DEF 14A 1 d662043ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.     )

 

Filed by the Registrant   þ  
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))
þ      Definitive Proxy Statement    
¨      Definitive Additional Materials    
¨      Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

AK STEEL HOLDING CORPORATION

 

 

(Name of Registrant as Specified In Its Certificate)

 

      

 

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

Payment of Filing Fee (Check the appropriate box):

 

þ

No fee required.

 

¨

Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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.

 

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Amount Previously Paid:

      

 

 

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Form, Schedule or Registration Statement No.:

      

 

 

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Filing Party:

      

 

 

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Date Filed:

      

 


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AK Steel Holding Corporation

9227 CENTRE POINTE DRIVE

WEST CHESTER, OHIO 45069

 

James L. Wainscott

CHAIRMAN OF THE BOARD, PRESIDENT AND

CHIEF EXECUTIVE OFFICER

April 21, 2014

 

LOGO

   To our Stockholders:
  

 

It is my pleasure to invite you to the 2014 Annual Meeting of Stockholders of AK Steel Holding Corporation. The meeting will be held at 1:30 p.m., Eastern Daylight Saving Time, on Thursday, May 29, 2014, at the Hilton Columbus at Easton, located at 3900 Chagrin Drive, Columbus, Ohio 43219. Registration will begin at 1:00 p.m.

  

 

Attendance at the Annual Meeting is limited to stockholders of record as of the close of business on March 31, 2014, or their duly appointed proxies, and to guests of Management. If you cannot attend the meeting in person, I strongly urge you to participate by voting your proxy in one of the methods explained in the Notice of 2014 Meeting of Stockholders that you received in the mail.

 

Please note that this year one of the proposals being voted on (Proposal No. 5 to increase the total number of authorized shares of common stock) requires the affirmative vote of a majority of all outstanding shares of the Company’s common stock for approval (not just a majority of the shares actually voted). Thus, although your vote is always important, it is particularly important this year with respect to Proposal No. 5. Absent a higher-than-normal percentage of stockholders voting, it is possible that a majority of shares actually voted could be in favor of Proposal No. 5, but it still might fail because it did not receive a “For” vote by a majority of all outstanding shares entitled to vote. In other words, if you fail to vote with respect to Proposal No. 5, you will effectively be voting “Against” it whether you intend to or not. The Board believes that passage of Proposal No. 5 is in the best interests of the Company and its stockholders in order to provide the Company with greater flexibility in considering and planning for potential future corporate needs.

 

  

Please read the enclosed Notice of Meeting and the accompanying Proxy Statement carefully. Your vote is important. In addition to Proposal No. 5 noted above, there are four other proposals included in the accompanying Proxy Statement. The Board of Directors recommends that you vote your shares FOR all of the proposals in the Proxy Statement, as follows:

 

1. FOR the election of each of the nominee Directors (Proposal No. 1).

 

2. FOR the ratification of the appointment of Ernst & Young LLP as independent registered public accounting firm (Proposal No. 2).

 

3. FOR the approval of Named Executive Officer compensation (Proposal No. 3).

 

4. FOR the approval of the amendment and restatement of the Company’s Stock Incentive Plan (Proposal No. 4).

 

5. FOR the approval of the proposed amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of common stock (Proposal No. 5)

  

 

If you cannot attend in person, you may listen to the Annual Meeting via the Internet. To listen to the live webcast, log on at www.aksteel.com and select the link on the homepage for the webcast of the 2014 Annual Meeting of Stockholders. The webcast will begin at 1:30 p.m. and will remain on the Company’s website for one year. Please note, however, that you cannot record your vote on this website. In order to vote by proxy, you must use one of the methods explained in the Notice of 2014 Meeting of Stockholders that you received in the mail.

  

 

Your continuing interest in our company is greatly appreciated. I look forward to seeing you at the Annual Meeting.

Sincerely,

LOGO

James L. Wainscott


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AK STEEL HOLDING CORPORATION

9227 Centre Pointe Drive

West Chester, Ohio 45069

 

 

NOTICE OF 2014 ANNUAL MEETING OF STOCKHOLDERS

OF AK STEEL HOLDING CORPORATION (THE “COMPANY”)

 

 

 

Date:   

Thursday, May 29, 2014

 

Time:   

Registration will begin at 1:00 p.m., Eastern Daylight Saving Time

The meeting will begin at 1:30 p.m., Eastern Daylight Saving Time

 

Place:   

Hilton Columbus at Easton

3900 Chagrin Drive

Columbus, Ohio

 

Purposes:   

1.    To elect as Directors of the Company the eleven candidates nominated by the Board;

  

2.    To ratify, by a non-binding advisory vote, the Audit Committee’s appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2014;

  

3.    To vote on a non-binding advisory resolution to approve the compensation of our Named Executive Officers;

  

4.    To approve the Amendment and Restatement of the Company’s Stock Incentive Plan;

  

5.    To approve a proposed amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock from 200,000,000 to 300,000,000; and

  

6.    To transact such other business as properly may come before the meeting.

Who Can Vote:   

AK Steel stockholders of record as of the close of business on March 31, 2014.

 

How You Can Vote:   

You may vote in person at the meeting or you may vote in advance of the meeting via the Internet, by telephone, or by using the proxy card that will be enclosed with those materials. If you intend to use the proxy card, please mark, date and sign it, and then return it promptly in the postage-paid envelope that comes with the card. If you intend to vote over the telephone or via the Internet, please follow the instructions on the proxy card that you received. If you intend to vote in person at the meeting and your shares are held at a broker, bank or other institution, you must obtain a “legal proxy” from your broker, bank or other institution in advance of the meeting in order to vote your shares at the meeting. Please vote regardless of whether you plan to attend the Annual Meeting.

 

Right to Revoke Your Proxy:   

You may revoke your proxy at any time before it is voted by submitting a new proxy card with a later date or by submitting a subsequent vote via the Internet or by telephone. If you are a stockholder of record, you also may attend the Annual Meeting and revoke your proxy in person.

 

Who May Attend:   

Attendance at the Annual Meeting is limited to stockholders of record as of the close of business on March 31, 2014, or their duly appointed proxies, and to guests of Management.

 

How Do I Prove I Am a Stockholder of Record:   

If your shares are registered in your name, you will need to present personal photo identification. If your shares are not registered in your name (if, for instance, your shares are held in “street name” for you by your broker, bank or other institution), you must present (1) personal photo identification, and (2) proof of stock ownership. We will accept as proof of stock ownership either a copy of your account statement or a letter from your broker, bank or other institution reflecting the number of shares of common stock you owned as of March 31, 2014.

 

No Recording of Meeting; Packages Subject to Inspection:   

Please note that you may not record the meeting using a video or audio electronic device of any kind. To enforce this rule and for your safety, we reserve the right to inspect all packages prior to admission at the Annual Meeting and to prohibit certain electronic devices from being brought into the meeting room.

 

 

By Authorization of the Board of Directors,
David C. Horn, Secretary

West Chester, Ohio

April 21, 2014


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PROXY STATEMENT

TABLE OF CONTENTS

 

     Page  

Proxy Statement

     1   

Proposal No. 1 — Election of Directors

     6   

Corporate Governance

     19   

Director Compensation

     29   

Director Compensation Table

     30   

Stock Ownership

     31   

Executive Compensation

     33   

Compensation Discussion and Analysis

     33   

Management Development and Compensation Committee Report

     61   

Summary Compensation Table

     62   

Grants of Plan-Based Awards Table

     66   

Outstanding Equity Awards at Fiscal Year-End Table

     68   

Option Exercises and Stock Vested Table

     71   

Pension Benefits Table

     72   

Nonqualified Deferred Compensation Table

     74   

Potential Payments Upon Termination or Change-of-Control

     75   

Audit Committee Report

     81   

Principal Accounting Firm Fees

     82   

Proposal No. 2 — Advisory Vote to Ratify Appointment of Ernst & Young LLP as Independent Registered Public Accounting Firm

     83   

Proposal No. 3 — Advisory Vote to Approve Named Executive Officer Compensation

     83   

Proposal No. 4 — Approval of Amendment and Restatement of the Company’s Stock Incentive Plan

     87   

Proposal No. 5 — Approval of Proposed Amendment to the Company’s Restated Certificate of Incorporation to Increase the Number of Authorized Shares of Common Stock

     94   

Stockholder Proposals for the 2015 Annual Meeting and Nominations of Directors

     98   

Other Matters

     98   


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AK STEEL HOLDING CORPORATION

9227 Centre Pointe Drive

West Chester, Ohio 45069

 

 

PROXY STATEMENT

 

 

This Proxy Statement is being furnished in connection with the solicitation by the Board of Directors of AK Steel Holding Corporation (the “Company” or “AK Steel”) of proxies to be voted at the Annual Meeting of Stockholders (“Annual Meeting”) of the Company to be held on May 29, 2014, and at any and all postponements or adjournments thereof.

On or about April 21, 2014, we mailed to stockholders of record our 2014 Proxy Statement and 2013 Annual Report to Stockholders.

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

 

Q.

What is a “proxy?”

 

A.

A proxy is a person or entity authorized to act for another person. In this instance, the Board of Directors has appointed a Proxy Committee to vote the shares represented by proxy forms submitted by stockholders to the Company prior to the Annual Meeting. Giving the Proxy Committee your proxy means that you authorize the Proxy Committee to vote your shares on your behalf at the Annual Meeting as you specifically instruct on your proxy card with respect to each proposal, or if a matter that is not raised on the proxy card comes up for a vote at the Annual Meeting, in accordance with the Proxy Committee’s best judgment.

 

Q.

Whom am I appointing as my proxy?

 

A.

The Proxy Committee consists of James L. Wainscott, David C. Horn and Roger K. Newport.

 

Q.

What is a Proxy Statement?

 

A.

The document you are reading is a Proxy Statement. It is intended to provide our stockholders with information necessary to vote in an informed manner on matters to be presented at the Annual Meeting. It is sent in conjunction with a solicitation of your proxy.

 

Q.

Why is the Company soliciting my proxy?

 

A.

The Board of Directors is soliciting your proxy to vote at the Annual Meeting because you are a “stockholder of record,” which means that you were shown on the Company’s records as the owner of common stock of the Company or you were the beneficial owner of shares held in street name at the close of business on March 31, 2014, the record date. All stockholders of record are entitled to vote at the meeting. It is important that as many stockholders as possible attend the meeting, either in person or by proxy, and vote on the issues to be decided at the Annual Meeting. The process of soliciting proxies is intended to increase the number of stockholders who vote on those issues.

 

Q.

Why did I receive more than one Proxy Statement or proxy card?

 

A.

You may receive more than one Proxy Statement and proxy card if you hold AK Steel stock in different ways (e.g., joint tenancy, in trust, or in a custodial account) or in multiple accounts.

 


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Q.

What is the difference between a “stockholder of record” and a beneficial owner of shares held in “street name?”

 

A.

Stockholder of Record.    If your shares are registered directly in your name with the Company’s transfer agent, Computershare Investor Services, LLC (“Computershare”), you are considered the stockholder of record with respect to those shares.

Beneficial Owner of Shares Held in Street Name.    If your shares are held in an account at a bank, broker or other institution, then you are the “beneficial owner” of shares held in “street name.” The entity holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to instruct that entity on how to vote the shares held in your account.

 

Q.

How do I obtain voting instructions if my stock is held in “street name?”

 

A.

If your stock is held in “street name,” you will receive a notice, typically entitled “Voting Instruction Form” or something similar, either electronically or by mail from the bank, broker or other institution holding your stock. This notice contains instructions regarding how to access the proxy materials and how to vote.

 

Q.

If I hold my stock in street name and fail to provide specific voting instructions to the bank, broker or other institution holding it on my behalf, will my stock still get voted?

 

A.

Not on all matters. If you hold your shares in street name and want a vote to be cast on your behalf for all proposals described in this Proxy Statement, you must submit your specific voting instructions to the bank, broker or other institution holding the stock on your behalf in response to the notice you receive from it.

 

Q.

If I hold my stock in street name and do not provide specific voting instructions to the bank, broker or other institution holding it on my behalf, for which proposals will a vote not be cast on my behalf?

 

A.

If you are a holder of shares in street name and you fail to provide specific voting instructions to the bank, broker or other institution holding the stock on your behalf, a vote will not be cast on your behalf with respect to the following proposals:

 

   

the election of Directors (Proposal No. 1);

 

   

the advisory vote on Named Executive Officer compensation (Proposal No. 3); and

 

   

the approval of the amendment and restatement of the Company’s Stock Incentive Plan (Proposal No. 4).

 

Q.

If I hold my stock in street name and do not provide specific voting instructions to the bank, broker or other institutions holding it on my behalf, for which proposals may a vote be cast on my behalf?

 

A.

If you are a holder of shares in street name and you fail to provide specific voting instructions to the bank, broker or other institution holding the stock on your behalf, that entity may cast a vote on your behalf only with respect to the following proposals:

 

   

the ratification of the appointment of the independent registered public accounting firm (Proposal No. 2); and

 

   

the approval of the proposed amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of common stock (Proposal No. 5).

 

Q.

What are “broker non-votes” and how are they counted for voting purposes?

 

A.

“Broker non-votes” occur when a broker (or a bank or other institution holding someone’s shares) returns a proxy, but does not vote the shares represented by that proxy on a particular proposal, usually because the beneficial owners of those shares have not provided direction to the holder on how to vote them and the holder does not have discretionary voting power with respect to the proposal. Broker non-votes do not count

 

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for voting purposes, but are considered “present” at the meeting and are counted to determine whether there is a quorum present at the meeting.

 

Q.

What documentation must I provide to be admitted to the Annual Meeting?

 

A.

If your shares are registered in your name, you will need to present personal photo identification. If your shares are not registered in your name (if, for instance, your shares are held in street name for you by your broker, bank or other institution), you must present (1) personal photo identification, and (2) proof of stock ownership. We will accept as proof of stock ownership either a copy of your account statement or a letter from your broker, bank or other institution, as long as such statement or letter reflects the number of shares of common stock you owned as of March 31, 2014.

 

Q.

What documentation must I provide to vote in person at the Annual Meeting?

 

A.

Upon admission, if you are a stockholder of record, you may vote all shares registered in your name in person at the Annual Meeting. If you are not a stockholder of record as to any of your shares (i.e., instead of being registered in your name, all or a portion of your shares are registered in a street name and held by your broker, bank or other institution for your benefit), you must obtain and bring with you to the meeting a “legal proxy” from the broker, bank or other institution in whose name any of your shares are held in order to vote those shares in-person at the meeting. You should contact the bank, broker or other institution that holds those shares for specific information on how to obtain a legal proxy in order to vote them at the meeting.

 

Q.

Is there any way for me to vote other than in person or by proxy at the Annual Meeting?

 

A.

Yes. If you are a stockholder of record, you may vote over the telephone or via the Internet. The proxy card from the Company you received in the mail contains instructions for voting by these methods. If you hold your shares in street name, you must follow the instructions contained in the voting instruction card provided to you by the broker, bank or other institution holding your shares on your behalf.

 

Q.

Do I vote only once regardless of how many shares I own? If not, how many votes do I get to cast?

 

A.

You are entitled to one vote for each share of common stock in the Company which you held as of the close of business on March 31, 2014.

 

Q.

What is a quorum and why is it important?

 

A.

In the context of the Annual Meeting, a quorum is the presence at the meeting, either in person or by proxy, of stockholders holding the minimum number of shares of the Company’s stock necessary to make the proceedings of that meeting valid under the Company’s By-laws and applicable law.

More specifically, the presence of stockholders at the meeting, in person or represented by proxy, holding a majority of the Company’s issued and outstanding shares constitutes a quorum. As of March 31, 2014, there were 136,712,665 issued and outstanding shares of the Company’s common stock, which is the only class of stock outstanding. The number of shares necessary to constitute a quorum in the context of the Annual Meeting thus is 68,356,334.

 

Q.

What are my choices when voting on a particular proposal?

 

A.

You may vote “FOR”, “AGAINST” or “ABSTAIN” with respect to every proposal.

 

Q.

How many votes are needed for the proposals to pass?

 

A.

Election of Directors (Proposal No. 1).    The affirmative vote of a majority of the votes cast at the Annual Meeting in person or by proxy is required for election as a Director. The “affirmative vote of a majority of the votes cast” means that the number of votes cast “FOR” a Director Nominee’s election exceeds the

 

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number of votes cast “AGAINST” such Director Nominee’s election. Abstentions and broker non-votes are not counted as votes in this context.

Advisory Vote to Ratify Appointment of Ernst & Young LLP as Independent Registered Public Accounting Firm (Proposal No. 2) and Advisory Vote to Approve Named Executive Officer Compensation (Proposal No 3).    Each of these proposals can be approved by the affirmative vote of a majority of the votes cast at the Annual Meeting in person or by proxy. In this context, the “affirmative vote of a majority of the votes cast” means that the number of votes cast “FOR” a proposal exceeds the number of votes cast “AGAINST” such proposal. Abstentions and broker non-votes also are not counted as votes in this context. Please note, however, that the results of the votes regarding the appointment of the independent registered public accounting firm (Proposal No. 2) and the approval of Named Executive Officer compensation (Proposal No. 3) are non-binding.

Approval of Amendment and Restatement of the Company’s Stock Incentive Plan (Proposal No. 4).    The affirmative vote of a majority of the votes cast at the Annual Meeting in person or by proxy is required for approval of the amendment and, unless otherwise provided by the Board, restatement of the Company’s Stock Incentive Plan. The “affirmative vote of a majority of the votes cast” means that the number of votes cast “FOR” the approval of the amendment and restatement of the Company’s Stock Incentive Plan exceeds the number of votes cast “AGAINST” such proposal. Abstentions and broker non-votes are not counted as votes in this context.

Approval of Proposed Amendment to the Company’s Restated Certificate of Incorporation to Increase the Number of Authorized Shares of Common Stock (Proposal No. 5).    The affirmative vote of a majority of the outstanding shares of the Company’s stock is required for approval of the proposed amendment of the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of common stock. Abstentions or the failure to vote shares therefore effectively will be counted as “AGAINST” votes in this context. Banks, brokers and other institutions may vote shares held in “street name” on a discretionary basis for purposes of Proposal No. 5.

 

Q.

What does it mean to “ABSTAIN” from voting and what impact does that have?

 

A.

If you indicate on your proxy card that you wish to “ABSTAIN” from voting with respect to a particular proposal, your shares will not be voted with respect to that proposal. Your shares, however, will be considered “present” and “entitled to vote” at the meeting and will be counted to determine whether there is a quorum present at the Annual Meeting. Beyond being counted for purposes of establishing a quorum, the practical effect of voting to “ABSTAIN” may vary depending upon the proposal for which you submit it. With respect to Proposals No. 1, No. 2, No. 3 and No. 4, voting to “ABSTAIN” will have no practical effect because the outcome of the vote on each proposal will be based upon the number of votes cast and votes to “ABSTAIN” are not counted as votes cast. With respect to Proposal No. 2 (ratification of the appointment of the independent registered public accounting firm) and Proposal No. 3 (approval of Named Executive Officer compensation), the vote is advisory in nature and, to the extent that the Board considers and gives weight to the voting results when considering future action on the subject of the proposal, a vote to “ABSTAIN” provides no input to the Board with respect to your preference on that subject. With respect to Proposal No. 5, voting to “ABSTAIN” has a different effect because the affirmative vote of a majority of the outstanding shares of common stock of the Company is required for approval of this proposal. Therefore, a vote to “ABSTAIN” on Proposal No. 5 effectively counts as a vote “AGAINST” the proposal.

 

Q.

Who will count the votes?

 

A.

The votes will be counted by an inspector of election appointed by the Board. The Board has appointed Jeanine Simon of Computershare as the inspector of election and David Dietrich, also of Computershare, as an alternate inspector of election in the event Ms. Simon is unable to serve.

 

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Q.

What happens if I return my proxy card but do not mark how I want my votes to be cast?

 

A.

If you timely return a signed and dated proxy card, but do not mark how your shares are to be voted, those shares will be voted by the Proxy Committee as recommended by the Board of Directors.

 

Q.

How does the Board of Directors recommend that I vote?

 

A.

The Board of Directors recommends that you vote your shares:

 

  1.

FOR the election of each of the nominee Directors (Proposal No. 1).

 

  2.

FOR the ratification of the appointment of Ernst & Young LLP as independent registered public accounting firm (Proposal No. 2).

 

  3.

FOR the approval of Named Executive Officer compensation (Proposal No. 3).

 

  4.

FOR the approval of the amendment and restatement of the Company’s Stock Incentive Plan (Proposal No. 4).

 

  5.

FOR the approval of the proposed amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of common stock (Proposal No. 5).

 

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ELECTION OF DIRECTORS

(Proposal No. 1 on the proxy card)

Eleven of the Company’s incumbent Directors will stand for election at the Annual Meeting. One of them — Dr. Bonnie Hill — has decided not to stand for re-election after more than twenty years of distinguished service on the AK Steel Board of Directors. If elected, each nominee will serve as a Director of the Company for a term expiring on the date of the next succeeding Annual Meeting and until his or her successor is duly elected and qualified. If any nominee is unable to serve, or determines prior to his or her election that he or she will be unable to serve, proxies may be voted by the proxy holders for another person designated by the Board of Directors. The Company has no reason to believe that any nominee will be unable to serve.

Overview

The Company is proud to have a diverse, but cohesive, Board of Directors comprised currently of twelve distinguished and highly accomplished individuals, all of whom are independent except for Mr. Wainscott, the Company’s President and Chief Executive Officer. Collectively, they bring a wide range of viewpoints and backgrounds to the Board, rooted in a broad base of complementary experience and expertise. They share a record of substantial achievements and extraordinary service in the public and private sectors and in charitable endeavors.

The Board’s members include current and former top executives of leading American companies. Having overseen successful companies themselves, these Directors are able to assist the Company’s Management in reaching and implementing key tactical and strategic decisions, leveraging experiences from their combined decades of leadership and experience. In many instances, the companies with which the Directors are or were formerly executives conduct business in areas that either are related to the Company’s ongoing business or operations (such as the steel, iron ore or automotive business), or else share similar characteristics with the Company’s business or operations (such as operating in the manufacturing sector).

The Board also includes several Directors who have served the public in high positions with the federal and state governments. In addition to the substantive expertise achieved in the various public offices in which they have served, these Directors are able to draw upon their general experience in the government sector when exercising their oversight responsibilities as members of the Company’s Board. As with most large businesses today, the Company deals with various government agencies on a regular basis and, accordingly, receives great dividends from the insights of these Directors.

Many of the Company’s Directors also have served and currently serve on other boards of directors, including the boards of some of the world’s top companies, premier academic institutions and leading charitable organizations. Their experiences on these other boards enhance their base of experience and facilitate their ability to provide strategic oversight and direction to the Company’s Management.

As with all boards of directors, the composition of the Company’s Board changes over time, as new Directors replace those whose service to the Company has ended. The Nominating and Governance Committee, comprised entirely of independent Directors, is responsible for identifying, screening and recommending persons for nomination by the Board to serve as a Director. Directors are selected on the basis of, among other things, the following criteria listed in the Company’s Corporate Governance Guidelines:

 

   

personal qualities and characteristics, such as judgment, integrity, reputation in the business community and record of public service;

 

   

business and/or professional expertise, experience and accomplishments;

 

   

ability and willingness to devote sufficient time to the affairs of the Board and of the Company;

 

   

diversity of viewpoints, backgrounds and experience they will bring to the Board; and

 

   

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

 

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One of the explicit criteria listed above for selection as a Director nominee is the diversity of viewpoints, backgrounds and experience the potential nominee will bring to the Board. Thus, the Nominating and Governance Committee specifically considers diversity in discharging its duty to identify, screen and review individuals qualified to serve as Directors of the Company. In addition, pursuant to its Charter, the Committee also annually reviews the size and composition of the Board as a whole to consider whether the Board reflects the appropriate balance of skills, experience and other characteristics, including diversity. The Committee does not, however, apply a narrow definition of diversity that would limit it to an individual’s gender, race, ethnic background or other such personal characteristics. Rather, the Committee views diversity as an expansive criteria that encompasses differing backgrounds, perspectives, personal qualities, technical skills, professional experience, expertise, education and other desired qualities. It utilizes this inclusive view in the context of identifying and evaluating nominees whose viewpoints, attributes and experiences, taken as a whole, will complement the existing Board and facilitate its ability to be effective and responsive to the needs of the Company and its stockholders.

The Nominating and Governance Committee may solicit input and/or recommendations from other members of the Board and/or independent advisors. After the Committee’s deliberations are completed, it reports its findings and recommendations to the Board. The Board then proposes a slate of nominees to the stockholders for election to the Board at the annual stockholders’ meeting. Between annual stockholders’ meetings, the Board (based on the recommendations of the Nominating and Governance Committee) may elect Directors to serve until the next annual meeting. Using this methodology, the Board nominates candidates whom the Board feels are the best available choice to complement the experience and expertise of the existing Directors and to represent the interests of the Company and its stockholders.

As a matter of good corporate governance, the Board includes a mandatory retirement age for Directors in its Corporate Governance Guidelines. As part of the Board’s succession planning process, the Nominating and Governance Committee monitors when Directors are approaching that mandatory retirement age and takes appropriate action to be prepared for Director retirements. Toward that end, the Nominating and Governance Committee initiated a review process in 2013 to identify one or more potential new members of the Board of Directors. During this process the Nominating and Governance Committee evaluated potential new Directors utilizing the criteria discussed above. It also considered how candidates would complement the existing strengths and fulfill the needs of the Board, while contributing new and diverse viewpoints and experience to its overall makeup. At the conclusion of the process, the Nominating and Governance Committee recommended, and the Board approved, the election of two new members to the Board of Directors effective November 1, 2013. Those two new Directors are Mr. Mark G. Essig and Mr. Vicente Wright, both of whom are Director nominees for the 2014 Annual Meeting.

Set forth below is a description of the particular experience, qualifications, attributes and skills of each Director nominee — including Messrs. Essig and Wright — that led the Board to conclude that he or she should be nominated to serve as a Director of AK Steel. While each nominee, of course, has many other traits and qualifications to serve as a Director of AK Steel, the descriptions set forth below are intended to articulate the most significant of them and the ones to which the Board gave the most attention in its evaluation of who should be nominated to serve as a Director of AK Steel. As discussed above, however, the Board also gave consideration to the overall composition of the Board and to ensuring that the Board continues to have a broad diversity of viewpoints, backgrounds and experience.

 

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Information Concerning Nominees for Directors

 

LOGO

 

Richard A. Abdoo

   Age:  

70

 

   AK Steel Director Since:  

April 19, 2001

 

   AK Steel Committees:  

Management Development and Compensation (Chair), Nominating and Governance

 

   Current Principal Occupation:  

President, R. A. Abdoo & Co., LLC

   Prior Significant Positions Held:  

Served as Chairman and Chief Executive Officer of Wisconsin Energy Corporation from May 1991 to April 2004, and as President from May 1991 to March 2003

 

   Other Public Directorships Held:*  

NiSource Inc. (2008 — present), ZBB Energy Corporation (2009 — present), RENERGY Corporation (f/k/a Catalytica Energy Systems, Inc.) (2005 — 2009)

 

   Education:  

Bachelor degree in electrical engineering from the University of Dayton; Master of Arts degree in economics from the University of Detroit

 

   Other Information:  

Member of the American Economic Association and a registered professional engineer in Michigan, Ohio, Pennsylvania and Wisconsin

 

   Narrative Description of Experience, Qualifications, Attributes and Skills:  

By virtue of his former positions as Chairman and Chief Executive Officer of Wisconsin Energy Corporation, as well as his current positions as a member of the Boards of Directors of two other energy-related companies, Mr. Abdoo has extraordinary expertise and experience pertaining to energy issues. Because the steel industry is an intense user of energy, his depth of knowledge of the energy industry is of particular note with respect to his qualifications to serve as a Director of AK Steel, though it clearly is not the sole reason for his nomination to the Board. More broadly, by virtue of his diverse background and experience, Mr. Abdoo provides valuable insights with respect to a broad range of business, social and governance issues facing corporations today. As a former Chief Executive Officer, Mr. Abdoo understands well the issues facing executive management of a major corporation. As a registered professional engineer in several states, Mr. Abdoo is able to offer a unique technical perspective to issues under consideration by the Board. By virtue of his long-time role as a champion of humanitarian and social causes, including on behalf of the Lebanese community, he has great expertise with respect to the social issues confronting corporate America. As a result of his commitment to and work on behalf of social causes, he is a recipient of the Ellis Island Medal of Honor, presented to Americans of diverse origins for their outstanding contributions to their own ethnic groups and to American society.

 

 

*

Included in this section for Mr. Abdoo, and similarly for all other nominees below, are all directorships at public companies and registered investment companies held currently or at any time since January 1, 2009.

 

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LOGO

 

John S. Brinzo

   Age:   

72

 

   AK Steel Director Since:   

January 19, 2007

 

   AK Steel Committees:   

Finance, Management Development and Compensation, Nominating and Governance

 

   Current Principal Occupation:   

Retired Chairman of the Board of Directors and Chief Executive Officer of Cliffs Natural Resources, Inc. (f/k/a Cleveland-Cliffs Inc)

 

   Prior Significant Positions Held:   

Served as Chairman, President and Chief Executive Officer of Cliffs Natural Resources, Inc. (f/k/a Cleveland-Cliffs Inc) from July 2003 until April 2005; served as Chairman and Chief Executive Officer of Cliffs Natural Resources, Inc. (f/k/a Cleveland-Cliffs Inc) from January 2000 until his retirement as CEO in September 2006 and subsequent retirement as Chairman in May 2007

 

   Other Public Directorships Held:   

Delta Air Lines, Inc. (2007 — present), Alpha Natural Resources, Inc. (2006 — 2009), Brink’s Home Security Holdings, Inc. (2008 — 2010)

 

   Education:   

Bachelor of Science degree in business administration from Kent State University; Master of Business Administration degree from Case Western Reserve University

 

   Other Information:   

Chairman of the advisory council of the School of Business, Kent State University. Past Chairman of the National Mining Association. Past director of the American Iron and Steel Institute.

 

   Narrative Description of Experience, Qualifications, Attributes and Skills:   

Mr. Brinzo brings to the Board a broad knowledge of, and unique insights into, raw materials issues, an area which is and will remain vital to the Company’s business. Mr. Brinzo guided Cliffs Natural Resources, Inc. (then known as Cleveland-Cliffs Inc) through some of the most difficult times in the history of the iron ore and steel industries, expanding the company with domestic and international acquisitions, and transforming it into a very successful world-wide enterprise. Mr. Brinzo’s contribution to the Board, however, is not limited to his industrial expertise and experience. He has years of executive management experience which he is able to draw upon when exercising his oversight responsibilities as a member of the Company’s Board. In addition, by virtue of his service on other large company boards, such as Alpha Natural Resources, Inc., Brinks Home Security Holdings, Inc. and Delta Airlines, Inc., Mr. Brinzo provides valuable experience in dealing with other areas of Board responsibility, including with respect to corporate governance and executive compensation matters. Mr. Brinzo also has an extensive financial background and served as Controller and Chief Financial Officer of Cliffs Natural Resources. He is a member of Delta Airlines’ Audit Committee and has served on three other audit committees of publicly traded companies.

 

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LOGO

 

Dennis C. Cuneo

   Age:  

64

 

   AK Steel Director Since:  

January 21, 2008

 

   AK Steel Committees:  

Audit, Public and Environmental Issues

 

   Current Principal Occupation:  

Partner, Washington DC office, Fisher & Phillips LLP and President, DC Strategic Advisors, LLC

 

   Prior Significant Positions Held:  

Served as an attorney at Arent Fox LLP from 2006 to 2010, Senior Vice President of Toyota Motor North America, Inc. from 2000 to 2006, Corporate Secretary and Chief Environmental Officer of Toyota Motor North America, Inc. from 2004 to 2006, and Senior Vice President of Toyota Motor Manufacturing North America from 2001 to 2006

 

  

Other Public Directorships Held:

 

 

BorgWarner Inc. (2009 — present)

 

   Education:  

Bachelor of Science in Business Administration degree from Gannon College; Master of Business Administration degree from Kent State University; Juris Doctor degree from Loyola University

 

   Other Information:  

Serves on the boards of directors for the Center for Automotive Research and SSOE Group. Member of the Visiting Committee of the University of Chicago’s Physical Sciences Division. Served as Board Chairman of the Cincinnati Branch of the Federal Reserve from 2003 to 2004. Former member of the executive committee and chair of the human resources group of the National Association of Manufacturers. Previous gubernatorial appointments in California, Kentucky and Mississippi. Serves on the Advisory Boards of View Inc. and UIEvolution.

 

   Narrative Description of Experience, Qualifications, Attributes and Skills:  

Mr. Cuneo brings a wealth of experience in, and a deep understanding of, the automotive industry, a key part of the Company’s product market and strategy. Mr. Cuneo is a former senior executive and officer at Toyota Motor North America, Inc. and Toyota Motor Manufacturing North America. Mr. Cuneo’s Toyota career spanned more than 22 years, during which he was responsible for legal affairs, administration, public relations, investor relations, environmental affairs, corporate advertising, government relations, philanthropy, planning, research and Toyota’s Latin America Research Group. As one of Toyota’s earliest American manufacturing executives, he was instrumental in the launch of the company’s manufacturing operations in North America, and led Toyota’s site selection team for North America for over 10 years. He continues to consult in the automotive industry, and sits on the Boards of BorgWarner Inc., a publicly-traded automotive supplier, and the Center for Automotive Research, a leading auto industry think tank. Thus, he not only brings to the Board his knowledge of the automotive industry and its trends, he also contributes significantly to its expertise and experience in a broad range of Board oversight areas. Mr. Cuneo also is a licensed attorney, so he is able to provide a legal perspective on issues facing the Board and the Company, particularly with respect to corporate governance and regulatory matters.

 

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LOGO

 

Mark G. Essig

   Age:  

56

 

   AK Steel Director Since:  

November 1, 2013

 

   AK Steel Committees:  

Not yet assigned

 

   Current Principal Occupation:  

Chief Executive Officer, FKI Security Group

 

   Prior Significant Positions Held:  

Served as Chief Executive Officer of Rathgibson LLC from January 2011 to May 2012; served as President and CEO of Sangamon Industries LLC from May 2008 to January 2011; served as Chief Executive Officer of Aviation, Power & Marine, Inc. from January 2009 to January 2010; served as President and CEO of Barjan LLC from August 2002 to May 2008; served as Chief Executive Officer, President and Chairman of the Board of GS Industries from January 1998 to August 2002; held several positions at AK Steel, including Executive Vice President — Operations and Sales from 1997 to January 1998, Executive Vice President — Sales 1994 to 1997, Vice President — Sales and Marketing from 1992 to 1994 and Assistant to CEO and Vice President — Human Resources in 1992; served as Chief Financial Officer of Washington Steel Corporation from 1990 to 1992 and as Vice President — Finance and Administration from 1988 to 1990

 

  

Other Public Directorships Held:

 

 
   Education:  

Bachelor degree from Loyola University; Master of Business Administration degree from the University of Illinois

 

   Other Information:  

Served on the Board of Directors of Steel Technologies from 2002 to 2008.

 

   Narrative Description of Experience, Qualifications, Attributes and Skills:  

As a current and former chief executive of several companies, Mr. Essig brings to the Board the perspective of a leader facing a dynamic business environment on a daily basis. He is an accomplished senior operating executive with a wealth of finance, sales and administration experience in a number of diverse industries, including significant experience with manufacturing businesses. In light of his past service as an executive officer of AK Steel and of Washington Steel, and as a Director of Steel Technologies, he brings with him to the Board a deep understanding of the steel industry and its challenges and opportunities. Mr. Essig also has experience heading various portfolio companies of private equity firms, where he maintained a keen focus on operational efficiency and maximizing stockholder value.

 

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LOGO

 

William K. Gerber

   Age:  

60

 

   AK Steel Director Since:  

January 1, 2007

 

   AK Steel Committees:  

Finance, Audit (Chair), Public and Environmental Issues

 

   Current Principal Occupation:  

Managing Director, Cabrillo Point Capital LLC

   Prior Significant Positions Held:  

Served as Executive Vice President and Chief Financial Officer of Kelly Services, Inc. from 1998 to December 2007; served as Vice President-Finance from 1993 to 1998 and Vice President-Corporate Controller from 1987 to 1993 of L Brands Inc. (f/k/a The Limited Brands Inc.)

 

   Other Public Directorships Held:  

Wolverine World Wide, Inc. (2008 — present), Kaydon Corporation (2007 — 2013)

 

   Education:  

Bachelor of Science in Economics degree from the Wharton School at the University of Pennsylvania; MBA degree from the Harvard Graduate School of Business Administration

 

   Other Information:  

Certified Public Accountant

 

   Narrative Description of Experience, Qualifications, Attributes and Skills:  

Mr. Gerber brings an impressive background in corporate finance and accounting to AK Steel’s Board. Mr. Gerber currently is Managing Director of Cabrillo Point Capital LLC, a private investment fund. Prior to that, he was Executive Vice President and Chief Financial Officer of Kelly Services, Inc., a global staffing solutions company. Prior to joining Kelly Services, Mr. Gerber held senior management positions in corporate finance for The Limited, Inc. He also is a Certified Public Accountant. By virtue of these and other positions, Mr. Gerber is one of the Board’s “audit committee financial experts.” He thus contributes a broad and keen understanding of complex financial and accounting matters to the Board and its Audit Committee, which he chairs. The Board also benefits from Mr. Gerber’s membership on the audit committee of Wolverine World Wide, Inc., as he is able to share best practices and ideas learned and developed during his service on that committee.

 

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LOGO

 

Robert H. Jenkins

   Age:  

71

 

   AK Steel Director Since:  

January 24, 1996

 

   AK Steel Committees:  

Management Development and Compensation, Nominating and Governance (Chair)

 

   Current Principal Occupation:  

Lead Director of the Company’s Board of Directors

   Prior Significant Positions Held:  

Served as the non-executive Chairman of the Board of the Company from October 2003 through December 2005; served as Chairman of the Board of Sundstrand Corporation from April 1997 and as its President and Chief Executive Officer from September 1995, in each case until his retirement in August 1999 following the merger of Sundstrand Corporation with and into United Technologies Corporation in June 1999; employed by Illinois Tool Works as its Executive Vice President and in other senior management positions for more than five years prior thereto

 

   Other Public Directorships Held:  

Clarcor Inc. (1999 — present), ACCO Brands Corporation (2007 — present; Presiding Independent Director 2009 — 2013)

 

   Education:  

Bachelor of Science degree in Business Administration and Engineering from the University of Wisconsin

 

   Other Information:  

Past member of the board of trustees for the Manufacturers Alliance and the National Association of Manufacturers. Past member of the board of directors of Sentry Insurance and Visteon Corporation.

 

   Narrative Description of Experience, Qualifications, Attributes and Skills:  

Mr. Jenkins brings to the Board a long and accomplished history of service and leadership on this Board and on the boards of other companies. In 2003 he was selected by Board Alert as one of the year’s seven Outstanding Directors in the United States. In addition to serving as the Lead Director of AK Steel, he also served as the Presiding Independent Director of ACCO Brands Corporation. He has a keen understanding of executive management issues by virtue of his own experiences as an executive in the private sector, including as former Chairman and Chief Executive Officer of Sundstrand Corporation and as a senior executive at Illinois Tool Works. His prior experience with Sundstrand and Illinois Tool Works also provided Mr. Jenkins with an in-depth understanding of industrial processes and management of a manufacturing business. The Board and the Company’s Management gain valuable strategic and operational guidance from Mr. Jenkins, owing to his depth and breadth of experience in manufacturing companies and his history of board leadership positions.

 

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LOGO

 

Ralph S. Michael, III

   Age:  

59

 

   AK Steel Director Since:  

July 20, 2007

 

   AK Steel Committees:  

Finance (Chair), Audit, Management Development and Compensation

 

   Current Principal Occupation:  

President and Chief Executive Officer, Fifth Third Bank, Greater Cincinnati

   Prior Significant Positions Held:  

Former President and Chief Operating Officer of the Ohio Casualty Insurance Company from July 2005 until its sale in August 2007; served as Executive Vice President and Manager of West Commercial Banking for U.S. Bank, National Association, and then as Executive Vice President and Manager of Private Asset Management for U.S. Bank, from 2004 through July 2005; served as President of U.S. Bank Oregon from 2003 to 2005; served as Executive Vice President and Group Executive of PNC Financial Services Group, with responsibility for PNC Advisors, PNC Capital Markets and PNC Leasing, from 2001 to 2002; served as Executive Vice President and Chief Executive Officer of PNC Corporate Banking from 1996 to 2001

 

   Other Public Directorships Held:  

Key Energy Services Inc. (2003 — present), Arlington Asset Investment Corporation (2006 — present), and FBR & Co. (2009 — 2013)

 

   Education:  

Bachelor of Arts degree in economics from Stanford University; Master of Business Administration degree from the University of California at Los Angeles (UCLA) Graduate School of Management

 

   Other Information:  

Serves on the boards of directors of The Cincinnati Bengals, Inc., the Cincinnati Center City Development Corporation, CSAA Insurance Exchange and AAA-Allied Group. Serves on the board of trustees of Xavier (OH) University, the Good Samaritan Hospital Foundation, and the Cincinnati Chapter of The American Red Cross.

 

   Narrative Description of Experience, Qualifications, Attributes and Skills:  

Mr. Michael brings a strong business, banking and financial background to the Board. Mr. Michael has held executive level positions with several companies in the insurance and financial sectors, including in his current capacity as President and Chief Executive Officer of Fifth Third Bank, Greater Cincinnati. Previously, Mr. Michael held various executive and management positions with Ohio Casualty Insurance Company, U.S. Bank and PNC Financial Services Group. As a result of these years of experience in executive management and financial services, Mr. Michael is one of the Board’s “audit committee financial experts.” His experience and background also enable him to provide valuable insights on a variety of Board oversight matters, including complex banking and financial issues. In addition, the Board and Management benefit from the experience and knowledge Mr. Michael provides from service on other public company boards. These include capital markets and finance matters as a former director for FBR & Co. and energy-related issues as a member of the board and Lead Director of Key Energy Services, Inc.

 

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LOGO

 

Shirley D. Peterson

   Age:  

72

 

   AK Steel Director Since:  

January 13, 2004

 

   AK Steel Committees:  

Audit, Nominating and Governance

 

   Current Principal Occupation:  

Retired

   Prior Significant Positions Held:  

Served as President of Hood College, an independent liberal arts college in Frederick, Maryland from 1995 until 2000; served in the U.S. government, first appointed by President George H. W. Bush as Assistant Attorney General in the Tax Division of the Department of Justice, then as Commissioner of Internal Revenue Service from 1989 until 1993; partner in the law firm of Steptoe & Johnson from 1978 until 1989 and 1993 until 1994

 

   Other Public Directorships Held:  

Goodyear Tire & Rubber Company (2004 — 2014), Wolverine World Wide, Inc. (2005 — 2014), and Champion Enterprises, Inc. (2004 — 2010)

 

   Education:  

Bachelor of Arts degree from Bryn Mawr College; Juris Doctor degree from the New York University School of Law

 

   Other Information:  

Recipient of the Distinguished Service Award from the U.S. Department of Treasury and the Edmund J. Randolph Award for outstanding service from the U. S. Department of Justice. Former director on the board of Bethlehem Steel Corporation. Former Trustee and Chairman of the Board of a DWS Fund Complex (f/k/a Scudder Mutual Funds). Trustee Emerita, Bryn Mawr College.

 

   Narrative Description of Experience, Qualifications, Attributes and Skills:  

Ms. Peterson brings to the Board a wealth of diverse and distinguished experience from her career in both the public and private sectors. She has relevant financial, executive management and legal experience as well as extensive experience on public company boards, including several in the steel or manufacturing sector. Her service to the U.S. government includes her appointment by President George H. W. Bush as Assistant Attorney General in the Tax Division of the Department of Justice, and a subsequent appointment as Commissioner of the Internal Revenue Service. In the private sector, Ms. Peterson’s experience includes serving as President of Hood College and as head of the tax practice of Steptoe & Johnson, a leading national law firm. She also served on the board of directors of Bethlehem Steel Corporation, as well as the boards of other public manufacturing companies. This variety of experience at the highest levels in different sectors and areas, including the steel industry, enables Ms. Peterson to bring a valuable and diverse viewpoint to the Board.

 

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LOGO

 

Dr. James A. Thomson

   Age:  

69

 

   AK Steel Director Since:  

March 18, 1996

 

   AK Steel Committees:  

Audit, Public and Environmental Issues (Chair)

 

   Current Principal Occupation:  

Retired President and Chief Executive Officer of The RAND Corporation

   Prior Significant Positions Held:  

President and Chief Executive Officer of The RAND Corporation from 1989 to 2011. From 1977 to January 1981, Dr. Thomson was a member of the National Security Council staff at the White House. He served on the staff of the Office of the Secretary of Defense from 1974 to 1977.

 

  

Other Public Directorships Held:

 

 
   Education:  

Bachelor of Science degree in physics from the University of New Hampshire; M.S. and Ph.D. in physics from Purdue University

 

   Other Information:  

Serves on the board of directors of Praedicat, Inc. Member of the Council on Foreign Relations, New York; the International Institute for Strategic Studies, London; and the boards of the Los Angeles World Affairs Council and the Los Angeles Regional Food Bank. Former member of the National Security Council staff at the White House, where he was primarily responsible for defense and arms-control matters related to Europe, and the staff of the Office of the Secretary of Defense.

 

   Narrative Description of Experience, Qualifications, Attributes and Skills:  

Dr. Thomson is the former President and Chief Executive Officer of The RAND Corporation. Dr. Thomson had been President and Chief Executive Officer of The RAND Corporation since 1989 and a member of its staff since 1981. RAND is a nonprofit, nonpartisan institution that seeks to improve public policy through research and analysis. RAND’s agenda is broad, including international security, supply chains, health policy, energy and environment, and economics, to name just a sample. Through his position as the top executive of, and years of service with, a think tank providing policy-related research and analysis, Dr. Thomson is able to provide the Board and the Company an unparalleled perspective and depth of knowledge with respect to public policy issues and global trends that affect the Company’s business. As a result, Dr. Thomson is extremely well-suited for his position as Chair of the Public and Environmental Issues Committee. As a former CEO, Dr. Thomson also provides a valuable perspective on the current issues confronting executive management.

 

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LOGO

 

James L. Wainscott

   Age:  

57

 

   AK Steel Director Since:  

October 16, 2003

 

   AK Steel Committees:  

None

 

   Current Principal Occupation:  

Chairman, President and Chief Executive Officer of the Company

   Prior Significant Positions Held:  

President and Chief Executive Officer of the Company from October 2003 to December 2005; Chief Financial Officer from July 1998 to October 2003; Treasurer of the Company from April 1995 to April 2001; elected Senior Vice President of the Company in January 2000, having previously served as Vice President from April 1995 until that date

 

  

Other Public Directorships Held:

 

 

Parker-Hannifin Corporation (2009 — present)

   Education:  

Bachelor of Science degree in accounting from Ball State University; Master of Business Administration degree from the University of Notre Dame

 

   Other Information:  

Chairman of the 2014 Greater Cincinnati United Way Campaign; Chairman of the Steel Market Development Institute; Member of the board of trustees of Xavier (OH) University; Former Chairman, American Iron and Steel Institute; Former Chairman of the board of trustees of the Good Samaritan Hospital Foundation

 

   Narrative Description of Experience, Qualifications, Attributes and Skills:  

Mr. Wainscott serves as the Chairman of the Board and the Company’s Chief Executive Officer and President. Mr. Wainscott began his steel industry career in 1982 with the former National Steel Corporation, holding a number of increasingly responsible positions at plant and corporate headquarters levels. He joined AK Steel as Vice President and Treasurer in 1995, later advancing to Senior Vice President and CFO before becoming the Company’s President and Chief Executive Officer in 2003. By virtue of this experience, Mr. Wainscott has an extraordinarily broad and deep knowledge of the Company and the steel industry. As the only employee-Director on the Board, he is able to provide the Board with an “insider’s view” of what is happening in all facets of the Company. He shares not only his vision for the Company, but also his hands-on perspective as a result of his daily management of the Company and constant communication with employees at all levels. A former chairman and current board member of the American Iron and Steel Institute, Mr. Wainscott is able to furnish the Board with the most recent and relevant information affecting the steel industry. Mr. Wainscott’s appointment to the board of directors of the Parker-Hannifin Corporation has further expanded his exposure to other management styles and governance perspectives.

 

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LOGO

 

Vicente Wright

   Age:  

61

 

   AK Steel Director Since:  

November 1, 2013

 

   AK Steel Committees:  

Not yet assigned

 

   Current Principal Occupation:  

Retired President and Chief Executive Officer of California Steel Industries, Inc.

 

   Prior Significant Positions Held:  

President and Chief Executive Officer of California Steel Industries from July 2008 to July 2012; director of iron ore and pellets sales for VALE S.A. from January 2007 to June 2008; President and CEO of Rio Doce America Inc. (RDA) and Rio Doce Limited (RDL), a subsidiary of VALE S.A., from October 2004 to December 2006; President and CEO of California Steel Industries from March 2003 to June 2004, and Executive Vice President, Finance and CFO from February 1998 to February 2003

 

  

Other Public Directorships Held:

 

 
   Education:  

Bachelor degree in marketing from Marquette University

 

   Other Information:  

Serves as Chairman of the Board of Directors for Children’s Fund; former member of the Board of Directors of the American Iron and Steel Institute; former Chairman of California Steel Industries

 

   Narrative Description of Experience, Qualifications, Attributes and Skills:  

Mr. Wright’s extensive experience in both the steel and iron ore industries enables him to contribute a wealth of strategic and operational knowledge with respect to key issues affecting the Company. As a former Chief Executive Officer of another major steel company, he is able to provide valuable insights into the current challenges and opportunities for the Company’s steel business. In addition, by virtue of his experience working for one of the world’s largest iron ore producers, he is able to provide guidance with respect to significant trends and emerging issues pertaining to one of the Company’s most significant raw materials. Having served as an executive for several large international metals and mining companies, he brings to the Board a global and diverse perspective to the Company’s business. Mr. Wright also is multi-lingual and has worked in various regions of the world throughout his distinguished career.

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

 

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CORPORATE GOVERNANCE

Committees of the Board of Directors

The Board of Directors has five standing committees: an Audit Committee, a Finance Committee, a Management Development and Compensation Committee, a Nominating and Governance Committee, and a Public and Environmental Issues Committee. The table below shows the current membership for each Board committee.

 

Director

  

Audit
Committee

  

Finance Committee

  

Management
Development and

Compensation

Committee

  

Nominating and

Governance

Committee

  

Public and

Environmental

Issues Committee

Richard A. Abdoo

         ü(Chair)    ü   

John S. Brinzo

      ü    ü    ü   

Dennis C. Cuneo

   ü             ü

Mark G. Essig(1)

              

William K. Gerber

   ü(Chair)    ü          ü

Dr. Bonnie G. Hill(2)

            ü    ü

Robert H. Jenkins(3)

         ü    ü(Chair)   

Ralph S. Michael, III

   ü    ü(Chair)    ü      

Shirley D. Peterson

   ü          ü   

Dr. James A. Thomson

   ü             ü(Chair)

James L. Wainscott(4)

              

Vicente Wright(1)

              

 

(1)

Messrs. Essig and Wright were elected to the Board of Directors on November 1, 2013 and have not yet been appointed to any Committee.

 

(2)

The current Committee memberships of Dr. Hill are shown, but she has chosen not to stand for re-election to the Board.

 

(3)

Mr. Jenkins is the independent Lead Director of the Board.

 

(4)

Mr. Wainscott is the Chairman of the Board.

Audit Committee

The Audit Committee has five members and met ten times in 2013. The primary purpose of the Audit Committee is to assist the Board of Directors in fulfilling its responsibility to oversee Management’s conduct of the Company’s financial reporting process, including:

 

   

overseeing the integrity of the Company’s financial statements;

 

   

monitoring compliance with legal and regulatory requirements;

 

   

assessing the independent registered public accounting firm’s qualifications and independence;

 

   

assessing the performance of the independent registered public accounting firm and internal audit function;

 

   

determining annually that one or more of its members meets the definition of “audit committee financial expert” within the meaning of the Sarbanes-Oxley Act of 2002; and

 

   

reviewing annually the financial literacy of each of its members, as required by the New York Stock Exchange listing standards.

In fulfilling these responsibilities, the Audit Committee selects and appoints the independent registered public accounting firm that will serve as the independent auditor of the Company’s annual financial statements.

 

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As a matter of good corporate governance, the Committee seeks ratification by the Company’s stockholders of the appointment of that firm as the Company’s independent registered public accounting firm. The Committee also meets with representatives of that accounting firm to review the plan, scope and results of the annual audit, the Company’s critical accounting policies and estimates, and the recommendations of the independent registered public accounting firm regarding the Company’s internal accounting systems and controls. The report of the Audit Committee is located on page 81.

At its March 2014 meeting, the Board of Directors determined that all of the members of the Audit Committee are financially literate and that each of Messrs. Gerber and Michael is an “audit committee financial expert,” as that term is defined in Item 407(d)(5) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board further determined that each member of the Audit Committee satisfies the independence requirements of New York Stock Exchange Listed Company Manual Sections 303A.02, 303A.06 and 303A.07 and Rule 10A-3 of the Exchange Act. The Audit Committee and each of its members also satisfy all other requirements of those provisions.

Finance Committee

The Finance Committee has three members and met six times in 2013. The primary purpose of the Finance Committee is to advise and assist the Board in fulfilling its oversight responsibilities with respect to:

 

   

the Company’s exposure to short- and long-term financial risk and Management’s strategies, plans and procedures to manage such risks, including its hedging strategies;

 

   

the Company’s capital structure and liquidity, including credit facilities;

 

   

Management’s assessment of the Company’s cash needs, evaluation of capital market and other options to assist in addressing those needs, and recommendations with respect to those options; and

 

   

the performance of the members of any Benefit Plans Administrative Committee and any Benefit Plans Asset Review Committee of the Company, and the performance of assets under the direction of the Benefit Plans Asset Review Committee.

Management Development and Compensation Committee

The Management Development and Compensation Committee has four members and met five times in 2013. The primary purpose of the Management Development and Compensation Committee is to assist the Board in overseeing the Company’s management compensation policies and practices, including:

 

   

overseeing and reporting to the Board on the development and implementation of the Corporation’s policies and programs for the development of its senior leadership;

 

   

overseeing and reporting to the Board on the development and implementation of the Corporation’s Executive Officer succession plan;

 

   

determining and approving the compensation of the Company’s Chief Executive Officer;

 

   

determining and approving compensation levels for the Company’s other Executive Officers;

 

   

reviewing and approving management incentive compensation policies and programs;

 

   

reviewing and approving equity compensation programs for employees;

 

   

reviewing and approving for inclusion in the proxy statement the Compensation Discussion and Analysis;

 

   

reviewing and assessing the Corporation’s compensation program to determine whether any of its aspects encourage excessive or inappropriate risk-taking;

 

   

reviewing and assessing any stockholder advisory vote on the compensation of the Corporation’s Named Executive Officers (“say-on-pay vote”) and considering whether to make any adjustments to the Corporation’s executive compensation policies and practices in light of such assessment;

 

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reviewing and recommending to the Board the frequency with which the Corporation should submit to the stockholders a say-on-pay vote; and

 

   

reviewing the independence of compensation committee consultant(s).

At its March 2014 meeting, the Board of Directors determined that all of the members of the Management Development and Compensation Committee are “outside directors” as that term is defined by the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), in Section 162(m) and “non-employee directors” as that term is defined in Rule 16b-3(b)(3) under the Exchange Act. The Board further determined that each member of the Management Development and Compensation Committee satisfies the independence requirements of New York Stock Exchange Listed Company Manual Section 303A.02. The Management Development and Compensation Committee and each of its member also satisfy all of the requirements of New York Stock Exchange Rule 303A.05. For additional information concerning the Management Development and Compensation Committee and its activities, see “Compensation Discussion and Analysis” beginning on page 33.

Nominating and Governance Committee

The Nominating and Governance Committee has five members and met five times in 2013. The primary purpose of the Nominating and Governance Committee is to assist the Board in:

 

   

reviewing the size and composition of the Board as a whole, including whether the Board reflects the appropriate balance of independence, sound judgment, business specialization, technical skills, diversity and other desired qualities;

 

   

identifying, screening and reviewing individuals qualified to serve as Directors and recommending to the Board candidates for nomination for election at the Annual Meeting of Stockholders or to fill Board vacancies;

 

   

overseeing the Company’s policies and procedures for the receipt of stockholder suggestions regarding Board composition and recommendations of candidates for nomination by the Board;

 

   

developing, recommending to the Board and overseeing implementation of the Company’s Corporate Governance Guidelines;

 

   

reviewing on a regular basis the overall corporate governance of the Company and recommending improvements when necessary;

 

   

considering the independence and related qualifying determinations of each Director and nominee for Director and making a recommendation to the Board with respect to such matters; and

 

   

reviewing the Company’s policies and procedures for the review, approval or ratification of reportable transactions with related persons, including reviewing and addressing conflicts of interest of Directors and Executive Officers, and making a recommendation to the Board with respect to such matters.

At its March 2014 meeting, the Board of Directors determined that all of the members of the Nominating and Governance Committee satisfy the independence requirements of New York Stock Exchange Listed Company Manual Sections 303A.02 and 303A.04. The Nominating and Governance Committee and each of its members also satisfy all other requirements of those provisions.

In fulfilling its responsibility of identifying, screening and recommending persons for nomination by the Board to serve as a director, the Committee may solicit input and/or recommendations from other members of the Board and/or independent advisors. After the Committee deliberates, it reports its findings and recommendation to the Board. The Board then considers that recommendation and proposes a slate of nominees to the stockholders for election to the Board. In addition to meeting independence requirements, nominees for the Board must not have reached their 74th birthday at the time of their election. The principal criteria used for the selection of nominees, as well as the focus of the Committee on diversity as part of the selection process, is described more fully above at page 6 under “Overview.”

 

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The Nominating and Governance Committee will give appropriate consideration to candidates for Board membership nominated by stockholders in accordance with the Company’s By-laws, or as otherwise recommended, and will evaluate such candidates in the same manner as other candidates identified to the Committee. Any such recommendations may be submitted in writing to the Chairman of the Nominating and Governance Committee, c/o Secretary, AK Steel Holding Corporation, 9227 Centre Pointe Drive, West Chester, Ohio 45069, and should contain all required information and any other supporting material the stockholder considers appropriate. The Committee also will consider whether to nominate any person nominated by a stockholder pursuant to the provisions of the Company’s By-laws relating to stockholder nominations as described below at page 98 in “Stockholder Proposals for the 2015 Annual Meeting and Nominations of Directors.” No such nominee was recommended by any stockholder or stockholder group for election at the 2014 Annual Meeting.

Public and Environmental Issues Committee

The Public and Environmental Issues Committee has four members and met five times in 2013. The primary purpose of the Public and Environmental Issues Committee is to review on behalf of the Board, and to advise Management with respect to, significant public policy, environmental, legal, health and safety, and trade issues pertinent to the Company and its policies.

Majority Voting

Section 7(a) of the Company’s By-laws provides that each Director in an uncontested election shall be elected by the vote of the majority of votes cast at any meeting for the election of Directors. The By-laws also include a Director resignation procedure consistent with the majority vote standard requiring an incumbent Director who does not receive the requisite affirmative majority of the votes cast for the Director’s re-election to tender his or her resignation to the Board within 30 days. The Board, after considering the recommendation of the Nominating and Governance Committee on the matter, will publicly disclose its decision as to whether to accept the tendered resignation within 90 days after the certification of election results.

Director nominees in contested elections will continue to be elected by the vote of a plurality of the votes cast.

Attendance at Meetings

The Board of Directors met seven times in 2013. The Company expects each Director to make a diligent effort to attend all Board meetings and meetings of those committees of which he or she is a member. During 2013, all Directors attended 100% of the aggregate of the total meetings of the Board and those committees of which he or she was a member except as follows: one Director attended approximately 82% and one other Director attended approximately 94% of such meetings; in addition, Messrs. Essig and Wright attended only one meeting held in 2013 because it was the only meeting held after their election to the Board effective November 1, 2013. The Company does not have a formal written policy regarding Director attendance at the Annual Meeting, although Directors are encouraged to attend. All Directors in office at that time attended the 2013 Annual Meeting in person.

Director Stock Ownership Guidelines

Under the stock ownership guidelines for non-employee Directors, each such Director is expected to hold at least 25% of the shares of the Company’s common stock issued to that Director pursuant to a restricted stock unit award until at least six months following the Director’s termination of service on the Board. All of the Directors currently are in compliance with the stock ownership guidelines.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s Directors and officers, and persons who own beneficially more than ten percent of a registered class of the Company’s equity securities, to file with the

 

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Securities and Exchange Commission initial reports of ownership of the equity securities of the Company and reports of changes in that ownership. Exchange Act Rule 16a-3(e) requires officers, Directors and greater-than-ten-percent beneficial owners to furnish the Company with copies of all reports that they file pursuant to Section 16(a). On June 3, 2013, a Form 4 was filed on behalf of Mr. Kirk Reich to report the surrender of restricted shares for tax obligations with respect to restricted shares that lapsed on May 28, 2013. On July 23, 2013, a Form 4 was filed on behalf of Mr. Eric Petersen to report restricted shares awarded to him on July 18, 2013. On January 24, 2014 four Form 4s were filed on behalf of Mr. Abdoo to correct the number of RSUs awarded to him on March 31, 2013, June 30, 2013, September 30, 2013 and December 31, 2013. Other than the reports referenced above, to the Company’s knowledge, based upon a review of the copies of the reports furnished to the Company and written representations from its Executive Officers and Directors that no other reports were required, all Section 16(a) filing requirements applicable to the Company’s officers and Directors were complied with during 2013.

Board Leadership Structure

The Company’s Chief Executive Officer, Mr. James L. Wainscott, currently also serves as the Chairman of its Board of Directors. He has held both roles since first being elected to the position of Chairman in January 2006. In keeping with what the Board views as a best practice for public companies with a combined chief executive and chairperson, since January 2006 the Board also has appointed an independent Director to serve as the Lead Director of the Board. Mr. Robert H. Jenkins has served in that role since it was established in January 2006.

While the Board presently believes that combining the Chief Executive Officer and Chairman roles is the best and most efficient leadership structure for the Company, the Board expressly notes in its Corporate Governance Guidelines that it retains the authority to separate these functions if it deems such action appropriate. Indeed, that was the case immediately prior to combining the roles with Mr. Wainscott. From September 2003 until January 2006, Mr. Jenkins was the non-executive Chairman of the Board while Mr. Wainscott served as the Company’s Chief Executive Officer.

In determining in 2006, and annually since then, that the Company and its stockholders would be best served with Mr. Wainscott leading the Board as it oversees the strategic direction, business and other affairs of the Company, the Board has considered many factors. Chief among the factors relied upon by the Board in determining that this leadership structure is appropriate are the following:

 

   

Mr. Wainscott’s extensive steel industry and financial experience gained during his career. The Board believes that this experience is particularly valuable in light of the many challenges currently facing the Company and the steel industry. The Company and the cyclical steel industry are continuing to face difficult business and economic conditions following the severe global recession which started in the fall of 2008 and continue to face significant technological, environmental and other significant challenges to their business. Mr. Wainscott’s experience provides an extremely valuable and particularly well-suited foundation for developing the business strategies and tactics to meet those challenges;

 

   

Mr. Wainscott’s role in managing the Company’s business on a day-to-day basis and the keen awareness of, insights into, and deep understanding of the most important matters affecting the Company which he derives from that role;

 

   

The combination of Mr. Wainscott’s day-to-day management of the business in his role of Chief Executive Officer and his leadership of the Board in its oversight of the strategic initiatives and risk management uniquely enables Mr. Wainscott to assist the Board and Management in identifying potential material items of risk and to develop and implement solutions for addressing or mitigating such risks;

 

   

Mr. Wainscott’s outstanding leadership and performance as Chief Executive Officer, including the extraordinary gains and improvements by the Company since he first became President and Chief Executive Officer in the fall of 2003; and

 

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The benefits of centralized and unified Company leadership in one person so that there is no ambiguity as to who is accountable for leading the Company.

In making the determination concerning the Board’s leadership structure, the Board considered the impact of the structure on its risk oversight role. The Board concluded that its role with respect to risk oversight is fully consistent with, and supported by, a leadership structure that includes a combined Chairman of the Board and Chief Executive Officer for the same reasons articulated above that the Board relied upon in selecting that leadership structure. In addition, there are policies and practices in place at the Company to ensure effective and independent Board oversight of Management and Mr. Wainscott’s role as Chairman of the Board, including that: (i) all members of the Board other than Mr. Wainscott are independent Directors; (ii) each of the Board’s committees is chaired by and comprised entirely of independent Directors; (iii) the Board, upon the recommendation of its Management Development and Compensation Committee, annually establishes goals and objectives for Mr. Wainscott and reviews his performance; (iv) the Management Development and Compensation Committee annually determines his compensation package; (v) the independent Directors meet in “executive session” without Mr. Wainscott or any other member of Management, typically at least once at each regularly scheduled Board meeting and each meeting of its committees; (vi) the Board retains the authority to separate the roles of Chief Executive Officer and Chairman at its discretion in the future if it determines that the combination of the two is no longer in the best interests of the Board, the Company, or its stockholders; and (vii) the appointment and role of an independent Lead Director of the Board.

In addition, as noted above, the Board also believes that when the roles of Chief Executive Officer and Chairman are combined, it is appropriate to appoint an independent Lead Director. The Lead Director is responsible for presiding over meetings at which the Chair is not present, including when the Board meets in “executive session,” for coordinating the activities of the other independent Directors, and for performing the duties specified in the Company’s Corporate Governance Guidelines. Specifically, from time to time the Lead Director’s duties may include serving as a liaison between the Chair and/or members of Management and the independent Directors, collaborating with the Chair to schedule Board meetings and structure the agendas for such meetings, availing himself of direct communications from and with the Company’s stockholders, and such other duties as the Board assigns.

Communication with the Board of Directors

Stockholders and interested parties may send communications to the Chairman of the Board, to the Lead Director, or to any one or more of the other Directors by addressing such correspondence to the name(s) of any specific Director(s), or to the “Board of Directors” as a whole, and mailing it to: Secretary, c/o AK Steel Holding Corporation, 9227 Centre Pointe Drive, West Chester, Ohio 45069.

Board Independence

In accordance with the requirements of the New York Stock Exchange (“NYSE”), the Board has adopted a policy that at least a majority of its members shall be “independent,” as determined under applicable law and regulations, including without limitation Section 303A of the NYSE Listed Company Manual. The Company’s Corporate Governance Guidelines include categorical standards for determining the independence of all non-employee Directors. Those standards are set forth in guidelines attached as Exhibit A to the Company’s Corporate Governance Guidelines, which are available on the Company’s website at www.aksteel.com. A Director who meets all of the categorical standards set forth in the Corporate Governance Guidelines shall be presumed to satisfy the NYSE’s definition of “independence” and thus be “independent” within the purview of the Board’s policy on Director independence.

At their respective March 2014 meetings, the Nominating and Governance Committee and the Board of Directors reviewed the independence of all current non-employee Directors. In advance of these meetings, each incumbent Director was asked to provide the Board with detailed information regarding his or her business and other relationships with the Company and its affiliates, and with Executive Officers and their affiliates, to enable the Board to evaluate his or her independence.

 

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Upon the recommendation of the Nominating and Governance Committee, and after considering all relevant facts and circumstances with the assistance of legal counsel, the Board has affirmatively determined that none of the current incumbent Directors, except for Mr. Wainscott, has a material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company), other than being a Director, and all such incumbent Directors other than Mr. Wainscott meet the categorical standards of independence set forth in the Company’s Corporate Governance Guidelines and therefore are “independent” as that term is used and defined in Section 303A of the NYSE Listed Company Manual and in Rule 10A-3 under the Exchange Act. The Board further determined that each of the incumbent Directors other than Mr. Wainscott is an “Outside Director” as that term is used in Section 162(m) of the Internal Revenue Code and the associated Treasury Regulations, 26 CFR § 1.162-27 et seq., and is a “Non-Employee Director,” as defined in Rule 16b-3(b)(3) promulgated under the Exchange Act.

Under the Company’s Corporate Governance Guidelines, Directors have an affirmative ongoing obligation to inform the Board of any material changes that might impact the foregoing determinations by the Board. This obligation includes all business relationships between the Director and/or an immediate family member, on the one hand, and the Company and/or its affiliates and/or Executive Officers, on the other.

Board Oversight of Risk

As an integral part of its oversight function, the Board oversees the material risks facing the Company, both with respect to the relative probability and magnitude of the risks and also with respect to Management’s strategies to mitigate those risks. The Board engages in its risk oversight role in a variety of different ways.

The Board as a whole typically discusses and addresses the key strategic risks facing the Company. Specific strategic risks facing the Company are addressed at Board meetings, both as they relate to particular projects or other topics being considered by the Board and in their own right as a separate agenda topic. In addition, at least once annually, the Board has a session devoted exclusively to strategic planning, including identifying and addressing the Company’s principal strategic risks.

In addition, the Board delegates responsibility for oversight of specific risk categories to its Committees. Generally, each Committee has responsibility to identify and address risks which are associated with the purpose of and responsibilities delegated to that Committee. For example, the Audit Committee oversees risks related to financial reporting, internal controls, and pension accounting matters; the Nominating and Governance Committee manages risks related to board composition, director independence, governance, and corporate compliance and reporting obligations; the Management Development and Compensation Committee deals with risks related to senior Management development and succession planning, Management compensation, and employment benefits and policies; the Public and Environmental Issues Committee handles risks with respect to health and safety issues, public policy, international trade and reputational risks; and the Finance Committee oversees the Company’s exposure to short- and long-term financial risk, including risks relating to the Company’s capital structure, liquidity, hedging strategies, pension and benefit plans, pension fund asset performance and cash needs. Each Committee Chair reports to the full Board with respect to any significant risks which the Committee has discussed. Depending upon the nature and severity of the risk, the Committee may simply report to the Board with respect to that risk or it may make recommendations to the Board which then are discussed and acted upon by the Board as a whole. For those risks that cross several disciplines or which could have impacts across various stakeholder groups, multiple Committees may review the relevant aspects of the risk in the committee setting prior to a discussion at the full Board session.

The Board’s oversight of risk is enhanced by the detailed information it receives as a result of the Company’s Total Enterprise Risk Management (“TERM”) program. The Company commenced the TERM program several years ago as a tool for identifying the key risks to the Company and discussing them with the Board in a prompt, logical and efficient manner. The TERM assessment is performed quarterly and involves evaluation of the key risks that the Company currently faces or is likely to encounter in the near- and medium-term. During the quarterly TERM assessment each manager responsible for a significant area of the Company’s

 

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business will review and, to the extent necessary, update or supplement a list of key risks affecting his or her respective business area. As part of that process, the manager evaluates each risk according to its likelihood of occurrence in the succeeding twelve months and, assuming that the development or event at risk were to occur, its most likely impact on the Company’s financial condition, operations, industry or reputation. The most significant risk items identified in each quarterly report are discussed with the Audit Committee. In addition, a complete copy of the full TERM report is distributed to and discussed by the full Board, typically in the Board’s regularly scheduled first quarter meeting.

The Board’s consideration of risk is not limited to discussions during Board and Committee meetings. Rather, the Board communicates with senior Management as a group, or individually, concerning the Company’s most significant risks whenever it deems such communications to be appropriate. In addition, each Director has complete access to all Company employees to the extent he or she may have questions concerning a particular risk.

Risk Assessment with Respect to Compensation Policies and Practices

At its January 2014 meeting, the Management Development and Compensation Committee (for purposes of this section, the “Committee”) reviewed the various design elements of the Company’s compensation program to determine whether any of its aspects encourage excessive or inappropriate risk-taking. The scope of this review included aspects of executive compensation, as well as consideration of the items of the Company’s compensation policies and practices that affect all employees. In general, the process used by the Committee to complete its risk evaluation was as follows:

 

   

The Committee identified the most significant risks facing the Company.

 

   

The Committee identified the material design elements of the Company’s compensation policies and practices with respect to all employees.

 

   

The Committee then evaluated whether there is a relationship between any of those design elements and any of the Company’s most significant risks. More specifically, the Committee evaluated whether any of the design elements of the Company’s compensation policies and practices encourage the Company’s employees to take excessive or inappropriate risks that are reasonably likely to have a material adverse impact on the Company.

The result of the Committee’s evaluation was a conclusion that the Company’s compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. More specifically, the Committee concluded that the Company’s compensation program is designed to encourage employees to take actions and pursue strategies that support the best interests of the Company and its stockholders, without promoting excessive or inappropriate risk.

The design elements of the Company’s program (which are described in detail in the “Compensation Discussion and Analysis” section beginning at page 33) do not include unusual or problematic compensatory schemes that have been linked to excessive risk-taking in the financial and other industries. Furthermore, the design elements of the Company’s compensation program that directly tie compensatory rewards to the Company’s performance include various counter-balances designed to offset potentially excessive or inappropriate risk-taking. For example, there is a balance between the fixed components of the program and the performance-based components. Similarly, with respect to the performance-based components, there is a balance between annual and longer-term incentives. Thus, the overall program is not too heavily weighted towards incentive compensation, in general, or short-term incentive compensation, in particular. The financial incentives are not based simply upon revenue. Rather, they are tied to performance metrics such as net income and EBITDA (i.e., earnings before interest, taxes, depreciation and amortization) which more closely align the interests of Management with the interests of the Company’s stockholders. The performance metrics for incentive payments are established annually and reflect goals that are a stretch, but not so high that they require performance outside of what the Committee believes is reasonable for the Company. There are caps on how much performance-based

 

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compensation may be earned in a particular performance period and the Board of Directors has adopted a policy for clawback of performance-based compensation that was paid out as a result of fraudulent or illegal conduct on the part of the employee who received it. In addition, the Committee maintains an ongoing dialogue with the Company’s Management to track progress on performance-based goals in order to foresee and avoid any excessive or inappropriate risk-taking that may otherwise be driven by a desire to maximize performance-based compensation.

Related Person Transactions

All related person transactions, as such transactions are defined by Item 404(a) of Regulation S-K under the Exchange Act, must be reviewed and approved or ratified by the Board (or a committee of the Board to which such responsibility is delegated by the Board) for the purpose of determining whether such transactions are in, or not inconsistent with, the best interests of the Company and its stockholders.

Based on information submitted to the Company by Directors and Executive Officers (on an annual basis) and nominees (prior to their election or appointment to the extent practicable), the Company develops a list of related persons, which it distributes annually to individuals in the Company who might reasonably be expected to have responsibility for a transaction or proposed transaction between the Company and a related person. Directors and Executive Officers are expected to timely update the information they submit to the Company in the event of relevant changes or developments.

The recipients of the list must provide prior notice to the Company’s General Counsel of any plans or intentions for anyone within their respective business units, departments or areas of responsibility to enter into any agreement by or on behalf of the Company with a related person. If the General Counsel determines that the proposed transaction is a related person transaction, the transaction will be submitted to the Nominating and Governance Committee for its consideration and approval at its next meeting.

The Nominating and Governance Committee considers all available and relevant facts and circumstances in determining whether to approve a related person transaction submitted for its review, including, if applicable:

 

   

the benefits of the transaction to the Company;

 

   

the impact on a Director’s independence in the event the related person is a Director, an immediate family member of a Director, or an entity in which a Director is a partner, stockholder or Executive Officer;

 

   

the availability of other sources for comparable products or services;

 

   

the terms of the transaction; and

 

   

the terms available to unrelated third parties or to employees generally with respect to a comparable transaction.

The Nominating and Governance Committee approves only those related person transactions that it determines are in, or are not inconsistent with, the best interests of the Company and its stockholders.

In the event that the Company enters into a legally binding related person transaction before approval by the Nominating and Governance Committee, then the Nominating and Governance Committee will review the transaction at its next meeting unless it is subject to an exemption. The Nominating and Governance Committee will determine whether to ratify a related person transaction by applying the same procedures and standards that it would have used to determine whether to approve a related person transaction in advance. In the event that the Nominating and Governance Committee determines that it would not be appropriate to ratify the transaction, the Nominating and Governance Committee will identify the options available to the Company, including but not limited to rescission, amendment or termination of the related person transaction.

 

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During its 2013 fiscal year, the Company participated in two series of transactions of immaterial size, each of which constituted a related person transaction as defined by Item 404(a) of Regulation S-K under the Exchange Act. The first of these transactions involved routine machine maintenance and repair services provided by Whitt Machine Inc., a company whose sole owner is Mr. Dean Whitt, the father-in-law of Mr. Kirk Reich, the Company’s Vice President, Procurement and Supply Chain Management. In consideration for these services, the Company paid a total of approximately $710,000 to Whitt Machine in 2013. The transactions were performed under the Company’s standard terms and conditions at competitive prices. The second series of transactions involved routine machine maintenance and repair services by Dalton Industries, Inc. on the Company’s hot strip mills at its Middletown and Mansfield Works. Mr. Reich’s wife is a sales person for Dalton Industries, Inc. In consideration for these services, the Company paid a total of approximately $3.8 million to Dalton Industries, Inc. in 2013. These transactions also were performed under the Company’s standard terms and conditions at competitive prices. In 2013, the Nominating and Governance Committee reviewed the facts and circumstances relevant to each of these series of transactions and, in accordance with the Company’s Related Person Transaction Policy and Item 404(a) of Regulation S-K, determined that they were in, or not inconsistent with, the best interests of the Company and its stockholders. The Nominating and Governance Committee then approved these 2013 transactions pursuant to the Company’s Related Person Transaction Policy.

Documents Available on the Company’s Website

The charters of the Audit, Finance, Management Development and Compensation, Nominating and Governance, and Public and Environmental Issues Committees, as well as the Company’s Corporate Governance Guidelines, Code of Business Conduct and Ethics for AK Steel Directors, Officers and Employees, and Code of Ethics for Principal Officers of AK Steel, are posted on the Company’s website at www.aksteel.com.

 

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DIRECTOR COMPENSATION

Each non-employee Director receives an annual Board retainer fee for service on the Board in the amount of $150,000, of which $90,000 is paid in the form of restricted stock units (“RSUs”) and $60,000 is paid in the form of cash or, at the Director’s option, in the form of additional RSUs. RSUs vest immediately upon grant, but are not settled (i.e., paid out in the form of common stock) until one year after the date of the grant, unless a Director elects deferred settlement. As set forth in the Company’s Stock Incentive Plan, Directors may elect to defer the settlement of their RSUs until six months following the date their service on the Board has ended. If a Director elects the deferral option, he or she also may elect to take distribution of the shares upon settlement in a single distribution or in annual installments not to exceed 15 years. Prior to settlement, the holder of an RSU is entitled to receive the value of all dividends and other distributions paid or made on the Company’s common stock in the form of additional RSUs, but does not otherwise have any of the rights of a stockholder, including the right to vote the shares underlying the RSUs.

Each non-employee Director who chairs a committee of the Board of Directors receives an additional annual retainer. The annual retainer for the chair of the Audit Committee is $20,000. The annual retainer for the chair of the Management Development and Compensation Committee is $15,000. The annual retainer for each of the chairs of the Finance Committee, Nominating and Governance Committee and the Public and Environmental Issues Committee is $10,000. Mr. Jenkins also is paid an annual cash retainer fee in the amount of $60,000 for his service as Lead Director of the Board of Directors. In addition, the Company pays non-employee Directors $2,000 for each meeting that they attend of the Board and of a committee on which they serve as a member. Annual retainers for service as a committee chair and attendance fees are paid in cash or, at the Director’s option, in the form of additional RSUs. The Company reimburses all Directors for the expenses they incur in attending meetings.

Director compensation is paid quarterly. Annual retainers are paid prospectively; attendance fees are paid retrospectively. RSUs are issued quarterly at the time the cash compensation is paid and are settled one-for-one (i.e., one RSU equals one share of Company common stock) on the settlement date.

Under the Director Deferred Compensation Plan, each year a Director may elect to defer any portion of his or her annual retainer or other director fees that are not paid in the form of RSUs. There are no preferential or above-market earnings in the Director Deferred Compensation Plan, and the Company does not make any contributions under the plan.

An employee of the Company who serves as a Director receives no additional compensation for such service. Mr. Wainscott currently is the sole employee who also serves on the Board of Directors.

 

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DIRECTOR COMPENSATION TABLE

The following table sets forth the total compensation paid to non-employee Directors during the fiscal year ended December 31, 2013:

 

Name(1)

  Fees Earned or
Paid in Cash
($)
    Restricted Stock
Unit Awards
($)(3)
    Option
Awards ($)(4)
    All Other
Compensation ($)(5)
    Total ($)  

Richard A. Abdoo(2)

  $ 50,750      $ 146,250      $ 0      $ 5,000      $ 202,000   

John S. Brinzo

    106,000        90,000        0        5,000        201,000   

Dennis C. Cuneo

    104,000        90,000        0        0        194,000   

Mark G. Essig(6)

    10,000        45,000        0        0        55,000   

William K. Gerber

    136,000        90,000        0        2,500        228,500   

Dr. Bonnie G. Hill

    88,000        90,000        0        6,000        184,000   

Robert H. Jenkins

    164,000        90,000        0        5,000        259,000   

Ralph S. Michael, III

    126,000        90,000        0        5,000        221,000   

Shirley D. Peterson

    104,000        90,000        0        1,250        195,250   

Dr. James A. Thomson

    114,000        90,000        0        6,300        210,300   

Vicente Wright(6)

    10,000        45,000        0        0        55,000   

 

(1)

Mr. James L. Wainscott, the Company’s Chairman, President and Chief Executive Officer, is not included in this table because he is an employee of the Company and thus receives no compensation for his service as a Director and Chairman of the Board of Directors. Mr. Wainscott’s compensation from the Company for his service as an employee and Executive Officer is reported in the Summary Compensation Table beginning at page 62.

 

(2)

Mr. Abdoo elected to take an additional portion of his compensation in the form of RSUs during 2013, pursuant to the terms of the Company’s Stock Incentive Plan. This had the effect of reducing his cash compensation and increasing the value of his RSU awards in the table above.

 

(3)

The amounts in this column reflect the aggregate grant date fair value of RSUs granted in 2013, computed in accordance with ASC Topic 718, Compensation—Stock Compensation (“ASC Topic 718”). The amounts in this column also include accrued RSU dividend equivalents awarded to each Director in 2013. The average of the high and low selling price of the Company’s common stock on the date the fee is to be paid is used to calculate the number of RSUs to be issued. The actual number of RSUs granted each quarter is calculated by dividing the quarterly annualized amount (e.g., $22,500) by the average of the high and low sales price of the Company’s common stock on the grant date. For 2013, Mr. Abdoo, Mr. Brinzo, Mr. Cuneo, Dr. Hill and Mr. Wright elected to defer settlement of their RSUs until six months following the date they complete their service on the Board. As of December 31, 2013, non-employee Directors had the following aggregate number of RSUs outstanding (rounded to the nearest whole number): Mr. Abdoo, 135,008; Mr. Brinzo, 54,213; Mr. Cuneo, 48,434; Mr. Essig, 12,784; Mr. Gerber, 22,856; Dr. Hill, 93,188; Mr. Jenkins, 22,856; Mr. Michael, 22,856; Mrs. Peterson, 22,856; Dr. Thomson, 28,635; and Mr. Wright, 12,784.

 

(4)

No stock options were granted to Directors in 2013. As of December 31, 2013, non-employee Directors had the following aggregate number of options outstanding: Mr. Abdoo, 10,000; Mr. Brinzo, 10,000; Mr. Cuneo, 10,000; Mr. Gerber, 10,000; Mr. Jenkins, 10,000; Mr. Michael, 10,000; Mrs. Peterson, 10,000; and Dr. Thomson, 10,000.

 

(5)

The amounts in this column constitute matching charitable gift donations made by the AK Steel Foundation pursuant to a matching gift program. Under this program, employees and Directors of the Company are eligible for matching contributions by the Foundation of up to $5,000 per person per calendar year to qualifying charitable institutions. In certain instances, because of timing issues related to when a contribution is made by a participant in the program and when the participant submits the related matching gift form to the Company, a participant could have matching contributions from the Foundation totaling up to $10,000 paid in a single year relating to contributions by the participant spanning two calendar years.

 

(6)

Messrs. Essig and Wright were elected to the Board effective November 1, 2013, so their total compensation for 2013 is less than the other Directors. Upon their election, Messrs. Essig and Wright each received a grant of 10,044 RSUs.

 

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STOCK OWNERSHIP

Directors and Executive Officers

The table below provides stock ownership information as of March 28, 2014 with respect to the beneficial ownership of the Company’s common stock by: (i) each Named Executive Officer listed in the Summary Compensation Table beginning on page 62, (ii) each current Director and each nominee for election as a Director, and (iii) all current and nominee Directors and Executive Officers of the Company as a group:

 

Directors and Executive Officers

   Shares Owned
Beneficially(1)
     Percentage of
Outstanding Shares(2)
 

Richard A. Abdoo

     35,000         *   

Gary T. Barlow(3)

     36,878         *   

John S. Brinzo

     22,451         *   

Dennis C. Cuneo

     25,712         *   

Mark G. Essig

     0         *   

Albert E. Ferrara, Jr.(4)

     167,219         *   

William K. Gerber

     50,691         *   

Dr. Bonnie G. Hill

     2,492         *   

David C. Horn

     360,163         *   

Keith J. Howell

     125,480         *   

Robert H. Jenkins

     97,824         *   

John F. Kaloski(5)

     258,164         *   

Ralph S. Michael, III

     64,446         *   

Roger K. Newport

     149,049         *   

Shirley D. Peterson

     53,764         *   

Dr. James A. Thomson

     58,229         *   

James L. Wainscott

     1,304,774         *   

Vicente Wright

     0         *   

All current and nominee Directors and current Executive Officers as a group (19 persons)

     2,682,685         1.96

 

(1)

A significant portion of the effective equity ownership in the Company by Directors is in the form of RSUs that do not satisfy the definition of “shares beneficially owned” for purposes of this table and therefore are not included in this table. An RSU is a grant valued in terms of stock, but no actual shares of stock are issued at the time of the grant. Only those RSUs which may be settled in shares of the Company’s stock on or before March 28, 2014 meet the definition of “shares beneficially owned”. None of the RSUs owned by the Directors will be settled on or before March 28, 2014 and thus none are included in this table. Directors had the following aggregate number of RSUs outstanding (rounded to the nearest whole number) as of March 28, 2014: Mr. Abdoo, 135,008; Mr. Brinzo, 54,213; Mr. Cuneo, 48,434; Mr. Essig, 12,784; Mr. Gerber, 22,856; Dr. Hill, 93,188; Mr. Jenkins, 22,856; Mr. Michael, 22,856; Mrs. Peterson, 22,856; Dr. Thomson, 28,635; and Mr. Wright, 12,784.

The table includes options to purchase shares of AK Steel Holding Corporation common stock exercisable before May 29, 2014 as follows: Messrs. Abdoo, Brinzo, Cuneo, Gerber, Jenkins, and Michael, Dr. Thomson, and Mrs. Peterson, 10,000 shares each; Mr. Wainscott, 564,253 shares; Mr. Barlow, 25,800 shares; Mr. Ferrara, 60,160 shares; Mr. Horn, 118,927 shares; Mr. Howell, 40,971 shares; Mr. Kaloski, 98,527 shares; and Mr. Newport 44,775 shares.

 

(2)

An asterisk indicates ownership of less than 1%.

 

(3)

Mr. Barlow left the Company effective July 18, 2013. The number of shares included in the table as beneficially owned by Mr. Barlow is as of the effective date of his resignation.

 

(4)

Mr. Ferrara retired from the Company effective August 31, 2013. The number of shares included in the table as beneficially owned by Mr. Ferrara is as of the effective date of his retirement.

 

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(5)

Mr. Kaloski retired from the Company effective January 31, 2014. The number of shares included in the table as beneficially owned by Mr. Kaloski is as of the effective date of his retirement.

Other Beneficial Owners

The table below provides information with respect to each person known by the Company as of March 28, 2014 to own beneficially more than 5% of the outstanding common stock of the Company:

 

Name and Address of Beneficial Owner

   Shares Owned
Beneficially
    Percentage of
Outstanding Shares
 

BlackRock Inc.

     12,170,863 (1)      8.9

55 East 52nd Street

    

New York, NY 10055

    

The Vanguard Group, Inc.

     8,459,708 (2)      6.2

100 Vanguard Blvd.

    

Malvem, PA 19355

    

 

(1)

Based on information contained in a statement on Schedule 13G (Amendment No. 2) dated December 31, 2013 and filed January 28, 2014, BlackRock Inc. has sole investment power and sole voting power over 12,170,863 shares of the outstanding common stock of the Company.

 

(2)

Based on information contained in a statement on Schedule 13G (Amendment No. 4) dated December 31, 2013 and filed February 10, 2014, The Vanguard Group, Inc. has sole investment power and sole voting power over 8,459,708 shares of the outstanding common stock of the Company.

Equity Compensation Plan Information

The table below provides information, as of December 31, 2013, with respect to compensation plans under which equity securities of the Company are authorized for issuance. All such plans have been approved by security holders.

 

Plan Category

   Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
     Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
     Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in First Column)
 

Equity compensation plans approved by security holders

     2,193,532       $ 12.26         2,960,823   

 

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

 

I.

Introduction and Executive Summary of Pay-for-Performance Components and other Key Elements of the Executive Compensation Program

Introduction

In many respects, 2013 was a year of significant improvement for the Company. Its financial performance improved significantly over 2012. Its pension and other postretirement benefit obligations declined by $719 million. The Company’s quality performance continued to be very strong, garnering many awards and establishing several all-time bests. The Company’s safety performance was once again industry leading and 2013 tied its best year ever. From a commercial perspective, the Company experienced improved demand for its steel sold to the automotive market and its shipments to that important market increased year-over-year. The Company saw substantial progress in its strategic investments in Magnetation and AK Coal. AK Coal began its mining activities in mid-2013 and started ramping up production. Magnetation received the permits to begin construction of its pellet plant and made significant progress with that construction. In 2013, the Company’s stock price increased by approximately 78%. Thus, there were substantial achievements by the Company in the face of continued challenges.

However, the challenging economic and business conditions that started with the deep recession in 2008 lingered for the domestic steel industry into 2013. Thus, despite all of the 2013 successes noted above, the Company still reported a net loss for 2013. That financial performance by the Company had a substantial impact on the compensation paid to the Named Executive Officers (“NEOs”)1 for 2013. More specifically, the only performance-based compensation they received for 2013 under the Company’s executive compensation program was 10% of the potential award under the annual incentive plan that relates to safety performance. Conversely:

 

   

There were no payouts under the quality or financial performance components of the Company’s annual incentive plan;

 

   

There were no payouts under the Company’s long-term performance plan;

 

   

There were no payouts with respect to performance shares under the Company’s stock incentive plan; and,

 

   

There were no performance-based matches under the Company’s 401k plan.

Anticipating that 2013 was going to be a challenging year, the Management Development and Compensation Committee (the “Committee”) also did not increase base salaries for the NEOs in 2013 compared to 2012 and reduced the value of their equity grants by approximately 50% year-over-year. Thus, there is a very strong and direct relationship under the Company’s executive compensation program between executive compensation and the financial performance of the Company. With the exception of safety performance — a core value that the Board wants to incent regardless of financial performance — success and improvements have little or no direct impact on executive compensation unless they also impact the Company’s bottom line in a positive way and lead to net income. In short, 2013 is a clear example of the close relationship between pay and performance that is a bedrock principle of the Company’s executive compensation program. It also demonstrates

 

1 

For purposes of this Compensation Discussion and Analysis, the term “Named Executive Officers” or “NEOs,” when capitalized, refers to the following in reference to 2013 (with their titles as of December 31, 2013, unless otherwise noted):

 

  

James L. Wainscott — Chairman of the Board of Directors, President and Chief Executive Officer

  

David C. Horn — Executive Vice President, General Counsel and Secretary

  

John F. Kaloski — Executive Vice President and Operating Officer

  

Roger K. Newport — Vice President, Finance and Chief Financial Officer

  

Keith J. Howell — Vice President, Operations

  

Albert E. Ferrara, Jr. — (Retired) Senior Vice President, Corporate Strategy and Investor Relations

  

Gary T. Barlow – (Former) Vice President, Sales and Customer Service

 

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in a very simple and objective way why a vote “for” the “say-on-pay” resolution set forth later in this proxy statement is appropriate. The remainder of this Compensation Discussion and Analysis provides more data and information with respect to the Company’s executive compensation program, including how it is closely linked to performance.

Compensation Philosophy

The compensation philosophy of the Committee is that a compensation program should strengthen the commonality of interests between Management and the Company’s stockholders, while at the same time enabling the Company to attract, motivate and retain executives of high caliber and ability who will drive the Company’s success. Consistent with the objective of strengthening the commonality of interests between Management and the Company’s stockholders, the Committee believes that a significant portion of the overall compensation package for each of the Company’s Executive Officers should include components that link the executive’s compensation to the Company’s performance, including performance-based vesting provisions for a significant portion of the equity incentives awarded to each Executive Officer. The Committee further believes that a well-designed executive compensation program includes both annual and long-term performance incentives. While annual incentive awards are an important factor in motivating executives for the short-term, the Committee believes that long-term incentives incentivize executives beyond just the short term, while at the same time reducing the impact of volatility in business conditions on the performance-related components of the executive compensation program. In so doing, they establish a stronger link between the executives’ earnings opportunity and the long-term financial performance and growth of the Company.

Executive Compensation Program Elements

The key elements of the Company’s executive compensation program for its Executive Officers are:

 

   

base salary;

 

   

annual performance-based awards under the Company’s Management Incentive Plan (the “Annual Incentive Plan”);

 

   

long-term performance-based awards under the Company’s Long-Term Performance Plan (the “Long-Term Plan”);

 

   

awards of stock options, restricted stock and performance shares under the Company’s Stock Incentive Plan (the “Stock Plan”); and

 

   

certain employee benefits, perquisites and post-employment benefits.

Key Company Policies and Practices which Help Link Executive Compensation to Performance

The Company also has adopted a variety of policies and practices that are intended to support the strong link between executive compensation and Company performance and thereby more closely align the interests of Management with the interests of the Company’s stockholders. Key examples of such policies include the following:

 

   

Annual say-on-pay shareholder vote

 

   

A shareholder outreach program through which the chair of the Committee offers to speak directly with the Company’s largest shareholders with respect to their views on the Company’s executive compensation program

 

   

The Committee’s engagement of its own independent compensation consultant

 

   

The use of peer group and other comparative survey data provided by an independent compensation consultant in determining executive compensation

 

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The establishment annually of a focus list of items for the CEO and an annual evaluation of the CEO’s and the Company’s performance that is factored into the annual determination of the CEO’s compensation package

 

   

A policy against re-pricing or replacing underwater options

 

   

An executive compensation clawback policy applied to performance-based compensation

 

   

Stockholder approval of certain severance agreements with senior executives

 

   

Executive Officer stock ownership guidelines

 

   

A policy prohibiting employees, including Executive Officers, from engaging in insider trading or hedging transactions, holding Company securities in margin accounts and the pledging of Company securities

 

   

No tax gross-ups or “single triggers” in the change of control agreements with its Executive Officers

 

   

Locking the Company’s Executive Minimum and Supplemental Retirement Plan, or “SERP”, to existing participants and replacing it for future officers with a new retirement plan

These policies and practices are described in more detail below.

Graphical Illustration of 2013 Performance-Linked Compensation

The Board believes that its executive compensation program does, in fact, link executive pay to performance. Set forth below are four charts which illustrate the link between the compensation of the Company’s NEOs for 2013 and the performance of the Company during the relevant periods that determine the compensation paid to the NEOs for 2013 and the performance periods ending in 2013. Included in the performance-based compensation are the following categories of compensation: incentive payments under the Annual Incentive Plan for the one-year performance period consisting of 2013, incentive payments under the Long-Term Plan for the three-year performance period ending in 2013, and the value of stock issued pursuant to performance share awards for the three-year performance period ending in 2013. Included in the non-performance based compensation are the following categories of compensation: salary paid in 2013, bonus, if any, paid in 2013, the value of restricted stock awards made in 2013, the value of stock option awards made in 2013, and the value of all other compensation paid in 2013.2

 

2 

The only item referenced in the Summary Compensation Table not included in the charts on this and the next page is the change in pension value for each NEO. That value is excluded because it is not a component of compensation awarded annually by the Committee to the NEOs. Rather, it is a mathematical calculation of the actuarial change in value of the NEO’s pension that is attributable to factors outside the control of the Committee and the NEOs, such as a change in the discount rate used to present value the pension benefits or a change in the interest component of the value as a result of the NEO’s change in age relative to the NEO’s assumed retirement date. The change in value also is not a fair reflection of the NEO’s total compensation. That is illustrated by the difference in the change-in-value numbers for Mr. Wainscott for 2013 compared to 2012. In 2012, the calculated value of his pension increased by approximately $3.6 million. In 2013, it decreased by approximately $0.85 million. The difference is attributable almost entirely to changes in the discount rate used to determine Mr. Wainscott’s future pension value and to re-calculate it to its present value. For each year reported, the value is simply an actuarial calculation. In neither year did Mr. Wainscott realize any cash benefit (or detriment) attributable to the reported change in value.

 

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Chart Nos. 1 and 2 below demonstrate that approximately three quarters of each NEO’s total potential compensation for 2013 was directly linked to the performance of the Company.

Composition of Total Potential Compensation for 2013

 

Chart No. 1    Chart No. 2
LOGO

Chart Nos. 3 and 4 below demonstrate that there is a direct link to the Company’s performance. When the Company does not achieve the performance goals established by the Committee for the relevant performance periods, there is a direct negative impact on the amount of the performance-based compensation that is actually received by the NEOs. In fact, because of this link, the NEOs received only about 4% of the total performance-based compensation for which they were eligible in 2013.

Performance-based Compensation Actually Received for 2013

 

Chart No. 3    Chart No. 4
LOGO

 

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The two tables below show the actual compensation values, and the sources for those values, used in the above charts.

Data Used for Chart Nos. 1 and 2 and “Potential” Portion of Chart Nos. 3 and 4

 

    Base Pay1     Restricted
Stock2
    Stock
Options2
    Other
Comp1
    Total Non-
Performance-
based
    Maximum
MIP2
    Maximum
LTPP2
    Performance
Shares3
    Total
Performance-

based
    Total  

Wainscott

  $ 1,150,000      $ 526,014      $ 397,192      $ 150,405      $ 2,223,611      $ 2,530,000      $ 2,530,000      $ 1,893,600      $ 6,953,600      $ 9,177,211   

Horn

  $ 637,500      $ 98,685      $ 74,408      $ 44,210      $ 854,803      $ 956,250      $ 956,250      $ 355,050      $ 2,267,550      $ 3,122,353   

Kaloski

  $ 565,000      $ 98,685      $ 74,408      $ 31,942      $ 770,035      $ 847,500      $ 847,500      $ 355,050      $ 2,050,050      $ 2,820,085   

Newport

  $ 360,000      $ 58,293      $ 44,278      $ 21,896      $ 484,467      $ 468,000      $ 468,000      $ 173,580      $ 1,109,580      $ 1,594,047   

Howell

  $ 320,000      $ 53,703      $ 40,610      $ 21,753      $ 436,066      $ 384,000      $ 384,000      $ 173,580      $ 941,580      $ 1,377,646   

Ferrara

  $ 357,500      $ 72,981      $ 55,050      $ 37,204      $ 522,735      $ 500,500      $ 500,500      $ 252,480      $ 1,253,480      $ 1,776,215   

Barlow

  $ 188,846      $ 48,654      $ 36,942      $ 639,810      $ 914,252      $ 207,731      $ 207,731      $ 173,580      $ 589,042      $ 1,503,294   

Data Used for “Received” Portion of Chart Nos. 3 and 4

 

     Actual
MIP1
     Actual
LTPP1
     Actual
Performance
Shares4
     Total
Performance-
based
 

Wainscott

   $ 253,000       $ 0       $ 0       $ 253,000   

Horn

     95,625         0         0         95,625   

Kaloski

     84,750         0         0         84,750   

Newport

     46,800         0         0         46,800   

Howell

     38,400         0         0         38,400   

Ferrara

     50,050         0         0         50,050   

Barlow

     20,773         0         0         20,773   

 

 

(1)

From Summary Compensation Table for 2013 at page 62.

 

(2)

From Grants of Plan-Based Awards Table at page 66 (with the exception of grants to Messrs. Ferrara and Barlow, for which their actual base pay amounts received were used since they were only employed by the Company for a portion of 2013).

 

(3)

Full Grant Date Fair Value of Award at time of grant — from Grants of Plan-Based Awards Table at page 60 of AK Steel Proxy Statement for 2012 Annual Meeting of Stockholders filed on April 9, 2012.

 

(4)

The performance share grants awarded in January 2011 expired in December 2013 with no shares of common stock being issued with respect to those grants. See below at page 40.

CEO Realizable Pay

To further illustrate the alignment of the Company’s executive compensation program with the performance of the Company, set forth below is an illustration of the CEO’s “realizable pay.” The Committee believes that consideration of realizable pay in the context of analyzing pay-for-performance is appropriate for a variety of reasons, including the following:

 

   

A substantial portion of the compensation granted by the Committee to the CEO and reported in the Summary Compensation Table at page 62 represented an incentive for future performance at the time it was awarded, not actual cash compensation.

   

Much of this incentive pay was never actually received for the years reported in the Summary Compensation Table and may not be received for many years in the future, if ever.

   

If and when this incentive pay is realized, the amount realized may differ significantly from the amounts shown in the Summary Compensation Table, depending on how the Company actually performs.

 

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For purposes of this realizable pay analysis, the term “realizable pay” has been defined to include the following compensation items:

 

   

Actual base pay;

   

Incentive payouts and discretionary bonuses, if any, actually paid;

   

All other compensation actually paid; and

   

The fair value of all equity grants made, measured at the end of the most recently completed fiscal year. The fair value of stock options was determined using the Black-Scholes model based on year-end assumptions and the maximum remaining life of the options. The fair value of restricted stock and performance shares was determined using the average of the high and the low stock price on the last day of the fiscal year and assumes all vesting considerations were met.

In order to demonstrate the strong correlation between pay and performance under the Company’s executive compensation program, the graph below tracks annual realizable pay for Mr. Wainscott since 2009 and overlays the Company’s closing stock price as of the last business day of each year during that period. The year 2009 was chosen as a starting point because that provides a five-year look back at the relationship between pay and performance, which is long enough to show a clear pattern.

 

LOGO

Data Used for Average Annual Realizable Pay Graph

 

Annual Totals

   Base Pay      Bonus      MIP      LTPP      Stock
Options
     Restricted
Shares
     Performance
Shares
     Other
Comp
     Total for
Year
 

2013

   $ 1,150,000       $ —         $ 253,000       $ —         $ 955,080       $ 941,439       $ 1,449,948       $ 150,405       $ 4,899,872   

2012

   $ 1,150,000       $ —         $ 253,000       $ —         $ 356,260       $ 513,981       $ 791,603       $ 163,014       $ 3,227,858   

2011

   $ 1,150,000       $ —         $ 581,356       $ —         $ 364,010       $ 730,245       $ 984,600       $ 152,146       $ 3,962,357   

2010

   $ 1,150,000       $ —         $ 156,620       $ —         $ 697,800       $ 872,317       $ 1,308,476       $ 169,317       $ 4,354,530   

2009

   $ 1,010,625       $ —         $ 222,338       $ 2,310,000       $ 1,936,695       $ 2,336,754       $ 3,505,142       $ 210,064       $ 11,531,618   

The above graph and supporting compensation data illustrate the strong link between the Company’s executive compensation program and the Company’s performance in two ways. First, they demonstrate that there is a strong correlation between the realizable pay of the Company’s CEO and the value of the Company’s stock. Secondly, they demonstrate that there is a strong correlation between the realizable pay of the CEO and the Company’s financial performance, which has lagged since late 2008 as a result of the extraordinary recessionary conditions that impacted the domestic and global economies and from which the steel industry is still recovering.

 

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Overview of Key Pay-for-Performance Components and Application to 2013 Executive Compensation

The application of the key pay-for-performance components of the Company’s executive compensation program on the 2013 compensation of the Company’s Named Executive Officers illustrates the strong link between executive compensation and the performance of the Company. Those components and their application to the 2013 executive compensation program are summarized below.

 

   

Annual Incentive Plan

Overview:    The Company provides annual cash performance awards to its employees, including its NEOs, pursuant to its Annual Incentive Plan. Under the terms of the Annual Incentive Plan, a participant can earn a performance award based upon the annual performance of the Company against goals established for three different performance factors: safety, quality and net income (excluding special, unusual and extraordinary items). If paid at the target level, the allocation of the components of an annual incentive award would be 20% for safety, 20% for quality and 60% for financial performance. If paid at the maximum level, they would be 10% for safety, 10% for quality and 80% for financial performance. The heavy weighting toward the financial performance component reflects the Committee’s objective of strengthening the commonality of interests between Management and the Company’s stockholders, while still recognizing that safety and quality are core values of the Company. The Committee assigns an annual threshold goal and target goal for each of these performance factors in the first quarter of the year. The Committee also assigns an additional annual goal for the financial performance component which, if achieved, would result in payment of the maximum performance award under the Annual Incentive Plan. No award will be paid with respect to a particular performance factor unless the Company at least meets the threshold goal for that performance factor. In addition, no award will be paid with respect to quality unless the Company at least meets the threshold goal for financial performance. Because, however, of the critical importance the Company places on the safety of its employees, the Annual Incentive Plan is designed to allow a payout for safety performance even if the financial performance threshold goal is not achieved.

As applied in 2013:    For 2013, the NEOs were paid only the 10% of the maximum available award under the Annual Incentive Plan which related to safety performance. With respect to safety, the Company met its target goal under the Annual Incentive Plan, tying its best year ever with respect to the performance metric of OSHA recordables and continuing to lead the steel industry by a significant margin. With respect to quality, the Company exceeded its target goal for two of the three quality metrics in the Annual Incentive Plan and generally had another year of excellent performance, establishing several internal records and exceeding certain of its target metrics under the Annual Incentive Plan. With respect to financial performance, the Company did not meet its threshold goal in 2013. Because the quality component of the Annual Incentive Plan is not paid unless the Company meets at least the threshold goal of the financial performance component of the plan, no incentive award was earned with respect to either the financial or the quality components of the Annual Incentive Plan for 2013. Thus, for 2013, the NEOs were only paid the safety component of the Annual Incentive Plan. The dollar value of that award to each NEO for 2013 is set forth in the notes to the Summary Compensation Table at page 63.

 

   

Long-Term Performance Plan

Overview:    The Company also provides cash performance awards to selected employees, including its NEOs, pursuant to its Long-Term Plan. Under the terms of the Long-Term Plan, a participant can earn a performance award based upon the three-year performance of the Company against a performance goal. The Committee establishes threshold, target and maximum performance goals for each three-year performance period. The Committee uses cumulative EBITDA (excluding special, unusual and extraordinary items) as the performance metric for the Long-Term Plan.

As applied in 2013:    For awards under the Long-Term Plan that would be reflected in the 2013 compensation of the NEOs, the performance period began January 1, 2011 and ended December 31, 2013. Most of this performance period occurred while the country still was coming out of the worst recession in its history since the Great Depression. The effects of that recession, as well as very

 

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challenging business conditions caused by excess capacity in the global steel industry, affected the steel industry and the Company’s business throughout the 2011 – 2013 Long-Term Plan performance period. As a consequence, the Company’s cumulative EBITDA for the three-year period ending December 31, 2013, was below the threshold level established by the Committee. Accordingly, no performance award was paid to the participants in the Long-Term Plan for that performance period and there is no long-term award to the NEOs reflected in the 2011 – 2013 Long-Term Plan performance period in the Summary Compensation Table at page 63.

 

   

Performance Shares under the Stock Plan

Overview:    Like most major companies, the Company has a Stock Plan pursuant to which it makes equity grants to its Executive Officers and other key employees. A principal purpose of equity grants under the Company’s Stock Plan is to enhance the commonality of interests between Management and the Company’s stockholders by linking executive compensation to the Company’s performance and to appreciation in the market price of the Company’s common stock. The form of equity grant which most directly serves that purpose is the award of performance shares. Each grant of a performance share award is expressed as a target number of shares of the Company’s common stock. The number of shares of common stock, if any, actually earned by and issued to an NEO under a performance share award will be based upon the performance of the Company over a three-year performance period with respect to certain threshold, target and maximum performance goals established at the outset of the performance period. Those goals are established using the following performance metrics: (a) the Company’s total stockholder return (“Total Stockholder Return”), defined as price appreciation plus reinvested dividends, if any, during the performance period relative to the total stockholder return during that same period of the companies in the Standard & Poor’s 400 Midcap Index, and (b) the compounded annual growth rate (the “Growth Rate”) of the price of the Company’s common stock over the performance period, using as the base the average closing price of the Company’s common stock for the last 20 trading days during the month of December.

As applied in 2013:    For a performance share award under the Stock Plan that would be reflected in the 2013 compensation of the NEOs, the performance period began January 1, 2011 and ended December 31, 2013. Despite the approximately 78% increase in the Company’s stock price in 2013, the Company’s stock performance with respect to the Total Stockholder Return and Growth Rate metrics for the entire three-year performance period did not meet the threshold performance levels to earn a payout under the Stock Plan. Accordingly, no shares of the Company’s common stock were issued with respect to the performance share awards granted in January 2011 for the three-year period ended December 31, 2013.

Overview of Other Key Compensation Components and Application to 2013 Executive Compensation

While the three programs described above represent the most direct links between pay and performance, there are other significant links included in the Company’s executive compensation program. Other key components of the Company’s compensation program that link pay to performance are summarized below.

 

   

Restricted Stock Grants.    An important component of the equity portion of the Company’s executive compensation program is the grant of restricted stock to key members of Management, including the NEOs. Though not as direct a link as performance share awards to the performance of the Company, restricted stock grants still are intended to — and do — link executive compensation to the Company’s performance. With limited exceptions (e.g., death, disability or retirement), these restricted stock awards will have a value to the grantee only if the grantee remains in the Company’s employment for the period required for the stock to vest, and the actual value of the award ultimately will depend on the performance of the Company’s stock during that period leading up to vesting. The performance of the Company’s stock is, of course, linked to the performance of the Company. This portion of executive compensation thus is linked to the Company’s performance as well. The aggregate grant date fair value of the restricted stock awards to the NEOs is set forth in the Summary Compensation Table at page 62.

 

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Stock Option Grants.    A third component of the equity portion of executive compensation is the grant of stock options under the Stock Plan. All such options granted in 2013 will vest in three equal installments on the first, second and third anniversaries of the grant date. With limited exceptions (e.g., death, disability or retirement), these stock options will have a value for a grantee, including an NEO, only if the grantee remains in the Company’s employment for the period required for the option to become exercisable, and then only if the market price of the Company’s stock increases above the exercise price (i.e., the market price on the date the option was granted). Thus, as with restricted stock grants, this portion of executive compensation also is linked to performance. The aggregate grant date fair value of those awards to each of the NEOs is set forth in the Summary Compensation Table for 2013 at page 62.

 

   

Thrift Plan Matches.    The Company has a thrift plan (the “Thrift Plan”), which is a qualified retirement plan under Section 401(k) of the Internal Revenue Code and a supplemental thrift plan (the “Supplemental Thrift Plan”) which is a non-qualified retirement plan. Participation in these plans includes the NEOs, but is not limited to them. Under these plans, the Company matches employee contributions up to 5% of base salary. Half of that Company match is dependent upon the Company’s net income. In addition, the Company will make a supplemental contribution when its net income exceeds $150 million. Thus, this component of executive compensation also is linked to the Company’s performance. In 2013, there were no performance-based matching or supplemental contributions by the Company to the participants in these plans. There were, however, contributions made by the participants themselves and matching contributions by the Company not dependent on the Company’s performance.

 

   

Base Salary.    Although each NEO’s base salary is not directly linked to or dependent upon the Company’s performance once it is set, the Committee strongly considers such performance in its annual determination of base salaries. The extent of this link to the Company’s performance has been particularly evident over the course of the last several years. For example, due to the continued impact on the Company’s financial performance of the extremely challenging economic and business conditions of the last several years, the base salary of the Company’s CEO remained at the same level in 2013 as it was in 2010. Similarly, although certain of the NEOs have received increases related to promotions, there also were no merit increases to the base salaries of the non-CEO Named Executive Officers during that period. Again, this reflects the strong link between the Company’s performance and the structure and application of its executive compensation program.

Summary of Actual Payment of Pay-for-Performance Components of Executive Compensation

Set forth below is a chart which summarizes the actual payouts under the Annual Incentive Plan, the Long-Term Plan and the Stock Plan performance shares by year in 2011, 2012 and 2013 as a percentage of the maximum potential award for each year.

 

Year

   Annual Incentive Plan     Long-Term Plan     Performance Shares  

2011

     23     0     0

2012

     10     0     0

2013

     10     0     0

 

II.

Full Discussion and Analysis of Executive Compensation Program

The summary in the preceding section was intended to provide an overview of the key components of the Company’s executive compensation program, with a particular focus on its pay-for-performance components. Set forth below is a more-detailed description of the total program.

 

Who

has the direct responsibility for determining executive compensation?

Management Development and Compensation Committee

The Committee has the direct responsibility for determining the compensation of the Company’s Executive Officers. When the Committee deems it appropriate, it may, at its discretion, seek ratification of its

 

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determinations by the Board. The Committee also is responsible for establishing, and periodically reviewing, the Company’s executive compensation philosophy and policies and, as appropriate, will recommend changes in such philosophy and policies to the Board.

Committee Membership

The Committee is comprised entirely of Directors who are not current or former employees or officers of the Company and who have been determined by the Board of Directors to meet the independence standards of the Securities and Exchange Commission (“SEC”) and the NYSE. Each member of the Committee is also an “outside” Director for purposes of Section 162(m) of the Internal Revenue Code. There currently are four members of the Committee. They are Richard A. Abdoo, John S. Brinzo, Robert H. Jenkins and Ralph S. Michael, III. Mr. Abdoo is the Chair of the Committee.

Committee Charter and Responsibilities

The general function of the Committee is to oversee the Company’s Management compensation policies and program and its policies and programs with respect to succession planning and the development of senior Management personnel. The Committee operates under a written charter reviewed and approved by the full Board of Directors of the Company. The Committee’s Charter describes its specific responsibilities and is available at www.aksteel.com.

Committee Support and Use of Executive Compensation Consultant

In discharging its responsibilities, the Committee is empowered to inquire into any matter that it considers appropriate to carry out its responsibilities, with access to all books, records, facilities and personnel of the Company. The Committee has the power to retain outside counsel and compensation consultants or other advisors to assist it in carrying out its responsibilities. The Company is required to, and does, provide adequate resources to support the Committee’s activities, including compensation of the Committee’s counsel, consultants and other advisors. The Committee has the sole authority to retain, compensate, direct, oversee and terminate such counsel, compensation consultants, and other advisors hired to assist the Committee and all such advisors are ultimately accountable to the Committee.

The Committee typically engages an independent executive compensation consultant who reports directly to the Committee. In connection with the 2013 executive compensation program, the Committee retained Frederic W. Cook & Co., Inc. (“Frederic W. Cook & Co.”) as its independent consultant for executive compensation matters. As appropriate, the Committee’s consultant also works with Management on behalf of the Committee, in particular with the Company’s Vice President, Human Resources, and its Secretary, to develop internal compensation data and to implement compensation policies, plans and programs. The consultant, at the Committee’s request, also works with Mr. Wainscott to assist him in developing his recommendations to the Committee for non-CEO Executive Officer compensation packages. The consultant provides analytical assistance and data to the Committee with respect to the design, implementation and evaluation of the Company’s compensation program for Executive Officers. This includes providing assistance to the Committee in identifying similarly-situated companies to be included in a peer group to be used to develop competitive data. That data is used in the determination annually of base salary, annual and long-term incentives, and equity grants. The consultant also periodically compiles survey data from that peer group and, if appropriate, other companies. The consultant further assists the Committee in developing, evaluating and administering incentive plans, agreements addressing post-termination benefits, and other ongoing compensation-related arrangements or benefits. On request, the consultant also provides consulting services to the Board with respect to Director compensation matters. Except as described above, the consultant does not provide any other services to the Company.

The Committee annually assesses the performance and independence of its compensation consultant. Most recently, in March 2014, the Committee considered various factors bearing upon Frederic W. Cook & Co.’s independence in connection with its engagement of Frederic W. Cook & Co., including, but not limited to, the

 

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following: (1) the amount of fees received by Frederic W. Cook & Co. from AK Steel is less than 1% of Frederic W. Cook & Co.’s total revenue, (2) Frederic W. Cook & Co. has adopted policies and procedures which appear to be reasonably and effectively designed to prevent conflicts of interest, (3) neither Frederic W. Cook & Co. nor any member of its consulting team serving AK Steel owns any stock or equity derivative in AK Steel, (4) Frederic W. Cook & Co. does not provide any services to AK Steel other than as described in this Proxy Statement in its capacity as an independent advisor with respect to Executive Officer and Director compensation, and (5) after reasonable and appropriate inquiry, AK Steel has not identified any business or personal relationships between Frederic W. Cook & Co. and any Executive Officer of AK Steel or any member of the Committee. After reviewing these and other factors, the Committee determined that Frederic W. Cook & Co. is independent and that its engagement does not present any conflicts of interest. Frederic W. Cook & Co. also separately determined, and affirmed in a written statement delivered to the Chair of the Committee, that it is independent and that its engagement does not present any conflicts of interest. Although expressly confirming its independence and the absence of conflicts in that written statement, for the sake of full transparency Frederic W. Cook & Co. also noted that four of its employees who do not serve the AK Steel account provide consulting services to other companies unrelated to AK Steel on whose Board of Directors members of the AK Steel Board also serve.

What is the Company’s compensation philosophy?

The Company’s compensation philosophy, as determined by the Committee and approved by the Board, is that a compensation program should strengthen the commonality of interests between Management and the Company’s stockholders, while at the same time enabling the Company to attract, motivate and retain executives of high caliber and ability who will drive the Company’s success. Consistent with the objective of strengthening the commonality of interests between Management and the Company’s stockholders, the Committee believes that a significant portion of the overall compensation package for each of the Company’s Executive Officers should include components that link the executive’s compensation to the Company’s performance, including performance-based vesting provisions for a portion of the equity incentives awarded to each Executive Officer.

The Committee believes that a well-designed executive compensation program includes both annual and long-term performance incentives. While annual incentive awards are an important factor in motivating executives for the short-term, the Committee believes that long-term incentives reduce the impact of volatility in business conditions on the performance-related components of the executive compensation program and also establish a stronger link between the executives’ earnings opportunity and the long-term financial performance and growth of the Company.

The Committee further believes that the Company’s compensation program should be designed to reward superior performance and to provide financial consequences for below-market performance. Consistent with that design objective, and the goal of attracting, motivating and retaining executives of high caliber and ability who will drive the Company’s success, the Committee attempts to establish a fair and reasonable compensation package for each Executive Officer that reflects not only the relative performance of the Company against its peers, but also is competitive relative to the Executive Officer’s peers, both inside and outside the Company. The percentage of total compensation that is performance-based generally will increase with the level of seniority and/or responsibility of the executive. There is no set formula or policy, however, with respect to the allocation between performance-based and non-performance-based compensation. Nor is there any set formula or policy with respect to the allocation between cash and non-cash compensation.

Does the Committee review the Company’s executive compensation program periodically to determine if it still effectively implements the Company’s compensation philosophy?

Each year the Committee routinely reviews the effectiveness and competitiveness of the Company’s executive compensation program with the assistance of its independent executive compensation consultant. In addition, every several years, the Committee engages in a more comprehensive “deep dive” review of the program. In 2013, the Committee engaged in such a more-comprehensive review, with the assistance of its executive compensation consultant. More specifically, in 2013 the Committee reviewed each of the Company’s

 

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incentive and retirement plans for its Executive Officers and others, evaluated them in the context of the Company’s peer group and recent executive compensation trends as provided by the Committee’s executive compensation consultant, and solicited (and duly considered) input from the Company’s largest shareholders with respect to their views of the executive compensation program. In connection with the outreach program to the Company’s largest institutional stockholders, Mr. Abdoo, as Chair of the Committee, participated directly in several of the calls with investors. Further details with respect to this outreach program are set forth below.

Does the Company reach out to shareholders to solicit their views on its executive compensation program?

Yes. Particularly since 2012, the Company has reached out to a significant number of its shareholders to solicit their direct input with respect to its executive compensation program. In 2013, Management contacted shareholders who owned approximately 71 million shares, or approximately 52% of the Company’s outstanding common stock at that time, and requested an opportunity to have calls with them. Ultimately, seven shareholders who owned approximately 37 million shares, or approximately 27% of the Company’s outstanding common stock at that time, accepted Management’s offer and participated in calls during which they provided their comments on the Company’s executive compensation program. Their comments were summarized and provided to the Committee. In addition, subsequent to the 2013 annual meeting of shareholders, the Company again reached out to twelve of its largest shareholders and offered an opportunity for each of them to have a direct call with Mr. Abdoo, as Chair of the Committee, concerning the Company’s executive compensation program. Six of those shareholders accepted the offer and had a call with Mr. Abdoo for the specific purpose of providing feedback to the Committee on the Company’s executive compensation program.

What changes did the Committee make to the executive compensation program in 2013?

As a result of its annual review process discussed above, as well as the feedback from shareholders as a result of the 2012 and 2013 outreach programs, the Committee made several changes to the executive compensation program during 2013. As previously reported, it decided at its January 2013 meeting to hold the base salaries of the Executive Officers flat relative to 2012. It also decided to keep the number of restricted shares, options and performance shares granted to each Executive Officer the same as in 2012, which had the effect of reducing the value of the equities granted to the Executive Officers because of the decrease in share price compared to the prior year. In addition, the Committee recommended to the Board, and the Board approved at its January 2013 meeting, the following changes to the change-of-control agreements of certain of its Named Executive Officers:

 

1.

Elimination of “Modified Single-Trigger” – With respect to the change-of-control agreements of Mr. Wainscott and Mr. Horn, the Board elected to remove the “modified single-trigger” provision included in those agreements and replace it with a “double trigger” provision. The old “modified single-trigger” provided that the payments and benefits under the change-of-control agreement were triggered in the event that there was a change-of-control of the Company (as defined in the Agreement) and within six months thereafter the Executive Officer voluntarily terminated his employment with the Company for any reason. The new “double trigger” provides that the Executive Officer is entitled to the payments and benefits under the agreement if, within 24 months following a change-of-control of the Company, the Executive Officer’s employment with the Company is involuntarily terminated without “cause” or the Executive Officer voluntarily terminates employment with the Company for “good reason.”

 

2.

Elimination of “Gross-Up” Payment – With respect to the change-of-control agreements of Messrs. Wainscott, Horn, Kaloski, Ferrara, and Mr. Lawrence Zizzo, the Board elected to remove the provision that provides that if any portion of the required payments to the Executive Officer becomes subject to the federal excise tax on “parachute payments,” the Company would be required to make a “gross-up” payment to the Executive Officer. The result of such a “gross-up” payment is that the net amount retained by the executive after deduction of the excise tax and any applicable taxes on the “gross-up” payment is not reduced as a consequence of the excise tax.

The five Named Executive Officers whose change-of-control agreements were affected by the changes described above entered into new change-of-control agreements incorporating such changes in 2013. The

 

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change-of-control agreements of the other Executive Officers did not include “modified single-trigger” or “gross-up” provisions. Thus, following the execution of the new agreements by the five Named Executive Officers identified above, all Executive Officer change-of-control agreements include a “double trigger” with respect to when the payment of benefits is triggered and none contains a “gross-up” provision.

Lastly, after several discussions during 2013, the Committee decided at its January 2014 meeting to close the Company’s Executive Minimum and Supplemental Retirement Plan, also known as a supplemental executive retirement plan, or “SERP,” to any new participants and to replace it for those who become officers in the future with a new retirement plan referred to as the AK Steel Executive Retirement Income Plan (the “Retirement Plan”) . The terms of the Retirement Plan were established by the Committee and recommended to and approved by the Board at their March 2014 meetings after discussions with the Committee’s executive compensation consultant. The Retirement Plan is expected to reduce the retirement benefits provided to future participants. For purposes of example, if it had been utilized to prepare the Pension Benefits Table on page 72, the Retirement Plan would have resulted in retirement benefits that are approximately 35% lower on average than earned under the SERP. The terms of the Retirement Plan are described below at pages 57-59.

What specific policies does the Company have which impact executive compensation?

Policy Against Re-Pricing or Replacing Underwater Options

The Company has long had a practice of not re-pricing or replacing stock options because the Company’s stock is at a price below which such options are exercisable. The Company formalized this practice into a policy, which was adopted by the Board upon the recommendation of the Committee in January 2012. The Company thus now has a written policy against re-pricing or replacing such “underwater” options. That policy is incorporated in the Company’s Corporate Governance Guidelines at Section II(N). Those guidelines are available at www.aksteel.com/governance.

Compensation Clawback Policy

The Board has adopted a compensation clawback policy, which provides that the Company may recoup performance-based, incentive compensation from officers covered by the policy if the Board determines that (i) the officer has engaged in knowing or intentional fraudulent or illegal conduct which (ii) resulted in the achievement of financial results or the satisfaction of performance metrics that increased the amount of such compensation.

Stockholder Approval of Certain Severance Agreements with Senior Executives

The Board also has adopted a policy concerning stockholder approval of certain severance agreements with the Company’s senior executives, including its Named Executive Officers. That policy provides that the Board should seek stockholder approval or ratification of severance agreements with the Company’s senior executives entered into on or after May 13, 2003 (the date the policy was adopted) if such agreements require payment of benefits attributable to severance in an amount exceeding 2.99 times the sum of the senior executive’s annual base salary plus annual and long-term incentive bonuses payable for the then-current calendar year. For purposes of this policy, the term “severance agreement” means an employment agreement, retirement agreement or change-of-control agreement which contains a provision for payment of benefits upon severance of employment with the Company, as well as renewals, modifications or extensions of such agreements. The term “senior executive” means the Chief Executive Officer, President, principal financial officer, principal accounting officer and any elected Vice President of the Company. The term “benefits” means lump-sum cash payments (including cash payments in lieu of medical benefits) and the estimated present value of future periodic cash payments to be paid to a senior executive in excess of what he or she otherwise would be entitled to receive under the terms of any qualified or non-qualified Company pension or employee benefit plan.

 

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Stock Ownership Guidelines for Executive Officers

The Board also has a policy concerning stock ownership guidelines for Executive Officers. The principal objective of the policy is to enhance the linkage between the interests of stockholders and Management through a minimum level of stock ownership. The policy establishes a “target ownership” guideline for the Company’s common stock for each Executive Officer. The guideline typically is expressed as a number of shares equal in market value to a multiple of the Executive Officer’s annual base salary. The target ownership guideline set for each Executive Officer varies in amount based upon that person’s relative level of seniority and responsibility. Among the NEOs, the target ownership guideline varies from a number of shares equal in market value to three times applicable annual base salary to one times applicable base salary, with Mr. Wainscott at three times. The applicable base salary is the one in effect at the time the officer first became subject to the policy, or if the officer subsequently was promoted, at the time of the promotion. Once established, an Executive Officer’s target ownership guideline does not adjust automatically as a result of changes in his or her base salary (unless due to promotion) or changes in the price of the Company’s stock. The Committee may, however, reevaluate and revise a particular Executive Officer’s target ownership guideline in its discretion. For purposes of the policy, stock “ownership” includes (i) shares of Company stock held directly by an Executive Officer, (ii) shares of Company stock held by an Executive Officer’s family member living in the same household, and (iii) shares of Company restricted stock held directly by an Executive Officer, whether or not yet vested. “Ownership” does not include options, whether vested or unvested, to purchase stock. Executive Officers are expected to attain the minimum level of target ownership within a period of three years from the effective date of the policy or from the date he or she is first elected as an Executive Officer, whichever is later. Currently, each of the Named Executive Officers is in compliance with the stock ownership policy.

Policy Prohibiting Insider Trading, Hedging Transactions and Pledging of Securities

In 2011, the Board approved a change to the Company’s Insider Trading Policy to add provisions which prohibit Directors and all employees, including the Named Executive Officers, from engaging in hedging or other monetization transactions, pledging the Company’s securities as collateral for loans, holding Company securities in margin accounts and engaging in short sales. The policy accordingly was renamed the Insider Trading and Anti-Hedging Policy.

How does the Committee determine executive compensation?

Use of Competitive Data in the Compensation Determination Process

Each year, the Committee’s executive compensation consultant develops competitive compensation data based upon publicly available information from a peer group of the Company, as well as general industry surveys for similarly-sized companies. (See the discussion below for a list of who is in this peer group and the criteria used to establish it.) The Committee relies upon and considers this data as a factor in its determination, but it does not have a policy or practice of utilizing a particular compensation percentile as a benchmark for purposes of determining initial or subsequent salary levels. Rather it uses this competitive data principally in two respects. First, it provides one measure for assessing the reasonableness of any compensation package the Committee is considering for an Executive Officer. Second, it assists the Committee in implementing its goal of retaining executives of high caliber by enabling the Committee to better understand what competitors or other potential employers may pay to attract away an existing Executive Officer and what the Company must pay to attract to the Company a candidate for an Executive Officer position.

Peer Companies

The competitive data used by the Committee include compensation data from a peer group of industrial companies with sales, size and scope reasonably comparable to those of the Company, as well as other large publicly-owned, United States-based companies in the steel industry. Among other factors, the members of this peer group are selected because the Company directly or indirectly competes with them for employees, business, capital and/or investors, whether as a result of its status as an industry competitor or as a manufacturing company with a similar range of market capitalization, geographic location, manner of operations, and/or other relevant characteristics.

 

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The Committee periodically reviews the peer group to evaluate whether it remains reasonable and appropriate. Although the Committee plans to review the peer group again later this year, it last engaged in such a review at its October 2010 meeting. At that meeting, the Committee’s executive compensation consultant presented a report in which it recommended several changes to the Company’s then-existing peer group. The Committee approved those recommended changes. As a result, the Company’s peer group currently consists of the following companies:

 

•  Allegheny Technologies, Inc.

  

•  Precision Castparts Corp.

•  American Axle & Manufacturing Holdings

  

•  Reliance Steel & Aluminum Co.

•  Cliffs Natural Resources Inc.

  

•  Schnitzer Steel Industries, Inc.

•  Commercial Metals Company

  

•  Steel Dynamics, Inc.

•  Eaton Corporation

  

•  Tenneco Automotive Inc.

•  MeadWestvaco Corporation

  

•  The Timken Company

•  Meritor Inc

  

•  United States Steel Corporation

•  Nucor Corporation

  

•  Worthington Industries, Inc.

Use of Tally Sheets

The Committee utilizes tally sheets to review the amounts payable under each element of an NEO’s compensation, as well as the aggregate value of such compensation, in the event of a circumstance that would trigger payment of post-termination compensation. These tally sheets are prepared by the Company’s executive compensation consultant, with the assistance of the Company’s independent outside actuary. The Committee also uses tally sheets as a measure for assessing the reasonableness of the compensation packages approved by the Committee for an Executive Officer, including the NEOs. This assessment of reasonableness includes a comparison of the compensation packages of each Executive Officer for internal equity between and among the Executive Officers, as well as a comparison of the compensation packages of each Executive Officer to relevant executive positions in the Company’s peer group.

Management’s Role in the Compensation Process

After consulting with the Committee’s executive compensation consultant, Mr. Wainscott makes recommendations to the Committee with respect to the annual compensation packages for all of the Executive Officers other than himself. The Committee discusses those recommendations with Mr. Wainscott and the Committee’s executive compensation consultant before making the determination of the non-CEO executive compensation packages.

Other than Mr. Wainscott, the only member of Management who provides a recommendation to the Committee with respect to any aspect of the annual executive compensation program is Ms. Stephanie Bisselberg, the Vice President, Human Resources. This officer makes a recommendation to the Committee each year with respect to the goals to be used for purposes of determining performance awards in the next performance cycle under the Company’s Annual Incentive Plan, Long-Term Plan and with respect to performance shares. The recommendation with respect to such goals principally takes into consideration the Company’s performance against the goals of the prior performance cycle, consultation with Mr. Wainscott and other Management personnel concerning the anticipated performance of the Company in the next performance cycle with respect to those goals, an evaluation of what would be a realistic, but appropriately demanding, performance level for each specific goal, and consultation with the Committee’s independent executive compensation consultant. Ms. Bisselberg further evaluates and makes recommendations to the Committee with respect to the design and implementation of the various incentive plans, retirement plans, and other ongoing compensation-related arrangements and benefits for the Executive Officers.

 

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How did the Committee determine the 2013 executive compensation package for Mr. Wainscott?

Key Factors Considered by the Committee during the 2013 Compensation Process

In connection with the determination of Mr. Wainscott’s 2013 compensation package, the Committee evaluated his performance as CEO and President of the Company during the prior calendar year. For that purpose, the Committee approved prior to its January 2013 meeting a written performance evaluation form to be completed by all members of the Board. Mr. Wainscott completed a self-evaluation using the same evaluation form. All of these completed forms were returned to Mr. Abdoo, as the Chairman of the Committee, who then summarized and presented them to the full Board. In addition, each year Mr. Wainscott prepares a list of proposed annual goals and objectives for himself and the Company and provides that list to the Committee. Mr. Wainscott prepared such a list for 2012 and the Committee approved it at the Committee’s January 2012 meeting. The Board considered that approved list of 2012 personal goals and objectives in connection with its January 2013 evaluation of Mr. Wainscott’s 2012 performance. Those 2012 goals and objectives addressed the following subjects: improving the Company’s financial performance, including substantially improving earnings and liquidity; continuing to provide the best customer service in the industry; focus on margin enhancement, including progress on major strategic initiatives for that purpose (with a particular emphasis on accelerating the benefits of the Company’s initiatives with respect to raw materials); achieving the full benefits from certain major capital investments; management development, succession planning and diversity enhancement; successful completion of certain labor negotiations; enhancing personal communications and visibility with various constituents; improving certain fundamental operating measures; enhancing long-term shareholder value; and certain personal development goals.

In addition, as part of its normal deliberative process for all of the Executive Officers, including the CEO and other NEOs, the Committee principally considered the following factors in establishing 2013 base salaries and target performance award opportunities, and determining awards of restricted stock, performance shares and stock options:

 

   

a report prepared by Frederic W. Cook & Co., which analyzed competitive peer group compensation data to assess executive compensation levels and share usage, dilution, and fair value transfer levels relative to the peer group to assess annual burn rate, total overhang and aggregate costs as related to long-term incentive awards;

 

   

the Board’s evaluation of each Executive Officer’s relative contribution to the Company’s performance during the relevant performance periods;

 

   

the performance of the Company’s publicly-traded securities;

 

   

the Company’s financial performance in 2012 and its projected financial performance in 2013;

 

   

the Company’s safety, quality and financial performance in 2012 and the trends associated with these performance metrics over the last few years;

 

   

the extent to which performance goals incent appropriate conduct and do not encourage inappropriate or excessive risk that would not be in the best interests of the Company and its stakeholders;

 

   

the highly competitive nature of the steel industry; and,

 

   

the need to retain and motivate the Management team to continue the Company’s financial improvement and compete effectively in the highly competitive steel industry.

The Committee also met with Mr. Wainscott as CEO and President of the Company with respect to the performance of each of the other Executive Officers, including the other NEOs. Mr. Wainscott provided his evaluation of the NEOs’ performance for the Committee’s consideration in its determination of their respective compensation packages. Mr. Wainscott also made a recommendation to the Committee for its consideration with respect to what he believed would be an appropriate compensation package for each Executive Officer (other than himself), including each of the other NEOs.

 

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Committee Conclusion and Action with Respect to 2013 Compensation Packages

After following its stated compensation process, and discussing the factors set forth above, the Committee concluded that the 2013 compensation packages under consideration for each of the Company’s then-existing Executive Officers, including the NEOs, were consistent with the Company’s compensation philosophy and were reasonable, competitive and appropriate, both individually and taken as a whole. The Committee’s conclusion with respect to these compensation packages, though based in part on subjective factors and reference to each individual’s compensation package in recent prior years, was primarily founded upon the Committee’s recognition of the high level of performance by each Executive Officer, including each NEO, and the Committee’s confidence that the compensation packages provide proper incentive for these Executive Officers to remain employed by the Company and to continue to focus on serving the best interests of the Company and its stockholders in the coming years. The Committee further concluded that these packages, particularly insofar as they did not include increases in base salary and did include reductions in the value of equity grants, were appropriate in light of the Company’s recent financial performance and reflected then-current conditions at the Company and in the industry. The Committee also concluded that the compensation packages would provide adequate and appropriate incentives to the Executive Officers to work diligently and effectively to improve its performance, not only in 2013 but for a longer term.

The Committee therefore approved the compensation packages for 2013 that are reflected in the Summary Compensation Table beginning on page 62. Further detail on the decisions with regard to each key component is provided in the following section. The Committee then reported its action to the Board and recommended that the Board ratify the compensation packages approved by the Committee. After consideration and discussion by the Board as a whole, the Board ratified those packages. The approval and ratification of the 2013 compensation packages with respect to all of the NEOs occurred in January 2013.

What specific action did the Committee take in 2013 with regard to the key elements of the Company’s executive compensation program and what were the principal reasons for that action?

Base Salary

The salary level for an NEO is assigned initially based upon experience, expertise, job responsibilities and competitive data, including a review of the salary levels for comparable positions at other similarly-situated major corporations as disclosed in competitive data presented by Frederic W. Cook & Co. As noted above, the individual performance of each NEO other than Mr. Wainscott is reviewed by the Committee with Mr. Wainscott. Mr. Wainscott’s individual performance is reviewed by the Committee based upon a written evaluation by the Board of Mr. Wainscott’s performance against various goals and objectives. The Committee also reviews the base salary levels of the NEOs for internal consistency and equity relative to each other. The principal factors in determining whether to increase, maintain, or decrease an annual base salary for an NEO are individual performance, Company performance, changes in job responsibility, and competitive market compensation data and trends. The Committee does not rely on any specific formula, nor does it assign specific weights to the various factors used in determining base salaries. Strong individual performance and strong Company performance would generally result in above-market increases. Below-market increases, no increases, or even decreases may occur in years when either individual performance or Company performance has been below expectations.

In January 2013, after considering all of the above factors and consulting with Frederic W. Cook & Co., the Committee determined not to increase the base salaries of any of the NEOs. The principal factor in this decision was the Company’s financial performance in 2012. (Note, however, that the base salary of Mr. Newport was increased in May 2012 as a result of a promotion. Thus, his total 2013 base salary is higher than his total 2012 base salary in the Summary Compensation Table at page 62.)

Annual Incentive Awards

As discussed above, the Company provides annual cash performance awards to its employees, including its NEOs, pursuant to its Annual Incentive Plan. This component of an NEO’s compensation is intended to motivate

 

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the NEO to focus on both financial and non-financial annual performance-based goals that directly impact stockholders. Under the terms of the Annual Incentive Plan, a participant can earn a performance award based upon the annual performance of the Company against goals established for performance at a threshold, target and maximum level. The three performance metrics used for the goals are safety, quality and net income.

For 2013, a performance award at the target level would be paid under the Annual Incentive Plan to the CEO in an amount equal to 110% of base salary and a performance award at the maximum level may be paid in an amount equal to 220% of base salary. For the other NEOs, and depending upon the NEO’s title and position, a performance award at the target level for 2013 would be paid in an amount equal to between 55% and 75% of base salary and a performance award at the maximum level may be paid in an amount equal to between 110% and 150% of base salary. Performance awards between the threshold and the target level are determined by a straight-line interpolation between those two levels, starting from a base of zero at the threshold level. By way of example, assuming that a potential award at the target level for a particular performance factor was $10,000, then annual performance by the Company at halfway between the threshold and target goals would result in payment of a performance award with respect to that particular factor in the amount of $5,000. Similarly, performance at three-quarters of the way between the threshold and target goals would result in payment of a performance award with respect to that particular factor in the amount of $7,500.

Under the terms of the Annual Incentive Plan, the Committee weights each performance factor as a percentage of the whole. For 2013, the Committee approved the weighting of the three performance factors at 20% for safety, 20% for quality and 60% for financial performance for purposes of determining the portion of a performance award paid up to the target level. Payment of a performance award beyond the target level is based solely upon financial performance. Since payment beyond the target level is predicated solely on financial performance, this has the effect of reducing the percentage of the whole award attributable to safety and quality. For example, if a performance award is earned at the maximum level under the Annual Incentive Plan, the relative weightings would be 10% for safety, 10% for quality and 80% for financial performance.

With respect to the safety performance factor, the metric selected by the Committee to measure performance was the number of OSHA-recordable cases. That metric was selected because there is no higher priority at the Company than the safety of its employees and it is a standard metric reported to a federal government agency. It also is commonly used in the steel industry as a measure of safety performance. For the safety component of the 2013 Annual Incentive Plan, at its January 2013 meeting the Committee established a target level goal of no more than 23 OSHA-recordable injuries on a Company-wide basis and a threshold level goal equal to 125% of that number. (The threshold goal in this instance is higher than the target goal because that reflects less successful performance.) These goals were chosen because they represented challenging, but achievable goals, which if achieved were expected to constitute industry leading performance. For 2013, the Company had a total of 16 OSHA-recordable injuries. In 2013, the Company thus performed at the target level performance goal for safety under the Annual Incentive Plan and the safety portion of the Annual Incentive Plan was paid in full (i.e., at 10% of the maximum available annual incentive award).

With respect to the quality performance factor, the Committee selected three metrics: internal rejections, internal retreats and external customer claims. Those metrics were selected because they also are commonly used in the steel industry to measure both internal and external quality performance. In addition, there is a direct relationship between the Company’s performance with respect to each of those metrics and the Company’s costs attributable to quality. At its January 2013 meeting, the Committee established a 2013 target level goal of no more than 0.37% for the internal rejection rate, 0.56% for the internal retreat rate, and 0.167% for the customer claim rate. Again, the threshold goals for each of those metrics were set at 125% of the target goals. (As with the safety performance factor, a higher number reflects less successful performance). These goals were chosen because they represented challenging, but achievable goals, which if achieved were expected to continue the Company’s recognized industry leading quality performance. In 2013, the Company performed at a level better than the target level performance goals with respect to two of the quality metrics used to measure its performance under the Annual Incentive Plan, but because it did not achieve the threshold goal of the financial performance component of the Annual Incentive Plan, there was no payout with respect to the quality component of the plan for 2013.

 

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With respect to the financial performance factor, the Annual Incentive Plan establishes net income (excluding special, unusual and extraordinary items) as the performance metric and that was the performance metric used for 2013. This metric was established because it is a widely recognized and accepted measure of a company’s financial performance and the Committee believes it helps to align the interests of Management and the Company’s stockholders. The net income threshold goal typically is set at a level which would represent a minimum acceptable performance by the Company in the context of the business conditions and other challenges facing the Company. The target goal typically is set at a level which would represent performance that is more demanding, but still reasonably attainable. The maximum goal is set at a level which would represent extraordinary performance. At its January 2013 meeting, the Committee established threshold, target and maximum net income performance goals for 2013 under the Annual Incentive Plan of $2 million, $29 million and $72 million, respectively (excluding special, unusual and extraordinary items). In 2013, the Company recorded a net loss for purposes of the Annual Incentive Plan financial component. In accordance with the terms of the plan documents, there thus was no payout with respect to the financial performance component of the plan for 2013.

In January 2014, the Committee approved the payment of performance awards for the 2013 performance period to the participants in the Annual Incentive Plan based upon the performance metrics described above. For the Executive Officers, including the NEOs, that payment was equal to 10% of the maximum potential incentive award under the Annual Incentive Plan, all of it attributable to the Company’s outstanding safety performance in 2013. The amount of the Annual Incentive Plan performance awards to each of the NEOs for 2013 is included in the Summary Compensation Table beginning on page 62.

Long-Term Incentive Awards

The Company also provides cash performance awards to its employees, including its NEOs, pursuant to its Long-Term Plan. The fundamental purposes of the Company’s Long-Term Plan are to:

 

   

align the interests of Management more closely with the interests of the stockholders;

 

   

link a portion of Management’s compensation to the performance of the Company;

 

   

increase the focus of Management on the Company’s long-term performance by establishing performance goals that support long-term strategies; and

 

   

assist the Company in recruiting, retaining and motivating a highly talented group of managers who will successfully manage the Company in a way that benefits all of its stakeholders.

Under the terms of the Long-Term Plan, a participant can earn a performance award based upon the three-year performance of the Company against a goal established by the Committee at the start of that three-year period. For 2013, the Committee used cumulative EBITDA (excluding special, unusual and extraordinary items) as the performance metric for the Long-Term Plan. The Committee selected this metric because the Committee believes it creates value and provides a strong incentive for Management to achieve the Company’s objective of sustainable profitability. Accordingly, the Committee believes the use of this metric will more closely align the interests of Management with the interests of the Company’s stockholders over the long term.

Pursuant to the terms of the Long-Term Plan, the Committee establishes cumulative EBITDA threshold, target and maximum payout goals in the first quarter of each three-year performance period. In determining the Long-Term Plan goals, the Committee attempts to establish a target goal that will be challenging to achieve and that is not likely to be satisfied with respect to every three-year performance period. As with respect to the Annual Incentive Plan goals, the threshold goal would be set at a level that would represent a minimum acceptable performance by the Company and the maximum goal would be set at a level that represents extraordinary performance. The threshold goal must be met before any payout is made.

A performance award at the target level may be paid under the Long-Term Plan to the CEO in an amount equal to 110% of base salary and a performance award at the maximum level may be paid in an amount equal to

 

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220% of base salary. For the other NEOs, and depending upon the NEO’s position, a performance award at the target level may be paid in an amount equal to between 55% and 75% of base salary and a performance award at the maximum level may be paid in an amount equal to between 110% and 150% of base salary. There is a linear progression of the payout for achievement of cumulative EBITDA between the threshold, target and maximum payout goals. All payouts earned, if any, are paid in cash. For the three-year period ending December 31, 2013, the Committee established at its March 2011 meeting cumulative EBITDA goals of $1.0 billion as the threshold to reach for any incentive payment, $1.25 billion for payment at the target level, and $1.5 billion for payment at the maximum level. For the three-year period ending in 2013, the Company did not achieve the threshold performance level of cumulative EBITDA. Thus, no incentive payment was paid to the participants in the Long-Term Plan, including the NEOs, for the 2011 — 2013 performance period. Accordingly, the Summary Compensation Table beginning on page 62 does not include any payouts for 2013 to the NEOs under the Long-Term Plan.

Equity Awards

Another key component of an NEO’s annual compensation package is the grant of equity awards under the Company’s Stock Plan. Such grants may be in the form of stock option awards, restricted stock awards and/or performance-based equity awards in the form of performance shares.

A principal purpose of equity grants under the Company’s Stock Plan is to enhance the commonality of interests between Management and the Company’s stockholders by linking executive compensation to the Company’s performance and to appreciation in the market price of the Company’s common stock. Equity grants also are intended to encourage executives to remain in the employ of the Company, as discussed below.

Performance share awards

Performance share grants are an important element of an NEO’s annual compensation package because they closely align the interests of the NEOs and the Company’s stockholders by directly linking how many shares, if any, ultimately are earned by an NEO to the performance of the Company over a three-year performance period. Each grant of a performance share award is expressed as a target number of shares of the Company’s common stock. The number of shares of common stock, if any, actually earned by and issued to the NEO under a performance share award will be based upon the performance of the Company over the applicable performance period. By way of example, the performance period applicable to the performance share awards granted in January 2011 started on January 1, 2011 and ended on December 31, 2013. Depending upon the Company’s performance with reference to the performance categories described below, an NEO ultimately may earn from 0% to 150% of the target number of shares granted. The performance categories used to determine how many performance shares ultimately will be earned and issued are:

 

   

the Company’s Total Stockholder Return, defined as price appreciation plus reinvested dividends, if any, during the performance period relative to the total stockholder return during that same period of the companies in the Standard & Poor’s 400 Midcap Index, and

 

   

the compounded Growth Rate of the price of the Company’s common stock over the performance period, using as the base the average closing price of the Company’s common stock for the last 20 trading days during the month of December.

One-half of the total target number of shares awarded may be earned based on the Growth Rate performance and the other half may be earned based on the relative Total Stockholder Return performance. The Committee chose the Growth Rate metric as an objective measure of the value created for shareholders over time. The Committee chose the relative Total Stockholder Return metric because it facilitates a comparison between the growth rate of the Company’s common stock over time and a broad-based market index. The Committee considered that the collective use of Growth Rate and relative Total Stockholder Return as performance metrics for the performance share awards created a balance between two commonly used internal and external metrics, both being recognized measures that are aligned to shareholder value.

 

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For each performance category, levels have been established to provide threshold, target and maximum payouts as follows:

 

Payout (Stated as a % of

Category’s Target Shares)

   Total Stockholder
Return
     Annual
Stock Price
Growth Rate
 

Threshold (50%)

     25th percentile         5.0

Target (100%)

     50th percentile         7.5

Maximum (150%)

     75th percentile         10.0

If the threshold performance level is not achieved in a performance category as of the end of the performance period, then none of the target shares related to that category will be earned or issued. If at least the threshold is achieved in a performance category, then shares will be earned and issued in an amount equal to the number of the award’s target shares related to that category, multiplied by a percentage determined by a straight-line interpolation between the actual level of the Company’s performance and the above-stated payout percentages. Although the Company experienced approximately a 78% increase in the price of its stock in 2013, for the three-year performance period ending in 2013, the Company’s stock performance with respect to the Total Stockholder Return and Growth Rate metrics did not meet the threshold performance levels. Accordingly, no shares of the Company’s common stock were issued with respect to the three-year performance period that ended in 2013.

Restricted stock awards

The Committee typically determines and approves restricted stock grants each year at its regularly-scheduled January meeting. There is a limited exception to this standard award schedule for grants of restricted stock to someone promoted or hired during the year. Restricted stock generally has a value for an NEO only if the NEO remains in the Company’s employment for the period required for the stock to vest, thus providing an incentive for the NEO to remain in the Company’s employment. (However, an exception to the requirement of continued employment occurs with respect to death, disability or retirement. Vesting occurs immediately upon death or disability. Upon qualification for retirement, the restricted stock will continue to vest in the normal course after the date of retirement.)

Restrictions on grants of common stock to the Company’s employees typically will lapse with respect to one-third of the shares on the first anniversary of the date of the award, and with respect to an additional one-third of the shares on each of the second and third anniversaries of the date of the award. That is the case with all of the restricted stock grants to the NEOs which occurred in January 2013 at the time the Committee determined the 2013 compensation packages for the NEOs. However, in connection with the promotion of three of the then-existing Named Executive Officers (Messrs. Ferrara, Horn and Kaloski), on May 26, 2010, the Committee approved additional grants of restricted stock to each of them with a vesting schedule that differs from the normal three-year step vesting. With respect to these May 2010 stock grants, the vesting schedule was three-year “cliff” vesting. That is, all of the shares of restricted stock granted in May 2010 vested in May 2013 at the third anniversary of the grant date. The reason for the change from the normal three-year step vesting schedule was to increase the term for which the restricted stock provides an incentive to each of these NEOs to continue his employment with the Company.

Stock option awards

Stock option awards serve the purposes of the Stock Plan because they generally have a value to the grantee only if the grantee remains in the Company’s employment for the period required for the option to become exercisable, and then only if the market price of the Company’s stock increases above its price on the date the option was granted. This provides an incentive for the grantee to remain employed by the Company and to take actions that, over time, are intended to enhance the value of the Company’s stock. (As with restricted stock, an exception to the requirement of continued employment is made in the event of death, disability or retirement. In addition, for stock options an exception is made for involuntary termination without cause.)

 

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For each NEO, stock options are a part of the determination of the NEO’s overall compensation package for that year. Although the Company has long had a practice of not replacing or re-pricing options granted to its NEOs (or others) that are “underwater,” in January 2012 the Board of Directors made that practice into a formal policy. That policy was adopted as part of, and is disclosed in Section II(N) of, the AK Steel Corporate Governance Guidelines, which can be found at www.aksteel.com. All options granted to employees under the Stock Plan, including the NEOs, must be exercised within a ten-year period of the grant date and typically vest in three equal installments on the first, second and third anniversary of the grant date.

Under the terms of the Stock Plan, the exercise price for a share of the Company’s common stock underlying an option may not be less than the fair market value of the Company’s stock on the date on which such option was granted. It has been the uniform practice of the Committee to establish an option exercise price equal to the fair market value of the underlying common stock. Under the terms of the Stock Plan, that fair market value is the average of the highest and lowest sales price for the Company’s common stock on the grant date (or if there were no sales of the Company’s common stock on the grant date, then the weighted average of the mean between the highest and lowest sales price for the Company’s common stock on the nearest preceding trading day during which there were sales of such stock). It is both the policy and practice of the Committee only to grant options to its employees, including its NEOs, as of the date of the meeting at which the grants were made. This typically occurs at the regularly-scheduled January Committee meeting. Generally, the Committee only grants options at a meeting other than the January meeting in a situation in which an employee is being promoted (e.g., to a new key management or officer position) or is first hired. Under those circumstances, the grant may occur at a meeting other than the regularly-scheduled January Committee meeting, but the grant date for the options still would be the date of the meeting at which the grant was approved. The exercise price for such options also still would be the fair market value of the Company’s common stock determined as described above under the terms of the Stock Plan. The Company has not had, and does not have, a practice of backdating stock options. In addition and as noted above, under the terms of the Annual Incentive Plan, the price of an option shall not be less than the fair market value of the shares on the date of the grant. Neither the selection of Committee meeting dates nor option grant dates is timed in any way to try to maximize gain or manipulate the price of an option. Management does not have a role in determining the timing of option grants.

2013 Equity Grants to NEOs

As in the past, the Committee engaged Frederic W. Cook & Co., the Company’s independent executive compensation consultant, to provide assistance in determining appropriate equity awards to the Executive Officers, including the NEOs, for 2013. In January 2013, Frederic W. Cook & Co. developed and provided to the Committee competitive compensation data based upon publicly available information from the Company’s peer group, as well as general industry surveys for similarly-sized companies. The Committee considered this data as a factor in its determination of equity grants, but it did not utilize a particular compensation percentile as a benchmark for purposes of determining such grants. Rather, it used this competitive data to help the Committee assess the reasonableness of the grant awards under consideration by the Committee for an Executive Officer.

While there is no express policy with respect to the allocation of each type of equity award, the total value of shares at the grant date of the January 2013 equity grants to the CEO (as well as the other NEOs) was allocated approximately as follows: 23% stock options, 30% restricted stock, and 47% performance shares at target. The specific grants of stock options, restricted stock and performance shares made during 2013 to each of the NEOs are set forth in the Grants of Plan-Based Award Table beginning on page 66.

Post-Termination Benefits

Severance and Change-of-Control Agreements – Rationale

The Company has entered into severance agreements and change-of-control agreements with each of the NEOs that provide post-termination benefits. The descriptions of those agreements in this Proxy Statement are qualified in all respects by reference to the actual documents filed with the Securities and Exchange Commission.

 

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The current forms of the change–of–control and the severance agreements were attached as exhibits to a Form 8-K filed on March 26, 2014. The only material change from the prior form of the agreements was to broaden the non-compete provision to reflect changes in competitive landscape for the industry.

For each of the NEOs, their initial severance and change-of-control agreements each had a five-year term, and renew automatically thereafter on a year-to-year basis unless written notice of non-renewal is given by either party at least 90 days prior to the expiration of the term. The new recently executed agreements continue for the remaining period of that initial five-year term. If the initial five-year term had expired, the agreements continue on a year-to-year basis. The new forms of these agreements were recommended by the Committee and approved by the Board in March 2014.

The severance agreements are provided to the NEOs because they promote the interests of the Company and its stakeholders by, among other things:

 

   

securing a release of claims from the terminated NEO and thereby avoiding the risk and financial exposure of employment litigation;

 

   

ensuring that for one year after termination of employment the NEO will not compete against the Company;

 

   

ensuring that for one year after termination of employment the NEO will not solicit any employee of the Company to resign his or her employment;

 

   

ensuring that for one year after termination of employment the NEO will cooperate with respect to various Company matters in which the NEO was personally involved prior to the NEO’s employment termination; and

 

   

securing an agreement by the NEO to arbitrate all legally arbitrable claims arising not only from the severance agreement, but also from the NEO’s employment relationship with the Company.

The change-of-control agreements are provided to the NEOs because they promote the interests of the Company and its stakeholders by, among other things:

 

   

obtaining the same covenants and commitments as described above with respect to severance agreements; and

 

   

mitigating an NEO’s concerns about personal job security and financial well-being in the event of a change-of-control, thereby eliminating consequences that might prevent the NEO from providing objective advice and information to the Board and stockholders with respect to a proposed change-of-control of the Company, and helping to ensure that the Management team stays intact before and during a proposed change-of-control transaction.

The Committee annually reviews the form and terms of the Company’s severance and change-of-control agreements to evaluate whether they continue to promote the interests of the Company as noted above and were appropriate and competitive under the then-existing circumstances.

Severance Agreements Terms Overview

Under the terms of the existing form of severance agreement with the Company’s NEOs, an NEO who voluntarily terminates employment or whose employment is terminated involuntarily for cause would not receive any severance benefits associated with such termination. An NEO who is terminated involuntarily without cause would receive at a minimum a lump sum payment equal to the NEO’s base salary for a period of six months. In addition, if the NEO executes an agreement releasing the Company from any liability for claims relating to the NEO’s employment with the Company, the NEO also is entitled to receive:

 

   

an additional lump sum severance payment (ranging from 12 to 18 months of base salary);

 

 

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a lump sum payment based upon the NEO’s assigned target amount under the Company’s Annual Incentive Plan (ranging from 1 to 1.5 times target) and a pro-rated payment of any Annual Incentive Plan award actually earned for the year in which the termination occurs; and

 

   

continuing coverage under the Company’s benefit plans, including life, health and other insurance benefits, for a specified period of time (ranging from eighteen months to two years).

Change-of-Control Agreements Terms Overview

An NEO typically is entitled to severance payments and other benefits under the NEO’s change-of-control agreement if, within 24 months following a change-of-control of the Company, the NEO’s employment with the Company is involuntarily terminated without cause or the NEO voluntarily terminates employment with the Company for “good reason.”

There are different versions of the change-of-control agreement with respect to the level of benefit payments made in the event of a change-of-control. Generally, the highest level of benefits is provided for Mr. Wainscott. For each NEO, including Mr. Wainscott, the base severance benefit is a lump sum payment equal to the NEO’s base salary for a period of six months. In addition, if the NEO executes an agreement releasing the Company from any liability for claims relating to employment with the Company, the NEO would be entitled to receive:

 

   

an additional lump sum severance payment (ranging from 18 to 30 months of base salary);

 

   

a lump sum payment based upon the NEO’s awards under the Company’s Annual Incentive Plan (equal to two to three times the greatest of (1) the NEO’s assigned Annual Incentive Plan target amount for the calendar year in which the termination occurs, (2) the actual Annual Incentive Plan payout for the calendar year immediately preceding the calendar year in which the termination occurs, or (3) the average of the Annual Incentive Plan payouts for the three calendar years immediately preceding the calendar year of termination, reduced in each instance by any amount otherwise paid or payable under the Annual Incentive Plan with respect to the preceding calendar year, plus a prorated Annual Incentive Plan payout at the maximum level for the portion of the then-current calendar year prior to date of termination);

 

   

a prorated Long-Term Plan payment at the target level for all incomplete performance periods as of the date of termination;

 

   

continuing coverage under the Company’s benefit plans, including life, health and other insurance benefits, for a specified period (ranging from 24 to 36 months);

 

   

additional service credits toward retiree medical coverage (ranging from two to three years);

 

   

the immediate vesting of all restricted stock awards to the NEO under the Company’s Stock Plan and the lapse of all restrictions on such awards; and

 

   

the right, for a period of three years, to exercise all stock options awarded to the NEO under the Stock Plan.

Specific Payments and Benefits under Severance and Change-of-Control Agreements

The specific circumstances that would trigger the payments and other benefits under the severance agreements, the estimated payments and benefits that would be provided in each covered circumstance for each NEO, how the payments and benefits are determined under such circumstances and all material conditions and obligations applicable to the receipt of the payments and benefits are set forth in the Potential Payments Upon Termination or Change-of-Control discussion beginning on page 75.

 

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Pension and Other Retirement Benefits

Non-Contributory Pension Plan

Prior to January 31, 2009, the Company’s full-time, non-represented salaried employees, including its NEOs, could elect to participate in a qualified benefit plan known as the Non-Contributory Pension Plan. Effective January 31, 2009, however, no new participants were allowed to enter the Non-Contributory Pension Plan and all benefit accruals under the plan for existing participants were frozen. For those who entered the Non-Contributory Pension Plan prior to January 31, 2009, retirement benefits are calculated using one of two formulas: (1) a cash balance formula, or (2) a final average pay formula. Eligibility for coverage under a particular formula is typically determined by the date on which a participant commenced employment with the Company. The compensation taken into account in determining benefits under either formula is subject to the compensation limits imposed by the Internal Revenue Code. A description of the terms of the Non-Contributory Pension Plan, including the formulas used to calculate a participant’s retirement benefits, is set forth in footnote (1) to the Pension Benefits Table beginning at page 72.

Executive Minimum and Supplemental Retirement Plan (locked — for existing officers only)

The Company’s existing officers, including its NEOs, are eligible to participate in an unfunded nonqualified deferred compensation plan called the Executive Minimum and Supplemental Retirement Plan, also known as a supplemental executive retirement plan, or “SERP.” At its January 2014 meeting, however, the Committee recommended to the Board, and the Board approved, closing the SERP and replacing it for future officers with a new retirement plan referred to as the AK Steel Executive Retirement Income Plan (the “Retirement Plan”). The terms of the Retirement Plan were established by the Committee and recommended to and approved by the Board at its March 2014 meetings. Those terms are described below, following the description of the terms of the SERP.

Each of the NEOs is a participant in the Company’s SERP. The Company’s SERP provides (1) a “make up” of qualified plan benefits that were denied as a result of limitations imposed by the Internal Revenue Code, and (2) supplemental benefits to vested participants. As part of its annual review of retirement benefits provided to Executive Officers, including the NEOs, the Committee has determined that the retirement benefit provided by the SERP continues to be a key element of a competitive compensation package and, therefore, important to retaining Executive Officers.

The benefits for participants in the SERP, including the NEOs, vest under a form of graded vesting. More specifically, a participant will vest in 50% of his or her accrued benefit after a minimum requirement of five years of service as an officer of the Company and as a participant in the SERP, and in an additional 10% of such benefit for each year of service as an employee of the Company in addition to such five years, up to 100% vesting after ten years of total service. Vesting also will occur upon the effective date of a change of control (as defined in the SERP). In addition, vesting occurs with respect to a participant who has completed at least five years of service with the Company upon the participant’s death or disability. The form of payment is a lump sum payment to be made within 30 days after the later of attainment of age 55 or termination of employment, subject to a six-month delay for specified employees, including the NEOs. A participant whose employment with the Company terminates after his or her benefit has vested, but before the participant reaches the age of 60, is entitled to an early retirement benefit, reduced to its actuarial equivalent based on the participant’s age.

Benefits paid under the SERP are subject to an offset for any benefit received under the Company’s qualified defined benefit plan, as well as the actuarial equivalent of certain Company-provided vested benefits accumulated under the Thrift Plan. A participant’s benefit under the SERP, prior to giving effect to such offset, is equal to the greater of: (1) 50% of his or her average covered compensation (base salary and bonus under the Annual Incentive Plan) during the employee’s highest three calculation years of eligible earnings over the participant’s last ten years of consecutive service, or (2) the participant’s benefit under the applicable qualified plan in which he or she participates without regard to the limitations imposed by the Internal Revenue Code. The present value of accumulated benefits for each of the NEOs under the SERP is set forth in the Pension Benefits Table beginning on page 72.

 

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Retirement Plan (future – for new officers)

The Retirement Plan will provide benefits for new officers as appointed by the Committee. The Retirement Plan will provide supplemental benefits to vested participants, and for participants who have a benefit under the locked and frozen qualified plan, also will provide a “make up” of qualified plan benefits that were denied as a result of limitations imposed by the Internal Revenue Code. The Committee has determined that the retirement benefit provided by the Retirement Plan is a key element of a competitive compensation package to attract and retain future officers.

The benefits for participants in the Retirement Plan will vest under a form of graded vesting. A participant will vest in 50% of his or her accrued benefit after a minimum requirement of five years of service as an officer of the Company and as a participant in the Retirement Plan, and in an additional 10% of such benefit for each year of service as an employee of the Company in addition to such five years, up to 100% vesting after ten years of total service. Vesting also will occur upon the effective date of a change of control (as defined in the Retirement Plan). In addition, vesting occurs with respect to a participant who has completed at least five years of service with the Company upon the participant’s death or disability. The form of payment is a lump sum payment to be made within 30 days after the later of attainment of age 55 or termination of employment, subject to a six-month delay for specified employees, including the NEOs. A participant whose employment with the Company terminates after his or her benefit has vested, but before the participant reaches the age of 60, is entitled to an early retirement benefit, reduced to its actuarial equivalent based on the participant’s age.

Benefits paid under the Retirement Plan are subject to an offset for any benefit received under the Company’s qualified defined benefit plan, as well as the actuarial equivalent of certain Company-provided vested benefits accumulated under the Thrift Plan. A participant’s benefit under the Retirement Plan, prior to giving effect to such offset, is equal to the greater of: (1) 40% of his or her average annual base salary during the employee’s last three years of consecutive service, plus the annual average of any incentive awards received by the Member for the last ten consecutive annual performance periods under the AK Steel Corporation Annual Management Incentive Plan; or (2) the participant’s benefit under the qualified plan without regard to the limitations imposed by the Internal Revenue Code. There is no present value of accumulated benefits for any of the NEOs under the Retirement Plan.

Thrift Plan and Supplemental Thrift Plan

The Thrift Plan is a qualified retirement plan under Section 401(k) of the Internal Revenue Code. It provides for Company matching contributions with respect to employee contributions up to 5% of base salary, a portion of which is guaranteed and a portion of which is dependent upon the Company’s net income. It further provides for supplemental contributions by the Company if the Company’s net income exceeds $150 million. At the same time that the Company locked and froze its Non-Contributory Pension Plan (see discussion above), it amended its Thrift Plan to add an automatic contribution by the Company to a participant’s account in the Thrift Plan. Effective January 31, 2009, the Thrift Plan provides for the Company to make a contribution to the account of each participant in the Thrift Plan equal to 3% of the participant’s base salary, whether or not the participant makes an elective contribution to the Thrift Plan. This 3% contribution is in addition to the matching contributions described above with respect to the participant’s elective contributions. All such contributions are subject to the compensation limits imposed by the Internal Revenue Code.

The Supplemental Thrift Plan is an unfunded nonqualified retirement plan. It provides for Company matching contributions with respect to base salary that may not be taken into account under the Thrift Plan due to limits on earnings imposed by the Internal Revenue Code. The Supplemental Thrift Plan thus provides a vehicle to maximize Company matching contributions that otherwise would not be eligible for the Thrift Plan due to the Internal Revenue Code’s compensation limits.

The Committee has determined that the Supplemental Thrift Plan provides a retirement benefit that is a key competitive element of the overall compensation package and, therefore, important to recruiting and retaining key management members.

 

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Any member of Management of the Company, including an NEO, is eligible for participation in the Thrift Plan, but participants in the Supplemental Thrift Plan must be selected by the Committee. For 2013, the participants in the Supplemental Thrift Plan included the NEOs. The contributions under these plans for 2013 are set forth in the Nonqualified Deferred Compensation Table on page 74. In 2013, all contributions to these plans were fixed contributions that were not dependent upon the Company’s net income; there were no performance-based contributions because the Company had a net loss for the year.

Executive Deferred Compensation Plan

The Company has an Executive Deferred Compensation Plan (the “Deferred Plan”). The Deferred Plan is an unfunded nonqualified deferred compensation arrangement. Participants are always fully vested in their accounts under this plan. Participants direct the investment of their accounts among available investment options (generally the same investment options available under the Company’s qualified thrift plan) at market rates. To be eligible to participate in the Deferred Plan, an employee must be an elected officer or other member of the Management of the Company. Eligible employees who desire to participate in the Deferred Plan must be approved by the Chairman and the Committee. In 2013, none of the NEOs chose to participate in the Deferred Plan.

Perquisites and Other Personal Benefits

Each of the NEOs receives various perquisites and other personal benefits, which the Committee has determined, based upon information provided by Frederic W. Cook & Co., are customary for Executive Officers of a company the size and stature of the Company and appropriate to provide a competitive overall compensation package to the Company’s NEOs. These consist principally of reimbursement for tax planning services, financial planning services, mandatory physical evaluations, and limited personal use of the Company’s airplane by the CEO. While the value of these perquisites and other personal benefits is not considered by the Committee to be a material component of the overall compensation package of an NEO, the perquisites and personal benefits provided to that NEO are disclosed in the All Other Compensation column of the Summary Compensation Table on page 62.

Principally for security reasons, the Company has a policy pursuant to which the Company’s CEO has limited use of the Company plane for personal purposes. The convenience of using the Company plane also helps to provide balance to the time he must spend on Company business. Such personal use results in imputed income to Mr. Wainscott. The Company does not “gross-up” payments to Mr. Wainscott to reimburse him for the individual income taxes incurred as a result of his personal use of the plane.

Other Employee Benefit Plans

Each of the NEOs also participates in various employee benefit plans generally available to all employees on the same terms and conditions as with respect to other similarly situated employees. These include the normal and customary programs with respect to death and disability benefits generally available to all employees on the same terms and conditions of other similarly situated employees. It also includes the normal and customary programs for life insurance, health insurance, prescription drug insurance, dental insurance, vision insurance, pre-tax flexible spending accounts, short- and long-term disability insurance, pension benefits, educational assistance and matching gifts for charitable contributions. While these benefits are considered to be an important and appropriate employment benefit for all employees of the Company, they are not considered to be a material component of an NEO’s annual compensation program. Because the NEOs receive these benefits on the same basis as other employees, these benefits are not established or determined by the Committee separately for each NEO as part of the NEO’s annual compensation package.

Mandatory Retirement Age of Executive Officers

In July 2013, the Committee recommended, and the Board approved, a policy mandating that Executive Officers of the Company shall be required, subject to certain qualifying conditions, to retire from employment

 

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with the Company by the end of the calendar month in which he or she reaches age 65. That policy further provides, however, that in the event an Executive Officer who is covered by the policy would be required to retire within one year of when he or she otherwise would become fully vested under the SERP, then such officer shall not be required to retire from employment with the Company until the end of the month in which he or she becomes fully vested in the SERP.

What is the Company’s Policy with Respect to Deductibility of Executive Compensation?

Section 162(m) of the Internal Revenue Code generally places a $1,000,000 limit on the deductibility for federal income tax purposes of the annual compensation paid to a company’s Chief Executive Officer and each of its other three most highly compensated Executive Officers (excluding the Chief Financial Officer). However, “qualified performance-based compensation” is exempt from this deductibility limitation. Qualified performance- based compensation is compensation paid based solely upon the achievement of objective performance goals, the material terms of which are approved by the stockholders of the paying corporation.

The Committee considers the anticipated tax treatment to the Company when determining executive compensation and routinely seeks to structure its executive compensation program in a way that preserves the deductibility of compensation payments and benefits. It should be noted, however, that there are many factors which are considered by the Committee in determining executive compensation and, similarly, there are many factors that may affect the deductibility of executive compensation. In order to maintain the flexibility to be able to compensate NEOs in a manner designed to promote varying corporate goals, the Committee has not adopted a strict policy that all executive compensation must be deductible under Section 162(m).

 

III.

Consideration of shareholder “say-on-pay” and “say-when-on-pay” voting results

In connection with the Company’s 2011 Annual Meeting of Stockholders, a majority of the votes cast by shareholders were in favor of holding an advisory vote on executive compensation on an annual basis. In light of those voting results and other matters considered by the Board of Directors, the Board, at a meeting held on the same day as the 2011 Annual Meeting and upon the recommendation of the Committee, decided to include a stockholder advisory vote on Named Executive Officer compensation in the Company’s proxy materials on an annual basis. In the absence of a subsequent Board action to the contrary, this annual advisory vote decision will remain in effect until the next required stockholder advisory vote on the frequency of future stockholder advisory votes on Named Executive Officer compensation, which will occur no later than the Company’s Annual Meeting of Stockholders in 2017.

In connection with the Company’s 2012 Annual Meeting of Stockholders, approximately 69% of the shares voted were in favor of a resolution to approve the compensation of the NEOs as disclosed in the Company’s 2013 Proxy Statement. The Committee considered the results of the voting by shareholders on the Company’s 2012 say-on-pay proposal at its January 2013 meeting. At that meeting, the Committee discussed the results of the vote and directed Management to actively engage in dialogue with Company shareholders, as appropriate, to determine why they voted as they did on the say-on-pay issue in 2012 and whether they have particular concerns about the Company’s executive compensation program. The Committee also considered the policies and recommendations of proxy advisory firms with respect to executive compensation. In the context of those considerations, the Committee recommended, and the Board of Directors approved, changes to the form of the Company’s change-of-control agreements to eliminate modified single-trigger and tax gross-up provisions.

In connection with the Company’s 2013 Annual Meeting of Stockholders, approximately 76% of the shares voted were in favor of a resolution to approve the compensation of the NEOs as disclosed in the Company’s 2013 Proxy Statement. Prior to that meeting and pursuant to the Committee’s direction, Management reached out to a significant number of the Company’s largest shareholders to engage in dialogue with them concerning the Company’s executive compensation program. In addition, subsequent to the annual meeting, Mr. Abdoo, as Chair of the Committee, personally engaged in a series of calls with several of the Company’s largest shareholders to solicit their views on the Company’s executive compensation program. The Committee

 

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considered the feedback it received through these shareholder engagement programs, along with the results of the voting by shareholders on the Company’s 2013 say-on-pay proposal, at the Committee’s January 2014 meeting. The Committee also considered the policies and recommendations of proxy advisory firms with respect to executive compensation. In the context of those considerations, at its January 2014 meeting the Committee decided to lock participation in the SERP to then-existing participants and to replace the SERP with a new retirement plan for future new officers.

MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE REPORT

The Management Development and Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with Management and, based upon such review and discussion, the Management Development and Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

THE MANAGEMENT DEVELOPMENT

AND COMPENSATION COMMITTEE

Mr. Richard A. Abdoo, Chair

Mr. John S. Brinzo

Mr. Robert H. Jenkins

Mr. Ralph S. Michael, III

 

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SUMMARY COMPENSATION TABLE FOR 2013

The table below summarizes the total compensation paid to or earned by each Named Executive Officer (“NEO”) for the years ended December 31, 2011, 2012, and 2013:

 

Name and Principal Position

  Year     Salary
($)
    Bonus
($)
    Stock
Awards
($)(1)
    Option
Awards
($)(2)
    Non-
Equity
Incentive
Plan
Compen-
sation
($)(3)
    Change in
Pension
Value and
Nonqualified
Deferred
Compen-
sation
Earnings
($)(4)
    All
Other
Compen-
sation
($)(6)
    Total
($)
 

James L. Wainscott

    2013      $ 1,150,000      $ 0      $ 1,352,917      $ 397,192      $ 253,000      $ 0 (5)    $ 150,405      $ 3,303,514   

Chairman of the Board,

    2012        1,150,000        0        2,803,711        689,780        253,000        3,627,753        163,014        8,687,258   

President and CEO

    2011        1,150,000        0        3,190,330        631,010        581,356        3,017,425        152,146        8,722,267   

David C. Horn

    2013        637,500        0        253,759        74,408        95,625        196,137        44,210        1,301,639   

Executive Vice President,

    2012        637,500        0        525,872        129,220        95,625        0 (5)      46,147        1,434,364   

General Counsel and

    2011        637,500        0        624,595        131,165        219,732        1,193,194        39,472        2,845,658   

Secretary

                 

John F. Kaloski(7)

    2013        565,000        0        253,759        74,408        84,750        122,793        31,942        1,132,652   

Executive Vice President,

    2012        565,000        0        525,872        129,220        84,750        286,989        43,837        1,635,668   

and Operating Officer

    2011        565,000        0        618,767        128,329        194,743        908,622        45,056        2,460,51 7   

Roger K. Newport

    2013        360,000        0        150,588        44,278        46,800        0 (5)      21,896        623,562   

Vice President, Finance and

    2012        335,909        0        360,074        64,155        41,307        578,178        26,023        1,405,646   

Chief Financial Officer

                 

Keith J. Howell

    2013        320,000        0        138,033        40,610        38,400        0 (5)      21,753        558,796   

Vice President, Operations

                 

Albert E. Ferrara, Jr.(8)

    2013        357,500        0        187,764        55,020        50,050        313,877        37,204        1,001,415   

Retired Senior Vice

    2012        536,250        0        389,114        95,550        75,075        323,014        34,786        1,453,789   

President, Corporate

    2011        536,250        0        459,374        100,678        172,511        731,941        39,838        2,040,592   

Strategy and Investor

Relations

                 

Gary T. Barlow(9)

    2013        188,846        0        125,488        36,942        20,773        0 (5)      639,810 (10)      1,011,859   

Former Vice President,

                 

Sales and Customer Service

                 

 

(1)

The amounts in this column reflect the aggregate grant date fair value of awards computed in accordance with ASC Topic 718 for awards of both restricted stock and performance shares pursuant to the Stock Plan. A discussion of the assumptions used to calculate the value of the stock awards reported in this column is located in Note 11 to the consolidated financial statements included in the Company’s 2013 Annual Report. The following table sets forth the values for only the performance share awards, as of their respective grant dates, assuming the performance conditions of such awards are achieved at their maximum potential levels:

 

     Maximum Award Value  
     2013      2012     2011  

James L. Wainscott

   $ 1,240,355       $ 2,639,558      $ 2,840,400   

David C. Horn

     232,611         495,011        532,575   

John F. Kaloski

     232,611         495,011        532,575   

Roger K. Newport

     138,443         245,262        (a

Keith J. Howell

     126,495         (b     (b

Albert E. Ferrara, Jr.

     172,175         366,398        378,720   

Gary T. Barlow

     115,251         (b     (b

 

  (a)

Since Mr. Newport was not a Named Executive Officer during 2011, award values are not included for 2011.

 

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  (b)

Since Messrs. Barlow and Howell were not Named Executive Officers during 2011 and 2012, award values are not included for those years.

 

(2)

The amounts in this column reflect the aggregate grant date fair value computed in accordance with ASC Topic 718 for awards of stock options pursuant to the Stock Plan. A discussion of the assumptions used to calculate the value of the stock options reported in this column is located in Note 11 to the consolidated financial statements included in the Company’s 2013 Annual Report.

 

(3)

The table below summarizes the payments to each NEO under the Company’s Annual Incentive Plan and Long-Term Plan for the fiscal years ended December 31, 2011, 2012, and 2013:

Non-Equity Incentive Plan Compensation

 

 

Name and Principal Position

   Year      Annual Incentive
Plan ($)
     Long-
Term
Plan ($)
     Total ($)  

James L. Wainscott

     2013       $ 253,000       $ 0       $ 253,000   
     2012         253,000         0         253,000   
     2011         581,356         0         581,356   

David C. Horn

     2013         95,625         0         95,625   
     2012         95,625         0         95,625   
     2011         219,732         0         219,732   

John F. Kaloski

     2013         84,750         0         84,750   
     2012         84,750         0         84,750   
     2011         194,743         0         194,743   

Roger K. Newport

     2013         46,800         0         46,800   
     2012         41,307         0         41,307   

Keith J. Howell

     2013         38,400         0         38,400   

Albert E. Ferrara, Jr.

     2013         50,050         0         50,050   
     2012         75,075         0         75,075   
     2011         172,511         0         172,511   

Gary T. Barlow

     2013         20,773         0         20,773   

 

(4)

The amounts reported in this column represent the change in pension value for each NEO. No NEO received preferential or above-market earnings on deferred compensation. The change in pension value for each NEO principally was the result of three factors: (i) a change in the ordinary course of the qualified earnings of each NEO used to calculate pension values; (ii) a change in the calculation of the interest component as a result of each NEO’s change in age relative to the NEO’s assumed retirement date; and (iii) a change in the discount rates used to determine the lump sum pension benefit as of the NEO’s assumed future payout date following his retirement and then to calculate the present value of the lump sum pension benefit to the reporting date. Another less significant factor which impacts the actuarial increase in pension value is the change in the value of the benefits to which an NEO is entitled under a qualified plan. See footnotes to Pension Benefits Table, below, for further explanation of the methodology used to calculate the present value of accumulated pension benefits for each NEO.

 

(5)

In any case where an NEO’s change in pension value was negative, the value is reported as $0 in the Summary Compensation Table in accordance with SEC rule. The actual negative change in pension values in 2013 were as follows: ($851,580) for Mr. Wainscott, ($283,405) for Mr. Newport, ($287,598) for Mr. Howell and ($1,653,587) for Mr. Barlow. The actual negative change in pension value in 2012 for Mr. Horn was ($268,240). Pension values at a given point in time for each NEO will vary based upon changes in the discount rate used to calculate the present value of the pension benefits or a change in the interest component of the value as a result of the NEO’s change in age relative to the NEO’s assumed retirement date. This variation was particularly acute for Mr. Wainscott from 2012 to 2013. In 2012 the

 

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calculated value of his pension increased by approximately $3.6 million, but in 2013 it decreased by approximately $0.85 million. The differences are attributable almost entirely to changes in two interest rates used to calculate his pension value as of an assumed payout date for him in the future after he reaches the age of 60 and is entitled to receive his full pension benefits. The first is the discount rate used to determine Mr. Wainscott’s future lump sum pension benefit as of that assumed future payout date following his retirement. From December 31, 2011 to December 31, 2012, the discount rate used to determine the lump sum pension benefit of Mr. Wainscott’s pension benefit declined, thereby increasing his pension value in 2012. From December 31, 2012 to December 31, 2013,the opposite occurred. The discount rate increased, with a resulting negative change in Mr. Wainscott’s pension value for 2013. The second interest rate which changed is the discount rate used to calculate the present value of Mr. Wainscott’s lump sum pension benefit to the reporting date and a similar pattern occurred with respect to this rate. Similar effects occurred for Messrs. Newport and Howell in 2013, though to a lesser extent than with respect to Mr. Wainscott, based upon differences in their ages relative to when they would be entitled to receive a full pension benefit and the impact of present valuing that benefit. Mr. Horn similarly had a negative change in pension value from 2011 to 2012. For Mr. Barlow, the forfeiture of his unvested pension benefits upon his departure from the Company also was a significant factor in the negative change in pension value for him in 2013.

 

(6)

The compensation shown in this column includes matching contributions made by the Company to a qualified defined contribution plan and a nonqualified supplemental thrift plan, imputed income on Company-sponsored life insurance, dividends on restricted stock and perquisites. A summary of the amounts included in this column is provided in the table below. Perquisites included in this column and provided to the NEOs include: reimbursement for tax planning services, financial planning services, mandatory physical evaluations, and use of company-owned tickets to athletic events. They also included limited personal use of the corporate aircraft for the CEO and his family.

 

(7)

Mr. Kaloski retired from the Company effective January 31, 2014.

 

(8)

Mr. Ferrara retired from the Company effective August 31, 2013.

 

(9)

Mr. Barlow left the Company effective July 18, 2013.

 

(10)

This amount includes all payments made in connection with Mr. Barlow’s departure from the Company, as disclosed in the Potential Payments Upon Termination or Change-of-Control Table beginning on page 76.

 

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Summary of All Other Compensation

 

Name

  Year     Company
Fixed
Contribution
to the
Qualified
Plan
    Company
Match
to the
Qualified
Plan
    Company
Match
to the
Non-
Qualified
Plan
    Imputed
Income
on Life
Insurance
    Dividends
on
Restricted
Stock
    Perquisites     Vacation
in Lieu
of Time
Off
    Severance     Total  

James L. Wainscott

    2013      $ 7,650      $ 6,375      $ 22,375      $ 11,615      $ 0      $ 102,390 (a)    $ 0      $ 0      $ 150,405   
    2012        7,500        6,250        22,500        11,615        9,595        105,554        0        0        163,014   
    2011        7,350        6,125        22,625        6,215        32,168        77,663        0        0        152,146   

David C. Horn

    2013        7,650        6,375        9,563        9,717        0        10,905        0        0        44,210   
    2012        7,500        6,250        9,688        9,717        1,200        11,792        0        0        46,147   
    2011        7,350        6,125        9,813        6,329        2,400        7,455        0        0        39,472   

John F. Kaloski

    2013        7,650        6,375        7,750        8,577        0        1,590        0        0        31,942   
    2012        7,500        6,250        7,875        8,577        1,200        12,435        0        0        43,837   
    2011        7,350        6,125        8,000        8,577        2,400        12,604        0        0        45,056   

Roger K. Newport

    2013        7,650        6,375        2,625        1,211        0        4,035        0        0        21,896   
    2012        7,500        6,250        2,148        1,138        2,178        6,809        0        0        26,023   

Keith J. Howell

    2013        7,650        6,375        1,625        1,067        0        5,036        0        0        21,753   

Albert J. Ferrara, Jr.

    2013        7,650        6,375        2,563        10,424        0        10,192        0        0        37,204   
    2012        7,500        6,250        7,156        8,126        1,200        4,554        0        0        34,786   
    2011        7,350        6,125        7,281        8,126        2,400        8,556        0        0        39,838   

Gary T. Barlow

    2013        5,665        4,721        0        759        0        5,588        8,077        615,000        639,810   

 

(a)

Valuation of Personal Use of Corporate Aircraft:    The value of personal aircraft usage included in the number reported in this column is $96,340 for 2013 and is based upon the incremental cost of the usage to the Company. It includes fuel costs, trip-related crew travel expenses (such as hotels, meals and ground transportation), in-flight meals, landing and ground handling fees and taxes, trip-related engine maintenance service plan costs, and an allocated portion of plane maintenance costs based upon the average per hour flown. The calculation does not include fixed costs that would be incurred regardless of whether there is any personal use of the aircraft (e.g., aircraft purchase costs, depreciation, crew salaries and related benefit costs, and insurance costs).

 

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GRANTS OF PLAN-BASED AWARDS TABLE

The table below summarizes equity and non-equity grants to the NEOs during the fiscal year ended December 31, 2013:

 

           Estimated Future Payouts
Under Non-Equity Incentive

Plan Awards
    Estimated Future Payouts
Under Equity Incentive

Plan Awards(3)
   

All

Other

Stock
Awards:
Number
of Shares

or Units

   

All

Other

Option

Awards:
Number of
Securities
Underlying

Options

   

Exercise

or Base
Price of
Option

Awards

   

Grant
Date Fair
Value of

Awards

 
     Grant     Threshold     Target     Maximum     Threshold     Target     Maximum          

Name

   Date     ($)     ($)     ($)     (#)     (#)     (#)     (#)(4)     (#)(5)(6)     ($/Sh)(6)     ($)(7)  

James L. Wainscott

        (1)    $ 0      $ 1,265,000      $ 2,530,000                                                    
        (2)      632,500        1,265,000        2,530,000                                                    
     01/23/13                             88,250        176,500        264,750                           $ 826,903   
     01/23/13                                                  114,600                      526,014   
     01/23/13                                                         151,600      $ 4.590        397,192   

David C. Horn

        (1)    $ 0      $ 478,125      $ 956,250                                                    
        (2)      239,063        478,125        956,250                                                    
     01/23/13                             16,550        33,100        49,650                           $ 155,074   
     01/23/13                             `—                      21,500                      98,685   
     01/23/13                                                         28,400      $ 4.590        74,408   

John F. Kaloski

        (1)    $ 0      $ 423,750      $ 847,500                                                    
        (2)      211,875        423,750        847,500                                                    
     01/23/13                             16,550        33,100        49,650                           $ 155,074   
     01/23/13                                                  21,500                      98,685   
     01/23/13                                                         28,400      $ 4.590        74,408   

Roger K. Newport

        (1)    $ 0      $ 234,000      $ 468,000                                                    
        (2)      117,000        234,000        468,000                                                    
     01/23/13                             9,850        19,700        29,550                           $ 92,295   
     01/23/13                                                  12,700                      58,293   
     01/23/13                                                         16,900      $ 4.590        44,278   

Keith J. Howell

        (1)    $ 0      $ 192,000      $ 384,000                                                    
        (2)      96,000        192,000        384,000                                                    
     01/23/13                             9,000        18,000        27,000                           $ 84,330   
     01/23/13                                                  11,700                      53,703   
     01/23/13                                                         15,500      $ 4.590        40,610   

Albert E. Ferrara, Jr.

        (1)    $ 0      $ 375,375      $ 750,750                                                    
        (2)      187,688        375,375        750,750                                                    
     01/23/13                             12,250        24,500        36,750                           $ 114,783   
     01/23/13                                                  15,900                      72,981   
     01/23/13                                                         21,000      $ 4.590        55,020   

Gary T. Barlow

        (1)    $ 0      $ 165,000      $ 330,000                                                    
        (2)    $ 82,500      $ 165,000      $ 330,000                                                    
     01/23/13                             8,200        16,400        24,600                           $ 76,834   
     01/23/13                                                  10,600                      48,654   
     01/23/13                                                         14,100      $ 4.590        36,942   

 

(1)

The amounts reported in this row represent the range of potential awards under the threshold, target and maximum performance objectives established in January 2013 for the 2013 performance period under the Annual Incentive Plan, as described in the “Overview of Key Pay-for-Performance Components and Application to 2013 Executive Compensation” and “Annual Incentive Awards” sections of the Compensation Discussion and Analysis. The estimate is based on the NEO’s base pay on January 1, 2013. The amounts actually paid to each NEO for 2013 are set forth in the Summary Compensation Table at page 62.

 

(2)

The amounts reported in this row represent the range of potential awards under the threshold, target and maximum performance objectives established in January 2013 for the 2013-2015 performance period under the Long-Term Plan, as described in the “Overview of Key Pay-for-Performance Components and Application to 2013 Executive Compensation” and “Long-Term Incentive Awards” sections of the Compensation Discussion and Analysis. The estimate is based on the NEO’s base pay on January 1, 2013. No payments were earned or made to any NEO for the three-year performance period ending in 2013, as set forth in the Summary Compensation Table.

 

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(3)

The amounts reported in this column represent the range of the potential number of performance shares representing a right to receive shares of the Company’s common stock that may be issued to each NEO for the 2013-2015 performance period under the Stock Plan. Terms applicable to the performance share grants reported in this column are described in the “Overview of Key Pay-for-Performance Components and Application to 2013 Executive Compensation” and “Equity Awards” sections of the Compensation Discussion and Analysis.

 

(4)

The amounts reported in this column represent the number of shares of restricted stock granted under the Stock Plan to each NEO in 2013. The restrictions on the transfer of the restricted stock grants made on January 23, 2013 reported in this column will lapse over a three-year period as follows: one-third lapsed on January 23, 2014, one-third will lapse on January 23, 2015 and one-third will lapse on January 23, 2016. Other terms applicable to the restricted stock grants reported in this column are described in the “Overview of Key Pay-for-Performance Components and Application to 2013 Executive Compensation” and “Equity Awards” sections of the Compensation Discussion and Analysis.

 

(5)

The amounts reported in this column represent the number of nonqualified stock options granted to each NEO under the Stock Plan in 2013. Each option represents a right to purchase a share of the Company’s common stock at a price established in an option award agreement at the time of the grant. The stock options reported in this column vest in three equal installments on January 23, 2014, 2015 and 2016. Other terms applicable to the stock options granted under the Stock Plan are described in the “Overview of Key Pay-for-Performance Components and Application to 2013 Executive Compensation” and “Equity Awards” sections of the Compensation Discussion and Analysis.

 

(6)

The exercise price for options granted under the Stock Plan equals the average of the high and low sales prices for the Company’s common stock on the grant date. If there were no sales of the Company’s common stock on the grant date, then the exercise price equals the weighted average of the mean between the high and low sales prices for the Company’s common stock on the nearest preceding trading day on which there were sales of the Company’s common stock.

 

(7)

The grant date fair value of restricted stock awards is calculated by multiplying the total number of shares granted times the fair market value of those shares. The fair market value of restricted stock is the average of the high and low sales prices of a share of the Company’s common stock on the grant date. The grant date fair value of stock options and performance shares are valued by the Company’s actuary in accordance with ASC Topic 718. A discussion of the assumptions used to calculate the grant date value of stock options and performance shares reported in this column is located in Note 11 to the consolidated financial statements included in our 2013 Annual Report.

 

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE

The table below provides information as to all outstanding option awards and restricted and performance share awards held by the NEOs as of December 31, 2013:

 

Name

  Option
Award
Grant
Date
    Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
    Equity
Incentive
Plan
Awards:

Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
    Option
Exercise
Prices
($)
    Option
Expiration
Date
    Number
of Shares  or
Units of
Stock
That
Have
Not
Vested
(#)(4)
    Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested
($)(5)
    Equity
Incentive
Plan
Awards:
Number
of Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)(6)
    Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)(5)
 

James L. Wainscott

              141,794      $ 1,162,711        353,000      $ 2,894,600   
    01/20/05        40,000        0      $ 13.700        01/20/15           
    01/18/07        80,000        0        16.755        01/18/17           
    01/17/08        36,000        0        36.585        01/17/18           
    01/21/09        107,654        0        9.210        01/21/19           
    01/20/10        60,000        0        22.965        01/20/20           
    01/19/11        59,333        29,667 (1)      14.570        01/19/21           
    01/18/12        50,533        101,067 (2)      9.110        01/18/22           
    01/23/13        0        151,600 (3)      4.590        01/23/23           

David C. Horn

              26,750      $ 219,350        66,200      $ 542,840   
    01/20/05        10,000        0      $ 13.700        01/20/15           
    01/19/06        10,000        0        7.885        01/19/16           
    01/18/07        15,000        0        16.755        01/18/17           
    01/17/08        6,750        0        36.585        01/17/18           
    01/21/09        20,185        0        9.210        01/21/19           
    01/20/10        10,093        0        22.965        01/20/20           
    01/19/11        12,333        6,167 (1)      14.570        01/19/21           
    01/18/12        9,466        18,934 (2)      9.110        01/18/22           
    01/23/13        0        28,400 (3)      4.590        01/23/23           

John F. Kaloski

              27,552      $ 225,926        66,200      $ 542,840   
    01/19/06        5,000        0      $ 7.885        01/19/16           
    01/18/07        10,000        0        16.755        01/18/17           
    01/17/08        6,750        0        36.585        01/17/18           
    01/21/09        20,185        0        9.210        01/21/19           
    01/20/10        10,093        0        22.965        01/20/20           
    01/19/11        12,066        6,034 (1)      14.570        01/19/21           
    01/18/12        9,466        18,934 (2)      9.110        01/18/22           
    01/23/13        0        28,400 (3)      4.590        01/23/23           

Roger K. Newport

              33,712      $ 276,438        36,100      $ 296,020   
    01/19/06        1,667        0      $ 7.885        01/19/16           
    01/18/07        5,000        0        16.755        01/18/17           
    01/17/08        2,750        0        36.585        01/17/18