Age 68

 

 

Picture 27

Director since 2017

Mr. Rupp was employed by Olin Corporation, a publicly-traded global manufacturer and distributor of chemical products and a leading U.S. manufacturer of ammunition located in Clayton, Missouri, from 1972 until his retirement in 2017. During his tenure at Olin, Mr. Rupp held positions of increasing responsibility, serving as President of Olin Brass, Corporate Vice President and Executive Vice President-Operations before being named President and CEO in 2002, a position he held until 2016. Mr. Rupp also served as Chairman of Olin’s Board of Directors from 2005 until April 2017. Mr. Rupp serves as a director of Quanex Building Products, Dot Foods, Inc., Cass Information Systems and on the Board of Trustees, Missouri University of Science and Technology. Mr. Rupp holds a B.S. in metallurgical engineering from Missouri University of Science and Technology, formerly the University of Missouri-Rolla. Mr. Rupp’s extensive business leadership skills, management expertise, executive experience leading a global manufacturer and significant public company board experience qualify him to serve on the Company’s Board.

 

 

 

 

2019 Proxy Statement    

7

 


 

John H. Walker, Age 61

 

 

Picture 30

Director Nominee

Mr. Walker has served as Non-Executive Chairman of Global Brass and Copper Holdings, Inc., a manufacturer and distributor of copper and copper-alloy sheet, strip, plate, foil, rod and fabricated components, since March 2014. Mr. Walker previously served as Executive Chairman of Global Brass and Copper from November 2013 to March 2014 and as Chief Executive Officer from 2007 to March 2014. Prior to joining Global Brass and Copper, Mr. Walker was President and Chief Executive Officer of The Boler Company, the parent company of Hendrickson International, a suspension manufacturer for heavy duty trucks and trailers, from 2003 to 2006. From 2001 to 2003, he served as Chief Executive Officer of Weirton Steel Corporation, a producer of flat rolled carbon steel, and from 2000 to 2001 as President and Chief Operating Officer. From 1997 to 2000, Mr. Walker was President of flat rolled products for Kaiser Aluminum Corporation, a producer of fabricated aluminum products. Mr. Walker has been a director of Nucor Corporation since 2008 (Lead Director since February 2017), and was a director of Delphi Corporation from 2005 to 2009 and United Continental Holdings, Inc. from 2002 to 2016. He holds a B.S. in engineering from Virginia Polytechnic Institute & State University and an M.S. in industrial administration from Carnegie Mellon University. Mr. Walker’s extensive executive experience leading global businesses, strategic management skills, vast experience in metal-related manufacturing and fabricating industries and public company board service qualify him to serve on the Company’s Board.

 

Carol A. Williams, Age 61

 

 

Picture 23

Director since 2014

Ms. Williams retired in early 2015 after serving as a special advisor to the Chief Executive Officer at Dow Chemical Company, a diversified chemical company. Prior to her special advisor role, she served as Dow’s Executive Vice President of Manufacturing and Engineering, Supply Chain and Environmental, Health & Safety Operations. During Ms. Williams’ 34 year history at Dow, she assumed increasingly more significant management positions in R&D before becoming operations leader and then Vice President for the chloralkali assets business. She was named Senior Vice President of Basic Chemicals in 2009 and President of Chemicals & Energy in 2010. Ms. Williams has served as a board member at Olin Corporation since October 2015. She previously served as a board member at Zep, Inc. from 2012 to 2015. She holds a B.S. in chemical engineering from Carnegie Mellon University where she was selected as an Alumnae of the year in 2009. Ms. Williams received the 2010/2011 Woman of the Year Award from the National Association of Professional Women and in 2014, received the Junior Achievement Laureate award of Mid-Michigan. Ms. Williams’ extensive management expertise from manufacturing to purchasing to supply chain as well as her substantial experience in research and development qualify her to serve on the Company’s Board.

 

 

 

 

8

    2019 Proxy Statement

 


 

Dennis K. Williams, Age 73

 

 

Picture 26

Director since 2005

Mr. Williams retired in 2006 after long and extensive service as an executive. Before retiring, Mr. Williams was with IDEX Corporation, a publicly traded corporation that manufactures and markets proprietary engineered industrial products. He was Chairman of the Board at IDEX from 2000 to 2006 and President and Chief Executive Officer from 2000 to 2005. Prior to joining IDEX, Mr. Williams had over ten years of executive experience with General Electric Company (“GE”) and its subsidiaries. During his time with GE, Mr. Williams held multiple executive leadership positions with subsidiaries in Italy, Canada and the United States. His last position with GE was as the President and Chief Executive Officer of GE Power Systems Industrial Products from 1998 to 2000, and in that role Mr. Williams was responsible for a $4 billion global manufacturing and service business based in Florence, Italy. Mr. Williams has been a director of AMETEK, Inc. since 2006 and was a director of Actuant Corporation from 2006 to 2018. From 2001 to 2007, Mr. Williams was also a director of the Washington Group International, where he obtained valuable knowledge regarding restructuring and capital markets transactions by helping to guide Washington’s emergence from bankruptcy and subsequent sale. Through his board membership and various executive positions, Mr. Williams has acquired substantial training in corporate governance and developed valuable financial reporting expertise. Mr. Williams holds a B.S. in aeronautical engineering from the Georgia Institute of Technology and attended the Program for Management Development at Harvard Business School. Mr. Williams’ extensive experience in leading businesses in international markets, executive leadership skills, significant public company board experience, financial reporting expertise and corporate governance training qualify him to serve on the Company’s Board.

 

 

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE NOMINEES IDENTIFIED ABOVE.

 

 

 

 

2019 Proxy Statement    

9

 


 

GOVERNANCE INFORMATION

Board Leadership Structure

The Board decided that the roles of the Board Chair and CEO would be separated as of January 1, 2016. At the 2016 Annual Meeting, the Board selected Carol A. Williams, an independent member of the Board, to become its Independent Board Chair (“IBC”) and the Company eliminated the role of Lead Director.

The primary responsibility of the IBC is to make the Board as effective as possible in fulfilling its oversight responsibility for the Company and to ensure that the Company derives the most benefit from the experience, education and skills of individual Board members.

In fulfilling this primary responsibility, the IBC will be expected to be a leader of his/her peers by taking personal responsibility for delivering excellence in the boardroom. This will mean helping shape meeting agendas, ensuring open communication, meaningful participation and constructive debate and focusing on appropriate follow-through regarding Board conclusions and recommendations.

The IBC will maintain regular communications with other Board members, with the frequency and depth of communications dependent on the issues that are the current focus of the Company. In addition, the IBC will act as a sounding board for the CEO, as well as other members of senior management. In separating the roles of CEO and IBC, the Board has expressly decided that it does not want the IBC to be perceived as “managing the Company” or as an “executive chair” in the eyes of management or the Company’s investors.

As the leader of the Board, the IBC is expected to take the lead in connection with the Board’s self-assessment process and the follow-through necessary to improve the Board’s overall oversight of the Company. Moreover, the IBC will assume a leadership role in CEO succession planning.

Executive Sessions

The Company’s non-employee directors meet in regularly scheduled executive sessions, both with the CEO and also without any members of management present. The purpose of these executive sessions is to promote open and candid discussion between the Board and the CEO and separately among the non-employee directors of the Board. The Board believes this approach effectively complements the Company’s Board leadership structure. The non-employee directors met six times in executive session in 2018 without management present, and the independent directors met twice in executive session in 2018. As provided by the Guidelines, the IBC presided at these executive sessions.

Risk Oversight

The Board recognizes that an important part of its responsibilities is to evaluate the Company’s exposure to risk and to monitor the steps management has taken to assess and control risk. The Board primarily oversees risks through committees of the Board, particularly through the Risk Oversight Committee and the Audit Committee, as discussed in the descriptions of the committees below. The committees report to the Board and matters of particular importance or concern, including any significant areas of risk faced by the Company, are discussed by the entire Board. In addition, the Board meets with the Company’s regional presidents on a rotating basis to review risk exposure with respect to the Company’s strategic plans and objectives in order to improve long-term organizational performance.

General Board Responsibilities

The Board has the ultimate authority for overseeing the management of the Company’s business. The Board also identifies and evaluates candidates for, and ultimately appoints the Company’s officers, delegates responsibilities for the conduct of the Company’s operations to those officers, and monitors their and the Company’s performance. Certain important functions of the Board are performed by committees comprised of members of the Board, as provided below.

Board Independence

The vast majority of the members of the Board are “independent” in accordance with the New York Stock Exchange listing standards. The Board has affirmatively determined that each of the following directors is an independent director of the Company under the listing standards of the New York Stock Exchange: Gordon J. Hardie, Peter S. Hellman, John Humphrey, Anastasia D. Kelly, Alan J. Murray, Hari N. Nair, Hugh H. Roberts, Joseph D. Rupp, Carol A. Williams and

 

 

 

10

    2019 Proxy Statement

 


 

Dennis K. Williams. The Board has also affirmatively determined that the director nominee, John H. Walker, is independent. In making this determination, the Board has determined that none of these directors or nominees have any material relationships with the Company other than their roles as directors.

Board Member Stock Ownership

The Board has established stock ownership guidelines for its members. Each member of the Board is required to own shares of the Company’s Common Stock having a value equal to five times the director’s annual cash retainer. New directors have four years from the date of joining the Board to attain the required stock ownership. Until the stock ownership guidelines are met, directors are required to retain 100% of the “net profit shares” acquired from grants of restricted stock or exercises of stock options. Net profit shares are those shares remaining after payment of tax obligations.

Board Size

The Board currently consists of 12 members. Under the Company’s Third Restated Certificate of Incorporation, the maximum size of the Board is 12 members.

Board Meeting Attendance

In 2018, the full Board met 11 times. All of the incumbent members of the Board attended more than 75% or more of the aggregate number of meetings of the Board and of committees of the Board of which such director was a member. Attendance at Board and committee meetings during 2018 averaged over 95% for directors as a group.

The Company does not have a policy with regard to Board members’ attendance at Annual Meetings, although members of the Board are encouraged to attend. All members of the then-current Board attended the 2018 Annual Meeting.

Corporate Governance Guidelines

A copy of the Company’s Corporate Governance Guidelines is available on the “Investors” section of the Company’s website (www.o-i.com). A copy is also available in print to share owners upon request, addressed to the “Corporate Secretary” at Owens-Illinois, Inc., One Michael Owens Way, Perrysburg, Ohio 43551‑2999. The address of the Company’s website provided above or elsewhere in the Proxy Statement is not intended to function as a hyperlink, and the contents of the Company’s website are neither a part of this Proxy Statement nor incorporated by reference.

Board Nominees

The Nominating/Corporate Governance Committee is responsible for identifying individuals qualified to become members of the Board and recommending that the Board select the candidates for all directorships to be filled by the Board or by the share owners. The Nominating/Corporate Governance Committee is governed in this regard by its Policies and Procedures Regarding the Identification and Evaluation of Candidates for Director (the “Policies and Procedures”), copies of which are available on the “Investors” section of the Company’s website (www.o-i.com) and in print, free of charge, to share owners upon request to the “Corporate Secretary” at Owens-Illinois, Inc., One Michael Owens Way, Perrysburg, Ohio 43551‑2999.

Pursuant to the Policies and Procedures, candidates for the Board must demonstrate strong leadership in their particular field, and have broad business experience and the ability to exercise sound business judgment. In addition, candidates must possess the highest personal and professional ethics, integrity and values, and be committed to representing the long-term interests of the share owners. Candidates must also be willing to devote sufficient time to carry out their duties and responsibilities effectively, and be committed to serve on the Board for an extended period of time.

The Policies and Procedures require the Nominating/Corporate Governance Committee to consider the contributions that a candidate can be expected to make to the collective functioning of the Board based on the totality of the candidate’s background, skills, experience and expertise and the composition of the Board at the time. The Policies and Procedures also state the Nominating/Corporate Governance Committee’s belief that diversity is an important attribute of a well-functioning Board and the Policies and Procedures, the Guidelines and the Nominating/Corporate Governance Committee’s Charter each require the Nominating/Corporate Governance Committee to take into consideration the benefits of having Board members who reflect a diversity of age, gender, ethnicity and country of citizenship.

The Company maintains a skills matrix, and actively monitors the skills, experience and expertise of all its individual directors with an eye towards ensuring that the Board is balanced with respect to key skill sets. Given that the Company

 

 

 

2019 Proxy Statement    

11

 


 

is a large global public manufacturing company, many of the Board’s directors have skills and experience relating to similar organizations. The Board also has strong skills, experience and expertise in other areas, including finance and capital allocation, mergers and acquisitions, strategic planning and corporate governance. The Nominating/Corporate Governance Committee considers the skills, experience and expertise of Board members expected to retire or leave the Board in the near future when it identifies candidates for Board membership. The Nominating/Corporate Governance Committee also considers in its nomination processes the recommendations of current Board members regarding particular skills that could improve the ability of the Board to carry out its responsibilities.

Director Experience and Skills

The following chart represents the diverse range of experience and skills offered by the 12 nominees for director.

 

Manufacturing

Operations

    

Public Company Management

    

Global Business

    

Corporate Governance

    

Financial

    

Marketing/Sales

    

Risk

Management

    

Engineering

Gordon J. Hardie

 

X

 

X

 

X

 

 

 

 

 

X

 

X

 

 

Peter S. Hellman

 

X

 

X

 

X

 

X

 

X

 

X

 

X

 

 

John Humphrey

 

X

 

X

 

 

 

 

 

X

 

 

 

X

 

X

Anastasia D. Kelly

 

 

 

X

 

 

 

X

 

 

 

 

 

X

 

 

Andres A. Lopez

 

X

 

X

 

X

 

X

 

X

 

X

 

X

 

X

Alan J. Murray

 

X

 

X

 

X

 

X

 

X

 

X

 

X

 

 

Hari N. Nair

 

X

 

X

 

X

 

X

 

X

 

X

 

X

 

X

Hugh H. Roberts

 

 

 

X

 

X

 

 

 

 

 

X

 

X

 

 

Joseph D. Rupp

 

X

 

X

 

X

 

X

 

X

 

X

 

X

 

X

John H. Walker

 

X

 

X

 

X

 

X

 

X

 

 

 

X

 

X

Carol A. Williams

 

X

 

X

 

X

 

X

 

X

 

X

 

X

 

X

Dennis K. Williams

 

X

 

X

 

X

 

X

 

X

 

X

 

X

 

X

The Nominating/Corporate Governance Committee will consider potential candidates for director who have been recommended by the Company’s directors, the CEO, other members of senior management and share owners. Outside consultants may also be employed to help identify potential candidates. Mr. Walker was recommended to the Nominating/Corporate Governance Committee as a director candidate by a third-party search firm engaged by the Company under the direction of the Nominating/Corporate Governance Committee to assist in identifying potential director candidates. Pursuant to its Policies and Procedures, the Nominating/Corporate Governance Committee conducts all necessary and appropriate inquiries into the backgrounds and qualifications of possible candidates and considers questions of independence and possible conflicts of interest. Members of the Nominating/Corporate Governance Committee discuss and evaluate possible candidates in detail, and determine which individuals to consider in more depth. Once a candidate is identified whom the Nominating/Corporate Governance Committee wants to move toward nomination, one or more members of the Nominating/Corporate Governance Committee will enter into discussions with the candidate. The procedures for the nomination of director candidates by share owners are described under the heading “2020 Annual Meeting of Share Owners.”

The performance of incumbent members of the Board is evaluated annually by the Nominating/Corporate Governance Committee. Incumbent directors who continue to satisfy the Nominating/Corporate Governance Committee’s criteria for Board membership and whom the Nominating/Corporate Governance Committee believes continue to make important contributions to the Board generally will be renominated by the Board at the end of their term.

Code of Business Conduct and Ethics

The Company has a Global Code of Business Conduct and Ethics (the “Code”) that is applicable to all directors, officers and employees of the Company, including the Chief Executive Officer and Chief Financial Officer. The Code is available on the “Investors” section of the Company’s website (www.o-i.com) and in print, free of charge, to share owners upon

 

 

 

12

    2019 Proxy Statement

 


 

request, addressed to the “Corporate Secretary” at Owens-Illinois, Inc., One Michael Owens Way, Perrysburg, Ohio 43551‑2999.

Communicating with the Board

Share owners and other interested parties may contact any member (or all members) of the Board (including, without limitation, the non-employee directors as a group), the IBC, any Board committee or any Chair of any such committee. To communicate with the Board, the IBC, any individual directors or any group or committee of directors, correspondence should be addressed to the “Board of Directors”, the “IBC” or any such individual directors or group or committee of directors by either name or title. All such correspondence should be addressed to the “Corporate Secretary” at Owens-Illinois, Inc., One Michael Owens Way, Perrysburg, Ohio 43551‑2999. All communications so received will be opened by the Corporate Secretary for the sole purpose of determining whether the contents represent a message to the directors. Any contents that are not in the nature of advertising, promotions of a product or service or patently offensive material will be forwarded promptly to the addressees. In the case of communications to the Board, the IBC or any group or committee of directors, the Corporate Secretary will distribute the contents to each director who is a member of the group or committee to which the contents are addressed.

 

 

 

2019 Proxy Statement    

13

 


 

 

 

BOARD AND COMMITTEE MEMBERSHIP

There are four standing committees of the Board: the Audit Committee, the Compensation and Talent Development Committee, the Nominating/Corporate Governance Committee and the Risk Oversight Committee. Subject to applicable provisions of the Company’s By-Laws and Corporate Governance Guidelines, the Board appoints the members of each committee and rotates members periodically consistent with the experience and expertise of individual directors.

Current Committee Membership

Directors currently serving on committees of the Board and the number of meetings held in 2018 by the committees are identified below.

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation

 

Nominating/

 

 

 

 

 

 

and Talent

 

Corporate

 

Risk

Name

    

Audit

    

Development

    

Governance

    

Oversight

Independent Directors:

 

  

 

  

 

  

 

  

Gordon J. Hardie

 

  

 

 

 

  

 

Chair

Peter S. Hellman

 

 X

 

 X

 

  

 

 

John Humphrey(1)

 

X

 

 

 

  

 

  

Anastasia D. Kelly

 

  

 

  

 

Chair

 

X

Alan J. Murray

 

Chair

 

  

 

X

 

  

Hari N. Nair

 

X

 

Chair

 

  

 

  

Hugh H. Roberts

 

  

 

X

 

X

 

  

Joseph D. Rupp(2)

 

 

 

 X

 

X

 

  

Carol A. Williams

 

  

 

  

 

X

 

  

Dennis K. Williams

 

X

 

X

 

  

 

  

Non-Independent Directors:

 

  

 

  

 

  

 

  

Andres A. Lopez

 

  

 

  

 

  

 

X

John J. McMackin, Jr.

 

  

 

  

 

  

 

X

Number of meetings in 2018

 

9

 

5

 

5

 

5


(1)

On May 10, 2018, Mr. Humphrey began serving as a director of the Company. He also began serving as a member of the Audit Committee.

(2)

On May 10, 2018, Mr. Rupp resigned from the Audit Committee and began serving as a member of the Compensation and Talent Development Committee.

Audit Committee

The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit Committee represents and assists the Board with the oversight of: (a) the integrity of the Company’s financial statements and internal controls; (b) the Company’s compliance with legal and regulatory requirements; (c) the independent registered public accounting firm’s qualifications and independence; and (d) the performance of the Company’s internal audit function and of the independent registered public accounting firm. The Audit Committee operates under a written charter adopted by the Board that sets forth the specific responsibilities of the Audit Committee. A copy of the Audit Committee Charter is available on the “Investors” section of the Company’s website (www.o-i.com) and in print, free of charge, to any share owner upon request addressed to the “Corporate Secretary” at Owens-Illinois, Inc., One Michael Owens Way, Perrysburg, Ohio 43551‑2999.

All members of the Audit Committee meet the audit committee independence requirements of the New York Stock Exchange and also satisfy the independence standards applicable to audit committees pursuant to Rule 10A‑3(b)(i) under the Exchange Act. The Board has determined that Mr. Murray, the Chair of the Audit Committee,  and Messrs. Hellman and Humphrey are each qualified as an “audit committee financial expert” within the meaning of Securities and Exchange Commission (“SEC”) regulations and that all of the Audit Committee members meet the financial literacy requirements of the New York Stock Exchange. No member of the Audit Committee serves on the audit committee of more than three public companies.

 

 

 

14

    2019 Proxy Statement

 


 

Compensation and Talent Development Committee

The Compensation and Talent Development Committee assists the Board with respect to compensation of the Company’s directors, officers and employees. In carrying out such responsibilities, the Compensation and Talent Development Committee administers the Amended and Restated 1997 Equity Participation Plan, the Second Amended and Restated 2005 Incentive Award Plan, the 2017 Incentive Award Plan, the Company’s annual bonus plans and certain other benefit plans of the Company and makes recommendations to the Board with respect to the compensation to be paid and benefits to be provided to directors, officers and employees of the Company. The Compensation and Talent Development Committee also oversees and reviews management succession planning and development for key executive positions other than the CEO, including ensuring the availability of qualified replacements and planning for contingencies such as the departure, death or disability of key executives so that the Company has in place an emergency succession plan that addresses both interim and longer-term leadership for the Company. The Compensation and Talent Development Committee makes recommendations to the Board with respect to the adequacy of the succession and development plans for key executive officer positions other than the CEO.

The Compensation and Talent Development Committee operates under a written charter adopted by the Board that sets forth the specific responsibilities of the Compensation and Talent Development Committee. A copy of the Compensation and Talent Development Committee Charter is available on the “Investors” section of the Company’s website (www.o‑i.com) and in print, free of charge, to any share owner upon request addressed to the “Corporate Secretary” at Owens-Illinois, Inc., One Michael Owens Way, Perrysburg, Ohio 43551‑2999.

Each member of the Compensation and Talent Development Committee is an “independent director” under the New York Stock Exchange listing standards.

Nominating/Corporate Governance Committee

The Nominating/Corporate Governance Committee assists the Board by (a) identifying and evaluating individuals qualified to become directors; (b) selecting, or recommending that the Board select, the candidates for all directorships to be filled by the Board or by the share owners; (c) developing and recommending to the Board a set of corporate governance principles contained in the Company’s Corporate Governance Guidelines and Global Code of Business Conduct and Ethics; (d) overseeing the evaluation of the Board and management of the Company; (e) taking a leadership role in shaping the corporate governance of the Company; (f) overseeing CEO succession planning and development; and (g) overseeing the Company’s Ethics and Compliance function, in conjunction with other committees requested to address issues arising in this area.

The Nominating/Corporate Governance Committee operates under a written charter adopted by the Board that sets forth the specific responsibilities of the Nominating/Corporate Governance Committee. A copy of the Nominating/Corporate Governance Committee Charter is available on the “Investors” section of the Company’s website (www.o-i.com) and in print, free of charge, to share owners upon request, addressed to the “Corporate Secretary” at Owens-Illinois, Inc., One Michael Owens Way, Perrysburg, Ohio 43551‑2999.

Each member of the Nominating/Corporate Governance Committee is an “independent director” under the New York Stock Exchange listing standards.

The Nominating/Corporate Governance Committee will accept recommendations from share owners for nominees for the Board. The procedures for submitting share owner recommendations are described under the heading “2020 Annual Meeting of Share Owners.”

Risk Oversight Committee

The Risk Oversight Committee assists the Board in fulfilling its oversight responsibilities with respect to the Company’s risk management processes. The Risk Oversight Committee: (a) provides oversight of management’s policies and activities relating to the identification, evaluation, management and monitoring of the Company’s significant enterprise risks, including the major strategic, operational, financial, regulatory, compliance, cyber security, reporting, reputational, governance and human resources and labor risks inherent in the business of the Company (the “Enterprise Risks”); (b) oversees compliance with legal and regulatory requirements with respect to the conduct of the Company’s business, except for those specific compliance matters under the jurisdiction of other Committees of the Board, as determined by the Board; and (c) reports to the Board regarding the Enterprise Risks that have the potential to significantly impact the Company’s ability to execute its strategic priorities and achieve its performance goals.

 

 

 

2019 Proxy Statement    

15

 


 

The Risk Oversight Committee operates under a written charter adopted by the Board that sets forth the specific responsibilities of the Risk Oversight Committee. A copy of the Risk Oversight Committee Charter is available on the “Investors” section of the Company’s website (www.o-i.com) and in print, free of charge, to share owners upon request to the “Corporate Secretary” at Owens-Illinois, Inc., One Michael Owens Way, Perrysburg, Ohio 43551‑2999.

Under the terms of the Risk Oversight Committee Charter, the Risk Oversight Committee (a) reviews and submits for Board approval the Company’s Risk Management Philosophy, Risk Management Policy and Statement of Risk Appetite, as developed by management; (b) reviews management’s processes designed to identify, assess, manage, monitor and report the Company’s significant Enterprise Risks; (c) reviews, monitors and discusses with management the Company’s significant Enterprise Risks and opportunities including steps management is taking to assess and manage such risks and opportunities; (d) reviews the Company’s disclosure of Enterprise Risks in all filings with the SEC (including the Annual Report on Form 10-K); and (e) together with the Audit Committee, reviews, assesses and discusses with the general counsel, the Chief Financial Officer and the independent registered public accounting firm (i) any significant risks or exposures; (ii) the steps management has taken to minimize such risks or exposures; and (iii) the Company’s underlying policies with respect to risk assessment and risk management.

 

 

 

16

    2019 Proxy Statement

 


 

 

DIRECTOR COMPENSATION AND OTHER INFORMATION

Director Compensation

Prior to 2019, each non-employee director of the Company received an annual retainer of $67,500, paid quarterly. Effective January 1, 2019, the Board approved an increase in the amount of the annual retainer each non-employee director of the Company receives to $72,500. Each non-employee director also receives $2,000 for each Board meeting in which such director participates and for each committee meeting in which such director participates as a member (including as Chair).

The Independent Board Chair receives an annual retainer of $150,000. Prior to 2019, committee chairs received additional annual retainers as follows:

·

Audit Committee Chair – $20,000

·

Compensation and Talent Development Committee Chair – $15,000

·

Nominating/Corporate Governance and Risk Oversight Committee Chairs – $10,000

Effective January 1, 2019, the amount of the annual retainer each committee chair receives was increased to:

·

Audit Committee Chair – $25,000

·

Compensation and Talent Development Committee Chair – $20,000

·

Nominating/Corporate Governance and Risk Oversight Committee Chairs – $15,000

Each non-employee director also receives on the date immediately following the date of the Company’s annual meeting of share owners at which directors are elected (“Date of Grant”), a grant of restricted stock units (“RSUs”) with respect to a number of shares of Common Stock having a fair market value on the Date of Grant equal to $120,000, rounded up or down to nearest whole share of Common Stock, pursuant to the terms of the applicable Company equity incentive plan. The Board approved the increase of the annual equity award from $120,000 to $125,000 effective in 2019.

In October 2018, the Company’s outside executive compensation consultant reviewed the competiveness of the current compensation programs and found them to be below the market median in the value of its equity awards, annual retainer and annual committee chair retainer. Therefore, the Board approved the increases noted above.

The RSUs vest in full on the date of the Company’s next annual meeting of share owners at which directors are elected following the Date of Grant (“Normal Vesting Date”) or earlier upon a director’s termination of service due to death, disability or retirement (after reaching age 60). In addition, upon termination of service for reasons other than death, disability, retirement or removal for cause, the RSUs will vest pro rata on a daily basis based on the number of days of service from the Date of Grant to the Normal Vesting Date.  All RSUs are immediately forfeited upon a non-employee director’s removal for cause. All RSUs will fully vest upon a change in control. Vested RSUs are paid in shares of Common Stock, on a one for one basis, within 30-days after the Normal Vesting Date, or if earlier, termination of service.

In the event a new non-employee director joins the Board on any date other than the date of the annual meeting of share owners, in addition to the RSU grant described in the previous paragraph, such new non-employee director will also receive on the date immediately following the first annual meeting of share owners at which directors are elected during such director’s tenure on the Board an additional grant of RSUs with respect to a number of shares of Common Stock having a fair market value on the date of such grant equal to a pro rata allocation of the dollar amount of the prior year’s RSU grant based on the number of days of service in the period from the commencement of such director’s service on the Board to the date of such grant, rounded up or down to the nearest whole share of Common Stock.

The Deferred Compensation Plan for Directors of Owens-Illinois, Inc. provides an opportunity for non-employee directors to defer payment of their directors’ fees. Under the plan, a non-employee director may defer receipt of all or any portion of the cash portion of the compensation described above. Deferrals may be credited into a cash account or into a Company stock unit account. Funds held in a cash account accrue interest at a rate equal from time to time to the average annual yield on domestic corporate bonds of Moody’s A-rated companies, plus one percent. Distributions from the plan are made in cash.

 

 

 

2019 Proxy Statement    

17

 


 

Each director is reimbursed for expenses associated with meetings of the Board or its committees.

The total compensation earned by non-employee directors in 2018 is reflected in the following table:

DIRECTOR COMPENSATION IN 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock

 

 

 

 

 

Fees Earned

 

Awards

 

 

 

Name

    

(1)

    

(2)

    

Total

Gary F. Colter(3)

 

$

33,107

 

$

 —

 

$

33,107

Gordon J. Hardie

 

 

107,500

 

 

120,000

 

 

227,500

Peter S. Hellman

 

 

115,500

 

 

120,000

 

 

235,500

John Humphrey(4)

 

 

66,393

 

 

120,000

 

 

186,393

Anastasia D. Kelly

 

 

117,500

 

 

120,000

 

 

237,500

John J. McMackin, Jr.

 

 

99,500

 

 

120,000

 

 

219,500

Alan J. Murray

 

 

133,500

 

 

120,000

 

 

253,500

Hari N. Nair

 

 

132,500

 

 

120,000

 

 

252,500

Hugh H. Roberts

 

 

109,500

 

 

120,000

 

 

229,500

Joseph D. Rupp(5)

 

 

107,500

 

 

186,970

 

 

294,470

Carol A. Williams

 

 

249,500

 

 

120,000

 

 

369,500

Dennis K. Williams

 

 

117,500

 

 

120,000

 

 

237,500


(1)

The cash amounts earned by each director are made up of the following amounts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Committee

 

Board

 

Committee

 

 

 

 

 

Annual

 

Chair

 

Meeting

 

Meeting

 

 

 

Name

    

Retainer

    

Retainer(6)

    

Fees

    

Fees

    

Total

Gary F. Colter

 

$

24,107

 

$

 —

 

$

5,000

 

$

4,000

 

$

33,107

Gordon J. Hardie

 

 

67,500

 

 

10,000

 

 

20,000

 

 

10,000

 

 

107,500

Peter S. Hellman

 

 

67,500

 

 

 —

 

 

20,000

 

 

28,000

 

 

115,500

John Humphrey

 

 

43,393

 

 

 —

 

 

15,000

 

 

8,000

 

 

66,393

Anastasia D. Kelly

 

 

67,500

 

 

10,000

 

 

20,000

 

 

20,000

 

 

117,500

John J. McMackin, Jr.

 

 

67,500

 

 

 —

 

 

22,000

 

 

10,000

 

 

99,500

Alan J. Murray

 

 

67,500

 

 

20,000

 

 

18,000

 

 

28,000

 

 

133,500

Hari N. Nair

 

 

67,500

 

 

15,000

 

 

22,000

 

 

28,000

 

 

132,500

Hugh H. Roberts

 

 

67,500

 

 

 —

 

 

22,000

 

 

20,000

 

 

109,500

Joseph D. Rupp

 

 

67,500

 

 

 —

 

 

20,000

 

 

20,000

 

 

107,500

Carol A. Williams

 

 

67,500

 

 

150,000

 

 

22,000

 

 

10,000

 

 

249,500

Dennis K. Williams

 

 

67,500

 

 

 —

 

 

22,000

 

 

28,000

 

 

117,500


(2)

Amounts reflect the aggregate grant date fair value computed in accordance with Financial Accounting Standard Board (“FASB”) ASC 718. Each of the current non-employee directors held 6,296 unvested restricted stock units as of December 31, 2018, with the exception of Mr. Rupp who held 9,810 unvested restricted stock units.

(3)

Mr. Colter served as a Director through May 10, 2018.

(4)

Mr. Humphrey became a Director on May 10, 2018.

(5)

Mr. Rupp became a Director on October 2, 2017. Because he joined prior to the 2018 Annual Meeting of Share Owners, he received an additional pro-rated equity award of 3,514 restricted stock units.

(6)

Includes the IBC Retainer.

Related Person Transactions

Pursuant to written policies and procedures set forth in the Company’s Corporate Governance Guidelines, the Company reviews relationships and transactions in which the Company and its directors and executive officers, or their immediate family members, are participants. The Board has delegated initial review of such transactions to the Nominating/Corporate Governance Committee. The Company’s Corporate Governance Guidelines provide that the Nominating/Corporate Governance Committee will review and, if appropriate, recommend to the full Board the approval

 

 

 

18

    2019 Proxy Statement

 


 

or ratification of related party transactions. Pursuant to the Guidelines, the Nominating/Corporate Governance Committee takes into account the following factors: the related person’s connection to the Company and interest in the transaction, the approximate dollar value of the transaction, the importance of the transaction to the related person and the Company, whether the transaction would impair the judgment of the director or executive officer to act in the best interests of the Company, and any other appropriate information.

During 2018, the law firm of Williams & Jensen, PLLC, of which director McMackin is a principal, billed the Company approximately $833,000 for legal services in connection with various matters. Williams & Jensen, PLLC is an independently owned, Washington, D.C. law firm with particular expertise in the area of government affairs. Upon the review and recommendation of the Nominating/Corporate Governance Committee, the Board reviewed and approved the Company’s 2018 engagement of Williams & Jensen, PLLC at the billing levels indicated above.

Compensation and Talent Development Committee Interlocks and Insider Participation

During 2018, the following directors served on the Compensation and Talent Development Committee of the Board: Gary F. Colter, Peter S. Hellman, Hari N. Nair (Chair), Hugh H. Roberts, Joseph D. Rupp and Dennis K. Williams. No member of the Compensation and Talent Development Committee is a current or former officer or employee of the Company or has any relationship with the Company requiring disclosure under Item 404 or Item 407(e)(4)(iii) of Regulation S‑K. In addition, no executive officer of the Company served on any board of directors or compensation committee of any other board for which any of the Company’s directors served as an executive officer at any time during 2018.

 

 

 

2019 Proxy Statement    

19

 


 

 

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Executive Summary

The Owens-Illinois Compensation and Talent Development Committee (“the Committee”) is committed to working with the Board of Directors and management to design compensation plans that motivate the Company’s executives and support business objectives that create share owner value. The Company’s compensation plans for 2018 follow the same framework used in 2017. The Committee believes that the 2017 structure remains appropriate, supports the Company’s business objectives and reflects share owners’ interests, as demonstrated by the overwhelmingly strong support (97% approval) from share owners for the Company’s advisory vote for Say on Pay received in 2017.

However, following a drop in share owner support for the Company’s advisory vote for Say on Pay in 2018 (78% approval), the Company engaged in extensive share owner outreach. While the outreach discussions indicated support for the pay program and identified no fundamental issues, the Committee made two important changes to the Company’s compensation plans for the 2019-2021 performance cycle to strengthen the program’s ties to performance in general and share owners’ interests in particular: 

§

introduced relative Total Shareholder Return (R-TSR) as a modifier to the performance stock unit payout and

§

increased the portion of the target Long Term Incentive (“LTI”) value delivered in the form of performance stock units from 50% to 60%.

The Foundation: The Strategic Plan for the Company

The strategic plan for the Company serves as the foundation for its pay program. Following a year when the Company continued to focus on stabilizing the business, the strategy concentrated on one team, one enterprise and one plan. The plan looks to expand the markets in which the Company competes by being recognized as the preferred glass supplier, as well as being the most cost-effective producer of glass. The Company is focusing its employees on understanding customer needs, managing costs of the total enterprise, improving flexibility, taking an integrated approach to problem solving, developing breakthrough innovation, and delivering on its commitments. The Company is doing this by emphasizing collaboration across the Company, leveraging its knowledge and expertise, increasing accountability, and aligning incentives with the right results. The Company believes successful execution along these lines will lead to enhanced value for share owners, customers, and employees.

Linking the Company’s Incentives to Its Plan and Share Owner Interests

For the 2018 Short-Term Incentive (“STI”) Plan, the Committee maintained the measures of Earnings Before Interest and Taxes (“EBIT”) (weighted at 80%) to continue management’s focus on profitability, the need to control costs and accountability for delivering financial results, and Free Cash Flow (“FCF”) (weighted at 20%) critical for managing the Company’s financial obligations, deleveraging its balance sheet, investing in its business, and returning value to share owners.  Further, the Committee continued to base the Global Leadership Team’s STI Awards on overall enterprise results, reinforcing the Company’s strategy of one team, one enterprise and one plan.

For the 2018 LTI Plan, the Committee continued its balanced approach to delivering LTI by awarding 50% of target value in the form of performance stock units and 50% in the form of time-based restricted stock units. The Committee also continued its approach for measuring long-term results associated with the performance stock units, wherein awards are based on the Company’s performance for a full three-year period as measured by cumulative Adjusted Net Earnings Per Share (“EPS”) and a three-year average Return on Invested Capital (“ROIC”), weighted equally, maintaining the program’s ties to delivering sustained, long-term financial results.

The Committee continued to set reasonably demanding incentive goals for both the STI and LTI plans consistent with the Board’s expectations of management and its commitments to share owners.  As shown below, our incentive structure is highly motivational and creates share owner alignment.

 

 

 

20

    2019 Proxy Statement

 


 

Incentive Plan Results: Reflect the Company’s Performance

Key Performance Highlights

 

 

Delivered EBIT (as defined on page 28) of $879M, a 10.98% increase over prior year, which fell between the target and maximum performance levels for this STI measure.  1

 

 

 

 

Produced FCF (as defined on page 28) of $349M, a 28% increase over prior year, which exceeded the maximum performance level for this STI measure.1

 

 

 

 

Increased EPS (as defined on page 33) by approximately 30% over the three year performance period 2016-20182, generating a maximum payout for this measure under the Company’s LTI performance stock unit program.

 

 

 

 

Achieved ROIC (as defined on page 33) of 10.72%, which significantly exceed the Company’s weighted average cost of capital, generating a maximum payout for this measure under the Company’s LTI performance stock unit program.

 

 

 

 

Returned value to share owners, by initiating a share buyback program and instituting a quarterly dividend beginning in the first quarter of 2019.


(1)

The Committee elected to apply its discretion to reduce the STI payout from 148.6% to 80.0%, as management and the Committee believe this reduction results in a payout more aligned with the underlying operating performance of the Company for the year, while supporting management engagement and recognizing the actual achievement against the performance ranges.

(2)

Adjusted to exclude the effect of share buybacks.

These results were reflected in the rewards earned for 2018 under the Company’s incentive plans, which required management to meet challenging goals. When approving the STI payout, the Committee considered certain non-budgeted events, including a non-operational tax credit and non-recurring changes in working capital. Considering these factors, based on management’s recommendation, the Committee elected to apply its discretion and approve an 80% STI payout. Management and the Committee believe this payout result is aligned with the underlying operating performance of the Company for the year, while supporting management engagement and recognizing the actual achievement against the performance ranges. The Company’s actual performance against those goals supported a payout of 148.6% of target as FCF results exceeded our maximum performance objective which was partially offset by EBIT results that were between target and maximum goals.

The Company’s executives earned performance stock units for the 2016-2018 period at maximum levels (200% of target), based on strong EPS, ROIC, and revenue performances. The Committee felt that the payout reflected the Company performance for the period, as the Company achieved or exceeded key targets established during the 2016 Investor Day for the 2016-2018 period.  In addition, over the preceding three years, the Company increased EPS (as defined on page 33) by approximately 30%. These results were achieved despite significant headwinds, including the effect of unfavorable foreign exchange rates.  Overall, these results represented a significant improvement from the inconsistent financial performance achieved prior to the 2016-2018 performance cycle.

These payout levels and the associated stock price movement are consistent with a historical trend of being closely aligned with the returns earned by its investors relative to those of the S&P 500 or its pay benchmarking companies as more clearly seen in the realizable pay and performance analysis covered beginning on page 24.

No Problematic Pay Practices

The Committee regularly monitors the Company’s pay practices, which are consistent with good corporate governance and identified best practices.  The Committee has established a clawback or recovery policy covering cash and equity incentives. Double triggers have been established for receiving any benefits associated with a change-in-control. The stock ownership guidelines are consistent with those of other large companies and are reinforced by stock holding requirements. The Committee also prohibits executives from hedging and pledging their positions in Owens-Illinois stock, a policy which was strengthened in 2018.

 

 

 

2019 Proxy Statement    

21

 


 

2019 Say on Pay

The Company’s 2019 Say on Pay proposal is found on page 69. The proposal received 78% support from share owners in 2018, down from overwhelmingly strong support (97% in 2017) from share owners in past years. In response to this decline in support, the Company conducted a share owner outreach initiative, wherein it reached out to its top 20 share owners and met with those that expressed interest. While the outreach discussions indicated strong support for the pay program and identified no fundamental issues, the Committee made two important changes to the Company’s compensation plans for 2019 to strengthen the program’s ties to performance in general and share owners’ interests in particular:

§

introduced relative Total Shareholder Return (R-TSR) as a modifier to the performance stock unit payout and

§

increased the portion of the target LTI value delivered in the form of performance stock units from 50% to 60%.

In addition, the Board, at the recommendation of the Committee, amended its Insider Trading Policy in 2018 to prohibit the Company’s directors, executive officers and other covered personnel from purchasing company securities on margin, pledging company securities as collateral for a loan, and borrowing against any account in which company securities are held. Prior to this revision, company securities could be pledged with pre-clearance from the Company’s General Counsel and notice to the Committee. (None of our named executive officers (“NEOs”) or directors had actually pledged shares.)

As a result, the Committee believes the Company’s executive compensation program represents share owners’ interests in a responsible and reasonable fashion and warrants your support at this year’s Annual Meeting.

Compensation Principles

The Committee approves executive compensation programs that are designed to align executive pay with share owner interests and the annual and long‑term performance of the Company. The Company believes that its executive compensation program strikes the appropriate balance between using responsible, measured pay practices and providing rewards that effectively attract and retain executives while motivating them to create value for the share owners. Key elements of this pay strategy include:

Key Principles of Compensation

 

 

Targeting total direct compensation (overall and by element) for the NEOs at market median pay levels, while also considering internal equity, and regularly evaluating pay versus market practices using comparator company and survey comparisons;

 

 

 

 

Ensuring that a majority of target compensation for each NEO is in the form of annual and long-term incentives;

 

 

 

 

Analyzing annually the relationship between executive pay and Company performance to ensure alignment; and

 

 

 

 

Completing regular risk assessments, taking into consideration the Company’s business model, incentive plan design (including mix of incentive vehicles, balance of performance measures, target setting methodology, caps on payouts, etc.) and policies designed to reduce risk (such as share ownership and retention guidelines, clawback policy, and anti‑hedging and prohibition of pledging policy), among other considerations, to evaluate if the Company’s compensation program promotes excessive risk taking.

 

Say on Pay Vote and Share Owner Outreach

The Committee continues to believe that, overall, the Company’s compensation programs are well aligned with both share owners’ interests and the competitive market, and are designed to reward overall Company and individual performance. Nonetheless, the Committee and management regularly review compensation programs to ensure such alignment continues and make changes as appropriate or necessary.

 

 

 

22

    2019 Proxy Statement

 


 

As the Company believes that an annual “Say on Pay” vote encourages beneficial dialogue on compensation and provides the most consistent and clear communication channel for share owner concerns about executive compensation, the Company will again hold an annual advisory vote in 2019 to approve executive compensation. The Committee will continue to consider the results from this year’s and future advisory votes on executive compensation. The Company continues to actively engage major share owners and proxy advisory firms, ISS and Glass Lewis, regarding executive pay and its alignment with share owner interests, as well as the preferred frequency in which to conduct the “Say on Pay” vote.

Compensation and Governance Practices

The Company’s executive compensation programs are designed to reflect appropriate governance practices aligned with the needs of the business. Below is a summary of compensation practices the Company has adopted to drive performance and to align with share owner interests, followed by a list of practices the Company does not subscribe to because the Company does not believe they would serve their share owners’ long‑term interests.

 

 

 

What the Company Does/Has

    

What the Company Does Not Do/Have

  Aligned Pay and Performance

  Appropriately Demanding Incentive Goals

  Incentive Metrics Aligned with Value Creation Strategy: higher earnings (EBIT and EPS), greater free cash flow, capital efficiency (ROIC) and stock price (equity awards)

  Balanced Compensation Structure: fixed vs. variable; annual vs. long term; cash vs. stock; service vs. performance based awards

  Target Market Median Pay Levels based on pay data of  Peers and Other Industrial Companies of Similar Size

  Compensation Recovery (Clawback) Policy

  Stock Ownership and Retention Guidelines

  Double Trigger (a change in control and an involuntary termination) Requirement for Equity Vesting

  Anti-Hedging and Prohibition of Pledging Policy, as well as a Pre Clearance Policy regarding equity transactions

  Annual Independent Risk Assessment of Compensation Programs

  Annual Review of Independence of Committee’s Advisors

  Annual “Say on Pay” Vote

  Independent Compensation and Talent Development Committee 

  Relative TSR modifier in the LTI performance stock unit program (beginning in 2019)

  Majority (60%) of LTI delivered in performance based awards vs. service based equity (beginning in 2019)

  Common Annual Grant Date each Year to Minimize Perception of Market Timing

  Protective Noncompete, Nonsolicitation and Confidential Information Covenants Applicable to LTI Awards

  One-year minimum vesting requirement for equity awards (with up to 5% of shares being exempt from this requirement)

  Non-employee director award limit

 

 

  Excessive Perquisites or Tax Gross‑ups for Perquisites: See “Other Benefits” for details

  Excise Tax Gross‑Ups upon Change in Control

  Payment of Dividends or Dividend Equivalents on Unvested LTI awards

  Repricing of Underwater Stock Options

  Single Trigger Change in Control Severance Payments

  Encourage Excessive Risk Taking

  Liberal Share Recycling

  Multi-Year Employment Contracts

 

 

 

 

 

 

2019 Proxy Statement    

23

 


 

This Compensation Discussion and Analysis describes the material elements of the compensation of the Company’s NEOs, the objectives and principles underlying executive compensation programs, the Company’s recent compensation decisions, and the factors considered in making those decisions. The Company’s NEOs for 2018 were:

 

 

 

Name

    

Position

Andres A. Lopez

 

President and Chief Executive Officer (“CEO”)

Jan A. Bertsch

 

Senior Vice President and Chief Financial Officer (“CFO”)

Miguel I. Alvarez

 

President, O-I Americas

Vitaliano Torno 

 

President, O-I Europe

John C. Webb (1)

 

Senior Vice President and Chief Human Resources Officer

Sergio B. O. Galindo (2)

 

Former President, O-I North America


(1)

Mr. Webb’s employment with the Company ended on December 31, 2018.

(2)

Mr. Galindo’s employment with the Company ended on March 31, 2018.

Assessment of Realizable Pay and Performance

The Committee annually compares the NEOs’ realizable pay and the Company’s performance to the pay and performance of comparator companies in order to assess the alignment of the Company’s pay and performance.

In assessing pay and performance, the Company’s independent compensation advisors, Pay Governance, analyzed the Company’s 2015-2017 realizable pay and performance relative to comparator companies. Unlike the results reported in the Summary Compensation Table reported on page 41, realizable pay looks at the pay an executive earned or could have earned for a period based on the actual financial performance against the Company’s incentive goals and the stock price performance that drove those results (December 31, 2017 stock price). The Committee believes realizable pay is a better gauge for assessing pay and performance than the data found in the Summary Compensation Table, as the Summary Compensation Table definition of total pay includes a mix of some elements that are actual pay, such as salary and annual incentives, and other elements that are accounting estimates of future potential pay, such as performance stock units, restricted stock units and options. Further, annual changes in the discount rate for pension calculations are not part of the pay decisions made by the Committee and may significantly distort pay reported in the Summary Compensation Table and how it relates to the Company’s performance.

In assessing realizable pay, the Committee reviewed the actual rewards earned by the CEO and CFO from 2015 to 2017: base salaries received by the executive, annual bonuses earned, vesting date value (as opposed to grant date or accounting value used in the Summary Compensation Table) of time‑based restricted awards granted during the period, any exercise gains realized on options granted during the period and the value of any long‑term performance awards made and earned in the three‑year period. In addition, realizable pay includes the value of any outstanding (unvested, unexercised or unearned) long‑term incentives awarded during the three‑year period based on the Company’s stock price as of December 31, 2017. The same approach is used to calculate the realizable pay of the CEOs and CFOs at comparator companies. This enables the Committee to compare the Company’s realizable pay levels with similar executives at comparator companies. As a result, realizable pay relies on information reported in comparator company proxies, the latest year for which pay is available being 2017.

In addition to assessing the Company’s realizable pay levels relative to comparator companies, the Committee also examined the Company’s annual and long‑term performance versus those companies. From a long‑term performance perspective, the analysis focused on TSR relative to those companies, which captures the principal goal of the Company’s long‑term incentive plans—creating value for investors. As shown in the following two exhibits, the Company’s pay program has produced realizable pay levels relative to peers that are directionally and reasonably aligned with the Company’s TSR performance relative to those companies.

 

 

 

24

    2019 Proxy Statement

 


 

 

 

Picture 17

Picture 16

 

(1)    Excludes restricted stock award at hiring.

From an annual or short‑term performance perspective, the Company’s performance across several perspectives of EBIT and cash flow performance (growth, percent of revenue and percent of invested capital) was evaluated relative to similar metrics for comparator companies for each year of the past five years. These results captured the key drivers of the Company’s STI program, which support the Company’s strategic objectives as well as its value creation efforts. The Company’s rankings relative to comparator companies across these annual performance metrics were compared to rankings of the cash compensation (salary + actual bonus) earned by the Company’s CEO and CFO during the period. As with the Company’s realizable pay and TSR comparisons, the Company’s annual cash compensation was appropriately aligned with its annual performance rankings relative to peers.  When considering financial performance for each of the past five years, the Company’s average peer ranking equaled the 40th percentile, comparable to the average cash compensation (salary & bonus) ranking of its CEO (44th percentile) and CFO (42nd percentile).

From these perspectives, the Company believes the pay program produced acceptable outcomes with officers’ relative pay levels aligned with its relative annual and long‑term performance levels, supportive of share owners’ interests.

Compensation Benchmarking

While realizable pay examines the alignment of the Company’s performance and the pay actually realized or realizable by those results, the Committee also annually reviews the competitiveness of the target pay opportunities provided to the Company’s senior leadership team (including the CEO and his key direct reports). This review encompasses all elements of target direct compensation: base salary, annual incentives and cash compensation (base salary + annual incentives), LTI and direct compensation (base salary + annual incentives + LTI). In addition, the review examines the mix of total pay (fixed to variable pay, short to long‑term compensation and cash to stock compensation) and LTI mix (stock awards versus options and service versus performance‑based awards). The objectives of this review are to ensure the opportunities associated with the Company’s program are aligned with its pay philosophy, which targets market median and also considers internal equity between senior leadership team members.

Market Data

In determining compensation levels for the senior leadership team, the Committee reviews competitive market remuneration data including:

     proxies of companies in the comparator group used to benchmark pay (shown below). Proxy data is only considered for the Company’s CEO and CFO; and

     surveys published by Aon Hewitt, Mercer and Willis Towers Watson, which provide data reflecting the incumbent’s functional responsibilities and the appropriate revenue scope (corporate or region) of their operating unit, are used to assess the target compensation for other senior leaders.

 

 

 

2019 Proxy Statement    

25

 


 

Comparator Group Companies

While there is no other company of comparable size to O-I that also focuses purely on glass container production, the group of comparator companies used to benchmark executive pay practices and pay levels for select officers is selected primarily from companies in the packaging and manufacturing sectors that resemble the Company in size, business profile, global presence, asset intensity, and other relevant factors. After a review of the comparator group companies in 2018, the Committee elected not to make any changes to the comparator group from that used in 2017.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dollars in Millions

 

% Revs.

 

 

 

 

 

 

 

 

 

Total

 

Mkt.

 

Enterp.

 

Outside

 

# of

 

Company

    

Industry

    

Revs.(1)

    

Assets(1)

    

Cap(2)

    

Value(2,3)

    

U.S.(4)

    

Emp.

    

WestRock Company

 

Paper Packaging

 

16,285

 

25,361

 

9,534

 

15,329

 

20

%

45,100

 

Ingersoll-Rand Plc

 

Industrial Machinery

 

15,668

 

17,915

 

22,411

 

25,514

 

36

%

49,000

 

The Goodyear Tire & Rubber Company

 

Tires and Rubber

 

15,475

 

16,872

 

4,756

 

10,580

 

57

%

64,000

 

Parker-Hannifin Corporation

 

Industrial Machinery

 

14,302

 

15,320

 

19,739

 

23,861

 

37

%

57,170

 

Tenneco Inc.

 

Auto Parts and Equipment

 

11,763

 

13,232

 

2,215

 

3,623

 

62

%

81,000

 

Ball Corporation

 

Metal and Glass Containers

 

11,635

 

16,554

 

15,596

 

21,776

 

50

%

17,500

 

Crown Holdings Inc.

 

Metal and Glass Containers

 

11,151

 

15,262

 

5,620

 

14,761

 

73

%

33,000

 

Dana Holding Corporation

 

Auto Parts and Equipment

 

8,143

 

5,918

 

1,972

 

3,797

 

56

%

30,900

 

Avery Dennison Corporation

 

Paper Packaging

 

7,159

 

5,178

 

7,789

 

9,413

 

77

%

30,000

 

Owens Corning

 

Building Products

 

7,057

 

9,771

 

4,808

 

8,387

 

34

%

20,000

 

Packaging Corporation of America

 

Paper Packaging

 

7,015

 

6,570

 

7,825

 

10,033

 

 7

%

15,000

 

Graphic Packaging Holding Company

 

Paper Packaging

 

6,023

 

7,059

 

3,302

 

6,961

 

14

%

18,000

 

Sonoco Products Co.

 

Paper Packaging

 

5,391

 

4,583

 

5,303

 

6,461

 

35

%

23,000

 

Terex Corporation

 

Construction Machinery and Heavy Trucks

 

5,125

 

3,486

 

2,032

 

2,840

 

45

%

11,700

 

Sealed Air Corporation

 

Paper Packaging

 

4,733

 

5,050

 

5,467

 

8,832

 

49

%

15,500

 

Silgan Holdings Inc.

 

Metal and Glass Containers

 

4,449

 

4,579

 

2,613

 

5,361

 

25

%

13,220

 

Bemis Company, Inc.

 

Paper Packaging

 

4,090

 

3,571

 

4,178

 

5,569

 

33

%

15,694

 

Greif, Inc.

 

Metal and Glass Containers

 

3,874

 

3,195

 

1,940

 

2,890

 

50

%

13,000

 

75th Percentile

 

  

 

11,731

 

15,306

 

7,816

 

13,716

 

54

%

42,075

 

50th Percentile

 

  

 

7,108

 

6,814

 

5,055

 

8,609

 

41

%

21,500

 

25th Percentile

 

  

 

5,191

 

4,700

 

2,785

 

5,413

 

33

%

15,549

 

Owens-Illinois, Inc.

 

Metal and Glass Containers

 

6,877

 

9,699

 

2,736

 

8,065

 

71

%

26,500

 

O-I Percentile Rank

 

  

 

40

%

59

%

25

%

46

%

93

%

56

%


(1)

Fiscal 2018 financial data

(2)

Data as of December 31, 2018

(3)

Enterprise value defined as market capitalization plus total debt plus total preferred equity plus minority interest less cash and short-term investments

(4)

Select companies’ data represent revenues for sales outside North America

 

 

 

26

    2019 Proxy Statement

 


 

Compensation Program Overview

Total Direct Compensation

Total direct compensation is the combination of base pay, annual incentive and long‑term incentives. Although the Company’s pay philosophy targets market median, while also considering internal equity, an NEO’s total direct compensation opportunity may be higher or lower than the market 50th percentile based on individual performance, experience, past leadership roles, potential future contributions and Company performance. In making compensation decisions, the Committee considers each of these factors and the NEO’s total direct compensation to ensure overall alignment with the Company’s compensation philosophy and principles.

It is the Company’s philosophy that a significant portion of the target compensation opportunity provided to the NEOs be “variable” or “at risk”—based on Company performance and/or the price of the Company’s stock. Based on compensation packages in effect on December 31, 2018, the CEO had 87% of his target total direct compensation “at risk” and the other NEOs had approximately 69% of their target total direct compensation “at risk.” The Company has no prescribed pay mix that drives compensation decisions. The resulting pay mix is based on the Company’s pay philosophy, market pay data used to establish individual executive’s compensation and internal equity pay considerations.

 

 

 

Picture 13

 

Picture 1

The Committee strives to achieve alignment between executive pay and performance by establishing and adhering to a fair and performance‑oriented rewards philosophy/strategy, setting appropriate performance objectives, and regularly testing the relationship between pay and performance.

Base Pay

The base pay program is designed to ensure the Company’s ability to attract and retain key executives. The Committee reviews NEO salaries and pay positioning at least once per year, and may adjust salaries based on several factors, including: current market conditions, Company performance, individual performance, previous experience, potential and the results of benchmarking against market data. Merit pay budgets are set annually based on external labor market trends, business performance, inflation and other pertinent factors. In 2018, the Company’s merit budget was 3% for the United States and 1% for Switzerland. After considering the factors listed above, the Committee approved a base pay increase of 5% for Mr. Lopez (to reduce but not eliminate the differences between his salary and the median of the peer group), 3% for Ms. Bertsch and Messrs. Alvarez and Webb and 8% for Mr. Torno (to bring his salary closer to the market median), all effective April 1, 2018. Mr. Galindo was not employed with the Company at the time of the merit increase.

 

 

 

2019 Proxy Statement    

27

 


 

Short-Term Incentive

The annual incentive is designed to promote the achievement of short‑term financial results and motivate individual performance.

Measures

The Committee annually reviews the performance measures for the STI each year to ensure they support the Company’s ongoing business strategies and reflect the needs of the business as well as drive share owner value. For the 2018 STI,  the Committee considered performance against the following measures to determine the awards under the 2017 Incentive Award Plan:

 

 

 

 

 

Measure

    

Weight

    

Definition

Financial Measures:

 

 

 

 

EBIT

 

80

%  

Consolidated earnings from continuing operations before net interest expense and provision for income taxes, excluding charges for asbestos‑related costs, restructuring, asset impairment and other items that management considers not representative of ongoing operations, and adjusted for changes in foreign currency exchange rates and to exclude the impact of acquisitions and divestitures that occur during the performance period.

FCF

 

20

%  

Cash provided by continuing operating activities less cash payments for property, plant and equipment from continuing operations, adjusted for changes in foreign currency exchange rates and for payments made beyond the Company’s annual statutory requirement for pensions that were not included in the Company’s budget.

The Committee believes these measures improved the balance between accounting (EBIT) versus value-based metrics (FCF) and reward results within management’s control versus those outside their ability to influence. These metrics also aligned with the Company’s strategic objectives for 2018 and supported both short- and long-term share owner value creation based on discussions with its investors.  In addition, by rewarding the senior leadership team, including Regional Presidents, based on enterprise performance, the senior leadership team is encouraged to leverage one region of the Company to compensate for pressures in another region, for the good of the Company.

While the Company is affected by broader macroeconomic trends, including currency and interest rate shifts, by measuring results on a constant currency basis, management is squarely focused on select key value drivers and delivering steady—and improving—performance on those metrics. The Company bases its incentive programs and sets core operating goals on metrics the executive team can influence and thus create increased long-term share owner value. This design drives motivation and retention despite cost headwinds and other external challenges that may be out of the executive team’s control.

Each measure stands alone for payment, so results under one measure can result in payment (up to the established maximum for that metric) even if results under the other measure result in no award.

Determining Performance Targets and Measure Weights

The Committee reviews and approves the financial targets and measure weightings set for the metrics for each plan year after considering the overall Company budget (as approved by the Board of Directors), the state of the industry and other external economic factors for the Company overall. Performance is based on the Company’s absolute performance.

When setting the targets for the measures, the Committee considers the assessment prepared by its independent executive compensation consultant, Pay Governance, of the difficulty of its financial goals from various perspectives, including the Company’s historic payout results, as well as a comparison of proposed goals versus: previous goals, public guidance, analyst estimates for the Company and its peers, and historic performance of the Company and its peers. The assessment found the Company’s goals for 2018 to be challenging, overall.

2018 Performance Results

For 2018, the STI awards for the NEOs were determined by the financial results of the enterprise.

 

 

 

28

    2019 Proxy Statement

 


 

Based on the targets set and actual achievement against those targets, the Company’s performance would have resulted in a payout of 148.6% of target opportunities.  However, both the Committee and management believed those results were achieved, in part, because of certain non-budgeted events, including a non-operational tax credit and non-recurring changes in working capital.  Based on management’s recommendation, the Committee elected to apply its discretion under the STI plan to reduce the payout to 80% of target to reflect these non-budgeted events.  Management and the Committee believe this reduction results in a payout that is more aligned with the underlying operating performance of the Company for the year, while continuing to support management engagement and recognizing the actual achievement against the performance ranges.

The performance targets, results, and payouts for the enterprise are as follows (dollars in millions):

Measures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performance Range

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payout

 

Weighted Payout

  

 

 

 

 

Threshold

 

Target

 

Maximum

 

Actual

 

(as % of

 

(as % of

 

Weight

    

Measure

    

30%

    

100%

    

200%

    

Results

    

Target Award)

    

Target Award)

 

80

%  

EBIT

 

$

740

 

$

871

 

$

895

 

$

879

(1)  

135.7

%  

108.6

%

20

%  

FCF

 

$

238

 

$

280

 

$

310

 

$

349

(1)  

200.0

%  

40.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Calculated Payout:

 

148.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Approved Payout:

 

80.0

%


(1)

See Appendix A for a calculation of this measure.

Individual Award Determination

In determining individual payouts, the Committee considers the Company’s performance relative to the EBIT and FCF performance targets as well as the individual performance of each NEO.  Per the plan’s design, payouts based on the Company’s achievement of financial performance goals can be adjusted by +/-20% based on each NEO’s  performance against personal objectives. For the 2018 STI awards, the Committee, with input from the Board of Directors (also the CEO in the case of the other NEO’s), did not adjust any of the STI awards for the NEOs based on individual performance.

Individual Target Opportunities and 2018 STI Payouts

Target awards for each NEO are expressed as a percentage of annual earnings based on market competitiveness and considering the Company’s overall median pay philosophy. Achievement of threshold financial performance against the performance measures would imply funding of 30% of the target opportunity, while maximum performance would yield a payout of 200% of the target.

Target bonuses are sufficient to produce median cash compensation (salary + annual incentives) if earned, with maximum bonuses capable of producing top quartile pay if maximum performance goals are achieved. If no bonus is paid, pay for the Company’s NEOs would rank in the market’s bottom quartile on a cash compensation basis.

The individual target opportunities and payouts based on 2018 performance were as follows: